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ITT HARTFORD GROUP, INC.
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
The Annual Meeting of the Shareholders of ITT Hartford Group, Inc. (the
"Company") will be held on Friday, May 2, 1997 at 9:30 a.m. at the Sheraton
San Diego Hotel & Marina (West Tower), 1590 Harbor Island Drive, San Diego,
California, for the following purposes:
1. to elect a Board of Directors;
2. to approve a change of the Company's name;
3. to approve certain material terms of the Company's annual executive
bonus program;
4. to approve certain material terms of the Hartford 1995 Incentive
Stock Plan;
5. to approve certain material terms of the 1997 Hartford Life, Inc.
Incentive Stock Plan;
6. to ratify the appointment of Arthur Andersen LLP as independent
auditors of the Company for the fiscal year ending December 31,
1997; and
7. to act upon such other matters as may properly come before the
annual meeting.
Only shareholders of record at the close of business on March 4, 1997 are
entitled to notice of, and to vote at, the annual meeting.
Michael O'Halloran
Vice President
and Secretary
March 31, 1997
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PRELIMINARY PROXY STATEMENT
ITT HARTFORD GROUP, INC.
690 ASYLUM AVENUE
HARTFORD, CT 06115
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PROXY STATEMENT
ANNUAL MEETING OF SHAREHOLDERS
MAY 2, 1997
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GENERAL INFORMATION
The accompanying proxy is solicited by the Board of Directors of ITT
Hartford Group, Inc. (the "Company" or "The Hartford") in connection with the
annual meeting of shareholders of the Company to be held on Friday, May 2,
1997 at 9:30 a.m. at the Sheraton San Diego Hotel & Marina (West Tower), 1590
Harbor Island Drive, San Diego, California, and at any adjournment or
postponement thereof (the "Annual Meeting"). This Proxy Statement and the
accompanying proxy card are first being sent to shareholders on or about
March 31, 1997.
When you return a proxy card that is properly signed, the shares of the
Company's common stock ("Common Stock") represented by the proxy will be voted
as you specify on the proxy card. As to the election of directors, by marking
the appropriate box you may (a) vote for all of the director nominees as a
group except those nominees whose names you specify on the card; or (b)
withhold your vote from all nominees as a group. As to the other items, you
may vote "for" or "against" the item or "abstain" from voting by marking the
appropriate box.
If you properly sign and return your proxy card but do not specify any
choices you will thereby confer authority upon the persons named as proxies to
vote your shares in their discretion. The proxy also confers discretionary
authority on these individuals to vote your shares of Common Stock on (1) any
matter that was not known on the date of this Proxy Statement but is presented
at the Annual Meeting, including voting on the nomination or election of any
person not identified in this Proxy Statement as a nominee for election as a
director; and (2) any shareholder proposal that has been omitted from this
Proxy Statement pursuant to the proxy regulations of the Securities and
Exchange Commission ("SEC") but is presented at the Annual Meeting.
Your vote is important and the Board of Directors urges you to exercise your
right to vote. Whether or not you plan to attend the Annual Meeting, you can
assure that your shares are voted by properly completing, signing, dating and
returning the enclosed proxy card. You may revoke your proxy at any time
before it is exercised by giving written notice thereof to the Secretary of
the Company, by submitting a subsequently dated and properly signed proxy, or
by attending the Annual Meeting and revoking the proxy. Your attendance at the
Annual Meeting will not by itself revoke your proxy.
Shares of Common Stock held in the Company's Investment and Savings Plan
("ISP") are held of record and are voted by the trustee of the ISP, and shares
held in the Company's Employee Stock Purchase Plan ("ESPP") are held of record
by the ESPP's administrator, Dean Witter Trust Company ("Dean Witter"), and
are voted by Dean Witter. Participants in the ISP and the ESPP may direct the
trustee and Dean Witter as to how to vote shares allocated to their ISP and
ESPP accounts by properly signing, completing and returning the enclosed proxy
card. The ISP trustee will vote shares as to which it has not received
direction in accordance with the terms of the ISP.
Only shareholders of record on March 4, 1997 (the "Record Date") are
entitled to notice of, and to vote at, the Annual Meeting. As of the Record
Date, there were [ ] shares of Common Stock issued and outstanding. Each
shareholder is entitled to one vote for each share of Common Stock registered
in that person's name as of the Record Date.
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ITEM 1
ELECTION OF DIRECTORS
A Board of twelve directors is to be elected at the Annual Meeting to serve
until the next annual meeting and until their successors are elected and
qualified. There are currently eleven directors serving on the Board, all of
whom have been nominated for reelection as directors at the Annual Meeting. In
addition, David K. Zwiener, the Company's Executive Vice President and Chief
Financial Officer, has been nominated for election for the first time. Each of
the directors, except for Messrs. Araskog, Ayer, Frahm, Smith and Swygert, was
elected in connection with the Company becoming a separate public company as
part of the spin-off from ITT Corporation ("ITT") that occurred effective
December 19, 1995 (the "Spin-Off"). Messrs. Frahm and Araskog have served on
the Board since 1985, Messrs. Ayer and Smith have served since 1991, and Mr.
Swygert has served since 1996.
Unless there is a contrary indication, shares of Common Stock represented by
valid proxies will be voted for the election of all nominees. The Board has no
reason to believe that any nominee will be unable to serve as a director. If
for any reason a nominee should become unable to serve, the shares represented
by valid proxies will be voted for the election of such other person as the
Board may recommend, or the Board may reduce the number of directors to
eliminate the vacancy.
Set forth below is certain information about each director and nominee for
election as a director, including information regarding his or her background
for at least the past five years.
DIRECTORS AND NOMINEES
BETTE B. ANDERSON
Mrs. Anderson, 68, joined Kelly, Anderson, Pethick & Associates,
Inc., a Washington based management firm, in 1990 and served as
President effective January 1, 1991 until January 1996, when she
became Vice Chairperson. Mrs. Anderson was formerly a partner in
the public affairs company of Anderson, Benjamin, Read & Haney.
She was Undersecretary of the Treasury from 1977 to 1981. Mrs.
Anderson was affiliated for twenty-seven years with the Citizens
and Southern National Bank of Savannah, having served as a Vice
President until she assumed the Treasury post. Mrs. Anderson is a
director of American Bank Note Corporation, the New ITT
Corporation (defined below), ITT Educational Services, Inc., the
Miller Foundation at the University of Virginia and a member of
the Advisory Council of Girl Scouts of America. She attended
Georgia Southern and Armstrong State Colleges and is a graduate of
the Stonier Graduate School of Banking at Rutgers University.
(ART)
RAND V. ARASKOG
Mr. Araskog, 65, served as an executive officer of ITT until the
Spin-Off. He was Chief Executive officer of ITT since 1979,
Chairman since 1980 and President since March 1991. After the
Spin-Off, Mr. Araskog became Chairman and Chief Executive of the
new ITT Corporation ("New ITT"), formerly an ITT subsidiary called
ITT Destinations, Inc., a company that owns and operates
hospitality, entertainment and information services businesses. He
is a director of Alcatel Alsthom of France, Dow Jones & Company,
Inc., Dayton-Hudson Corporation, Rayonier Inc., Shell Oil Company
and ITT Educational Services, Inc. He is a member of The Business
Council and the Trilateral Commission. He is a trustee of the New
York Zoological Society and the Salk Institute. Mr. Araskog is a
graduate of the U.S. Military Academy at West Point and attended
the Harvard Graduate School of Arts and Sciences.
(ART)
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RAMANI AYER
Mr. Ayer, 49, became Chairman and Chief Executive Officer of the
Company on February 1, 1997. Prior to that, he served as an
Executive Vice President of the Company since the Spin-Off in
December 1995. Mr. Ayer has been President and Chief Operating
Officer of Hartford Fire Insurance Company ("Hartford Fire"), the
Company's principal property and casualty insurance subsidiary,
since 1991 and previously served as Executive Vice President of
Hartford Fire from 1990 to April 1991 and Senior Vice President
from 1989 to 1990. Mr. Ayer joined The Hartford in 1973 as a
member of the operations research department. In 1981 he was
appointed the Secretary and Director of corporate reinsurance. In
1983 he was named Vice President of HartRe, The Hartford's
reinsurance subsidiary, and in 1984 he joined the Hartford
Specialty Company, of which he was appointed President in 1986.
(ART)
ROBERT A. BURNETT
Mr. Burnett, 69, served as Chairman of Meredith Corporation from
1988 until his retirement in 1992. He served as President and
Chief Executive Officer from 1977 and relinquished the latter
office in 1989. Mr. Burnett is a director of New ITT, ITT
Industries, Inc., Meredith Corporation, Whirlpool Corporation and
MidAmerican Energy Company. He is a member of the Board of
Trustees of Grinnell College, Grinnell, Iowa. He is also a
director of the Greater Des Moines Committee and the Des Moines
Art Center. Mr. Burnett has a B.A. degree in economics from the
University of Missouri.
(ART)
DONALD R. FRAHM
Mr. Frahm, 65, served as Chairman, President and Chief Executive
Officer of The Hartford from April 1988 until his retirement on
January 31, 1997. He is a member of the Board of Directors of the
Insurance Information Institute and the American Insurance
Association. Mr. Frahm is a director of the Hartford Hospital and
Junior Achievement North Central Connecticut Inc. and the Greater
Hartford Chamber of Commerce. He is also a corporator of
Connecticut Children's Medical Center.
(ART)
ARTHUR A. HARTMAN
Mr. Hartman, 71, has been Senior Consultant to APCO Associates,
Washington, D.C., since 1989. Previously, he was the U.S.
Ambassador to the former Union of Soviet Socialist Republics and
France. He is a director of the Dreyfus Fund, Lawter International
Inc. and Ford Meter Box Co., Inc. He is also Chairman of the First
NIS Regional Fund-Barings/ING.
(ART)
PAUL G. KIRK, JR.
Mr. Kirk, 59, became a partner in the law firm of Sullivan &
Worcester in 1977 and is presently of Counsel to the firm. He
served as Chairman of the Democratic National Committee from 1985
to 1989 and as Treasurer from 1983 to 1985. Following his
resignation in 1989 as Chairman of the Democratic National
Committee, he returned to Sullivan & Worcester as a partner in
general corporate practice at the firm's Boston and Washington
offices. Mr. Kirk is a director of New ITT and of Kirk-Sheppard &
Co., Inc., of which he also is Chairman and Treasurer. Mr. Kirk is
also a director of the Bradley Real Estate Corporation and
Rayonier Inc. He is Co-chairman of the Commission on Presidential
Debates, Chairman of the John F. Kennedy Library Foundation Board
of Directors, Chairman of the Board of Directors of the National
Democratic Institute for International Affairs, and a trustee of
Stonehill College. He is a graduate of Harvard College and Harvard
Law School.
(ART)
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LOWNDES A. SMITH
Mr. Smith, 57, became Vice-Chairman of the Company on February
1, 1997. Prior to that, he served as an Executive Vice President
of the Company since the Spin-Off in December 1995, and has been
President and Chief Operating Officer of The Hartford's life
insurance companies since 1989. Prior to that time, he served as
Senior Vice President and Group Controller for all companies owned
or operated by The Hartford. Mr. Smith joined The Hartford in 1968
as a member of the corporate accounting department. In 1972 he was
appointed the Secretary and Director of corporate accounting. He
was elected Assistant Vice President in 1974, and he was named
Controller in 1977. Mr. Smith is a director of the Connecticut
Children's Medical Center and the American Council of Life
Insurance.
(ART)
H. PATRICK SWYGERT
Mr. Swygert, 54, has been President of Howard University,
Washington, D.C., since August 1995. Prior to that, he was
President of the University at Albany, State University of New
York, since 1990. Mr. Swygert received his undergraduate and law
degrees from Howard University, has been a visiting professor and
lecturer abroad and is the author of numerous articles and
publications on higher education and the law. He is a member of
the Board of Directors of The Victory Funds, Cleveland, Ohio and
National Public Radio, Washington, D.C. Mr. Swygert is a trustee
of the Institute of Public Administration and a member of the
Commission on Women in Higher Education and the Capital District
Martin Luther King, Jr. Commission.
(ART)
DEROY C. THOMAS
Mr. Thomas, 71, was a partner of LeBoeuf, Lamb, Greene & MacRae,
a law firm in New York, New York, from 1991 through December 31,
1994. He was President, Chief Operating Officer and a director of
ITT from 1988 to 1991, and from 1983 to 1988 he was Vice Chairman
and Chief Operating Officer, ITT Diversified Services, and
Chairman and Chief Executive Officer of The Hartford. He is a
director of Houghton-Mifflin, Connecticut Health Services and
MedSpan, Inc. He is also a former trustee of Fordham University,
Wheelock College, University of Hartford, Hartford Hospital and CT
Health System. Mr. Thomas is President of Goodspeed Opera House
and the Chairman of the Old State House Association.
(ART)
GORDON I. ULMER
Mr. Ulmer, 64, is former Chairman and Chief Executive Officer of
the former Connecticut Bank and Trust Company ("CBT") and retired
President of the former Bank of New England Corporation, the
former holding company of CBT ("BNEC"). He joined CBT in 1957 and
held numerous positions before being elected President and a
director in 1980 and Chairman and Chief Executive Officer in 1985.
In 1988 he was elected President of BNEC, and retired as President
in December 1990. In January 1991, BNEC filed a petition under
Chapter 7 of the Bankruptcy Code and CBT began insolvency
proceedings. Mr. Ulmer also serves as a director of Rayonier Inc.,
and the Old State House Association. He is a graduate of
Middlebury College, the American Institute of Banking and Harvard
Business School Advanced Management Program and attended New York
University's Graduate School of Engineering.
(ART)
DAVID K. ZWIENER
Mr. Zwiener, 42, has been Executive Vice President and Chief
Financial Officer of The Hartford since August 1995. He previously
served as Executive Vice President and Chief Financial Officer of
ITT Financial Corporation from March 1993. From 1987 to February
1993, Mr. Zwiener served as Senior Vice President and Treasurer,
and Executive Vice President--Capital Markets Division, of Heller
International Corporation.
(ART)
4
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THE BOARD OF DIRECTORS AND ITS COMMITTEES
The Board of Directors is responsible for establishing broad corporate
policies and for overseeing the overall performance of the Company. The Board
reviews significant developments affecting the Company and acts on matters
requiring Board approval. During 1996, the Board held meetings. The standing
committees of the Board are the Audit, Compensation and Personnel, Finance,
Legal and Public Affairs, and Nominating committees, each of which is
comprised solely of directors who are not officers of, or otherwise employed
by, the Company or any of its subsidiaries. Set forth below is a description
of the duties of each committee and its members.
The Audit Committee recommends the selection of independent auditors for the
Company, confirms the scope of audits to be performed by such auditors,
reviews audit results and internal accounting and control procedures and
policies, and reviews the fees paid to the Company's independent auditors. The
Committee reviews and recommends approval of the audited financial statements
of the Company and the annual report to shareholders. It also reviews the
expense accounts of senior executives. The members of the Audit Committee are
Messrs. Burnett, Kirk (Chairman), Swygert and Ulmer. During 1996, the
Committee held meetings.
The Compensation and Personnel Committee evaluates senior management
performance and establishes executive compensation policies. Mrs. Anderson and
Messrs. Burnett, Hartman and Ulmer (Chairman) are the members of the
Committee. The Committee held meetings during 1996.
The Finance Committee is responsible for reviewing capital expenditures and
appropriations and maximizing the effective use of the Company's and its
subsidiaries' assets. This includes directing the investment allocation and
risk management policies of the Company. The members of the Committee are Mrs.
Anderson and Messrs. Araskog, Thomas (Chairman) and Ulmer. During 1996, the
Committee held meetings.
The Legal and Public Affairs Committee reviews and considers major claims
and litigation, and legal, regulatory, patent and related governmental policy
matters affecting the Company and its subsidiaries. The Committee reviews and
approves management policies and programs relating to compliance with legal
and regulatory requirements, business ethics and environmental matters. The
Committee also reviews and defines the Company's social responsibilities,
including issues of significance to the Company, its shareholders and
employees. The members of the Committee are Mrs. Anderson and Messrs. Hartman
(Chairman), Kirk, Swygert and Thomas. The Committee held meetings during
1996.
The Nominating Committee makes recommendations concerning the organization,
size, and composition of the Board and its committees, proposes nominees for
election to the Board and its committees and considers the qualifications,
compensation, and retirement of directors. The Committee's members are Messrs.
