Filed Pursuant to Rule 424(b)(5)
Registration No. 333-103915
THE INFORMATION IN THIS PROSPECTUS SUPPLEMENT AND THE ACCOMPANYING PROSPECTUS IS
NOT COMPLETE AND MAY BE CHANGED. THIS PROSPECTUS SUPPLEMENT AND THE ACCOMPANYING
PROSPECTUS ARE NOT AN OFFER TO SELL THESE SECURITIES AND ARE NOT SOLICITING AN
OFFER TO BUY THESE SECURITIES IN ANY STATE WHERE THE OFFER OR SALE IS NOT
PERMITTED.
SUBJECT TO COMPLETION, DATED MAY 14, 2003
PROSPECTUS SUPPLEMENT
MAY , 2003
(TO PROSPECTUS DATED APRIL 10, 2003)
$250,000,000
[THE HARTFORD LOGO]
THE HARTFORD FINANCIAL SERVICES GROUP, INC.
FLOATING RATE SENIOR NOTES DUE MAY , 2006
------------------------------
We are offering $250,000,000 aggregate principal amount of our floating
rate senior notes due May , 2006. We will pay interest on these notes
quarterly on February , May , August and November of each year,
beginning on August , 2003. The notes will rank equally with all of our other
unsecured, unsubordinated obligations.
Concurrently with this offering, we are offering, each by means of a
separate prospectus supplement, 12,000,000 Equity Units and 21,800,000 shares of
our common stock (or 24,700,000 shares, if the underwriters exercise in full
their option to purchase additional shares). The consummation of each of our
separate offerings of floating rate senior notes, Equity Units and common stock
is contingent upon the consummation of each of the other offerings.
------------------------------
Per Note Total
-------- --------
Public offering price(1)............................... % $
Underwriting discounts................................. % $
Proceeds, before expenses, to The Hartford(1).......... % $
---------------
(1) Plus accrued interest, if any, from May , 2003, if settlement occurs after
that date.
NEITHER THE SECURITIES AND EXCHANGE COMMISSION NOR ANY OTHER SECURITIES
COMMISSION OR OTHER REGULATORY BODY HAS APPROVED OR DISAPPROVED OF THESE
SECURITIES OR PASSED UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS SUPPLEMENT
OR THE ACCOMPANYING PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL
OFFENSE.
The underwriters expect to deliver the notes only in book-entry form
through the facilities of The Depository Trust Company for the accounts of its
participants, including Euroclear Bank S.A./N.V., as operator of the Euroclear
System, and Clearstream Banking, societe anonyme, on or about May , 2003.
------------------------------
Joint Book-Running Managers
BANC OF AMERICA SECURITIES LLC WACHOVIA SECURITIES
TABLE OF CONTENTS
PROSPECTUS SUPPLEMENT
PAGE
----
About This Prospectus Supplement............................ S-2
Forward-Looking Statements.................................. S-3
The Hartford Financial Services Group, Inc.................. S-4
Concurrent Offerings........................................ S-5
Use of Proceeds............................................. S-5
Capitalization.............................................. S-6
Ratio of Earnings to Fixed Charges.......................... S-7
Selected Financial Information.............................. S-8
Description of the Notes.................................... S-9
Certain United States Federal Income Tax Considerations..... S-12
Underwriting................................................ S-14
ERISA Considerations........................................ S-16
Validity of the Notes....................................... S-17
PROSPECTUS
About This Prospectus....................................... ii
Forward-Looking Statements.................................. ii
The Hartford Financial Services Group, Inc. ................ 1
The Hartford Capital Trusts................................. 1
Use of Proceeds............................................. 3
Ratio of Earnings to Fixed Charges.......................... 3
Description of the Debt Securities.......................... 3
Description of Junior Subordinated Debentures............... 15
Description of Capital Stock of The Hartford Financial
Services Group, Inc. ..................................... 27
Description of Depositary Shares............................ 34
Description of Warrants..................................... 36
Description of Stock Purchase Contracts and Stock Purchase
Units..................................................... 38
Description of Preferred Securities......................... 39
Description of Guarantee.................................... 51
Description of Corresponding Junior Subordinated
Debentures................................................ 53
Relationship Among the Preferred Securities, the
Corresponding Junior Subordinated Debentures and the
Guarantees................................................ 55
Plan of Distribution........................................ 57
Legal Opinions.............................................. 58
Experts..................................................... 58
Where You Can Find More Information......................... 58
Incorporation by Reference.................................. 59
------------------------------
You should rely only on information contained in this prospectus supplement
and the accompanying prospectus or information to which we have referred you. We
have not, and the underwriters have not, authorized anyone to provide you with
information that is different. This prospectus supplement and the accompanying
prospectus may only be used where it is legal to sell these securities. The
information in this prospectus supplement and the accompanying prospectus may
only be accurate as of the date of this prospectus supplement.
We are offering to sell, and are seeking offers to buy, the floating rate
senior notes (the "floating rate senior notes" or the "notes") only in
jurisdictions where offers and sales are permitted. The distribution of this
prospectus supplement and the accompanying prospectus and the offering of the
floating rate senior notes in certain jurisdictions may be restricted by law.
Persons outside the United States who come into possession of this prospectus
supplement and the accompanying prospectus must inform themselves about and
observe any restrictions relating to the offering of the floating rate senior
notes and the distribution of this prospectus supplement and the accompanying
prospectus outside the United States. This prospectus supplement and the
accompanying prospectus do not constitute, and may not be used in connection
with, an offer to sell, or a solicitation of an offer to buy, any securities
offered by this prospectus supplement and the accompanying prospectus by any
person in any jurisdiction in which it is unlawful for such person to make such
an offer or solicitation.
ABOUT THIS PROSPECTUS SUPPLEMENT
This document is in two parts. The first part is this prospectus
supplement, which describes the specific terms of this notes offering and also
adds to and updates information contained in the accompanying prospectus and the
documents incorporated by reference into this prospectus supplement and the
accompanying prospectus. The second part, the accompanying prospectus, gives
more general information, some of which may not apply to this offering.
If the description of the offering varies between this prospectus
supplement and the accompanying prospectus, you should rely on the information
contained in this prospectus supplement.
Unless we have indicated otherwise, or the context otherwise requires,
references in this prospectus supplement and the accompanying prospectus to "The
Hartford," "we," "us" and "our" or similar terms are to The Hartford Financial
Services Group, Inc. and its subsidiaries.
S-2
FORWARD-LOOKING STATEMENTS
Some of the statements contained in this prospectus supplement and the
accompanying prospectus are forward-looking statements. These forward-looking
statements are made pursuant to the safe harbor provisions of the Private
Securities Litigation Reform Act of 1995 and include estimates and assumptions
related to economic, competitive and legislative developments. These
forward-looking statements are subject to change and uncertainty which are, in
many instances, beyond our control and have been made based upon management's
expectations and beliefs concerning future developments and their potential
effect upon us. There can be no assurance that future developments will be in
accordance with management's expectations or that the effect of future
developments on us will be those anticipated by management. Actual results could
differ materially from those expected by us, depending on the outcome of various
factors. These factors include:
- the difficulty in predicting our potential exposure for asbestos and
environmental claims and related litigation, in particular, significant
uncertainty with regard to the outcome of our current dispute with Mac
Arthur Company and its subsidiary, Western MacArthur Company;
- the uncertain nature of damage theories and loss amounts and the
development of additional facts related to the September 11, 2001
terrorist attack;
- the uncertain impact on us of various tax reduction proposals being
considered by Congress that relate to the lowering of the capital gains
rate and the application of that rate to dividend distributions or the
exclusion of some or all of such distributions from gross income;
- the response of reinsurance companies under reinsurance contracts, the
impact of increasing reinsurance rates and the availability and adequacy
of reinsurance to protect us against losses;
- the possibility of more unfavorable loss experience than anticipated;
- the possibility of general economic and business conditions that are less
favorable than anticipated;
- the incidence and severity of catastrophes, both natural and man-made;
- the effect of changes in interest rates, the stock markets or other
financial markets;
- stronger than anticipated competitive activity;
- unfavorable legislative, regulatory or judicial developments;
- our ability to distribute our products through distribution channels,
both current and future;
- the uncertain effects of emerging claim and coverage issues;
- the effect of assessments and other surcharges for guaranty funds and
second-injury funds and other mandatory pooling arrangements;
- a downgrade in our claims-paying, financial strength or credit ratings;
- the ability of our subsidiaries to pay dividends to us; and
- other factors described in such forward-looking statements.
S-3
THE HARTFORD FINANCIAL SERVICES GROUP, INC.
GENERAL
We are a diversified insurance and financial services holding company. We
are among the largest providers of investment products, individual life, group
life and disability insurance products, and property and casualty insurance
products in the United States. Hartford Fire Insurance Company, or Hartford
Fire, founded in 1810, is the oldest of our subsidiaries. Our companies write
insurance and reinsurance in the United States and internationally. At March 31,
2003, our total assets were $188.66 billion and our total stockholders' equity
was $9.44 billion.
We were formed in December 1985 as a wholly-owned subsidiary of ITT
Corporation. On December 19, 1995, all our outstanding shares were distributed
to ITT Corporation's stockholders and we became an independent company. On May
2, 1997, we changed our name from ITT Hartford Group, Inc. to our current name,
The Hartford Financial Services Group, Inc.
As a holding company that is separate and distinct from our insurance
subsidiaries, we have no significant business operations of our own. Therefore,
we rely on the dividends from our insurance company and other subsidiaries as
the principal source of cash flow to meet our obligations. These obligations
include payments on our debt securities and the payment of dividends on our
capital stock, including preferred stock. The Connecticut insurance holding
company laws limit the payment of dividends by Connecticut-domiciled insurers.
Under these laws, the insurance subsidiaries may only make their dividend
payments out of unassigned surplus. In addition, these laws require notice to
and approval by the state insurance commissioner for the declaration or payment
by those subsidiaries of any dividend if the dividend and other dividends or
distributions made within the preceding twelve months exceeds the greater of:
- 10% of the insurer's policyholder surplus as of December 31 of the
preceding year, or
- net income, or net gain from operations if the subsidiary is a life
insurance company, for the previous calendar year, in each case
determined under statutory insurance accounting principles.
In addition, if any dividend of a Connecticut-domiciled insurer exceeds the
insurer's earned surplus, it requires the prior approval of the Connecticut
Insurance Commissioner.
The insurance holding company laws of the other jurisdictions in which our
insurance subsidiaries are incorporated, or deemed commercially domiciled,
generally contain similar, and in some instances more restrictive, limitations
on the payment of dividends. Our insurance subsidiaries are presently permitted
to pay us up to a maximum of approximately $335 million in dividends for the
remainder of 2003 without prior approval.
Our rights to participate in any distribution of assets of any of our
subsidiaries, for example, upon their liquidation or reorganization, and the
ability of holders of the securities to benefit indirectly from a distribution,
are subject to the prior claims of creditors of the applicable subsidiary,
except to the extent that we may be a creditor of that subsidiary. Claims on
these subsidiaries by persons other than us include, as of March 31, 2003,
claims by policyholders for benefits payable amounting to $55.18 billion, claims
by separate account holders of $108.07 billion, and other liabilities including
claims of trade creditors, claims from guaranty associations and claims from
holders of debt obligations amounting to $15.97 billion.
Our principal executive offices are located at Hartford Plaza, Hartford,
Connecticut 06115, and our telephone number is (860) 547-5000.
S-4
CONCURRENT OFFERINGS
Concurrently with this offering, The Hartford is offering, each by means of
a separate prospectus supplement, 12,000,000 Equity Units and a maximum of
21,800,000 shares of our common stock (or 24,700,000 shares, if the underwriters
exercise in full their option to purchase additional shares). Each Equity Unit
will have a stated amount of $50 and will consist of (i) a contract to purchase
for $50 in cash a number of shares of our common stock to be determined pursuant
to the formula described below and ranging from a minimum of shares to a
maximum of shares and (ii) initially, a 1/20, or 5%, ownership interest in
$1,000 principal amount of our % senior notes due August 16, 2008.
- Each purchase contract will obligate the holder of the contract to
purchase from us, no later than , 2006, for a price of $50
in cash, the following number of shares of our common stock, subject to
anti-dilution adjustments:
- if the average closing price of our common stock over the 20-trading
day period ending on the third trading day prior to ,
2006 equals or exceeds $ , shares of our common
stock;
- if the average closing price of our common stock over the same period
is less than $ but greater than $ , a number of
shares of our common stock having a value, based on the 20-trading
day average closing price, equal to $50; and
- if the average closing price of our common stock over the same period
is less than or equal to $ , shares of our common
stock.
Pursuant to the purchase contracts, The Hartford will have an obligation to
deliver, on or prior to , a maximum of shares of our common
stock, subject to anti-dilution adjustments as provided in the purchase
contracts. The consummation of each of our separate offerings of floating rate
senior notes, Equity Units and common stock is contingent upon the consummation
of each of the other offerings.
USE OF PROCEEDS
The net proceeds to us, after deducting underwriting discounts and
commissions in connection with this offering, from the sale of the floating rate
senior notes will be approximately $ million. In addition, we expect to
receive net proceeds of approximately $ million from our concurrent Equity
Units offering, after deducting underwriting discounts and commissions in
connection with that offering, and we expect to receive net proceeds of
approximately $ million from our concurrent common stock offering, after
deducting underwriting discounts and commissions in connection with that
offering (assuming no exercise of the underwriters' option to purchase
additional shares). We intend to contribute approximately $ million of the
net proceeds from these offerings to the capital of our property and casualty
insurance subsidiaries, to contribute approximately $ million of the net
proceeds from these offerings to the capital of our life insurance subsidiaries
and to use the balance of the net proceeds for general corporate purposes, which
may include additional capital contributions to our subsidiaries.
S-5
CAPITALIZATION
The following table sets forth as of March 31, 2003 on a consolidated
basis:
- our actual capitalization;
- adjustments to our capitalization to give effect to the consummation of
the sale of the floating rate senior notes in this offering;
- adjustments to our capitalization to give effect to the consummation of
the sale of the Equity Units and the consummation of the sale of the
common stock with aggregate proceeds of $1.0 billion, assuming no
exercise by the underwriters of their option to purchase additional
shares; and
- our adjusted capitalization after giving effect to the consummation of
the sale of the floating rate senior notes, the Equity Units and the
common stock.
The consummation of each of our separate offerings of floating rate senior
notes, Equity Units and common stock is contingent upon the consummation of each
of the other offerings.
The following data is qualified in its entirety by our financial statements
and other information contained elsewhere in this prospectus supplement and the
accompanying prospectus, or incorporated by reference.
AS OF MARCH 31, 2003
---------------------------------------------------------------
AS ADJUSTED TO
ADJUSTMENTS TO REFLECT THIS
REFLECT THE OFFERING, THE
EQUITY UNITS EQUITY UNITS
ADJUSTMENTS TO OFFERING AND THE OFFERING AND THE
REFLECT THIS COMMON STOCK COMMON STOCK
ACTUAL OFFERING OFFERING OFFERING
------ -------------- ---------------- ----------------
(UNAUDITED, IN MILLIONS)
Short-Term Debt......................... $ 315 $ 315 $ 315 $ 315
Long-Term Debt.......................... 2,596 2,846 3,196 3,446
Company Obligated Mandatorily Redeemable
Preferred Securities of Subsidiary
Trusts Holding Solely Junior
Subordinated Debentures (trust
preferred securities)................. 1,469 1,469 1,469 1,469
Equity excluding accumulated other
comprehensive income, net of tax...... 8,185 8,185 9,185(1)(2) 9,185(1)(2)
Accumulated other comprehensive income,
net of tax............................ 1,257 1,257 1,257 1,257
------- ------- ------- -------
Total Stockholders' Equity............ 9,442 9,442 10,442 10,442
Total Capitalization.................. $13,822 $14,072 $15,442 $15,672
------- ------- ------- -------
---------------
(1) Excludes an adjustment of approximately $ representing the present
value of the contract adjustment payments payable in connection with the
Equity Units and assumes a fair market value of $0 for the purchase
contracts.
(2) Excludes the effect of issuance costs allocated to the purchase contracts
issued in connection with the concurrent Equity Units offering and issuance
costs pertaining to the concurrent common stock offering.
S-6
RATIO OF EARNINGS TO FIXED CHARGES
The following table sets forth our ratio of consolidated earnings to fixed
charges for the years and the periods indicated ($ in millions):
THREE MONTHS
ENDED MARCH 31, YEAR ENDED DECEMBER 31,
--------------- ----------------------------------
2003 2002 2002 2001 2000 1999 1998
---- ---- ---- ---- ---- ---- ----
Ratio of Consolidated Earnings to Total
Fixed Charges(1).......................... $(2,225)(1) 2.1 1.8 1.2(1) 2.1 1.9 1.9
Ratio of Consolidated Earnings to Total
Fixed Charges and Preference
Dividends(2).............................. $(2,225)(1) 2.1 1.8 1.2(1) 2.1 1.9 1.9
---------------
(1) For the three months ended March 31, 2003, the calculation of the ratio of
consolidated earnings to total fixed charges reflects an after-tax charge of
$1.701 billion related to the Company's 2003 asbestos reserve addition. For
2001, the calculation of the ratio of consolidated earnings to total fixed
charges reflects losses of $678 million relating to the terrorist attack on
September 11, 2001.
(2) We had no dividends on preferred stock for the years 1998 to 2002 or for the
three months ended March 31, 2003 or 2002.
For purposes of computing the ratio of consolidated earnings to total fixed
charges, "earnings" consist of income from operations before federal income
taxes and fixed charges. "Fixed charges" consist of interest expense (including
interest credited to contractholders), capitalized interest, amortization of
debt expense and an imputed interest component for rental expense.
S-7
SELECTED FINANCIAL INFORMATION
The selected income statement information for each of the years during the
three year period ended December 31, 2002 and the selected balance sheet
information at each of December 31, 2002 and December 31, 2001 in the table
below were derived from our audited consolidated financial statements which have
been audited by Deloitte & Touche LLP, independent public accountants. The
selected income statement information for each of the years during the two year
period ended December 31, 1999 and the selected balance sheet information at
each of December 31, 2000, December 31, 1999 and December 31, 1998 were derived
from our audited consolidated financial statements which were audited by Arthur
Andersen LLP, independent public accountants. The selected financial information
at and for the three months ended March 31, 2003 and 2002 was derived from our
unaudited condensed consolidated financial statements which have been reviewed
by Deloitte & Touche LLP, independent accountants, and include all adjustments,
consisting of normal recurring accruals, which we consider necessary for a fair
presentation of our financial position and results of operations as of those
dates and for those periods. In addition, material intercompany transactions and
balances have been eliminated. This table should be read in conjunction with our
consolidated financial statements and the related notes that are incorporated by
reference in this prospectus.
THREE MONTHS ENDED
------------------ YEAR ENDED DECEMBER 31,
MARCH 31, MARCH 31, ----------------------------------------------------
2003 2002 2002 2001 2000 1999 1998
--------- --------- ---- ---- ---- ---- ----
(IN MILLIONS, EXCEPT FOR PER SHARE DATA)
INCOME STATEMENT DATA
Revenues(1)................................. $ 4,331 $ 4,060 $ 16,417 $ 15,980 $ 15,312 $ 13,945 $ 15,381
======== ======== ======== ======== ======== ======== ========
Net income(2)(3)............................ $ (1,395) $ 292 $ 1,000 $ 507 $ 974 $ 862 $ 1,015
======== ======== ======== ======== ======== ======== ========
Earnings Per Share Data:
Basic(2)(3)............................... $ (5.46) $ 1.19 $ 4.01 $ 2.13 $ 4.42 $ 3.83 $ 4.36
Diluted(2)(3)............................. $ (5.46) $ 1.17 $ 3.97 $ 2.10 $ 4.34 $ 3.79 $ 4.30
Dividends declared per common share......... $ 0.27 $ 0.26 $ 1.05 $ 1.01 $ 0.97 $ 0.92 $ 0.85
BALANCE SHEET DATA
Assets...................................... $188,657 $185,261 $181,975 $181,593 $171,951 $167,486 $150,632
======== ======== ======== ======== ======== ======== ========
Long-term debt.............................. $ 2,596 $ 1,965 $ 2,596 $ 1,965 $ 1,862 $ 1,548 $ 1,548
Company obligated mandatorily redeemable
preferred securities of subsidiary trusts
holding solely junior subordinated
debentures................................ $ 1,469 $ 1,425 $ 1,468 $ 1,412 $ 1,243 $ 1,250 $ 1,250
Total stockholders' equity.................. $ 9,442 $ 9,039 $ 10,734 $ 9,013 $ 7,464 $ 5,466 $ 6,423
======== ======== ======== ======== ======== ======== ========
---------------
(1) The year ended December 31, 2001 includes a $91 reduction in premiums from
reinsurance cessions related to the terrorist attack on September 11, 2001.
1998 includes $541 related to the recapture of an in force block of
Corporate Owned Life Insurance business from MBL Life Assurance Co. of New
Jersey. 1998 includes revenues of $1,117 from London & Edinburgh, which was
sold in November 1998.
(2) The three months ended March 31, 2003 includes an after-tax charge of $1,701
($6.66 per basic and diluted share) related to the Company's 2003 asbestos
reserve addition. The year ended December 31, 2001 includes $440 of losses
($1.85 per basic and $1.82 per diluted share) related to the terrorist
attack on September 11, 2001 and a $130 tax benefit ($0.55 per basic and
$0.54 per diluted share) at Hartford Life, Inc. ("HLI").
(3) The year ended December 31, 2001 includes a $34 after-tax charge ($0.14 per
basic and diluted share) related to the cumulative effect of accounting
changes for our adoption of SFAS No. 133, "Accounting for Derivative
Instruments and Hedging Activities" and Emerging Issues Task Force Issue
99-20, "Recognition of Interest Income and Impairment on Purchased and
Retained Beneficial Interests in Securitized Financial Assets."
S-8
DESCRIPTION OF THE NOTES
GENERAL
The notes will only be issued in fully registered form in denominations of
$1,000 and multiples of $1,000. The notes will mature on May , 2006. The
accompanying prospectus describes additional provisions of the notes and of the
indenture under which we will issue the notes. There is no limit on the
aggregate principal amount of notes of this series that we may issue. Subject to
certain tax limitations, we reserve the right, from time to time and without the
consent of any holders of any of the notes, to re-open this series of notes on
terms identical in all respects to the outstanding notes (except the date of
issuance, the date interest begins to accrue and, in certain circumstances, the
first interest payment date), so that such additional notes shall be
consolidated with, form a single issue with and increase the aggregate principal
amount of the notes.
INTEREST PAYMENTS
The notes will bear interest at a rate equal to three-month LIBOR (as
defined below) plus %. We will pay interest on the floating rate notes
quarterly in arrears on February , May , August and November of each
year, beginning August , 2003, each an "interest payment date", and on the
maturity date. Interest will be computed on the basis of a 360-day year based on
the actual number of days elapsed during the applicable interest period.
Interest on the notes will accrue from May , 2003 to, but excluding, the first
interest payment date, and then from, and including, the immediately preceding
interest payment date to which interest has been paid or duly provided for to,
but excluding, the next interest payment date or the maturity date, as the case
may be. Each period from and including an interest payment date to but excluding
the next interest payment date or the maturity date, as the case may be, is
referred to as an "interest period". The interest rate on the notes will be
calculated by JPMorgan Chase Bank, as calculation agent, except that the
interest rate in effect for the period from May , 2003 to August , 2003 (the
"initial interest rate") will be established by us as the rate for deposits in
U.S. dollars having a maturity of three months commencing on May , 2003 that
appears on Telerate Page 3750, plus %, as of 11:00 a.m., London time, on
May , 2003. If no rate appears on Telerate Page 3750, as specified in the
preceding sentence, then LIBOR will be determined by us in the manner described
in clause (ii) below, except that the banks referred to in that clause will be
selected by us rather than the calculation agent. All percentages resulting from
any calculation on the notes will be rounded, if necessary, to the nearest one
hundred-thousandth of a percentage point, with five one-millionths of a
percentage point rounded upwards. All dollar amounts used in or resulting from
such calculation on the notes will be rounded to the nearest cent, with one-half
cent being rounded upward.
The calculation agent will reset the interest rate with respect to the
notes on each interest payment date, each of which is referred to as an
"interest reset date", based on LIBOR, as determined by the calculation agent,
on the second London business day preceding that interest reset date, which is
referred to as the "interest determination date" for that interest reset date.
The interest rate in effect on each date that is not an interest reset date will
be the interest rate determined as of the interest determination date relating
to the immediately preceding interest reset date. The interest rate in effect on
any day that is an interest reset date will be the interest rate determined as
of the interest determination date relating to that interest reset date, except
that the interest rate in effect for the period from and including May , 2003
to August , 2003 will be the initial interest rate.
If an interest payment date other than the maturity date falls on a day
that is not a business day, it will be postponed to the following business day,
except that if that business day would fall in the next calendar month, the
interest payment date will be the immediately preceding business day. If the
maturity date falls on a day that is not a business day, the payment of
principal and interest due on the maturity date will be made on the next
succeeding business day, but interest on that payment will not accrue during the
period from and after the maturity date.
S-9
If an interest reset date falls on a day that is not a business day, it
will be postponed to the following business day, except that if that business
day is in the next calendar month, the interest reset date will be the
immediately preceding business day.
"LIBOR" will be determined by the calculation agent in accordance with the
following provisions:
(i) With respect to any interest determination date, LIBOR will be the
rate for deposits in U.S. dollars having a maturity of three months
commencing on the first day of the applicable interest period that appears
on Telerate Page 3750 as of 11:00 a.m., London time, on that interest
determination date. If no rate appears on that interest determination date,
LIBOR, in respect to that interest determination date, will be determined
in accordance with the provisions described in (ii) below.
