Summary
The Hartford Financial Services Group, Inc. (HIG) filed an 8-K on December 27, 2005, reporting material modifications to its incentive stock plans, effective December 21, 2005. These changes were made in anticipation of the Financial Accounting Standards Board's Statement No. 123 (revised 2004), Share-Based Payment, which becomes effective for the company on January 1, 2006. The primary objective of these modifications is to clarify the accounting treatment of equity-based awards, specifically addressing how these awards will be settled in the event of a "Change of Control." The updated plans now provide that, unless the Compensation and Personnel Committee determines otherwise, awards will be settled in shares. Previously, there were provisions for automatic or elective cash settlements under certain change of control scenarios.
Key Highlights
- 1The Hartford modified its 1995, Incentive, and 2005 Stock Plans, effective December 21, 2005.
- 2These modifications are in response to the upcoming adoption of FASB Statement No. 123 (revised 2004) - Share-Based Payment, effective January 1, 2006.
- 3The primary purpose is to eliminate ambiguity in the accounting treatment of equity-based awards.
- 4In the event of a 'Change of Control,' awards will generally be settled in shares, subject to committee discretion.
- 5The Committee retains discretion to opt for a cash settlement of stock options, restricted stock, and performance shares in a Change of Control scenario.
- 6Previously, change of control events could result in automatic or elective cash settlements.
- 7Details of the modified plans will be included in the company's Annual Report on Form 10-K for the year ending December 31, 2005.