Araskog, Burnett (Chairman), Hartman and Kirk. During 1996, the Committee held
meetings. The Nominating Committee will consider nominations of persons for
election as directors that are submitted by shareholders in writing in
accordance with certain requirements set forth in the Company's bylaws.
In 1996, no director failed to attend at least seventy-five percent of all
meetings of the Board of Directors and of the committees of which he or she
was a member.
SECTION 16(A) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section 16(a) of the Securities Exchange Act of 1934 requires that directors
and certain executive officers of the Company report their ownership of and
transactions in the Common Stock. During 1996, due to an inadvertent
administrative error by the Company, a report regarding one transaction of
Robert A. Burnett, a director, was filed nine days late.
DIRECTORS' COMPENSATION
STANDARD FEES. Members of the Board of Directors who are employees of the
Company or its subsidiaries are not compensated for service on the Board or
any of its committees. Compensation for non-employee directors
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for 1996 consisted of an annual retainer fee of $30,000 payable solely in
restricted shares of Common Stock pursuant to the ITT Hartford Group, Inc.
1996 Restricted Stock Plan for Non-Employee Directors (the "Non-Employee
Directors Plan") described below, a $1,000 fee for each meeting of the Board
attended and a $1,000 fee for each committee meeting attended. Directors are
also reimbursed for travel and related expenses incurred on behalf of the
Company.
RESTRICTED STOCK PLAN. Under the Non-Employee Directors Plan, non-employee
directors receive grants of shares of restricted Common Stock as payment for
their annual retainer fee. Restricted stock grants are made automatically on
the date of each annual meeting of shareholders to each non-employee director
elected at, or continuing in office following, the annual meeting. The number
of shares of restricted stock is determined by dividing the annual retainer
for the year of the award by the fair market value of the Company's Common
Stock as reported on the New York Stock Exchange as of the date of the award.
Non-employee directors receiving restricted stock may not sell, assign or
otherwise dispose of the stock until the restriction period ends. The
restriction period ends upon the earliest of: (i) five years after the grant
date, (ii) retirement at age seventy-two, (iii) a "change of control" (as
defined in the plan) of the Company (iv) death, (v) disability, or (vi)
resignation under certain circumstances, as set forth in the plan. If a non-
employee director resigns other than under such circumstances before the
restriction period ends, he or she will forfeit his or her restricted shares.
INSURANCE. The Company provides Non-employee directors with $100,000 of
group life insurance coverage and $750,000 of accidental death and
dismemberment and permanent total disability coverage while they are serving
on the Board. Non-employee directors may purchase additional benefits under
these policies.
ITEM 2
APPROVAL OF CHANGE OF THE COMPANY'S NAME
The Board of Directors has adopted a resolution to amend Article First of
the Company's certificate of incorporation to change the Company's name from
"ITT Hartford Group, Inc." to "The Hartford Financial Services Group, Inc."
Shareholder approval of this amendment is required and shareholders will vote
on the resolution at the Annual Meeting. Below is a discussion of the reasons
why the Board of Directors believes the Company's name should be changed.
The Company had been a subsidiary of ITT Corporation since 1970, and the
Company's corporate name "ITT Hartford Group, Inc." reflected this affiliation
with ITT. On December 19, 1995, the ITT Spin-Off occurred and as a result, the
Company became a separate publicly-traded company. Although no longer
affiliated with ITT, the Company retained the formal corporate name "ITT
Hartford Group, Inc." after the Spin-Off.
During the year after the Spin-Off, the Company's management became aware
that, because "ITT" was part of the Company's name, many of the Company's
customers, independent insurance agents, people in the investment community
and the public in general perceived that the Company was still owned by, or
affiliated with, ITT. Market surveys confirmed this perception and revealed
that there was some confusion regarding the Company's status after the Spin-
Off and its relation to the other two public companies that resulted from the
Spin-Off, both of which have "ITT" as part of their corporate names. In
addition, survey research revealed that customers, agents, the investment
community and the general public strongly associated "The Hartford" brand name
and the "stag" logo with the Company and its subsidiaries. Therefore, on the
first anniversary of the Spin-Off, the Company announced that it was returning
to the use of "The Hartford" as the Company's brand name, rather than "ITT
Hartford".
For these reasons, the Board of Directors believes that the formal corporate
name should be changed. The proposed new name of "The Hartford Financial
Services Group, Inc" not only deletes the "ITT" part of the name, but also
promotes the Company's image as a provider of a broad range of financial
services, including
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insurance. Thus, changing the formal corporate name of the Company should
further the Company's goals of establishing a separate corporate identity and
being perceived as a leading provider of financial services. Certain of the
Company's subsidiaries may, however, continue to use the "ITT Hartford" name
in certain international and other markets where recognition of that name
could be beneficial.
THE BOARD OF DIRECTORS RECOMMENDS THAT SHAREHOLDERS VOTE TO APPROVE THE
CHANGE OF THE COMPANY'S NAME.
ITEM 3
APPROVAL OF CERTAIN MATERIAL TERMS OF THE COMPANY'S ANNUAL EXECUTIVE BONUS
PROGRAM
The Company has an annual executive bonus program (the "Bonus Program") that
is intended to provide certain Company executives and key managers with
incentive compensation based upon the achievement of pre-established
performance goals and individual performance. The Bonus Program is intended to
provide an incentive for profitable growth and to motivate participating
executives and key managers toward even higher achievement and operating
results, to tie their goals and interests to those of the Company and its
shareholders and to enable the Company to attract and retain highly qualified
executives and key managers.
Under the Bonus Program, each participating executive and key manager is
assigned a target bonus opportunity based on his or her job grade and
position, expressed as a percentage of the executive's and key manager's year-
end base salary rate. At the end of each year, the aggregate amount of
individual target bonuses is adjusted in accordance with a pre-established
formula to create a bonus pool for the executives and key manager for the
year. The amount of the bonus pool for each year depends upon the Company's
achieving certain pre-established performance goals for the year, such as
achieving a certain net income and return on equity. Individual bonus awards
from the overall bonus pool are determined on a discretionary basis taking
into account specific personal contributions during the year. The Compensation
and Personnel Committee of the Board of Directors (the "Compensation
Committee") administers the Bonus Program with respect to certain senior
executives of the Company. Each year the Compensation Committee reviews and
approves management's suggestions for performance goals of such senior
executives and reviews and approves annual bonus payment levels based on the
achievement of goals by them.
Section 162(m) of the Internal Revenue Code of 1986, as amended (the "Code")
limits the tax deductibility by the Company of compensation paid to its five
most highly compensated executive officers to $1,000,000. However, if the
shareholders approve four material terms of a compensation plan or program,
and compensation paid pursuant to the plan or program otherwise complies with
Section 162(m), then such compensation is exempted from this limitation and is
fully deductible. The Compensation Committee has approved four material terms
of the Bonus Program as they relate to the five most highly compensated
executive officers of the Company and shareholders are requested to approve
these terms in order to maintain the deductibility of compensation paid to the
five most highly compensated executive officers. For purposes of Section
162(m), the four material terms of the Bonus Program need apply only to the
five most highly compensated executive officers of the Company for any given
year, although the Company may apply the same or similar performance criteria
to other executives.
Set forth below is a description of the four material terms of the Bonus
Program related to Section 162(m), all of which shareholders are asked to
approve:
1. CLASS OF EXECUTIVES. The five most highly compensated executive
officers of the Company and its subsidiaries for any given year.
2. PERFORMANCE CRITERIA. Payment of bonuses pursuant to the Bonus Program
shall be based upon any one or more of the following criteria, which shall
be stated for the five most highly compensated executive officers in terms
of an objective formula or standard as required by Section 162(m), and
which may be (a) determined solely by reference to the Company's
performance, any subsidiary or affiliate of the
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Company or any division or unit of any of the foregoing, or (b) based on
comparative performance of any one or more of the following relative to
other entities: (i) earnings per share, (ii) return on equity, (iii) cash
flow, (iv) return on total capital, (v) return on assets, (vi) economic
value added, (vii) increase in surplus, (viii) reductions in operating
expenses, (ix) increases in operating margins, (x) earnings before income
taxes and depreciation, (xi) total shareholder return, (xii) return on
invested capital, (xiii) cost reductions and savings, (xiv) earnings before
interest, taxes, depreciation and amortization (xv) pre-tax operating
income, (xvi) productivity improvements, or (xvii) an executive's
attainment of personal objectives with respect to any of the foregoing
criteria or other criteria such as growth and profitability, customer
satisfaction, leadership effectiveness, business development, negotiating
transactions and sales or developing long term business goals.
3. MAXIMUM PAYABLE EACH YEAR. The maximum bonus that may be paid to any
of the five most highly compensated executive officers in any given year is
the lesser of (a) 200% of such executive's annual base salary in effect at
the end of such year, or (b) $4,000,000.
4. COMMITTEE CERTIFICATION OF PERFORMANCE GOAL ACHIEVEMENT. At or after
the end of each calendar year, the Compensation Committee is required to
certify in writing whether the pre-established performance goals and
objectives have been satisfied in such year with respect to the five most
highly compensated executive officers. The actual bonus award for any
participant for such year shall then be determined based upon the pre-
established computation formulae or methods. The Compensation Committee has
no discretion to increase the amount of any participant's bonus as so
determined in order for the bonus to be exempt from the Section 162(m)
limitation but may reduce the amount of, or totally eliminate such bonus if
the Compensation Committee determines, in its absolute discretion, that
such a reduction or elimination is appropriate in order to reflect the
participant's performance or unanticipated factors.
Amendments can be made to the Bonus Program that can increase its cost to
the Company and can alter the allocation of benefits among participating
executive officers. In addition, the Compensation Committee generally intends
to take reasonable measures to avoid the loss of a Company tax deduction due
to Section 162(m). However, the Compensation Committee may in certain
circumstances, approve bonus or other payments outside of the Bonus Program
that do not meet the material terms of the Bonus Program described above and
that may not be tax deductible.
During 1996, 1,060 executives and key managers were eligible to participate
in the Bonus Program. The bonuses paid to the Company's Chief Executive
Officer and the other four most highly compensated executive officers for 1996
are included in the Summary Compensation Table under the caption "COMPENSATION
OF EXECUTIVE OFFICERS" below. Aggregate 1996 bonus payments of $1,462,000 and
$23,197,852 were paid to all current executive officers as a group, and all
participating executives and key managers who are not executive officers,
respectively. Since the Bonus Program requires performance goals to be set and
participants to be selected for each year, it is not determinable what
benefits, if any, will be paid to any participating executive or key manager
in the future.
THE BOARD OF DIRECTORS RECOMMENDS THAT SHAREHOLDERS VOTE TO APPROVE THE
MATERIAL TERMS OF THE COMPANY'S ANNUAL EXECUTIVE BONUS PROGRAM.
ITEM 4
APPROVAL OF CERTAIN MATERIAL TERMS OF THE HARTFORD 1995 INCENTIVE STOCK PLAN
Pursuant to the Hartford 1995 Incentive Stock Plan (the "Incentive Stock
Plan"), the Compensation Committee may grant stock options, stock appreciation
rights, restricted stock and performance shares to key employees of the
Company selected by the Compensation Committee. In connection with the ITT
Spin-Off, the shareholders of ITT approved the terms of the Incentive Stock
Plan at a special meeting of ITT shareholders held on September 21, 1995. The
terms of the Incentive Stock Plan approved by the ITT shareholders included
four material terms required by Section 162(m) of the Code in order for
compensation attributable to certain awards to be exempt from the Section
162(m) tax deduction limitation, as described in ITEM 3 above.
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The Compensation Committee has approved additional performance measures that
are included as subitems (xii) through (xvii) in the description of the second
of the material terms described below. The shareholders of the Company must
approve such additional performance measures in order for them to be effective
for purposes of Section 162(m). In addition to approving these additional
performance measures, shareholders are requested to approve all of the four
material terms of the Incentive Stock Plan related to Section 162(m) so that
the Incentive Stock Plan will comply with the requirements of Section 162(m)
for an additional five years, thereby allowing compensation attributable to
certain awards to be exempt from the Section 162(m) tax deduction limitation.
By approving all of the material terms of the Incentive Stock Plan described
below, the Section 162(m) requirements will be met for the years 1997 through
2001, whereas the 1995 approval by ITT's shareholders would extend only
through 1999. For purposes of Section 162(m), the four material terms of the
Incentive Stock Plan need apply only to the Company's five most highly
compensated executive officers, although the same or similar performance
criteria may be applied to others.
Set forth below is a description of the four material terms of the Incentive
Stock Plan related to Section 162(m), including the additional performance
measures, all of which shareholders are asked to approve.
1. CLASS OF EXECUTIVES. The five most highly compensated executive
officers of the Company, its subsidiaries and affiliates for any given year
whose responsibilities and decisions, in the judgment of the Committee,
directly affect the performance of the Company and its subsidiaries.
2. PERFORMANCE CRITERIA. Awards (other than certain option grants
described below) may be based on any one or more of the following criteria,
which shall be stated for the five most highly compensated executive
officers in terms of an objective formula or standard as required by
Section 162(m), and which may be (a) determined solely by reference to the
Company's performance, any subsidiary or affiliate of the Company or any
division or unit of any of the foregoing, or (b) based on comparative
performance of any one or more of the following relative to other entities:
(i) earnings per share, (ii) return on equity, (iii) cash flow, (iv) return
on total capital, (v) return on assets, (vi) economic value added, (vii)
increase in surplus, (viii) reductions in operating expenses, (ix)
increases in operating margins, (x) earnings before income taxes and
depreciation, (xi) total shareholder return, (xii) return on invested
capital, (xiii) cost reductions and savings, (xiv) earnings before
interest, taxes, depreciation and amortization, (xv) pre-tax operating
income, (xvi) productivity improvements, or (xvii) a key employee's
attainment of personal objectives with respect to any of the foregoing
criteria or other criteria such as growth and profitability, customer
satisfaction, leadership effectiveness, business development, negotiating
transactions and sales or developing long term business goals. Compensation
attributable to stock options granted at 100% of the fair market value of
the Common Stock on the date of grant and subject to individual maximums is
automatically exempt under Section 162(m).
3. LIMIT ON AWARDS TO ANY PARTICIPANT IN ANY YEAR. A participant in the
Incentive Stock Plan may be awarded stock options and stock appreciation
rights in any given year for no more than the lesser of (a) 500,000 shares
or (b) 10% of the Company's total issued and outstanding shares of Common
Stock and treasury shares reported in the Company's Form 10-K with respect
to the previous year. In addition, a participant may be awarded no more
than 100,000 shares of Common Stock in the form of performance shares in
any given year.
4. COMMITTEE CERTIFICATION OF PERFORMANCE GOAL ACHIEVEMENT. At or after
the end of each calendar year, the Compensation Committee is required to
certify in writing whether the pre-established performance goals and
objectives have been satisfied in such year with respect to awards to the
five most highly compensated executive officers that are intended to comply
with Section 162(m).
While shareholders are requested to approve only the four material terms of
the Incentive Stock Plan set forth above, SEC regulations require that the
Company describe the other material terms of the Incentive Stock Plan and
provide certain other information, as set forth below.
The Incentive Stock Plan provides for the grant of incentive stock options
(qualifying under Section 422 of the Code), non-qualified stock options, stock
appreciation rights ("SARs"), performance shares and restricted
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stock, or any combination of the foregoing, as the Compensation Committee may
determine. In addition, under the terms of the Incentive Stock Plan and in
connection with the Spin-Off, the Compensation Committee awarded substitute
stock options and restricted stock to key employees who surrendered previously
awarded options or restricted stock granted by ITT relating to shares of ITT
common stock. The Incentive Stock Plan will expire on December 31, 2005 but
will continue in effect for awards then outstanding for so long as such awards
are outstanding.
The Incentive Stock Plan contains a formula for establishing an annual limit
on the number of shares that may be awarded (or with respect to which non-
stock awards may be made) in any given calendar year (the "Annual Limit"). The
Annual Limit formula is expressed as a percentage of the Company's total
issued and outstanding shares of Common Stock and treasury stock as of the
year end immediately preceding the year of awards ("Plan Year"). Under the
Annual Limit formula, the maximum number of shares of Common Stock for which
awards may be granted under the Incentive Stock Plan in each Plan Year shall
be 1.5% of the total of the issued and outstanding shares of Common Stock and
treasury stock as reported in the Annual Report on Form 10-K of the Company
for the fiscal year ending immediately prior to any Plan Year. Any unused
portion of the Annual Limit for any Plan Year shall be carried forward and be
made available for awards in succeeding Plan Years. In addition to the
foregoing, in no event may more than five million shares of Common Stock be
cumulatively available for awards of incentive stock options, and provided
further, that no more than 20% of the total number of shares available on a
cumulative basis may be available for awards of restricted Common Stock and
awards of performance shares relating to Common Stock.