(ii) With respect to an interest determination date on which no rate
appears on Telerate Page 3750, as specified in (i) above, the calculation
agent will request the principal London offices of each of four major
reference banks in the London interbank market, as selected by the
calculation agent, to provide the calculation agent with its offered
quotation for deposits in U.S. dollars for the period of three months,
commencing on the first day of the applicable interest period, to prime
banks in the London interbank market at approximately 11:00 a.m., London
time, on that interest determination date and in a principal amount that is
representative for a single transaction in U.S. dollars in that market at
the time. If at least two quotations are provided, then LIBOR on that
interest determination date will be the arithmetic mean of those
quotations. If fewer than two quotations are provided, then LIBOR on the
interest determination date will be the arithmetic mean of the rates quoted
at approximately 11:00 a.m., New York City time, on the interest
determination date by three major banks in New York City selected by the
calculation agent for loans in U.S. dollars to leading European banks,
having a three-month maturity and in a principal amount that is
representative for a single transaction in U.S. dollars in that market at
that time; provided, however, that if the banks selected by the calculation
agent are not providing quotations in the manner described by this
sentence, LIBOR for the interest period commencing on the interest reset
date following the interest determination date will be LIBOR in effect on
that interest determination date.
In no event will the rate of interest on the notes be higher than the
maximum rate permitted by New York law, as the same may be modified by
United States law of general application.
A "business day" means any day, other than a Saturday or Sunday that is
neither a legal holiday nor a day on which banking institutions are
authorized or required by law or regulation to close in The City of New
York.
"London business day" means any day on which dealings in U.S. dollars
are transacted in the London interbank market.
"Telerate Page 3750" means the display designated as "Page 3750" on the
Moneyline Telerate, Inc. or any successor page or service, for the purposes
of displaying the London interbank offered rates for U.S. dollar deposits.
RANKING
The notes will rank equally with all of our other unsecured, unsubordinated
obligations.
REDEMPTION
The notes may not be redeemed prior to their stated maturity.
S-10
DEFEASANCE
The provisions of the indenture relating to defeasance, which are described
under the caption "Description of the Debt Securities -- Defeasance" in the
accompanying prospectus, will apply to the notes.
BOOK-ENTRY SECURITIES
The notes will be issued in the form of global securities. The global
securities will be deposited with, or on behalf of, The Depository Trust Company
("DTC"), and registered in the name of DTC or a nominee of DTC.
DTC has advised us as follows: DTC is a limited purpose trust company
organized under the New York Banking Law, a "banking organization" within the
meaning of the New York Banking Law, a member of the Federal Reserve System, a
"clearing corporation" within the meaning of the New York Uniform Commercial
Code and a "clearing agency" registered pursuant to the provisions of Section
17A of the Securities Exchange Act of 1934. DTC was created to hold securities
of its participants and to facilitate the clearance and settlement of securities
transactions among its participants in the securities through electronic
book-entry changes in participants' accounts, eliminating the need for physical
movement of securities certificates. DTC's participants include securities
brokers and dealers, banks, trust companies, clearing corporations and other
organizations, some of whom, or their representatives, own DTC. Access to DTC's
book-entry system also is available to others, such as banks, brokers, dealers
and trust companies that clear through or maintain a custodial relationship with
a participant, either directly or indirectly. The rules applicable to DTC are on
file with the Securities and Exchange Commission.
S-11
CERTAIN UNITED STATES FEDERAL INCOME TAX CONSIDERATIONS
The following is a general discussion of certain United States federal
income tax considerations relating to the purchase, ownership and disposition of
senior notes to holders who purchase notes at their original offering price and
hold the notes as capital assets. Except as provided below, this discussion
applies only to (1) an individual citizen or resident of the United States, (2)
a corporation, or other entity taxable as a corporation, created or organized in
or under the laws of the United States or any state thereof or the District of
Columbia or (3) a partnership, estate or trust treated, for United States
federal income tax purposes, as a domestic partnership, estate or trust
(referred to as a "U.S. holder"). This discussion is based upon the Internal
Revenue Code of 1986, as amended (the "Code"), Treasury regulations (including
proposed Treasury regulations) issued thereunder, Internal Revenue Service
rulings and pronouncements and judicial decisions now in effect, all of which
are subject to change, possibly with retroactive effect.
This discussion does not address all aspects of United States federal
income taxation that may be relevant to holders in light of their particular
circumstances, such as holders who are subject to special tax treatment (for
example, (1) banks, regulated investment companies, insurance companies, dealers
in securities or currencies or tax-exempt organizations, (2) persons holding
senior notes as part of a straddle, hedge, conversion transaction or other
integrated investment or (3) persons whose functional currency is not the U.S.
dollar), some of which may be subject to special rules, nor does it address
alternative minimum taxes, federal estate taxes or state, local or foreign
taxes. PROSPECTIVE INVESTORS ARE URGED TO CONSULT THEIR OWN TAX ADVISORS WITH
RESPECT TO THE TAX CONSEQUENCES OF THE PURCHASE, OWNERSHIP AND DISPOSITION OF
NOTES IN LIGHT OF THEIR OWN CIRCUMSTANCES.
INTEREST INCOME AND ORIGINAL ISSUE DISCOUNT
We anticipate that the notes will not be issued with an issue price that is
less than their stated redemption price at maturity by more than the statutory
de minimis amount. As a result, the notes will not be subject to the original
issue discount ("OID") rules, so that U.S. holders will generally be taxed on
the stated interest on the notes as ordinary income at the time it is paid or
accrued in accordance with the U.S. holder's regular method of tax accounting.
SALE, EXCHANGE, RETIREMENT OR OTHER DISPOSITION OF THE SENIOR NOTES
Upon the sale, exchange, retirement or other disposition of a note, a U.S.
holder will generally recognize taxable gain or loss in an amount equal to the
difference between the amount realized by such U.S. holder and such U.S.
holder's adjusted tax basis in the notes. Any gain or loss so recognized will
generally be capital gain or loss and be long-term capital gain or loss if the
U.S. holder has held the notes for more than one year at the time of
disposition. A reduced tax rate on long-term capital gain may apply to
individual holders. The deductibility of capital losses is subject to
limitations.
NON-U.S. HOLDERS
If an investor is not a U.S. holder as defined above (a "non-U.S. holder"),
payments received with respect to the notes should not be subject to United
States withholding tax, provided that such non-U.S. holder (1) does not actually
or constructively hold 10% or more of the combined voting power of all classes
of our stock that are entitled to vote within the meaning of section 871(h)(3)
of the Code, (2) is not a controlled foreign corporation for United States
federal income tax purposes that is related to us through stock ownership and
(3) complies with applicable certification requirements relating to its non-U.S.
status (including, in general, furnishing an IRS Form W-8BEN or a substitute
form).
In general, United States federal withholding tax will not apply to any
gain or income realized by a non-U.S. holder on the sale, exchange or other
disposition of the notes.
S-12
BACKUP WITHHOLDING AND INFORMATION REPORTING
Unless a U.S. holder is an exempt recipient, such as a corporation,
payments under the notes and the proceeds received from the sale or other
disposition of notes may be subject to information reporting and may also be
subject to United States federal backup withholding tax at the applicable rate
if such U.S. holder fails to supply an accurate taxpayer identification number
or otherwise fails to comply with applicable United States information reporting
or certification requirements. Any amounts so withheld may be allowed as a
credit against the holder's United States federal income tax liability provided
the required information is furnished to the IRS.
A U.S. holder will also be subject to information reporting with respect to
payments on the notes and proceeds from the sale or other disposition of the
notes, unless such U.S. holder is a corporation or other exempt recipient and
appropriately establishes that exemption.
A non-U.S. holder may have to comply with certification procedures to
establish that such holder is not a United States person in order to avoid
information reporting and backup withholding tax.
S-13
UNDERWRITING
Subject to the terms and conditions of the underwriting agreement, the
underwriters named below have severally agreed to purchase from us, and we have
agreed to sell, the principal amount of floating rate senior notes listed
opposite their names below at the public offering price less the underwriting
discount set forth on the cover page of this prospectus supplement:
PRINCIPAL
UNDERWRITERS AMOUNT OF NOTES
------------ ---------------
Banc of America Securities LLC.............................. $
Wachovia Securities, Inc. ..................................
------------
Total..................................................... $250,000,000
The underwriting agreement provides that the obligations of the several
underwriters to purchase the notes offered hereby are subject to certain
conditions and that the underwriters will purchase all of the notes offered by
this prospectus supplement if any of these notes are purchased.
We have been advised by the representatives of the underwriters that the
underwriters propose to offer the notes directly to the public at the public
offering price set forth on the cover page of this prospectus supplement and to
certain dealers at such price less a concession not in excess of % of the
principal amount of the notes. The underwriters may allow, and such dealers may
re-allow, a concession not in excess of % of the principal amount of the
notes to certain other dealers. After the initial public offering,
representatives of the underwriters may change the offering price and other
selling terms.
We estimate that our share of the total expenses of this offering,
excluding the underwriting discount, will be approximately $ .
We have agreed to indemnify the underwriters against certain liabilities,
including liabilities under the Securities Act of 1933, as amended, and to
contribute to payments the underwriters may be required to make in respect of
any of these liabilities.
The notes are a new issue of securities with no established trading market.
The notes will not be listed on any securities exchange or on any automated
dealer quotation system. The underwriters may make a market in the notes after
completion of the offering, but will not be obligated to do so and may
discontinue any market-making activities at any time without notice. No
assurance can be given as to the liquidity of the trading market for the notes
or that an active public market for the notes will develop. If an active public
trading market for the notes does not develop, the market price and liquidity of
the notes may be adversely affected.
In connection with the offering of the notes, certain of the underwriters
may engage in transactions that stabilize, maintain or otherwise affect the
price of the notes. Specifically, the underwriters may overallot in connection
with the offering, creating a short position. In addition, the underwriters may
bid for, and purchase, the notes in the open market to cover short positions or
to stabilize the price of the notes. Any of these activities may stabilize or
maintain the market price of the notes above independent market levels, but no
representation is made hereby of the magnitude of any effect that the
transactions described above may have on the market price of the notes. The
underwriters will not be required to engage in these activities, and may engage
in these activities, and may end any of these activities at any time without
notice.
Each underwriter has represented, warranted and agreed that: (i) it has not
offered or sold and, prior to the expiry of a period of six months from the
closing date, will not offer or sell any notes to persons in the United Kingdom
except to persons whose ordinary activities involve them in acquiring, holding,
managing or disposing of investments (as principal or agent) for the purposes of
their businesses or otherwise in circumstances which have not resulted and will
not result in an offer to the public in the United Kingdom within the meaning of
the Public Offers of Securities Regulations
S-14
1995; (ii) it has only communicated or caused to be communicated and will only
communicate or cause to be communicated any invitation or inducement to engage
in investment activity (within the meaning of section 21 of the Financial
Services and Markets Act 2000 ("FSMA")) received by it in connection with the
issue or sale of any notes in circumstances in which section 21(1) of the FSMA
does not apply to the Issuer; and (iii) it has complied and will comply with all
applicable provisions of the FSMA with respect to anything done by it in
relation to the notes in, from or otherwise involving the United Kingdom.
The notes may not be offered, sold, transferred or delivered in or from The
Netherlands, as part of their initial distribution or as part of any
re-offering, and neither this prospectus supplement, the accompanying prospectus
nor any other document in respect of the offering may be distributed or
circulated in The Netherlands, other than to individuals or legal entities which
include, but are not limited to, banks, brokers, dealers, institutional
investors and undertakings with a treasury department, who or which trade or
invest in securities in the conduct of a business or profession.
The notes have not been and will not be registered under the Securities and
Exchange Law of Japan. Each underwriter has represented and agreed that it has
not offered or sold, and it will not offer or sell, directly or indirectly, any
of the Company's notes in Japan or to, or for the account or benefit of, any
resident of Japan or to, or for the account or benefit, of any resident for
reoffering or resale, directly or indirectly, in Japan or to, or for the account
or benefit of, any resident of Japan except (i) pursuant to an exemption from
the registration requirements of, or otherwise in compliance with, the
Securities and Exchange Law of Japan and (ii) in compliance with the other
relevant laws and regulations of Japan.
No offer to sell the notes has been or will be made in the Hong Kong
Special Administrative Region of the People's Republic of China ("Hong Kong"),
by means of any document, other than to persons whose ordinary business is to
buy or sell shares or debentures, whether as principal or agent, except in
circumstances which do not constitute an offer to the public within the meaning
of the Companies Ordinance (Cap.32) of Hong Kong, and unless permitted to do so
under the securities laws of Hong Kong, no person has issued or had in its
possession for the purposes of issue, and will not issue or have in its
possession for the purpose of issue, any advertisement, document or invitation
relating to the notes in Hong Kong other than with respect to the shares
intended to be disposed of to persons outside Hong Kong or only to persons whose
business involves the acquisition, disposal or holding of securities whether as
principal or agent.
This prospectus has not been registered as a prospectus with the Monetary
Authority of Singapore. Accordingly, each of the underwriters has agreed that
this prospectus and any other document or material in connection with the offer
or sale, or invitation for subscription or purchase, of the notes may not be
circulated or distributed, nor may the notes be offered or sold, or be made the
subject of an invitation for subscription or purchase, whether directly or
indirectly, to the public or any member of the public in Singapore other than
(i) to an institutional investor or other person specified in Section 274 of the
Securities and Futures Act 2001 of Singapore (the "SFA"), (ii) to a
sophisticated investor, and in accordance with the conditions, specified in
Section 275 of the SFA or (iii) otherwise pursuant to, and in accordance with
the conditions of, any other applicable provision of the SFA.
The underwriters and their affiliates have provided and in the future may
continue to provide investment banking and other financial services, including
the provision of credit facilities, to us in the ordinary course of business for
which they have received and will receive customary compensation.
S-15
ERISA CONSIDERATIONS
Section 406 of the Employee Retirement Income Security Act of 1974, as
amended ("ERISA") and Section 4975 of the Internal Revenue Code of 1986, as
amended (the "Code"), prohibit pension, profit-sharing or other employee benefit
plans, as well as individual retirement accounts and Keogh plans subject to
Section 4975 of the Code ("Plans"), from engaging in certain transactions
involving "plan assets" with persons who are "parties in interest" under ERISA
or "disqualified persons" under the Code ("Parties in Interest") with respect to
certain Plans. As a result of our business, we may be a Party in Interest with
respect to certain Plans. Where we are a Party in Interest with respect to a
Plan (either directly or by reason of our ownership of our subsidiaries), the
purchase and holding of the senior notes by or on behalf of the Plan may be a
prohibited lending transaction under Section 406(a)(1) of ERISA and Section
4975(c)(1) of the Code, unless exemptive relief were available under an
applicable administrative exemption (as described below) or there was some other
basis on which the transaction was not prohibited.
Accordingly, the notes may not be purchased or held by any Plan, any entity
whose underlying assets include "plan assets" by reason of any Plan's investment
in the entity (a "Plan Asset Entity") or any person investing "plan assets" of
any Plan, unless such purchaser or holder is eligible for the exemptive relief
available under prohibited Transaction Class Exemption ("PTCE") 96-23, 95-60,
91-38, 90-1 or 84-14 issued by the U.S. Department of Labor or there was some
other basis on which the purchase and holding of the notes by the Plan Asset
Entity is not prohibited. Any purchaser or holder of the senior notes or any
interest therein will be deemed to have represented by its purchase and holding
thereof that either (a) it is not a Plan or a Plan Asset Entity and is not
purchasing the notes on behalf of or with "plan assets" of any Plan or (b) its
purchase and holding of the senior notes is eligible for the exemptive relief
available under PTCE 96-23, 95-60, 91-38, 90-1 or 84-14 or there is some basis
on which such purchase and holding is not prohibited.
Employee benefit plans that are governmental plans (as defined in Section
3(32) of ERISA), certain church plans (as defined in Section 3(33) of ERISA) and
foreign plans (as described in Section 4(b)(4) of ERISA) are not subject to
these "prohibited transaction" rules of ERISA or Section 4975 of the Code, but
may be subject to similar rules under other applicable laws or documents. Due to
the complexity of the applicable rules, it is particularly important that
fiduciaries or other persons considering purchasing the notes on behalf of or
with "plan assets" of any Plan consult with their counsel regarding the relevant
provisions of ERISA and the Code and the availability of exemptive relief under
PTCE 96-23, 95-60, 91-38, 90-1 or 84-14.
S-16
VALIDITY OF THE NOTES
The validity of the notes will be passed upon for us by Debevoise &
Plimpton, 919 Third Avenue, New York, New York 10022, and for the underwriters
by Davis Polk & Wardwell, 450 Lexington Avenue, New York, New York 10017. This
statement supersedes the "Legal Opinions" section in the accompanying
prospectus.
S-17
PROSPECTUS
THE HARTFORD FINANCIAL
SERVICES GROUP, INC.
DEBT SECURITIES
JUNIOR SUBORDINATED DEFERRABLE INTEREST DEBENTURES
PREFERRED STOCK
COMMON STOCK
DEPOSITARY SHARES
WARRANTS
STOCK PURCHASE CONTRACTS
STOCK PURCHASE UNITS
HARTFORD CAPITAL IV
HARTFORD CAPITAL V
HARTFORD CAPITAL VI
PREFERRED SECURITIES GUARANTEED
AS DESCRIBED IN THIS PROSPECTUS
AND THE ACCOMPANYING PROSPECTUS SUPPLEMENT
BY THE HARTFORD FINANCIAL SERVICES GROUP, INC.
By this prospectus, we may offer from time to time up to $2,586,562,704 of any
combination of the securities described in this prospectus.
We will provide specific terms of the securities in supplements to this
prospectus. You should read this prospectus and any supplement carefully before
you invest. A supplement may also change or update information contained in this
prospectus.
We will not use this prospectus to confirm sales of any of our securities unless
it is attached to a prospectus supplement.
Unless we state otherwise in a prospectus supplement, we will not list any of
these securities on any securities exchange.
Neither the Securities and Exchange Commission nor any state securities
commission has determined whether this prospectus is truthful or complete. They
have not made, nor will they make, any determination as to whether anyone should
buy these securities. Any representation to the contrary is a criminal offense.
The date of this Prospectus is April 10, 2003
TABLE OF CONTENTS
PAGE
----
ABOUT THIS PROSPECTUS....................................... ii
FORWARD-LOOKING STATEMENTS.................................. ii
THE HARTFORD FINANCIAL SERVICES GROUP, INC. ................ 1
THE HARTFORD CAPITAL TRUSTS................................. 1
USE OF PROCEEDS............................................. 3
RATIO OF EARNINGS TO FIXED CHARGES.......................... 3
DESCRIPTION OF THE DEBT SECURITIES.......................... 3
DESCRIPTION OF JUNIOR SUBORDINATED DEBENTURES............... 15
DESCRIPTION OF CAPITAL STOCK OF THE HARTFORD FINANCIAL
SERVICES GROUP, INC. ..................................... 27
DESCRIPTION OF DEPOSITARY SHARES............................ 34
DESCRIPTION OF WARRANTS..................................... 36
DESCRIPTION OF STOCK PURCHASE CONTRACTS AND STOCK PURCHASE
UNITS..................................................... 38
DESCRIPTION OF PREFERRED SECURITIES......................... 39
DESCRIPTION OF GUARANTEE.................................... 51
DESCRIPTION OF CORRESPONDING JUNIOR SUBORDINATED
DEBENTURES................................................ 53
RELATIONSHIP AMONG THE PREFERRED SECURITIES, THE
CORRESPONDING JUNIOR SUBORDINATED DEBENTURES AND THE
GUARANTEES................................................ 55
PLAN OF DISTRIBUTION........................................ 57
LEGAL OPINIONS.............................................. 58
EXPERTS..................................................... 58
WHERE YOU CAN FIND MORE INFORMATION......................... 58
INCORPORATION BY REFERENCE.................................. 59
ABOUT THIS PROSPECTUS
This prospectus is part of a registration statement that we filed with the
Securities and Exchange Commission utilizing a "shelf" registration process.
Under this shelf process, we may sell the securities described in the prospectus
from time to time. This prospectus provides you with a general description of
the securities we may offer. We may also add, update or change information
contained in this prospectus through one or more supplements to this prospectus.
Any statement that we make in this prospectus will be modified or superseded by
any inconsistent statement made by us in a prospectus supplement. The rules of
the SEC allow us to incorporate by reference information into this prospectus.
This information incorporated by reference is considered to be a part of this
prospectus, and information that we file later with the SEC will automatically
update and supersede this information. See "Incorporation by Reference." You
should read both this prospectus and any prospectus supplement together with
additional information described under the heading "Where You Can Find More
Information."
No person has been authorized to give any information or to make any
representations, other than those contained or incorporated by reference in this
prospectus and, if given or made, such information or representation must not be
relied upon as having been authorized by The Hartford Financial Services Group,
Inc., or any underwriter, agent, dealer or remarketing firm. Neither the
delivery of this prospectus nor any sale made hereunder shall under any
circumstances create any implication that there has been no change in the
affairs of The Hartford Financial Services Group, Inc. since the date hereof or
that the information contained or incorporated by reference herein is correct as
of any time subsequent to the date of such information. This prospectus does not
constitute an offer to sell or a solicitation of an offer to buy any securities
by anyone in any jurisdiction in which such offer or solicitation is not
authorized or in which the person making such offer or solicitation is not
qualified to do so or to any person to whom it is unlawful to make such offer or
solicitation.
FORWARD-LOOKING STATEMENTS
Certain of the statements contained in this prospectus or incorporated by
reference into this prospectus (other than statements of historical fact) are
forward-looking statements. These forward-looking statements are made pursuant
to the safe harbor provisions of the Private Securities Litigation Reform Act of
1995 and include estimates and assumptions related to economic, competitive and
legislative developments. These forward-looking statements are subject to change
and uncertainty which are, in many instances, beyond our control and have been
made based upon management's expectations and beliefs concerning future
developments and their potential effect upon us. There can be no assurance that
future developments will be in accordance with management's expectations or that
the effect of future developments on us will be those anticipated by management.
Actual results could differ materially from those expected by us, depending on
the outcome of various factors. These factors include:
- the difficulty in predicting our potential exposure for asbestos and
environmental claims and related litigation, in particular, significant
uncertainty with regard to the outcome of our current dispute with Mac Arthur
Company and its subsidiary, Western MacArthur Company;
- the uncertain nature of damage theories and loss amounts and the development
of additional facts related to the September 11 terrorist attack;
- the uncertain impact on us of the Bush Administration's budget proposals
relating to the distribution of nontaxable dividends to stockholders and the
creation of new tax-favored individual savings accounts;
- the response of reinsurance companies under reinsurance contracts, the impact
of increasing reinsurance rates, and the availability and adequacy of
reinsurance to protect us against losses;
ii
- the possibility of more unfavorable loss experience than anticipated;
- the possibility of general economic and business conditions that are less
favorable than anticipated;
- the incidence and severity of catastrophes, both natural and man-made;
- the effect of changes in interest rates, the stock markets or other financial
markets;
- stronger than anticipated competitive activity;
- unfavorable legislative, regulatory or judicial developments;
- our ability to distribute our products through distribution channels, both
current and future;
- the uncertain effects of emerging claims and coverage issues;
- the effect of assessments and other surcharges for guaranty funds and
second-injury funds and other mandatory pooling arrangements;
- a downgrade in our claims-paying, financial strength or credit ratings;
- the ability of our subsidiaries to pay dividends to us; and
- other factors described in such forward-looking statements.
iii
THE HARTFORD FINANCIAL SERVICES GROUP, INC.
We are a diversified insurance and financial services holding company. Through
our subsidiaries, we are among the largest providers of investment products,
individual life, group life and disability insurance products, and property and
casualty insurance products in the United States. Hartford Fire Insurance
Company, or Hartford Fire, founded in 1810, is the oldest of our subsidiaries.
Our companies write insurance and reinsurance in the United States and
internationally. At December 31, 2002, our total assets were $182.0 billion and
our total stockholders' equity was $10.7 billion.
We were formed in December 1985 as a wholly owned subsidiary of ITT Corporation.
On December 19, 1995, all our outstanding shares were distributed to ITT
Corporation's stockholders and we became an independent company. On May 2, 1997,
we changed our name from ITT Hartford Group, Inc. to our current name, The
Hartford Financial Services Group, Inc.
As a holding company that is separate and distinct from our insurance
subsidiaries, we have no significant business operations of our own. Therefore,
we rely on the dividends from our insurance company subsidiaries, which are
primarily domiciled in Connecticut, and our other subsidiaries as the principal
source of cash flow to meet our obligations. These obligations include payments
on our debt securities and the payment of dividends on our capital stock,
including preferred stock. The Connecticut insurance holding company laws limit
the payment of dividends by Connecticut-domiciled insurers. Under these laws,
the insurance subsidiaries may only make their dividend payments out of earned
surplus. In addition, these laws require notice to and approval by the state
insurance commissioner for the declaration or payment by those subsidiaries of
any dividend if the dividend and other dividends or distributions made within
the preceding twelve months exceeds the greater of:
- 10% of the insurer's policyholder surplus as of December 31 of the preceding
year, and
- net income, or net gain from operations if the subsidiary is a life insurance
company, for the previous calendar year,
in each case determined under statutory insurance accounting principles.
The insurance holding company laws of the other jurisdictions in which some of
our insurance subsidiaries are incorporated generally contain similar, and in
some instances more restrictive, limitations on the payment of dividends. As of
December 31, 2002, our insurance subsidiaries are permitted to pay us up to a
maximum of approximately $1.8 billion in dividends in 2003 without prior
regulatory approval.
Our rights to participate in any distribution of assets of any of our
subsidiaries (for example, upon their liquidation or reorganization) and the
ability of holders of the securities to benefit indirectly from a distribution,
are subject to the prior claims of creditors of the applicable subsidiary,
except to the extent that we may be a creditor of that subsidiary. Claims on
these subsidiaries by persons other than us include, as of December 31, 2002,
claims by policyholders for benefits payable amounting to $49.7 billion, claims
by separate account holders of $107.1 billion, and other liabilities including
claims of trade creditors, claims from guaranty associations and claims from
holders of debt obligations amounting to $14.5 billion.
Our principal executive offices are located at Hartford Plaza, Hartford,
Connecticut 06115, and our telephone number is (860) 547-5000.
THE HARTFORD CAPITAL TRUSTS
We created each trust as a Delaware statutory trust pursuant to a trust
agreement. We will enter into an amended and restated trust agreement for each
trust, which will state the terms and conditions for the trust to issue and sell
its preferred securities and common securities. We will amend and restate each
trust agreement in its entirety substantially in the form filed as an exhibit to
the
1
Registration Statement which includes this prospectus. Each trust agreement will
be qualified as an indenture under the Trust Indenture Act of 1939, as amended,
which we refer to in this prospectus as the "Trust Indenture Act."