Subject to the above limitations, shares of Common Stock to be issued under
the Incentive Stock Plan may be made available from the authorized but
unissued Common Stock, treasury stock or from shares purchased on the open
market or any combination of the foregoing. In the event of a reorganization,
merger, stock dividend or other change in the corporate structure of the
Company or the Common Stock described in the Incentive Stock Plan, the number
of shares subject to the Incentive Stock Plan, the number of shares then
subject to awards and the price per share payable on exercise of options may
be appropriately adjusted by the Compensation Committee.
For the purpose of computing the total number of shares of Common Stock
available for awards under the Incentive Stock Plan, there shall be counted
against the foregoing limitations the number of shares of Common Stock subject
to issuance upon exercise or settlement of awards and the number of shares of
Common Stock that equal the value of awards of performance shares, in each
case determined as at the dates on which such awards are granted. If any
awards under the Incentive Stock Plan are forfeited, terminated, expire
unexercised, are settled in cash in lieu of Common Stock or are exchanged for
other awards, the shares of stock which were theretofore subject to such
awards shall again be available for awards under the Incentive Stock Plan to
the extent of such forfeiture, termination, expiration, cash settlement or
exchange of such awards. Further, any shares that are exchanged (either
actually or constructively) by optionees as full or partial payment to the
Company of the purchase price of shares being acquired through the exercise of
a stock option granted under the Incentive Stock Plan may be available for
subsequent awards.
The Compensation Committee, none of whose members may receive any award
under the Incentive Stock Plan, administers the Incentive Stock Plan,
including, but not limited to, making determinations with respect to the
designation of those key employees who shall receive awards, the number of
shares to be covered by options, SARs and restricted stock awards, the
exercise price of options (which may not be less than 100% of the fair market
value of Common Stock on the date of grant), other option terms and
conditions, and the number of performance shares to be granted and the
applicable performance objectives. The Compensation Committee may impose such
additional terms and conditions on an award as it deems advisable, and its
decisions in the administration of the Incentive Stock Plan shall be binding
on all persons for all purposes. The Compensation Committee may in its sole
discretion delegate such administrative powers as it may deem appropriate to
the chief executive officer or other members of senior management, except that
awards to executive officers shall be made solely by the Compensation
Committee subject to compliance with Rule 16b-3 under the Exchange Act.
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STOCK OPTIONS AND RELATED SARS. Incentive stock options and related SARs
under the Incentive Stock Plan must expire within ten years after grant; non-
qualified stock options and related SARs will expire not more than ten years
and two days after grant. The exercise price for options must be at least
equal to the fair market value of the Common Stock on the date of grant. The
exercise price for options must be paid to the Company at the time of exercise
and, in the discretion of the Compensation Committee, may be paid in the form
of cash or already-owned shares of Common Stock or a combination thereof.
During the lifetime of a key employee, an option or SAR must be exercised only
by the key employee (or his or her estate or designated beneficiary) but no
later than three months after his or her termination of employment (or for
longer periods as determined by the Compensation Committee). If termination is
caused by retirement, total disability or death, an option or SAR may be
exercised within five years after such termination (or such other period
determined by the Compensation Committee), but in no event later than the
expiration of the original term of the option or SAR. If a key employee
voluntarily resigns or is terminated for cause, the options and SARs are
canceled immediately.
PERFORMANCE SHARES. Performance shares under the Incentive Stock Plan are
contingent rights to receive future payments of Common Stock, cash or a
combination thereof, based on the achievement of performance objectives as
prescribed by the Compensation Committee. Such performance objectives will be
determined by the Compensation Committee over a measurement period or periods
of not less than two nor more than five years and related to at least one of
the performance criteria described above. The maximum number of performance
shares that may be granted to any individual key employee in any given year is
100,000. The ultimate payments are determined by the number of shares awarded
and the extent that performance objectives are achieved during the period. In
the event a key employee terminates employment during such a performance
period, the key employee will forfeit any right to payment unless the
Compensation Committee determines otherwise. However, in the case of
retirement, total disability, death or cases of special circumstances, the key
employee may, in the discretion of the Compensation Committee, be entitled to
an award prorated for the portion of the performance period during which he or
she was employed by the Company.
RESTRICTED SHARES. Restricted shares of Common Stock awarded under the
Incentive Stock Plan will be issued subject to a restriction period set by the
Compensation Committee during which time the shares may not be sold,
transferred, assigned or pledged or otherwise disposed of. If an employee
terminates employment during a restriction period, all such shares still
subject to restrictions will be forfeited by the key employee and reacquired
by the Company, except when the Compensation Committee determines otherwise in
special circumstances. The Compensation Committee may provide for the lapse of
restrictions where deemed appropriate and it may also require the achievement
of pre-determined performance objectives in order for such shares to vest. The
recipient, as owner of the awarded shares, shall have all other rights of a
stockholder, including the right to vote the shares and receive dividends and
other distributions during the restriction period. The restrictions may be
waived, in the discretion of the Compensation Committee, in the event of the
awardee's retirement, total disability, death or in cases of special
circumstances.
COMPENSATION UPON CHANGE OF CONTROL. The Incentive Stock Plan provides for
the automatic protection of intended economic benefits for key employees in
the event of a change of control of the Company (i.e., upon the occurrence of
an "Acceleration Event" as defined below). Notwithstanding any other
provisions of the Incentive Stock Plan, upon the occurrence of an Acceleration
Event (a) all options and SARs will generally become immediately exercisable
for a period of 60 calendar days; (b) options and SARs will continue to be
exercisable for a period of seven months in the case of an employee whose
employment is terminated other than for "just cause" (as defined in the
Incentive Stock Plan) or who voluntarily terminates employment because of a
good faith belief that such employee will not be able to discharge his or her
duties; (c) SARs exercised during the 60-day period will be settled fully in
cash based on a formula price generally reflecting the highest price paid for
a share of Common Stock during the 60-day period preceding the date such SARs
are exercised; (d) "limited stock appreciation rights" shall automatically be
granted on all outstanding options not otherwise covered by SARs, which shall
generally be immediately exercisable in full and which shall entitle the
holders to the same exercise period and formula price referred to in clauses
(a), (b) and (c) above; (e) outstanding performance share awards shall
automatically vest, with the valuation of such performance shares based on the
formula price; and (f) restrictions applicable to awards of restricted stock
shall be automatically waived.
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"Acceleration Event" is generally defined in the Incentive Stock Plan as any
of the following events: (i) a report on Schedule 13D shall be filed with the
SEC pursuant to Section 13(d) of the Exchange Act disclosing that any person
(within the meaning of Section 13(d) of the Exchange Act), other than the
Company or a subsidiary of the Company or any employee benefit plan sponsored
by the Company or a subsidiary of the Company is the beneficial owner (as such
term is defined in Rule 13d-3 under the Exchange Act) directly or indirectly
of 20% or more of the outstanding Common Stock (calculated as provided in
paragraph (d) of Rule 13d-3 under the Exchange Act in the case of rights to
acquire Common Stock); (ii) any person (within the meaning of Section 13(d) of
the Exchange Act), other than the Company or a subsidiary of the Company or
any employee benefit plan sponsored by the Company or a subsidiary of the
Company, shall purchase shares pursuant to a tender offer or exchange offer to
acquire any Common Stock (or securities convertible into such Common Stock)
for cash, securities or any other consideration; provided that after
consummation of the offer, the person in question is the beneficial owner (as
such term is defined in Rule 13d-3 under the Exchange Act) directly or
indirectly of 15% or more of the outstanding Common Stock (calculated as
provided in paragraph (d) of Rule 13d-3 under the Exchange Act in the case of
rights to acquire Common Stock); (iii) the stockholders of the Company shall
approve (A) any consolidation or merger of the Company in which the Company is
not the continuing or surviving corporation or pursuant to which shares of
Common Stock would be converted into cash, securities or other property, other
than a merger of the Company in which holders of Common Stock immediately
prior to the merger have the same proportionate ownership of common stock of
the surviving corporation immediately after the merger as immediately before
or (B) any sale, lease, exchange or other transfer (in one transaction or a
series of related transactions) of all or substantially all the assets of the
Company; or (iv) there shall have been a change in a majority of the members
of the Board of Directors within a twelve- month period unless the election or
nomination for election by the Company's stockholders of each new director
during such twelve-month period was approved by the vote of two-thirds of the
directors then still in office who were directors at the beginning of such
twelve-month period.
AMENDMENT AND TERMINATION OF THE INCENTIVE STOCK PLAN. The Board of
Directors may amend or discontinue the Incentive Stock Plan at any time and,
specifically, may make such modifications to the Incentive Stock Plan as it
deems necessary to avoid the application of Section 162(m) of the Internal
Revenue Code and the United States Treasury regulations issued thereunder.
However, stockholder approval is required for any amendment which may, with
respect to the grant of Incentive Stock Options (i) increase the number of
shares reserved for awards (except as provided in the Incentive Stock Plan
with respect to stock splits or other similar changes), or (ii) materially
change the group of employees eligible for awards.
While any key employee of the Company selected by the Compensation Committee
is eligible to participate in the Incentive Stock Plan, it is anticipated that
awards will be made only to the class of certain executives and key managers
who are considered eligible to participate in the Company's Bonus Program
described above in ITEM 3. The Compensation Committee has not specified all
key employees who may receive awards under the Incentive Stock Plan in the
future. Information regarding the options, performance shares and restricted
stock granted to the Company's Chief Executive Officer and the four other most
highly compensated executive officers during 1996 is set forth in the various
compensation tables included under the caption "COMPENSATION OF EXECUTIVE
OFFICERS" below. During 1996, all current executive officers of the Company as
a group were granted: (i) options to purchase 175,700 shares of Common Stock,
(ii) 38,900 performance shares, and (iii) 5,000 restricted shares. During
1996, all employees of the Company, excluding executive officers of the
Company, were granted: (i) options to purchase 1,255,517 shares of Common
Stock, (ii) 139,720 performance shares, and (iii) no restricted shares. The
closing price of the Common Stock on the New York Stock Exchange on February
28, 1997 was $75.00 per share.
Federal Tax Treatment
The following is a brief summary of the current Federal income tax rules
generally applicable to options and related stock appreciation rights.
Options granted under the Incentive Stock Plan may be either non-qualified
options or "incentive stock options" qualifying under Section 422A of the
Code.
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NON-QUALIFIED OPTIONS
An optionee is not subject to Federal income tax upon grant of a non-
qualified option. At the time of exercise, the optionee will realize
compensation income (subject to withholding) to the extent that the then fair
market value of the Common Stock exceeds the option price. The amount of such
income will constitute an addition to the optionee's tax basis in the optioned
stock. Sale of the shares will result in capital gain or loss (long-term or
short-term depending on the optionee's holding period). The Company is
entitled to a Federal tax deduction at the same time and to the same extent
that the optionee realizes compensation income.
INCENTIVE STOCK OPTIONS ("ISOS")
Options under the Incentive Stock Plan denominated as ISOs are intended to
constitute incentive stock options under Section 422A of the Code. An optionee
is not subject to Federal income tax upon either the grant or exercise of an
ISO. If the optionee holds the shares acquired upon exercise for at least one
year after issuance of the optioned shares and until at least two years after
grant of the option, then the difference between the amount realized on a
subsequent sale or other taxable disposition of the shares and the option
price will constitute long-term capital gain or loss. To obtain favorable ISO
tax treatment for an ISO granted prior to 1987, an optionee cannot exercise
any installment of an ISO unless and until all installments of all ISOs
previously granted to the optionee (regardless of their price) have either
been exercised, allowed to expire, or canceled through the exercise of a
related SAR. To obtain favorable tax treatment, an ISO must be exercised
within three months after termination of employment (other than by retirement,
disability, or death) with the Company or a 50% subsidiary. To obtain
favorable tax treatment, an ISO must be exercised within three months of
retirement or within one year of cessation of employment for disability (with
no limitation in the case of death), notwithstanding any longer exercise
period permitted under the terms of the Incentive Stock Plan. The Company will
not be entitled to a Federal tax deduction with respect to the grant or
exercise of the ISO.
If the optionee sells the shares acquired under an ISO before the requisite
holding period, he will be deemed to have made a "disqualifying disposition"
of the shares and will realize compensation income in the year of disposition
equal to the lesser of the fair market value of the shares at exercise or the
amount realized on their disposition over the option price of the shares.
However, if the disposition is by gift or by sale to a related party, the
compensation income must be measured by the value of the shares at exercise
over the option price. Any gain recognized upon a disqualifying disposition in
excess of the ordinary income portion will constitute either short-term or
long-term capital gain. In the event of a disqualifying disposition, the
Company will be entitled to a Federal tax deduction in the amount of the
compensation income realized by the optionee.
The option spread on the exercise of an ISO is an adjustment in computing
alternative minimum taxable income. No adjustment is required, however, if the
optionee made a disqualifying disposition of the shares in the same year as he
is taxed on the exercise.
STOCK APPRECIATION RIGHTS ("SARS")
SARs may be awarded to with respect to both incentive stock options and non-
qualified options granted under the Plan. An optionee is not taxed upon the
grant of SARs. An optionee exercising SARs for cash will realize compensation
income (subject to withholding) in the amount of the cash received. The
Company is entitled to a tax deduction at the same time and to the same extent
that the optionee realizes compensation income.
GOLDEN PARACHUTE TAX PENALTIES
Options, SARs, performance shares or restricted stock which are granted,
accelerated or enhanced upon the occurrence of a takeover (i.e., an
Acceleration Event as defined in the Plan) may give rise, in whole or in part,
to "excess parachute payments" within the meaning of Section 280G of the
Internal Revenue Code and, to such extent, will be nondeductible by the
Company and subject to a 20% excise tax to the awardee.
THE BOARD OF DIRECTORS RECOMMENDS THAT SHAREHOLDERS VOTE TO APPROVE THE
MATERIAL TERMS OF THE 1995 ITT HARTFORD INCENTIVE STOCK PLAN.
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ITEM 5
APPROVAL OF CERTAIN MATERIAL TERMS OF THE 1997 HARTFORD LIFE, INC. INCENTIVE
STOCK PLAN
On February 10, 1997, Hartford Life, Inc. ("Hartford Life") filed a
registration statement on Form S-1 with the SEC to register the sale of shares
of its Class A Common Stock in an initial public offering ("IPO"). The Company
recently incorporated Hartford Life as a wholly-owned subsidiary of the
Company in order to own and operate all of the life insurance and other
financial services operations currently operated by the Company's life
insurance subsidiaries. If the IPO is consummated, the Company will own all of
Hartford Life's issued and outstanding shares of Class B Common Stock,
representing approximately 80% of the economic interest in Hartford Life and
in excess of 90% of the combined voting power of Hartford Life's Class A
Common Stock and Class B Common Stock. The shares of Class A Common Stock that
are anticipated to be sold in the IPO will represent approximately 20% of the
economic interest in Hartford Life and less than 10% of the combined voting
power of both classes of Common Stock.
In connection with the IPO and as more fully described in Hartford Life's
registration statement on Form S-1, the Board of Directors of Hartford Life is
expected to adopt certain benefit plans for Hartford Life's employees,
including the 1997 Hartford Life, Inc. Incentive Stock Plan (the "1997
Incentive Stock Plan"). Both Hartford Life and the Company desire that, if the
IPO is consummated, the terms of the 1997 Incentive Stock Plan comply with the
requirements of Section 162(m) of the Code for the same reasons discussed in
ITEM 4 above with respect to the Company's Incentive Stock Plan. As Section
162(m) requires that the Company's shareholders approve the four material
terms of the 1997 Incentive Stock Plan related to Section 162(m), the
Compensation Committee of the Company has approved such material terms
described below and the Compensation and Personnel Committee of the Board of
Directors of Hartford Life is anticipated to approve such material terms.
Therefore, the Company's shareholders will be requested to approve such
material terms at the Annual Meeting.
Set forth below is a description of the four material terms of the 1997
Incentive Stock Plan related to Section 162(m) of the Code. These material
terms are the same as those described above in ITEM 4 regarding the Company's
Incentive Stock Plan.
1. CLASS OF EXECUTIVES. The five most highly compensated executive
officers of Hartford Life, its subsidiaries and affiliates for any given
year whose responsibilities and decisions, in the judgment of Hartford
Life's Compensation Committee, directly affect the performance of Hartford
Life and its subsidiaries.
2. PERFORMANCE CRITERIA. Awards (other than certain option grants
described below) may be based upon any one or more of the following
criteria, which shall be stated for the five most highly compensated
executive officers in terms of an objective criteria or standard as
required by Section 162(m), and which may be (a) determined solely by
reference to Hartford Life's performance, any subsidiary or affiliate of
Hartford Life or any division or unit of any of the foregoing, or (b) based
on comparative performance of any one or more of the following relative to
other entities: (i) earnings per share, (ii) return on equity, (iii) cash
flow, (iv) return on total capital, (v) return on assets, (vi) economic
value added, (vii) increase in surplus, (viii) reductions in operating
expenses, (ix) increases in operating margins, (x) earnings before income
taxes and depreciation, (xi) total shareholder return, (xii) return on
invested capital, (xiii) cost reductions and savings, (xiv) earnings before
interest, taxes, depreciation and amortization, (xv) pre-tax operating
income, (xvi) productivity improvements, or (xvii) a key employee's
attainment of personal objectives with respect to any of the foregoing
criteria or other criteria such as growth and profitability, customer
satisfaction, leadership effectiveness, business development, negotiating
transactions and sales or developing long term business goals. Compensation
attributable to stock options granted at 100% of the fair market value of
the Class A Common Stock on the date of grant and subject to individual
maximums is automatically exempt under Section 162(m).
3. LIMIT ON AWARDS TO ANY PARTICIPANT IN ANY YEAR. Except for awards in
1997, a participant in the 1997 Incentive Stock Plan may be awarded stock
options and stock appreciation rights in any given year for no more than
the lesser of (a) 500,000 shares or (b) 10% of Hartford Life's total issued
and outstanding shares of Class A Common Stock and treasury shares reported
in Hartford Life's Form 10-K
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with respect to previous year with respect to such awards made in 1997, the
same limits apply except that the 10% limit set forth in (b) shall be
applicable to Hartford Life's issued and outstanding shares of Class A
Common Stock immediately following the completion of the IPO (excluding
shares issued by virtue of underwriters' over-allotments). In addition, a
participant may be awarded no more than 100,000 shares of Class A Common
Stock in the form of performance shares in any given year. In addition to
the foregoing, Hartford Life may grant options and other awards in respect
of shares of Class A Common Stock for options and other awards exchanged
for options and other awards granted under the Company's Incentive Stock
Plan.
4. COMMITTEE CERTIFICATION OF PERFORMANCE GOAL ACHIEVEMENT. At or after
the end of each calendar year, Hartford Life's Compensation Committee is
required to certify in writing whether the pre-established performance
goals and objectives have been satisfied in such year with respect awards
to the five most highly compensated executive officers that are intend to
comply with Section 162(m).
The other material terms of the 1997 Incentive Stock Plan are the same as
those described in ITEM 4 above regarding the Company's Incentive Stock
Plan except as follows:
(1) Awards under the 1997 Incentive Stock will be made with respect
to Hartford Life's shares of Class A Common Stock;
(2) Hartford Life will not be required to issue shares of its
authorized but unissued shares of Class A Common Stock in order to
satisfy awards if the issuance would result in the Company's ownership
being less than 80% of the combined voting power of both classes of
Hartford Life's Common Stock and 80% of the total value of the capital
stock of Hartford Life.
(3) The 1997 Incentive Stock Plan provides that a sale of the
Company's interest in Hartford Life will not be considered an
Acceleration Event. The 1997 Incentive Stock Plan also provides that if
an Acceleration Event (as defined above) occurs with respect to the
Company at a time when the Company owns more than 50% of the combined
voting power and value of the capital stock of Hartford Life, then an
Acceleration Event will be deemed to have occurred at such time with
respect to Hartford Life for purposes of the 1997 Incentive Stock Plan.
While any key employee of Hartford Life selected by Hartford Life's
Compensation Committee is eligible to participate in the 1997 Incentive Stock
Plan, it is anticipated that awards will be made only to the approximately 150
employees who are considered eligible to participate in the Company's Bonus
Program described above in ITEM 3. As of the date of this proxy statement, no
employees have been determined to receive awards under the 1997 Incentive Stock
Plan in the future. However, it is anticipated that after the IPO is completed,
certain employees of Hartford Life will exchange options and other awards
granted under the Company's Incentive Stock Plan for options and other awards
granted under Hartford Life's 1997 Incentive Stock Plan.
THE BOARD OF DIRECTORS RECOMMENDS THAT SHAREHOLDERS VOTE TO APPROVE THE
MATERIAL TERMS OF THE 1997 HARTFORD LIFE, INC. INCENTIVE STOCK PLAN.
ITEM 6
RATIFICATION OF THE APPOINTMENT OF INDEPENDENT AUDITORS
In accordance with the recommendation of the Audit Committee, the Board of
Directors has appointed Arthur Andersen LLP as independent auditors of the
Company for the fiscal year ending December 31, 1997. Although shareholders'
ratification of this appointment is not required, the Board requests
ratification by the shareholders. If the shareholders do not ratify the
appointment of Arthur Andersen LLP, the selection of other independent auditors
will be considered by the Audit Committee and the Board of Directors.
Arthur Andersen LLP has served as independent auditors of the former ITT
Corporation and most of its subsidiaries, including the Company, for many
years, and Arthur Andersen LLP's long-term knowledge of the Company has enabled
Arthur Andersen LLP to carry out its audits with effectiveness and efficiency.
Representatives of Arthur Andersen LLP will attend the Annual Meeting, will
have the opportunity to make a statement if they desire to do so, and will be
available to respond to appropriate questions.
THE BOARD OF DIRECTORS RECOMMENDS THAT SHAREHOLDERS VOTE FOR THE RATIFICATION
OF THE APPOINTMENT OF ARTHUR ANDERSEN LLP AS INDEPENDENT AUDITORS OF THE
COMPANY.
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REPORT OF THE COMPENSATION AND PERSONNEL COMMITTEE
ON EXECUTIVE COMPENSATION
This report sets forth the executive compensation policies of the
Compensation and Personnel Committee (the "Committee") of The Hartford's Board
of Directors and discusses the 1996 compensation of The Hartford's Chief
Executive Officer and certain other executive officers. Following this report
is a Summary Compensation Table that sets forth all 1996 compensation earned
by, and awarded or paid to, Donald R. Frahm, who served as the Chief Executive
Officer during 1996, and the other Named Executives included in that table.
Other tables following this report provide information on stock option and
other long-term performance grants, and a performance graph compares the
cumulative total return on The Hartford's common stock to the cumulative total
returns of the S&P 500 Index and an index consisting of peer insurance
companies.
COMMITTEE ROLE IN OVERSEEING EXECUTIVE COMPENSATION POLICY
A primary role of the Committee is to determine and oversee the
administration of compensation for the Company's executives, including its
senior executive officers ("Senior Executives"). In this capacity, the
Committee is dedicated to ensuring that the Company's compensation policies
and practices are used effectively to support the achievement of the Company's
short-term and long-term business objectives.
There are several principles that guide the Committee in its decision-making
capacity. The Committee:
. Adheres to a pay-for-performance philosophy, ensuring that aggregate
compensation levels paid to Senior Executives reflect the extent to which
the Company's key operating goals are fulfilled.
. Reinforces the central importance of shareholder value creation by
relying heavily on compensation programs that deliver value to Senior
Executives only when shareholders realize corresponding gains.
. Encourages the acquisition of Company stock by Senior Executives with the
objective of strengthening the common interests of management and
shareholders, thereby promoting the maximization of shareholder value.
. Establishes Senior Executive compensation levels in relation to the pay
rates that are offered at companies with which the Company competes for
senior management talent.
. Maintains a total compensation perspective on Senior Executive pay in
judging the appropriateness of rewards for the Company's Senior
Executives.
DESCRIPTION OF EXECUTIVE COMPENSATION POLICIES
The Committee approved a new compensation program for the Company's Senior
Executives effective January 1, 1996. The new program is characterized by base
salary levels that are targeted somewhat below market rates, a heavy emphasis
on performance-based, variable compensation, which when combined with base
salary, provides above market total compensation for successful performance, a
strong connection between pay and The Hartford's stock price, and commitment
to promote enhanced share ownership among Senior Executives. Consistent with
the shareholder value orientation of this program, the Committee has
authorized guidelines for Senior Executive share ownership which should serve
to further align the interests of management and investors. The guidelines
provide that within a five-year period Senior Executives should attain an
investment position in The Hartford's stock that is equal to two or three
times their base salary, depending on the position of the Senior Executive.
The Committee believes that the new compensation program will effectively
catalyze Senior Executive activities in support of the Company's goal
achievement and appropriately recognize the contributions of every Senior
Executive.
It is the Company's policy to target Senior Executive compensation levels in
relation to pay rates that are typical at organizations with which the Company
competes for senior management talent. For corporate Senior Executives, the
competitive market generally includes other leading insurance companies,
although general
16
<PAGE>
industry practices are also considered when reviewing pay for certain Senior
Executives whose functional responsibilities are not exclusively insurance
related. For line of business Senior Executives, pay is in line with practices
that are common at leading insurance carriers, as well as other financial
institutions that offer competing insurance products.
Consistent with the Company's pay-for-performance orientation, Senior
Executive salaries are targeted at levels that represent 90 percent of
prevailing market rates. Total compensation is designed to reach 120 percent
of market norms, but only when the Company's challenging performance goals are
fully achieved. Actual compensation levels may lead or lag these goals, but
the terms of the compensation program ensure such variances depend principally
on the Company's stock price appreciation and demonstrated operating success.
The principal elements of the new compensation program are: a base salary
tied to individual value added; an annual incentive opportunity dependent on
operating results and promoting Senior Executive share ownership; stock
options; and long-term compensation tied to earnings growth and stock price
appreciation. Each of these elements is discussed below.
1996 COMPENSATION
1996 BASE SALARY
The Company's compensation policy is to pay base salaries for Senior
Executives at levels that represent 90 percent of the median salaries paid by
organizations with which the Company competes for executive talent. Total
compensation, comprised of base and variable pay, can achieve 120 percent of
the market norm when performance goals are fully met. In assessing a Senior
Executive's salary level each year, the Committee's principal consideration is
the Senior Executive's performance on the job, including his or her
demonstrated contributions to the Company's goal achievement. In considering
salary actions, the Committee also reviews internal compensation equity and
the Senior Executive's level of responsibility, experience, and expertise.
On December 19,1995, the ITT Corporation ("ITT") Spin-Off occurred and The
Hartford became a separate public company. The Compensation and Personnel
Committee of ITT approved salary increases of $100,000 for each of Messrs.
Frahm, Ayer and Smith effective on December 19, 1995. These increases
reflected competing pay practices at other corporations and, with respect to
Mr. Frahm, his performance during 1995 and his leadership during the Spin-Off
transition. There were no other salary increases for Messrs. Frahm, Ayer and
Smith during 1996. The Hartford's Compensation and Personnel Committee
approved a salary increase of $15,000 for Mr. Gareau, effective January 1,
1996, and a salary increase of $30,000 for Mr. Zwiener, effective August 1,
1996. These increases were driven by a combination of the aforementioned
policies and considerations. In addition, Messrs. Ayer and Smith have
employment agreements with the Company that provide for minimum base salaries
of $525,000, as described below under the heading "Employment Agreements."
1996 VARIABLE COMPENSATION
Variable compensation reinforces the Company's pay-for-performance
philosophy and is a key element to the overall compensation program. Variable
compensation includes annual and long-term incentive compensation
opportunities. Annual incentive compensation is designed to deliver about 25
percent of variable compensation, while long-term incentives are designed to
deliver the remaining 75 percent. All variable compensation programs also
facilitate Senior Executives' acquisition of the Company's stock thereby
promoting a coordination of interest between management and shareholders.
ANNUAL INCENTIVES
Each year the Committee reviews management's suggestions for performance
goals, the achievement of which will enhance the Company's value. The
Committee also reviews and approves with respect to each Senior Executive,
annual incentive payment levels payable in the event performance goals are
fully achieved. Actual
17
<PAGE>
annual incentive payments vary with performance relative to such goals. Better
performance generates larger awards; lesser results yield smaller payments.
Ordinarily, corporate or staff Senior Executives earn annual incentives on
the basis of corporate and individual performance. Incentives for line of
business Senior Executives may relate to corporate, line of business, and
individual performance. On occasion, the Committee may approve management's
recommendation for customized annual incentive arrangements where they are
appropriate to address competitive market requirements or business needs.
For 1996, the amounts of annual incentive awards were based on financial
performance for the year compared to annual performance goals established by
the Committee at the beginning of the year. For 1996, such performance goals
were net income compared to budget, cash flow compared to budget, and return
on equity compared to budget for Messrs. Frahm, Ayer, Gareau and Zwiener.
These measures were weighted 65%, 10% and 25%, respectively. The performance
goals for Mr. Smith were net income compared to budget and return on equity
compared to budget with respect to Hartford Life.
The Committee awarded an annual incentive of $500,000, $300,000, $310,000,
$250,000 and $200,000 for Messrs. Frahm, Ayer, Smith, Zwiener and Gareau,
respectively.
Consistent with the Company's interest in promoting a strong alignment
between management and global shareholder interests, Senior Executives may
elect to forego receiving up to half their annual incentives in exchange for
the right to receive shares of common stock of the Company ("Stock Units").
Receipt of actual shares of stock is deferred during a three-year restriction
period applicable to the Stock Units. Senior Executives who elect to convert a
portion of their annual incentive payments to Stock Units are rewarded with
additional Stock Units equal to 10 percent of the amount converted, and actual
shares relating to these incremental Stock Units also will be deferred as to
receipt and restricted for a period of three years.
STOCK OPTIONS
For 1996, the Committee expanded eligibility to all executives for grants of
stock options under the terms of the 1995 ITT Hartford Incentive Stock Plan
(the "Incentive Stock Plan"). Stock options provide executives with the
opportunity to acquire an equity interest in the Company and to participate in
the creation of shareholder value as reflected in growth in the price of The
Hartford's common stock. The option exercise price equals 100 percent of the
fair market value of the Company's common stock on the date of option grant,
thereby ensuring that plan participants will derive benefits only as
shareholders realize corresponding gains. To ensure a long-term perspective,
options have a maximum ten-year term.
The Committee believes that the practice of granting stock options annually
reinforces the Company's policy of encouraging stock ownership by executives
in support of building shareholder value. Furthermore, options provide value
to Senior Executives only when shareholders realize positive returns on their
investment in the Company. In this way, stock option grants reward Senior
Executives only in conjunction with value creation for shareholders.
On February 14, 1996, options to purchase an aggregate of 189,300 shares of
common stock were granted under the Incentive Stock Plan to Messrs. Frahm,
Ayer, Gareau, Smith and Zwiener at an exercise price of $52 per share (the
closing price of a share of The Hartford's common stock on the New York Stock
Exchange on the February 14, 1996 grant date).
To further align interests of Senior Executives and shareholders, the
options granted to Messrs. Frahm, Ayer, Smith and Zwiener become exercisable
at the earlier of the point at which The Hartford's common stock trades at a
price equal to or exceeding 125 percent of the option exercise price for a
period of ten consecutive trading days, or seven years from the date of option
grant. Specifically, the options became exercisable on December 5, 1996, when
the closing price of The Hartford's common stock remained at or above $65 per
share
18
<PAGE>
(being 125% of the $52 grant price) for ten consecutive trading days. Options
for other executives become exercisable at the cumulative rate of one-third
per year for the first three years. Further information regarding option
grants for the named Senior Executives during 1996 is included in the Option
tables following this report.
1996 LONG-TERM PERFORMANCE PROGRAM
Beginning in 1996, Senior Executives and other executives were given the
opportunity to earn shares of Company Common Stock contingent on the Company
achieving certain performance objectives over a three-year period. Under the
terms of these contingent awards made in 1996, there are two equally weighted
performance objectives measured over the 1996-1998 period: (i) cumulative core
earnings per share and (ii) total shareholder return (stock price appreciation
and dividends reinvested) relative to the returns generated by an index of the
Company's competitors. Target level core earnings per share coupled with a
total shareholder return equal to the average of the peer community will
result in the awarding of a target number of shares. Better performance (up to
a maximum of 150 percent) will yield a larger payout; poorer performance (to a
minimum of 75 percent) will mean proportionally smaller payments. If the
minimum threshold is not achieved, no shares will ultimately be awarded.