Each trust exists for the exclusive purposes of:
- issuing and selling to the public preferred securities, representing undivided
beneficial interests in the assets of the trust,
- issuing and selling to us common securities, representing undivided beneficial
interests in the assets of the trust,
- using the proceeds from the sale of the preferred securities and common
securities to acquire a corresponding series of junior subordinated deferrable
interest debentures, which we refer to in this prospectus as the
"corresponding junior subordinated debentures,"
- distributing the cash payments it receives from the corresponding junior
subordinated debentures it owns to you and the other holders of preferred
securities and us, as the holder of common securities, and
- engaging in the other activities that are necessary, convenient or incidental
to these purposes.
Accordingly, the corresponding junior subordinated debentures will be the sole
assets of the trust, and payments under the corresponding junior subordinated
debentures and the related expense agreement will be the sole revenue of the
trust.
We will own all of the common securities of each trust. The common securities of
a trust will rank equally with and payments will be made pro rata with the
preferred securities of the trust, except that if an event of default under a
trust agreement then exists, our rights as holder of the common securities to
payment of distributions and payments upon liquidation or redemption will be
subordinated to your rights as a holder of the preferred securities of the
trust. See "Description of Preferred Securities -- Subordination of Common
Securities."
Unless we state otherwise in a prospectus supplement, each trust has a term of
approximately 45 years. A trust may also terminate earlier. The trustees of each
trust will conduct its business and affairs. As holder of the common securities
we will initially appoint the trustees. Initially, the trustees will be:
- Wilmington Trust Company, which will act as property trustee and as Delaware
trustee, and
- Two of our employees or officers or those of our affiliates, who will act as
administrative trustees.
Wilmington Trust Company, as property trustee, will act as sole indenture
trustee under each trust agreement for purposes of compliance with the
provisions of the Trust Indenture Act. Wilmington Trust Company will also act as
trustee under the guarantee and the junior subordinated indenture pursuant to
which we will issue the junior subordinated debentures. See "Description of
Junior Subordinated Debentures" and "Description of Guarantee."
The holder of the common securities of a trust, or the holders of a majority in
liquidation preference of the preferred securities if an event of default under
the trust agreement for the trust has occurred and is continuing, will be
entitled to appoint, remove or replace the property trustee and/or the Delaware
trustee of the trust. You will not have the right to vote to appoint, remove or
replace the administrative trustees. Only we, as the holder of the common
securities, will have these voting rights. The duties and obligations of the
trustees are governed by the applicable trust agreement. We will pay all fees
and expenses related to the trusts and the offering of the preferred securities
and will pay, directly or indirectly, all ongoing costs, expenses and
liabilities of the trusts, except for payments made on the preferred securities
or the common securities, subject to the guarantee.
The principal executive office of each trust is Hartford Plaza, Hartford,
Connecticut 06115, Attention: Secretary, and its telephone number is (860)
547-5000.
2
USE OF PROCEEDS
Unless we state otherwise in a prospectus supplement, we intend to use the
proceeds from the sale of the securities offered by this prospectus, including
the corresponding junior subordinated debentures issued to the trusts in
connection with their investment of all the proceeds from the sale of preferred
securities, for general corporate purposes, including working capital, capital
expenditures, investments in loans to subsidiaries, acquisitions and refinancing
of debt, including outstanding commercial paper and other short-term
indebtedness. We will include a more detailed description of the use of proceeds
of any specific offering of securities in the prospectus supplement relating to
the offering.
RATIO OF EARNINGS TO FIXED CHARGES
The following table sets forth our ratio of consolidated earnings to fixed
charges for the years and the periods indicated:
YEAR ENDED DECEMBER 31,
---------------------------------
2002 2001 2000 1999 1998
---- ---- ---- ---- ----
Ratio of Consolidated Earnings to Total Fixed
Charges.......................................... 1.7 1.2(1) 2.0 1.8 1.8
Ratio of Consolidated Earnings to Total Fixed
Charges and Preference Dividends(2).............. 1.7 1.2(1) 2.0 1.8 1.8
---------------
(1) For 2001, the calculation of the ratio of consolidated earnings to total
fixed charges reflects losses of $678 million relating to the terrorist
attack on September 11, 2001.
(2) We had no dividends on preferred stock for the years 1998 to 2002.
For purposes of computing the ratio of consolidated earnings to fixed charges,
"earnings" consists of income from operations before federal income taxes and
fixed charges. "Fixed charges" consists of interest expense (including interest
credited to contractholders), capitalized interest, amortization of debt expense
and an imputed interest component for rental expense.
DESCRIPTION OF THE DEBT SECURITIES
We may offer unsecured senior debt securities or subordinated debt securities.
We refer to the senior debt securities and the subordinated debt securities
together in this prospectus as the "debt securities." The senior debt securities
will rank equally with all of our other unsecured, unsubordinated obligations.
The subordinated debt securities will be subordinate and junior in right of
payment to all of our senior debt.
We will issue the senior debt securities in one or more series under an
indenture, which we refer to as the "senior indenture," dated as of October 20,
1995, between us and JPMorgan Chase Bank (formerly The Chase Manhattan Bank), as
trustee. We will issue subordinated debt securities in one or more series under
an indenture, which we refer to as the "subordinated indenture," between us and
the trustee to be named in the prospectus supplement relating to the offering of
subordinated debt securities.
The following description of the terms of the indentures is a summary. It
summarizes only those portions of the indentures which we believe will be most
important to your decision to invest in our debt securities. You should keep in
mind, however, that it is the indentures, and not this summary, which define
your rights as a debtholder. There may be other provisions in the indentures
which are also important to you. You should read the indentures for a full
description of the terms of the debt. The senior indenture and the subordinated
indenture are filed as exhibits to the Registration Statement that includes this
prospectus. See "Where You Can Find More Information" for information on how to
obtain copies of the senior indenture and the subordinated indenture.
3
THE DEBT SECURITIES ARE UNSECURED OBLIGATIONS
Our debt securities will be unsecured obligations. Our senior debt securities
will be unsecured and will rank equally with all of our other unsecured and
unsubordinated obligations. As a non-operating holding company most of our
operating assets are owned by our subsidiaries. We rely primarily on dividends
from these subsidiaries to meet our obligations for payment of principal and
interest on our outstanding debt obligations and corporate expenses.
Accordingly, the debt securities will be effectively subordinated to all
existing and future liabilities of our subsidiaries, and you should rely only on
our assets for payments on the debt securities. The payment of dividends by our
insurance subsidiaries is limited under the insurance holding company laws in
the jurisdictions where those subsidiaries are domiciled. See "The Hartford
Financial Services Group, Inc."
Unless we state otherwise in the applicable prospectus supplement, the
indentures do not limit us from incurring or issuing other secured or unsecured
debt under either of the indentures or any other indenture that we may have
entered into or enter into in the future. See "-- Subordination under the
Subordinated Indenture" and the prospectus supplement relating to any offering
of subordinated debt securities.
TERMS OF THE DEBT SECURITIES
We may issue the debt securities in one or more series through an indenture that
supplements the senior indenture or the subordinated indenture or through a
resolution of our board of directors or an authorized committee of our board of
directors.
You should refer to the applicable prospectus supplement for the specific terms
of the debt securities. These terms may include the following:
- title of the debt securities,
- any limit upon the aggregate principal amount of the series,
- maturity date(s) or the method of determining the maturity date(s),
- interest rate(s) or the method of determining the interest rate(s),
- dates on which interest will be payable and circumstances, if any, in which
interest may be deferred,
- dates from which interest will accrue and the method of determining those
dates,
- place or places where we may pay principal, premium, if any, and interest and
where you may present the debt securities for registration or transfer or
exchange,
- place or places where notices and demands relating to the debt securities and
the indentures may be made,
- redemption or early payment provisions,
- sinking fund or similar provisions,
- authorized denominations if other than denominations of $1,000,
- currency, currencies, or currency units, if other than in U.S. dollars, in
which the principal of, premium, if any, and interest on the debt securities
is payable, or in which the debt securities are denominated,
- any additions, modifications or deletions, in the events of default or
covenants of The Hartford Financial Services Group, Inc. specified in the
indenture relating to the debt securities,
- if other than the principal amount of the debt securities, the portion of the
principal amount of the debt securities that is payable upon declaration of
acceleration of maturity,
4
- any additions or changes to the indenture necessary to permit or facilitate
issuing the series in bearer form, registrable or not registrable as to
principal, and with or without interest coupons,
- any index or indices used to determine the amount of payments of principal of
and premium, if any, on the debt securities and the method of determining
these amounts,
- whether a temporary global security will be issued and the terms upon which
these temporary debt securities may be exchanged for definitive debt
securities,
- whether the debt securities will be issued in whole or in part in the form of
one or more global securities,
- identity of the depositary for global securities,
- appointment of any paying agent(s),
- the terms and conditions of any obligation or right we would have or any
option you would have to convert or exchange the debt securities into other
securities or cash,
- in the case of the subordinated indenture, any provisions regarding
subordination, and
- additional terms not inconsistent with the provisions of the indentures.
Debt securities may also be issued under the indentures upon the exercise of
warrants or delivery upon settlement of stock purchase contracts. See
"Description of Warrants" and "Description of Stock Purchase Contracts."
SPECIAL PAYMENT TERMS OF THE DEBT SECURITIES
We may issue one or more series of debt securities at a substantial discount
below their stated principal amount. These may bear no interest or interest at a
rate which at the time of issuance is below market rates. We will describe
United States federal tax consequences and special considerations relating to
any series in the applicable prospectus supplement.
The purchase price of any of the debt securities may be payable in one or more
foreign currencies or currency units. The debt securities may be denominated in
one or more foreign currencies or currency units, or the principal of, premium,
if any, or interest on any debt securities may be payable in one or more foreign
currencies or currency units. We will describe the restrictions, elections,
United States federal income tax considerations, specific terms and other
information relating to the debt securities and any foreign currencies or
foreign currency units in the applicable prospectus supplement.
If we use any index to determine the amount of payments of principal of,
premium, if any, or interest on any series of debt securities, we will also
describe in the applicable prospectus supplement the special United States
federal income tax, accounting and other considerations applicable to the debt
securities.
DENOMINATIONS, REGISTRATION AND TRANSFER
We expect to issue most debt securities in fully registered form without coupons
and in denominations of $1,000 and any integral multiple of $1,000. Except as we
may describe in the applicable prospectus supplement, debt securities of any
series will be exchangeable for other debt securities of the same issue and
series, in any authorized denominations, of a like aggregate principal amount
and bearing the same interest rate.
You may present debt securities for exchange as described above, or for
registration of transfer, at the office of the securities registrar or at the
office of any transfer agent we designate for that purpose. You will not incur a
service charge but you must pay any taxes and other governmental charges as
described in the indentures. We will appoint the trustees as securities
registrar under the indentures. We may at any time rescind the designation of
any transfer agent that we initially
5
designate or approve a change in the location through which the transfer agent
acts. We will specify the transfer agent in the applicable prospectus
supplement. We may at any time designate additional transfer agents.
GLOBAL DEBT SECURITIES
We may issue all or any part of a series of debt securities in the form of one
or more global securities. We will appoint the depository holding the global
debt securities. Unless we otherwise state in the applicable prospectus
supplement, the depositary will be The Depository Trust Company, or DTC. We will
issue global securities in registered form and in either temporary or definitive
form. Unless it is exchanged for individual debt securities, a global security
may not be transferred except:
- by the depositary to its nominee,
- by a nominee of the depositary to the depositary or another nominee, or
- by the depositary or any nominee to a successor of the depositary, or a
nominee of the successor.
We will describe the specific terms of the depositary arrangement in the
applicable prospectus supplement. We expect that the following provisions will
generally apply to these depositary arrangements.
BENEFICIAL INTERESTS IN A GLOBAL SECURITY
If we issue a global security, the depositary for the global security or its
nominee will credit on its book-entry registration and transfer system the
principal amounts of the individual debt securities represented by the global
security to the accounts of persons that have accounts with it. We refer to
those persons as "participants" in this prospectus. The accounts will be
designated by the dealers, underwriters or agents for the debt securities, or by
us if the debt securities are offered and sold directly by us. Ownership of
beneficial interests in a global security will be limited to participants or
persons who may hold interests through participants. Ownership and transfers of
beneficial interests in the global security will be shown on, and transactions
can be effected only through, records maintained by the applicable depositary or
its nominee, for interests of participants, and the records of participants, for
interests of persons who hold through participants. The laws of some states
require that you take physical delivery of securities in definitive form. These
limits and laws may impair your ability to transfer beneficial interests in a
global security.
So long as the depositary or its nominee is the registered owner of a global
security, the depositary or nominee will be considered the sole owner or holder
of the debt securities represented by the global security for all purposes under
the indenture. Except as provided below, you:
- will not be entitled to have any of the individual debt securities represented
by the global security registered in your name,
- will not receive or be entitled to receive physical delivery of any debt
securities in definitive form, and
- will not be considered the owner or holder of the debt securities under the
indenture.
PAYMENTS OF PRINCIPAL, PREMIUM AND INTEREST
We will make principal, premium, if any, and interest payments on global
securities to the depositary that is the registered holder of the global
security or its nominee. The depositary for the global securities will be solely
responsible and liable for all payments made on account of your beneficial
ownership interests in the global security and for maintaining, supervising and
reviewing any records relating to your beneficial ownership interests.
6
We expect that the depositary or its nominee, upon receipt of any principal,
premium, if any, or interest payment immediately will credit participants'
accounts with amounts in proportion to their respective beneficial interests in
the principal amount of the global security as shown on the records of the
depositary or its nominee. We also expect that payments by participants to you,
as an owner of a beneficial interest in the global security held through those
participants, will be governed by standing instructions and customary practices,
as is now the case with securities held for the accounts of customers in bearer
form or registered in "street name." These payments will be the responsibility
of those participants.
ISSUANCE OF INDIVIDUAL DEBT SECURITIES
Unless we state otherwise in the applicable prospectus supplement, if a
depositary for a series of debt securities is at any time unwilling, unable or
ineligible to continue as depositary, we will issue individual debt securities
in exchange for the global security. In addition, we may at any time and in our
sole discretion, subject to any limitations described in the prospectus
supplement relating to the debt securities, determine not to have any debt
securities represented by one or more global securities. If that occurs, we will
issue individual debt securities in exchange for the global security.
Further, we may specify that you may, on terms acceptable to us, the trustee and
the depositary, receive individual debt securities in exchange for your
beneficial interest in a global security, subject to any limitations described
in the prospectus supplement relating to the debt securities. In that instance,
you will be entitled to physical delivery of individual debt securities equal in
principal amount to that beneficial interest and to have the debt securities
registered in your name. Unless we otherwise specify, we will issue those
individual debt securities in denominations of $1,000 and integral multiples of
$1,000.
PAYMENT AND PAYING AGENTS
Unless we state otherwise in an applicable prospectus supplement, we will pay
principal of, premium, if any, and interest on your debt securities at the
office of the trustee for your debt securities in the City of New York or at the
office of any paying agent that we may designate.
Unless we state otherwise in an applicable prospectus supplement, we will pay
any interest on debt securities to the registered owner of the debt security at
the close of business on the record date for the interest, except in the case of
defaulted interest. We may at any time designate additional paying agents or
rescind the designation of any paying agent. We must maintain a paying agent in
each place of payment for the debt securities.
Any moneys deposited with the trustee or any paying agent, or then held by us in
trust, for the payment of the principal of, premium, if any, and interest on any
debt security that remain unclaimed for two years after the principal, premium
or interest has become due and payable will, at our request, be repaid to us.
After repayment to us, you are entitled to seek payment only from us as a
general unsecured creditor.
REDEMPTION
Unless we state otherwise in an applicable prospectus supplement, debt
securities will not be subject to any sinking fund.
Unless we state otherwise in an applicable prospectus supplement, we may, at our
option, redeem any series of debt securities on any interest payment date in
whole or in part. We may redeem debt securities in denominations larger than
$1,000 but only in integral multiples of $1,000.
7
REDEMPTION PRICE
Except as we may otherwise specify in the applicable prospectus supplement, the
redemption price for any debt security which we redeem will equal any accrued
and unpaid interest to the redemption date, plus the greater of:
- the principal amount, and
- an amount equal to:
-- for debt securities bearing interest at a fixed rate, the discounted
remaining fixed amount payments, calculated as described below, or
-- for debt securities bearing interest determined by reference to a
floating rate, the discounted swap equivalent payments, calculated as
described below.
The discounted remaining fixed amount payments will equal the sum of the current
values of the amounts of interest and principal that would have been payable by
us on each interest payment date after the redemption date and at stated
maturity of the final payment of principal. This calculation will take into
account any required sinking fund payments, but will otherwise assume that we
have not redeemed the debt security prior to the stated maturity.
The current value of any amount is the present value of that amount on the
redemption date after discounting that amount on a semiannual basis, from the
originally scheduled date for payment. We will use the treasury rate to
calculate this present value.
The treasury rate is a per annum rate, determined on the redemption date to be
the per annum rate equal to the semiannual bond equivalent yield to maturity for
United States Treasury securities maturing at the stated maturity of the final
payment of principal of the debt securities redeemed. We will determine this
rate by reference to the weekly average yield to maturity for United States
Treasury securities maturing on that stated maturity, if reported in the most
recent Statistical Release H.15(519) of the Board of Governors of the Federal
Reserve. If no such securities mature at the stated maturity, we will determine
the rate by interpolation between the most recent weekly average yields to
maturity for two series of United States Treasury securities, (1) one maturing
as close as possible to, but earlier than, the stated maturity and (2) the other
maturing as close as possible to, but later than, the stated maturity, in each
case as published in the most recent Statistical Release H.15(519) of the Board
of Governors of the Federal Reserve.
The discounted swap equivalent payments will equal the sum of:
- the current value of the amount of principal that would have been payable by
us at the stated maturity of the final payment of the principal of the debt
securities redeemed. This calculation will take into account any required
sinking fund payments, but will otherwise assume that we had not redeemed the
debt security prior to the stated maturity, and
- the sum of the current values of the fixed rate payments that leading interest
rate swap dealers would require to be paid by an assumed fixed rate payer
having the same credit standing as ours against floating rate payments to be
made by these leading dealers equal to the interest payments on the debt
securities being redeemed, taking into account any required sinking fund
payments but otherwise assuming we had not redeemed the debt securities prior
to the stated maturity, under a standard interest rate swap agreement having a
notional principal amount equal to the principal amount of the debt
securities, a termination date set at the stated maturity of the debt security
and payment dates for both fixed and floating rate payers set at each interest
payment date of the debt securities. The amount of the fixed rate payments
will be based on quotations received by the trustee, or an agent appointed for
that purpose, from four leading interest rate swap dealers or, if quotations
from four leading interest rate swap dealers are not obtainable, three leading
interest rate swap dealers.
8
NOTICE OF REDEMPTION
We will mail notice of any redemption of your debt securities at least 30 days
but not more than 60 days before the redemption date to you at your registered
address. Unless we default in payment of the redemption price, on and after the
redemption date interest will cease to accrue on the debt securities or the
portions called for redemption.
CONSOLIDATION, MERGER AND SALE OF ASSETS
We will not consolidate with or merge into any other corporation or convey,
transfer or lease our properties and assets substantially as an entirety to any
person, and no person may consolidate with or merge into us or convey, transfer
or lease to us its properties and assets substantially as an entirety, unless:
- if we consolidate with or merge into another corporation or convey or transfer
our properties and assets substantially as an entirety to any person, the
successor corporation is organized under the laws of the United States of
America or any state or the District of Columbia, and the successor
corporation expressly assumes our obligations relating to the debt securities,
- immediately after giving effect to the consolidation, merger, conveyance or
transfer, there exists no event of default, and no event which, after notice
or lapse of time or both, would become an event of default, and
- other conditions described in the indenture are met.
The general provisions of the indenture do not protect you against transactions,
such as a highly leveraged transaction, that may adversely affect you.
LIMITATIONS UPON LIENS
The indentures provide that neither we nor our restricted subsidiaries may
issue, assume or guarantee any indebtedness for money borrowed if the
indebtedness is secured by a lien upon any of our or any restricted
subsidiaries' principal property, or on any shares of stock of any restricted
subsidiary, whether the principal property or shares of stock are now owned or
later acquired.
GENERAL EXCEPTIONS
The indentures permit us to incur secured debt if we provide that the debt
securities will be secured equally and ratably with or in priority to the new
secured indebtedness. In this event, we may also provide that any of our other
indebtedness, including indebtedness guaranteed by us or the restricted
subsidiary, will be secured equally with or in priority to the new secured
indebtedness. Further, the restriction on incurring secured indebtedness will
not apply to:
- liens on property or shares of stock of any corporation existing at the time
the corporation becomes a restricted subsidiary,
- liens on property existing at the time it is acquired, or liens on property
which secure the payment of the purchase price of the property, or liens on
property which secure indebtedness incurred or guaranteed for the purpose of
financing the purchase price of the property or the construction of that
property, including improvements to existing property, which indebtedness is
incurred or guaranteed within 180 days after the latest of the acquisition or
completion of construction or commencement of operation of the property,
- liens securing indebtedness owing by any restricted subsidiary to us or a
wholly owned restricted subsidiary,
- liens on the property of a corporation existing at the time the corporation is
merged into or consolidated with us or a restricted subsidiary or at the time
of a purchase, lease or other
9
acquisition of the properties of a corporation or other person as an entirety
by us or a restricted subsidiary,
- liens on our property or the property of a restricted subsidiary in favor of
the United States of America or any state, agency, instrumentality or
political subdivision of the United States of America, or in favor of any
other country, or any political subdivision of that country, to secure any
indebtedness incurred or guaranteed for the purpose of financing all or any
part of the purchase price or the cost of construction of the property subject
to those liens within 180 days after the latest of the acquisition, completion
of construction or commencement of operation of that property, and
- any extension, renewal or replacement of any lien referred to in the five
preceding clauses.
EXCEPTIONS FOR SPECIFIED AMOUNT OF INDEBTEDNESS
We and one or more restricted subsidiaries may, without securing the debt
securities, issue, assume or guarantee secured indebtedness which would
otherwise be subject to the above restrictions, provided that after doing so the
aggregate amount of this indebtedness does not exceed 10% of consolidated net
tangible assets. In computing the aggregate amount of indebtedness outstanding
for purposes of the previous sentence, indebtedness issued, assumed or
guaranteed pursuant to the above clauses is not included.
When we use the term "consolidated net tangible assets," we mean the total
amount of assets, less applicable reserves and other properly deductible items,
after deducting:
- all current liabilities, excluding any liabilities which are by their terms
extendible or renewable at the option of the obligor to a time more than 12
months after the time as of which the amount is being computed, and
- all segregated goodwill, trade names, trademarks, patents, unamortized debt
discount and expense and other like intangibles, all as set forth on the most
recent balance sheet of The Hartford Financial Services Group, Inc. and its
consolidated subsidiaries and prepared in accordance with generally accepted
accounting principles. Our subsidiaries include any corporation where more
than 50% of its voting stock is owned or controlled by us or by another
subsidiary.
When we use the term "principal property," we mean all land, buildings,
machinery and equipment, and leasehold interests and improvements relating to
these items, which would be reflected on our consolidated balance sheet prepared
in accordance with generally accepted accounting principles, excluding all
tangible property located outside the United States of America and excluding any
tangible property which, in the opinion of our board of directors set forth in a
board resolution, is not material to us and our consolidated subsidiaries taken
as a whole.
When we use the term "restricted subsidiary," we mean any subsidiary which is
incorporated under the laws of any state of the United States or of the District
of Columbia, and which is a regulated insurance company principally engaged in
one or more of the property, casualty and life insurance businesses. However, no
subsidiary is a restricted subsidiary:
- if the total assets of that subsidiary are less than 10% of our total assets
and the total assets of our consolidated subsidiaries, including that
subsidiary, in each case as set forth on the most recent fiscal year-end
balance sheets of the subsidiary and us and our consolidated subsidiaries,
respectively, and computed in accordance with generally accepted accounting
principles, or
- if in the judgment of our board of directors, as evidenced by a board
resolution, the subsidiary is not material to the financial condition of us
and our subsidiaries taken as a whole.
10
As of the date of this prospectus, the following subsidiaries meet the
definition of restricted subsidiaries: Hartford Fire, Hartford Life Insurance
Company, Hartford Life and Accident Insurance Company and Hartford Life and
Annuity Insurance Company.
MODIFICATION AND WAIVER
MODIFICATION
We and the trustee may modify and amend each indenture with the consent of the
holders of a majority in aggregate principal amount of the series of debt
securities affected. However, no modification or amendment may, without the
consent of the holder of each outstanding debt security affected:
- change the stated maturity of the principal of, or any installment of interest
on, any outstanding debt security,
- reduce the principal amount of, or the rate of interest on or any premium
payable upon the redemption of, or the amount of principal of an original
issue discount security that would be due and payable upon a declaration of
acceleration of the maturity of, any outstanding debt security,
- change the place of payment, or the coin or currency in which any outstanding
debt security or the interest is payable,
- impair your right to institute suit for the enforcement of any payment on or
relating to any outstanding debt security after the stated maturity, or
- change the amendment provisions of the indenture requiring the consent of the
affected holders for waiver of compliance with the indenture or waiver of past
defaults.
WAIVER
The holders of a majority in principal amount of the outstanding debt securities
of a series may, on behalf of the holders of all debt securities of that series,
waive compliance by us with certain restrictive covenants of the indenture which
relate to that series.
The holders of not less than a majority in principal amount of the outstanding
debt securities of a series may, on behalf of the holders of that series,
generally waive any past default under the indenture relating to that series of
debt securities. However, a default in the payment of the principal of (or
premium, if any), or any interest on, any debt security of that series or
relating to a provision which under the indenture cannot be modified or amended
without the consent of the holder of each outstanding debt security of that
series affected cannot be so waived.