During 1996, Messrs Frahm, Ayer, Gareau, Smith and Zwiener were granted
contingent performance share awards of 14,400 shares, 8,250 shares, 5,000
shares, 8,250 shares, and 6,100 shares, respectively. Additional information
regarding these awards is included in the table below entitled "Long-Term
Incentive Plans--Awards in Fiscal Year 1996."
In order to provide an additional long-term incentive to Mr. Zwiener, who
joined the Company in 1995, the Committee granted 5,000 shares of restricted
common stock to Mr. Zwiener in January 1996. The restricted stock may not be
sold or otherwise transferred until three years after the grant date.
Additional information regarding this grant is set forth in the Summary
Compensation Table.
COMPLIANCE WITH SECTION 162(M)
Section 162(m) of the Internal Revenue Code of 1986, as amended, generally
denies a publicly-traded company a Federal income tax deduction for
compensation in excess of $1 million paid to certain of its executive officers
unless the amount of such excess is payable based solely upon the attainment
of objective performance criteria. The Committee believes that tax
deductibility of compensation is an important factor, but not the sole factor,
to be considered in setting executive compensation policy. Accordingly, the
Committee generally intends to take such reasonable steps as are required to
avoid the loss of a tax deduction due to Section 162(m), but reserves the
right to pay amounts which are not deductible in appropriate circumstances.
SUMMARY
The Committee is responsible for reviewing, monitoring, and approving all
compensation decisions affecting Company Senior Executives. The Committee
expects that all compensation paid to Senior Executives will be consistent
with the Company's interest in providing market competitive compensation
opportunities, within the context of a pay-for-performance environment, and in
a manner that is supportive of the Company's business mission. The Committee
will continue to actively monitor the effectiveness of the Company's Senior
Executive compensation plans and assess the appropriateness of Senior
Executive pay levels to assure prudent use of Company resources.
THE COMPENSATION AND PERSONNEL COMMITTEE:
Gordon I. Ulmer, Chairman
Bette B. Anderson
Robert A. Burnett
Arthur A. Hartman
19
<PAGE>
COMPENSATION OF EXECUTIVE OFFICERS
The following table provides information regarding the cash and other
compensation of those persons who, during the past year, (i) served as the
Company's Chief Executive Officer and (ii) were the four other most highly
compensated executive officers (the "Named Executives"):
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
LONG-TERM COMPENSATION
---------------------------------------
AWARDS PAYOUTS
--------------------------- -----------
NAME AND ANNUAL COMPENSATION RESTRICTED SECURITIES ALL OTHER
PRINCIPAL ------------------------ STOCK AWARDS UNDERLYING LTIP COMPENSATION
POSITION YEAR SALARY ($) BONUS($) ($) OPTIONS(#)(4) PAYOUTS (5) ($)(6)
--------- ---- ---------- -------- ------------ ------------- ----------- ------------
<S> <C> <C> <C> <C> <C> <C> <C>
Donald R. Frahm......... 1996 700,000 500,000 -- 64,800 -- 38,950
Chairman, President and 1995 603,750 263,300 -- 93,109 720,000 54,174
Chief Executive Officer 1994 565,833 270,000 -- 93,109 -- 21,585
(1)
Ramani Ayer............. 1996 525,000 300,000 -- 37,200 -- 21,956
Executive Vice 1995 428,750 204,800 -- 62,911 375,000 42,214
President; President 1994 333,333 235, 000 -- 62,911 -- 13,448
and Chief Operating
Officer--Hartford Fire
Insurance Company (1)
Lowndes A. Smith........ 1996 525,000 310,000 -- 37,200 -- 21,260
Executive Vice 1995 428,750 229,800 -- 62,911 300,000 38,693
President; President 1994 333,333 200,000 -- 62,911 -- 13,448
and Chief Operating
Officer--Hartford Life
Insurance Co. (1)
David K. Zwiener........ 1996 332,500 250,000 241,250(3) 27,600 -- 13,895
Executive Vice 1995 133,333 148,400 -- 42,780 -- --
President and Chief 1994 -- -- -- -- -- --
Financial Officer (2)
Joseph H. Gareau........ 1996 310,800 200,000 -- 22,500 -- 14,648
Executive Vice 1995 300,000 168,200 -- 37,747 150,000 39,268
President and Chief 1994 264,583 140,000 -- 37,747 -- 11,041
Investment Officer
</TABLE>
- -------
(1) Mr. Frahm served as Chairman, President and Chief Executive Officer during
1996, but retired effective January 31, 1997. Effective February 1, 1997,
Mr. Ayer succeeded Mr. Frahm as Chairman, President and Chief Executive
Officer, and Mr. Smith became Vice-Chairman of the Company.
(2) Mr. Zwiener joined the Company in August 1995; therefore, the amounts
above for 1995 represent only that portion of 1995 during which he served.
(3) Represents the market value of 5,000 shares of restricted Common Stock
granted to Mr. Zwiener on January 10, 1996 based on the closing price of
the Common Stock on the NYSE of $ 48.25 per share. The market value of
such shares was $337,500 on December 31, 1996 based on the NYSE closing
price of $67.50 per share on that day. Dividends are paid on the shares of
restricted Common Stock.
(4) Each of the Named Executives had been granted options to purchase shares
of ITT common stock. After the Spin-Off, each Named Executive elected to
substitute his ITT options for options to purchase shares of the Company's
Common Stock. The options listed in the table above for 1994 and 1995 are
the substituted options.
(5) The amounts in this column are payments made by the Company in 1996
pursuant to an ITT long-term performance plan. Under this plan, contingent
cash awards were made to certain executive officers of ITT and its
subsidiaries, including the Named Executives. The awards were contingent
upon ITT achieving certain levels of return on equity for the three year
period from 1992 to 1995. The plan was amended in 1995 to permit increased
or decreased payments based upon events that may have had a material
impact on ITT's performance.
(6) Amounts shown in this column represent company contributions under the
Company's Investment and Savings Plan and the Excess Savings Plan, which
are defined contribution plans. Under these plans, the Company makes a
matching contribution in an amount equal to 50% of an employee's
contribution, such matching contribution not to exceed three percent (3%)
of such employee's salary. The Company also makes a non-matching
contribution equal to one-half of one percent ( 1/2 of 1%) of an
employee's salary. In addition to ordinary company contributions in 1995,
in connection with the Spin-Off, each participant in the ITT Investment
and Savings Plan, including each Named Executive, received a one-time
distribution to his or her account. This distribution resulted from the
termination of the Employee Stock Ownership portion of the plan, the
shares of preferred stock of which were used to repay a loan and the
excess distributed to the accounts of participants. The Company's flexible
benefit programs allow for the sale back to the Company of up to one week
of vacation time capped at a 1996 limit of $2,885. The group term life
imputed income results from the federal tax laws' requirement that the
value of group term life insurance exceeding $50,000 be included as
taxable income.
20
<PAGE>
STOCK OPTIONS
Under the Incentive Stock Plan, the Compensation and Personnel Committee of
the Board of Directors selects key employees to receive various awards,
including stock options, stock appreciation rights, shares of restricted
Common Stock and performance shares. The table below provides information
regarding grants of stock options to the Named Executives during 1996.
OPTION GRANTS IN FISCAL YEAR 1996
<TABLE>
<CAPTION>
INDIVIDUAL GRANTS
----------------------------------------------------------------------------
POTENTIAL REALIZABLE
NUMBER OF VALUE AT ASSUMED
SECURITIES ANNUAL RATES OF STOCK
UNDERLYING % OF TOTAL PRICE APPRECIATION
OPTIONS OPTIONS GRANTED FOR OPTION TERM($)(4)
GRANTED(1) TO EMPLOYEES IN EXERCISE PRICE EXPIRATION ----------------------
NAME (#) 1996(2) ($/SHARE)(3) DATE 5% 10%
---- ---------- --------------- -------------- ---------- ---------- -----------
<S> <C> <C> <C> <C> <C> <C>
Donald R. Frahm......... 64,800 4.53 52.00 2/16/06 2,118,960 5,369,976
Ramani Ayer............. 37,200 2.60 52.00 2/16/06 1,216,440 3,082,764
Lowndes A. Smith........ 37,200 2.60 52.00 2/16/06 1,216,440 3,082,764
David K. Zwiener........ 27,600 1.93 52.00 2/16/06 902,520 2,287,212
Joseph H. Gareau........ 22,500 1.57 52.00 2/16/06 735,750 1,864,575
</TABLE>
- --------
(1) The options granted to Messrs. Frahm, Ayer, Smith and Zwiener became fully
exercisable on December 5, 1996, when the closing price of the Common
Stock on the NYSE was equal to or greater than $65.00 for ten consecutive
trading days. Mr. Gareau's options are exercisable in three equal annual
installments commencing on the first anniversary date of the grant. The
exercisability, payment or vesting of options and other awards shown in
the table may be accelerated upon the occurrence of a change in control
(as defined in the 1995 ITT Hartford Incentive Stock Plan) of the Company.
(2) Percentages indicated are based on options to purchase a total of
1,431,217 shares of Common Stock granted to 764 employees of the Company
during 1996.
(3) Options were granted at exercise prices that were 100% of the fair market
value of the Common Stock on the date of grant.
(4) At the end of the term of the options granted on February 14, 1996, the
projected price of a share of the Common Stock would be $84.70 and $134.87
at assumed annual appreciation rates of 5% and 10%, respectively.
21
<PAGE>
1996 OPTION EXERCISES AND 1996 YEAR-END OPTION VALUES
The following table provides information on stock options that were
exercised, if any, and the value of unexercised stock options held at December
31, 1996 by the Named Executives:
<TABLE>
<CAPTION>
AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR
AND FISCAL YEAR-END OPTION VALUES
-------------------------------------------------------------------------
NUMBER OF SECURITIES
SHARES UNDERLYING UNEXERCISED VALUE OF UNEXERCISED
ACQUIRED OPTIONS AT FISCAL IN-THE-MONEY OPTIONS HELD
ON YEAR-END (#) AT FISCAL YEAR-END ($)(1)
EXERCISE VALUE ------------------------- -------------------------
NAME (#) REALIZED ($) EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
---- -------- ------------ ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
Donald R. Frahm......... -- -- 319,788 0 8,784,272 0
Ramani Ayer............. -- -- 235,040 0 6,794,936 0
Lowndes A. Smith........ -- -- 241,216 0 7,201,309 0
David K. Zwiener........ -- -- 92,388 0 2,230,690 0
Joseph H. Gareau........ -- -- 91,754 60,248 3,406,350 1,389,088
</TABLE>
- --------
(1) Values are calculated for options "in-the-money" by subtracting the
exercise price per share of the options from the per share NYSE
consolidated trading closing price of $67.50 of the Common Stock on
December 31, 1996.
1996 LONG-TERM INCENTIVE PLAN AWARDS
On February 14, 1996, the Compensation and Personnel Committee of the Board
made contingent awards of performance shares to certain key employees of the
Company, including the Named Executives. The awards are contingent upon the
Company achieving certain performance objectives described below. To the
extent that the performance objectives are achieved, cash and shares of Common
Stock will be granted to each key employee pursuant to the performance share
provisions of the Incentive Stock Plan.
Under the terms of the awards, there are two equally weighted performance
objectives measured over the 1996-1998 three-year performance period: core
earnings per share of the Company ("Core Earnings") and total shareholder
return ("TSR"). Core Earnings is defined as the Company's net income minus:
(i) net realized capital gains or losses; (ii) income or losses due to changes
in methods of accounting; (iii) the amount of losses from individual
catastrophes in excess of 1% of worldwide property-casualty earned premium for
the year; (iv) the amount of any individual non-catastrophe loss associated
with any non-recurring charge that exceeds $100 million; and (v) the income or
loss associated with allocations resulting from the liability sharing
agreement entered into in connection with the ITT Spin-Off. TSR is measured by
the difference between the price of the Common Stock at the beginning of the
1996-1998 performance period and the price at the end of the performance
period (assuming the reinvestment of dividends paid), compared with the TSR of
the stock of a group of peer insurance companies.
The Compensation and Personnel Committee established a target Core Earnings
and a TSR to be achieved in connection with the awards. If the target is
achieved, a key employee will receive 100% of the performance shares awarded
(payable one-third in cash and two-thirds in Common Stock). The Compensation
and Personnel Committee also established a threshold (minimum) Core Earnings
and TSR to be achieved. If the threshold amounts are not achieved, the key
employees will not receive any of the performance shares awarded. If the Core
Earnings and TSR achieved exceeds the thresholds but falls below the targets,
the key employees will receive awards adjusted downward by interpolation to
reflect falling short of the targets. If the targets are exceeded, the key
employees will receive awards adjusted upward by interpolation subject to a
cap established by the Compensation and Personnel Committee.
22
<PAGE>
The following table provides information on these long-term performance
share awards made to the Named Executives during 1996:
<TABLE>
<CAPTION>
AWARDS OF PERFORMANCE
SHARES RELATING TO ESTIMATED FUTURE PAYOUTS
THE COMMON STOCK UNDER NON-STOCK
IN LAST FISCAL YEAR PRICE-BASED PLANS (#)(1)
------------------------ ------------------------------------
PERIOD UNTIL
NAME # OF SHARES PAYOUT (1) THRESHOLD (#) TARGET (#) MAXIMUM (#)
---- ----------- ------------ ------------- ---------- -----------
<S> <C> <C> <C> <C> <C>
Donald R. Frahm.. 14,400 3 years 7,200 14,400 28,800
Ramani Ayer...... 8,250 3 years 4,125 8,250 16,500
Lowndes A.
Smith........... 8,250 3 years 4,125 8,250 16,500
David K.
Zwiener......... 6,100 3 years 3,050 6,100 12,200
Joseph H.
Gareau.......... 5,000 3 years 2,500 5,000 10,000
</TABLE>
- --------
(1) Each of the Named Executives was granted the number of performance shares
relating to the Common Stock set forth above. The grants are contingent
upon the Company achieving two general performance objectives over a
three-year period ending on December 31, 1998. The performance objectives
and the extent to which a Named Executive may be entitled to a future
payout are described above. The threshold, target and maximum number of
shares that may be awarded as set forth in the table above are based on
the Company equally achieving 75%, 100% and 150% or more, respectively, of
each of the two performance objectives.
23
<PAGE>
ITT HARTFORD RETIREMENT PROGRAM
The Hartford Fire Insurance Company Retirement Plan covers substantially all
eligible U.S. salaried employees of the Company and its subsidiaries,
including senior executive officers and other executives. An employee's annual
pension will equal two percent of his or her average final compensation for
each of the first thirty years of benefit service, reduced by one and two-
thirds percent of the employee's primary Social Security benefit for each year
of benefit service to a maximum of thirty years; provided that no more than
one-half of an employee's primary Social Security benefit is used for such
reduction. An employee's average final compensation is defined under the plan
as the total of (i) an employee's average annual base salary for the five
calendar years of the last 120 consecutive calendar months of eligibility
service affording the highest such average plus (ii) a member's average annual
compensation not including base salary for the five calendar years of the
member's last 120 consecutive calendar months of eligibility service affording
the highest such average. The plan also provides for undiscounted early
retirement pensions for employees who retire at or after age sixty following
completion of fifteen years of eligibility service. An employee will be vested
in benefits accrued under the plan upon completion of five years of
eligibility service.
Applicable Federal law limits the amount of benefits that can be paid and
compensation which may be recognized under a tax-qualified retirement plan.
Therefore, the Company has non-qualified unfunded retirement plans (the
"Hartford Excess Benefit Plans") for payment of those benefits at retirement
that cannot be paid from the qualified retirement plan. The practical effect
of the Hartford Excess Benefit Plans is to continue calculation of retirement
benefits to all employees on a uniform basis. The Company also maintains an
excess plan trust under which excess benefits under the Hartford Excess
Benefit Plans for certain officers of the Company are funded. Any such
employee may indicate a preference, subject to certain conditions, to receive
any excess benefit in the form of a single discounted lump sum payment. Any
"excess" benefit accrued to any such employee will be immediately payable in
the form of a single discounted lump sum payment upon the occurrence of a
change in corporate control (as defined in the Hartford Excess Benefit Plans).
Based on various assumptions as to remuneration and years of service, before
Social Security reductions, the following table illustrates the estimated
annual benefits payable from the Retirement Program at retirement at age 65
that are paid for by the Company.
PENSION PLAN TABLE
<TABLE>
<CAPTION>
AVERAGE YEARS OF SERVICE
FINAL ------------------------------------------------------------------------------------
COMPENSATION 15 20 25 30
- ------------ -------- -------- -------- --------
<S> <C> <C> <C> <C>
$ 50,000 $ 15,000 $ 20,000 $ 25,000 $ 30,000
100,000 30,000 40,000 50,000 60,000
300,000 90,000 120,000 150,000 180,000
500,000 150,000 200,000 250,000 300,000
750,000 225,000 300,000 375,000 450,000
1,000,000 300,000 400,000 500,000 600,000
1,500,000 450,000 600,000 750,000 900,000
</TABLE>
The amounts shown under "Salary" and "Bonus" opposite the names of the Named
Executives in the Summary Compensation Table comprise the compensation that is
used for purposes of determining "average final compensation" under the plan.
The years of service with the Company of each of the Named Executives for
eligibility and benefits purposes as of December 31, 1996, were as follows:
Donald R. Frahm, 27.42 years; Ramani Ayer, 23.50 years; Joseph H. Gareau,
23.42 years; Lowndes A. Smith, 28.75 years and David K. Zwiener, 3.75 years.
Mr. Frahm's years of service include five years that were granted to him by
the Company.
24
<PAGE>
EMPLOYMENT AGREEMENTS
Ramani Ayer and Lowndes A. Smith have employment agreements with the Company
pursuant to which Mr. Ayer is employed as President and Chief Operating
Officer of Hartford Fire Insurance Company and Mr. Smith is employed as
President and Chief Operating Officer of Hartford Life Insurance Company. The
term of each agreement began on December 19, 1995, the effective date of the
Spin-Off, and continues for four years, unless terminated earlier in
accordance with the agreements. The agreements provide, among other things:
(i) base salaries for Messrs. Ayer and Smith of $525,000 per year which may be
increased from time to time, and their participation in the Company's benefit
plans and possible awards under executive incentive bonus and other programs;
(ii) certain payments and benefits if the Company terminates their employment
without "cause" (as defined in the agreements), such that the executive would
receive (a) salary, paid on a regular payroll cycle basis, equivalent in total
to the amount of salary remaining unpaid from the date of termination until
the term of the agreement ends, or at the Company's option, a lump sum payment
if the executive accepts other full-time employment, or (b) a termination
allowance under any severance or termination plan of the Company, if the
amount of such allowance that the executive would be entitled to receive is
greater than the salary remaining under the agreement; and (iii) as long as
salary payments are made after termination without cause, the executives will
be eligible to participate in certain, but not all, of the Company's benefit
plans, such as the employee health, dental and life insurance plans, but if
the executives receive no or reduced benefits because they cannot be treated
as employees under such plans, the Company may either make available other
equivalent benefit programs or pay the executives the amounts they would have
received under the plans had they been eligible to participate.
25
<PAGE>
PERFORMANCE OF THE COMPANY'S COMMON STOCK
The graph below compares the yearly percentage change in cumulative
shareholder return on the Common Stock for the one-year period of December 31,
1995 through December 31, 1996 with (i) the cumulative total return of the
Standard & Poors' 500 Index(R) and (ii) the Standard & Poors Insurance
Composite Index(R). The figures presented below assume the reinvestment of all
dividends into shares of Common Stock on any given dividend payment date and
that $100 was invested in Common Stock and in the Standard & Poors 500 Index
and in the Standard & Poors Insurance Composite Index. Common stock
performance information is provided only for the past year as the Company
became a separate public company following the ITT Spin-Off and regular-way
trading of the Common Stock on the NYSE did not begin until December 20, 1995.
[LINE GRAPH APPEARS HERE]
---------------------------------------------------------------
Dec-95 Dec-96
---------------------------------------------------------------
ITT Hartford Group $100 $144
---------------------------------------------------------------
S&P 500(R) $100 $123
---------------------------------------------------------------
S&P(R) Insurance Composite Index $100 $124
---------------------------------------------------------------
26
<PAGE>
STOCK OWNERSHIP OF DIRECTORS, EXECUTIVE OFFICERS
AND CERTAIN SHAREHOLDERS
DIRECTORS AND EXECUTIVE OFFICERS
The following table shows as of February 28, 1997 the number of shares of
Common Stock beneficially owned by each director and nominee for election as a
director, by each of the executive officers named in the Summary Compensation
Table below, and by the directors and executive officers as a group:
<TABLE>
<CAPTION>
AMOUNT AND
NAME OF NATURE OF BENEFICIAL
BENEFICIAL OWNER OWNERSHIP (1)(2)
---------------- --------------------
<S> <C>
Bette B. Anderson........................................ 1,946
Rand V. Araskog.......................................... 375,981
Ramani Ayer.............................................. 265,298
Robert A. Burnett........................................ 3,092
Donald R. Frahm.......................................... 379,362
Joseph H. Gareau......................................... 115,679
Arthur A. Hartman........................................ 1,063
Paul G. Kirk, Jr......................................... 1,873
Lowndes A. Smith......................................... 263,523
H. Patrick Swygert....................................... 606
DeRoy C. Thomas.......................................... 26,624
Gordon I. Ulmer.......................................... 2,863
David K. Zwiener......................................... 113,579
All directors and executive officers as a group (18
persons)................................................ 1,711,710
</TABLE>
- --------
(1) All shares are owned directly except as otherwise indicated below.
Pursuant to regulations of the SEC, shares (i) that may be acquired by
directors and executive officers upon exercise of stock options
exercisable within sixty days after February 28, 1997, (ii) allocated to
the accounts of certain directors and executive officers under the
Company's Investment and Savings Plan based on a valuation of plan
accounts as of December 31, 1996, (iii) acquired by directors and
executive officers under the Company's Dividend Reinvestment and Cash
Payment Plan through February 28, 1997, (iv) owned by a director's or
executive officer's spouse or minor child, or (v) that have been granted
under the Company's Incentive Stock Plan or the Non-Employee Directors
Restricted Stock Plan and are restricted, but as to which the directors or
executive officers have the right to vote, are deemed to be beneficially
owned by such directors and executive officers as of such date and are
included in the number of shares listed in the table above. Of the number of
shares shown above, the following represent shares that may be acquired upon
exercise of stock options that are exercisable within sixty days after
February 28, 1997 by: Mr. Ayer, 235,040 shares; Mr. Frahm, 319,788 shares;
Mr. Gareau, 111,836 shares; Mr. Smith, 241,216 shares; Mr. Zwiener, 92,388
shares; and all present directors and executive officers as a group,
1,135,687 shares.
(2) The shares of Common Stock beneficially owned by each person named above
do not exceed one percent of the issued and outstanding shares of Common
Stock. The shares beneficially owned by the group of directors and
executive officers represent approximately 1.4% of the issued and
outstanding shares.
27
<PAGE>
CERTAIN SHAREHOLDERS
The following table shows those persons known to the Company as of February
28, 1997 to be the beneficial owners of more than five percent of the
Company's Common Stock. In furnishing the information below, the Company has
relied on information filed by the beneficial owners with the SEC, and in some
cases, information provided by such owners.
<TABLE>
<CAPTION>
NAME AND ADDRESS AMOUNT AND NATURE
OF BENEFICIAL OF BENEFICIAL PERCENT
OWNER OWNERSHIP OF CLASS
---------------- ----------------- --------
<S> <C> <C>
FMR Corp. ........................................... 8,675,306(1) 7.4%
82 Devsonshire Street Boston, MA 02109
</TABLE>
- --------
(1) FMR Corp. ("FMR"), Edward C. Johnson, 3d and Abigail Johnson filed a
Schedule 13G with the SEC to report that they were the beneficial owners
of 8,675,306 shares of Common Stock as of December 31, 1997, and had sole
power to dispose of such shares. In addition, FMR had sole voting power
for 388,847 shares and Edward C. Johnson, 3d and Abigail Johnson each had
sole power to vote 400 shares. FMR is the parent to various subsidiaries,
including Fidelity Management & Research Company, that serve as investment
advisers to various investment companies and to a unit trust that hold
shares of Common Stock, and to entities that serve as investment managers
of institutional accounts. Members of the Edward C. Johnson, 3d family and
trusts established for their benefit own approximately 49% of the voting
stock of FMR, Mr. Johnson is Chairman of FMR and Abigail Johnson is a
director of FMR.
REQUIRED VOTES OF SHAREHOLDERS
The presence in person or by proxy of shareholders entitled to cast a
majority of shares of Common Stock will constitute a quorum for the
transaction of business at the Annual Meeting. The nominees for election as
directors receiving the greatest number of votes, up to the number of
directors to be elected, shall be elected directors. Approval of the amendment
of the Company's certificate of incorporation to change the Company's name
will require the affirmative vote of the holders of a majority of all issued
and outstanding shares of Common Stock. Approval of each other item submitted
to a vote of the shareholders will require the affirmative vote of the holders
of a majority of shares of Common Stock present in person or represented by
proxy. Abstentions and broker non-votes will be included in the computation of
the number of shares that are present for purposes of determining the presence
of a quorum but will not be counted as votes cast for or against items
submitted for a vote of shareholders. Accordingly, abstentions and broker non-
votes will have the same effect as a vote against such items.
One or more persons will be appointed to act as the inspector of election at
the Annual Meeting. The bylaws of the Company provide that shareholders shall
be accorded privacy in voting and that the integrity of the balloting process
shall be assured. Among other duties, the inspector of election will certify
as to compliance with such confidentiality provisions.
PROPOSALS OF SHAREHOLDERS
Proposals submitted by shareholders for inclusion in next year's Proxy
Statement must be received by the Company no later than the close of business
on December 5, 1997. Address your proposals to Michael O'Halloran, Vice
President and Secretary, ITT Hartford Group, Inc., 690 Asylum Avenue,
Hartford, CT 06115. Proposals must comply with all of the requirements of SEC
Rule 14a-8 under the Securities Exchange Act of 1934 and certain requirements
set forth in the Company's bylaws. A copy of the bylaws may be obtained from
the Secretary of the Company.
28
<PAGE>
OTHER INFORMATION
As of the date of this Proxy Statement, the Board of Directors has no
knowledge of any business that will be presented for consideration at the
Annual Meeting other than that described above. As to any other business, if
any, that may properly come before the Annual Meeting, the proxies will vote
in accordance with their judgment.
Present and former officers, directors and other employees of the Company
may solicit proxies by telephone, telegram or mail, or by meetings with
shareholders or their representatives. The Company will reimburse brokers,
banks or other custodians, nominees and fiduciaries for their charges and
expenses in forwarding proxy material to beneficial owners. The Company has
engaged Georgeson & Company, Inc. to solicit proxies for the Annual Meeting
for a fee of [$ ], plus the payment of its out-of-pocket expenses. All
expenses of solicitation of proxies will be borne by the Company.
A copy of the Company's Annual Report to Shareholders for 1996 is either
being sent with this Proxy Statement or was sent previously. If, upon
receiving this Proxy Statement, you have not received the Annual Report to
Shareholders, please write to the Corporate Secretary at the address below to
request a copy. IN ADDITION, A COPY OF THE COMPANY'S ANNUAL REPORT ON FORM 10-
K (WITHOUT EXHIBITS) FOR THE FISCAL YEAR ENDED DECEMBER 31, 1996, AS FILED
WITH THE SEC, IS AVAILABLE WITHOUT CHARGE UPON WRITTEN REQUEST TO MICHAEL
O'HALLORAN, VICE PRESIDENT AND SECRETARY, ITT HARTFORD GROUP, INC., 690 ASYLUM
AVENUE, HARTFORD, CT 06115.
By Order of the Board of Directors.
Michael O'Halloran
Vice President and Secretary
Dated: March 31, 1997
SHAREHOLDERS ARE URGED TO COMPLETE, SIGN, DATE, AND RETURN THE ENCLOSED
PROXY PROMPTLY IN THE SELF-ADDRESSED ENVELOPE WHETHER OR NOT THEY EXPECT TO
ATTEND THE MEETING. A SHAREHOLDER MAY NEVERTHELESS VOTE IN PERSON IF HE OR SHE
DOES ATTEND.
29
<PAGE>
THE HARTFORD 1995 INCENTIVE STOCK PLAN
1. Purpose
The purpose of the 1995 ITT Hartford 1995 Incentive Stock Plan is to
motivate and reward superior performance on the part of employees of ITT
Hartford Group, Inc. and its subsidiaries ("ITT Hartford") and to thereby
attract and retain employees of superior ability. In addition, the Plan is
intended to further opportunities for stock ownership by such employees in order
to increase their proprietary interest in ITT Hartford and, as a result, their
interest in the success of the Company. Awards will be made, in the discretion
of the Committee, to Key Employees (including officers and directors who are
also employees) whose responsibilities and decisions directly affect the
performance of any Participating Company and its subsidiaries. Such incentive
awards may consist of stock options, stock appreciation rights payable in stock
or cash, performance shares, restricted stock or any combination of the
foregoing, as the Committee may determine.
2. Definitions
When used herein, the following terms shall have the following meanings:
"Acceleration Event" means the occurrence of an event defined in Section 9
of the Plan.
"Act" means the Securities Exchange Act of 1934.
"Annual Limit" means the maximum number of shares of Stock for which Awards
may be granted under the Plan in each Plan Year as provided in Section 3 of the
Plan.
"Award" means an award granted to any Key Employee in accordance with the
provisions of the Plan in the form of Options, Rights, Performance Shares or
Restricted Stock, or any combination of the foregoing.
"Award Agreement" means the written agreement evidencing each Award granted
to a Key Employee under the Plan.
"Beneficiary" means the beneficiary or beneficiaries designated pursuant to
Section 10 to receive the amount, if any, payable under the Plan upon the death
of a Key Employee.
"Board" means the Board of Directors of the Company.
"Code" means the Internal Revenue Code of 1986, as now in effect or as
hereafter amended. (All citations to sections of the Code are to such sections
as they may from time to time be amended or renumbered.)
1
<PAGE>
"Committee" means the Compensation and Personnel Committee of the Board or
such other committee as may be designated by the Board to administer the Plan.
"Company" means ITT Hartford and its successors and assigns.
"Fair Market Value", unless otherwise indicated in the provisions of this
Plan, means, as of any date, the composite closing price for one share of Stock
on the New York Stock Exchange or, if no sales of Stock have taken place on such
date, the composite closing price on the most recent date on which selling
prices were quoted, the determination to be made in the discretion of the
Committee.
"Incentive Stock Option" means a stock option qualified under Section 422
of the Code.
"Key Employee" means an employee (including any officer or director who is
also an employee) of any Participating Company whose responsibilities and
decisions, in the judgment of the Committee, directly affect the performance of
the Company and its subsidiaries.
"Limited Stock Appreciation Right" means a stock appreciation right which
shall become exercisable automatically upon the occurrence of an Acceleration
Event as described in Section 9 of the Plan.
"Option" means an option awarded under Section 5 of the Plan to purchase
Stock of the Company, which option may be an Incentive Stock Option or a non-
qualified stock option.
"Participating Company" means the Company or any subsidiary or other
affiliate of the Company; provided, however, for Incentive Stock Options only,
"Participating Company" means the Company or any corporation which at the time
such Option is granted qualifies as a "subsidiary" of the Company under Section
424(f) of the Code.
"Performance Share" means a performance share awarded under Section 6 of
the Plan.
"Plan" means the 1995 ITT Hartford Incentive Stock Plan, as the same may be
amended, administered or interpreted from time to time.
"Plan Year" means the calendar year.
"Retirement" means eligibility to receive immediate retirement benefits
under a Participating Company pension plan.
"Restricted Stock" means Stock awarded under Section 7 of the Plan subject
to such restrictions as the Committee deems appropriate or desirable.
2
<PAGE>
"Right" means a stock appreciation right awarded in connection with an
Option under Section 5 of the Plan.
"Stock" means the common stock ($.01 par value) of the Company.
"Total Disability" means the complete and permanent inability of a Key
Employee to perform all of his or her duties under the terms of his or her
employment with any Participating Company, as determined by the Committee upon
the basis of such evidence, including independent medical reports and data, as
the Committee deems appropriate or necessary.