EVENTS OF DEFAULT
Under the terms of each indenture, each of the following constitutes an event of
default for a series of debt securities:
- default for 30 days in the payment of any interest when due,
- default in the payment of principal, or premium, if any, at maturity,
- default in the performance of any other covenant in the indenture for 60 days
after written notice,
- our bankruptcy, insolvency or reorganization,
- acceleration or default in the payment of indebtedness for borrowed money in
excess of $25,000,000, which has not been rescinded or annulled within 30 days
after notice, or
- any other event of default described in the applicable board resolution or
supplemental indenture under which the series of debt securities is issued.
11
We are required to furnish the trustee annually with a statement as to the
fulfillment of our obligations under the indenture. Each indenture provides that
the trustee may withhold notice to you of any default, except in respect of the
payment of principal or interest on the debt securities, if it considers it in
the interests of the holders of the debt securities to do so.
EFFECT OF AN EVENT OF DEFAULT
If an event of default exists, the trustee or the holders of not less than 25%
in principal amount of a series of debt securities may declare the principal
amount, or, if the debt securities are original issue discount securities, the
portion of the principal amount as may be specified in the terms of that series,
of the debt securities of that series to be due and payable immediately, by a
notice in writing to us, and to the trustee if given by holders. Upon that
declaration the principal will become immediately due and payable. However, at
any time after a declaration of acceleration has been made, but before a
judgment or decree for payment of the money due has been obtained, the holders
of a majority in principal amount of outstanding debt securities may, subject to
conditions specified in the indenture, rescind and annul that declaration.
Subject to the provisions of the indentures relating to the duties of the
trustee, if an event of default then exists, the trustee will be under no
obligation to exercise any of its rights or powers under the indenture at your
request, order or direction, unless you have offered to the trustee reasonable
security or indemnity. Subject to the provisions for the security or
indemnification of the trustee, the holders of a majority in principal amount of
a series of outstanding debt securities have the right to direct the time,
method and place of conducting and proceeding for and remedy available to the
trustee, or exercising any trust or power conferred on the trustee in connection
with the debt securities of that series.
LEGAL PROCEEDINGS AND ENFORCEMENT OF RIGHT TO PAYMENT
You will not have any right to institute any proceeding in connection with the
indenture or for any remedy under the indenture, unless you have previously
given to the trustee written notice of a continuing event of default with
respect to debt securities of that series. In addition, the holders of at least
25% in principal amount of the outstanding debt securities must have made
written request, and offered reasonable indemnity, to the trustee to institute
that proceeding as trustee, and, within 60 days following the receipt of that
notice, the trustee must not have received from the holders of a majority in
principal amount of the outstanding debt securities of that series a direction
inconsistent with that request, and must have failed to institute the
proceeding. However, you will have an absolute right to receive payment of the
principal of, premium, if any, and interest on that debt security on or after
the due dates expressed in the debt security and to institute a suit for the
enforcement of that payment.
SATISFACTION AND DISCHARGE
Each indenture provides that when, among other things, all debt securities not
previously delivered to the trustee for cancellation:
- have become due and payable, or
- will become due and payable at their stated maturity within one year,
and we deposit or cause to be deposited with the trustee, in trust, an amount in
the currency or currencies in which the debt securities are payable sufficient
to pay and discharge the entire indebtedness on the debt securities not
previously delivered to the trustee for cancellation, for the principal, and
premium, if any, and interest to the date of the deposit or to the stated
maturity, as the case may be, then the indenture will cease to be of further
effect, and we will be deemed to have satisfied and discharged the indenture.
However, we will continue to be obligated to pay all other
12
sums due under the indenture and to provide the officers' certificates and
opinions of counsel described in the indenture.
DEFEASANCE
Unless we state otherwise in the applicable prospectus supplement, each
indenture provides that we will be deemed to have paid and discharged the entire
indebtedness on all the debt securities of a series at any time prior to their
stated maturity or redemption when:
- we have irrevocably deposited or caused to be deposited with the trustee, in
trust, either:
-- sufficient funds to pay and discharge the entire indebtedness on the
debt securities for the principal, premium, if any, and interest to the
stated maturity or any redemption date, or
-- the amount of U.S. government securities as will, in the written
opinion of independent public accountants delivered to the trustee,
together with predetermined and certain income to accrue, without
consideration of any reinvestment, be sufficient to pay and discharge
when due the entire indebtedness on the debt securities for principal,
premium, if any, and interest to the stated maturity or any redemption
date,
- we have paid or caused to be paid all other sums payable on the debt
securities,
- we have delivered to the trustee an officer's certificate and an opinion of
counsel to the effect that:
-- we have received from, or there has been published by, the Internal
Revenue Service a ruling, or
-- since the date of execution of the applicable indenture, there has been
a change in the applicable federal income tax law,
in either case to the effect that the deposit and related defeasance would not
cause you to recognize income, gain or loss for federal income tax purposes,
- we have delivered to the trustee an opinion of counsel that neither we nor the
trust held by the trustee will immediately after the deposit just described be
an "investment company" or a company "controlled" by an "investment company"
within the meaning of the Investment Company Act of 1940, and
- we have delivered to the trustee the other officer's certificates and opinions
of counsel as may be required by the indenture, each stating that all
conditions precedent relating to the satisfaction and discharge of the entire
indebtedness on all debt securities have been complied with.
The subordinated indenture will not be discharged as described above if we have
defaulted in the payment of principal of, premium, if any, or interest on any
senior debt and that default is continuing or another event of default on the
senior debt then exists and has resulted in the senior debt becoming or being
declared due and payable prior to the date it would have become due and payable.
CONVERSION OR EXCHANGE
We may convert or exchange the debt securities into common stock or other
securities. If so, we will describe the specific terms on which the debt
securities may be converted or exchanged in the applicable prospectus
supplement. The conversion or exchange may be mandatory, at your option, or at
our option. The applicable prospectus supplement will describe the manner in
which the shares of common stock or other securities you would receive would be
converted or exchanged.
SUBORDINATION UNDER THE SUBORDINATED INDENTURE
In the subordinated indenture, we have agreed that any subordinated debt
securities are subordinate and junior in right of payment to all senior debt to
the extent provided in the subordinated indenture.
13
In case of the pendency of any receivership, insolvency, liquidation,
bankruptcy, reorganization, arrangement, adjustment, composition or other
proceeding relative to us, the holders of senior debt will first be entitled to
receive payment in full of principal of, premium, if any, and interest on the
senior debt before the holders of subordinated debt securities will be entitled
to receive or retain any payment of the principal of, premium, if any, or
interest on the subordinated debt securities.
If the maturity of any subordinated debt securities is accelerated, the holders
of all senior debt outstanding at the time of the acceleration will first be
entitled to receive payment in full of all amounts due, including any amounts
due upon acceleration, before you will be entitled to receive any payment of the
principal of, premium, if any, or interest on the subordinated debt securities.
We will not make any payments of principal of, premium, if any, or interest on
the subordinated debt securities if:
- a default in any payment on senior debt then exists,
- an event of default on any senior debt resulting in the acceleration of its
maturity then exists, or
- any judicial proceeding is pending in connection with default.
When we use the term "debt" we mean, with respect to any person, whether
recourse is to all or a portion of the assets of that person and whether or not
contingent:
- every obligation of that person for money borrowed,
- every obligation of that person evidenced by bonds, debentures, notes or other
similar instruments, including obligations incurred in connection with the
acquisition of property, assets or businesses,
- every reimbursement obligation of that person with respect to letters of
credit, bankers' acceptances or similar facilities issued for the account of
that person,
- every obligation of that person issued or assumed as the deferred purchase
price of property or services, but excluding trade accounts payable or accrued
liabilities arising in the ordinary course of business,
- every capital lease obligation of that person, and
- every obligation of the type referred to in the prior five clauses of another
person and all dividends of another person the payment of which that person
has guaranteed or is responsible or liable for, directly or indirectly,
including as obligor.
When we use the term "senior debt" we mean the principal of, premium, if any,
and interest on debt, whether incurred on, prior to, or after the date of the
subordinated indenture, unless the instrument creating or evidencing that debt
or pursuant to which that debt is outstanding states that those obligations are
not superior in right of payment to the subordinated debt securities or to other
debt which ranks equally with, or junior to, the subordinated debt securities.
Interest on this senior debt includes interest accruing on or after the filing
of any petition in bankruptcy or for reorganization relating to The Hartford
Financial Services Group, Inc., whether or not the claim for post-petition
interest is allowed in that proceeding.
However, senior debt will not include:
- any debt of The Hartford Financial Services Group, Inc. which when incurred
and without regard to any election under Section 1111(b) of the Bankruptcy
Code, was without recourse to The Hartford Financial Services Group, Inc.,
- any debt of The Hartford Financial Services Group, Inc. to any of its
subsidiaries,
- debt to any employee of The Hartford Financial Services Group, Inc.,
14
- any liability for taxes, and
- indebtedness or monetary obligations to trade creditors or assumed by The
Hartford Financial Services Group, Inc. or any of its subsidiaries in the
ordinary course of business in connection with the obtaining of materials or
services.
We are a non-operating holding company, and most of our assets are owned by our
subsidiaries. Accordingly, the debt securities will be effectively subordinated
to all our existing and future liabilities, including liabilities under
contracts of insurance and annuities written by our insurance subsidiaries. You
should rely only on our assets for payments of interest and principal and
premium, if any. The payment of dividends by our insurance company subsidiaries
is limited under the insurance holding company laws in the jurisdictions where
those subsidiaries are domiciled. See "The Hartford Financial Services Group,
Inc."
The subordinated indenture does not limit the amount of additional senior debt
that we may incur. We expect from time to time to incur additional senior debt.
The subordinated indenture provides that we may change the subordination
provisions relating to any particular issue of subordinated debt securities
prior to issuance. We will describe any change in the prospectus supplement
relating to the subordinated debt securities.
GOVERNING LAW
The indentures and the debt securities will be governed by and construed in
accordance with the laws of the State of New York.
CONCERNING THE TRUSTEES
Each of the trustees acts as depositary for funds of, makes loans to, and
performs other services for, us and our subsidiaries in the normal course of
business.
DESCRIPTION OF JUNIOR SUBORDINATED DEBENTURES
We will issue the junior subordinated debentures in one or more series under a
junior subordinated indenture, as supplemented from time to time, between us and
Wilmington Trust Company, as debenture trustee.
The following description of the terms of the junior subordinated debentures is
a summary. It summarizes only those terms of the junior subordinated debentures
which we believe will be most important to your decision to invest in our junior
subordinated debentures. You should keep in mind, however, that it is the junior
subordinated indenture, and not this summary, which defines your rights as a
holder of our junior subordinated debentures. There may be other provisions in
the junior subordinated indenture which are also important to you. You should
read the junior subordinated indenture for a full description of the terms of
the junior subordinated debentures. The junior subordinated indenture is filed
as an exhibit to the Registration Statement that includes this prospectus. See
"Where You Can Find More Information" for information on how to obtain a copy of
the junior subordinated indenture.
RANKING OF THE JUNIOR SUBORDINATED DEBENTURES
Each series of junior subordinated debentures will rank equally with all other
series of junior subordinated debentures, and will be unsecured and subordinate
and junior in right of payment, as described in the junior subordinated
indenture, to all of our senior debt. See "-- Subordination."
As a non-operating holding company, most of our operating assets and the assets
of our consolidated subsidiaries are owned by our subsidiaries. We rely
primarily on dividends from our subsidiaries to meet our obligations for payment
of principal and interest on our outstanding debt
15
obligations and corporate expenses. Accordingly, the junior subordinated
debentures will be effectively subordinated to all existing and future
liabilities of our subsidiaries. You should rely only on our assets for payments
on the junior subordinated debentures. The payment of dividends by our insurance
company subsidiaries is limited under the insurance holding company laws in
which those subsidiaries are domiciled. See "The Hartford Financial Services
Group, Inc."
Unless we state otherwise in the applicable prospectus supplement, the junior
subordinated indenture does not limit us from incurring or issuing other secured
or unsecured debt under the junior subordinated indenture or any other indenture
that we may have entered into or enter into in the future. See
"-- Subordination" and the prospectus supplement relating to any offering of
securities.
TERMS OF THE JUNIOR SUBORDINATED DEBENTURES
We may issue the junior subordinated debentures in one or more series through an
indenture that supplements the junior subordinated indenture or through a
resolution of our board of directors or an authorized committee of our board of
directors.
You should refer to the applicable prospectus supplement for the specific terms
of the junior subordinated debentures. These may include:
- the title and any limit upon the aggregate principal amount,
- the date(s) on which the principal is payable or the method of determining
those date(s),
- the interest rate(s) or the method of determining these interest rate(s),
- the date(s) on which interest will be payable or the method of determining
these date(s),
- the circumstances in which interest may be deferred, if any,
- the regular record date or the method of determining this date,
- the place or places where we may pay principal, premium, if any, and interest,
- conversion or exchange provisions, if any,
- the redemption or early payment provisions,
- the authorized denominations,
- the currency, currencies or currency units in which we may pay the purchase
price for, the principal of, premium, if any, and interest on the junior
subordinated debentures,
- additions to or changes in the events of default or any changes in any of our
covenants specified in the junior subordinated indenture,
- any index or indices used to determine the amount of payments of principal and
premium, if any, or the method of determining these amounts,
- whether a temporary global security will be issued and the terms upon which
you may exchange a temporary global security for definitive junior
subordinated debt securities,
- whether we will issue the junior subordinated debt securities in whole or in
part in the form of one or more global securities,
- the terms and conditions of any obligation or right we would have to convert
or exchange the junior subordinated debentures into preferred securities or
other securities, and
- additional terms not inconsistent with the provisions of the junior
subordinated indenture.
16
SPECIAL PAYMENT TERMS OF THE JUNIOR SUBORDINATED DEBENTURES
We may issue junior subordinated debentures at a substantial discount below
their stated principal amount, bearing no interest or interest at a rate which
at the time of issuance is below market rates. We will describe United States
Federal income tax consequences and special considerations relating to any
junior subordinated debentures in the applicable prospectus supplement.
The purchase price of any of the junior subordinated debentures may be payable
in one or more foreign currencies or currency units. The junior subordinated
debentures may be denominated in one or more foreign currencies or currency
units, or the principal of, premium, if any, or interest on any junior
subordinated debentures may be payable in one or more foreign currencies or
currency units. We will describe the restrictions, elections, federal income tax
considerations, specific terms and other information relating to the junior
subordinated debentures and the foreign currency units in the applicable
prospectus supplement.
If we use any index to determine the amount of payments of principal of,
premium, if any, or interest on any series of junior subordinated debentures, we
will also describe special federal income tax, accounting and other
considerations relating to the junior subordinated debentures in the applicable
prospectus supplement.
DENOMINATIONS, REGISTRATION AND TRANSFER
Unless we state otherwise in the applicable prospectus supplement, we will issue
the junior subordinated debentures only in registered form without coupons in
denominations of $25 and any integral multiple of $25. Junior subordinated
debentures of any series will be exchangeable for other junior subordinated
debentures of the same issue and series, of any authorized denominations, of a
like aggregate principal amount, of the same original issue date and stated
maturity and bearing the same interest rate.
You may present junior subordinated debentures for exchange as described above,
or for registration of transfer, at the office of the securities registrar or at
the office of any transfer agent we designate for that purpose. You will not
incur a service charge but you must pay any taxes and other governmental charges
as described in the indenture. We will appoint the trustees as securities
registrars under the indentures. We may at any time rescind the designation of
any transfer agent that we initially designate or approve a change in the
location through which the transfer agent acts. We must maintain a transfer
agent in each place of payment. We will specify the transfer agent in the
applicable prospectus supplement. We may at any time designate additional
transfer agents.
If we redeem any junior subordinated debentures, neither we nor the debenture
trustee will be required to:
- issue, register the transfer of, or exchange junior subordinated debentures
during a period beginning at the opening of business 15 days before the day of
selection for redemption of the junior subordinated debentures and ending at
the close of business on the day of mailing of the relevant notice of
redemption, or
- transfer or exchange any junior subordinated debentures selected for
redemption, except for any portion not redeemed of any junior subordinated
debenture that is being redeemed in part.
GLOBAL JUNIOR SUBORDINATED DEBENTURES
We may issue a series of junior subordinated debentures in the form of one or
more global junior subordinated debentures. We will identify the depositary
holding the global junior subordinated debentures in the applicable prospectus
supplement. We will issue global junior subordinated debentures only in fully
registered form and in either temporary or permanent form. Unless it is
17
exchanged for an individual junior subordinated debenture, a global junior
subordinated debenture may not be transferred except:
- by the depositary to its nominee,
- by a nominee of the depositary to the depositary or another nominee, or
- by the depositary or any nominee to a successor depositary, or any nominee of
the successor.
We will describe the specific terms of the depositary arrangement in the
applicable prospectus supplement. We expect that the following provisions will
generally apply to these depositary arrangements.
BENEFICIAL INTERESTS IN A GLOBAL JUNIOR SUBORDINATED DEBENTURE
If we issue a global junior subordinated debenture, the depositary for the
global junior subordinated debenture or its nominee will credit on its
book-entry registration and transfer system the principal amounts of the
individual junior subordinated debentures represented by the global junior
subordinated debenture to the accounts of persons that have accounts with it. We
refer to those persons as "participants" in this prospectus. The accounts will
be designated by the dealers, underwriters or agents for the junior subordinated
debentures, or by us if the junior subordinated debentures are offered and sold
directly by us. Ownership of beneficial interests in a global junior
subordinated debenture will be limited to participants or persons that may hold
interests through participants. Ownership and transfers of beneficial interests
in the global junior subordinated debenture will be shown on, and effected only
through, records maintained by the applicable depositary or its nominee, for
interests of participants, and the records of participants, for interests of
persons who hold through participants. The laws of some states require that you
take physical delivery of securities in definitive form. These limits and laws
may impair your ability to transfer beneficial interests in a global junior
subordinated debenture.
So long as the depositary or its nominee is the registered owner of the global
junior subordinated debenture, the depositary or the nominee will be considered
the sole owner or holder of the junior subordinated debentures represented by
the global junior subordinated debenture for all purposes under the junior
subordinated indenture. Except as provided below, you:
- will not be entitled to have any of the individual junior subordinated
debentures represented by the global junior subordinated debenture registered
in your name,
- will not receive or be entitled to receive physical delivery of any junior
subordinated debentures in definitive form, and
- will not be considered the owner or holder of the junior subordinated
debenture under the junior subordinated indenture.
PAYMENTS OF PRINCIPAL, PREMIUM AND INTEREST
We will make principal, premium and interest payments on global junior
subordinated debentures to the depositary that is the registered holder of the
global junior subordinated debenture or its nominee. The depositary for the
junior subordinated debentures will be solely responsible and liable for all
payments made on account of your beneficial ownership interests in the global
junior subordinated debenture and for maintaining, supervising and reviewing any
records relating to your beneficial ownership interests.
We expect that the depositary or its nominee, upon receipt of principal, premium
or interest payments, immediately will credit participants' accounts with
amounts in proportion to their respective beneficial interests in the principal
amount of the global junior subordinated debenture as shown on the records of
the depositary or its nominee. We also expect that payments by participants to
you, as an owner of a beneficial interest in the global junior subordinated
debenture held through those
18
participants, will be governed by standing instructions and customary practices,
as is now the case with securities held for the accounts of customers in bearer
form or registered in "street name." These payments will be the responsibility
of those participants.
ISSUANCE OF INDIVIDUAL JUNIOR SUBORDINATED DEBENTURES
Unless we state otherwise in the applicable prospectus supplement, if a
depositary for a series of junior subordinated debentures is at any time
unwilling, unable or ineligible to continue as depositary, we will issue
individual junior subordinated debentures in exchange for the global junior
subordinated debenture. In addition, we may at any time and in our sole
discretion, subject to any limitations described in the prospectus supplement
relating to the junior subordinated debentures, determine not to have any junior
subordinated debentures represented by one or more global junior subordinated
debentures. If that occurs, we will issue individual junior subordinated
debentures in exchange for the global junior subordinated debenture.
Further, we may specify that you may, on terms acceptable to us, the debenture
trustee and the depositary for the global junior subordinated debenture, receive
individual junior subordinated debentures in exchange for your beneficial
interest in a global junior subordinated debenture, subject to any limitations
described in the prospectus supplement relating to the junior subordinated
debentures. In that instance, you will be entitled to physical delivery of
individual junior subordinated debentures equal in principal amount to that
beneficial interest and to have the junior subordinated debentures registered in
your name. Unless we otherwise specify, those individual junior subordinated
debentures will be issued in denominations of $25 and integral multiples of $25.
PAYMENT AND PAYING AGENTS
Unless we state otherwise in the applicable prospectus supplement, we will pay
principal of, premium, if any, and interest on your junior subordinated
debentures at the office of the debenture trustee in the City of New York or at
the office of any paying agent that we may designate.
Unless we state otherwise in the applicable prospectus supplement, we will pay
any interest on junior subordinated debentures to the registered owner of the
junior subordinated debenture at the close of business on the regular record
date for the interest, except in the case of defaulted interest. We may at any
time designate additional paying agents or rescind the designation of any paying
agent. We must maintain a paying agent in each place of payment for the junior
subordinated debentures.
Any moneys deposited with the debenture trustee or any paying agent, or then
held by us in trust, for the payment of the principal of, premium, if any, and
interest on any junior subordinated debenture that remain unclaimed for two
years after the principal, premium or interest has become due and payable will,
at our request, be repaid to us. After repayment to us, you are entitled to seek
payment only from us as a general unsecured creditor.
REDEMPTION
Unless we state otherwise in the applicable prospectus supplement, junior
subordinated debentures will not be subject to any sinking fund.
We may, at our option, redeem any series of junior subordinated debentures on
any interest payment date in whole or in part. We may redeem junior subordinated
debentures in denominations larger than $25 but only in integral multiples of
$25.
19
REDEMPTION PRICE
Except as we may otherwise specify in the applicable prospectus supplement, the
redemption price for any junior subordinated debenture redeemed will equal any
accrued and unpaid interest to the redemption date, plus the greater of:
- the principal amount, and
- an amount equal to:
-- for junior subordinated debentures bearing interest at a fixed rate, the
discounted remaining fixed amount payments, calculated as described below,
or
-- for junior subordinated debentures bearing interest determined by reference
to a floating rate, the discounted swap equivalent payments, calculated as
described below.
The discounted remaining fixed amount payments will equal the sum of the current
values of the amounts of interest and principal that would have been payable by
us on each interest payment date after the redemption date and at stated
maturity of the final payment of principal. This calculation will take into
account any required sinking fund payments, but will otherwise assume that we
have not redeemed the junior subordinated debenture prior to the stated
maturity.
The current value of any amount is the present value of that amount on the
redemption date after discounting that amount on a monthly, quarterly or
semiannual basis, whichever corresponds to the interest payment date periods of
the related series of junior subordinated debentures, from the originally
scheduled date for payment. We will use the treasury rate to calculate this
present value.
The treasury rate is a per annum rate, expressed as a decimal and, in the case
of United States Treasury bills, converted to a per annum yield, determined on
the redemption date to be the per annum rate equal to the semiannual bond
equivalent yield to maturity, adjusted to reflect monthly or quarterly
compounding in the case of junior subordinated debentures having monthly or
quarterly interest payment dates for United States Treasury securities maturing
at the stated maturity of the final payment of principal of the junior
subordinated debentures redeemed. We will determine this rate by reference to
the weekly average yield to maturity for United States Treasury securities
maturing on that stated maturity if reported in the most recent Statistical
Release H.15(519) of the Board of Governors of the Federal Reserve. If no such
securities mature at the stated maturity, we will determine the rate by
interpolation between the most recent weekly average yields to maturity for two
series of United States Treasury securities, (1) one maturing as close as
possible to, but earlier than, the stated maturity and (2) the other maturing as
close as possible to, but later than, the stated maturity, in each case as
published in the most recent Statistical Release H.15(519) of the Board of
Governors of the Federal Reserve.
The discounted swap equivalent payments will equal the sum of:
- the current value of the amount of principal that would have been payable by
us pursuant to the terms of the junior subordinated debenture at the stated
maturity of the final payment of the principal of the junior subordinated
debentures. This calculation will take into account any required sinking fund
payments but will otherwise assume that we had not redeemed the junior
subordinated debenture prior to the stated maturity, and
- the sum of the current values of the fixed rate payments that leading interest
rate swap dealers would require to be paid by an assumed fixed rate payer
having the same credit standing as ours against floating rate payments to be
made by these leading dealers equal to the interest payments on the junior
subordinated debentures being redeemed, taking into account any required
sinking fund payment, but otherwise assuming we had not redeemed the junior
subordinated debenture prior to the stated maturity, under a standard interest
rate swap agreement having a notional principal amount equal to the principal
amount of the junior subordinated debentures, a termination date set at the
stated maturity of the junior subordinated debentures and payment
20
dates for both fixed and floating rate payers set at each interest payment
date of the junior subordinated debentures. The amount of the fixed rate
payments will be based on quotations received by the trustee, or an agent
appointed for that purpose, from four leading interest rate swap dealers or,
if quotations from four leading interest rate swap dealers are not obtainable,
three leading interest rate swap dealers.
SPECIAL EVENT REDEMPTION
Unless we state otherwise in the applicable prospectus supplement, if a special
event relating to a series of junior subordinated debentures then exists, we
may, at our option, redeem the series of junior subordinated debentures in
whole, but not in part, on any interest payment date within 90 days of the
special event occurring. The redemption price will equal the principal amount of
the junior subordinated debentures then outstanding plus accrued and unpaid
interest to the date fixed for redemption.
A "special event" means a "tax event" or an "investment company event." A "tax
event" occurs when a trust receives an opinion of counsel experienced in these
matters to the effect that, as a result of any amendment to, or change,
including any announced prospective change in, the laws or regulations of the
United States or any political subdivision or taxing authority affecting
taxation, or as a result of any official administrative pronouncement or
judicial decision interpreting or applying those laws or regulations, which
amendment or change is effective or pronouncement or decision is announced on or
after the date of issuance of the preferred securities of a trust, there is more
than an insubstantial risk that:
- the trust is, or will be within 90 days of that date, subject to United States
federal income tax with respect to income received or accrued on the
corresponding series of junior subordinated debentures;
- interest payable by us on the series of junior subordinated debentures is not,
or within 90 days of that date, will not be, deductible, in whole or in part,
for United States federal income tax purposes; or
- the trust is, or will be within 90 days of that date, subject to more than a
de minimis amount of other taxes, duties or other governmental charges.
An "investment company event" occurs when, in respect of a trust, there is
change in law or regulation, or a change in interpretation or application of law
or regulation, by any legislative body, court, governmental agency or regulatory
authority such that such trust is or will be considered an "investment company"
that is required to be registered under the Investment Company Act of 1940,
which change becomes effective on or after the date of issuance of the preferred
securities of a trust.
NOTICE OF REDEMPTION
We will mail notice of any redemption of your junior subordinated debentures at
least 30 days but not more than 60 days before the redemption date to you at
your registered address. Unless we default in payment of the redemption price,
on and after the redemption date interest will cease to accrue on the junior
subordinated debentures or the portions called for redemption.
OPTION TO EXTEND INTEREST PAYMENT DATE
If provided in the applicable prospectus supplement, we will have the right
during the term of any series of junior subordinated debentures to extend the
interest payment period for a specified number of interest payment periods,
subject to the terms, conditions and covenants specified in the prospectus
supplement. However, we may not extend these interest payments beyond the
maturity of the junior subordinated debentures. We will describe the federal
income tax consequences and
21
special considerations relating to any junior subordinated debentures in the
applicable prospectus supplement.
If we exercise this right, during the extension period we and our subsidiaries
may not:
- declare or pay any dividends or distributions on, or redeem, purchase, acquire
or make a liquidation payment on, any of our capital stock, or
- make any payment of principal, premium, if any, or interest on or repay,
repurchase or redeem any debt securities that rank equally with or junior in
interest to the junior subordinated debentures or make any related guarantee
payments,
other than:
- dividends or distributions on our common stock,
- redemptions or purchases of any rights pursuant to our rights plan, or any
successor to our rights plan, and the declaration of a dividend of these
rights in the future, and
- payments under any guarantee.
MODIFICATION OF INDENTURE
We and the debenture trustee may, without the consent of the holders of junior
subordinated debentures, amend, waive or supplement the junior subordinated
indenture for specified purposes, including, among other things, curing
ambiguities, defects or inconsistencies. However, no action may materially
adversely affect the interests of holders of any series of junior subordinated
debentures or, in the case of corresponding junior subordinated debentures, the
holders of the corresponding series of preferred securities so long as they
remain outstanding. We may also amend the junior subordinated indenture to
maintain the qualification of the indenture under the Trust Indenture Act.
We and the debenture trustee may, with the consent of the holders of not less
than a majority in principal amount of the series of junior subordinated
debentures affected, modify the junior subordinated indenture in a manner
affecting the rights of the holders of junior subordinated debentures. However,
no modification may, without the consent of the holder of each outstanding
junior subordinated debenture affected:
- change the stated maturity of the junior subordinated debentures,
- reduce the principal amount of the junior subordinated debentures,
- reduce the rate or, except as permitted by the junior subordinated indenture
and the terms of the series of junior subordinated debentures, extend the time
of payment of interest on the junior subordinated debentures, or
- reduce the percentage of principal amount of the junior subordinated
debentures, the holders of which are required to consent to the modification
of the junior subordinated indenture.
In the case of corresponding junior subordinated debentures, so long as any of
the corresponding series of preferred securities remain outstanding:
- no such modification may be made that adversely affects the holders of the
preferred securities,
- no termination of the junior subordinated indenture may occur, and
- no waiver of any debenture event of default or compliance with any covenant
under the junior subordinated indenture may be effective,
without the prior consent of the holders of at least a majority of the aggregate
liquidation preference of the preferred securities unless the principal of the
corresponding junior subordinated debentures
22
and all accrued and unpaid interest on the corresponding junior subordinated
debentures have been paid in full and other conditions are satisfied.
In addition, we and the debenture trustee may execute, without your consent, any
supplemental indenture for the purpose of creating any new series of junior
subordinated debentures.
DEBENTURE EVENTS OF DEFAULT
Under the terms of the junior subordinated indenture, each of the following
constitutes a debenture event of default for a series of junior subordinated
debentures:
- failure for 30 days to pay any interest on the series of junior subordinated
debentures when due, subject to the deferral of any due date in the case of an
extension period,
- failure to pay any principal or premium, if any, on the series of junior
subordinated debentures when due, including at maturity, upon redemption or by
declaration,
- failure to observe or perform in any material respect specified other
covenants contained in the indenture for 90 days after written notice from the
debenture trustee or the holders of at least 25% in principal amount of the
relevant series of outstanding junior subordinated debentures,
- our bankruptcy, insolvency or reorganization, or
- any other event of default described in the applicable board resolution or
supplemental indenture under which the series of debt securities is issued.
EFFECT OF EVENT OF DEFAULT
The holders of a majority in outstanding principal amount of the series of
junior subordinated debentures have the right to direct the time, method and
place of conducting any proceeding for any remedy available to the debenture
trustee. The debenture trustee or the holders of not less than 25% in aggregate
outstanding principal amount of the series of junior subordinated debentures may
declare the principal due and payable immediately upon a debenture event of
default. In the case of corresponding junior subordinated debentures, if the
debenture trustee or the holders of the corresponding junior subordinated
debentures fail to make this declaration, the holders of at least 25% in
aggregate liquidation preference of the corresponding series of preferred
securities will have that right.
WAIVER OF EVENT OF DEFAULT
The holders of a majority in aggregate outstanding principal amount of the
series of junior subordinated debentures may rescind and annul the declaration
and its consequences if:
- the event of default is other than our non-payment of the principal of the
junior subordinated debentures which has become due solely by such
acceleration and all other events of default have been cured or waived, and
- we have paid or deposited with the debenture trustee a sum sufficient to pay:
-- all overdue installments of interest (including interest on overdue
installments of interest) and principal (and premium, if any) due other
than by acceleration, and
-- certain amounts owing to the debenture trustee, its agents and counsel.
23
The holders of a majority in aggregate outstanding principal amount of the
junior subordinated debentures affected by the default may, on behalf of the
holders of all the junior subordinated debentures, waive any past default and
its consequences, except:
- a default in the payment of principal (or premium, if any) or interest,
- a default relating to a covenant or provision which under the junior
subordinated indenture cannot be modified or amended without the consent of
the holder of each outstanding junior subordinated debenture.
We are required under the junior subordinated indenture to file annually with
the junior subordinated indenture trustee a certificate of compliance.
DIRECT ACTIONS BY PREFERRED SECURITYHOLDERS
If a debenture event of default is attributable to our failure to pay interest
or principal on the corresponding junior subordinated debentures on the date the
interest or principal is payable, you, as a holder of preferred securities, may
institute a legal proceeding directly against us, which we refer to in this
prospectus as a "direct action," for enforcement of payment to you of the
principal of or interest on the corresponding junior subordinated debentures
having a principal amount equal to the aggregate liquidation amount of your
related preferred securities.
We may not amend the junior subordinated indenture to remove the right to bring
a direct action without the prior written consent of the holders of all of the
preferred securities. If the right to bring a direct action is removed, the
applicable issue may become subject to the reporting obligations under the
Securities Exchange Act of 1934. We have the right under the junior subordinated
indenture to set-off any payment made to you as a holder of preferred securities
by us in connection with a direct action. You will not be able to exercise
directly any other remedy available to holders of the corresponding junior
subordinated debentures.
You will not be able to exercise directly any remedies other than those
described in the preceding paragraph available to holders of the junior
subordinated debentures unless there has been an event of default under the
trust agreement.
CONSOLIDATION, MERGER, SALE OF ASSETS AND OTHER TRANSACTIONS
We will not consolidate with or merge into any other corporation or convey,
transfer or lease our properties and assets substantially as an entirety to any
person, and no person will consolidate with or merge into us or convey, transfer
or lease its properties and assets substantially as an entirety to us, unless:
- if we consolidate with or merge into another corporation or convey or transfer
our properties and assets substantially as an entirety to any person, the
successor corporation is organized under the laws of the United States or any
state or the District of Columbia, and the successor corporation expressly
assumes our obligations relating to the junior subordinated debentures,
- immediately after giving effect to the consolidation, merger, conveyance or
transfer, there exists no debenture event of default, and no event which,
after notice or lapse of time or both, would become a debenture event of
default,
- in the case of corresponding junior subordinated debentures, the transaction
is permitted under the related trust agreement or guarantee and does not give
rise to any breach or violation of the related trust agreement or guarantee,
and
- other conditions described in the junior subordinated indenture are met.
The general provisions of the junior subordinated indenture do not protect you
against transactions, such as a highly leveraged transaction, that may adversely
affect you.
24
SATISFACTION AND DISCHARGE
The junior subordinated indenture provides that when, among other things, all
junior subordinated debentures not previously delivered to the debenture trustee
for cancellation:
- have become due and payable, or
- will become due and payable at their stated maturity within one year,
and we deposit or cause to be deposited with the debenture trustee, in trust, an
amount in the currency or currencies in which the junior subordinated debentures
are payable sufficient to pay and discharge the entire indebtedness on the
junior subordinated debentures not previously delivered to the debenture trustee
for cancellation, for the principal, premium, if any, and interest on the date
of the deposit or to the stated maturity, as the case may be, then the junior
subordinated indenture will cease to be of further effect and we will be deemed
to have satisfied and discharged the indenture. However, we will continue to be
obligated to pay all other sums due under the junior subordinated indenture and
to provide the officers' certificates and opinions of counsel described in the
junior subordinated indenture.
CONVERSION OR EXCHANGE
We may convert or exchange the junior subordinated debentures into preferred
securities or other securities. If so, we will describe the specific terms on
which junior subordinated debentures may be converted or exchanged in the
applicable prospectus supplement. The conversion or exchange may be mandatory,
at your option or at our option. The applicable prospectus supplement will state
the manner in which the preferred securities you would receive would be
converted or exchanged.
SUBORDINATION
In the junior subordinated indenture, we have agreed that any junior
subordinated debentures will be subordinate and junior in right of payment to
all senior debt to the extent provided in the junior subordinated indenture.
In case of the pendency of any receivership, insolvency, liquidation,
bankruptcy, reorganization, arrangement, adjustment, composition or other
judicial proceeding relative to us, the holders of senior debt will first be
entitled to receive payment in full of principal of, premium, if any, and
interest on the senior debt before the holders of junior subordinated debentures
or, in the case of corresponding junior subordinated debentures, the property
trustee on behalf of the holders, will be entitled to receive or retain any
payment of the principal, premium, if any, or interest on the junior
subordinated debentures.
If the maturity of any junior subordinated debentures is accelerated, the
holders of all senior debt outstanding at the time of the acceleration will
first be entitled to receive payment in full of all amounts due, including any
amounts due upon acceleration, before you will be entitled to receive any
payment of the principal of, premium, if any, or interest on the junior
subordinated debentures.
We will not make any payments of principal of, premium, if any, or interest on
the junior subordinated debentures if:
- a default in any payment on senior debt then exists,
- an event of default on any senior debt resulting in the acceleration of its
maturity then exists, or
- any judicial proceeding is pending in connection with a default.
25
When we use the term "debt," we mean, with respect to any person, whether
recourse is to all or a portion of the assets of that person and whether or not
contingent:
- every obligation of that person for money borrowed,
- every obligation of that person evidenced by bonds, debentures, notes or other
similar instruments, including obligations incurred in connection with the
acquisition of property, assets or businesses,
- every reimbursement obligation of that person with respect to letters of
credit, bankers' acceptances or similar facilities issued for the account of
the person,
- every obligation of that person issued or assumed as the deferred purchase
price of property or services, but excluding trade accounts payable or accrued
liabilities arising in the ordinary course of business,
- every capital lease obligation of that person, and
- every obligation of the type referred to in the prior five clauses of another
person and all dividends of another person the payment of which the person has
guaranteed or is responsible or liable for, directly or indirectly, including
as obligor.
When we use the term "senior debt" we mean the principal, premium, if any, and
interest on debt, whether incurred on, prior to or after the date of the junior
subordinated indenture, unless the instrument creating or evidencing that debt
or pursuant to which that debt is outstanding states that those obligations are
not superior in right of payment to the junior subordinated debentures or to
other debt which ranks equally with, or junior to, the junior subordinated
debentures. Interest on this senior debt includes interest accruing on or after
the filing of any petition in bankruptcy or for reorganization relating to The
Hartford Financial Services Group, Inc., whether or not the claim for
post-petition interest is allowed in that proceeding.
However, senior debt will not include:
- any debt of The Hartford Financial Services Group, Inc. which when incurred
and without regard to any election under Section 1111(b) of the Bankruptcy
Code, was without recourse to The Hartford Financial Services Group, Inc.,
- any debt of The Hartford Financial Services Group, Inc. to any of its
subsidiaries,
- debt to any employee of The Hartford Financial Services Group, Inc.,
- any liability for taxes,
- indebtedness or monetary obligations to trade creditors or assumed by The
Hartford Financial Services Group, Inc. or any of its subsidiaries in the
ordinary course of business in connection with the obtaining of materials or
services, and
- any other junior subordinated debentures issued pursuant to the Junior
Subordinated Indenture, dated as of February 28, 1996 and the Junior
Subordinated Indenture, dated as of October 30, 1996.
We are a non-operating holding company, and most of our assets are owned by our
subsidiaries. Accordingly, the junior subordinated debentures will be
effectively subordinated to all existing and future liabilities of our
subsidiaries, including liabilities under contracts of insurance and annuities
written by our insurance subsidiaries. You should rely only on our assets for
payments of interest and principal and premium, if any. The payment of dividends
by our insurance company subsidiaries is limited under the insurance holding
company laws in the jurisdictions where those subsidiaries are domiciled. See
"The Hartford Financial Services Group, Inc."
The junior subordinated indenture does not limit the amount of additional senior
debt that we may incur. We expect from time to time to incur additional senior
debt.
26
The indenture provides that we may change the subordination provisions relating
to any particular issue of junior subordinated debentures prior to issuance. We
will describe any change in the prospectus supplement relating to the junior
subordinated debentures.
GOVERNING LAW
The junior subordinated indenture and the junior subordinated debentures will be
governed by and construed in accordance with the laws of the State of New York.
INFORMATION CONCERNING THE DEBENTURE TRUSTEE
The debenture trustee will have all the duties and responsibilities of an
indenture trustee specified in the Trust Indenture Act. Subject to those
provisions, the debenture trustee is not required to exercise any of its powers
under the junior subordinated indenture at your request, unless you offer
reasonable indemnity against the costs, expenses and liabilities which the
trustee might incur. The debenture trustee is not required to expend or risk its
own funds or incur personal financial liability in performing its duties if the
debenture trustee reasonably believes that it is not reasonably assured of
repayment or adequate indemnity.
DESCRIPTION OF CAPITAL STOCK OF
THE HARTFORD FINANCIAL SERVICES GROUP, INC.
AUTHORIZED AND OUTSTANDING CAPITAL STOCK
Our Amended and Restated Certificate of Incorporation, as amended effective May
1, 2002, provides that our authorized capital stock is 800,000,000 shares. These
shares consist of:
- 50,000,000 shares of preferred stock, par value $.01 per share, of which
300,000 shares have been designated as Series A Participating Cumulative
Preferred Stock; and
- 750,000,000 shares of common stock, par value $.01 per share.
As of March 31, 2003, we had 255,441,328 outstanding shares of common stock.
Holders of common stock have received a right entitling them, when the right
becomes exercisable, to purchase shares of Series A Participating Cumulative
Preferred Stock. See "-- Rights Agreement." No shares of preferred stock are
currently outstanding.
No holders of any class of our capital stock are entitled to preemptive rights
except as may be agreed from time to time by us and any such holders.
In general, the classes of authorized capital stock are afforded preferences in
relation to dividends and liquidation rights in the order listed above. Our
board of directors is empowered, without approval of our stockholders, to cause
the preferred stock to be issued in one or more classes or series, or both, with
the numbers of shares of each class or series and the rights, preferences and
limitations of each class or series to be determined by it. The specific matters
that may be determined by our board of directors include the dividend rights,
voting rights, redemption rights, liquidation preferences, conversion and
exchange rights, retirement and sinking fund provisions and other rights,
qualifications, limitations and restrictions of any wholly unissued series of
preferred stock, or of the entire class of preferred stock if none of the shares
have been issued, the number of shares constituting that series and the terms
and conditions of the issue of the shares.
The following description of our capital stock is a summary. It summarizes only
those aspects of our capital stock which we believe will be most important to
your decision to invest in our capital stock. You should keep in mind, however,
that it is our Amended and Restated Certificate of Incorporation and our Amended
and Restated By-Laws, and the Delaware General Corporation Law, and not this
summary, which define your rights as a securityholder. There may be other
provisions in these documents which are also important to you. You should read
these documents for a full description
27
of the terms of our capital stock. Our Amended and Restated Certificate of
Incorporation and our Amended and Restated By-Laws are incorporated by reference
as exhibits to the Registration Statement that includes this prospectus. See
"Where You Can Find More Information" for information on how to obtain copies of
these documents.
COMMON STOCK
Subject to any preferential rights of any preferred stock created by our board
of directors, as a holder of our common stock you are entitled to dividends as
our board of directors may declare from time to time out of funds that we can
legally use to pay dividends. The holders of common stock possess exclusive
voting rights, except to the extent provided by law and to the extent our board
of directors specifies voting power for any preferred stock that is issued.
As a holder of our common stock, you are entitled to one vote for each share of
common stock and do not have any right to cumulate votes in the election of
directors. In the event of our liquidation, dissolution or winding-up, you will
be entitled to receive on a proportionate basis any assets remaining after
provision for payment of creditors and after payment or provision for payment of
any liquidation preferences to holders of preferred stock. Our common stock is
listed on the New York Stock Exchange under the symbol "HIG."
The transfer agent and registrar for our common stock is The Bank of New York.
PREFERRED STOCK
We will describe the particular terms of any series of preferred stock in the
prospectus supplement relating to the offering.
We will fix or designate the rights, preferences, privileges and restrictions,
including dividend rights, voting rights, terms of redemption, retirement and
sinking fund provisions and liquidation preferences, if any, of a series of
preferred stock through a certificate of designation adopted by our board of
directors or a duly authorized committee of our board of directors. We will
describe the terms, if any, on which shares of any series of preferred stock are
convertible or exchangeable into common stock in the prospectus supplement
relating to the offering. The conversion or exchange may be mandatory, at your
option or at our option. The applicable prospectus supplement will state the
manner in which the shares of common stock that you will receive as a holder of
preferred stock would be converted or exchanged.
On October 10, 1995, our board of directors declared a dividend of rights to
holders of record of our common stock outstanding as of the close of business on
December 19, 1995, with respect to common stock issued after that date until the
distribution date, and, in certain circumstances, with respect to common stock
issued after the distribution date. When those rights become exercisable,
holders of the rights will be entitled to purchase shares of Series A
Participating Cumulative Preferred Stock. See "-- Rights Agreement."
PROVISIONS OF OUR AMENDED AND RESTATED CERTIFICATE OF INCORPORATION AND AMENDED
AND RESTATED BY-LAWS THAT MAY DELAY OR MAKE MORE DIFFICULT UNSOLICITED
ACQUISITIONS OR CHANGES OF OUR CONTROL
Some provisions of our Amended and Restated Certificate of Incorporation and
Amended and Restated By-Laws may delay or make more difficult unsolicited
acquisitions or changes of our control. We believe that these provisions will
enable us to develop our business in a manner that will foster long-term growth
without disruption caused by the threat of a takeover not thought by our board
of directors to be in our best interest and the best interests of our
stockholders.
Those provisions could have the effect of discouraging third parties from making
proposals involving an unsolicited acquisition or change of control of our
company, although the proposals, if made, might be considered desirable by a
majority of our stockholders. Those provisions may also have the
28
effect of making it more difficult for third parties to cause the replacement of
our current management without the concurrence of our board of directors.
These provisions include:
- the availability of capital stock for issuance from time to time at the
discretion of our board of directors (see "-- Authorized and Outstanding
Capital Stock" and "-- Preferred Stock"),
- prohibitions against stockholders calling a special meeting of stockholders or
acting by written consent instead of at a meeting,
- requirements for advance notice for raising business or making nominations at
stockholders' meetings, and
- the ability of our board of directors to increase the size of the board and to
appoint directors to fill newly created directorships.
NO STOCKHOLDER ACTION BY WRITTEN CONSENT; SPECIAL MEETINGS
Our Amended and Restated Certificate of Incorporation and Amended and Restated
By-Laws provide that stockholder action can be taken only at an annual or
special meeting and cannot be taken by written consent. Our Amended and Restated
Certificate of Incorporation and Amended and Restated By-Laws also provide that
special meetings of stockholders can be called only by the chairman of our board
of directors or by a vote of the majority of the entire board of directors.
Furthermore, our Amended and Restated By-Laws provide that only such business as
is specified in the notice of any special meeting of stockholders may come
before the meeting.
ADVANCE NOTICE FOR RAISING BUSINESS OR MAKING NOMINATIONS AT MEETINGS
Our Amended and Restated By-Laws establish an advance notice procedure for
stockholder proposals to be brought before an annual meeting of stockholders and
for nominations by stockholders of candidates for election as directors at an
annual or special meeting at which directors are to be elected. The only
business that may be conducted at an annual meeting of stockholders is the
election of members of the board of directors for the succeeding year and
business that has been specified in the notice of the meeting given by or at the
direction of the board of directors or otherwise brought before the meeting by,
or at the direction of, the board of directors, or by a stockholder who has
given to the secretary of the company timely written notice, in proper form, of
the stockholder's intention to bring that business before the meeting. Only
persons who are nominated by, or at the direction of, the board of directors, or
who are nominated by a stockholder who has given timely written notice, in
proper form, to the secretary prior to a meeting at which directors are to be
elected will be eligible for election as directors.
To be timely, notice of business to be brought before an annual meeting or
nominations of candidates for election as directors at an annual meeting must be
given by a stockholder to the company's secretary not later than 90 days prior
to the anniversary date for the immediately preceding annual meeting, or not
more than 10 days after the first public disclosure of the originally scheduled
date of the annual meeting, whichever is earlier.
Similarly, notice of nominations to be brought before a special meeting of
stockholders for the election of directors must be delivered to the secretary no
later than the close of business on the seventh day following the date on which
notice of the date of the special meeting of stockholders is given.
The notice of any nomination for election as a director is required to state:
- the name and address of the stockholder who intends to make the nomination and
of the person or persons to be nominated,
29
- a representation that the stockholder is a holder of record of stock entitled
to vote at such meeting and intends to appear in person or by proxy at the
meeting to nominate the person or persons specified in the notice,
- a description of all arrangements or understandings relating to the nomination
between the stockholder and each nominee and any other person or persons,
naming those persons,
- all other information regarding each nominee proposed by the stockholder that
would have been required to be included in a proxy statement filed under the
proxy rules of the Securities and Exchange Commission had each nominee been
nominated, or intended to be nominated, by our board of directors,
- the consent of each nominee to serve as a director if so elected, and
- if applicable, a representation that the stockholder intends to solicit
proxies in support of each nominee.
NUMBER OF DIRECTORS; FILLING OF VACANCIES
Our Amended and Restated By-Laws provide that newly created directorships
resulting from any increase in the authorized number of directors, or any
vacancy, may be filled by a vote of a majority of directors then in office,
subject to the requirement in the Amended and Restated By-Laws that the majority
of directors holding office immediately after the election must be "independent
directors," as defined in the Amended and Restated By-Laws. Accordingly, our
board of directors may be able to prevent any stockholder from obtaining
majority representation on the board of directors by increasing the size of the
board and filling the newly created directorships with its own nominees.
RIGHTS AGREEMENT
THE HARTFORD FINANCIAL SERVICES GROUP, INC. RIGHTS
On October 10, 1995, our board of directors declared a dividend of one right for
each share of common stock outstanding as of the close of business on December
19, 1995, with respect to common stock issued after that date until the
distribution date, and, in certain circumstances, with respect to common stock
issued after the distribution date.
On May 21, 1998, our board of directors declared a two-for-one stock split
effected in the form of a 100% stock dividend distributed on July 15, 1998 to
stockholders of record as of June 24, 1998. Before our board of directors
declared the two-for-one stock split, each right entitled the registered holder
to purchase from us, when it became exercisable, one one-thousandth (1/1000th)
of a share of Series A Participating Cumulative Preferred Stock, at a price of
$220, subject to adjustment in specific circumstances. As a result of the stock
split, the terms of the rights were adjusted so that the holder of a right may
purchase from us, when the right becomes exercisable, one two-thousandth
(1/2000th) of a share of Series A Participating Cumulative Preferred Stock, at a
price of $110, subject to adjustment in specific circumstances.
Each right is subject to redemption at a price of $.005 per share. The terms of
the rights are described in the rights agreement, dated as of November 1, 1995,
between us and The Bank of New York, as rights agent. The rights will not be
exercisable until the distribution date and will expire on November 1, 2005,
unless earlier redeemed by us as described below. Until a right is exercised,
the holder of the right will not as a result of holding that right have rights
as a stockholder of our company including the right to vote or to receive
dividends with respect to the rights or the Series A Participating Cumulative
Preferred Stock relating to the right.
The following description of the terms of the rights is a summary. It summarizes
only those terms of the rights which we believe will be most important to your
decision to invest in our common stock. You should keep in mind, however, that
it is the rights agreement, and not this summary, which defines your rights as a
holder of our rights. There may be other provisions in the rights agreement
30
which are also important to you. You should read the rights agreement for a full
description of the terms of the rights. The rights agreement is filed as an
exhibit to the Registration Statement that includes this prospectus. See "Where
You Can Find More Information" for information on how to obtain a copy of the
rights agreement.
DISTRIBUTION DATE
Under the rights agreement, the distribution date is the earlier of:
- the time that we learn that a person or group, including any affiliate or
associate of the person or group, has acquired, or has obtained the right to
acquire, beneficial ownership of more than 15% of the outstanding shares of
our common stock (we refer to that person or group as an "acquiring person"),
unless provisions preventing accidental triggering of the distribution of the
rights apply, and
- the close of business on the date, if any, that may be designated by our board
of directors following the commencement of, or first public disclosure of an
intent to commence, a tender or exchange offer for more than 15% or more of
the outstanding shares of our common stock.
A person or group, or any affiliate or associate of the person or group,
however, that inadvertently acquires more than 15% of the outstanding shares of
our common stock will not be deemed to be an acquiring person provided that
person or group reduces its percentage of beneficial ownership to less than 15%
of the outstanding shares of our common stock by the close of business on the
fifth business day after notice from us that that person's or group's ownership
interest exceeds 15% of the outstanding shares of our common stock. That person
or group will be deemed to be an acquiring person at the end of that five
business day period absent such reduction.
EVIDENCE OF RIGHTS
Until the distribution date, the rights will be evidenced by the certificates
for common stock rather than separate right certificates. Therefore, from the
issuance date until the distribution date, you will be able to transfer the
rights only with the common stock and each transfer of common stock will also
transfer the associated rights. As soon as practicable following the
distribution date, we will mail separate certificates evidencing the rights to
holders of record of the common stock as of the close of business on the
distribution date, and to each initial record holder of common stock originally
issued after the distribution date. These separate certificates alone will then
evidence the rights.
ADJUSTMENTS
The number of shares of Series A Participating Cumulative Preferred Stock or
other securities that we will issue upon exercise of the rights, the purchase
price, the redemption price and the number of rights associated with each share
of common stock are all subject to adjustment from time to time if there is any
change in the common stock or the Series A Participating Cumulative Preferred
Stock. An adjustment may be made as a result of stock dividends, stock splits,
recapitalizations, mergers, consolidations, combinations or exchanges of
securities, split-ups, split-offs, spin-offs, liquidations, other similar
changes in capitalization or any distribution or issuance of cash, assets,
evidences of indebtedness or subscription rights, options or warrants to holders
of common stock or Series A Participating Cumulative Preferred Stock.
We may, but we are not required to, issue fractions of rights or distribute
right certificates which evidence fractional rights. Instead of issuing
fractional rights, we may make a cash payment based on the market price of those
rights. In addition, we may, but we are not required to, issue fractions of
shares upon the exercise of the rights or distribute certificates which evidence
fractional shares of Series A Participating Cumulative Preferred Stock. Instead
of fractional shares of Series A Participating Cumulative Preferred Stock, we
may utilize a depositary arrangement as provided by the terms of the Series A
Participating Cumulative Preferred Stock and, for fractions other than one
31
two-thousandth (1/2000th) of a share of Series A Participating Cumulative
Preferred Stock or integral multiples, may make a cash payment based on the
market price of those shares.
TRIGGERING EVENT AND EFFECT OF TRIGGERING EVENT
Any time there is an acquiring person, the rights will entitle you, provided you
are not the acquiring person, to purchase, for the purchase price of the rights,
that number of one two-thousandths of a share of Series A Participating
Cumulative Preferred Stock equivalent to the number of shares of common stock
which at the time of that event would have a market value of twice the purchase
price.
If we are acquired in a merger or other business combination by an acquiring
person or an affiliate or associate of an acquiring person that is a publicly
traded corporation, or 50% or more of our assets or assets representing 50% or
more of our revenues or cash flow are sold, leased, exchanged or otherwise
transferred in one or more transactions to an acquiring person or an affiliate
or associate of an acquiring person that is not a publicly traded corporation,
each right will entitle you, subject to the next paragraph, to purchase, for the
purchase price of the right, that number of common shares of that corporation
which at the time of the transaction would have a market value of twice the
purchase price. If we are acquired in a merger or other business combination by
an acquiring person or an affiliate or associate of an acquiring person that is
not a publicly traded entity or 50% or more of our assets or assets representing
50% or more of our revenues or cash flow are sold, leased, exchanged or
otherwise transferred in one or more transactions to an acquiring person or an
affiliate or associate of an acquiring person that is not a publicly traded
entity, each right will entitle you, subject to the next paragraph, to purchase,
for the purchase price of the right, at your option:
- that number of shares of the surviving corporation which at the time of the
transaction would have a book value of twice the purchase price,
- that number of shares of that entity which at the time of the transaction
would have a book value of twice the purchase price, or
- if that entity has an affiliate which has publicly traded common shares, that
number of common shares of that affiliate which at the time of the transaction
would have market value of twice the purchase price.
Any rights that are at any time beneficially owned by an acquiring person, or
any affiliate or associate of an acquiring person, will be null and void and
nontransferable. Any holder of that right, including any purported transferee or
subsequent holder, will be unable to exercise or transfer the right.
REDEMPTION
At any time prior to the earlier of:
- the time a person or group becomes an acquiring person, and
- November 1, 2005,
our board of directors may redeem the rights in whole, but not in part, at a
price, which we refer to in this prospectus as the "redemption price," in cash
or common stock or other securities deemed by our board of directors to be at
least equivalent in value to $.005 per right. This amount is subject to
adjustment as provided in the rights agreement. Immediately upon the action of
our board of directors ordering the redemption of the rights, and without any
further action and without any notice, your right to exercise the rights will
terminate and your only right as a holder of rights will be to receive the
redemption price. Within 10 business days after the action of our board of
directors ordering the redemption of the rights, we will give notice of the
redemption to the holders of the then
32
outstanding rights by mail. We will state the method by which we will pay the
redemption price in the notice of redemption.
In addition, at any time after there is an acquiring person, our board of
directors may elect to exchange each right, other than rights that have become
null and void and nontransferable as described above, for a consideration per
right consisting of one-half of the securities that would be issuable at that
time upon exercise of one right.
AMENDMENT
At any time prior to the distribution date, we may, without your approval,
supplement or amend any provision of the rights agreement, including, without
limitation, the distribution date, the definition of acquiring person, the time
during which the rights may be redeemed or the terms of the Series A
Participating Cumulative Preferred Stock. However, we will not supplement or
amend the rights agreement to reduce the redemption price or provide for an
earlier expiration date. After the distribution date and subject to applicable
law, we may amend the rights agreement without your approval only:
- to cure any ambiguity or to correct or supplement any provision contained in
the rights agreement which may be defective or inconsistent with any other
provision of the rights agreement, or
- to make any other provision which we may deem necessary or desirable and which
will not adversely affect the interests of the holders of right certificates.
Any supplement or amendment adopted during any period after any person or group
has become an acquiring person but prior to the distribution date will be null
and void unless that supplement or amendment could have been adopted under the
prior sentence after the distribution date.
EFFECT OF THE RIGHTS AGREEMENT
The rights agreement is designed to protect you in the event of unsolicited
offers to acquire us and other coercive takeover tactics which, in the opinion
of our board of directors, could impair our ability to represent your interests.
The provisions of the rights agreement may render an unsolicited takeover more
difficult or less likely to occur or might prevent such a takeover, even though
that takeover may offer you the opportunity to sell your stock at a price above
the prevailing market rate and may be favored by a majority of our stockholders.
RESTRICTIONS ON OWNERSHIP UNDER INSURANCE LAWS
State insurance laws could be a significant deterrent to any person interested
in acquiring control of our company. The insurance holding company laws of each
of the jurisdictions in which our insurance subsidiaries are incorporated or
commercially domiciled, as well as state corporation laws, govern any
acquisition of control of our insurance subsidiaries or of our company. In
general, these laws provide that no person or entity may directly or indirectly
acquire control of an insurance company unless that person or entity has
received the prior approval of the insurance regulatory authorities. An
acquisition of control would be presumed in the case of any person or entity who
purchases 10% or more of our outstanding common stock, or 5% or more, in the
case of the Florida insurance holding company laws, unless the applicable
insurance regulatory authorities determine otherwise.
DELAWARE GENERAL CORPORATION LAW
The terms of Section 203 of the Delaware General Corporation Law apply to us
since we are a Delaware corporation. Under Section 203, with some exceptions, a
Delaware corporation may not engage in a broad range of business combinations,
such as mergers, consolidations and sales of
33
assets, with an "interested stockholder," for a period of three years from the
date that person became an interested stockholder unless:
- the transaction or the business combination that results in a person becoming
an interested stockholder is approved by the board of directors of the
corporation before the person becomes an interested stockholder,
- upon consummation of the transaction which results in the stockholder becoming
an interested stockholder, the interested stockholder owns 85% or more of the
voting stock of the corporation outstanding at the time the transaction
commenced, excluding shares owned by persons who are directors and also
officers and shares owned by certain employee stock plans, or
- on or after the date the person becomes an interested stockholder, the
business combination is approved by the corporation's board of directors and
by holders of at least two-thirds of the corporation's outstanding voting
stock, excluding shares owned by the interested stockholder, at a meeting of
stockholders.
Under Section 203, an "interested stockholder" is defined as any person (or the
affiliates or associates of such person), other than the corporation and any
direct or indirect majority-owned subsidiary, that is:
- the owner of 15% or more of the outstanding voting stock of the corporation,
or
- an affiliate or associate of the corporation and was the owner of 15% or more
of the outstanding voting stock of the corporation at any time within the
three-year period immediately prior to the date on which it is sought to be
determined whether the person is an interested stockholder.
Section 203 does not apply to a corporation that so provides in an amendment to
its certificate of incorporation or by-laws passed by a majority of its
outstanding shares at any time. This stockholder action does not become
effective for 12 months following its adoption and would not apply to persons
who were already interested stockholders at the time of the amendment. Our
Amended and Restated Certificate of Incorporation does not exclude us from the
restrictions imposed under Section 203.
Section 203 makes it more difficult for a person who would be an interested
stockholder to effect business combinations with a corporation for a three-year
period, although the stockholders may elect to exclude a corporation from the
restrictions imposed. The provisions of Section 203 may encourage companies
interested in acquiring us to negotiate in advance with our board of directors,
because the stockholder approval requirement would be avoided if a majority of
the directors then in office approve either the business combination or the
transaction which results in the stockholder becoming an interested stockholder.
These provisions also may have the effect of preventing changes in our
management. It is further possible that these provisions could make it more
difficult to accomplish transactions that stockholders may otherwise deem to be
in their best interest.
DESCRIPTION OF DEPOSITARY SHARES
GENERAL TERMS
We may elect to offer depositary shares representing receipts for fractional
interests in debt securities or preferred stock. In this case, we will issue
receipts for depositary shares, each of which will represent a fraction of a
debt security or share of a particular series of preferred stock, as the case
may be.
We will deposit the debt securities or shares of any series of preferred stock
represented by depositary shares under a deposit agreement between us and a
depositary which we will name in the applicable prospectus supplement. Subject
to the terms of the deposit agreement, as an owner of a depositary share you
will be entitled, in proportion to the applicable fraction of a debt security or
34
share of preferred stock represented by the depositary share, to all the rights
and preferences of the debt security or preferred stock, as the case may be,
represented by the depositary share, including, as the case may be, interest,
dividend, voting, conversion, redemption, sinking fund, repayment at maturity,
subscription and liquidation rights.
The following description of the terms of the deposit agreement is a summary. It
summarizes only those terms of the deposit agreement that we believe will be
most important to your decision to invest in our depositary shares. You should
keep in mind, however, that it is the deposit agreement, and not this summary,
which defines your rights as a holder of depositary shares. There may be other
provisions in the deposit agreement that are also important to you. You should
read the deposit agreement for a full description of the terms of the depositary
shares. The form of the deposit agreement is filed as an exhibit to the
Registration Statement that includes this prospectus. See "Where You Can Find
More Information" for information on how to obtain a copy of the deposit
agreement.
INTEREST, DIVIDENDS AND OTHER DISTRIBUTIONS
The depositary will distribute all payments of interest, cash dividends or other
cash distributions received on the debt securities or preferred stock, as the
case may be, to you in proportion to the number of depositary shares that you
own.
In the event of a distribution other than in cash, the depositary will
distribute property received by it to you in an equitable manner, unless the
depositary determines that it is not feasible to make a distribution. In that
case the depositary may sell the property and distribute the net proceeds from
the sale to you.
REDEMPTION OF DEPOSITARY SHARES
If we redeem a debt security or series of preferred stock represented by
depositary shares, the depositary will redeem your depositary shares from the
proceeds received by the depositary resulting from the redemption. The
redemption price per depositary share will be equal to the applicable fraction
of the redemption price per debt security or share of preferred stock, as the
case may be, payable in relation to the redeemed series of debt securities or
preferred stock. Whenever we redeem debt securities or shares of preferred stock
held by the depositary, the depositary will redeem as of the same redemption
date the number of depositary shares representing, as the case may be, the debt
securities or shares of preferred stock redeemed. If fewer than all the
depositary shares are to be redeemed, the depositary shares to be redeemed will
be selected by lot, proportionately or by any other equitable method as the
depositary may determine.
EXERCISE OF RIGHTS UNDER THE INDENTURES OR VOTING THE PREFERRED STOCK
Upon receipt of notice of any meeting at which you are entitled to vote, or of
any request for instructions or directions from you as holder of debt
securities, the depositary will mail to you the information contained in that
notice. Each record holder of the depositary shares on the record date will be
entitled to instruct the depositary how to give instructions or directions with
respect to the debt securities represented by that holder's depositary shares or
how to vote the amount of the preferred stock represented by that holder's
depositary shares. The record date for the depositary shares will be the same
date as the record date for the debt securities or preferred stock, as the case
may be. The depositary will endeavor, to the extent practicable, to give
instructions or directions with respect to the debt securities or to vote the
amount of the preferred stock, as the case may be, represented by the depositary
shares in accordance with those instructions. We will agree to take all
reasonable action which the depositary may deem necessary to enable the
depositary to do so. The depositary will abstain from giving instructions or
directions with respect to the debt securities or voting shares of the preferred
stock, as the case may be, if it does not receive specific instructions from
you.
35
AMENDMENT AND TERMINATION OF THE DEPOSIT AGREEMENT
We and the depositary may amend the form of depositary receipt evidencing the
depositary shares and any provision of the deposit agreement at any time.
However, any amendment which materially and adversely alters the rights of the
holders of the depositary shares will not be effective unless the amendment has
been approved by the holders of at least a majority of the depositary shares
then outstanding.
The deposit agreement will terminate if:
- all outstanding depositary shares have been redeemed, or
- there has been a complete repayment or redemption of the debt securities or a
final distribution in respect of the preferred stock, including in connection
with our liquidation, dissolution or winding up, and the repayment, redemption
or distribution proceeds, as the case may be, have been distributed to you.
RESIGNATION AND REMOVAL OF DEPOSITARY
The depositary may resign at any time by delivering to us notice of its election
to do so. We also may, at any time, remove the depositary. Any resignation or
removal will take effect upon the appointment of a successor depositary and its
acceptance of such appointment. We must appoint the successor depositary within
60 days after delivery of the notice of resignation or removal. The successor
depositary must be a bank or trust company having its principal office in the
United States and having a combined capital and surplus of at least $50,000,000.
CHARGES OF DEPOSITARY
We will pay all transfer and other taxes and governmental charges arising solely
from the existence of the depositary arrangements. We will pay charges of the
depositary in connection with the initial deposit of the debt securities or
preferred stock, as the case may be, and issuance of depositary receipts, all
withdrawals of shares of debt securities or preferred stock, as the case may be,
by you and any repayment or redemption of the debt securities or preferred
stock, as the case may be. You will pay other transfer and other taxes and
governmental charges, as well as the other charges that are expressly provided
in the deposit agreement to be for your account.
MISCELLANEOUS
The depositary will forward all reports and communications from us which are
delivered to the depositary and which we are required or otherwise determine to
furnish to holders of debt securities or preferred stock, as the case may be.
Neither we nor the depositary will be liable under the deposit agreement to you
other than for the depositary's gross negligence, willful misconduct or bad
faith. Neither we nor the depositary will be obligated to prosecute or defend
any legal proceedings relating to any depositary shares, debt securities or
preferred stock unless satisfactory indemnity is furnished. We and the
depositary may rely upon written advice of counsel or accountants, or upon
information provided by persons presenting debt securities or shares of
preferred stock for deposit, you or other persons believed to be competent and
on documents which we and the depositary believe to be genuine.
DESCRIPTION OF WARRANTS
We may issue warrants, including warrants to purchase debt securities, preferred
stock, common stock or other of our securities. We may issue warrants
independently or together with any other securities, and they may be attached to
or separate from those securities. We will issue the warrants under warrant
agreements between us and a bank or trust company, as warrant agent, that we
will describe in the prospectus supplement relating to the warrants that we
offer.
36
The following description of the terms of the warrants is a summary. It
summarizes only those terms of the warrants and the warrant agreement which we
believe will be most important to your decision to invest in our warrants. You
should keep in mind, however, that it is the warrant agreement and the warrant
certificate relating to the warrants, and not this summary, which defines your
rights as a warrantholder. There may be other provisions in the warrant
agreement and the warrant certificate relating to the warrants which are also
important to you. You should read these documents for a full description of the
terms of the warrants. Forms of these documents are filed as exhibits to the
Registration Statement that includes this prospectus. See "Where You Can Find
More Information" for information on how to obtain copies of these documents.
DEBT WARRANTS
We will describe in the applicable prospectus supplement the terms of warrants
to purchase debt securities that we may offer, the warrant agreement relating to
the debt warrants and the warrant certificates representing the debt warrants.
These terms will include the following:
- the title of the debt warrants,
- the debt securities for which the debt warrants are exercisable,
- the aggregate number of the debt warrants,
- the principal amount of debt securities that you may purchase upon exercise of
each debt warrant, and the price or prices at which we will issue the debt
warrants,
- the procedures and conditions relating to the exercise of the debt warrants,
- the designation and terms of any related debt securities issued with the debt
warrants, and the number of debt warrants issued with each debt security,
- the date, if any, from which you may separately transfer the debt warrants and
the related securities,
- the date on which your right to exercise the debt warrants commences, and the
date on which your right expires,
- the maximum or minimum number of the debt warrants which you may exercise at
any time,
- if applicable, a discussion of material United States federal income tax
considerations,
- any other terms of the debt warrants and terms, procedures and limitations
relating to your exercise of the debt warrants, and
- the terms of the securities you may purchase upon exercise of the debt
warrants.
We will also describe in the applicable prospectus supplement any provisions for
a change in the exercise price or expiration date of the warrants and the kind,
frequency and timing of any notice to be given. You may exchange debt warrant
certificates for new debt warrant certificates of different denominations and
may exercise debt warrants at the corporate trust office of the warrant agent or
any other office that we indicate in the applicable prospectus supplement. Prior
to exercise, you will not have any of the rights of holders of the debt
securities purchasable upon that exercise and will not be entitled to payments
of principal, premium, if any, or interest on the debt securities purchasable
upon the exercise.
OTHER WARRANTS
We may issue other warrants. We will describe in the applicable prospectus
supplement the following terms of those warrants:
- the title of the warrants,
37
- the securities, which may include preferred stock or common stock, for which
you may exercise the warrants,
- the aggregate number of the warrants,
- the number of securities that you may purchase upon exercise of each warrant,
and the price or prices at which we will issue the warrants,
- the procedures and conditions relating to the exercise of the warrants,
- the designation and terms of any related securities issued with the warrants,
and the number of warrants issued with each security,
- the date, if any, from which you may separately transfer the warrants and the
related securities,
- the date on which your right to exercise the warrants commences, and the date
on which your right expires,
- the maximum or minimum number of warrants which you may exercise at any time,
- if applicable, a discussion of material United States federal income tax
considerations, and
- any other terms of the warrants, including terms, procedures and limitations
relating to your exchange and exercise of the warrants.
We will also describe in the applicable prospectus supplement any provisions for
a change in the exercise price or the expiration date of the warrants and the
kind, frequency and timing of any notice to be given. You may exchange warrant
certificates for new warrant certificates of different denominations and may
exercise warrants at the corporate trust office of the warrant agent or any
other office that we indicate in the applicable prospectus supplement. Prior to
the exercise of your warrants, you will not have any of the rights of holders of
the preferred stock, common stock or other securities purchasable upon that
exercise and will not be entitled to dividend payments, if any, or voting rights
of the preferred stock, common stock or other securities purchasable upon the
exercise.
EXERCISE OF WARRANTS
We will describe in the prospectus supplement relating to the warrants the
principal amount or the number of our securities that you may purchase for cash
upon exercise of a warrant, and the exercise price. You may exercise a warrant
as described in the prospectus supplement relating to the warrants at any time
up to the close of business on the expiration date stated in the prospectus
supplement. Unexercised warrants will become void after the close of business on
the expiration date, or any later expiration date that we determine.
We will forward the securities purchasable upon the exercise as soon as
practicable after receipt of payment and the properly completed and executed
warrant certificate at the corporate trust office of the warrant agent or other
office stated in the applicable prospectus supplement. If you exercise less than
all of the warrants represented by the warrant certificate, we will issue you a
new warrant certificate for the remaining warrants.
DESCRIPTION OF STOCK PURCHASE CONTRACTS AND STOCK PURCHASE UNITS
We may issue stock purchase contracts, including contracts obligating you to
purchase from us, and for us to sell to you, a specific number of shares of
common stock or preferred stock, or other property, at a future date or dates.
The price per share of preferred stock or common stock may be fixed at the time
the stock purchase contracts are issued or may be determined by reference to a
specific formula described in the stock purchase contracts. We may issue stock
purchase contracts separately or as a part of units each consisting of a stock
purchase contract and debt securities, trust preferred securities, depositary
shares representing fractional interests in debt securities or shares of
preferred stock, or debt obligations of third parties, including U.S. Treasury
securities,
38
securing your obligations to purchase the preferred stock or the common stock,
or other property, under the stock purchase contract. The stock purchase
contracts may require us to make periodic payments to you or vice versa and the
payments may be unsecured or prefunded on some basis. The stock purchase
contracts may require you to secure your obligations in a specified manner. We
will describe in the applicable prospectus supplement the terms of any stock
purchase contracts or stock purchase units.
DESCRIPTION OF PREFERRED SECURITIES
The trustees of each trust will issue preferred securities and common securities
of the trust. The preferred securities will represent preferred undivided
beneficial interests in the assets of the related trust. As a holder of trust
preferred securities, you will generally be entitled to a preference with
respect to distributions and amounts payable on redemption or liquidation over
the common securities of the trust, as well as other benefits as described in
the corresponding trust agreement. Each of the trusts is a legally separate
entity and the assets of one are not available to satisfy the obligations of any
of the others.
The following description of the terms of the form of trust agreement is a
summary. It summarizes only those portions of the form of trust agreement which
we believe will be most important to your decision to invest in the preferred
securities. You should keep in mind, however, that it is the trust agreement,
and not this summary, which defines your rights as a holder. There may be other
provisions in the trust agreement which are also important to you. You should
read the form of trust agreement itself for a full description of the terms of
the preferred securities. The form of trust agreement is filed as an exhibit to
the Registration Statement. See "Where You Can Find More Information" for
information on how to obtain a copy of the trust agreement.
RANKING OF PREFERRED SECURITIES
The preferred securities of a trust will rank equally, and we will make payments
proportionately, with the common securities of the trust except as described
under "-- Subordination of Common Securities." The preferred securities of each
trust represent preferred undivided beneficial interests in the assets of the
trust. The property trustee will hold legal title to the corresponding junior
subordinated debentures in trust for the benefit of the holders of the related
preferred securities and common securities.
Each guarantee agreement that we execute for your benefit, as a holder of
preferred securities of a trust, will be a guarantee on a subordinated basis
with respect to the related preferred securities. However, our guarantee will
not guarantee payment of distributions or amounts payable on redemption or
liquidation of the preferred securities when the related trust does not have
funds on hand available to make such payments. See "Description of Guarantee."
DISTRIBUTIONS ON THE PREFERRED SECURITIES
The trust will pay the distributions on the preferred securities and common
securities at a rate specified in the prospectus supplement.
The amount of distributions the trust must pay for any period will be computed
on the basis of a 360-day year of twelve 30-day months unless we otherwise
specify in the applicable prospectus supplement. Distributions that are in
arrears may bear interest at the rate per annum specified in the applicable
prospectus supplement. The term "distributions" as we use it in this prospectus
includes any additional amounts provided in the corresponding trust agreement.
Distributions on the preferred securities will be cumulative, will accrue from
the date of original issuance and will be payable on the dates specified in the
applicable prospectus supplement. If any date on which distributions are payable
on the preferred securities is not a business day, the trust will instead make
the payment on the next succeeding day that is a business day, and without any
39
interest or other payment on account of the delay. However, if that business day
is in the next succeeding calendar year, the trust will make the payment on the
immediately preceding business day. In each case payment will be made with the
same force and effect as if made on the date the payment was originally due.
When we use the term "business day" in this prospectus, we mean any day other
than a Saturday or a Sunday, or a day on which banking institutions in the City
of New York are authorized or required by law or executive order to remain
closed or a day on which the corporate trust office of the property trustee or
the debenture trustee is closed for business.
If provided in the applicable prospectus supplement, we have the right under the
junior subordinated indenture, the contract that provides the terms for the
corresponding junior subordinated debentures, to extend the interest payment
period for a specified number of periods. However, we may not extend these
interest payments beyond the maturity of the junior subordinated debentures. As
a consequence of any extension, distributions on the corresponding preferred
securities would be deferred by the trust during the extension period. These
distributions would continue to accumulate additional distributions at the rate
per annum set form in the prospectus supplement.
If we exercise this right, during the extension period we and our subsidiaries
may not:
- declare or pay any dividends or distributions on, or redeem, purchase, acquire
or make a liquidation payment on, any of our capital stock, or
- make any payment of principal, premium, if any, or interest on or repay,
repurchase or redeem any debt securities that rank equally with or junior in
interest to the corresponding junior subordinated debentures or make any
related guarantee payments,
other than:
- dividends or distributions on our common stock,
- redemptions or purchases of any rights pursuant to our rights plan, or any
successor to our rights plan, and the declaration of a dividend of these
rights in the future, and
- payments under any guarantee.
We anticipate that the revenue of each trust available for distribution to you,
as a holder of preferred securities, will be limited to payments under the
corresponding junior subordinated debentures in which the trust will invest the
proceeds from the issuance and sale of its preferred securities and its common
securities. See "Description of Corresponding Junior Subordinated Debentures."
If we do not make interest payments on the corresponding junior subordinated
debentures, the property trustee will not have funds available to pay
distributions on the corresponding preferred securities. The payment of
distributions, if and to the extent the trust has funds legally available for
the payment of these distributions is guaranteed by us on a limited basis as set
forth under "Description of Guarantee."
The trust will pay distributions on the preferred securities to you provided you
are entered in the register of the trust on the relevant record dates. As long
as the preferred securities remain in book-entry form, the record date will be
one business day prior to the relevant distribution date. If any preferred
securities are not in book-entry form, the record date for the preferred
securities will be the date 15 days prior to the relevant distribution date.
REDEMPTION
REDEMPTION ON A REPAYMENT OR REDEMPTION OF THE CORRESPONDING JUNIOR
SUBORDINATED DEBENTURES
Upon the repayment or redemption, in whole or in part, of any corresponding
junior subordinated debentures, the property trustee must apply the proceeds
from that repayment or redemption to redeem a like amount of the corresponding
preferred securities. This redemption must be made
40
upon not less than 30 nor more than 60 days notice to you. The redemption price
will be equal to the aggregate liquidation preference of the preferred
securities, plus accumulated and unpaid distributions on the preferred
securities to the date of redemption and the related amount of any premium paid
by us upon the concurrent redemption of the corresponding junior subordinated
debentures. See "Description of Corresponding Junior Subordinated
Debentures -- Optional Redemption."
If less than all of any series of corresponding junior subordinated debentures
are repaid or redeemed, then the proceeds from the repayment or redemption will
be allocated to redeem a proportionate amount of each of the preferred
securities and the common securities. The amount of premium, if any, paid by us
upon the redemption of all or any part of any series of any corresponding junior
subordinated debentures repaid or redeemed will be allocated proportionately to
the redemption of the preferred securities and the common securities.
We must repay the principal of the corresponding junior subordinated debentures
when they are due. In addition, we will have the right to redeem any series of
corresponding junior subordinated debentures:
- in whole or in part, subject to the conditions we describe under "Description
of Corresponding Junior Subordinated Debentures -- Optional Redemption,"
- at any time, in whole, but not in part, upon the occurrence of a tax event or
an investment company event, each as defined below, and subject to the further
conditions we describe under "Description of Corresponding Junior Subordinated
Debentures -- Optional Redemption," or
- as we may otherwise specify in the applicable prospectus supplement.
REDEMPTION OR DISTRIBUTION UPON THE OCCURRENCE OF A TAX EVENT OR AN INVESTMENT
COMPANY EVENT
If an event occurs that constitutes a tax event or an investment company event
we will have the right to:
- redeem the corresponding junior subordinated debentures in whole, but not in
part, and cause a mandatory redemption of the preferred securities and common
securities in whole, but not in part, within 90 days following the occurrence
of the tax event or an investment company event, or
- terminate the related trust and cause the corresponding junior subordinated
debentures to be distributed to the holders of the preferred securities and
common securities in liquidation of the trust.
If provided in the applicable prospectus supplement, we will have the right to
extend or shorten the maturity of any series of corresponding junior
subordinated debentures at the time that we exercise our right to elect to
terminate the related trust and cause the corresponding junior subordinated
debentures to be distributed to the holders of the preferred securities and
common securities in liquidation of the trust.
When we use the term "additional sums" in this prospectus we mean the additional
amounts that may be necessary in order that the amount of distributions then due
and payable by a trust on its outstanding preferred securities and common
securities will not be reduced as a result of any additional taxes, duties and
other governmental charges to which the trust has become subject as a result of
a tax event.
When we use the term "tax event" we mean the receipt by the trust of an opinion
of counsel experienced in those matters to the effect that, as a result of any
amendment to, or change, including any announced prospective change, in, the
laws of the United States or any political subdivision or taxing authority
affecting taxation, or as a result of any official administrative pronouncement
or judicial decision interpreting or applying those laws or regulations, which
41
amendment or change is effective or pronouncement or decision is announced on or
after the trust issues the preferred securities, there is more than an
insubstantial risk that:
- the trust is, or will be within 90 days of the date of the opinion, subject to
United States federal income tax with respect to income received or accrued on
the corresponding series of corresponding junior subordinated debentures,
- interest payable by us on the series of corresponding junior subordinated
debentures is not, or within 90 days of the date of the opinion, will not be,
deductible, in whole or in part, for United States federal income tax
purposes, or
- the trust is, or will be within 90 days of the date of the opinion, subject to
more than a de minimis amount of other taxes, duties or other governmental
charges.
When we use the term "investment company event" we mean the occurrence of a
change in law or regulation or a change in interpretation or application of law
or regulation by any legislative body, court, governmental agency or regulatory
authority to the effect that the applicable trust is or will be considered an
investment company that is required to be registered under the Investment
Company Act of 1940, which change becomes effective on or after the date of
original issuance of the series of preferred securities issued by the trust.
When we use the term "like amount," we mean:
- with respect to a redemption of any series of preferred securities, preferred
securities having a liquidation amount equal to that portion of the principal
amount of corresponding junior subordinated debentures to be contemporaneously
redeemed, the proceeds of which will be used to pay the redemption price of
the preferred securities, and
- with respect to a distribution of corresponding junior subordinated debentures
to you, as a holder of preferred securities in connection with a dissolution
or liquidation of the related trust, corresponding junior subordinated
debentures having a principal amount equal to the liquidation amount of your
preferred securities.
When we use the term "liquidation amount," we mean the stated amount of $25 per
preferred security and common security.
After the liquidation date fixed for any distribution of corresponding junior
subordinated debentures for any series of preferred securities:
- the series of preferred securities will no longer be deemed to be outstanding,
- The Depository Trust Company, which we refer to in this prospectus as "DTC,"
or its nominee, as the record holder of the series of preferred securities,
will receive a registered global certificate or certificates representing the
corresponding junior subordinated debentures to be delivered upon that
distribution, and
- any certificates representing the series of preferred securities not held by
DTC or its nominee will be deemed to represent the corresponding junior
subordinated debentures having a principal amount equal to the stated
liquidation preference of the series of preferred securities, and bearing
accrued and unpaid interest in an amount equal to the accrued and unpaid
distributions on the series of preferred securities until you present the
certificates to the administrative trustees or their agent for transfer or
reissuance.
We can make no assurance as to what the market prices will be for the preferred
securities or the corresponding junior subordinated debentures that may be
distributed to you in exchange for your preferred securities if a dissolution
and liquidation of a trust were to occur. Accordingly, the preferred securities
that you purchase, or the corresponding junior subordinated debentures that you
receive on dissolution and liquidation of a trust, may trade at a discount to
the price that you paid to purchase the preferred securities.
42
VOLUNTARY DISTRIBUTION OF JUNIOR SUBORDINATED DEBENTURES
If we so provide in the applicable prospectus supplement, we may elect, at any
time, to dissolve the trust and cause the corresponding junior subordinated
debentures to be distributed to you, as a holder of the preferred securities,
and us, as the holder of the common securities, in liquidation of the trust.
REDEMPTION PROCEDURES
The trust will redeem the preferred securities on each redemption date at the
redemption price with the applicable proceeds from the contemporaneous
redemption of the corresponding junior subordinated debentures. The trust will
make redemptions of the preferred securities and pay the redemption price only
to the extent that it has funds available for the payment of the redemption
price. See also "-- Subordination of Common Securities."
If a trust gives notice to you of redemption of your preferred securities, then
by 12:00 noon, New York City time, on the redemption date, to the extent funds
are available, the property trustee will irrevocably deposit with DTC funds
sufficient to pay the applicable redemption price and will give DTC irrevocable
instructions and authority to pay the redemption price to you. See
"-- Book-Entry Issuance."
If the preferred securities are no longer in book-entry form, the trust, to the
extent funds are available, will irrevocably deposit with the paying agent for
the preferred securities funds sufficient to pay the applicable redemption price
to you and will give the paying agent irrevocable instructions and authority to
pay the redemption price to you upon surrender of your certificates.
The trust will pay any distributions payable on or prior to the redemption date
for any preferred securities called for redemption to you on the relevant record
dates for the distribution. If the trust has given notice of redemption and has
deposited the required funds, then upon the date of the deposit, all your rights
will cease, except your right to receive the redemption price, without interest
on that redemption price, and your preferred securities will cease to be
outstanding. If any date fixed for redemption of preferred securities is not a
business day, then the trust will pay the redemption price on the next
succeeding day which is a business day, and without any interest or other
payment on account of the delay. However, if the business day falls in the next
calendar year, the trust will make the payment on the immediately preceding
business day. If payment of the redemption price is improperly withheld or
refused and not paid either by the trust or by us pursuant to the guarantee as
described under "Description of Guarantee," distributions on the preferred
securities will continue to accrue at the then applicable rate, from the
redemption date originally established by the trust for the preferred securities
to the date the redemption price is actually paid. In this case the actual
payment date will be the date fixed for redemption for purposes of calculating
the redemption price.
Subject to applicable law, including United States federal securities law, we or
our subsidiaries may at any time purchase outstanding preferred securities by
tender, in the open market or by private agreement.
The trust will make payment of the redemption price on the preferred securities
and any distribution of corresponding junior subordinated debentures to the
applicable record holders as they appear on the register for the preferred
securities on the relevant record date. This date will generally be one business
day prior to the relevant redemption date or liquidation date. However, if any
preferred securities are not in book-entry form, the relevant record date for
the preferred securities will be the date 15 days prior to the redemption date
or liquidation date.
If less than all of the preferred securities and common securities issued by a
trust are to be redeemed on a redemption date, then the aggregate liquidation
amount of the preferred securities and common securities to be redeemed will be
allocated proportionately among the preferred securities and the common
securities. The property trustee will select the particular preferred securities
to be redeemed on a proportionate basis not more than 60 days prior to the
redemption
43
date from the outstanding preferred securities not previously called for
redemption, by any method that the property trustee deems fair and appropriate.
This method may provide for the selection for redemption of portions, equal to
$25 or an integral multiple of $25, of the liquidation amount of preferred
securities. The property trustee will promptly notify the trust registrar in
writing of the preferred securities selected for redemption and, in the case of
any preferred securities selected for partial redemption, the liquidation amount
of the preferred securities to be redeemed.
SUBORDINATION OF COMMON SECURITIES
The trust will make payment of distributions, any additional amounts and the
redemption price on the preferred securities and common securities
proportionately based on the liquidation amount of the preferred securities and
common securities. However, if on any distribution date or redemption date a
debenture event of default exists, the trust will not make any payment on the
common securities unless payment in full in cash of all accumulated and unpaid
distributions, any additional amounts and the full amount of the redemption
price on all of the outstanding preferred securities of the trust, has been made
or provided for. The property trustee will apply all available funds first to
the payment in full in cash of all distributions on, or redemption price of, the
preferred securities then due and payable.
If any event of default resulting from a debenture event of default exists, we
as holder of the common securities of the trust will be deemed to have waived
any right to act with respect to the event of default under the trust agreement
until the effect of all those events of default with respect to the preferred
securities have been cured, waived or otherwise eliminated. Until any events of
default under the trust agreement with respect to the preferred securities have
been so cured, waived or otherwise eliminated, the property trustee will act
solely on your behalf, as a holder of the preferred securities, and not on our
behalf as holder of the common securities, and only you acting with the other
holders will have the right to direct the property trustee to act on your
behalf.
LIQUIDATION DISTRIBUTION UPON DISSOLUTION
Each trust will automatically terminate upon expiration of its term or the
redemption of all of the preferred securities of the trust. In addition, we will
terminate the trust on the first to occur of:
- our bankruptcy, dissolution or liquidation,
- the distribution of a like amount of corresponding junior subordinated
debentures to the holders of its preferred securities and common securities,
- the redemption of all of the preferred securities, and
- the entry of an order for the dissolution of the trust by a court of competent
jurisdiction.
If an early dissolution occurs as described in the clauses above, the trustees
will liquidate the trust as expeditiously as the trustees determine to be
possible by distributing, after satisfaction of liabilities to creditors of the
trust as provided by applicable law, to the holders of the preferred securities
and common securities a like amount of corresponding junior subordinated
debentures. If the property trustee determines that this distribution is not
practical, you will be entitled to receive out of the assets of the trust
available for distribution, after satisfaction of liabilities to creditors of
the trust as provided by applicable law, an amount equal to the aggregate of the
liquidation amount plus accrued and unpaid distributions to the date of payment.
We refer to this liquidation amount in this prospectus as the "liquidation
distribution." If the trust can make the liquidation distribution only in part
because it has insufficient assets available to pay the full aggregate
liquidation distribution, then it will pay the amounts on a proportionate basis.
We, as the holder of the common securities, will be entitled to receive
distributions upon any liquidation proportionately with you, and the other
holders of the preferred securities, except that if an event exists that
constitutes a debenture event of default, the preferred securities will have a
priority over the common securities. A supplemental indenture may provide that
if an early dissolution occurs as described in the third clause above, the
44
corresponding junior subordinated debentures may be subject to optional
redemption in whole, but not in part.
EVENTS OF DEFAULT; NOTICE
Under the terms of the form of trust agreement, each of the following
constitutes an event of default for a series of preferred securities:
- the occurrence of a debenture event of default under the junior subordinated
indenture (see "Description of Junior Subordinated Debentures -- Debenture
Events of Default"),
- default by the property trustee in the payment of any distribution when it
becomes due and payable, and continuation of that default for a period of 30
days,
- default by the property trustee in the payment of any redemption price of the
preferred securities or common securities when it becomes due and payable,
- default in the performance, or breach, in any material respect, of any
covenant or warranty of the trustees in the trust agreement, other than a
covenant or warranty a default in the performance of which or the breach of
which is dealt with in the second and third clauses above, and continuation of
the default or breach for a period of 60 days after there has been given to
the defaulting trustee or trustees by the holders of at least 10% in aggregate
liquidation amount of the outstanding preferred securities, a written notice
specifying the default or breach and requiring it to be remedied and stating
that the notice is a notice of default under such trust agreement, or
- the bankruptcy or insolvency of the property trustee and our failure to
appoint a successor property trustee within 60 days of that event.
Within five business days after the occurrence of any event of default actually
known to the property trustee, the property trustee will transmit notice of the
event of default to you, the administrative trustees and us, as depositor,
unless the event of default has been cured or waived. We, as depositor, and the
administrative trustees are required to file annually with the property trustee
a certificate as to whether or not we are and they are in compliance with all
the conditions and covenants applicable to them and to us under the trust
agreement.
If a debenture event of default then exists, the preferred securities will have
a preference over the common securities upon termination of the trust. See
"-- Liquidation Distribution Upon Dissolution."
The existence of an event of default does not entitle you to accelerate the
maturity.
REMOVAL OF TRUSTEES
Unless a debenture event of default then exists, the holder of the common
securities may remove any trustee. If a debenture event of default then exists
the holders of a majority in liquidation amount of the outstanding preferred
securities may remove the property trustee and the Delaware trustee. In no event
will you have the right to vote to appoint, remove or replace the administrative
trustees. These voting rights are vested exclusively in us as the holder of the
common securities. No resignation or removal of a trustee and no appointment of
a successor trustee will be effective until the acceptance of appointment by the
successor trustee in accordance with the provisions of the trust agreement.
CO-TRUSTEES AND SEPARATE PROPERTY TRUSTEE
Unless an event of default then exists, for the purpose of meeting the legal
requirements of the Trust Indenture Act or of any jurisdiction in which any part
of the trust property may be located, we, as the holder of the common
securities, and the administrative trustees will have power to appoint one or
more persons approved by the property trustee either to act as a co-trustee,
jointly with the property trustee, of all or any part of the trust property, or,
to the extent required by law, to act as separate
45
trustee. These persons will have the powers provided in the instrument of
appointment, and we may vest in that person or persons any property, title,
right or power deemed necessary or desirable, subject to the provisions of the
trust agreement. If a debenture event of default exists, the property trustee
alone will have power to make that appointment.
MERGER OR CONSOLIDATION OF TRUSTEES
Any corporation into which the property trustee, the Delaware trustee or any
administrative trustee that is not a natural person may be merged or converted
or with which it may be consolidated, or any corporation resulting from any
merger, conversion or consolidation to which the trustee is a party, or any
corporation succeeding to all or substantially all the corporate trust business
of the trustee, will be the successor of such trustee under the trust
agreements, provided that the corporation is otherwise qualified and eligible.
MERGERS, CONSOLIDATIONS, AMALGAMATIONS OR REPLACEMENTS OF THE TRUSTS
A trust may not merge with or into, consolidate, amalgamate, or be replaced by,
or convey, transfer or lease its properties and assets substantially as an
entirety to any corporation or other body, except as described below.
A trust may, at our request, with the consent of the administrative trustees and
without your consent, merge with or into, consolidate, amalgamate, or be
replaced by a trust organized under the laws of any state. However, the
following conditions must be satisfied:
- the successor entity must either:
-- expressly assume all of the obligations of the trust relating to the
preferred securities, or
-- substitute for the preferred securities other securities having
substantially the same terms and the same ranking as the preferred
securities,
- we must expressly appoint a trustee of the successor entity possessing the
same powers and duties as the property trustee as the holder of the
corresponding junior subordinated debentures,
- the successor securities must be listed, or any successor securities must be
listed upon notification of issuance, on any national securities exchange or
other organization on which the preferred securities are then listed,
- the merger, consolidation, amalgamation or replacement must not cause the
preferred securities, including any successor securities, to be downgraded by
any nationally recognized statistical rating organization,
- the merger, consolidation, amalgamation or replacement must not adversely
affect the rights, preferences and privileges of holders of the preferred
securities, including any successor securities, in any material respect,
- the successor entity must have a purpose identical to that of the trust,
- prior to the merger, consolidation, amalgamation, replacement, conveyance,
transfer or lease we must have received an opinion of counsel to the trust to
the effect that:
-- the merger, consolidation, amalgamation or replacement does not
adversely affect the rights, preferences and privileges of holders of
the preferred securities, including any successor securities, in any
material respect, and
-- following the merger, consolidation, amalgamation or replacement
neither the trust nor the successor entity will be required to register
as an investment company under the Investment Company Act, and
46
- we or any permitted successor or assignee must own all of the common
securities of the successor entity and guarantee the obligations of such
successor entity under the successor securities at least to the extent
provided by the guarantee.
However, a trust must not, except with the consent of holders of 100% in
liquidation amount of the preferred securities, consolidate, amalgamate, merge
with or into, or be replaced by or convey, transfer or lease its properties and
assets substantially as an entirety to any other entity or permit any other
entity to consolidate, amalgamate, merge with or into, or replace it if it would
cause the trust or the successor entity to be classified as other than a grantor
trust for federal income tax purposes.
VOTING RIGHTS; AMENDMENT OF TRUST AGREEMENT
Except as provided below and under "Description of Guarantee -- Amendments and
Assignment" and as otherwise required by law and the applicable trust agreement,
you will have no voting rights.
We and the trustees may amend a trust agreement without your consent:
- to cure any ambiguity, correct or supplement any provisions in the trust
agreement which may be inconsistent with any other provision, or to make any
other provisions with respect to matters or questions arising under the trust
agreement, which are not inconsistent with the other provisions of the trust
agreement, or
- to modify, eliminate or add to any provisions of the trust agreement to the
extent necessary to ensure that the trust will be classified for federal
income tax purposes as a grantor trust at all times that any preferred
securities and common securities are outstanding, or to ensure that the trust
will not be required to register as an investment company under the Investment
Company Act.
However, in the case of the first clause above, the action may not adversely
affect in any material respect the interests of the holders of the preferred
securities or our interests, as the holder of the common securities. Any
amendments of the trust agreement will become effective when notice is given to
you and us.
We and the trustees may also amend a trust agreement with:
- the consent of holders representing not less than a majority, based upon
liquidation amounts, of the outstanding preferred securities and common
securities, and
- receipt by the trustees of an opinion of counsel to the effect that the
amendment or the exercise of any power granted to the trustees under the
amendment will not affect the status of the trust as a grantor trust for
federal income tax purposes or its exemption from the status of an "investment
company" under the Investment Company Act.
Without both your and our consent a trust agreement may not be amended to:
- change the amount or timing of any distribution on the preferred securities
and common securities or otherwise adversely affect the amount of any
distribution of the preferred securities and common securities as of a
specified date, or
- restrict your or our right to institute suit for the enforcement of any
payment on or after that date.
So long as any corresponding junior subordinated debentures are held by the
property trustee, the trustees may not:
- direct the time, method and place of conducting any proceeding for any remedy
available to the debenture trustee, or for executing any trust or power
conferred on the debenture trustee with respect to the corresponding junior
subordinated debentures,
47
- waive any past default that is waiveable under specified sections of the
junior subordinated indenture,
- exercise any right to rescind or annul a declaration that the principal of all
the junior subordinated debentures is due and payable, or
- consent to any amendment, modification or termination of the junior
subordinated indenture or the corresponding junior subordinated debentures,
where that consent is required,
without, in each case, obtaining the prior approval of the holders of a majority
in aggregate liquidation amount of all outstanding preferred securities.
However, where a consent under the junior subordinated indenture would require
the consent of each holder of corresponding junior subordinated debentures
affected by the consent, no consent may be given by the property trustee without
the prior consent of each holder of the corresponding preferred securities.
The trustees may not revoke any action previously authorized or approved by a
vote of the preferred securities except by subsequent vote of the holders of the
preferred securities. The property trustee will notify you of any notice of
default with respect to the corresponding junior subordinated debentures. In
addition to obtaining the approval of the holders of the preferred securities
prior to taking any of these actions, the trustees must obtain an opinion of
counsel experienced in these matters to the effect that the trust will not be
classified as a corporation or partnership for United States federal income tax
purposes on account of the action.
Any required approval of holders of preferred securities may be given at a
meeting of holders of preferred securities convened for that purpose or through
a written consent. The property trustee will cause a notice of any meeting at
which you are entitled to vote, or of any matter upon which action by written
consent is to be taken, to be given to each holder of record of preferred
securities in the manner set forth in the trust agreement.
Your vote or consent is not required for a trust to redeem and cancel the
preferred securities under the applicable trust agreement.
Any preferred securities that are owned by us, the trustees or any of our
affiliates or any affiliate of the trustees, will, for purposes of a vote or
consent, be treated as if they were not outstanding.
GLOBAL PREFERRED SECURITIES
We may issue a series of preferred securities in the form of one or more global
preferred securities. We will identify the depositary which will hold the global
preferred security in the applicable prospectus supplement. Unless we otherwise
indicate in the applicable prospectus supplement, the depositary will be DTC. We
will issue global preferred securities only in fully registered form and in
either temporary or permanent form. Unless it is exchanged for individual
preferred securities, a global preferred security may not be transferred except:
- by the depositary to its nominee,
- by a nominee of the depositary to the depositary or another nominee, or
- by the depositary or any nominee to a successor depositary, or any nominee of
the successor.
We will describe the specific terms of the depositary arrangement in the
applicable prospectus supplement. We expect that the following provisions will
generally apply to these depositary arrangements.
BENEFICIAL INTERESTS IN A GLOBAL PREFERRED SECURITY
If we issue a global preferred security, the depositary for the global preferred
security or its nominee will credit on its book-entry registration and transfer
system the aggregate liquidation amounts of the individual preferred securities
represented by the global preferred securities to the accounts of
48
participants. The accounts will be designated by the dealers, underwriters or
agents for the preferred securities, or by us if the preferred securities are
offered and sold directly by us. Ownership of beneficial interests in a global
preferred security will be limited to participants or persons that may hold
interests through participants. Ownership and transfers of beneficial interests
in the global preferred security will be shown on, and effected only through,
records maintained by the applicable depositary or its nominee, for interests of
participants, and the records of participants, for interests of persons who hold
through participants. The laws of some states require that you take physical
delivery of the securities in definitive form. These limits and laws may impair
your ability to transfer beneficial interests in a global preferred security.
So long as the depositary or its nominee is the registered owner of the global
preferred security, the depositary or nominee will be considered the sole owner
or holder of the preferred securities represented by the global preferred
security for all purposes under the trust agreement. Except as provided below,
you:
- will not be entitled to have any of the individual preferred securities
represented by the global preferred security registered in your name,
- will not receive or be entitled to receive physical delivery of any preferred
securities in definitive form, and
- will not be considered the owner or holder of the preferred security under the
trust agreement.
PAYMENTS OF DISTRIBUTIONS
We will pay distributions on global preferred securities to the depositary that
is the registered holder of the global security, or its nominee. The depositary
for the preferred securities will be solely responsible and liable for all
payments made on account of your beneficial ownership interests in the global
preferred security and for maintaining, supervising and reviewing any records
relating to your beneficial ownership interests.
We expect that the depositary or its nominee, upon receipt of any payment of
liquidation amount, premium or distributions, immediately will credit
participants' accounts with amounts in proportion to their respective beneficial
interests in the aggregate liquidation amount of the global preferred security
as shown on the records of the depositary or its nominee. We also expect that
payments by participants to owners of beneficial interests in the global
preferred security held through those participants will be governed by standing
instructions and customary practices, as is now the case with securities held
for the accounts of customers in bearer form or registered in "street name."
These payments will be the responsibility of those participants.
ISSUANCE OF INDIVIDUAL PREFERRED SECURITIES
Unless we state otherwise in the applicable prospectus supplement, if a
depositary for a series of preferred securities is at any time unwilling, unable
or ineligible to continue as a depositary and we do not appoint a successor
depositary within 90 days, we will issue individual preferred securities in
exchange for the global preferred security. In addition, we may at any time and
in our sole discretion, subject to any limitations described in the prospectus
supplement relating to the preferred securities, determine not to have any
preferred securities represented by one or more global preferred securities. If
that occurs, we will issue individual preferred securities in exchange for the
global preferred security.
Further, we may specify that you may, on terms acceptable to us, the property
trustee and the depositary for the global preferred security, receive individual
preferred securities in exchange for your beneficial interests in a global
preferred security, subject to any limitations described in the prospectus
supplement relating to the preferred securities. In that instance, you will be
entitled to physical delivery of individual preferred securities equal in
liquidation amount to that beneficial interest and to have the preferred
securities registered in its name. Unless we otherwise specify,
49
those individual preferred securities will be issued in denominations of $25 and
integral multiples of $25.
PAYMENT AND PAYING AGENCY
The trust will make payments on the preferred securities to DTC, which will
credit the relevant accounts at DTC on the applicable distribution dates.
However, if any preferred securities are not held by DTC, the trust will make
the payments by check mailed to the address of the holder entitled to the
payment as shown on the register. Unless we state otherwise in the applicable
prospectus supplement, the paying agent will initially be the property trustee,
together with any co-paying agent chosen by the property trustee and acceptable
to the administrative trustees and us. The paying agent may resign as paying
agent upon 30 days' written notice to the administrative trustees, property
trustees and us. If the property trustee ceases to be the paying agent, the
administrative trustees will appoint a successor to act as paying agent. The
successor must be a bank or trust company acceptable to the administrative
trustees and us.
REGISTRAR AND TRANSFER AGENT
Unless we state otherwise in the applicable prospectus supplement, the property
trustee will act as registrar and transfer agent for the preferred securities.
The trust will register transfers of preferred securities without charge, but
upon your payment of any tax or other governmental charges that may be imposed
in connection with any transfer or exchange. The trust will not be required to
register the transfer of its preferred securities after the preferred securities
have been called for redemption.
INFORMATION CONCERNING THE PROPERTY TRUSTEE
The property trustee, unless an event of default then exists, will be required
to perform only those duties that are specifically set forth in the applicable
trust agreement. After an event of default, the property trustee must exercise
the same degree of care and skill as a prudent person would exercise or use in
the conduct of his or her own affairs. However, the property trustee is under no
obligation to exercise any of the powers vested in it by the trust agreement at
your request unless you offer reasonable indemnity against the costs, expenses
and liabilities that it might incur. If no event of default then exists and the
property trustee is required to decide between alternative causes of action,
construe ambiguous provisions in a trust agreement or is unsure of the
application of any provision of a trust agreement, and the matter is not one on
which holders are entitled under the trust agreement to vote, then the property
trustee will take such action as is directed by us. If it is not so directed,
the property trustee will take such action as it deems advisable and in the best
interests of the holders of the preferred securities and the holder of the
common securities and will have no liability except for its own bad faith,
negligence or willful misconduct.
MISCELLANEOUS
The trust agreements authorize and direct the administrative trustees to operate
the related trusts in such a way that the trust will not be deemed to be an
investment company required to be registered under the Investment Company Act or
taxed as a corporation for federal income tax purposes and so that the
corresponding junior subordinated debentures will be treated as our indebtedness
for United States federal income tax purposes. We and the administrative
trustees are authorized to take any action, not inconsistent with applicable
law, the certificate of trust of the trust or the trust agreement, that we and
the administrative trustees determine in our discretion to be necessary or
desirable for these purposes, as long as the action does not materially
adversely affect the interests of the holders of the preferred securities.
You have no preemptive or similar rights as a holder of preferred securities. No
trust may borrow money or issue debt or mortgage or pledge any of its assets.
50
DESCRIPTION OF GUARANTEE
At the same time as the issuance by a trust of its preferred securities, we will
execute and deliver a guarantee for your benefit, as a holder of the preferred
securities. The Wilmington Trust Company will act as indenture trustee under the
guarantee for the purposes of compliance with the Trust Indenture Act. The
guarantee will be qualified as an indenture under the Trust Indenture Act.
The following description of the terms of the guarantee is a summary. It
summarizes only those portions of the guarantee which we believe will be most
important to your decision to invest in the preferred securities. You should
keep in mind, however, that it is the guarantee, and not this summary, which
defines your rights. There may be other provisions in the guarantee which are
also important to you. You should read the guarantee itself for a full
description of its terms. The guarantee is filed as an exhibit to the
Registration Statement that includes this prospectus. See "Where You Can Find
More Information" for information on how to obtain a copy of the guarantee. When
we refer in this summary to preferred securities, we mean the preferred
securities issued by a trust to which the guarantee relates.
GENERAL TERMS OF THE GUARANTEE
We will irrevocably agree to pay in full on a subordinated basis, to the extent
described below, the guarantee payments, as defined below, to you, as and when
due, regardless of any defense, right of set-off or counterclaim that the trust
may have or assert other than the defense of payment.
The following payments, which we refer to in this prospectus as the "guarantee
payments," to the extent not paid by or on behalf of the related trust, will be
subject to the guarantee:
- any accrued and unpaid distributions required to be paid to you on the related
preferred securities, to the extent that the trust has funds available for the
payments,
- the redemption price for any preferred securities called for redemption, to
the extent that the trust has funds available for the payments, or
- upon a voluntary or involuntary dissolution, winding up or liquidation of the
trust, unless the corresponding junior subordinated debentures are distributed
to you, the lesser of:
-- the liquidation distribution, and
-- the amount of assets of the trust remaining available for distribution to
you.
Our obligation to make a guarantee payment may be satisfied by us directly
paying to you the required amounts or by causing the trust to pay the amounts to
you.
The guarantee will be an irrevocable guarantee on a subordinated basis of the
related trust obligations under the preferred securities, but will apply only to
the extent that the related trust has funds sufficient to make the payments. It
is not a guarantee of collection.
If we do not make interest payments on the corresponding junior subordinated
debentures held by the trust, we expect that the trust will not pay
distributions on the preferred securities and will not have funds legally
available for those payments. The guarantee will rank subordinate and junior in
right of payment to all senior debt. See "-- Status of the Guarantee."
As a non-operating holding company, most of our operating assets and the assets
of our consolidated subsidiaries are owned by our subsidiaries. We rely
primarily on dividends from our subsidiaries to meet our obligations for payment
of principal and interest on our outstanding debt obligations and corporate
expenses. Accordingly, our obligations under the guarantee will be effectively
subordinated to all existing and future liabilities of our subsidiaries. You
should rely only on our assets for payments we owe. The payment of dividends by
our insurance company subsidiaries is limited under the insurance holding
company laws in which those subsidiaries are domiciled. See "The Hartford
Financial Services Group, Inc."
51
Unless we state otherwise in the applicable prospectus supplement, the guarantee
does not limit the amount of secured or unsecured debt that we may incur. We
expect from time to time to incur additional senior debt.
We have, through the guarantee, the trust agreement, the junior subordinated
debentures, the junior subordinated indenture and the expense agreement, taken
together, fully, irrevocably and unconditionally guaranteed all of the
obligations of the trust under the preferred securities. No single document
standing alone or operating in conjunction with fewer than all of the other
documents constitutes the guarantee. It is only the combined operation of these
documents that has the effect of providing a full, irrevocable and unconditional
guarantee of the obligations of the trust under the preferred securities. See
"Relationship Among the Preferred Securities, the Corresponding Junior
Subordinated Debentures and the Guarantees."
STATUS OF THE GUARANTEE
The guarantee will constitute an unsecured obligation of The Hartford Financial
Services Group, Inc. and will rank subordinate and junior in right of payment to
all its senior debt.
Unless we state otherwise in the applicable prospectus supplement, the guarantee
of a series of preferred securities will rank equally with the guarantees
relating to all other series of preferred securities that we may issue. The
guarantee will constitute a guarantee of payment and not of collection, which
means that the guaranteed party may institute a legal proceeding directly
against us to enforce its rights under the guarantee without first instituting a
legal proceeding against any other person or entity. The property trustee of the
related trust will hold the guarantee for your benefit. The guarantee will not
be discharged except by payment of the guarantee payments in full to the extent
not paid by the trust or upon distribution of the corresponding junior
subordinated debentures to you.
AMENDMENTS AND ASSIGNMENT
We may not amend the guarantee without the prior approval of the holders of not
less than a majority of the aggregate liquidation amount of outstanding
preferred securities, except for any changes which do not materially adversely
affect the rights of the holders of the preferred securities, in which case no
vote will be required. The manner of obtaining any approval will be as set forth
under "Description of the Preferred Securities -- Voting Rights; Amendment of
Trust Agreement."
All guarantees and agreements contained in the guarantee will bind our
successors, assigns, receivers, trustees and representatives and will inure to
the benefit of the holders of the related preferred securities then outstanding.
EVENTS OF DEFAULT
An event of default under the guarantee will occur when we fail to perform any
of our payment or other obligations under the guarantee. The holders of not less
than a majority in aggregate liquidation amount of the related preferred
securities have the right to direct the time, method and place of conducting any
proceeding for any remedy available to the guarantee trustee under the guarantee
or to direct the exercise of any trust or power conferred upon the guarantee
trustee under the guarantee.
You may institute a legal proceeding directly against us to enforce your rights
under the guarantee without first instituting a legal proceeding against the
trust, the guarantee trustee or any other person or entity.
We, as guarantor, are required to file annually with the guarantee trustee a
certificate as to whether or not we are in compliance with all the conditions
and covenants applicable to us under the guarantee.
52
INFORMATION CONCERNING THE GUARANTEE TRUSTEE
The guarantee trustee, unless a default by us in the performance of the
guarantee then exists, is required to perform only those duties that are
specifically set forth in the guarantee. After a default under the guarantee,
the guarantee trustee must exercise the same degree of care and skill as a
prudent person would exercise or use in the conduct of his or her own affairs.
However, the guarantee trustee is under no obligation to exercise any of the
powers vested in it by the guarantee at your request unless you offer reasonable
indemnity against the costs, expenses and liabilities that it might incur.
TERMINATION OF THE GUARANTEE
The guarantee will terminate and be of no further force and effect:
- upon full payment of the redemption price of the related preferred securities,
- upon full payment of the amounts payable upon liquidation of the related
trust, or
- upon distribution of corresponding junior subordinated debentures to the
holders of the preferred securities.
The guarantee will continue to be effective or will be reinstated if at any time
you must restore payment of any sums paid under the preferred securities or the
guarantee.
GOVERNING LAW
The guarantee will be governed by and construed in accordance with the laws of
the State of New York.
THE EXPENSE AGREEMENT
Under an expense agreement entered into by us, we will irrevocably and
unconditionally guarantee to each person or entity to whom a trust becomes
indebted or liable, the full payment of any costs, expenses or liabilities of
the trust, other than obligations of the trust to pay to you the amounts due to
you under the terms of the preferred securities.
DESCRIPTION OF CORRESPONDING JUNIOR SUBORDINATED DEBENTURES
The corresponding junior subordinated debentures are to be issued in one or more
series of junior subordinated debentures under the junior subordinated indenture
with terms corresponding to the terms of the related preferred securities. See
"Description of Junior Subordinated Debentures."
The following description of the terms of the corresponding junior subordinated
debentures and the junior subordinated indenture is a summary. It summarizes
only those portions of the junior subordinated indenture which we believe will
be most important to your decision to invest in the preferred securities. You
should keep in mind, however, that it is the junior subordinated indenture, and
not this summary, which defines your rights. There may be other provisions in
the junior subordinated indenture which are also important to you. You should
read the junior subordinated indenture itself for a full description of its
terms. The junior subordinated indenture is filed as an exhibit to the
Registration Statement that includes this prospectus. See "Where You Can Find
More Information" for information on how to obtain a copy of the junior
subordinated indenture.
GENERAL TERMS OF THE CORRESPONDING JUNIOR SUBORDINATED DEBENTURES
At the same time a trust issues preferred securities, the trust will invest the
proceeds from the sale and the consideration paid by us for the common
securities in a series of corresponding junior subordinated debentures issued by
us to the trust. Each series of corresponding junior subordinated debentures
will be in the principal amount equal to the aggregate stated liquidation amount
of the
53
related preferred securities plus our investment in the common securities and,
unless we state otherwise in the applicable prospectus supplement, will rank
equally with all other series of corresponding junior subordinated debentures.
The corresponding junior subordinated debentures will be unsecured and
subordinate and junior in right of payment to the extent and in the manner set
forth in the junior subordinated indenture to all our senior debt. See
"Description of Junior Subordinated Debentures -- Subordination" and the
prospectus supplement relating to any offering of related preferred securities.
OPTIONAL REDEMPTION
Unless we state otherwise in the applicable prospectus supplement, we may, at
our option, redeem the corresponding junior subordinated debentures on any
interest payment date, in whole or in part. Unless we state otherwise in the
applicable prospectus supplement, the redemption price for any corresponding
junior subordinated debentures will be equal to any accrued and unpaid interest
to the date fixed for redemption, plus the greater of:
- the principal amount of the debentures, and
- an amount equal to:
-- for junior subordinated debentures bearing interest at a fixed rate,
the discounted remaining fixed amount payments. See "Description of
Junior Subordinated Debentures -- Redemption."
-- for junior subordinated debentures bearing interest determined by
reference to a floating rate, the discounted swap equivalent payments.
See "Description of Junior Subordinated Debentures -- Redemption."
If a tax event or an investment company event exists, we may, at our option,
redeem the corresponding junior subordinated debentures on any interest payment
date falling within 90 days of the occurrence of the tax event or investment
company event, in whole but not in part, subject to the provisions of the junior
subordinated indenture. The redemption price for any corresponding junior
subordinated debentures will be equal to 100% of the principal amount of the
corresponding junior subordinated debentures then outstanding plus accrued and
unpaid interest to the date fixed for redemption. See "Description of Junior
Subordinated Debentures -- Redemption."
For so long as the applicable trust is the holder of all the outstanding series
of corresponding junior subordinated debentures, the trust will use the proceeds
of any redemption to redeem the corresponding preferred securities. We may not
redeem a series of corresponding junior subordinated debentures in part unless
all accrued and unpaid interest has been paid in full on all outstanding
corresponding junior subordinated debentures of the series for all interest
periods terminating on or prior to the redemption date.
COVENANTS OF THE HARTFORD FINANCIAL SERVICES GROUP, INC.
We will covenant in the junior subordinated indenture for each series of
corresponding junior subordinated debentures that we will pay additional sums to
the trust, if:
- the trust that has issued the corresponding series of preferred securities and
common securities is the holder of all of the corresponding junior
subordinated debentures,
- a tax event exists, and
- we have not redeemed the corresponding junior subordinated debentures or
terminated the trust.
We will also covenant, for each series of corresponding junior subordinated
debentures, that we and our subsidiaries will not:
54
- declare or pay any dividends or distributions on, or redeem, purchase,
acquire, or make a liquidation payment on any of our capital stock, or
- make any payment of principal of, interest or premium, if any, on or repay or
repurchase or redeem any debt securities, including other corresponding junior
subordinated debentures, that rank equally with or junior in interest to the
corresponding junior subordinated debentures or make any related guarantee
payments,
other than:
- dividends or distributions in our common stock,
- redemptions or purchases of any rights pursuant to our rights plan, or any
successor to our rights plan, and the declaration of a dividend of these
rights in the future, and
- payments under any guarantee of preferred securities,
if at that time:
- there has occurred any event of which we have actual knowledge that with the
giving of notice or the lapse of time, or both, would constitute an "event of
default" under the junior subordinated indenture for that series of
corresponding junior subordinated debentures which we have not taken
reasonable steps to cure,
- we are in default on our payment of any obligations under the related
guarantee, or
- we have given notice of our selection of an extension period as provided in
the junior subordinated indenture for that series of corresponding junior
subordinated debentures and have not rescinded that notice, or the extension
period, or any extension, is continuing.
We will also covenant, for each series of corresponding junior subordinated
debentures:
- to maintain, by ourselves or our permitted successors, directly or indirectly,
100% ownership of the common securities of the trust to which corresponding
junior subordinated debentures have been issued,
- not to voluntarily terminate, wind-up or liquidate any trust, except in
connection with a distribution of corresponding junior subordinated debentures
to you in liquidation of the trust, or in connection with mergers,
consolidations or amalgamations permitted by the related trust agreement, and
- to use our reasonable efforts, consistent with the terms and provisions of the
related trust agreement, to cause the trust to remain a statutory trust and
not to be classified as an association taxable as a corporation for United
States federal income tax purposes.
RELATIONSHIP AMONG THE PREFERRED SECURITIES, THE CORRESPONDING
JUNIOR SUBORDINATED DEBENTURES AND THE GUARANTEES
As long as payments of interest and other payments are made when due on each
series of corresponding junior subordinated debentures, these payments will be
sufficient to cover distributions and other payments due on the related
preferred securities, primarily because:
- the aggregate principal amount of each series of corresponding junior
subordinated debentures will be equal to the sum of the aggregate stated
liquidation amount of the corresponding preferred securities and corresponding
common securities,
- the interest rate and interest and other payment dates on each series of
corresponding junior subordinated debentures will match the distribution rate
and distribution and other payment dates for the corresponding preferred
securities,
- we will pay for all and any costs, expenses and liabilities of the trust
except the obligations of the trust to holders of its preferred securities
under the preferred securities, and
55
- each trust agreement further provides that the trust will not engage in any
activity that is not consistent with the limited purposes of the trust.
We will irrevocably guarantee payments of distributions and other amounts due on
the preferred securities, to the extent the trust has funds available for the
payment of such distributions, to the extent set forth under "Description of
Guarantee."
Taken together, our obligations under each series of junior subordinated
debentures, the junior subordinated indenture, the related trust agreement, the
related expense agreement and the related guarantee provide a full, irrevocable
and unconditional guarantee of payments of distributions and other amounts due
on the related series of preferred securities. No single document standing alone
or operating in conjunction with fewer than all of the other documents
constitutes the guarantee. It is only the combined operation of these documents
that has the effect of providing a full, irrevocable and unconditional guarantee
of the obligations of the trust under the preferred securities. If and to the
extent that we do not make payments on any series of corresponding junior
subordinated debentures, the trust will not pay distributions or other amounts
due on its preferred securities.
Notwithstanding anything to the contrary in the junior subordinated indenture,
we have the right to set-off any payment we are otherwise required to make under
the indenture with and to the extent we have made or are making a payment under
the related guarantee.
You may institute a legal proceeding directly against us to enforce your rights
under the related guarantee without first instituting a legal proceeding against
the guarantee trustee, the related trust or any other person or entity.
The preferred securities of each trust evidence your rights to the benefits of
the trust. Each trust exists for the sole purpose of issuing its preferred
securities and common securities, investing the proceeds from the sale of such
securities in corresponding junior subordinated debentures and related purposes.
A principal difference between your rights as a holder of a preferred security
and the rights of a holder of a corresponding junior subordinated debenture is
that a holder of a corresponding junior subordinated debenture will accrue, and,
subject to the permissible extension of the interest period, is entitled to
receive, interest on the principal amount of corresponding junior subordinated
debentures held, while you are only entitled to receive distributions if and to
the extent the trust has funds available for the payment of those distributions.
Upon any voluntary or involuntary termination, winding-up or liquidation of any
trust involving the liquidation of the corresponding junior subordinated
debentures, you will be entitled to receive, out of assets held by the trust,
the liquidation distribution in cash. See "Description of Preferred
Securities -- Liquidation Distribution Upon Termination."
Upon any voluntary or involuntary liquidation or bankruptcy of The Hartford
Financial Services Group, Inc., the property trustee, as holder of the
corresponding junior subordinated debentures, would be a subordinated creditor.
In this case, the property trustee would be subordinated in right of payment to
all senior debt, but entitled to receive payment in full of principal and
interest, before any of our stockholders receive payments or distributions.
Since we are the guarantor under each guarantee and have agreed to pay for all
costs, expenses and liabilities of each trust, your position as a holder of the
preferred securities and the position of a holder of the corresponding junior
subordinated debentures relative to other creditors and to our stockholders in
the event of liquidation or bankruptcy of our company would be substantially the
same.
A default or event of default under any senior debt would not constitute a
default or event of default under the junior subordinated indenture. However, in
the event of payment defaults under, or acceleration of, senior debt, the
subordination provisions of the junior subordinated indenture provide that we
may not make payments on the corresponding junior subordinated debentures until
the senior debt has been paid in full or any payment default under the senior
debt has been cured or
56
waived. Our failure to make required payments on any series of corresponding
junior subordinated debentures would constitute an event of default under the
junior subordinated indenture.
PLAN OF DISTRIBUTION
We may sell the securities offered by this prospectus through agents,
underwriters or dealers, or directly to purchasers.
Agents whom we designate may solicit offers to purchase the securities.
- We will name any agent involved in offering or selling securities, and
disclose any commissions that we will pay to the agent, in the applicable
prospectus supplement.
- Unless we indicate otherwise in the applicable prospectus supplement, our
agents will act on a best efforts basis for the period of their appointment.
- Our agents may be deemed to be underwriters under the Securities Act of 1933,
as amended, of any of the securities that they offer or sell.
We may use an underwriter or underwriters in the offer or sale of our
securities.
- If we use an underwriter or underwriters, we will execute an underwriting
agreement with the underwriter or underwriters at the time that we reach an
agreement for the sale of the securities.
- We will include the names of the specific managing underwriter or
underwriters, as well as the names of any other underwriters, and the terms of
the transactions, including the compensation the underwriters and dealers will
receive, in the applicable prospectus supplement.
- The underwriters will use the applicable prospectus supplement to sell the
securities.
We may use a dealer to sell the securities.
- If we use a dealer, we, as principal, will sell the securities to the dealer.
- The dealer will then sell the securities to the public at varying prices that
the dealer will determine at the time it sells our securities.
- We will include the name of the dealer and the terms of our transactions with
the dealer in the applicable prospectus supplement.
We may solicit directly offers to purchase the securities, and we may directly
sell the securities to institutional or other investors. We will describe the
terms of our direct sales in our prospectus supplement.
We may also offer and sell securities, if so indicated in the applicable
prospectus supplement, in connection with a remarketing upon their purchase, in
accordance with a redemption or repayment pursuant to their terms, or otherwise,
by one or more firms referred to as remarketing firms, acting as principals for
their own accounts or as our agents. Any remarketing firm will be identified and
the terms of its agreement, if any, with us, and its compensation will be
described in the applicable prospectus supplement. Remarketing firms may be
deemed to be underwriters under the Securities Act in connection with the
securities they remarket.
We may indemnify agents, underwriters, dealers and remarketing firms against
certain liabilities, including liabilities under the Securities Act. Our agents,
underwriters, dealers and remarketing firms, or their affiliates, may be
customers of, engage in transactions with or perform services for us, in the
ordinary course of business.
We may authorize our agents and underwriters to solicit offers by certain
institutions to purchase the securities at the public offering price under
delayed delivery contracts.
57
- If we use delayed delivery contracts, we will disclose that we are using them
in the prospectus supplement and will tell you when we will demand payment and
delivery of the securities under the delayed delivery contracts.
- These delayed delivery contracts will be subject only to the conditions that
we describe in the prospectus supplement.
- We will describe in the applicable prospectus supplement the commission that
underwriters and agents soliciting purchases of the securities under delayed
contracts will be entitled to receive.
LEGAL OPINIONS
Unless we state otherwise in the applicable prospectus supplement the validity
of any securities offered by this prospectus will be passed upon for us by
Debevoise & Plimpton, New York, New York, and for the trusts by Richards, Layton
& Finger, P.A., special Delaware counsel to the trusts, and for any underwriters
or agents by counsel that we will name in the applicable prospectus supplement.
EXPERTS
The consolidated financial statements and the related financial statement
schedules incorporated in this prospectus by reference from the Company's Annual
Report on Form 10-K for the year ended December 31, 2002 have been audited by
Deloitte & Touche LLP, independent auditors, as stated in their report, which is
incorporated herein by reference (which report expresses an unqualified opinion
and includes an explanatory paragraph relating to the Company's changes in its
method of accounting for (a) goodwill and indefinite-lived intangible assets in
2002, (b) accounting for derivative instruments and hedging activities in 2001
and (c) the recognition of interest income and impairment on purchased retained
beneficial interests in securitized financial assets in 2001), and have been so
incorporated in reliance upon the report of such firm given upon their authority
as experts in accounting and auditing.
WHERE YOU CAN FIND MORE INFORMATION
This prospectus is part of a Registration Statement that we filed with the
Securities and Exchange Commission. The Registration Statement, including the
attached exhibits, contains additional relevant information about us. The rules
and regulations of the Securities and Exchange Commission allow us to omit some
of the information about The Hartford Financial Services Group, Inc. In
addition, we file reports, proxy statements, information statements and other
information with the Securities and Exchange Commission. This information may be
read and copied at the Public Reference Room of the Securities and Exchange
Commission at 450 Fifth Street, N.W., Judiciary Plaza, Washington, D.C. 20549.
Information regarding the operation of the Public Reference Room may be obtained
by calling the Securities and Exchange Commission at 1-800-SEC-0330. The
material may also be accessed electronically by means of the Securities and
Exchange Commission's home page on the Internet at http://www.sec.gov or through
our web site at http://www.thehartford.com.
Our common stock is listed on the New York Stock Exchange, Inc. You can also
inspect reports and other information concerning us at the office of the New
York Stock Exchange, Inc., 20 Broad Street, New York, New York 10005.
58
INCORPORATION BY REFERENCE
The rules of the Securities and Exchange Commission allow us to incorporate by
reference information into this prospectus. The information incorporated by
reference is considered to be a part of this prospectus, and information that we
file later with the Securities and Exchange Commission will automatically update
and supercede this information. This prospectus incorporates by reference the
documents listed below.
- Our Annual Report on Form 10-K for the year ended December 31, 2002,
- description of our common stock and the rights associated with our common
stock contained in our registration statement on Form 8-A, dated September 18,
1995 (as amended by the Form 8-A/ A filed on November 13, 1995),
- our current reports on Form 8-K filed on March 17, 2003 and March 25, 2003,
and
- all documents filed by us pursuant to Sections 13(a), 13(c), 14 and 15(d) of
the Exchange Act after the date of this prospectus.
We will provide without charge to each person, including any beneficial owner,
to whom a copy of this prospectus is delivered, upon written or oral request of
such person, a copy of any or all of the documents referred to above which have
been or may be incorporated by reference in this prospectus. You should direct
requests for those documents to The Hartford Financial Services Group, Inc.,
Hartford Plaza, Hartford, Connecticut 06115, Attention: Brian S. Becker, Senior
Vice President and Corporate Secretary (Telephone: 860-547-5000).
59
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
$250,000,000
[THE HARTFORD LOGO]
THE HARTFORD FINANCIAL SERVICES GROUP, INC.
FLOATING RATE SENIOR NOTES DUE MAY , 2006
------------------------------------------
PROSPECTUS SUPPLEMENT
MAY , 2003
------------------------------------------
Joint Book-Running Managers
BANC OF AMERICA SECURITIES LLC
WACHOVIA SECURITIES
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------