3. Shares Subject to the Plan
The aggregate number of shares of Stock which may be awarded under the Plan
in any Plan Year shall be subject to an annual limit. The maximum number of
shares of Stock for which Awards may be granted under the Plan in each Plan Year
shall be 1.5 percent (1.5%) of the total of the issued and outstanding shares of
ITT Hartford Common Stock and Treasury Stock as reported in the Annual Report on
Form 10-K of the Company for the fiscal year ending immediately prior to any
Plan Year. Any unused portion of the Annual Limit for any Plan Year shall be
carried forward and be made available for awards in succeeding Plan Years.
In addition to the foregoing, in no event shall more than five million
(5,000,000) shares of ITT Hartford Common Stock be cumulatively available for
Awards of incentive stock options under the Plan, and provided further, that no
more than twenty percent (20%) of the total number of shares on a cumulative
basis shall be available for restricted stock and performance shares Awards. For
any Plan Year, no individual employee may receive an Award of stock options for
more than the lesser of (i) ten percent (10%) of the Annual Limit on available
shares applicable to that Plan Year and (ii) 500,000 shares; except that, for
the Plan Year that follows the Distribution Date, each individual employee may
receive in addition to the foregoing limit that number of stock options equal to
the lesser of (x) 525,000 and (y) the number of substitute stock options
required to replace ITT Corporation stock options surrendered by such employee
in connection with the spin-off by ITT Corporation of the shares of ITT Hartford
to ITT Corporation shareholders.
Subject to the above limitations, shares of ITT Hartford Common Stock to be
issued under the Plan may be made available from the authorized but unissued
shares, or shares held by the Company in treasury or from shares purchased in
the open market.
For the purpose of computing the total number of shares of Stock available
for Awards under the Plan, there shall be counted against the foregoing
limitations the number of shares of Stock subject to issuance upon exercise or
settlement of Awards and the number of shares of Stock which equal the value of
performance share Awards, in each case determined as at the dates on which such
Awards are granted. If any Awards under the Plan are forfeited, terminated,
expire unexercised, are settled in cash in lieu of Stock or are exchanged for
other Awards, the shares of
3
<PAGE>
Stock which were theretofore subject to such Awards shall again be available for
Awards under the Plan to the extent of such forfeiture, termination, expiration
cash settlement or exchange of such Awards. Further, any shares that are
exchanged (either actually or constructively) by optionees as full or partial
payment to the Company of the purchase price of shares being acquired through
the exercise of a stock option granted under the Plan may be available for
subsequent Awards.
4. Grant of Awards and Award Agreements
(a) Subject to the provisions of the Plan, the Committee shall (i)
determine and designate from time to time those Key Employees or groups of Key
Employees to whom Awards are to be granted; (ii) determine the form or forms of
Award to be granted to any Key Employee; (iii) determine the amount or number of
shares of Stock subject to each Award; and (iv) determine the terms and
conditions of each Award.
(b) Each Award granted under the Plan shall be evidenced by a written Award
Agreement. Such agreement shall be subject to and incorporate the express terms
and conditions, if any, required under the Plan or required by the Committee.
5. Stock Options and Rights
(a) With respect to Options and Rights, the Committee shall (i) authorize
the granting of Incentive Stock Options, non-qualified stock options, or a
combination of Incentive Stock Options and non-qualified stock options; (ii)
authorize the granting of Rights which may be granted in connection with all or
part of any Option granted under this Plan, either concurrently with the grant
of the Option or at any time thereafter during the term of the Option; (iii)
determine the number of shares of Stock subject to each Option or the number of
shares of Stock that shall be used to determine the value of a Right; and (iv)
determine the time or times when and the manner in which each Option or Right
shall be exercisable and the duration of the exercise period.
(b) Any option issued hereunder which is intended to qualify as an
Incentive Stock Option shall be subject to such limitations or requirements as
may be necessary for the purposes of Section 422 of the Code or any regulations
and rulings thereunder to the extent and in such form as determined by the
Committee in its discretion.
(c) The exercise period for a non-qualified stock option and any related
Right shall not exceed ten years and two days from the date of grant, and the
exercise period for an Incentive Stock Option and any related Right shall not
exceed ten years from the date of grant.
(d) The Option price per share shall be determined by the Committee at the
time any Option is granted and shall be not less than the Fair Market Value of
one share of Stock on the date the Option is granted.
4
<PAGE>
(e) No part of any Option or Right may be exercised until the Key Employee
who has been granted the Award shall have remained in the employ of a
Participating Company for such period after the date of grant as the Committee
may specify, if any, and the Committee may further require exercisability in
installments.
(f) The purchase price of the shares as to which an Option shall be
exercised shall be paid to the Company at the time of exercise either in cash or
Stock already owned by the optionee having a total Fair Market Value equal to
the purchase price, or a combination of cash and Stock having a total fair
market value, as so determined, equal to the purchase price. The Committee shall
determine acceptable methods for tendering Stock as payment upon exercise of an
Option and may impose such limitations and prohibitions on the use of Stock to
exercise an Option as it deems appropriate.
(g) In case of termination of employment, the following provisions shall
apply:
(A) If a Key Employee who has been granted an Option shall die before
such Option has expired, his or her Option may be exercised in full by the
person or persons to whom the Key Employee's rights under the Option pass
by will, or if no such person has such right, by his or her executors or
administrators, at any time, or from time to time, within five years after
the date of the Key Employee's death or within such other period, and
subject to such terms and conditions as the Committee may specify, but not
later than the expiration date specified in Section 5(d) above.
(B) If the Key Employee's employment by any Participating Company
terminates because of his or her Retirement or Total Disability, he or she
may exercise his or her Options in full at any time, or from time to time,
within five years after the date of the termination of his or her
employment or within such other period, and subject to such terms and
conditions as the Committee may specify, but not later than the expiration
date specified in Section 5(d) above. Any such Options not fully
exercisable immediately prior to such optionee's retirement shall become
fully exercisable upon such retirement unless the Committee, in its sole
discretion, shall otherwise determine.
5
<PAGE>
(C) Except as provided in Section 9, if the Key Employee shall
voluntarily resign before eligibility for Retirement or he or she is
terminated for cause as determined by the Committee, the Options or Rights
shall be canceled coincident with the effective date of the termination of
employment.
(D) If the Key Employee's employment terminates for any other reason,
he or she may exercise his or her Options, to the extent that he or she
shall have been entitled to do so at the date of the termination of his or
her employment, at any time, or from time to time, within three months
after the date of the termination of his or her employment or within such
other period, and subject to such terms and conditions as the Committee may
specify, but not later than the expiration date specified in Section 5(d)
above.
(j) No Option or Right granted under the Plan shall be transferable other
than by will or by the laws of descent and distribution. During the lifetime of
the optionee, an Option or Right shall be exercisable only by the Key Employee
to whom the Option or Right is granted (or his or her estate or designated
beneficiary).
(k) With respect to an Incentive Stock Option, the Committee shall specify
such terms and provisions as the Committee may determine to be necessary or
desirable in order to qualify such Option as an "incentive stock option" within
the meaning of Section 422 of the Code.
(l) With respect to the exercisability and settlement of Rights:
(i) Upon exercise of a Right, the Key Employee shall be entitled,
subject to such terms and conditions the Committee may specify, to receive
upon exercise thereof all or a portion of the excess of (A) the Fair Market
Value of a specified number of shares of Stock at the time of exercise, as
determined by the Committee, over (B) a specified amount which shall not,
subject to Section 5(e), be less than the Fair Market Value of such
specified number of shares of Stock at the time the Right is granted. Upon
exercise of a Right, payment of such excess shall be made as the Committee
shall specify in cash, the issuance or transfer to the Key Employee of
whole shares of Stock with a Fair Market Value at such time equal to any
excess, or a combination of cash and shares of Stock with a combined Fair
Market Value at such time equal to any such excess, all as determined by
the Committee. The Company will not issue a fractional share of Stock and,
if a fractional share would otherwise be issuable, the Company shall pay
cash equal to the Fair Market Value of the fractional share of Stock at
such time.
(ii) In the event of the exercise of such Right, the Company's
obligation in respect of any related Option or such portion thereof will be
discharged by payment of the Right so exercised.
6
<PAGE>
6. Performance Shares
(a) Subject to the provisions of the Plan, the Committee shall (i)
determine and designate from time to time those Key Employees or groups of
Key Employees to whom Awards of Performance Shares are to be made, (ii)
determine the Performance Period (the "Performance Period") and Performance
Objectives (the "Performance Objectives") applicable to such Awards, (iii)
determine the form of settlement of a Performance Share and (iv) generally
determine the terms and conditions of each such Award. At any date, each
Performance Share shall have a value equal to the Fair Market Value of a
share of Stock at such date; provided that the Committee may limit the
aggregate amount payable upon the settlement of any Award. The maximum
award for any individual employee in any given year shall be 100,000
Performance Shares.
(b) The Committee shall determine a Performance Period of not less
than two nor more than five years. Performance Periods may overlap and Key
Employees may participate simultaneously with respect to Performance Shares
for which different Performance Periods are prescribed.
(c) The Committee shall determine the Performance Objectives of Awards
of Performance Shares. Performance Objectives may vary from Key Employee to
Key Employee and between groups of Key Employees and shall be based upon
one or more of the following objective criteria, as the Committee deems
appropriate, which may be (i) determined solely by reference to the
performance of the Company, any subsidiary or affiliate of the Company or
any division or unit of any of the foregoing, or (ii) based on comparative
performance of any one or more of the following relative to other entities:
(A) earnings per share, (B) return on equity, (C) cash flow, (D) return on
total capital, (E) return on assets, (F) economic value added, (G) increase
in surplus, (H) reductions in operating expenses, (I) increases in
operating margins (J) earnings before income taxes and depreciation, (K)
total shareholder return (L) return on invested capital, (M) cost
reductions and savings, (N) earnings before interest, taxes, depreciation
and amortization ("EDITDA"), (O) pre-tax operating income (P) productivity
improvements, or (Q) a Key Employee's attainment of personal objectives
with respect to any of the foregoing criteria or other criteria such as
growth and profitability, customer satisfaction, leadership effectiveness,
business development, negotiating transactions and sales or developing long
term business goals. If during the course of a Performance Period there
shall occur significant events which the Committee expects to have a
substantial effect on the applicable Performance Objectives during such
period, the Committee may revise such Performance Objectives.
(d) At the beginning of a Performance Period, the Committee shall
determine for each Key Employee or group of Key Employees the number of
Performance Shares or the percentage of Performance Shares which shall be
paid to the Key Employee or member of the group of Key Employees if the
applicable Performance Objectives are met in whole or in part.
(e) If a Key Employee terminates service with all Participating
Companies during a Performance Period because of death, Total Disability,
Retirement, or under other circumstances
7
<PAGE>
where the Committee in its sole discretion finds that a waiver would be in
the best interests of the Company, that Key Employee may, as determined by
the Committee, be entitled to payment in settlement of such Performance
Shares at the end of the Performance Period based upon the extent to which
the Performance Objectives were satisfied at the end of such period and
prorated for the portion of the Performance Period during which the Key
Employee was employed by any Participating Company; provided, however, the
Committee may provide for an earlier payment in settlement of such
Performance Shares in such amount and under such terms and conditions as
the Committee deems appropriate or desirable. If a Key Employee terminates
service with all Participating Companies during a Performance Period for
any other reason, then such Key Employee shall not be entitled to any Award
with respect to that Performance Period unless the Committee shall
otherwise determine.
(f) Each Award of a Performance Share shall be paid in whole shares of
Stock, or cash, or a combination of Stock and cash either as a lump sum
payment or in annual installments, all as the Committee shall determine,
with payment to commence as soon as practicable after the end of the
relevant Performance Period.
7. Restricted Stock
(a) Restricted Stock shall be subject to a restriction period (after
which restrictions will lapse) which shall mean a period commencing on the
date the Award is granted and ending on such date as the Committee shall
determine (the "Restriction Period"). The Committee may provide for the
lapse of restrictions in installments where deemed appropriate and it may
also require the achievement of predetermined performance objectives in
order for such shares to vest.
(b) Except when the Committee determines otherwise pursuant to Section
7(d), if a Key Employee terminates employment with all Participating
Companies for any reason before the expiration of the Restriction Period,
all shares of Restricted Stock still subject to restriction shall be
forfeited by the Key Employee and shall be reacquired by the Company.
(c) Except as otherwise provided in this Section 7, no shares of
Restricted Stock received by a Key Employee shall be sold, exchanged,
transferred, pledged, hypothecated or otherwise disposed of during the
Restriction Period.
(d) In cases of death, Total Disability or Retirement or in cases of
special circumstances, the Committee may, in its sole discretion when it
finds that a waiver would be in the best interests of the Company, elect to
waive any or all remaining restrictions with respect to such Key Employee's
Restricted Stock.
(e) The Committee may require, under such terms and conditions as it
deems appropriate or desirable, that the certificates for Stock delivered
under the Plan may be held in custody by a bank or other institution, or
that the Company may itself hold such shares in custody until the
Restriction Period expires or until restrictions thereon otherwise lapse,
and may require, as a
8
<PAGE>
condition of any Award of Restricted Stock that the Key Employee shall have
delivered a stock power endorsed in blank relating to the Restricted Stock.
(f) Nothing in this Section 7 shall preclude a Key Employee from
exchanging any shares of Restricted Stock subject to the restrictions
contained herein for any other shares of Stock that are similarly
restricted.
(g) Subject to Section 7(e) and Section 8, each Key Employee entitled
to receive Restricted Stock under the Plan shall be issued a certificate
for the shares of Stock. Such certificate shall be registered in the name
of the Key Employee, and shall bear an appropriate legend reciting the
terms, conditions and restrictions, if any, applicable to such Award and
shall be subject to appropriate stop-transfer orders.
8. Certificates for Awards of Stock
(a) The Company shall not be required to issue or deliver any
certificates for shares of Stock prior to (i) the listing of such shares on
any stock exchange on which the Stock may then be listed and (ii) the
completion of any registration or qualification of such shares under any
federal or state law, or any ruling or regulation of any government body
which the Company shall, in its sole discretion, determine to be necessary
or advisable.
(b) All certificates for shares of Stock delivered under the Plan shall
also be subject to such stop-transfer orders and other restrictions as the
Committee may deem advisable under the rules, regulations, and other
requirements of the Securities and Exchange Commission, any stock exchange
upon which the Stock is then listed and any applicable federal or state
securities laws, and the Committee may cause a legend or legends to be
placed on any such certificates to make appropriate reference to such
restrictions. In making such determination, the Committee may rely upon an
opinion of counsel for the Company.
(c) Except for the restrictions on Restricted Stock under Section 7,
each Key Employee who receives Stock in settlement of an Award of Stock,
shall have all of the rights of a shareholder with respect to such shares,
including the right to vote the shares and receive dividends and other
distributions. No Key Employee awarded an Option, a Right or Performance
Share shall have any right as a shareholder with respect to any shares
covered by his or her Option, Right or Performance Share prior to the date
of issuance to him or her of a certificate or certificates for such shares.
9. Acceleration Events
(a) For the purposes of this Plan, an Acceleration Event shall occur if
(i) a report on Schedule 13D shall be filed with the Securities and
Exchange Commission pursuant to Section 13(d) of the Act disclosing that
any person (within the meaning of Section 13(d) of the Act), other than the
Company or a subsidiary of the Company or any employee benefit plan
sponsored by the
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Company or a subsidiary of the Company, is the beneficial owner directly or
indirectly of twenty percent or more of the outstanding Stock of the Company;
(ii) any person (within the meaning of Section 13(d) of the Act), other than the
Company or a subsidiary of the Company or any employee benefit plan sponsored by
the Company or a subsidiary of the Company, shall purchase shares pursuant to a
tender offer or exchange offer to acquire any Stock of the Company (or
securities convertible into Stock) for cash, securities or any other
consideration, provided that after consummation of the offer, the person in
question is the beneficial owner (as such term is defined in Rule 13d-3 under
the Act), directly or indirectly, of fifteen percent or more of the outstanding
Stock of the Company (calculated as provided in paragraph (d) of Rule 13d-3
under the Act in the case of rights to acquire Stock); (iii) the stockholders of
the Company shall approve (A) any consolidation or merger of the Company in
which the Company is not the continuing or surviving corporation or pursuant to
which shares of Stock of the Company would be converted into cash, securities or
other property, other than a merger of the Company in which holders of Stock of
the Company immediately prior to the merger have the same proportionate
ownership of common stock of the surviving corporation immediately after the
merger as immediately before, or (B) any sale, lease, exchange or other transfer
(in one transaction or a series of related transactions) of all or substantially
all the assets of the Company; or (iv) there shall have been a change in a
majority of the members of the Board within a 12-month period unless the
election or nomination for election by the Company's stockholders of each new
director during such 12-month period was approved by the vote of two-thirds of
the directors then still in office who were directors at the beginning of such
12-month period.
(b) Notwithstanding any provisions in this Plan to the contrary:
(i) Each outstanding Option granted under the Plan shall become
immediately exercisable in full for the aggregate number of shares covered
thereby and all related Rights shall also become exercisable upon the
occurrence of an Acceleration Event described in this Section 9 and shall
continue to be exercisable in full for cash for a period of 60 calendar
days beginning on the date that such Acceleration Event occurs and ending
on the 60th calendar day following that date; provided, however, that no
Option or Right shall be exercisable beyond the expiration date of its
original term.
(ii) Options and Rights shall not terminate and shall continue to be
fully exercisable for a period of seven months following the occurrence of
an Acceleration Event in the case of an employee who is terminated other
than for just cause or who voluntarily terminates his employment because he
in good faith believes that as a result of such Acceleration Event he is
unable effectively to discharge his present duties or the duties of the
position he occupied just prior to the occurrence of such Acceleration
Event. For purposes of Section 9 only, termination shall be for "just
cause" only if such termination is based on fraud, misappropriation or
embezzlement on the part of the employee which results in a final
conviction of a felony. Under no circumstances, however, shall any Option
or Right be exercised beyond the expiration date of its original term.
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(iii) Any Right or portion thereof may be exercised for cash within
the 60-calendar-day period following the occurrence of an Acceleration
Event with settlement, except in the case of a Right related to an
Incentive Stock Option, based on the "Formula Price" which shall be the
highest of (A) the highest composite daily closing price of the Stock
during the period beginning on the 60th calendar day prior to the date on
which the Right is exercised and ending on the date such Right is
exercised, (B) the highest gross price paid for the Stock during the same
period of time, as reported in a report on Schedule 13D filed with the
Securities and Exchange Commission or (C) the highest gross price paid or
to be paid for a share of Stock (whether by way of exchange, conversion,
distribution upon merger, liquidation or otherwise) in any of the
transactions set forth in this Section 9 as constituting an Acceleration
Event.
(iv) Upon the occurrence of an Acceleration Event, Limited Stock
Appreciation Rights shall automatically be granted as to any Option with
respect to which Rights are not then outstanding; provided, however, that
Limited Stock Appreciation Rights shall be provided at the time of grant of
any Incentive Stock Option subject to exercisability upon the occurrence of
an Acceleration Event. Limited Stock Appreciation Rights shall entitle the
holder thereof, upon exercise of such rights and surrender of the related
Option or any portion thereof, to receive, without payment to the Company
(except for applicable withholding taxes), an amount in cash equal to the
excess, if any, of the Formula Price as that term is defined in Section 9
over the option price of the Stock as provided in such Option; provided
that in the case of the exercise of any such Limited Stock Appreciation
Right or portion thereof related to an Incentive Stock Option, the Fair
Market Value of the Stock at the time of such exercise shall be substituted
for the Formula Price. Each such Limited Stock Appreciation Right shall be
exercisable only during the period beginning on the first business day
following the occurrence of such Acceleration Event and ending on the 60th
day following such date and only to the same extent the related Option is
exercisable. Upon exercise of a Limited Stock Appreciation Right and
surrender of the related Option, or portion thereof, such Option, to the
extent surrendered, shall not thereafter be exercisable.
(v) The restrictions applicable to Awards of Restricted Stock issued
pursuant to Section 7 shall lapse upon the occurrence of an Acceleration
Event and the Company shall issue stock certificates without a restrictive
legend. Key Employees holding Restricted Stock on the date of an
Acceleration Event may tender such Restricted Stock to the Company which
shall pay the Formula Price as that term is defined in Section 9; provided,
such Restricted Stock must be tendered to the Company within 60 calendar
days of the Acceleration Event.
(vi) If an Acceleration Event occurs during the course of a
Performance Period applicable to an Award of Performance Shares pursuant to
Section 6, then the Key Employee shall be deemed to have satisfied the
Performance Objectives and settlement of such Performance Shares shall be
based on the Formula Price, as defined in this Section 9.
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10. Beneficiary
(a) Each Key Employee shall file with the Company a written designation of
one or more persons as the Beneficiary who shall be entitled to receive the
Award, if any, payable under the Plan upon his or her death. A Key Employee may
from time to time revoke or change his or her Beneficiary designation without
the consent of any prior Beneficiary by filing a new designation with the
Company. The last such designation received by the Company shall be controlling;
provided, however, that no designation, or change or revocation thereof, shall
be effective unless received by the Company prior to the Key Employee's death,
and in no event shall it be effective as of a date prior to such receipt.
(b) If no such Beneficiary designation is in effect at the time of a Key
Employee's death, or if no designated Beneficiary survives the Key Employee or
if such designation conflicts with law, the Key Employee's estate shall be
entitled to receive the Award, if any, payable under the Plan upon his or her
death. If the Committee is in doubt as to the right of any person to receive
such Award, the Company may retain such Award, without liability for any
interest thereon, until the Committee determines the rights thereto, or the
Company may pay such Award into any court of appropriate jurisdiction and such
payment shall be a complete discharge of the liability of the Company therefor.
11. Administration of the Plan
(a) Each member of the Committee shall be both a member of the Board and
both a "non-employee director" within the meaning of Rule 16b-3 under the Act or
successor rule or regulation and an "outside director" for purposes of Section
162(m) of the Internal Revenue Code.
(b) All decisions, determinations or actions of the Committee made or taken
pursuant to grants of authority under the Plan shall be made or taken in the
sole discretion of the Committee and shall be final, conclusive and binding on
all persons for all purposes.
(c) The Committee shall have full power, discretion and authority to
interpret, construe and administer the Plan and any part thereof, and its
interpretations and constructions thereof and actions taken thereunder shall be,
except as otherwise determined by the Board, final, conclusive and binding on
all persons for all purposes.
(d) The Committee's decisions and determinations under the Plan need not be
uniform and may be made selectively among Key Employees, whether or not such Key
Employees are similarly situated.
(e) The Committee may, in its sole discretion, delegate such of its powers
as it deems appropriate to the chief executive officer or other members of
senior management, except that Awards to executive officers shall be made solely
by the Committee and subject to compliance
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with Rule 16b-3 of the Act.
(f) If an Acceleration Event has not occurred and if the Committee
determines that a Key Employee has taken action inimical to the best interests
of any Participating Company, the Committee may, in its sole discretion,
terminate in whole or in part such portion of any Option (including any related
Right) as has not yet become exercisable at the time of termination, terminate
any Performance Share Award for which the Performance Period has not been
completed or terminate any Award of Restricted Stock for which the Restriction
Period has not lapsed.
12. Amendment, Extension or Termination
The Board may, at any time, amend or terminate the Plan and, specifically,
may make such modifications to the Plan as it deems necessary to avoid the
application of Section 162(m) of the Code and the Treasury regulations issued
thereunder. However, no amendment applicable to Incentive Stock Options shall,
without approval by a majority of the Company's stockholders, (a) alter the
group of persons eligible to participate in the Plan, or (b) except as provided
in Section 13 increase the maximum number of shares of Stock which are available
for Awards under the Plan. If an Acceleration Event has occurred, no amendment
or termination shall impair the rights of any person with respect to a prior
Award.
13. Adjustments in Event of Change in Common Stock
In the event of any reorganization, merger, recapitalization,
consolidation, liquidation, stock dividend, stock split, reclassification,
combination of shares, rights offering, split-up or extraordinary dividend
(including a spin-off) or divestiture, or any other change in the corporate
structure or shares, the Committee may make such adjustment in the Stock subject
to Awards, including Stock subject to purchase by an Option, or the terms,
conditions or restrictions on Stock or Awards, including the price payable upon
the exercise of such Option and the number of shares subject to restricted stock
awards, as the Committee deems equitable.
14. Substitute Awards
The Committee shall be authorized to issue substitute ITT Hartford stock
options and related rights to those key employees of Participating Companies who
surrender options to acquire stock in ITT Corporation. The Committee may make a
determination as to the exercise price and number of such substitute options as
it may determine in order to preserve the economic value of the surrendered ITT
options and related rights in the aggregate amount not to exceed 8,000,000
shares. Subject to this limitation, shares of ITT Hartford Common Stock to be
issued upon the exercise of substitute stock options may be made available from
authorized but unissued shares or from treasury or shares held by ITT Hartford
in shares purchased in the open market.
The maximum number of substitute ITT Hartford stock options and related
rights that may be
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granted to an individual employee is 525,000 or such lower number as may be
necessary to preserve the economic value of the surrendered ITT options and
related rights by any such individual employee.
The terms and conditions of each substitute stock award, including, without
limitation, the expiration date of the option, the time or times when, and the
manner in which, each substitute option shall be exercisable, the duration of
the exercise period, the method of exercise, settlement and payment, and the
rules in the event of termination, shall be the same as those of the surrendered
ITT award.
The Committee shall also be authorized to issue substitute grants of ITT
Hartford Restricted Stock to replace shares of ITT restricted stock surrendered
by employees of Participating Companies. Such substitute shares shall be subject
to the same terms and conditions as the surrendered shares of ITT restricted
stock, including, without limitation, the restriction period of such ITT shares.
15. Miscellaneous
(a) Except as provided in Section 9, nothing in this Plan or any Award
granted hereunder shall confer upon any employee any right to continue in the
employ of any Participating Company or interfere in any way with the right of
any Participating Company to terminate his or her employment at any time. No
Award payable under the Plan shall be deemed salary or compensation for the
purpose of computing benefits under any employee benefit plan or other
arrangement of any Participating Company for the benefit of its employees unless
the Company shall determine otherwise. No Key Employee shall have any claim to
an Award until it is actually granted under the Plan. To the extent that any
person acquires a right to receive payments from the Company under this Plan,
such right shall be no greater than the right of an unsecured general creditor
of the Company. All payments to be made hereunder shall be paid from the general
funds of the Company and no special or separate fund shall be established and no
segregation of assets shall be made to assure payment of such amounts except as
provided in Section 7(e) with respect to Restricted Stock.
(b) The Committee may cause to be made, as a condition precedent to the
payment of any Award, or otherwise, appropriate arrangements with the Key
Employee or his or her Beneficiary, for the withholding of any federal, state,
local or foreign taxes.
(c) The Plan and the grant of Awards shall be subject to all applicable
federal and state laws, rules, and regulations and to such approvals by any
government or regulatory agency as may be required.
(d) The terms of the Plan shall be binding upon the Company and its
successors and assigns.
(e) Captions preceding the sections hereof are inserted solely as a matter
of convenience and
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in no way define or limit the scope or intent of any provision hereof.
16. Effective Date, Term of Plan and Shareholder Approval
The effective date of the Plan shall be December 19, 1995. No Award shall
be granted under this Plan after the Plan's termination date. The Plan's
termination date shall be December 31, 2005. The Plan will continue in effect
for existing Awards as long as any such Award is outstanding.
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PRELIMINARY
PROXY
ITT HARTFORD GROUP, INC.
1997 ANNUAL MEETING OF SHAREHOLDERS
THIS PROXY IS SOLICITED BY THE BOARD OF DIRECTORS
The undersigned hereby appoints J. Richard Garrett, Michael O'Halloran and
Michael S. Wilder, and each of them, as proxies of the undersigned, each
with power to appoint his or her substitute, and hereby authorizes each or
any of them to vote, as designated on the reverse side of this proxy, all
shares of common stock of ITT Hartford Group, Inc. (the "Company"),
including all shares held in the Company's Dividend Reinvestment and Cash
Payment Plan, the Company's Investment and Savings Plan and in the
Company's Employee Stock Purchase Plan, which the undersigned is entitled
to vote if personally present at the Annual Meeting of Shareholders of the
Company to be held at 9:30 A.M. on May 2, 1997 at the Sheraton San Diego
Hotel & Marina (West Tower), 1590 Harbor Island Drive, San Diego,
California, and at any adjournments or postponements thereof, and confers
discretionary authority upon each such proxy to vote upon any other matter
properly brought before the meeting.
Please specify your choices by marking the appropriate boxes on the reverse side
of this Proxy. The shares represented by this Proxy will be voted as you
designate on the reverse side. If no designation is made, the shares will be
voted for the election as directors of the nominees named in Item 1 and for
Items 2, 3, 4, 5 and 6. The shares of common stock represented by this Proxy
cannot be voted unless you sign and return this Proxy.
SEE REVERSE SIDE
<PAGE>
ITEM 1. Election of Directors
FOR all nominees WITHHOLD AUTHORITY *EXCEPTIONS [ ]
listed below [ ] for all nominees listed below [ ]
Director Nominees: Bette B. Anderson, Rand V. Araskog, Ramani Ayer, Robert A.
Burnett, Donald R. Frahm, Arthur A. Hartman, Paul G. Kirk, Jr., Lowndes A.
Smith, H. Patrick Swygert, DeRoy C. Thomas, Gordon I. Ulmer and David K.
Zweiner.
(INSTRUCTIONS: To withhold authority to vote for any individual nominee, mark
the "EXCEPTIONS" box and write that nominee's name in the space provided below.)
*EXCEPTIONS:______________________________________________________________
ITEM 2. Approval of a change of the Company's name.
FOR [ ] AGAINST [ ] ABSTAIN [ ]
ITEM 3. Approval of certain material terms of the Company's annual executive
bonus program.
FOR [ ] AGAINST [ ] ABSTAIN [ ]
ITEM 4. Approval of certain material terms of the Hartford 1995 Incentive
Stock Plan.
FOR [ ] AGAINST [ ] ABSTAIN [ ]
ITEM 5. Approval of certain material terms of the 1997 Hartford Life Inc.
Incentive Stock Plan.
FOR [ ] AGAINST [ ] ABSTAIN [ ]
ITEM 6. Ratification of the appointment of Arthur Andersen LLP as independent
auditors of the Company for the fiscal year ending December 31, 1997.
FOR [ ] AGAINST [ ] ABSTAIN [ ]
MARK THIS BOX IF YOU PLAN TO ATTEND THE ANNUAL MEETING [ ]
CHANGE OF ADDRESS AND COMMENTS MARK HERE [ ]
- -------------------------------------- ---------------------,1997
Signature Date
Note: Please add your title if you are signing for a corporation or other
business entry, or as attorney, administrator, executor, guardian, trustee or
in any other representative capacity.
Votes MUST be indicated (X) in black or blue ink. [ ]
<PAGE>
SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the Securities
Exchange Act of 1934 (Amendment No. )
Filed by the Registrant [X]
Filed by a Party other than the Registrant [_]
Check the appropriate box:
[X] Preliminary Proxy Statement [_] Confidential, for Use of the
Commission Only (as permitted by
Rule 14a-6(e)(2))
[_] Definitive Proxy Statement
[_] Definitive Additional Materials
[_] Soliciting Material Pursuant to Section 240.14a-11(c) or Section 240.14a-12
ITT HARTFORD GROUP. INC.
- --------------------------------------------------------------------------------
(Name of Registrant as Specified In Its Charter)
- --------------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
[X] No fee required.
[_] Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and 0-11.
(1) Title of each class of securities to which transaction applies:
-------------------------------------------------------------------------
(2) Aggregate number of securities to which transaction applies:
-------------------------------------------------------------------------
(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (set forth the amount on which
the filing fee is calculated and state how it was determined):
-------------------------------------------------------------------------
(4) Proposed maximum aggregate value of transaction:
-------------------------------------------------------------------------
(5) Total fee paid:
-------------------------------------------------------------------------
[_] Fee paid previously with preliminary materials.
[_] Check box if any part of the fee is offset as provided by Exchange
Act Rule 0-11(a)(2) and identify the filing for which the offsetting fee
was paid previously. Identify the previous filing by registration statement
number, or the Form or Schedule and the date of its filing.
(1) Amount Previously Paid:
-------------------------------------------------------------------------
(2) Form, Schedule or Registration Statement No.:
-------------------------------------------------------------------------
(3) Filing Party:
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(4) Date Filed:
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Notes:
