-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: keymaster@town.hall.org Originator-Key-Asymmetric: MFkwCgYEVQgBAQICAgADSwAwSAJBALeWW4xDV4i7+b6+UyPn5RtObb1cJ7VkACDq pKb9/DClgTKIm08lCfoilvi9Wl4SODbR1+1waHhiGmeZO8OdgLUCAwEAAQ== MIC-Info: RSA-MD5,RSA, Qt/gXZs/J/lOFczeu5meHUHm0jqsU0lwIFvmwlOCRct7c7HIDYKX8325rrGB+Frz O2V2CnLeeQyJ8uoYDc5fuQ== 0000912057-94-000806.txt : 19940309 0000912057-94-000806.hdr.sgml : 19940309 ACCESSION NUMBER: 0000912057-94-000806 CONFORMED SUBMISSION TYPE: 10-K PUBLIC DOCUMENT COUNT: 18 CONFORMED PERIOD OF REPORT: 19931231 FILED AS OF DATE: 19940308 FILER: COMPANY DATA: COMPANY CONFORMED NAME: HONEYWELL INC CENTRAL INDEX KEY: 0000048305 STANDARD INDUSTRIAL CLASSIFICATION: 3822 IRS NUMBER: 410415010 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-K SEC ACT: 34 SEC FILE NUMBER: 001-00971 FILM NUMBER: 94514916 BUSINESS ADDRESS: STREET 1: HONEYWELL PLZ CITY: MINNEAPOLIS STATE: MN ZIP: 55408 BUSINESS PHONE: 6129511000 MAIL ADDRESS: STREET 1: PO BOX 524 CITY: MINEAPOLIS STATE: MN ZIP: 55440-0524 FORMER COMPANY: FORMER CONFORMED NAME: MINNEAPOLIS HONEYWELL REGULATOR CO DATE OF NAME CHANGE: 19670213 10-K 1 FORM 10-K 1993 - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- FORM 10-K SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 (Mark One) [X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 [ FEE REQUIRED ]
For the fiscal year ended December 31, 1993 OR [ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 [ NO FEE REQUIRED ]
For the transition period from............................ to................................
Commission file number 1-971 HONEYWELL INC. (Exact name of registrant as specified in its charter) DELAWARE 41-0415010 (State or other jurisdiction of (I.R.S. Employer Identification No.) incorporation or organization) HONEYWELL PLAZA, MINNEAPOLIS, MINNESOTA 55408 (Address of principal executive offices) (Zip Code) Registrant's telephone number, including area code 612-951-1000 Securities registered pursuant to section 12(b) of the act: Name of each exchange Title of each class on which registered Common Stock, par value $1.50 New York Stock Exchange per share Preferred Stock Purchase Rights New York Stock Exchange Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes _X_ No ___. Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K (Section 229.405 of this chapter) is not contained herein, and will not be contained, to the best of registrant's knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. /X/ Based on the closing sales price of $33.125 on March 1, 1994, the aggregate market value of the voting stock held by nonaffiliates of the registrant was $4,303,663,699. As of March 1, 1994, the number of shares outstanding of the registrant's common stock, par value $1.50 per share, was 130,676,010 shares. DOCUMENTS INCORPORATED IN PART BY REFERENCE Incorporated Documents Location in Form 10-K - -------------------------------------------------------- --------------------- Honeywell Notice of 1994 Annual Meeting and Proxy Part III Statement - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- PART I ITEM 1. BUSINESS Honeywell Inc., a Delaware corporation incorporated in 1927, is a Minneapolis-based international controls corporation that supplies automation and control systems, components, software, products and services for homes and buildings, industry, and space and aviation. The purpose of the company is to develop and apply advanced-technology products, systems and services to conserve energy, improve productivity, protect the environment, enhance comfort and increase safety. Development and modification occur continuously in Honeywell's business as new or improved products and services are introduced, new markets are created or entered, distribution methods are revised, and products and services are discontinued. INDUSTRY SEGMENT INFORMATION Honeywell's products and services are classified by management into three industry segments: (i) Home and Building Control, (ii) Industrial Control, and (iii) Space and Aviation Control. Financial information relating to these industry segments is set forth in Part II, Item 6 at pages 9 and 10. HOME AND BUILDING CONTROL Honeywell's Home and Building Control business provides controls and systems for building automation, energy management, fire and security, as well as thermostats, air cleaners and other environmental controls and services for buildings and homes. Honeywell manufactures, markets and installs mechanical, pneumatic, electrical and electronic control products and systems for heating, ventilation and air conditioning in homes and commercial, industrial and public buildings. The systems, which may be generic or specifically designed for each application, may include panels and computers to centralize control of mechanical and electrical functions. Honeywell also produces building management systems for commercial buildings, burner and boiler controls, lighting controls, thermostatic radiator valves, pressure regulators for water systems, thermostats, actuators, humidistats, relays, contactors, transformers, air-quality products, and gas valves and ignition controls for homes and commercial buildings. Sales of these products are made directly to original equipment manufacturers, including manufacturers of heating and air conditioning equipment, through wholesalers, distributors, dealers, contractors, hardware stores and home-care centers, and also through the company's nationwide sales and service organization. Services provided include indoor air-quality services, central-station burglary and fire protection services for homes and commercial buildings, video surveillance, access control and entry management services for commercial buildings, contract maintenance services for commercial building mechanical and control systems, automated management of building operations for building complexes, energy management services, energy retrofit services and training. INDUSTRIAL CONTROL The Industrial Control business serves the automation and control needs of its worldwide industrial customers as a major supplier of products, systems and services ranging from sensors to integrated systems designed for specific applications. Honeywell's Industrial Control segment supplies process control systems and associated software and services to customers in the refining, petrochemical, bulk and fine chemical, pulp-and-paper, electric utility, food and consumer goods, pharmaceutical, metals and transportation markets, as well as other industries. Honeywell also designs and manufactures process instruments, process controllers, recorders, programmers, programmable controllers, transmitters and other field instruments. These products are sold as stand-alone products or integrated into systems. These products are generally used in indicating, recording and automatically controlling process variables. 1 Under the MICRO SWITCH trademark, Honeywell manufactures solid-state sensors (position, pressure, airflow, temperature and current), sensor interface devices, manual controls, explosion-proof switches and precision snap-acting switches, as well as proximity, photoelectric and mercury switches and lighted/unlighted push-buttons. These products are used in industrial, commercial, business equipment, and in consumer, medical, automotive, aerospace and computer applications. Other products include solenoid valves, optoelectronic devices, fiber-optic systems and components, as well as microcircuits, sensors, transducers and high-accuracy, noncontact measurement and detection products for factory automation, quality inspection and robotics applications. Honeywell also furnishes services, including product and component testing, instrument maintenance, repair and calibration, contract services for industrial control equipment and third-party maintenance for CAD/CAM and other industrial control equipment, training, applications service and a range of customer support services. Services are generally sold directly to users on a monthly or annual contract basis. Products are customarily sold by Honeywell on a delivered, supervised or installed basis directly to end users, to equipment manufacturers and contractors, or through third-party channels such as distributors and systems houses. SPACE AND AVIATION CONTROL Honeywell's Space and Aviation Control business supplies avionics for the commercial, military and space markets. The company designs, manufactures, services and markets a variety of sophisticated electronic control systems and components that are used on commercial and business aircraft, military aircraft and spacecraft. Products manufactured for aircraft use include ring laser gyro-based inertial reference systems, navigation and guidance systems, flight control systems, flight management systems, inertial sensors, air data computers, radar altimeters, automatic test equipment, cockpit display systems and other communication and flight instrumentation. Honeywell products and services have been involved in every major U.S. space mission since the mid-1960s. Products include guidance systems for launch and re-entry vehicles, flight and engine control systems for manned spacecraft, precision components for strategic missiles and on-board data processing. Other products include spacecraft attitude and positioning systems, and precision pointing and isolation systems. Space and Aviation Control products are sold through an integrated international marketing organization, with customer service centers providing international service for commercial and business aviation users. OTHER PRODUCTS Products and services not included in the foregoing segment information are described below. Honeywell provides systems analysis and applied research and development on systems and products, including space systems technology, application software, sensors and artificial intelligence. The company is involved in the design and development of gallium arsenide integrated circuits and the development of very high-speed integrated circuit (VHSIC) technology. Solid State Electronics Center, a semiconductor facility in Minnesota, designs and manufactures integrated circuits for Honeywell and its government customers. Honeywell, through its Aerospace and Defense Group in Germany, develops, markets and sells to European countries, among other things, military avionics and electro-optic devices for flight control and nautical systems, including sonar transducers and echo sounders. 2 GENERAL INFORMATION RAW MATERIALS Honeywell experienced no significant or unusual problems in the purchase of raw materials and commodities in 1993. Although it is impossible to predict what effects shortages or price increases may have in the future, at present management has no reason to believe a shortage of raw materials will cause any material adverse impact during 1994. PATENTS, TRADEMARKS, LICENSES AND DISTRIBUTION RIGHTS Honeywell owns, or is licensed under, a large number of patents, patent applications and trademarks acquired over a period of many years, which relate to many of its products or improvements thereon and are of importance to its business. From time to time, new patents and trademarks are obtained and patent and trademark licenses and rights are acquired from others. In addition, Honeywell has distribution rights of varying terms in a number of products and services produced by other companies. In the judgment of management, such rights are adequate for the conduct of the business being done by Honeywell. See Item 3 at page 7 for information concerning litigation in which Honeywell is involved relating to patents. SEASONALITY Although Honeywell's business is not seasonal in the traditional sense, revenues and earnings have tended to concentrate to some degree in the fourth quarter of each calendar year, reflecting the tendency of customers to increase ordering and spending for capital goods late in the year. MAJOR CUSTOMER Approximately 4 percent of Honeywell's total sales for 1993 was attributable to sales of products and services to the United States government as a prime contractor or subcontractor, the majority of which are described under the heading "Space and Aviation Control" on page 2. Such business is significant because of its volume and its contribution to Honeywell's technical capabilities, but Honeywell's dependence upon individual programs is minimized by the large variety of products and services it provides. Contracts and subcontracts for all of such sales are subject to the standard provisions permitting the government to terminate for convenience or default. BACKLOG The total dollar amount of backlog of Honeywell's orders believed to be firm was approximately $3,128 million at December 31, 1993, and $3,603 million at December 31, 1992. All but approximately $481 million of the 1993 backlog is expected to be delivered within the current fiscal year. Backlog is not a reliable indicator of Honeywell's future revenues because a substantial portion of backlog represents the value of orders that are cancelable at the customer's option. COMPETITION Honeywell is subject to active competition in substantially all products and services. Competitors generally are engaged in business on a nationwide or an international scale. Honeywell is the largest producer of control systems and products used to regulate and control heating and air conditioning in commercial buildings, and of systems to control industrial processes worldwide. Honeywell is also a leading supplier of commercial aviation, space and avionics systems. Honeywell's automation and control businesses compete worldwide, supported by a strong distribution network with manufacturing and/or marketing capabilities, for at least a portion of these businesses, in 95 countries. Competitive conditions vary widely among the thousands of products and services provided by Honeywell, and vary as well from country to country. Markets, customers and competitors are becoming more international in outlook. In those areas of environmental and industrial components and controls where sales are primarily to equipment manufacturers, price/performance is probably the most significant competitive factor, but customer service and applied technology are also important. Competition is increasingly being applied to government procurements to improve price and product performance. In service businesses, quality, reliability and promptness of service are the most 3 important competitive factors. Service must be offered from many areas because of the localized nature of such business. In engineering, construction, consulting and research activities, technological capability and a record of proven reliability are generally the principal competitive factors. Although in a small number of highly specialized products and services Honeywell may have relatively few significant competitors, in most markets there are many competitors. RESEARCH AND DEVELOPMENT During 1993 Honeywell spent approximately $742.2 million on research and development activities, including $404.8 million in customer-funded research, relating to the development of new products or services, or the improvement of existing products or services. Honeywell spent $703.1 million in 1992 and $674.2 million in 1991 on research and development activities, including $390.5 million and $373.5 million, respectively, in customer-funded research. No single product or service accounted for a material portion of Honeywell's research and development expenditures. ENVIRONMENTAL PROTECTION Compliance with current federal, state and local provisions regulating the discharge of materials into the environment, or otherwise relating to the protection of the environment, has not had, and in the opinion of management will not have, a material effect upon Honeywell's capital expenditures, earnings or competitive position. See Item 7 at page 13 for further information concerning environmental matters. EMPLOYEES Honeywell employed approximately 52,300 persons in total operations as of December 31, 1993. GEOGRAPHIC AREAS Honeywell engages in material operations in foreign countries. A large majority of Honeywell's foreign business is in Western Europe, Canada and the Asian Pacific Rim. Although there are risks attendant to foreign operations, such as potential nationalization of facilities, currency fluctuation and restrictions on movement of funds, Honeywell has taken action reasonably calculated to mitigate such risks. Financial information related to geographic areas is included in Note 18 to the financial statements in Part II, Item 8 at page 36. 4 EXECUTIVE OFFICERS OF THE REGISTRANT
POSITION AGE AT NAME OFFICE HELD SINCE 3/1/94 - ------------------------- ------------------------------------------------------------ ------------- ------------- M. R. Bonsignore (1) Chairman of the Board and Chief Executive Officer 1993 52 D. L. Moore (2) President and Chief Operating Officer 1993 57 J. R. Dewane (3) President, Space & Aviation Control 1993 59 E. D. Grayson (4) Vice President and General Counsel 1992 55 J. J. Grierson (5) Vice President, Business Development 1992 51 W. M. Hjerpe (6) Vice President and Controller 1992 42 E. T. Hurd (7) President, Industrial Control 1993 55 M. L. Jackson (8) Senior Vice President, Marketing and Administration 1993 51 J. J. Renier (9) Chairman, Executive Committee 1993 64 J.-P. Rosso (10) President, Home and Building Control 1993 53 W. L. Trubeck (11) Senior Vice President and Chief Financial Officer 1993 47 C. L. Vignali (12) Senior Vice President, Operations 1993 59 Officers are elected by the Board of Directors to terms of one year and until their successors are elected and qualified. - ------------------------ (1) Mr. Bonsignore was elected to this position on February 16, 1993, effective April 20, 1993. For more than five years prior thereto he was an executive officer of the company. (2) Dr. Moore was elected to this position on February 16, 1993, effective April 20, 1993. From November 1990 to April 1993, he was Executive Vice President and Chief Operating Officer, Space and Aviation, and Industrial. From May 1989 to November 1990, he was President, Space and Aviation. Prior thereto, he was Group Vice President of Honeywell's Commercial Flight Systems Group since joining Honeywell when it acquired the Sperry Aerospace Group in December 1986. (3) Mr. Dewane was elected to this position on April 20, 1993, effective March 15, 1993. From April 1989 to March 1993, he was Group Vice President of Honeywell's Commercial Flight Systems Group. From December 1987 to March 1989 he was Vice President and Group Executive of Honeywell's Military Aviation Controls Group. (4) Mr. Grayson was elected to this position on April 21, 1992, effective April 1, 1992, when he joined the company. For more than five years prior thereto, he was Senior Vice President, General Counsel, Corporate Secretary and Clerk of Wang Laboratories. (5) Mr. Grierson was elected to this position on February 18, 1992, effective March 1, 1992. For more than five years prior thereto he was an executive officer of the company. (6) Mr. Hjerpe was elected to this position on February 18, 1992, effective March 1, 1992. From July 1990 to February 1992, he was Vice President and Treasurer of the company. From March 1989 to June 1990, he was Vice President of Finance and Administration for Home and Building and Defense and Marine Business. (7) Mr. Hurd was appointed to this position on December 20, 1991, effective January 1, 1992, and elected an executive officer of the company on April 20, 1993, effective April 26, 1993. From January 1991 to December 1991, he was Vice President and Group Executive of Honeywell's Industrial Automation and Control Group. From October 1989 to December 1990, he was Vice
5 President and General Manager of Honeywell's Industrial Automation and Control Division. From November 1988 to September 1989, he was Vice President and General Manager of Honeywell's Industrial Automation Systems Division. (8) Mr. Jackson was elected to this position on April 20, 1993, effective April 26, 1993. From January 1992 to April 1993, he was Senior Vice President, Development and Customer Alliances. From December 1987 to December 1991, he was Vice President and General Manager of Sales and National Accounts for Honeywell's Commercial Building Group. (9) Dr. Renier was elected to this position on February 16, 1993, effective April 20, 1993. For more than five years prior thereto, he was Chief Executive Officer of the company, and from December 1988 to April 1993 served as Chairman of the Board of Directors. (10) Mr. Rosso was appointed to this position on December 20, 1991, effective January 1, 1992, and elected an executive officer of the company on April 20, 1993, effective April 26, 1993. From January 1987 to December 1991, he was President of Honeywell Europe. (11) Mr. Trubeck was elected to this position on June 15, 1993, effective June 1, 1993. From February 1991 to March 1993, he was Chief Financial and Administrative Officer for White & Case, an international law firm in New York. From November 1990 to January 1991 he was self-employed as a consultant. From March 1989 to October 1990 he was Executive Vice President of Finance and Chief Financial Officer for NWA Inc. and Northwest Airlines. (12) Mr. Vignali was elected to this position on April 20, 1993, by the Board of Directors, effective April 26, 1993. From June 1987 to April 1993, he was Vice President and Group Executive of Honeywell's Space Systems Group.
ITEM 2. PROPERTIES Honeywell and its subsidiaries operate facilities worldwide comprising approximately 20,340,000 square feet of space for use as manufacturing, office and warehouse space, of which approximately 12,438,600 square feet is owned and approximately 7,901,400 square feet is leased. The facilities used by Honeywell are adequate and suitable for the purposes they serve. Facilities allocated for corporate use in the United States, including sales offices, comprise approximately 3,379,000 square feet of space, of which approximately 1,512,200 square feet is owned and approximately 1,866,800 square feet is leased. These figures include Honeywell's principal executive offices in Minneapolis, Minnesota which comprise approximately 957,400 square feet, all of which is owned. A summary of properties held by each segment of Honeywell is set forth below, showing major plants, their location, size and type of holding. The descriptions include approximately 232,400 square feet of space owned or leased by Honeywell's operations in the United States that has been leased or subleased to third parties. In addition, approximately 4,628,100 square feet of previously leased space in the United States is under assignment to third parties (including 2,851,700 square feet, 451,400 square feet and 102,600 square feet which is assigned to Alliant Techsystems Inc., Federal Systems Inc. and Bull HN Information Systems, Inc., respectively, all of which were formerly affiliates of the company). HOME AND BUILDING CONTROL Home and Building Control occupies approximately 2,402,000 square feet of space for operations in the United States, of which approximately 1,887,900 square feet is owned and approximately 514,100 square feet is leased. Outside the United States, Home and Building Control operations occupy approximately 3,204,900 square feet, of which approximately 1,670,100 square feet is owned and approximately 1,534,800 square feet is leased. Principal facilities operated outside the United States are located in Canada, Germany, The Netherlands, the United Kingdom and Australia. 6 Facilities in the United States comprising 300,000 square feet or more are listed below.
MAJOR USE OF APPROXIMATE OWNED OR LOCATION FACILITY SQUARE FEET LEASED - -------------------------- ------------------- ------------ --------- Arlington Heights, Ill. Manufacturing 494,600 Owned Golden Valley, Minn. Manufacturing 1,185,300 Owned
INDUSTRIAL CONTROL Industrial Control occupies approximately 3,320,300 square feet of space for operations in the United States, of which approximately 2,233,200 square feet is owned and approximately 1,087,100 square feet is leased. Outside the United States, Industrial Control operations occupy approximately 2,228,500 square feet, of which approximately 862,200 square feet is owned and approximately 1,366,300 square feet is leased. Principal facilities operated outside the United States are located in the United Kingdom, Australia, Canada, Switzerland, France, Germany, Belgium and The Netherlands. Facilities in the United States comprising 300,000 square feet or more are listed below.
MAJOR USE OF APPROXIMATE OWNED OR LOCATION FACILITY SQUARE FEET LEASED - -------------------------- ------------------- ------------ --------- Freeport, Ill. Manufacturing 316,000 Owned Ft. Washington, Pa. Manufacturing 411,400 Leased Phoenix, Az. Manufacturing 550,000 Owned
SPACE AND AVIATION CONTROL Space and Aviation Control occupies approximately 5,244,500 square feet of space for operations in the United States, of which approximately 3,819,100 square feet is owned and approximately 1,425,400 square feet is leased. Outside the United States, Space and Aviation Control operations occupy approximately 540,300 square feet, of which approximately 433,400 square feet is owned and approximately 106,900 square feet is leased. Principal facilities operated outside the United States are located in Canada, the United Kingdom and Singapore. Facilities in the United States comprising 300,000 square feet or more are listed below.
MAJOR USE OF APPROXIMATE OWNED OR LOCATION FACILITY SQUARE FEET LEASED - -------------------------- ------------------- ------------ --------- Phoenix, Ariz. Manufacturing 939,000 Owned St. Louis Park, Minn. Manufacturing 559,000 Owned Albuquerque, N.M. Office 526,600 Owned Minneapolis, Minn. Manufacturing 525,100 Owned Clearwater, Fla. Manufacturing 914,800 Owned St. Petersburg, Fla. Manufacturing 304,000 Leased
OTHER Honeywell operations not included in the foregoing segment information occupy approximately 20,500 square feet of space in areas outside the United States, all of which is owned. ITEM 3. LEGAL PROCEEDINGS On March 13, 1990, Litton Systems Inc. filed suit against Honeywell in U.S. District Court, Central District of California, alleging Honeywell patent infringement relating to the process used by Honeywell to coat mirrors incorporated in its ring laser gyroscopes; attempted monopolization by Honeywell of certain alleged markets for products containing ring laser gyroscopes; and intentional interference by Honeywell with Litton's prospective advantage in European markets and with its contractual relationships with Ojai Research, Inc., a California corporation. Honeywell has filed 7 counterclaims against Litton alleging, among other things, violations by Litton of various antitrust laws including attempted monopolization of markets for inertial systems and interference with Honeywell's relationships with suppliers. The trial of the patent infringement and intentional interference claims commenced June 4, 1993, and on August 31, 1993, a federal court jury in U.S. District Court in Los Angeles returned a verdict against Honeywell on each of these claims and awarded damages in the amount of $1.2 billion and concluded that the patent infringement was willful. Honeywell believes the verdict is unsupported by the facts; that the Litton patent is invalid; and that Honeywell's process differs from Litton's. The judge in the case held a hearing November 22, 1993, on various issues including, among others, Honeywell's claims that the patent was improperly obtained due to alleged "inequitable conduct" on the part of Litton and Honeywell's other legal and equitable defenses. The court has not yet entered a judgment. The trial will conclude when the court has resolved legal issues that could alter or eliminate the jury verdict. Honeywell will evaluate the outcome of the trial, including appealing any significant judgment against the company. No trial date has been set for the antitrust claims of Litton and Honeywell. The court has yet to rule on significant, complex and interrelated issues that could alter or eliminate the jury verdict; therefore, Honeywell and its counsel have determined that it is not possible to estimate the amount of damages, if any, that may ultimately be incurred. As a result, no provision has been made in the financial statements with respect to this contingent liability. Honeywell is a party to other various claims, legal and governmental proceedings, including claims relating to previously reported environmental matters. It is the opinion of management that losses in connection with these matters and the resolution of the environmental claims will not have a material effect on income. ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS No matters were submitted to a vote of security holders during the fourth quarter of 1993. PART II ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS The principal U.S. market for Honeywell's common stock is The New York Stock Exchange. The high and low sales prices for the stock as reported by the consolidated transaction reporting system, of the two most recent fiscal years is set forth in Part II, Item 8 at page 41. In November 1990, as part of Honeywell's program to enhance shareholder value, the company authorized the repurchase of up to 4 million shares of its common stock in open market transactions. In 1991, Honeywell repurchased 4 million shares under this program. In November 1991, the Board of Directors authorized the repurchase of additional shares during the next five years for an amount not to exceed $600 million. In 1991, 1992 and 1993, $3 million, $189 million and $240 million, respectively, of share repurchases were made under this program. Stockholders of record on March 1, 1994 totaled 33,159, excluding individual participants in security position listings. 8 ITEM 6. SELECTED FINANCIAL DATA HONEYWELL INC. AND SUBSIDIARIES (DOLLARS AND SHARES IN MILLIONS EXCEPT PER SHARE AMOUNTS)
1993 1992 1991 1990 1989 1988 -------- -------- -------- -------- -------- -------- Results of Operations Sales................................................... $5,963.0 $6,222.6 $6,192.9 $6,309.1 $6,058.6 $5,857.0 -------- -------- -------- -------- -------- -------- Cost of sales........................................... 4,019.6 4,195.3 4,185.1 4,308.7 4,172.5 4,258.8 Research and development................................ 337.4 312.6 300.7 279.6 283.5 288.9 Selling, general and administrative..................... 1,075.7 1,196.8 1,150.9 1,170.0 1,127.9 1,151.9 Litigation settlements and special charges.............. 18.6 (159.5) Discontinuance of product lines......................... 150.8 Provision for restructuring activities.................. 81.6 101.9 Interest -- net......................................... 51.0 58.5 61.4 67.6 90.3 217.1 Gain on sale of assets.................................. (21.7) (340.1) (33.7) Equity income........................................... (17.8) (15.8) (14.6) (11.5) (33.0) (9.8) -------- -------- -------- -------- -------- -------- 5,484.5 5,587.9 5,683.5 5,792.7 5,382.7 6,125.9 -------- -------- -------- -------- -------- -------- Income (loss) from continuing operations before income taxes.................................................. 478.5 634.7 509.4 516.4 675.9 (268.9) Provision for income taxes.............................. 156.3 234.8 178.3 144.6 125.6 212.6 -------- -------- -------- -------- -------- -------- Income (loss) from continuing operations................ 322.2 399.9 331.1 371.8 550.3 (481.5) Income from discontinued operations..................... 10.1 53.8 46.6 Extraordinary item...................................... (8.6) Cumulative effect of accounting changes................. (144.5) -------- -------- -------- -------- -------- -------- Net income (loss)....................................... $ 322.2 $ 246.8 $ 331.1 $ 381.9 $ 604.1 $ (434.9) -------- -------- -------- -------- -------- -------- -------- -------- -------- -------- -------- -------- Earnings (Loss) Per Common Share Continuing operations................................... $ 2.40 $ 2.88 $ 2.35 $ 2.45 $ 3.23 $ (2.83) Discontinued operations................................. 0.07 0.32 0.27 Extraordinary item...................................... (0.06) Cumulative effect of accounting changes................. (1.04) -------- -------- -------- -------- -------- -------- Net income (loss)....................................... $ 2.40 $ 1.78 $ 2.35 $ 2.52 $ 3.55 $ (2.56) -------- -------- -------- -------- -------- -------- -------- -------- -------- -------- -------- -------- Cash Dividends Per Common Share........................... $ 0.91 $ 0.84 $ 0.77 $ 0.70 $ 0.57 $ 0.53 Financial Position Current assets.......................................... $2,550.2 $2,707.8 $2,698.9 $2,582.2 $2,800.7 $2,576.3 Current liabilities..................................... 1,856.1 1,969.2 2,095.0 2,175.1 2,415.8 2,286.9 -------- -------- -------- -------- -------- -------- Working capital......................................... $ 694.1 $ 738.6 $ 603.9 $ 407.1 $ 384.9 $ 289.4 -------- -------- -------- -------- -------- -------- -------- -------- -------- -------- -------- -------- Short-term debt......................................... $ 187.9 $ 188.4 $ 168.4 $ 109.0 $ 145.6 $ 314.8 Long-term debt.......................................... 504.0 512.1 639.8 616.3 692.5 800.7 -------- -------- -------- -------- -------- -------- Total debt.............................................. 691.9 700.5 808.2 725.3 838.1 1,115.5 Stockholders' equity.................................... 1,773.0 1,790.4 1,850.8 1,696.9 1,918.2 1,731.3 -------- -------- -------- -------- -------- -------- Capitalization.......................................... $2,464.9 $2,490.9 $2,659.0 $2,422.2 $2,756.3 $2,846.8 -------- -------- -------- -------- -------- -------- -------- -------- -------- -------- -------- -------- Sales Home and Building Control............................... $2,424.3 $2,393.6 $2,249.1 $2,196.7 $2,076.8 $2,036.2 Industrial Control...................................... 1,691.5 1,743.9 1,626.8 1,653.5 1,491.4 1,400.2 Space and Aviation Control.............................. 1,674.9 1,933.1 2,132.3 2,071.3 2,004.1 1,839.6 Other................................................... 172.3 152.0 184.7 387.6 486.3 581.0 -------- -------- -------- -------- -------- -------- $5,963.0 $6,222.6 $6,192.9 $6,309.1 $6,058.6 $5,857.0 -------- -------- -------- -------- -------- -------- -------- -------- -------- -------- -------- --------
9 (DOLLARS AND SHARES IN MILLIONS EXCEPT PER SHARE AMOUNTS)
1993 1992 1991 1990 1989 1988 -------- -------- -------- -------- -------- -------- Operating Profit (1)(2)(3) Home and Building Control............................... $ 232.7 $ 193.4 $ 229.1 $ 237.0 $ 225.1 $ 216.1 Industrial Control...................................... 189.7 156.9 224.0 219.5 136.8 119.4 Space and Aviation Control.............................. 148.1 175.8 226.1 200.4 111.5 (141.9) Other................................................... (1.8) (9.5) (3.1) 18.8 20.8 (51.6) Discontinuance of product lines (4)..................... (150.8) -------- -------- -------- -------- -------- -------- Total operating profit (loss)........................... 568.7 516.6 676.1 675.7 494.2 (8.8) Interest expense........................................ (68.0) (89.9) (89.4) (106.0) (135.2) (254.1) Litigation settlements.................................. 32.6 287.9 Gain on sale of assets.................................. 21.7 340.1 33.7 Equity income........................................... 17.8 15.8 14.6 11.5 33.0 9.8 General corporate expense............................... (72.6) (95.7) (91.9) (86.5) (56.2) (49.5) -------- -------- -------- -------- -------- -------- Income (loss) before income taxes....................... $ 478.5 $ 634.7 $ 509.4 $ 516.4 $ 675.9 $ (268.9) -------- -------- -------- -------- -------- -------- -------- -------- -------- -------- -------- -------- Assets Home and Building Control............................... $1,327.3 $1,302.4 $1,282.8 $1,228.7 $1,202.1 $1,181.5 Industrial Control...................................... 1,059.8 1,057.5 1,001.7 955.3 937.5 896.6 Space and Aviation Control.............................. 1,219.6 1,403.6 1,594.5 1,684.7 1,701.8 1,812.5 Corporate and Other..................................... 991.4 1,106.6 927.7 877.5 1,158.7 868.7 Discontinued operations................................. 258.1 222.7 -------- -------- -------- -------- -------- -------- $4,598.1 $4,870.1 $4,806.7 $4,746.2 $5,258.2 $4,982.0 -------- -------- -------- -------- -------- -------- -------- -------- -------- -------- -------- -------- Additional information Average number of common shares outstanding............. 134.2 138.5 140.9 151.8 170.4 170.3 Return on average stockholders' equity.................. 18.4% 13.8% 19.2% 20.6% 33.5% Loss Stockholders' equity per common share................... $ 13.48 $ 13.10 $ 13.25 $ 11.99 $ 11.99 $ 10.04 Percent of debt to total capitalization................. 28% 28% 30% 30% 30% 39% Research and development Honeywell-funded...................................... $ 337.4 $ 312.6 $ 300.7 $ 279.6 $ 283.5 $ 288.9 Customer-funded....................................... 404.8 390.5 373.5 417.5 460.9 388.9 Capital expenditures.................................... 232.1 244.1 240.2 251.5 268.0 292.4 Depreciation............................................ 235.3 242.8 238.5 236.1 247.8 258.4 Employees at year end................................... 52,300 55,400 58,200 60,300 65,300 70,900 - -------------------------- (1) Operating profit is net of special charges amounting to $51.2 and $128.4 in 1993 and 1992, respectively, (see Note 3 to Financial Statements) as follows: Home and Building Control -- $9.9 and $42.7; Industrial Control -- $9.0 and $38.6; Space and Aviation Control -- $7.4 and $34.9; Other -- $16.4 and $2.6; and General Corporate Expense -- $8.5 and $9.6. (2) Operating profit is net of the additional operating expense impact of adopting SFAS 106 (see Note 17 to Financial Statements) and SFAS 112 (see Note 1 to Financial Statements) amounting to $16.4 and $3.8, respectively, in 1992 as follows: Home and Building Control -- $4.3 and $1.0; Industrial Control -- $4.0 and $0.9; Space and Aviation Control -- $7.0 and $1.6; Other -- $0.5 and $0.1; and General Corporate Expense -- $0.6 and $0.2. (3) Operating profit is net of provision for restructuring activities amounting to $81.6 and $101.9 in 1989 and 1988, respectively, as follows: Home and Building Control -- $28.4 and $22.5; Industrial Control -- $32.7 and $9.3; Space and Aviation Control -- $12.1 and $27.6; Other -- $3.1 and $27.2; and General Corporate Expense -- $5.3 and $15.3. (4) Operating profit includes provision for discontinuance of product lines amounting to $150.8 in 1988 as follows: Home and Building Control -- $(31.1); Industrial Control -- $4.8; Space and Aviation Control -- $23.8; and Other -- $153.3.
10 ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS OPERATIONS SALES Honeywell's 1993 sales were $5.963 billion, compared with $6.223 billion in 1992 and $6.193 billion in 1991. Both U.S. and international sales declined from 1992. U.S. sales of $3.895 billion were down 3 percent primarily due to a continuing cyclical downturn in the Space and Aviation Control commercial aviation market. International sales, which represent 35 percent of total sales, declined 6 percent from 1992 to $2.068 billion. The international sales decline was the result of negative currency effects as the dollar strengthened an average of 9 percent against local currencies in countries where Honeywell does business. This decline was partially offset by positive sales growth of 4 percent measured in local currency. U.S. export sales, including exports to foreign affiliates, were $769 million in 1993, compared with $830 million in 1992 and $808 million in 1991. COST OF SALES Cost of sales was $4.020 billion in 1993, or 67.4 percent of sales, compared with $4.195 billion (67.4 percent) in 1992 and $4.185 billion (67.6 percent) in 1991. Cost as a percentage of sales remained flat for 1993 during a period of tough competitive markets and stagnation for a majority of economic sectors. Honeywell remains committed to efforts to reduce operating costs and improve margins. RESEARCH AND DEVELOPMENT Honeywell spent $337 million, or 5.7 percent of sales, on research and development in 1993, compared with $313 million (5.0 percent) in 1992 and $301 million (4.9 percent) in 1991. Honeywell also received $405 million in funds for customer-funded research and development in 1993, compared with $390 million in 1992 and $373 million in 1991. The higher R&D percentage in 1993 reflects significant investments in next-generation technologies. The company expects to return to approximately the same rate of R&D spending in 1994 as in 1992. OTHER EXPENSES AND INCOME Selling, general and administrative expenses were $1.076 billion in 1993, or 18.0 percent of sales, compared with $1.197 billion (19.2 percent) in 1992 and $1.151 billion (18.6 percent) in 1991. Excluding royalties from autofocus licensing agreements (see Note 3 to Financial Statements on page 25), the percent of sales would have been 18.6 percent and 19.5 percent in 1993 and 1992, respectively. The higher percentage in 1992 was due to increased international selling expenses. On April 16, 1993, Honeywell announced the settlement of its lawsuits against the Unisys Corporation and other parties in connection with Honeywell's 1986 purchase of the Sperry Aerospace Group. Honeywell received $70 million in cash and notes, and recorded a gain of $22 million, or $14 million ($0.10 per share) after income taxes, to offset previously incurred costs associated with the matter (see Note 3 to Financial Statements on page 25). In April 1987, Honeywell filed suit against Minolta Camera Co. alleging that Minolta autofocus cameras infringe Honeywell patents. Subsequently, Honeywell filed similar suits against other major camera manufacturers that employ autofocus technology. In March 1992, following a jury award in Honeywell's favor, Minolta agreed to pay Honeywell $127 million in settlement of the damages and Honeywell's claims for interest and legal fees. In addition to the Minolta settlement, agreements were reached with various camera manufacturers for their use of Honeywell's patented automatic focus camera technology. The total of all autofocus settlements recorded, after associated expenses, was $10 million, or $6 million ($0.05 per share) after income taxes, in 1993 and $288 million, or $171 million ($1.24 per share) after income taxes, in 1992. The pre-tax gains from litigation settlements are included in litigation settlements and special charges on the income statement. 11 Also included in litigation settlements and special charges are provisions for special charges of $51 million, or $29 million ($0.22 per share) after income taxes, in 1993 and $128 million, or $85 million ($0.62 per share) after income taxes, in 1992. The 1993 charges were the result of implementing programs to improve productivity and reduce costs in each of Honeywell's business segments. Charges in 1992 were made to appropriately size the Space and Aviation Control business segment to current market conditions and to reposition the Home and Building Control and Industrial Control business segments to capitalize on emerging market opportunities. The special charges include provisions for work-force reductions, worldwide facilities consolidation and organizational changes in both 1993 and 1992. Net interest expense was $51 million in 1993, $59 million in 1992 and $61 million in 1991. In 1992, Honeywell reduced total debt by $108 million, including redemption of high-coupon, long-term debt. Earnings of companies owned 20 percent to 50 percent (primarily Yamatake-Honeywell), which are accounted for using the equity method, were $18 million in 1993, $16 million in 1992 and $15 million in 1991. INCOME TAXES The provision for income taxes was $156 million in 1993, compared with $235 million in 1992 and $178 million in 1991. The enactment by Congress of the Omnibus Budget Reconciliation Act of 1993, which raised the U.S. federal statutory income tax rate for corporations from 34 percent to 35 percent retroactive to January 1, 1993, did not have a material impact on the 1993 provision but did result in the recognition of a one-time gain of $9 million ($0.07 per share) in 1993 from the revaluation of deferred tax assets. Further information about income taxes is provided in Note 4 to Financial Statements on page 25. EXTRAORDINARY ITEM In 1992, Honeywell recorded an extraordinary loss of $14 million, or $9 million ($0.06 per share) after income taxes, as a result of early debt redemptions that required the payment of premiums and the recognition of unamortized discounts and deferred costs. These redemptions were undertaken as part of Honeywell's efforts to reduce its debt and manage its interest-rate exposure. ACCOUNTING CHANGES In 1992, Honeywell adopted three new Statements of Financial Accounting Standards. Statement of Financial Accounting Standards No. 106 (SFAS 106), "Employers' Accounting for Postretirement Benefits Other Than Pensions," required recognition of the expected cost of providing postretirement benefits over the time employees earn these benefits. Before adopting SFAS 106, Honeywell recognized the costs of providing these benefits on a pay-as-you-go basis by expensing the cost in the year the benefit was provided. The cumulative effect of adopting SFAS 106 at January 1, 1992, was a charge to income of $244 million, or $151 million ($1.09 per share) after income taxes. The operating impact of adopting SFAS 106 for 1992 was additional expense of $16 million, or $11 million ($0.08 per share) after income taxes. Statement of Financial Accounting Standards No. 109 (SFAS 109), "Accounting for Income Taxes," allowed consideration of future events in assessing the likelihood that tax benefits will be realized in future tax returns. The cumulative effect of adopting SFAS 109 at January 1, 1992, was an increase in income of $31 million ($0.23 per share) resulting from Honeywell's ability to recognize additional deferred tax assets. Statement of Financial Accounting Standards No. 112 (SFAS 112), "Employers' Accounting for Postemployment Benefits," required that the estimated cost of providing postemployment benefits be recognized on an accrual basis. The cumulative effect of adopting SFAS 112 at January 1, 1992, was a charge to income of $40 million, or $25 million ($0.18 per share) after income taxes. The operating impact of adopting SFAS 112 for 1992 was additional expense of $4 million, or $2 million ($0.02 per share) after income taxes. 12 NET INCOME Honeywell's net income was $322 million ($2.40 per share) in 1993, compared with $247 million ($1.78 per share) in 1992 and $331 million ($2.35 per share) in 1991. Net income in 1993 includes an after-tax gain from litigation settlements, after associated expenses, of $20 million ($0.15 per share); an after-tax provision for special charges of $29 million ($0.22 per share); and a gain of $9 million ($0.07 per share) from the revaluation of deferred tax assets. Net income in 1992 includes an after-tax gain from litigation settlements, after associated expenses, of $171 million ($1.24 per share); an after-tax provision for special charges of $85 million ($0.62 per share); an extraordinary loss after income taxes of $9 million ($0.06 per share) from the early redemption of long-term debt; and an after-tax reduction of $145 million ($1.04 per share) for the cumulative effect of accounting changes. Net income in 1992 also included the operating impact of SFAS 106 and SFAS 112, or an after-tax expense of $13 million ($0.10 per share). RETURN ON EQUITY AND INVESTMENT Return on equity was 18.4 percent in 1993, 13.8 percent in 1992 and 19.2 percent in 1991. Return on investment was 14.6 percent in 1993, 11.8 percent in 1992 and 15.4 percent in 1991. The adoption of SFAS 106 and SFAS 112 significantly reduced ROE and ROI in 1992. CURRENCY The U.S. dollar strengthened an average of 9 percent in 1993 compared with 1992 in relation to the principal foreign currencies in countries where Honeywell products are sold. A stronger dollar has a negative effect on international results because foreign-exchange-denominated profits translate into fewer U.S. dollars of profit; a weaker dollar has a positive translation effect. INFLATION Highly competitive market conditions and a relatively stagnant economy minimized inflation's impact on the selling prices of Honeywell's products and the cost of its purchased materials. Productivity improvements and cost-reduction programs largely offset the effects of inflation on other costs and expenses. EMPLOYMENT Honeywell employed 52,300 people worldwide at year-end 1993, compared with 55,400 people in 1992 and 58,200 people in 1991. Approximately 33,200 employees work in the United States, with 19,100 employed outside the country, primarily in Europe. Total compensation and benefits in 1993 were $2.7 billion, or 49 percent of total costs and expenses. Sales per employee were $110,900 in 1993, compared with $109,600 in 1992 and $106,100 in 1991. ENVIRONMENTAL MATTERS Honeywell is committed to protecting the environment, a commitment evidenced by both Honeywell's products and Honeywell's manufacturing operations. Honeywell's manufacturing sites generate both hazardous and nonhazardous wastes, the treatment, storage, transportation and disposal of which are subject to various local, state and national laws relating to protection of the environment. Honeywell is in varying stages of investigation or remediation of potential, alleged or acknowledged contamination at current or previously owned or operated sites and at off-site locations where its wastes were taken for treatment or disposal. In connection with the cleanup of various off-site locations, Honeywell, along with a large number of other entities, has been designated a potentially responsible party (PRP) by the U.S. Environmental Protection Agency under the Comprehensive Environmental Response, Compensation and Liability Act or by state agencies under similar state laws (Superfund), which potentially subjects PRPs to joint and several liability for the costs of such cleanup. In addition, Honeywell is incurring costs relating to environmental remediation pursuant to the federal Resource Conservation and Recovery Act. Based on Honeywell's assessment of the costs associated with its environmental responsibilities, compliance with federal, state and local laws regulating the discharge of materials into the environment, or otherwise relating to the protection of the environment, has not had, and in the opinion of Honeywell management, will not have a material 13 effect on Honeywell's financial position, results of operations, capital expenditures or competitive position. Honeywell's opinion with regard to Superfund matters is based on its assessment of the predicted investigation, remediation and associated costs, its expected share of those costs and the availability of legal defenses. Honeywell's policy is to record environmental liabilities when loss amounts are probable and reasonably estimable. DISCUSSION AND ANALYSIS BY SEGMENT HOME AND BUILDING CONTROL Sales in Home and Building Control were $2.424 billion in 1993, compared with $2.394 billion in 1992 and $2.249 billion in 1991. Sales in 1993 were up slightly as stronger U.S. sales were mostly offset by a stronger U.S. dollar and economic weakness in international markets, driven in large part by the continuing recession in Europe. Home Control gained market share in the United States through new product introductions and greater penetration of the OEM market. TotalHome-R- was introduced outside the United States in 1993. The acquisition of Enviracaire in December 1992 also contributed to the improvement in U.S. sales. Building Control experienced strong U.S. interest in its comprehensive retrofit and service solutions for schools and other institutions. The U.S. economy continues to show signs of improvement in these markets, while international market conditions have continued to deteriorate. Economic conditions may continue to impede new construction markets in 1994; however, Home and Building Control's large worldwide installed product base and market strategies should continue to support continued sales growth, given that retrofit and service revenues account for the largest portion of business. The sales increase in 1992 reflected worldwide improvement for both Home Control and Building Control despite weak commercial construction markets and erratic housing markets. Home Control experienced increased market penetration with original equipment manufacturers and retailers, and achieved growth with new product introductions. Building Control made market share gains in small-and medium-sized commercial buildings, and there was solid growth in vertical markets such as schools and health-care facilities in the United States. Home and Building Control operating profit was $233 million in 1993, compared with $193 million in 1992 and $229 million in 1991. Excluding the impact of special charges, operating profit increased slightly in 1993 despite the deepening European recession, a stronger U.S. dollar, unfavorable intra-European currency fluctuations, additional costs associated with streamlining the U.S. field organization, and costs associated with introducing the new EXCEL 5000TM building automation platform in the United States. Operating profit included special charges of $10 million for implementation of programs to improve productivity and competitiveness. Operating profit in 1992 included special charges of $43 million for costs associated with worldwide facilities consolidation, organizational changes and work-force reductions incurred to capitalize on emerging market opportunities. Excluding these added costs, operating profit increased over 1991, paced by strong performance in Home Control in the United States. Orders improved modestly in 1993 as stronger orders in the United States for both Home Control and Building Control offset international weakness and a stronger U.S. dollar. The backlog of orders showed a slight increase for 1993. INDUSTRIAL CONTROL Industrial Control sales were $1.692 billion in 1993, compared with $1.744 billion in 1992 and $1.627 billion in 1991. Sales declined slightly in 1993 due to negative currency translation trends and the divestiture of the Keyboard Division, which was sold to Key Tronic Corporation in the third quarter of 1993. Excluding these items, both Industrial Automation and Control and Control Components grew at moderate rates despite weak market conditions in the United States, Europe and Latin America. Industrial Automation and Control reported solid penetration gains in targeted worldwide markets despite a weak capital spending environment in the United States and Europe. Demand for 14 industrial systems increased in the Middle East and Asia Pacific. Sales of field instruments showed a strong increase due to broad acceptance of Industrial Automation and Control's smart field products. Control Components experienced significant growth in solid state sensors for on-board automotive and information technology and appliance market segments as demand for durable goods improved. The company expects a slight increase in 1994 Industrial Control sales despite a slow economic environment worldwide. Industrial Control sales for 1992 increased moderately, despite the deferral of industrial automation systems purchases in the United States due to the inherent uncertainty of the economy and worldwide weakness in durable goods markets. There was modest growth in Industrial Automation and Control sales in the United States as increased sales of services and measurement and control products offset weakness in automation systems. Control Component sales increased moderately in 1992, benefiting from the trend by equipment manufacturers to increase sensor utilization for quality and productivity improvements. Industrial Control operating profit was $190 million in 1993, $157 million in 1992 and $224 million in 1991. Excluding the impact of special charges, operating profit showed a slight increase in 1993. Profits were affected by the weak capital spending environment in the United States and Europe, strength of the U.S. dollar and aggressive investments in new technologies, with R&D spending up 26 percent over 1992. Operating profit included special charges of $9 million for implementation of programs to improve productivity and competitiveness. Operating profit in 1992 included special charges of $39 million for costs associated with worldwide facilities consolidation, organizational changes and work-force reductions to capitalize on emerging market opportunities. Before special charges, operating profit was down in 1992 as a result of lower profit margins reflecting a changing product mix in Industrial Automation and Control. In 1993, Industrial Control orders declined slightly, due to negative currency translation trends. Excluding this effect, Industrial Automation and Control orders increased modestly as a result of solid showings in Asia Pacific and Latin America. Control Components orders declined slightly due to the divestiture of the Keyboard Division. Micro Switch orders were strong in North America and Asia Pacific. The backlog of orders was down modestly for the year. SPACE AND AVIATION CONTROL Sales in Space and Aviation Control were $1.675 billion in 1993, compared with $1.933 billion in 1992 and $2.132 billion in 1991. Sales in 1993 continued to decline as anticipated as a result of the continuing cyclical decline in commercial aircraft production, weak demand in the business jet market and decreased spending in the military market. We expect these trends to continue in 1994. Anticipated growth in 1992 did not materialize, and 1992 sales for commercial flight systems declined sharply as financial pressures caused airlines to defer, and in some instances cancel, aircraft and spare parts purchases. As expected, military markets were weak as a result of declining defense spending and flat NASA funding. Space and Aviation Control operating profit was $148 million in 1993, compared with $176 million in 1992 and $226 million in 1991. Operating profit declined in 1993 due to the sharp volume decline in sales of commercial flight systems and significant investments in next-generation avionics. Operating profit included special charges of $7 million for implementation of programs to improve productivity and competitiveness. Because of continued weak market conditions, revenue and operating profit are expected to decline again in 1994. Operating profit in 1992 included special charges of $35 million for costs associated with facilities consolidation, organizational changes and severance pay incurred to appropriately size operations to current and anticipated market conditions. Excluding these special charges, operating profit was down moderately in 1992 as a sharp volume decline in the commercial aviation business was partially offset by an improved cost structure and a favorable sales mix in military avionics. 15 Space and Aviation orders were down in 1993 as commercial flight systems and military avionics showed sharp declines. Space systems orders increased moderately. The backlog of orders declined sharply from 1992 levels. OTHER Sales from other operations were $172 million in 1993, $152 million in 1992 and $185 million in 1991. These sales included the activities of various business units, such as the Solid State Electronics Center and the Systems and Research Center, which do not correspond with Honeywell's primary business segments. These operations incurred operating losses of $2 million in 1993, $9 million in 1992 and $3 million in 1991. The 1993 loss included special charges of $16 million for organizational changes and work-force reductions. The 1992 loss included special charges of $3 million that were also associated with organizational changes and work-force reductions. FINANCIAL POSITION FINANCIAL CONDITION At year-end 1993, Honeywell's capital structure comprised $188 million of short-term debt, $504 million of long-term debt and $1.773 billion of stockholders' equity. The ratio of debt to total capital was 28 percent and remained unchanged from year-end 1992. Honeywell's debt-to-total capital policy range is 30 to 40 percent. Honeywell managed its capital structure during 1993 at or below the low end of this range. Total debt decreased $9 million during 1993 to $692 million. Stockholders' equity decreased $17 million in 1993. Contributing to the decrease was a $209 million increase in treasury stock. Other changes in stockholders' equity included an increase in retained earnings of $322 million from net income, offset by dividends of $122 million; a $3 million decrease in the accumulated foreign currency translation; and a $13 million decrease from the recognition of a pension liability adjustment under Statement of Financial Accounting Standards No. 87, "Employers' Accounting for Pensions," (see Note 16 to Financial Statements on page 33). Several events and trends that affected Honeywell's financial position are discussed below. CASH GENERATION In 1993, $475 million of cash was generated from operating activities, compared with $532 million in 1992 and $489 million in 1991. Included in 1992 operating cash flow was $194 million, net of expenses and taxes, from autofocus settlements. In 1993, cash generated from investing and financing activities included $47 million of proceeds from the sale of assets, $20 million from a reduction of investment in Sperry Aerospace Group and $18 million of proceeds from employee stock plans. These funds were primarily used to support $232 million of capital expenditures, $14 million of acquisitions, $122 million of dividend payments, $241 million of share repurchases and $7 million of long-term debt repayments. Cash balances decreased $100 million in 1993. WORKING CAPITAL Cash used for increases in the portion of working capital consisting of trade and long-term receivables and inventories, offset by accounts payable and customer advances, was $2 million in 1993. This portion of working capital as a percentage of sales was 28 percent, compared with 26 percent in 1992. Trade receivables sold at year-end 1993 were $38 million, an increase of $22 million in 1993. CAPITAL EXPENDITURES AND ACQUISITIONS Capital expenditures for property, plant and equipment in 1993 were $232 million, compared with $244 million in 1992 and $240 million in 1991. The 1993 depreciation charges were $235 million. Honeywell continues to invest at levels believed to be adequate to maintain its technological position in areas providing long-term returns. During 1993, Honeywell invested $14 million in complementary business acquisitions. 16 SHARE REPURCHASE PLANS In November 1990, the board of directors authorized a 4 million share repurchase program. This program was completed in 1991. In November 1991, the board of directors authorized a five-year program to purchase up to $600 million of Honeywell shares. Under terms of this authorization, which expires December 31, 1996, the program may be altered depending on economic conditions, share prices and cash-flow availability. Honeywell repurchased $3 million of shares in 1991, $189 million of shares in 1992 and $240 million of shares in 1993, and has $168 million remaining under this authorization. At year-end 1993, Honeywell had 188 million shares issued, 132 million shares outstanding and 33,382 stockholders of record. At year-end 1992, Honeywell had 188 million shares issued, 137 million shares outstanding and 34,571 stockholders of record. DIVIDENDS In November 1992, the board of directors approved an 8 percent increase in the regular annual dividend to $0.89 per share, from $0.825 per share, effective in the fourth quarter 1992. In November 1993, the board of directors approved an additional 8 percent increase in the regular annual dividend to $0.96 per share effective in the fourth quarter 1993. Honeywell paid $0.9075 per share in dividends in 1993, compared with $0.84125 in 1992 and $0.76875 in 1991. Honeywell has paid a quarterly dividend since 1932 and has increased the annual payout per share in each of the last 18 years. EMPLOYEE STOCK PROGRAM Honeywell contributed 643,913 shares of Honeywell common stock to employees under its U.S. employee stock match savings plans in 1993. The number of shares contributed under this program depends on employee savings levels and company performance. PENSION CONTRIBUTIONS Cash contributions to Honeywell's Retirement Plan for U.S. non-union employees were $105 million in 1993, $79 million in 1992 and $61 million in 1991. Cash contributions to the Pension Plan for U.S. union employees were $36 million in 1993, $27 million in 1992 and $27 million in 1991. TAXES In 1993, taxes paid were $92 million. Accrued income taxes and related interest decreased $18 million during 1993. FUNDING SPECIAL CHARGES During 1993 and 1992, the company established reserves for productivity initiatives to strengthen the company's competitiveness. Future cash flows from operating activities are expected to be sufficient to fund these accrued costs. LIQUIDITY Short-term debt at year-end 1993 was $188 million, consisting of $181 million of commercial paper and $7 million of notes payable and current maturities of long-term debt. Short-term debt at year-end 1992 totaled $188 million, consisting of $182 million of notes payable and commercial paper and $6 million of current maturities of long-term debt. Through its banks, Honeywell has access to various credit facilities, including committed credit lines for which Honeywell pays commitment fees and uncommitted lines provided by banks on a non-committed, best-efforts basis. Available lines of credit at year-end 1993 totaled $2.272 billion. This consists of $1.875 billion of committed credit lines to meet Honeywell's financing requirements, including support of commercial paper and bank note borrowings and an appeal bond which could be required in the Litton litigation as described in Litigation below, and $397 million of uncommitted credit lines available to certain foreign subsidiaries. This compared with $1.002 billion of available credit lines at year-end 1992, consisting of $645 million of committed credit lines and $357 million of 17 uncommitted credit lines available to certain foreign subsidiaries. Cash and short-term investments totaled $256 million at year-end 1993 and $346 million at year-end 1992. Honeywell believes its available cash and committed credit lines provide adequate liquidity. LITIGATION On August 31, 1993, a federal court jury in U.S. District Court in Los Angeles returned a verdict against Honeywell on patent infringement and intentional interference claims in the amount of $1.2 billion. These claims were part of a lawsuit brought by Litton Systems Inc. alleging, among other things, Honeywell patent infringement relating to the process used by Honeywell to coat mirrors incorporated in its ring laser gyroscopes. Honeywell believes the verdict is unsupported by the facts; that the Litton patent is invalid; and that Honeywell's process differs from Litton's. The judge in the case held a hearing November 22, 1993, on various issues including, among others, Honeywell's claims that the patent was improperly obtained due to alleged "inequitable conduct" on the part of Litton and Honeywell's other legal and equitable defenses. The court has yet to enter a judgment. The trial will conclude when the court has resolved legal issues that could alter or eliminate the jury verdict. Honeywell will evaluate the outcome of the trial, including appealing any significant judgment against the company. No trial date has been set for the antitrust claims of Litton and Honeywell. The court has yet to rule on significant, complex and interrelated issues that could alter or eliminate the jury verdict; therefore, Honeywell and its counsel have determined that it is not possible to estimate the amount of damages, if any, that may ultimately be incurred. As a result, no provision has been made in the financial statements with respect to this contingent liability. Honeywell continues to believe the lawsuit is without merit, and its financial position, liquidity and business strategies have not been adversely affected by the jury verdict. CREDIT RATINGS Honeywell's credit ratings remained unchanged during 1993. Ratings for long-term and short-term debt are, respectively, A/A-1 by Standard and Poor's Corporation, A/Duff1 by Duff and Phelps Corporation and A3/P-2 by Moody's Investor Service, Inc. On August 31, 1993, Moody's Investor Service, Inc. placed Honeywell on credit watch status as a result of the jury verdict in the Litton litigation. Any lowering of Honeywell's present credit ratings could lead to higher interest costs by potentially reducing Honeywell's ability to access the commercial paper market and other unsecured borrowing sources on terms as favorable as those currently available. STOCK PERFORMANCE The market price of Honeywell stock ranged from $39 3/8 to $31 in 1993, and was $34 1/4 at year end. Book value at year end was $13.48 in 1993 and $13.10 in 1992. 18 ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA INDEPENDENT AUDITORS' REPORT To the Stockholders of Honeywell Inc.: We have audited the statement of financial position of Honeywell Inc. and subsidiaries as of December 31, 1993 and 1992, and the related statements of income and cash flows for each of the three years in the period ended December 31, 1993. Our audits also included the financial statement schedules listed at Item 14(a)2. These financial statements and financial statement schedules are the responsibility of the Company's management. Our responsibility is to express an opinion on these financial statements based on our audits. We have conducted our audits in accordance with generally accepted auditing standards. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion. In our opinion, such financial statements present fairly, in all material respects, the financial position of Honeywell Inc. and subsidiaries at December 31, 1993 and 1992, and the results of their operations and their cash flows for each of the three years in the period ended December 31, 1993, in conformity with generally accepted accounting principles. Also in our opinion, such financial statement schedules, when considered in relation to the basic financial statements taken as a whole, present fairly in all material respects the information set forth therein. As discussed in Note 19 to the financial statements, Honeywell is a defendant in litigation alleging (1) patent infringement, (2) market monopolization and (3) interference with the plaintiff's markets and contractual relationships. A federal court jury has returned a verdict against Honeywell on the patent infringement and intentional interference claims in the case in the amount of $1.2 billion; however, the court has yet to rule on significant, complex and interrelated issues that could alter or eliminate the jury verdict. The ultimate outcome of the litigation cannot presently be determined. Accordingly, no provision for any loss that may result from the resolution of this matter has been made in the accompanying financial statements. As discussed in Notes 1, 4 and 17 to the financial statements, in 1992 the Company changed its method of accounting for postemployment benefits, income taxes and postretirement benefits other than pensions. Deloitte & Touche Minneapolis, Minnesota February 11, 1994 19 INCOME STATEMENT HONEYWELL INC. AND SUBSIDIARIES (DOLLARS AND SHARES IN MILLIONS EXCEPT PER SHARE AMOUNTS)
YEARS ENDED DECEMBER 31 --------------------------------- 1993 1992 1991 --------- ---------- ---------- Sales......................................................................... $ 5,963.0 $ 6,222.6 $ 6,192.9 --------- ---------- ---------- Costs and Expenses Cost of sales............................................................... 4,019.6 4,195.3 4,185.1 Research and development.................................................... 337.4 312.6 300.7 Selling, general and administrative......................................... 1,075.7 1,196.8 1,150.9 Litigation settlements and special charges.................................. 18.6 (159.5) --------- ---------- ---------- 5,451.3 5,545.2 5,636.7 --------- ---------- ---------- Interest Interest expense............................................................ 68.0 89.9 89.4 Interest income............................................................. 17.0 31.4 28.0 --------- ---------- ---------- 51.0 58.5 61.4 --------- ---------- ---------- Equity Income................................................................. 17.8 15.8 14.6 --------- ---------- ---------- Income before Income Taxes.................................................... 478.5 634.7 509.4 Provision for Income Taxes.................................................... 156.3 234.8 178.3 --------- ---------- ---------- Income before Extraordinary Item and Cumulative Effect of Accounting Changes...................................................................... 322.2 399.9 331.1 Extraordinary Item -- Loss on Early Redemption of Debt........................ (8.6) Cumulative Effect of Accounting Changes....................................... (144.5) --------- ---------- ---------- Net Income.................................................................... $ 322.2 $ 246.8 $ 331.1 --------- ---------- ---------- --------- ---------- ---------- Earnings Per Common Share Income before extraordinary item and cumulative effect of accounting changes.................................................................... $ 2.40 $ 2.88 $ 2.35 Extraordinary item -- loss on early redemption of debt...................... (0.06) Cumulative effect of accounting changes..................................... (1.04) --------- ---------- ---------- Net income.................................................................. $ 2.40 $ 1.78 $ 2.35 --------- ---------- ---------- --------- ---------- ---------- Average Number of Common Shares Outstanding................................... 134.2 138.5 140.9
See accompanying Notes to Financial Statements. 20 STATEMENT OF FINANCIAL POSITION HONEYWELL INC. AND SUBSIDIARIES (DOLLARS IN MILLIONS) ASSETS
DECEMBER 31 ----------------------- 1993 1992 ---------- ----------- Current Assets Cash and cash equivalents............................................................. $ 242.3 $ 342.4 Short-term investments................................................................ 13.8 3.8 Receivables........................................................................... 1,275.9 1,214.5 Inventories........................................................................... 760.1 827.6 Deferred income taxes................................................................. 258.1 319.5 ---------- ----------- 2,550.2 2,707.8 Investments and Advances................................................................ 227.7 162.1 Property, Plant and Equipment Property, plant and equipment......................................................... 2,549.4 2,497.9 Less accumulated depreciation......................................................... 1,487.4 1,384.4 ---------- ----------- 1,062.0 1,113.5 Other Assets Long-term receivables................................................................. 51.3 42.0 Goodwill.............................................................................. 133.0 139.5 Patents, licenses and trademarks...................................................... 89.8 114.7 Software and other intangibles........................................................ 266.3 301.2 Deferred income taxes................................................................. 63.8 156.8 Other................................................................................. 154.0 132.5 ---------- ----------- Total Assets........................................................................ $ 4,598.1 $ 4,870.1 ---------- ----------- ---------- ----------- LIABILITIES AND STOCKHOLDERS' EQUITY Current Liabilities Short-term debt....................................................................... $ 187.9 $ 188.4 Accounts payable...................................................................... 381.9 357.2 Customer advances..................................................................... 61.4 85.0 Accrued compensation and benefit costs................................................ 433.2 440.6 Accrued income taxes.................................................................. 320.8 338.9 Deferred income taxes................................................................. 10.2 Other accrued liabilities............................................................. 460.7 559.1 ---------- ----------- 1,856.1 1,969.2 Long-Term Debt.......................................................................... 504.0 512.1 Other Liabilities Accrued benefit costs................................................................. 378.6 389.2 Deferred income taxes................................................................. 27.6 147.1 Other................................................................................. 58.8 62.1 Stockholders' Equity Common stock -- $1.50 par value Authorized -- 250,000,000 shares Issued -- 1993 -- 188,328,570 shares.................................................. 282.5 1992 -- 188,439,504 shares................................................... 282.7 Additional paid-in capital............................................................ 431.5 423.8 Retained earnings..................................................................... 2,447.3 2,247.0 Treasury stock -- 1993 -- 56,769,007 shares........................................... (1,428.4) 1992 -- 51,759,304 shares............................................ (1,219.0) Accumulated foreign currency translation.............................................. 52.9 55.9 Pension liability adjustment.......................................................... (12.8) ---------- ----------- 1,773.0 1,790.4 ---------- ----------- Total Liabilities and Stockholders' Equity.......................................... $ 4,598.1 $ 4,870.1 ---------- ----------- ---------- -----------
See accompanying Notes to Financial Statements. 21 STATEMENT OF CASH FLOWS HONEYWELL INC. AND SUBSIDIARIES (DOLLARS IN MILLIONS)
YEARS ENDED DECEMBER 31 ------------------------------- 1993 1992 1991 --------- --------- --------- Cash Flows from Operating Activities Net income..................................................................... $ 322.2 $ 246.8 $ 331.1 Adjustments to reconcile net income to net cash flows from operating activities: Cumulative effect of accounting changes...................................... 144.5 Extraordinary item -- loss on early redemption of debt....................... 8.6 Depreciation................................................................. 235.3 242.8 238.5 Amortization of intangibles.................................................. 49.6 49.9 47.5 Deferred income taxes........................................................ 28.8 6.7 33.7 Equity income, net of dividends received..................................... (14.5) (13.8) (12.3) Loss on sale of assets....................................................... 6.2 1.6 4.4 Contributions to employee stock plans........................................ 28.7 40.0 34.3 Increase in receivables...................................................... (62.7) (136.0) (48.2) Decrease in inventories...................................................... 54.2 67.7 63.6 Increase (decrease) in accounts payable...................................... 28.8 (60.8) 21.5 Increase (decrease) in accrued income taxes and interest..................... 8.3 (25.7) (38.7) Other changes in working capital, excluding short-term investments and short-term debt............................................................. (146.6) (85.6) (150.9) Other noncurrent items -- net................................................ (63.5) 44.9 (35.6) --------- --------- --------- Net cash flows from operating activities......................................... 474.8 531.6 488.9 --------- --------- --------- Cash Flows from Investing Activities Reduction of investment in Sperry Aerospace Group.............................. 20.0 Proceeds from sale of assets................................................... 46.8 54.7 27.1 Capital expenditures........................................................... (232.1) (244.1) (240.2) Investment in acquisitions..................................................... (14.2) (83.5) (Increase) decrease in short-term investments.................................. (10.2) 6.8 26.4 Other -- net................................................................... (23.3) (7.1) (10.6) --------- --------- --------- Net cash flows from investing activities......................................... (213.0) (273.2) (197.3) --------- --------- --------- Cash Flows from Financing Activities Net increase in short-term debt................................................ 2.8 90.1 66.9 Proceeds from issuance of long-term debt....................................... 0.6 2.6 99.1 Repayment of long-term debt.................................................... (7.3) (199.7) (81.5) Purchase of treasury stock..................................................... (241.2) (188.2) (123.6) Proceeds from employee stock plans............................................. 17.6 27.4 16.7 Dividends paid................................................................. (122.0) (116.7) (108.3) --------- --------- --------- Net cash flows from financing activities......................................... (349.5) (384.5) (130.7) --------- --------- --------- Effect of exchange rate changes on cash.......................................... (12.4) (28.7) 6.0 --------- --------- --------- Increase (decrease) in cash and cash equivalents................................. (100.1) (154.8) 166.9 Cash and cash equivalents at beginning of year................................... 342.4 497.2 330.3 --------- --------- --------- Cash and cash equivalents at end of year......................................... $ 242.3 $ 342.4 $ 497.2 --------- --------- --------- --------- --------- ---------
See accompanying Notes to Financial Statements. 22 NOTES TO FINANCIAL STATEMENTS HONEYWELL INC. AND SUBSIDIARIES (DOLLARS IN MILLIONS EXCEPT PER SHARE AMOUNTS) NOTE 1 -- ACCOUNTING POLICIES CONSOLIDATION The consolidated financial statements and accompanying data include Honeywell Inc. and subsidiaries. All material intercompany transactions are eliminated. SALES Product sales are recorded when title is passed to the customer, which usually occurs at the time of delivery or acceptance. Sales under long-term contracts are recorded on the percentage-of-completion method measured on the cost-to-cost basis for engineering-type contracts and the units-of-delivery basis for production-type contracts. Provisions for anticipated losses on long-term contracts are recorded in full when they become evident. INCOME TAXES Income taxes are accounted for in accordance with Statement of Financial Accounting Standards No. 109 (see Note 4). Interest costs related to prior years' tax issues are included in the provision for income taxes in 1993. EARNINGS PER COMMON SHARE Earnings per common share are based on the average number of common shares outstanding during the year. STATEMENT OF CASH FLOWS Cash equivalents are all highly liquid, temporary cash investments purchased with a maturity of three months or less. Cash flows from contracts used to hedge cash dividend payments from subsidiaries are classified as part of the effect of exchange rate changes on cash. INVENTORIES Inventories are valued at the lower of cost or market. Cost is determined using the weighted-average method. Market is based on net realizable value. Payments received from customers relating to the uncompleted portion of contracts are deducted from applicable inventories. INVESTMENTS Investments in companies owned 20 to 50 percent are accounted for using the equity method. PROPERTY Property is carried at cost and depreciated primarily using the straight-line method over estimated useful lives of 10 to 40 years for buildings and improvements, and three to 15 years for machinery and equipment. INTANGIBLES Intangibles are carried at cost and amortized using the straight-line method over their estimated useful lives of not more than 40 years for goodwill, three to 17 years for patents, licenses and trademarks, and six to 24 years for software and other intangibles. Intangibles also include the asset resulting from recognition of the defined benefit pension plan minimum liability, which is amortized as part of net periodic pension cost. 23 NOTES TO FINANCIAL STATEMENTS (CONTINUED) HONEYWELL INC. AND SUBSIDIARIES (DOLLARS IN MILLIONS EXCEPT PER SHARE AMOUNTS) NOTE 1 -- ACCOUNTING POLICIES (CONTINUED) FOREIGN CURRENCY Foreign currency assets and liabilities are generally translated into U.S. dollars using the exchange rates in effect at the statement of financial position date. Results of operations are generally translated using the average exchange rates throughout the period. The effects of exchange rate fluctuations on translation of assets, liabilities and hedges of cash dividend payments from subsidiaries are reported as accumulated foreign currency translation and reduced stockholders' equity $3.0 in 1993, $74.8 in 1992 and $0.1 in 1991. The carrying amounts of foreign currency contracts purchased to hedge firm foreign currency commitments are deferred and included in the measurement of the related foreign currency transaction. Foreign currency contracts that are not hedges of firm foreign currency commitments are marked to market on a current basis. Gains and losses from foreign currency transactions are included in selling, general and administrative expenses on the income statement and were not material in any year. POSTEMPLOYMENT BENEFITS In 1992, Honeywell adopted Statement of Financial Accounting Standards No. 112 (SFAS 112), "Employers' Accounting for Postemployment Benefits." The pre-tax cumulative effect of this accounting change to January 1, 1992, was $39.7 and resulted in a reduction in net income of $24.6 ($0.18 per share). The effect of this accounting change for 1992 was a decrease in income before income taxes of $3.8, or $2.5 ($0.02 per share) after income taxes. The enactment by Congress of the Omnibus Budget Reconciliation Act of 1993, which made Medicare the primary provider of medical benefits for disabled former employees after 29 months of disability, reduced the accumulated benefit obligation for postemployment benefits by $33.4 in the fourth quarter of 1993. This change in estimate is included in cost of sales on the income statement. RECLASSIFICATIONS Certain amounts in the 1992 statement of financial position have been reclassified to conform to the presentation of similar amounts in the 1993 statement of financial position. NOTE 2 -- ACQUISITIONS AND SALE OF ASSETS Honeywell acquired eight companies in 1993 and nine companies in 1992 for $14.2 and $83.5 in cash, respectively. These acquisitions were accounted for as purchases, and accordingly, the assets and liabilities of the acquired entities have been recorded at their estimated fair values at the dates of acquisition. The excess of purchase price over the estimated fair values of the net assets acquired, in the amount of $11.8 in 1993 and $44.2 in 1992, has been recorded as goodwill and is amortized over estimated useful lives. The pro forma results for 1993 and 1992, assuming these acquisitions had been made at the beginning of the year, would not be significantly different from reported results. In 1993, Honeywell sold its Keyboard Division to Key Tronic Corporation for $29.7 in cash, notes and common stock. Proceeds from other asset sales, including the collection of notes receivable and sale of stock received from asset sales made in previous years, amounted to $22.9. Gains and losses from asset sales were not material in any year and are included in selling, general and administrative expenses on the income statement. 24 NOTES TO FINANCIAL STATEMENTS (CONTINUED) HONEYWELL INC. AND SUBSIDIARIES (DOLLARS IN MILLIONS EXCEPT PER SHARE AMOUNTS) NOTE 3 -- LITIGATION SETTLEMENTS AND SPECIAL CHARGES LITIGATION SETTLEMENTS On April 16, 1993, Honeywell announced the settlement of its lawsuits against the Unisys Corporation and other parties in connection with Honeywell's 1986 purchase of the Sperry Aerospace Group. Honeywell received $70.0 in cash and notes and recorded a gain of $22.4 in the second quarter of 1993 to offset previously incurred costs associated with the matter. In addition, the portion of the purchase price originally allocated to goodwill and other intangibles was reduced by $47.6. Honeywell has reached agreement with various camera manufacturers for their use of Honeywell's patented automatic focus camera technology. The total of all one-time settlements recorded in these matters, after associated expenses, resulted in a gain of $10.2 in the third quarter of 1993 and $287.9 in 1992. Several settlements also included licensing agreements that require the payment of royalties to Honeywell based upon the amount of product manufactured or sold by the licensee. Autofocus royalty income from the licensing agreements amounted to $31.4 in 1993 and $14.9 in 1992, and is included in selling, general and administrative expenses on the income statement. SPECIAL CHARGES Honeywell recorded special charges of $23.2 and $28.0 in the second and third quarters of 1993, respectively, for productivity initiatives to strengthen the company's competitiveness. In 1992, special charges of $128.4 were recorded to appropriately size the Space and Aviation Control business segment and to reposition the Home and Building Control and Industrial Control business segments to capitalize on emerging market opportunities. Special charges include costs for work-force reductions, worldwide facilities consolidation, organizational changes and other cost accruals. NOTE 4 -- INCOME TAXES The components of income before income taxes consist of the following:
1993 1992 1991 --------- --------- --------- Domestic........................................................ $ 316.9 $ 467.7 $ 282.9 Foreign......................................................... 161.6 167.0 226.5 --------- --------- --------- $ 478.5 $ 634.7 $ 509.4
The provision for income taxes on that income is as follows:
1993 1992 1991 --------- --------- --------- Current tax expense United States................................................. $ 81.7 $ 140.2 $ 79.2 Foreign....................................................... 36.0 52.5 60.7 State and local............................................... 11.3 35.7 5.5 --------- --------- --------- Total current................................................. 129.0 228.4 145.4 --------- --------- --------- Deferred tax expense United States................................................. 17.9 3.1 12.2 Foreign....................................................... 5.8 2.5 15.6 State and local............................................... 3.6 0.8 5.1 --------- --------- --------- Total deferred................................................ 27.3 6.4 32.9 --------- --------- --------- Provision for income taxes...................................... $ 156.3 $ 234.8 $ 178.3
The enactment by Congress of the Omnibus Budget Reconciliation Act of 1993, which raised the U.S. federal statutory income tax rate for corporations from 34 percent to 35 percent retroactive to 25 NOTES TO FINANCIAL STATEMENTS (CONTINUED) HONEYWELL INC. AND SUBSIDIARIES (DOLLARS IN MILLIONS EXCEPT PER SHARE AMOUNTS) NOTE 4 -- INCOME TAXES (CONTINUED) January 1, 1993, did not have a material impact on the 1993 provision for income taxes; however, the enactment of this legislation did result in a one-time gain of $9.2 million ($0.07 per share) in the third quarter of 1993 from the revaluation of deferred tax assets. In 1992, Honeywell adopted Statement of Financial Accounting Standards No. 109 (SFAS 109), "Accounting for Income Taxes," and elected not to restate prior years. The cumulative effect of this accounting change to January 1, 1992, was an increase in net income of $31.4 ($0.23 per share), resulting from the recognition of unrecorded deferred tax assets. This accounting change had no effect on the 1992 provision for income taxes. A reconciliation of the provision for income taxes to the amount computed using U.S. federal statutory rates is as follows:
1993 1992 1991 --------- --------- --------- Taxes on income at U.S. federal statutory rates........................... $ 167.5 $ 215.8 $ 173.2 Tax effects of foreign income............................................. (26.0) (1.8) 21.0 State taxes............................................................... 10.9 24.1 7.0 Adjustments to effective tax rates used in recording tax assets and liabilities.............................................................. (1.5) (29.8) Other..................................................................... 3.9 (1.8) 6.9 --------- --------- --------- Provision for income taxes................................................ $ 156.3 $ 234.8 $ 178.3
Taxes paid were $91.8 in 1993, $244.0 in 1992 and $190.4 in 1991. Deferred income taxes are provided for the temporary differences between the financial reporting basis and the tax basis of Honeywell's assets and liabilities. Temporary differences comprising the net deferred taxes shown on the statement of financial position are:
1993 1992 --------- --------- Employee benefits................................................................... $ 177.8 $ 180.4 Miscellaneous accruals.............................................................. 96.0 114.2 Excess of tax over book depreciation................................................ (79.2) (75.8) Asset valuation reserves............................................................ 42.5 43.4 Interest............................................................................ 28.7 Long-term contracts, installment sales and sale/leasebacks deferred for tax purposes........................................................................... 24.8 14.7 Losses on discontinuance of product lines........................................... 2.3 4.2 State taxes......................................................................... 29.8 36.1 Pension liability adjustment........................................................ 8.2 Other............................................................................... (18.1) (16.7) --------- --------- $ 284.1 $ 329.2
The components of net deferred taxes shown on the statement of financial position are:
1993 1992 --------- --------- Deferred tax assets................................................................. $ 445.7 $ 476.3 Deferred tax liabilities............................................................ 161.6 147.1
26 NOTES TO FINANCIAL STATEMENTS (CONTINUED) HONEYWELL INC. AND SUBSIDIARIES (DOLLARS IN MILLIONS EXCEPT PER SHARE AMOUNTS) NOTE 4 -- INCOME TAXES (CONTINUED) Provision has not been made for U.S. or additional foreign taxes on $654.7 of undistributed earnings of international subsidiaries as those earnings are considered to be permanently reinvested in the operations of those subsidiaries. It is not practicable to estimate the amount of tax that might be payable on the eventual remittance of such earnings. At December 31, 1993, foreign subsidiaries had tax operating loss carryforwards of $5.4. NOTE 5 -- RECEIVABLES Receivables have been reduced by an allowance for doubtful accounts as follows:
1993 1992 --------- --------- Receivables, current............................................... $ 24.3 $ 26.7 Long-term receivables.............................................. 0.5 0.8
Receivables include approximately $21.1 in 1993 and $26.3 in 1992 billed to customers but not paid pursuant to contract retainage provisions. These balances are due upon completion of the contracts, generally within one year. Unbilled receivables related to long-term contracts amount to $275.6 in 1993 and $241.1 in 1992 and are generally billable and collectible within one year. Long-term, interest-bearing notes receivable from the sale of assets have been reduced by valuation reserves of $3.6 in 1993 and $2.9 in 1992 to an amount that approximates realizable value. In 1992, Honeywell entered into a three-year agreement, whereby it can sell an undivided interest in a designated pool of trade accounts receivable up to a maximum of $50.0 on an ongoing basis. As collections reduce accounts receivable sold, Honeywell may sell an additional undivided interest in new receivables to bring the amount sold up to the $50.0 maximum. The uncollected balance of receivables sold amounted to $37.9 and $16.0 at December 31, 1993 and 1992, respectively, and averaged $21.7 and $11.6 during those respective years. The discount recorded on sale of receivables is included in selling, general and administrative expenses on the income statement and amounted to $0.7, $0.6 and $5.3 in 1993, 1992 and 1991, respectively. Honeywell, as agent for the purchaser, retains collection and administrative responsibilities for the participating interests sold. NOTE 6 -- INVENTORIES
1993 1992 --------- --------- Finished goods.................................................. $ 265.3 $ 246.4 Inventories related to long-term contracts...................... 97.7 139.1 Work in process................................................. 168.1 196.1 Raw materials and supplies...................................... 229.0 246.0 --------- --------- $ 760.1 $ 827.6
Inventories related to long-term contracts are net of payments received from customers relating to the uncompleted portions of such contracts in the amounts of $36.8 and $65.0 at December 31, 1993 and 1992, respectively. 27 NOTES TO FINANCIAL STATEMENTS (CONTINUED) HONEYWELL INC. AND SUBSIDIARIES (DOLLARS IN MILLIONS EXCEPT PER SHARE AMOUNTS) NOTE 7 -- PROPERTY, PLANT AND EQUIPMENT
1993 1992 --------- ---------- Land.................................................................. $ 77.1 $ 78.5 Buildings and improvements............................................ 589.9 621.7 Machinery and equipment............................................... 1,814.2 1,734.4 Construction in progress.............................................. 68.2 63.3 --------- ---------- $ 2,549.4 $ 2,497.9
NOTE 8 -- FOREIGN SUBSIDIARIES The following is a summary of financial data pertaining to foreign subsidiaries:
1993 1992 1991 --------- ---------- ---------- Income before extraordinary item and cumulative effect of accounting changes....................................... $ 119.8 $ 112.0 $ 150.7 Assets.................................................... $ 1,546.5 $ 1,554.7 $ 1,720.1 Liabilities............................................... 620.5 655.7 714.8 --------- ---------- ---------- Net assets................................................ $ 926.0 $ 899.0 $ 1,005.3
Insofar as can be reasonably determined, there are no foreign-exchange restrictions that materially affect the financial position or the operating results of Honeywell and its subsidiaries. NOTE 9 -- INVESTMENTS IN OTHER COMPANIES Following is a summary of financial data pertaining to companies 20 to 50 percent owned. The principal company included is Yamatake-Honeywell Co., Ltd., of which Honeywell owns 24.2 percent of the outstanding common stock.
1993 1992 1991 --------- ---------- ---------- Sales..................................................... $ 1,866.7 $ 1,656.3 $ 1,503.4 Gross profit.............................................. 682.4 607.4 556.3 Net income................................................ 69.8 62.8 61.3 Equity in net income...................................... 17.8 15.8 14.6 Current assets............................................ $ 1,297.0 $ 1,035.4 $ 1,020.9 Noncurrent assets......................................... 588.2 502.8 401.9 --------- ---------- ---------- 1,885.2 1,538.2 1,422.8 --------- ---------- ---------- Current liabilities....................................... 704.5 687.0 678.1 Noncurrent liabilities.................................... 359.3 200.1 221.6 --------- ---------- ---------- 1,063.8 887.1 899.7 --------- ---------- ---------- Net assets................................................ $ 821.4 $ 651.1 $ 523.1 Equity in net assets...................................... $ 200.3 $ 158.3 $ 126.4
28 NOTES TO FINANCIAL STATEMENTS (CONTINUED) HONEYWELL INC. AND SUBSIDIARIES (DOLLARS IN MILLIONS EXCEPT PER SHARE AMOUNTS) NOTE 10 -- INTANGIBLE ASSETS Intangible assets have been reduced by accumulated amortization as follows:
1993 1992 --------- --------- Goodwill.................................................................. $ 34.3 $ 30.4 Patents, licenses and trademarks.......................................... 170.0 144.2 Software and other intangibles............................................ 135.4 117.8
NOTE 11 -- DEBT SHORT-TERM DEBT Honeywell has lines of credit available totaling $2,271.9 at December 31, 1993. Domestic revolving credit lines with 14 banks total $1,875.0, which management believes is adequate to meet its financing requirements, including support of commercial paper and bank note borrowings and an appeal bond that could be required in the Litton litigation (see Note 19). These domestic lines have commitment fee requirements. There were no borrowings on these lines at December 31, 1993. The remaining credit facilities of $396.9 have been arranged by non-U.S. subsidiaries in accordance with customary lending practices in their respective countries of operation. Borrowings against these lines amounted to $6.6 at December 31, 1993. Short-term debt consists of the following:
1993 1992 --------- --------- Commercial paper.......................................................... $ 181.0 $ 161.0 Notes payable............................................................. 6.6 21.1 Current maturities of long-term debt...................................... 0.3 6.3 --------- --------- $ 187.9 $ 188.4
LONG-TERM DEBT
1993 1992 --------- --------- Honeywell Inc. 8% Dual-currency yen/U.S. dollar notes due 1995......................... $ 116.7 $ 114.9 7 7/8% due 1996......................................................... 100.0 100.0 6 1/4% Deutsche mark bonds due 1997..................................... 88.0 92.7 8 5/8% due 2006......................................................... 100.0 100.0 7.7% to 10 1/2% due 1995 to 2010........................................ 12.0 12.1 Subsidiaries 9.6% Canadian dollar notes due 1996..................................... 86.4 90.9 9.0% to 12.75% due 1994 to 2020, various currencies..................... 1.2 7.8 --------- --------- 504.3 518.4 Less amount included in short-term debt................................. 0.3 6.3 --------- --------- $ 504.0 $ 512.1
The 8 percent dual-currency yen/U.S. dollar notes due 1995 are repayable at a fixed exchange rate and are linked to a currency exchange agreement that results in a fixed U.S. dollar interest cost of 10.5 percent. The 6 1/4 percent Deutsche mark bonds due 1997 are linked to a currency exchange agreement that converts principal and interest payments into fixed U.S. dollar obligations with an interest cost of 8.17 percent. 29 NOTES TO FINANCIAL STATEMENTS (CONTINUED) HONEYWELL INC. AND SUBSIDIARIES (DOLLARS IN MILLIONS EXCEPT PER SHARE AMOUNTS) NOTE 11 -- DEBT (CONTINUED) In 1992, Honeywell entered into interest rate swap agreements effectively converting $100.0 of its 8 5/8 percent debentures due 2006 from fixed-rate debt to floating-rate debt based on six-month LIBOR rates. During 1993, $50.0 of the $100.0 swap was terminated resulting in a gain of $0.9, which is being amortized over the remaining life of the swap agreement. In 1993, Honeywell entered into interest rate swap agreements effectively converting the 9.6 percent Canadian dollar notes due 1996 to floating-rate debt based on three-month Canadian bankers acceptance rates. The differential to be paid or received is accrued as interest rates change and is charged to interest expense over the lives of the agreements, which expire in September 1995 for the 8 5/8 percent debentures and December 1996 for the 9.6 percent Canadian dollar notes. Honeywell is exposed to credit risk to the extent of nonperformance by the counterparties to the currency exchange agreements and the interest rate swaps discussed above. However, the credit ratings of the counterparties, which consist of a diversified group of financial institutions, are regularly monitored and risk of default is considered remote. In 1992, Honeywell redeemed its 9 3/8 percent debentures due 2005 to 2009, its 8.2 percent debentures due 1996 to 1998, its 9 7/8 percent debentures due 1998 to 2017, and certain notes due 1993 to 2004, amounting to $9.6 with interest rates ranging from 7.5 percent to 11.75 percent. These early redemptions required the payment of premiums and the recognition of unamortized discounts and deferred cost resulting in the recording of an extraordinary loss of $13.8, or $8.6 ($0.06 per share) after income taxes. Honeywell redeemed an additional $5.9 of notes due 1993 to 2000 with interest rates ranging from 10 percent to 12.1 percent in the first quarter of 1993 with no additional income statement impact. Annual sinking-fund and maturity requirements for the next five years on long-term debt outstanding at December 31, 1993, are as follows: 1994............................................... $ 0.3 1995............................................... 126.8 1996............................................... 186.5 1997............................................... 88.1 1998............................................... 0.1
Interest paid amounted to $63.9, $98.5 and $96.9 in 1993, 1992 and 1991, respectively. NOTE 12 -- FAIR VALUE OF FINANCIAL INSTRUMENTS The estimated fair value of Honeywell's financial instruments at December 31, 1993 and 1992, is as follows:
1993 1992 -------------------- -------------------- CARRYING FAIR Carrying Fair AMOUNT VALUE Amount Value --------- --------- --------- --------- Long-term debt........................................... $ (504.3) $ (569.0) $ (518.4) $ (551.6) Interest-rate and currency contracts..................... 10.7 22.3 15.8 10.0
The estimated fair value of long-term debt is based on quoted market prices for the same or similar issues or on current rates available to Honeywell for debt of the same remaining maturities. The estimated fair value of interest-rate and currency contracts is based on quotes obtained from various financial institutions that deal in these types of instruments. The estimated fair values of all other financial instruments approximate their carrying amounts in the statement of financial position. 30 NOTES TO FINANCIAL STATEMENTS (CONTINUED) HONEYWELL INC. AND SUBSIDIARIES (DOLLARS IN MILLIONS EXCEPT PER SHARE AMOUNTS) NOTE 13 -- LEASING ARRANGEMENTS As lessee, Honeywell has minimum annual lease commitments outstanding at December 31, 1993, with the majority of the leases having initial periods ranging from one to 10 years. Following is a summary of operating lease information.
OPERATING LEASES ----------- 1994........................................................... $ 101.7 1995........................................................... 81.8 1996........................................................... 57.7 1997........................................................... 41.2 1998........................................................... 28.1 1999 and beyond................................................ 125.8 ----------- $ 436.3
Rent expense for operating leases was $134.2 in 1993, $128.0 in 1992 and $119.6 in 1991. Substantially all leases are for plant, warehouse, office space and automobiles. A number of the leases contain renewal options ranging from one to 10 years. NOTE 14 -- CAPITAL STOCK
ADDITIONAL COMMON PAID-IN TREASURY STOCK CAPITAL STOCK ----------- ----------- ----------- Balance January 1, 1991............................................. $ 141.8 $ 522.4 $ (992.2) Purchase of treasury stock -- 2,108,327 shares.................................................. (123.6) Issued for employee stock plans -- 1,313,025 treasury shares......................................... 8.0 47.0 157,696 shares canceled........................................... (0.2) ----------- ----------- ----------- Balance December 31, 1991........................................... 141.6 530.4 (1,068.8) Purchase of treasury stock -- 5,586,254 shares.................................................. (192.0) Issued for employee stock plans -- 2,965,328 treasury shares......................................... 35.0 41.8 355,342 shares canceled........................................... (0.5) Adjustment for two-for-one stock split -- 94,397,423 shares................................................. 141.6 (141.6) ----------- ----------- ----------- Balance December 31, 1992........................................... 282.7 423.8 (1,219.0) Purchase of treasury stock -- 6,916,868 shares.................................................. (240.0) Issued for employee stock plans -- 1,907,165 treasury shares......................................... 7.7 30.6 110,934 shares canceled........................................... (0.2) ----------- ----------- ----------- Balance December 31, 1993........................................... $ 282.5 $ 431.5 $ (1,428.4)
31 NOTES TO FINANCIAL STATEMENTS (CONTINUED) HONEYWELL INC. AND SUBSIDIARIES (DOLLARS IN MILLIONS EXCEPT PER SHARE AMOUNTS) NOTE 14 -- CAPITAL STOCK (CONTINUED) STOCK SPLIT On November 9, 1992, the board of directors authorized a two-for-one stock split in the form of a stock dividend payable to stockholders of record November 27, 1992. All references in the financial statements to average number of shares outstanding and related prices, per share amounts, stock plan data and the 1992 share amounts in the table above have been restated to reflect this split. KEY EMPLOYEE PLANS In 1993, the board of directors adopted, and the stockholders approved, the 1993 Honeywell Stock and Incentive Plan. The plan, which terminates December 31, 1998, provides for the award of up to 7,500,000 shares of common stock. The purpose of the plan is to further the growth, development and financial success of Honeywell and its subsidiaries by aligning the personal interests of key employees, through the ownership of shares of common stock and through other incentives, to those of Honeywell stockholders. The plan is further intended to provide flexibility to Honeywell in its ability to compensate key employees and to motivate, attract and retain the services of such key employees who have the ability to enhance the value of Honeywell and its subsidiaries. Awards made under the plan may be in the form of stock options, stock appreciation rights or other stock based awards. The plan replaced existing similar plans. Awards currently outstanding under those plans are not affected, but no new awards will be made. There were 15,118,538 shares reserved for all key employee plans at December 31, 1993. Stock options to purchase common stock have been granted to key employees at 100 percent of the market price at time of granting, pursuant to plans approved by the stockholders. The following is a summary of stock options:
1993 1992 1991 ---------- ----------- ----------- Granted -- Number of shares.................................... 969,173 1,353,224 1,014,184 Price per share..................................... $31-$38 $31-$37 $21-$32 Exercised -- Number of shares.................................... 1,020,769 1,926,649 1,508,424 Price per share..................................... $12-$33 $8-$30 $8-$26 Outstanding December 31 -- Number of shares.................................... 4,739,683 4,800,613 5,382,932 Price per share..................................... $12-$38 $12-$37 $8-$32
Options totaling 3,779,200 shares at prices ranging from $12 to $37 per share were exercisable at December 31, 1993. Restricted common stock is issued to certain key employees as compensation. Restricted shares are awarded with a fixed restriction period, usually five years, or a restriction period dependent on the achievement of performance goals within a specified measurement period. Participants have the rights of stockholders, including the right to receive cash dividends and the right to vote. Restricted shares forfeited revert to Honeywell at no cost. Restricted shares issued totaled 533,995 in 1993, 47,812 in 1992 and 174,518 in 1991. The cost of restricted stock is charged to income over the restriction period and amounted to $6.3 in 1993, $6.5 in 1992 and $6.4 in 1991. At December 31, restricted shares outstanding for key employee plans totaled 775,861 in 1993, 412,872 in 1992 and 968,750 in 1991. 32 NOTES TO FINANCIAL STATEMENTS (CONTINUED) HONEYWELL INC. AND SUBSIDIARIES (DOLLARS IN MILLIONS EXCEPT PER SHARE AMOUNTS) NOTE 14 -- CAPITAL STOCK (CONTINUED) EMPLOYEE STOCK MATCH AND STOCK PURCHASE PLANS In 1990, Honeywell adopted Stock Match and Performance Stock Match plans under which Honeywell matches, in the form of Honeywell common stock, certain eligible U.S. employee savings plan contributions. Shares issued under the stock match plans totaled 643,913 shares in 1993, 977,716 shares in 1992 and 933,344 shares in 1991 at a cost of $22.3, $33.3 and $27.9, respectively. There were 2,348,295 shares reserved for employee stock match plans at December 31, 1993. Honeywell has granted to eligible foreign subsidiary employees the right to purchase common stock, principally at the lower of 85 percent of the market price at the time of grant or at the time of purchase. At December 31, 1993, there were 335,537 shares reserved for foreign subsidiary employee stock purchase plans. Total shares issued under the foreign stock purchase plans amounted to 49,250 in 1992 and 66,096 in 1991 at an average price per share of $33 and $27, respectively. There were no shares issued in 1993. STOCK PLEDGE In 1993, Honeywell pledged to the Honeywell Foundation a 5-year option to purchase 2,000,000 shares of common stock at $33 per share. This option is exercisable in whole or in part, subject to certain conditions, from time to time during its term. No shares were purchased under this option in 1993 and at December 31, 1993, there were 2,000,000 shares reserved for this pledge. PREFERENCE STOCK Twenty-five million preference shares with a par value of $1 have been authorized. None has been issued at December 31, 1993. NOTE 15 -- RETAINED EARNINGS
1993 1992 1991 --------- ---------- ---------- Balance January 1......................................... $ 2,247.0 $ 2,116.9 $ 1,894.1 Net income................................................ 322.2 246.8 331.1 Dividends 1993-$0.9075 PER SHARE.................................. (121.9) 1992-$0.84125 per share................................. (116.7) 1991-$0.76875 per share................................. (108.3) --------- ---------- ---------- Balance December 31....................................... $ 2,447.3 $ 2,247.0 $ 2,116.9
Included in retained earnings are undistributed earnings of companies 20 to 50 percent owned, amounting to $121.3 at December 31, 1993. NOTE 16 -- PENSION PLANS Honeywell and its subsidiaries have noncontributory defined benefit pension plans that cover substantially all of their U.S. employees. The plan covering non-union employees provides pension benefits based on employee average earnings during the highest paid 60 consecutive calendar months of employment during the 10 years prior to retirement. The plan covering union employees provides pension benefits of stated amounts for each year of credited service. Funding for these plans is provided solely through contributions from Honeywell determined by the board of directors after consideration of recommendations from the plans' independent actuary. Such recommendations are based on actuarial valuations of benefits payable under the plans. 33 NOTES TO FINANCIAL STATEMENTS (CONTINUED) HONEYWELL INC. AND SUBSIDIARIES (DOLLARS IN MILLIONS EXCEPT PER SHARE AMOUNTS) NOTE 16 -- PENSION PLANS (CONTINUED) The components of net periodic pension cost for U.S. defined benefit pension plans are as follows:
1993 1992 1991 --------- --------- --------- Service cost of benefits earned during the period...................... $ 48.3 $ 48.1 $ 45.4 Interest cost of projected benefit obligation.......................... 198.9 192.2 175.6 Actual return on assets................................................ (225.7) (147.7) (360.7) Net amortization and deferral.......................................... 69.3 (5.1) 212.2 --------- --------- --------- $ 90.8 $ 87.5 $ 72.5
Assumptions used in the accounting for the U.S. defined benefit plans were:
1993 1992 1991 ---------- ----------- ----------- Discount rate used in determining present values............................. 7.5% 8.75% 8.75% Annual increase in future compensation levels................................ 4.0% 5.0% 5.5% Expected long-term rate of return on assets.................................. 8.5% 8.75% 8.75%
Employees in foreign countries who are not U.S. citizens are covered by various retirement benefit arrangements, some of which are considered to be defined benefit pension plans for accounting purposes. The cost of all foreign pension plans charged to income was $14.2 in 1993, $9.0 in 1992 and $9.8 in 1991. The components of net periodic pension cost for foreign defined benefit pension plans are as follows:
1993 1992 1991 --------- --------- --------- Service cost of benefits earned during the period......................... $ 25.8 $ 29.8 $ 24.1 Interest cost of projected benefit obligation............................. 46.3 47.0 40.5 Actual return on assets................................................... (111.7) (38.4) (76.5) Net amortization and deferral............................................. 50.7 (32.8) 16.0 --------- --------- --------- $ 11.1 $ 5.6 $ 4.1
Assumptions used in the accounting for foreign defined benefit plans were:
1993 1992 1991 ---------- ------------ ------------ Discount rate used in determining present values................ 5.0-9.0% 5.0-9.5% 6.0-11.0% Annual increase in future compensation levels................... 2.0-8.0% 2.0-8.0% 2.0-9.0% Expected long-term rate of return on assets..................... 6.0-9.5% 6.0-10.3% 7.0-10.3%
34 NOTES TO FINANCIAL STATEMENTS (CONTINUED) HONEYWELL INC. AND SUBSIDIARIES (DOLLARS IN MILLIONS EXCEPT PER SHARE AMOUNTS) NOTE 16 -- PENSION PLANS (CONTINUED) The plans' funded status as of September 30 and amounts recognized in Honeywell's statement of financial position for its pension plans are summarized below.
Plans Whose Plans Whose Assets Exceed Accumulated Accumulated Benefits 1993 (U.S. AND FOREIGN) Benefits Exceed Assets - ----------------------------------------------------------------------------------- ------------- ------------- Actuarial present value of benefit obligations: Vested benefit obligation........................................................ $ (309.7) $ (2,472.0) Accumulated benefit obligation................................................... $ (389.5) $ (2,626.5) Projected benefit obligation..................................................... $ (480.6) $ (2,909.0) Plan assets at fair value.......................................................... 637.7 2,381.7 ------------- ------------- Projected benefit obligation (in excess of) less than plan assets.................. 157.1 (527.3) Remaining unrecognized net transition asset........................................ (71.4) (9.2) Unrecognized prior service cost.................................................... 1.8 228.6 Unrecognized net (gain) loss....................................................... (23.1) 170.3 Fourth-quarter 1993 contributions to plans......................................... 38.0 Adjustment to recognize minimum liability.......................................... (113.0) ------------- ------------- Overfunded (unfunded) pension asset (liability) recognized in the statement of financial position................................................................ $ 64.4 $ (212.6)
Plans Whose Plans Whose Assets Exceed Accumulated Accumulated Benefits 1992 (U.S. and Foreign) Benefits Exceed Assets - ----------------------------------------------------------------------------------- ------------- ------------- Actuarial present value of benefit obligations: Vested benefit obligation........................................................ $ (1,876.8) $ (508.1) Accumulated benefit obligation................................................... $ (2,050.0) $ (538.1) Projected benefit obligation..................................................... $ (2,426.4) $ (584.0) Plan assets at fair value.......................................................... 2,307.6 425.9 ------------- ------------- Projected benefit obligation in excess of plan assets.............................. (118.8) (158.1) Remaining unrecognized net transition obligation (asset)........................... (164.2) 62.5 Unrecognized prior service cost.................................................... 210.3 41.3 Unrecognized net (gain) loss....................................................... (5.0) 5.1 Fourth-quarter 1992 contributions to plans......................................... 28.7 7.9 Adjustment to recognize minimum liability.......................................... (74.7) ------------- ------------- Unfunded pension liability recognized in the statement of financial position....... $ (49.0) $ (116.0)
Adjustments recorded to recognize the minimum liability required for defined benefit pension plans whose accumulated benefits exceed assets amounted to $113.0 in 1993 and $74.7 in 1992. A corresponding amount was recognized as an intangible asset to the extent of unrecognized prior service cost and unrecognized transition obligation. In 1993, $21.0 of excess minimum liability resulted in a reduction in stockholders' equity, net of income taxes, of $12.8. Plan assets are held by trust funds devoted to servicing pension benefits and are not available to Honeywell until all covered benefits are satisfied after a plan is terminated. The assets held by the trust funds consist of a diversified portfolio of fixed-income investments and equity securities. 35 NOTES TO FINANCIAL STATEMENTS (CONTINUED) HONEYWELL INC. AND SUBSIDIARIES (DOLLARS IN MILLIONS EXCEPT PER SHARE AMOUNTS) NOTE 17 -- POSTRETIREMENT BENEFITS OTHER THAN PENSIONS In 1992, Honeywell adopted Statement of Financial Accounting Standards No. 106 (SFAS 106), "Employers' Accounting for Postretirement Benefits Other Than Pensions," which requires recognition of the expected cost of providing postretirement benefits over the time employees earn the benefits. Before adopting SFAS 106, Honeywell recognized the cost of providing these benefits on a pay-as-you-go basis by expensing the cost in the year the benefit was provided. Substantially all of Honeywell's domestic and Canadian employees who retire from Honeywell between the ages of 55 and 65 with 10 or more years of service are eligible to receive health-care benefits until age 65 identical to those available to active employees. Honeywell continues to fund postretirement benefits on a pay-as-you-go basis. Honeywell elected to immediately recognize the cumulative effect of this change in accounting for postretirement benefits for both U.S. and Canadian plans, reducing net income by $151.3 ($1.09 per share). The pre-tax cumulative effect of $244.1 represents the accumulated postretirement benefit obligation (APBO) existing at January 1, 1992, less $11.3 related to discontinued product lines recorded in prior years. The effect of this accounting change for 1992 was a decrease in income before income taxes of $16.4, or $10.9 ($0.08 per share) after income taxes. The pro forma effect of this change on years prior to 1992 would have been a decrease in net income in amounts approximately equal to the 1992 effect. The components of net periodic postretirement benefit cost are as follows:
1993 1992 ----- ----- Service cost of benefits earned during the period........... $11.5 $10.5 Interest cost on accumulated postretirement benefit obligation................................................. 22.2 20.9 ----- ----- $33.7 $31.4
The amounts recognized in Honeywell's statement of financial position are as follows:
1993 1992 ------ ------ Accumulated postretirement benefit obligation: Retirees.................................................. $ 86.6 $ 84.7 Fully eligible active plan participants................... 41.5 44.6 Other active plan participants............................ 129.9 139.9 Unrecognized net gain..................................... 25.7 ------ ------ Accrued postretirement benefit cost......................... $283.7 $269.2
The discount rate used in determining the APBO was 7.0 percent in 1993 and 8.5 percent in 1992. The assumed health-care cost trend rate used in measuring the APBO was 10.0 percent in 1993 and 1994, then declining by 0.6 percent per year to an ultimate rate of 5.5 percent. The health-care cost trend rate assumption has a significant effect on the amounts reported. For example, a 1 percent increase in the health-care trend rate would increase the APBO by 11 percent at December 31, 1993, and the net periodic postretirement benefit cost by 14 percent for 1993. NOTE 18 -- SEGMENT INFORMATION Honeywell's operations are engaged in the design, development, manufacture, marketing and service of control solutions in three industry segments -- Home and Building Control, Industrial Control and Space and Aviation Control. 36 NOTES TO FINANCIAL STATEMENTS (CONTINUED) HONEYWELL INC. AND SUBSIDIARIES (DOLLARS IN MILLIONS EXCEPT PER SHARE AMOUNTS) NOTE 18 -- SEGMENT INFORMATION (CONTINUED) Home and Building Control provides products and services to create efficient, safe, comfortable environments by offering controls for heating, ventilation, humidification and air-conditioning equipment; security and fire alarm systems; home automation systems; energy-efficient lighting controls; and building management systems and services. Industrial Control produces systems for the automation and control of process operations in industries such as oil refining, oil and gas drilling, pulp and paper manufacturing, food processing, chemical manufacturing and power generation; solid-state sensors for position, pressure, air flow, temperature and current; precision electromechanical switches; manual controls; advanced vision-based sensors; fiber-optic components; and solenoid valves used in fluid control and processing industries. Space and Aviation Control is a full-line avionics supplier and systems integrator for commercial, military and space applications, providing automatic flight control systems, electronic cockpit displays, flight management systems, navigation, surveillance and warning systems, severe weather avoidance systems and flight reference sensors. The "other" category comprises various operations, such as Solid State Electronics Center and Systems and Research Center, that are not a significant part of Honeywell's operations either individually or in the aggregate. Information concerning Honeywell's sales, operating profit and identifiable assets by industry segment can be found in Item 6. Selected Financial Data at page 9. This information for 1993, 1992 and 1991 is an integral part of these financial statements. Sales include external sales only. Intersegment sales are not significant. Corporate and other assets include the assets of the entities in the "other" category, and cash, short term investments, investments, property and deferred taxes held by corporate. Following is additional financial information relating to industry segments:
1993 1992 1991 --------- --------- --------- Capital expenditures Home and Building Control..................................... $ 73.6 $ 63.5 $ 58.1 Industrial Control............................................ 72.8 81.9 55.4 Space and Aviation Control.................................... 58.4 67.2 88.9 Corporate and other........................................... 27.3 31.5 37.8 --------- --------- --------- $ 232.1 $ 244.1 $ 240.2 Depreciation and amortization Home and Building Control..................................... $ 67.9 $ 69.0 $ 68.9 Industrial Control............................................ 59.9 54.6 48.6 Space and Aviation Control.................................... 127.0 137.4 137.9 Corporate and other........................................... 30.1 31.7 30.6 --------- --------- --------- $ 284.9 $ 292.7 $ 286.0
Honeywell engages in material operations in foreign countries, the majority of which are located in Europe. Other geographic areas of operation include Canada, Mexico, Australia, South America and the Far East. 37 NOTES TO FINANCIAL STATEMENTS (CONTINUED) HONEYWELL INC. AND SUBSIDIARIES (DOLLARS IN MILLIONS EXCEPT PER SHARE AMOUNTS) NOTE 18 -- SEGMENT INFORMATION (CONTINUED) Following is financial information relating to geographic areas:
1993 1992 1991 --------- ---------- ---------- External sales United States........................................... $ 3,895.1 $ 4,014.9 $ 4,100.2 Europe.................................................. 1,441.2 1,556.3 1,428.4 Other areas............................................. 626.7 651.4 664.3 --------- ---------- ---------- $ 5,963.0 $ 6,222.6 $ 6,192.9 Transfers between geographic areas United States........................................... $ 246.7 $ 242.2 $ 233.1 Europe.................................................. 36.9 33.0 26.8 Other areas............................................. 47.6 47.0 48.0 --------- ---------- ---------- $ 331.2 $ 322.2 $ 307.9 Total sales United States........................................... $ 4,141.8 $ 4,257.1 $ 4,333.3 Europe.................................................. 1,478.1 1,589.3 1,455.2 Other areas............................................. 674.3 698.4 712.3 Eliminations............................................ (331.2) (322.2) (307.9) --------- ---------- ---------- $ 5,963.0 $ 6,222.6 $ 6,192.9 Operating profit United States........................................... $ 384.1 $ 338.1 $ 428.3 Europe.................................................. 140.2 150.4 205.6 Other areas............................................. 44.4 28.1 42.2 --------- ---------- ---------- Operating profit........................................ 568.7 516.6 676.1 Interest expense........................................ (68.0) (89.9) (89.4) Litigation settlements.................................. 32.6 287.9 Equity income........................................... 17.8 15.8 14.6 General corporate expense............................... (72.6) (95.7) (91.9) --------- ---------- ---------- Income before income taxes.............................. $ 478.5 $ 634.7 $ 509.4 Identifiable Assets United States........................................... $ 2,337.5 $ 2,502.7 $ 2,566.3 Europe.................................................. 1,111.4 1,134.4 1,183.3 Other areas............................................. 357.1 372.5 362.0 Corporate............................................... 792.1 860.5 695.1 --------- ---------- ---------- $ 4,598.1 $ 4,870.1 $ 4,806.7
Honeywell transfers products from one geographic region for resale in another. These transfers are priced to provide both areas with an equitable share of the overall profit. Operating profit is net of provision for special charges amounting to $51.2 and $128.4 in 1993 and 1992, respectively, (see Note 3) as follows: United States -- $22.4 and $79.8, Europe -- $20.3 and $29.7, other areas -- $9.3 in 1992. General corporate expense includes special charges of $8.5 in 1993 and $9.6 in 1992. General corporate expense has been reduced by royalty income of $31.4 in 1993 and $14.9 in 1992 (see Note 3). 38 NOTES TO FINANCIAL STATEMENTS (CONTINUED) HONEYWELL INC. AND SUBSIDIARIES (DOLLARS IN MILLIONS EXCEPT PER SHARE AMOUNTS) NOTE 18 -- SEGMENT INFORMATION (CONTINUED) The operating profit impact of implementing SFAS 106 was additional expense of $16.4 in 1992 (see Note 17) as follows: United States -- $15.3, other areas - -- $0.5, general corporate expense -- $0.6. The operating profit impact of implementing SFAS 112 was additional expense of $3.8 in 1992 (see Note 1) as follows: United States -- $3.6, general corporate expense -- $0.2. NOTE 19 -- CONTINGENCIES LITTON LITIGATION On March 13, 1990, Litton Systems Inc. filed suit against Honeywell in U.S. District Court, Central District of California, alleging Honeywell patent infringement relating to the process used by Honeywell to coat mirrors incorporated in its ring laser gyroscopes; attempted monopolization by Honeywell of certain alleged markets for products containing ring laser gyroscopes; and intentional interference by Honeywell with Litton's prospective advantage in European markets and with its contractual relationships with Ojai Research, Inc., a California corporation. Honeywell has filed counterclaims against Litton alleging, among other things, violations by Litton of various antitrust laws including attempted monopolization of markets for inertial systems and interference with Honeywell's relationships with suppliers. The trial of the patent infringement and intentional interference claims commenced June 4, 1993, and on August 31, 1993, a federal court jury in U.S. District Court in Los Angeles returned a verdict against Honeywell on each of these claims and awarded damages in the amount of $1,200.0 and concluded that the patent infringement was willful. Honeywell believes the verdict is unsupported by the facts; that the Litton patent is invalid; and that Honeywell's process differs from Litton's. The judge in the case held a hearing November 22, 1993, on various issues including, among others, Honeywell's claims that the patent was improperly obtained due to alleged "inequitable conduct" on the part of Litton and Honeywell's other legal and equitable defenses. The court has not yet entered a judgment. The trial will conclude when the court has resolved legal issues that could alter or eliminate the jury verdict. Honeywell will evaluate the outcome of the trial, including appealing any significant judgment against the company. No trial date has been set for the antitrust claims of Litton and Honeywell. The court has yet to rule on significant, complex and interrelated issues that could alter or eliminate the jury verdict; therefore, Honeywell and its counsel have determined that it is not possible to estimate the amount of damages, if any, that may ultimately be incurred. As a result, no provision has been made in the financial statements with respect to this contingent liability. ENVIRONMENTAL MATTERS Honeywell's manufacturing sites generate both hazardous and nonhazardous wastes, the treatment, storage, transportation and disposal of which are subject to various local, state and national laws relating to protection of the environment. Honeywell is in varying stages of investigation or remediation of potential, alleged or acknowledged contamination at current or previously owned or operated sites and at off-site locations where its wastes were taken for treatment or disposal. In connection with the cleanup of various off-site locations, Honeywell, along with a large number of other entities, has been designated a potentially responsible party (PRP) by the U.S. Environmental Protection Agency under the Comprehensive Environmental Response, Compensation and Liability Act or by state agencies under similar state laws (Superfund), which potentially subjects PRPs to joint and several liability for the costs of such cleanup. In addition, Honeywell is incurring costs relating to environmental remediation pursuant to the federal Resource Conservation and Recovery Act. Based on Honeywell's assessment of the costs associated with its environmental responsibilities, compliance 39 NOTES TO FINANCIAL STATEMENTS (CONTINUED) HONEYWELL INC. AND SUBSIDIARIES (DOLLARS IN MILLIONS EXCEPT PER SHARE AMOUNTS) NOTE 19 -- CONTINGENCIES (CONTINUED) with federal, state and local laws regulating the discharge of materials into the environment, or otherwise relating to the protection of the environment, has not had, and in the opinion of Honeywell management, will not have a material effect on Honeywell's financial position, results of operations, capital expenditures or competitive position. Honeywell's opinion with regard to Superfund matters is based on its assessment of the predicted investigation, remediation and associated costs, its expected share of those costs and the availability of legal defenses. Honeywell's policy is to record environmental liabilities when loss amounts are probable and reasonably estimable. OTHER MATTERS Honeywell is a party to a large number of other legal proceedings, some of which are for substantial amounts. It is the opinion of management that losses in connection with these matters will not have a material effect on net income. The transfer of assets by Honeywell in the 1990 spinoff of the Defense and Marine Systems Business to Alliant Techsystems Inc. (Alliant) included the assignment of various contracts between Honeywell and the U.S. government. As required by federal procurement regulations applicable to government contracts, Honeywell has entered into novation agreements with Alliant and the U.S. government that will provide, among other things, for Honeywell to directly or indirectly guarantee or otherwise become liable for the performance of Alliant's obligations under such contracts. NOTE 20 -- QUARTERLY DATA (UNAUDITED)
1993 1ST QTR. 2ND QTR. 3RD QTR. 4TH QTR. - ------------------------------------------------------------------- --------- --------- --------- --------- Sales.............................................................. $1,438.6 $1,452.0 $1,452.3 $1,620.1 Cost of sales...................................................... 989.8 982.2 985.4 1,062.2 Net income......................................................... 57.3 71.4 80.9 112.6 Per share........................................................ 0.42 0.53 0.60 0.85
The third quarter of 1993 includes a gain of $9.2 from the revaluation of deferred tax assets (see Note 4). The fourth quarter of 1993 benefited from a change in estimate of $33.4 for postemployment benefits (see Note 1) that was partially offset by accruals for facilities closures and other expenses in the amount of $26.9. Following is a summary of other significant items affecting 1993 results.
1993 1ST QTR 2ND QTR. 3RD QTR. 4TH QTR. - ------------------------------------------------------------------------ --------- --------- --------- --------- Gain from litigation settlements (see Note 3)........................... $ 22.4 $ 10.2 After tax............................................................. 13.9 6.3 Per share............................................................. 0.10 0.05 Special charges (see Note 3)............................................ (23.2) (28.0) After tax............................................................. (13.3) (15.5) Per share............................................................. (0.10) (0.12)
40 NOTES TO FINANCIAL STATEMENTS (CONTINUED) HONEYWELL INC. AND SUBSIDIARIES (DOLLARS IN MILLIONS EXCEPT PER SHARE AMOUNTS) NOTE 20 -- QUARTERLY DATA (UNAUDITED) (CONTINUED)
1992 1st Qtr. 2nd Qtr. 3rd Qtr. 4th Qtr. - ---------------------------------------------------------------- ---------- ---------- ---------- ---------- Sales........................................................... $ 1,481.6 $ 1,485.8 $ 1,550.0 $ 1,705.2 Cost of sales................................................... 1,023.0 1,005.1 1,039.1 1,128.1 Income before extrarordinary item and cumulative effect of accounting changes 113.4 81.8 172.6 32.1 Per share..................................................... 0.82 0.58 1.25 0.23 Extroardinary item.............................................. (5.5) (3.1) Per share..................................................... (0.04) (0.02) Cumulative effect of accounting changes......................... (144.5) Per share..................................................... (1.04) Net income...................................................... (31.1) 81.8 167.1 29.0 Per share..................................................... (0.22) 0.58 1.21 0.21
The first quarter of 1992 includes the cumulative effects of adopting SFAS 106 (see Note 17), SFAS 109 (see Note 4) and SFAS 112 (see Note 1) at January 1, 1992. The 1992 impact of adopting these accounting changes was a decrease in income before income taxes of approximately $5.1 on a combined basis, or $3.4 ($0.03 per share) after income taxes, for each quarter. Other significant items affecting 1992 results include the following:
1992 1st Qtr 2nd Qtr. 3rd Qtr. 4th Qtr. - ------------------------------------------------------------------------ --------- ----------- --------- --------- Gain from litigation settlements (see Note 3)........................... $ 108.3 $ 12.3 $ 152.8 $ 14.5 After tax............................................................. 65.0 7.4 91.6 7.4 Per share............................................................. 0.46 0.06 0.66 0.06 Special charges (see Note 3)............................................ (128.4) After tax............................................................. (85.1) Per share............................................................. (0.62)
Common Stock Price (New York Stock Exchange Composite) Dividends 1993 Per Share High Low - -------------------------------------------------------------------------------- ----------- --------- --------- FIRST QUARTER................................................................... $ .2225 $35 1/2 $31 1/2 SECOND QUARTER.................................................................. .2225 38 1/4 32 1/4 THIRD QUARTER................................................................... .2225 39 3/8 34 5/8 FOURTH QUARTER.................................................................. .24 37 31 1992 - -------------------------------------------------------------------------------- First Quarter................................................................... $ .20625 $37 7/8 $31 1/2 Second Quarter.................................................................. .20625 37 1/4 33 1/4 Third Quarter................................................................... .20625 34 7/8 30 7/8 Fourth Quarter.................................................................. .2225 34 7/8 30 1/8
Stockholders of record on February 2, 1994, totaled 33,166. ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE No report on Form 8-K reporting a change in Honeywell's certifying independent accountants has been filed within the 24 months prior to the date of the most recent financial statements. 41 PART III ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT Pages 3 through 9 and page 14 of the Honeywell Notice of 1994 Annual Meeting and Proxy Statement are incorporated herein by reference. ITEM 11. EXECUTIVE COMPENSATION Pages 14 through 20 of the Honeywell Notice of 1994 Annual Meeting and Proxy Statement are incorporated herein by reference. ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT Pages 10 through 11 of the Honeywell Notice of 1994 Annual Meeting and Proxy Statement are incorporated herein by reference. ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS None. PART IV ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K (A) DOCUMENTS FILED AS A PART OF THIS REPORT 1. FINANCIAL STATEMENTS The financial statements required to be filed as part of this Annual Report on Form 10-K are listed below with their location in this report.
PAGE --------- Honeywell Inc. and Subsidiaries: Independent Auditors' Report....................................................... 19 Income Statement................................................................... 20 Statement of Financial Position.................................................... 21 Statement of Cash Flows............................................................ 22 Notes to Financial Statements...................................................... 23-41
2. FINANCIAL STATEMENT SCHEDULES The schedules required to be filed as part of this Annual Report on Form 10-K are listed below with their location in this report.
PAGE ----- Honeywell Inc. and Subsidiaries: Independent Auditors' Report.................................................................. 19 Schedules for the Years Ended December 31, 1993, 1992 and 1991: V -- Property, Plant and Equipment......................................... 46 VI -- Accumulated Depreciation.............................................. 47 VIII -- Valuation Reserves.................................................... 48 IX -- Short-Term Borrowings................................................. 49 X -- Supplementary Income Statement Information............................ 49
All schedules, other than indicated above, are omitted because of the absence of the conditions under which they are required or because the information required is shown in the financial statements or notes thereto. 42 3. EXHIBITS Documents Incorporated by Reference: (3)(a) Restated Certificate of Incorporation of Honeywell Inc. dated June 18, 1991. (4) Rights Agreement between Honeywell Inc. and Manufacturers Hanover Trust Company, as Rights Agent, dated as of February 24, 1986, Amended and Restated as of June 17, 1986, Amended and Restated as of December 12, 1988, Amended as of April 2, 1990. (10)(iii)(a) Honeywell Key Employee Severance Plan, as amended, is incorporated by reference to Exhibit (10)(iii)(e) to Honeywell's Annual Report on Form 10-K for 1989. (10)(iii)(b) 1984 Honeywell Key Employee Stock Option Plan, as amended, is incorporated by reference to Exhibit (10)(iii)(l) to Honeywell's Annual Report on Form 10-K for 1992. (10)(iii)(c) Honeywell Supplementary Executive Retirement Plan for Mid-Career Hires, is incorporated by reference to Exhibit (10)(iii)(m) to Honeywell's Annual Report on Form 10-K for 1992. (10)(iii)(d) Honeywell-Norwest Rabbi Trust Agreement, is incorporated by reference to Exhibit (10)(iii)(n) to Honeywell's Annual Report on Form 10-K for 1992. (28)(a) Honeywell Notice of 1994 Annual Meeting and Proxy Statement.* Exhibits submitted herewith: No instrument defining the rights of holders of long-term debt of Honeywell and its consolidated subsidiaries or of any unconsolidated subsidiary for which financial statements are required to be filed, is filed as an exhibit hereto because there is no such instrument authorizing long-term debt in a total amount exceeding 10% of the total assets of Honeywell and its subsidiaries on a consolidated basis. Honeywell hereby agrees to furnish a copy of any such instrument to the Securities and Exchange Commission upon request. (3)(b) By-laws of Honeywell Inc., as amended through December 21, 1993. (10)(i) Credit and Reimbursement Agreement dated as of December 9, 1993 among Honeywell Inc., Morgan Guaranty Trust Company of New York, The Chase Manhattan Bank, Bank of America National Trust and Savings Association, The Fuji Bank Limited and Citicorp USA, Inc. (10)(iii)(e) 1993 Honeywell Stock and Incentive Plan. (10)(iii)(f) 1988 Honeywell Stock and Incentive Plan, as amended. (10)(iii)(g) Restricted-Stock Retirement Plan for Non-Employee Directors. (10)(iii)(h) Honeywell Corporate Executive Compensation Plan, as amended. (10)(iii)(i) Honeywell Supplementary Executive Retirement Plan for Compensation in Excess of $200,000, as amended. (10)(iii)(j) Honeywell Supplementary Executive Retirement Plan for CECP Participants. (10)(iii)(k) Honeywell Supplementary Retirement Plan, as amended. (10)(iii)(l) Honeywell Supplementary Executive Retirement Plan for Benefits in Excess of Limits Under Tax Reform Act of 1986. (10)(iii)(m) Honeywell Executive Life Insurance Agreement. (10)(iii)(n) Form of Executive Termination Contract. (10)(iii)(o) Honeywell Inc. Compensation Plan for Outside Directors. (11) Computation of Earnings Per Share. (22) Subsidiaries of Honeywell. (24) Consent of Independent Auditors.
43 3. EXHIBITS (CONTINUED) (25) Powers of Attorney. (B) REPORTS ON FORM 8-K None - ------------------------ *Only the portions of Exhibit (28)(a) specifically incorporated by reference are deemed filed with the Commission.
44 SIGNATURES Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized. HONEYWELL INC. By: /s/ SIGURD UELAND, JR. -------------------------------------- Sigurd Ueland, Jr., Vice President Dated: March 4, 1994 Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated.
SIGNATURE TITLE - --------------------------- --------------------------------------------------------------------------- M. R. BONSIGNORE Chairman of the Board and Chief Executive Officer and Director W. L. TRUBECK Senior Vice President and Chief Financial Officer W. M. HJERPE Vice President and Controller A. J. BACIOCCO, JR. Director E. E. BAILEY Director E. H. CLARK, JR. Director W. H. DONALDSON Director R. D. FULLERTON Director G. GREENWALD Director J. J. HOWARD Director G. M. JOSEPH Director B. E. KARATZ Director D. L. MOORE Director A. B. RAND Director J. J. RENIER Director S. G. ROTHMEIER Director M. W. WRIGHT Director
By: /s/ SIGURD UELAND, JR. -------------------------------------- Sigurd Ueland, Jr., ATTORNEY-IN-FACT March 4, 1994 45 SCHEDULE V HONEYWELL INC. AND SUBSIDIARIES PROPERTY, PLANT AND EQUIPMENT FOR THE YEARS ENDED DECEMBER 31, 1993, 1992 AND 1991 (DOLLARS IN MILLIONS)
BALANCE AT TRANSERS BALANCE AT BEGINNING OF ADDITIONS AT RECLASSIFICATIONS, ETC. CLOSE OF CLASSIFICATION YEAR COST RETIREMENTS (NOTES 2 & 3) YEAR - --------------------------------------- ------------- ------------ --------------- ----------------------- ----------- Year ended December 31, 1993: Land................................. $ 78.5 $ 0.1 $ 1.8 $ 0.3 $ 77.1 Buildings and improvements........... 621.7 24.4 50.6 (5.6) 589.9 Machinery and equipment.............. 1,734.4 200.5 108.4 (12.3) 1,814.2 Construction in progress............. 63.3 7.1 (2.2) 68.2 ------------- ------------ ------- ------ ----------- Total.............................. $ 2,497.9 $ 232.1 $ 160.8 $ (19.8) $ 2,549.4 ------------- ------------ ------- ------ ----------- ------------- ------------ ------- ------ ----------- Year ended December 31, 1992: Land................................. $ 76.6 $ 3.9 $ 1.3 $ (0.7) $ 78.5 Buildings and improvements........... 616.5 29.9 17.2 (7.5) 621.7 Machinery and equipment.............. 1,673.8 218.5 120.4 (37.5) 1,734.4 Construction in progress............. 79.7 (8.2) (8.2) 63.3 ------------- ------------ ------- ------ ----------- Total.............................. $ 2,446.6 $ 244.1 $ 138.9 $ (53.9) $ 2,497.9 ------------- ------------ ------- ------ ----------- ------------- ------------ ------- ------ ----------- Year ended December 31, 1991: Land................................. $ 78.2 $ 1.4 $ (0.2) $ 76.6 Buildings and improvements........... 602.2 $ 26.1 10.4 (1.4) 616.5 Machinery and equipment.............. 1,542.2 227.8 101.5 5.3 1,673.8 Construction in progress............. 93.2 (13.7) 0.2 79.7 ------------- ------------ ------- ------ ----------- Total.............................. $ 2,315.8 $ 240.2 $ 113.3 $ 3.9 $ 2,446.6 ------------- ------------ ------- ------ ----------- ------------- ------------ ------- ------ ----------- - ------------------------ Notes: (1) Property is carried at cost and depreciated primarily using the straight-line method over estimated useful lives of 10 to 40 years for buildings and improvements and three to 15 years for machinery and equipment. (2) Foreign currency translation adjustments amounted to $(26.1) in 1993, $(62.6) in 1992 and $0.1 in 1991. (3) Includes $7.2 in 1993 and $17.4 in 1992 resulting from acquisitions.
46 SCHEDULE VI HONEYWELL INC. AND SUBSIDIARIES ACCUMULATED DEPRECIATION FOR THE YEARS ENDED DECEMBER 31, 1993, 1992 AND 1991 (DOLLARS IN MILLIONS)
BALANCE AT ADDITIONS TRANSERS BALANCE BEGINNING OF CHARGED TO RECLASSIFICATIONS, AT CLOSE OF CLASSIFICATION YEAR INCOME RETIREMENTS ETC. (NOTE) YEAR - -------------------------------------------------- ------------ ---------- ----------- ------------------ ----------- Year ended December 31, 1993: Buildings and improvements...................... $ 274.4 $ 32.7 $ 24.7 $ (2.7) $ 279.7 Machinery and equipment......................... 1,110.0 202.6 91.3 (13.6) 1,207.7 ------------ ---------- ----------- ------ ----------- Total......................................... $ 1,384.4 $ 235.3 $ 116.0 $ (16.3) $ 1,487.4 ------------ ---------- ----------- ------ ----------- ------------ ---------- ----------- ------ ----------- Year ended December 31, 1992: Buildings and improvements...................... $ 259.4 $ 33.1 $ 11.9 $ (6.2) $ 274.4 Machinery and equipment......................... 1,041.0 209.7 104.6 (36.1) 1,110.0 ------------ ---------- ----------- ------ ----------- Total......................................... $ 1,300.4 $ 242.8 $ 116.5 $ (42.3) $ 1,384.4 ------------ ---------- ----------- ------ ----------- ------------ ---------- ----------- ------ ----------- Year ended December 31, 1991: Buildings and improvements...................... $ 237.3 $ 32.0 $ 9.3 $ (0.6) $ 259.4 Machinery and equipment......................... 928.2 206.5 95.9 2.2 1,041.0 ------------ ---------- ----------- ------ ----------- Total......................................... $ 1,165.5 $ 238.5 $ 105.2 $ 1.6 $ 1,300.4 ------------ ---------- ----------- ------ ----------- ------------ ---------- ----------- ------ ----------- - -------------------------- Note: Foreign currency translation adjustments amounted to $(17.2) in 1993, $(38.6) in 1992 and $0.7 in 1991.
47 SCHEDULE VIII HONEYWELL INC. AND SUBSIDIARIES VALUATION RESERVES FOR THE YEARS ENDED DECEMBER 31, 1993, 1992 AND 1991 (DOLLARS IN MILLIONS)
BALANCE AT ADDITIONS DEDUCTIONS BALANCE BEGINNING CHARGED TO FROM AT CLOSE OF YEAR INCOME RESERVES OF YEAR ------------- ---------------- ----------------- ----------- Reserves deducted from assets to which they apply -- allowance for doubtful accounts: RECEIVABLES -- CURRENT - -------------------------------------------------------- Year ended December 31, 1993............................ $ 26.7 $ 9.1(1) $ 11.5(2) $ 24.3 ------------- ------ ------ ----------- ------------- ------ ------ ----------- Year ended December 31, 1992............................ $ 26.3 $ 13.1(1) $ 12.7(2) $ 26.7 ------------- ------ ------ ----------- ------------- ------ ------ ----------- Year ended December 31, 1991............................ $ 24.9 $ 17.7(1) $ 16.3(2) $ 26.3 ------------- ------ ------ ----------- ------------- ------ ------ ----------- LONG-TERM RECEIVABLES - -------------------------------------------------------- Year ended December 31, 1993............................ $ 0.8 $ -- $ 0.3(2) $ 0.5 ------------- ------ ------ ----------- ------------- ------ ------ ----------- Year ended December 31, 1992............................ $ 1.7 $ -- $ 0.9(2) $ 0.8 ------------- ------ ------ ----------- ------------- ------ ------ ----------- Year ended December 31, 1991............................ $ 1.4 $ 0.3(1) $ -- $ 1.7 ------------- ------ ------ ----------- ------------- ------ ------ ----------- Reserves deducted from assets to which they apply -- valuation reserve: LONG-TERM RECEIVABLES - -------------------------------------------------------- Year ended December 31, 1993............................ $ 2.9 $ 0.7(1) $ -- $ 3.6 ------------- ------ ------ ----------- ------------- ------ ------ ----------- Year ended December 31, 1992............................ $ 7.9 $ -- $ 5.0(4) $ 2.9 ------------- ------ ------ ----------- ------------- ------ ------ ----------- Year ended December 31, 1991............................ $ 5.5 $ 2.4(3) $ -- $ 7.9 ------------- ------ ------ ----------- ------------- ------ ------ ----------- Reserves deducted from assets to which they apply -- allowance for amortization of intangibles: GOODWILL - -------------------------------------------------------- Year ended December 31, 1993............................ $ 30.4 $ 6.7(5) $ 2.8(6) $ 34.3 ------------- ------ ------ ----------- ------------- ------ ------ ----------- Year ended December 31, 1992............................ $ 24.8 $ 5.3(5) $ (0.3)(6) $ 30.4 ------------- ------ ------ ----------- ------------- ------ ------ ----------- Year ended December 31, 1991............................ $ 21.5 $ 3.7(5) $ 0.4(6) $ 24.8 ------------- ------ ------ ----------- ------------- ------ ------ ----------- PATENTS, LICENSES AND TRADEMARKS - -------------------------------------------------------- Year ended December 31, 1993............................ $ 144.2 $ 25.8(5) $ -- $ 170.0 ------------- ------ ------ ----------- ------------- ------ ------ ----------- Year ended December 31, 1992............................ $ 119.8 $ 24.4(5) $ -- $ 144.2 ------------- ------ ------ ----------- ------------- ------ ------ ----------- Year ended December 31, 1991............................ $ 96.0 $ 23.9(5) $ 0.1(6) $ 119.8 ------------- ------ ------ ----------- ------------- ------ ------ ----------- SOFTWARE AND OTHER INTANGIBLES - -------------------------------------------------------- Year ended December 31, 1993............................ $ 117.8 $ 17.1(5) $ (0.5)(6) $ 135.4 ------------- ------ ------ ----------- ------------- ------ ------ ----------- Year ended December 31, 1992............................ $ 96.1 $ 20.2(5) $ (1.5)(6) $ 117.8 ------------- ------ ------ ----------- ------------- ------ ------ ----------- Year ended December 31, 1991............................ $ 77.0 $ 19.9(5) $ 0.8(6) $ 96.1 ------------- ------ ------ ----------- ------------- ------ ------ ----------- - -------------------------- Notes: (1) Represents amounts included in selling, general and administrative expenses. (2) Represents uncollectible accounts written off, less recoveries and translation adjustments. (3) Represents amounts charged against interest income to reduce long-term interest bearing notes receivable from sale of assets to an amount which approximates realizable value. (4) Represents reclassification of amount to other liabilities. (5) Represents amounts included in cost of sales. (6) Represents removal of fully amortized amounts and translation adjustments.
48 SCHEDULE IX HONEYWELL INC. AND SUBSIDIARIES SHORT-TERM BORROWINGS FOR THE YEARS ENDED DECEMBER 31, 1993, 1992 AND 1991 (DOLLARS IN MILLIONS)
AVERAGE WEIGHTED BALANCE AVERAGE WEIGHTED OUTSTANDING INTEREST RATE BALANCE AT AVERAGE MAXIMUM DURING FOR THE CLOSE INTEREST MONTH-END THE YEAR YEAR OF YEAR RATE BALANCE (NOTE 2) (NOTE 3) ------------- --------------- ------------- --------------- ------------------- 1993 -- Banks (Note 1)................... $ 6.6 10.1% $ 6.6 $ 3.5 7.1% Bank notes....................... -- -- 81.0 36.9 3.2 Commercial paper................. 181.0 3.3 241.0 198.8 3.2 Total.......................... $ 187.6 3.5% $ 311.5 $ 239.2 3.2% ------------- --- ------------- ------- --- ------------- --- ------------- ------- --- 1992 -- Banks (Note 1)................... $ 1.1 5.9% $ 7.9 $ 2.9 10.3% Bank notes....................... 20.0 3.6 54.0 23.6 3.6 Commercial paper................. 161.0 3.6 236.0 121.3 3.7 Total.......................... $ 182.1 3.6% $ 239.3 $ 147.8 3.8% ------------- --- ------------- ------- --- ------------- --- ------------- ------- --- 1991 -- Banks (Note 1)................... $ 2.0 9.0% $ 45.5 $ 24.8 11.4% Bank notes....................... -- -- 57.0 11.0 5.4 Commercial paper................. 90.0 4.8 201.9 109.8 5.8 Total.......................... $ 92.0 4.9% $ 245.9 $ 145.6 6.7% ------------- --- ------------- ------- --- ------------- --- ------------- ------- --- - ------------------------ Notes: (1) Borrowings are made against established credit facilities, primarily foreign currencies. (2) The average monthly borrowing is calculated using month-end balances outstanding during the year. (3) The approximate weighted average is calculated by dividing the related interest expense by average monthly borrowings.
------------------------ SCHEDULE X HONEYWELL INC. AND SUBSIDIARIES SUPPLEMENTARY INCOME STATEMENT INFORMATION FOR THE YEARS ENDED DECEMBER 31, 1993, 1992 AND 1991 (DOLLARS IN MILLIONS)
1993 1992 1991 --------- --------- --------- Maintenance and repairs................................................................ $ 77.6 $ 81.3 $ 76.7 --------- --------- --------- --------- --------- --------- Taxes, other than payroll and income taxes............................................. $ 62.3 $ 57.2 $ 55.1 --------- --------- --------- --------- --------- --------- - ------------------------ Note: Depreciation and amortization of intangible assets, royalties and advertising are excluded because none exceeded 1% of total revenue.
49 EXHIBIT (11) HONEYWELL INC. AND SUBSIDIARIES COMPUTATION OF EARNINGS PER SHARE FOR THE FIVE YEARS ENDED DECEMBER 31, 1993 (DOLLARS IN MILLIONS EXCEPT PER SHARE AMOUNTS)
1993 1992 1991 1990 1989 ----------- ----------- ----------- ----------- ----------- Primary: Income: Income from continuing operations........................... $ 322.2 $ 399.9 $ 331.1 $ 371.8 $ 550.3 Income from discontinued operations......................... 10.1 53.8 ----------- ----------- ----------- ----------- ----------- Income before extraordinary item and cumulative effect of accounting changes......................................... 322.2 399.9 331.1 381.9 604.1 Extraordinary item -- loss on early redemption of debt...... (8.6) Cumulative effect of accounting changes (Note).............. (144.5) ----------- ----------- ----------- ----------- ----------- Net income................................................ $ 322.2 $ 246.8 $ 331.1 $ 381.9 $ 604.1 ----------- ----------- ----------- ----------- ----------- ----------- ----------- ----------- ----------- ----------- Shares: Weighted average of shares outstanding during the year...... 134,242,394 138,525,414 140,868,222 151,759,942 170,404,548 ----------- ----------- ----------- ----------- ----------- ----------- ----------- ----------- ----------- ----------- Earnings per share: Continuing operations....................................... $ 2.40 $ 2.88 $ 2.35 $ 2.45 $ 3.23 Discontinued operations..................................... 0.07 0.32 ----------- ----------- ----------- ----------- ----------- Income before extraordinary item and cumulative effect of accounting changes........................................ 2.40 2.88 2.35 2.52 3.55 Extraordinary item -- loss on early redemption of debt...... (0.06) Cumulative effect of accounting changes (Note).............. (1.04) ----------- ----------- ----------- ----------- ----------- Net income................................................ $ 2.40 $ 1.78 $ 2.35 $ 2.52 $ 3.55 ----------- ----------- ----------- ----------- ----------- ----------- ----------- ----------- ----------- ----------- Assuming full dilution: Income: Income from continuing operations........................... $ 322.2 $ 399.9 $ 331.1 $ 371.8 $ 550.3 Income from discontinued operations......................... 10.1 53.8 ----------- ----------- ----------- ----------- ----------- Income before extraordinary item and cumulative effect of accounting changes........................................ 322.2 399.9 331.1 381.9 604.1 Extraordinary item -- loss on early redemption of debt...... (8.6) Cumulative effect of accounting changes (Note).............. (144.5) ----------- ----------- ----------- ----------- ----------- Net income................................................ $ 322.2 $ 246.8 $ 331.1 $ 381.9 $ 604.1 ----------- ----------- ----------- ----------- ----------- ----------- ----------- ----------- ----------- ----------- Shares: Weighted average of shares outstanding during the year...... 134,242,394 138,525,414 140,868,222 151,759,942 170,404,548 Shares issuable in connection with stock plans less shares purchaseable from proceeds................................ 1,069,901 1,599,395 2,120,234 1,410,826 2,426,676 ----------- ----------- ----------- ----------- ----------- Total shares.............................................. 135,312,295 140,124,809 142,988,456 153,170,768 172,831,224 ----------- ----------- ----------- ----------- ----------- ----------- ----------- ----------- ----------- ----------- Earnings per share: Continuing operations....................................... $ 2.38 $ 2.85 $ 2.32 $ 2.43 $ 3.19 Discontinued operations..................................... 0.06 0.31 ----------- ----------- ----------- ----------- ----------- Income before extraordinary item and cumulative effect of accounting changes........................................ 2.38 2.85 2.32 2.49 3.50 Extraordinary item -- loss on early redemption of debt...... (0.06) Cumulative effect of accounting changes (Note).............. (1.03) ----------- ----------- ----------- ----------- ----------- Net income................................................ $ 2.38 $ 1.76 $ 2.32 $ 2.49 $ 3.50 ----------- ----------- ----------- ----------- ----------- ----------- ----------- ----------- ----------- ----------- - ------------------------------ Note: The cumulative effect of accounting changes in 1992 are the result of adopting Statement of Financial Accounting Standards (SFAS) No. 106, "Employers' Accounting for Postretirement Benefits Other Than Pensions," which reduced net income by $151.3 ($1.09 per share); SFAS No. 109, "Accounting for Income Taxes," which increased net income by $31.4 ($0.23 per share); and SFAS No. 112, "Employers' Accounting for Postemployment Benefits," which reduced net income by $24.6 ($0.18 per share).
50 EXHIBIT (24) CONSENT OF INDEPENDENT AUDITORS Honeywell Inc.: We consent to the incorporation by reference in Registration Statements Nos. 2-64351, 2-98660, 33-29442, 33-44282, 33-44283, 33-44284 and 33-49819 on Form S-8, and No. 33-62300 on Form S-3, of our reports dated February 11, 1994, appearing in and incorporated by reference in the Annual Report on Form 10-K of Honeywell Inc. for the year ended December 31, 1993. Deloitte & Touche Minneapolis, Minnesota March 3, 1994 51 EX-3 2 EXHIBIT 3B Exhibit (3)(b) --------------------------------------------------------- --------------------------------------------------------- HONEYWELL INC. ------------------ Incorporated under the Laws of the State of Delaware October 27, 1927 ------------------------ BY-LAWS As Adopted October 27, 1927, and Amended through December 21, 1993 - ---------------------------------------------------- - ---------------------------------------------------- INDEX OF BY-LAWS
Page ARTICLE I. MEETINGS OF STOCKHOLDERS................................ 1 Section 1. Annual Meetings.............................. 1 Section 2. Advance Notice of Stockholder- Proposed Business at Annual Meetings........ 1 Section 3. Special Meetings............................. 2 Section 4. Place of Meeting............................. 3 Section 5. Notices of Meetings.......................... 3 Section 6. Quorum....................................... 4 Section 7. Organization................................. 5 Section 8. Order of Business............................ 5 Section 9. Voting....................................... 5 Section 10. List of Stockholders......................... 7 Section 11. Inspectors of Election....................... 8 ARTICLE II. CONSENTS TO CORPORATE ACTION................. 8 Section 1. Consent of Stockholders in Lieu of Meeting... 8 Section 2. Record Date.................................. 9 Section 3. Procedures................................... 10
ii ARTICLE III. BOARD OF DIRECTORS.................. 11 Section 1. General Powers...................... 11 Section 2. Number, Qualifications and Term of Office..................... 11 Section 3. Nominations of Directors............ 11 Section 4. Election of Directors............... 12 Section 5. Organization........................ 13 Section 6. Resignations........................ 13 Section 7. Qualifications and Retirement....... 13 Section 8. Vacancies........................... 15 Section 9. Place of Meeting, etc............... 15 Section 10. First Meeting....................... 15 Section 11. Regular Meetings.................... 16 Section 12. Special Meetings; Notice............ 16 Section 13. Quorum and Manner of Acting......... 17 Section 14. Removal of Directors................ 17 Section 15. Compensation........................ 17 Section 16. Committees.......................... 18 Section 17. Indemnification of Employees, Officers and Directors............. 19 Section 18. Action Without Meeting.............. 21 Section 19. Presence at Meetings................ 21
iii ARTICLE IV. OFFICERS............................ 22 Section 1. Number.............................. 22 Section 2. Election, Term of Office and Qualifications..................... 23 Section 3. Removal............................. 23 Section 4. Resignations........................ 23 Section 5. Vacancies........................... 23 Section 6. The Chairman of the Board of Directors................. 24 Section 7. The Vice Chairman of the Board of Directors................. 24 Section 8. The President of the Corporation.... 25 Section 9. Authority and Duties of the Business Presidents, Executive Vice Presidents, Senior Vice Presidents, and Vice Presidents................ 25 Section 10. The Treasurer....................... 26 Section 11. The Secretary....................... 27 Section 12. Assistant Treasurers, Assistant Secretaries and Attesting Secretaries........................ 28 Section 13. Salaries............................ 29 Section 14. Subordinate Positions, etc.......... 29 ARTICLE V. CONTRACTS, LOANS, CHECKS, DEPOSITS, ETC................................ 29 Section 1. Contracts, etc. How Executed........ 29 Section 2. Loans............................... 30 Section 3. Checks, Drafts, etc................. 30 Section 4. Deposits............................ 30 Section 5. General and Special Bank Accounts... 31 ARTICLE VI. SHARES AND THEIR TRANSFER........... 31 Section 1. Certificates for Stock.............. 31 Section 2. Transfer of Stock................... 32 Section 3. Transfer and Registry Agents........ 33 Section 4. Lost, Stolen, Destroyed, and Mutilated Certificates......... 33 Section 5. Fixing Date for Determination of Stockholders of Record.......... 33
iv ARTICLE VII. OFFICES............................. 35 Section 1. Registered Office................... 35 Section 2. Other Offices....................... 35 ARTICLE VIII. DIVIDENDS, SURPLUS, ETC............. 35 ARTICLE IX. SEAL................................ 36 ARTICLE X. FISCAL YEAR AND AUDIT............... 36 Section 1. Fiscal Year......................... 36 Section 2. Audit of Books and Accounts......... 36 ARTICLE XI. WAIVER OF NOTICES................... 37 ARTICLE XII. INCENTIVE COMPENSATION PAYMENTS..... 37 ARTICLE XIII. NATIONAL EMERGENCY.................. 39 Section 1. Definition and Application.......... 39 Section 2. Meetings, etc....................... 39 Section 3. Amendment........................... 40 Section 4. Chief Executive Officer............. 41 Section 5. Substitute Directors................ 41 ARTICLE XIV. AMENDMENTS.......................... 41 CERTIFICATION......................................... 42
BY-LAWS OF HONEYWELL INC. --------- ARTICLE I. MEETINGS OF STOCKHOLDERS SECTION 1. ANNUAL MEETINGS. The annual meeting of the stockholders of Honeywell Inc. (hereinafter called the Corporation) for the election of directors and for the transaction of any other proper business, notice of which is given in the notice of the meeting, shall be held on such date and at such hour as may be determined from time to time by the Board of Directors, which date and hour shall be designated in the notice thereof. If any annual meeting for the election of directors shall not be held on the date designated therefor, the Board of Directors shall cause the meeting to be held as soon thereafter as convenient. SECTION 2. ADVANCE NOTICE OF STOCKHOLDER-PROPOSED BUSINESS AT ANNUAL MEETINGS. At an annual meeting of the stockholders, only such business shall be conducted as shall have been properly brought before the meeting. To be properly brought before an annual meeting, business must be specified in the notice of meeting (or any supplement thereto) given by or at the direction of the Board, otherwise properly brought before the meeting by or at the direction of the Board, or otherwise properly brought before the meeting by a stockholder. In addition to any other applicable requirements, for business to be properly brought before an annual meeting by a stockholder, the stockholder must have given timely notice thereof in writing to the Secretary, Honeywell Inc. To be timely, a stockholder's notice must be delivered to or mailed and received at the principal executive offices of the 2 Corporation, not less than 50 days nor more than 75 days prior to the meeting; provided, however, that in the event that less than 65 days' notice or prior public disclosure of the date of the meeting is given or made to stockholders, notice by the stockholder to be timely must be so received not later than the close of business on the 15th day following the day on which such notice of the date of the annual meeting was mailed or such public disclosure was made. A stockholder's notice to the Secretary shall set forth as to each matter the stockholder proposes to bring before the annual meeting (i) a brief description of the business desired to be brought before the annual meeting and the reasons for conducting such business at the annual meeting, (ii) the name and record address of the stockholder proposing such business, (iii) the class and number of shares of the Corporation which are beneficially owned by the stockholder, and (iv) any material interest of the stockholder in such business. Notwithstanding anything in the By-Laws to the contrary, no business shall be conducted at the annual meeting except in accordance with the procedures set forth in this Section 2, PROVIDED, HOWEVER, that nothing in this Section 2 shall be deemed to preclude discussion by any stockholder of any business properly brought before the annual meeting in accordance with said procedure. The Chairman of an annual meeting shall, if the facts warrant, determine and declare to the meeting that business was not properly brought before the meeting in accordance with the provisions of this Section 2, and if he should so determine, he shall so declare to the meeting and any such business not properly brought before the meeting shall not be transacted. SECTION 3. SPECIAL MEETINGS. A special meeting of the stockholders for any purpose or purposes may be called at any time by the Board of Directors, or by the Chairman of the 3 Board of Directors, or by the President of the Corporation, or as otherwise prescribed by statute or by the Certificate of Incorporation of the Corporation. SECTION 4. PLACE OF MEETING. Meetings of the stockholders (including annual meetings, special meetings, meetings for the election of directors, and any and all other meetings of stockholders) may be held at such places, within or without the State of Delaware, as may be designated from time to time by the Board of Directors or in the notices thereof. The Board of Directors is authorized to and shall fix the place of meeting. Such action by the Board of Directors may be taken from time to time and may fix different places from time to time. SECTION 5. NOTICES OF MEETINGS. Every stockholder shall furnish the Secretary of the Corporation with an address at which notices of meetings and all other corporate communications may be served on or mailed to him. Except in special cases with respect to which other provision is made by statute or by the Certificate of Incorporation of the Corporation, and except in those situations in which action is to be taken pursuant to Section 1 of Article II, written or printed notice of each meeting of the stockholders, whether annual or special, shall be given, not less than ten (10) nor more than fifty (50) days before the date on which the meeting is to be held, to each stockholder of record of the Corporation entitled to vote at such meeting by delivering such notice thereof to him personally or by depositing such notice in the United States mail, in a postage-prepaid envelope directed to him at the post office address furnished by him to the Secretary of the Corporation for such purpose, or, if he shall not have furnished to the Secretary of the Corporation his address for such purpose, then at his address as it shall otherwise appear on the records of the Corporation. Except in special cases where other provision is made by statute, no publication of any notice of a meeting of stockholders shall be required. Every notice of a 4 meeting of stockholders shall state the place, date and hour of the meeting and the purpose or purposes for which the meeting is called. Nevertheless, notice of any meeting of stockholders shall not be required to be given to any stockholder who shall attend such meeting in person or by proxy except a stockholder who shall attend such meeting for the express purpose of objecting, at the beginning of the meeting, to the transaction of any business because the meeting was not lawfully called or convened. Except where otherwise required by statute, notice of any adjourned meeting of the stockholders of the Corporation shall not be required to be given if the time and place thereof are announced at the meeting which is adjourned. SECTION 6. QUORUM. At all meetings of the stockholders of the Corporation, except where other provision is made by statute, stockholders of the Corporation holding of record a majority of the shares of stock of the Corporation entitled to vote thereat shall be present in person or by proxy to constitute a quorum for the transaction of business. In the absence of a quorum at any meeting or any adjournment thereof, a majority in voting interest of those present in person or by proxy and entitled to vote may adjourn such meeting from time to time. At any such adjourned meeting at which a quorum may be present any business may be transacted which might have been transacted at the meeting as originally called. The absence from any meeting of stockholders holding the number of shares of stock of the Corporation required by statute or by the Certificate of Incorporation of the Corporation or by these by-laws for action upon any given matter shall not prevent action at such meeting upon any other matter or matters which may properly come before the meeting, if there shall be present thereat in person or by proxy stockholders holding the number of shares of stock of the Corporation required in respect of such other matter or matters. 5 SECTION 7. ORGANIZATION. At each meeting of the stockholders the Chairman of the Board of Directors, or in his absence the Vice Chairman of the Board of Directors, or in their absence the President of the Corporation, or in the absence of the Chairman of the Board, the Vice Chairman of the Board and the President of the Corporation, a chairman (who shall be one of the other Executive Vice Presidents or Vice Presidents, if any of them be present) chosen by a majority in voting interest of the stockholders present in person or by proxy and entitled to vote, shall act as chairman; and the Secretary of the Corporation or, in his absence, an Assistant Secretary or, in the absence of the Secretary and Assistant Secretaries of the Corporation, any person whom the chairman of the meeting shall appoint, shall act as secretary of the meeting. SECTION 8. ORDER OF BUSINESS. The order of business at all meetings of the stockholders shall be determined by the chairman of the meeting, but such order of business may be changed by the vote of a majority in voting interest of those present or represented at said meeting and entitled to vote thereat. SECTION 9. VOTING. Each stockholder of the Corporation entitled to vote at a meeting of stockholders or entitled to give consent in writing to corporate action without a meeting shall have one vote in person or by proxy for each share of stock having voting rights held by him and registered in his name on the books of the Corporation: (a) on the date fixed pursuant to the provisions of Subsection (a) of Section 5 of Article VI of these by-laws as the record date for the determination of stockholders who shall be entitled to notice of and to vote at such meeting or to give consent in writing to corporate action without a meeting, or 6 (b) if no such record date shall have been so fixed, then as provided by the provisions of Subsection (b) of Section 5 of Article VI of these by-laws. Shares of its own capital stock belonging to the Corporation or to another corporation, if a majority of the shares entitled to vote in the election of directors of such other corporation is held by the Corporation, shall not be entitled to vote. Persons holding stock in a fiduciary capacity shall be entitled to vote the shares so held, and persons whose stock is pledged shall be entitled to vote, unless in the transfer by the pledgor on the books of the Corporation he shall have expressly empowered the pledgee to vote thereon, in which case only the pledgee or his proxy may represent said stock and vote thereon. If shares shall stand of record in the names of two or more persons, whether fiduciaries, members of a partnership, joint tenants, tenants in common, tenants by the entirety or otherwise, or if two or more persons shall have the same fiduciary relationship respecting the same shares, unless the Secretary of the Corporation shall have been given written notice to the contrary and have been furnished with a copy of the instrument of order appointing them or creating the relationship wherein it is so provided, their acts with respect to voting shall have the following effect: (i) if only one shall vote, his act shall bind all, (ii) if more than one shall vote, the act of the majority so voting shall bind all, or (iii) if more than one shall vote, but the vote shall be evenly split on any particular matter, then, except as otherwise required by statute, each faction may vote the shares in question proportionally. If the instrument so filed shall show that any such tenancy is held in unequal interests, a majority or even-split for the purpose of the next preceding sentence shall be a majority or 7 even-split in interest. Any vote on stock of the Corporation may be given by the stockholder entitled thereto in person or by his proxy appointed by an instrument in writing, subscribed by such stockholder or by his attorney thereunto authorized and delivered to the secretary of the meeting; provided, however, that no proxy shall be voted or acted upon after three years from its date unless said proxy provides for a longer period. Except as provided in Section 1 of Article II and Section 13 of Article III of these by-laws, and except also in special cases where otherwise made mandatory by statute or by the Certificate of Incorporation of the Corporation, all matters coming before the stockholders shall be decided by the vote of a majority in voting interest of the stockholders of the Corporation present in person or by proxy at a meeting and entitled to vote thereat, a quorum being present. SECTION 10. LIST OF STOCKHOLDERS. It shall be the duty of the Secretary, or other officer of the Corporation who shall have charge of the stock ledger, either directly or through a transfer agent appointed by the Board of Directors, to prepare and make, at least ten days before every meeting of stockholders, a complete list of stockholders entitled to vote thereat, arranged in alphabetical order, and showing the address of each stockholder and the number of shares registered in the name of each stockholder. Such list shall be open to the examination of any stockholder, for any purpose germane to the meeting, during ordinary business hours, for a period of at least ten (10) days prior to the meeting, either at a place within the city where the meeting is to be held, which place shall be specified in the notice of the meeting, or, if not so specified, at the place where the meeting is to be held. The list shall also be produced and kept at the time and place of the meeting during the whole time thereof, and may be inspected by any stockholder who is present. Upon the wilful neglect or refusal of the directors to produce such a list at any meeting for the election of directors, they shall be ineligible for election to any office at 8 such meeting. The stock ledger shall be the only evidence as to who are stockholders entitled to examine the stock ledger, such list or the books of the Corporation, or to vote in person or by proxy, at any meeting of stockholders. SECTION 11. INSPECTORS OF ELECTION. At each meeting of the stockholders, the chairman of such meeting may appoint two Inspectors of Election to act thereat. Each Inspector of Election so appointed shall first subscribe an oath or affirmation faithfully to execute the duties of an Inspector of Election at such meeting with strict impartiality and according to the best of his ability. Such Inspectors of Election, if any, shall take charge of the ballots at such meeting and after the balloting thereat on any question shall count the ballots cast thereon and shall make a report in writing to the secretary of such meeting of the results thereof. An Inspector of Election need not be a stockholder of the Corporation, and any officer or employee of the Corporation may be an Inspector of Election on any question other than a vote for or against his election to any position with the Corporation or on any other question in which he may be directly interested. ARTICLE II. CONSENTS TO CORPORATE ACTION SECTION 1. CONSENT OF STOCKHOLDERS IN LIEU OF MEETING. The election of directors and any other action required by the General Corporation Law of the State of Delaware or these by-laws to be taken at any annual or special meeting of stockholders, or any action which may be taken at any annual or special meeting of such stockholders, may be taken without a meeting, without prior notice and without a vote, if a consent in writing, setting forth the action so taken, shall be signed by the holders of outstanding stock having not less than the 9 minimum number of votes that would be necessary to authorize or take such action at a meeting at which all shares entitled to vote thereon were present and voted. Separate written consents may be signed by stockholders severally. Prompt notice of the taking of the corporate action without a meeting by less than unanimous written consent shall be given to those stockholders who have not consented in writing. SECTION 2. RECORD DATE. The record date for determining stockholders entitled to express consent to corporate action in writing without a meeting shall be as fixed by the Board or as otherwise established under this Section. Any person seeking to have the stockholders authorize or take corporate action by written consent without a meeting may, by written notice addressed to the Secretary and delivered to the Company as set forth below, request that a record date be fixed for such purpose. The record date for determining stockholders entitled to consent in writing without a meeting to corporate action for which no prior action by the Board is required under the General Corporation Law of the State of Delaware shall be (i) the date fixed by the Board or (ii) if no record date has been so fixed prior to the first date on which a signed written consent setting forth the action taken or proposed to be taken is delivered to the Company by delivery to its registered office in Delaware, its principal place of business or an officer or agent of the corporation having custody of the book in which proceedings of meetings of stockholders are recorded, then such first date. The record date for determining stockholders entitled to consent in writing without a meeting to corporate action for which prior action by the Board is required under the General Corporation Law of the State of Delaware shall be (i) the date fixed by the Board or (ii) if the Board has not taken action to fix the record date then such record date shall be the close of business on the date upon which the Board adopts the resolution taking such prior action. In connection with a record date fixed by the Board, in 10 no case shall such record date (i) precede or (ii) be fixed more than 10 days after the date upon which the resolution fixing the record date is adopted by Board. SECTION 3. PROCEDURES. In the event of the delivery to the Corporation of a written consent or consents purporting to authorize or take corporate action and/or related revocations (each such written consent and related revocation is referred to in this Article II as a "Consent"), the Secretary of the Corporation shall provide for the safe-keeping of such Consent and shall promptly conduct such ministerial review of the sufficiency of the consents and of the validity of the action to be taken by stockholder consent as he deems necessary or appropriate including, determining whether the holders of shares having the requisite voting power to authorize or take the action specified in the Consent have given consent; PROVIDED, HOWEVER, that if the corporate action to which the Consent relates is the removal or replacement of one or more members of the Board, the Secretary of the Corporation shall designate two persons, who may not be members of the Board, to serve as Inspectors with respect to such Consent and such Inspectors shall discharge the functions of the Secretary of the Corporation under this Section 3. If after such investigation the Secretary or the Inspectors (as the case may be) shall determine that the Consent is valid and that the action purported to be authorized or taken has been validly authorized, that fact shall be noted on the records of the Corporation kept for the purpose of recording the proceedings of meetings of stockholders, and the Consent shall be filed in such records, at which time the Consent shall become effective as stockholder action. In conducting the investigation required by this Section 3, the Secretary or the Inspectors (as the case may be) may, at the expense of the Corporation, retain special legal counsel and other necessary or appropriate professional advisors, and such other personnel as they may deem necessary or appropriate, to assist them. 11 ARTICLE III. BOARD OF DIRECTORS SECTION 1. GENERAL POWERS. The property, affairs and business of the Corporation shall be managed by the Board of Directors. SECTION 2. NUMBER, QUALIFICATIONS AND TERM OF OFFICE. The number of directors shall be fifteen, but the number may be increased, or diminished to not less than three, by amendment of these by-laws. Directors need not be stockholders. Each of the directors of the Corporation shall hold office until the annual meeting held next after his election and shall qualify, or until his earlier death or his earlier resignation or removal in the manner hereinafter provided. SECTION 3. NOMINATIONS OF DIRECTORS. Only persons who are nominated in accordance with the following procedures shall be eligible for election as directors. Nominations of persons for election to the Board of Directors of the Corporation may be made at a meeting of stockholders by or at the direction of the Board of Directors by any nominating committee or person appointed by the Board or by any stockholder of the Corporation entitled to vote for the election of directors at the meeting who complies with the notice procedures set forth in this Section 3. Such nominations, other than those made by or at the direction of the Board, shall be made pursuant to timely notice in writing to the Secretary, Honeywell Inc. To be timely, a stockholder's notice shall be delivered to or mailed and received at the principal executive offices of the Corporation not less than 50 days nor more than 75 days prior to the meeting; PROVIDED, HOWEVER, that in the event that less than 65 days' notice or prior public disclosure of the date of the meeting is given or made to stockholders, notice by the 12 stockholder to be timely must be so received not later than the close of business on the 15th day following the day on which such notice of the date of the meeting was mailed or such public disclosure was made. Such stockholder's notice to the Secretary shall set forth (a) as to each person whom the stockholder proposes to nominate for election or re-election as a director, (i) the name, age, business address and residence address of the person, (ii) the principal occupation or employment of the person, (iii) the class and number of shares of capital stock of the Corporation which are beneficially owned by the person and (iv) any other information relating to the person that is required to be disclosed in solicitations for proxies for election of directors pursuant to Rule 14a under the Securities Exchange Act of 1934, as amended; and (b) as to the stockholder giving the notice (i) the name and record address of stockholder and (ii) the class and number of shares of capital stock of the Corporation which are beneficially owned by the stockholder. The Corporation may require any proposed nominee to furnish such other information as may reasonably be required by the Corporation to determine the eligibility of such proposed nominee to serve as director of the Corporation. No person shall be eligible for election as a director of the Corporation unless nominated in accordance with the procedures set forth herein. The Chairman of the meeting shall, if the facts warrant, determine and declare to the meeting that a nomination was not made in accordance with the foregoing procedure, and if he should so determine, he shall so declare to the meeting and the defective nomination shall be disregarded. SECTION 4. ELECTION OF DIRECTORS. At each meeting of stockholders for the election of directors at which a quorum is present, the persons receiving the largest number of votes (up to and including the number of directors to be elected) shall be directors. If directors are to be elected by consent in writing of the stockholders without a meeting pursuant to Section 1 of 13 Article II of these by-laws, those persons receiving the consent in writing of the largest number of shares in the aggregate and constituting not less than a majority of the total outstanding shares entitled to give consent in writing thereon (up to and including the number of directors to be elected) shall be directors. SECTION 5. ORGANIZATION. At each meeting of the Board of Directors, the Chairman of the Board of Directors, or in his absence, the President of the Corporation, or in his absence an Executive Vice President, if a member of the Board of Directors, or in the absence of all of said officers, a Vice President, if a member of the Board of Directors, or in the absence of all of said officers, a chairman chosen by the majority of the directors present, shall preside. The Secretary of the Corporation, or in his absence, an Assistant Secretary, if any, or, in the absence of both the Secretary and Assistant Secretaries, any person whom the chairman shall appoint, shall act as secretary of the meeting. Any person so appointed as secretary of the meeting shall, if so required by the Board of Directors, be sworn to the faithful discharge of his duties before entering thereupon. SECTION 6. RESIGNATIONS. Any director of the Corporation may resign at any time by giving written notice to the Chairman of the Board of Directors or to the President of the Corporation or to the Secretary of the Corporation. Such resignation shall take effect at the time specified therein, or, if the time be not specified, upon receipt thereof by the Chairman of the Board of Directors, the President of the Corporation or the Secretary, as the case may be; and, unless otherwise specified therein, the acceptance of such resignation shall not be necessary to make it effective. SECTION 7. QUALIFICATIONS AND RETIREMENT. (a) CHIEF EXECUTIVE OFFICERS OF HONEYWELL. A director who is also the Chief Executive Officer of the Company shall 14 no longer be qualified to act as a director and his or her term of office shall expire at the time he or she ceases to hold that position; PROVIDED, HOWEVER, that in the event the Nominating Committee determines that it will be in the best interests of the Company for the former Chief Executive Officer to continue as a director, the Committee may ask him or her to continue as a director through the completion of any remaining part of his or her current, regular term of office as a director and, in addition to any such partial year, may nominate the former Chief Executive Officer to be a director for a single term of one year. (b) OTHER INSIDE DIRECTORS. Any director who is an officer of the Company, other than the Chief Executive Officer, shall no longer be qualified to act as a director and his or her term of office shall expire on the earliest to occur of: (i) the time of a diminution in his or her duties or responsibilities as an officer unless the Nominating Committee at its sole discretion determines such officer continues to be qualified to act as a director, (ii) the time he or she ceases to be an employee of the Corporation for any reason, or (iii) on his or her sixty-fifth birthday. (c) OUTSIDE DIRECTORS. Any director who is not and has not been an officer of the Company (an Outside Director) shall not be nominated for re-election as a director at the next annual meeting following either (i) fifteen years service as a director or (ii) the director's seventieth birthday. At the time an Outside Director retires from or changes the principal occupation engaged in when initially elected as a director, he or she shall notify the Nominating Committee of his or her change of position together with an indication of whether or not he or she is willing to stand for election as a director at the next annual meeting; thereafter the Nominating Committee at 15 its discretion will determine whether or not to ask that director to stand for re-election to the Board, provided the director shall not be permitted to stand for re-election beyond the age and years-of-service limits set forth above. (d) INTERPRETATION. The Nominating Committee in its sole discretion shall have the responsibility for interpretation of qualifications for directors identified in this Section 7. SECTION 8. VACANCIES. Except as otherwise provided by law, any vacancy in the Board of Directors (whether because of death, resignation, removal, an increase in the number of directors or any other cause) may be filled by a majority of the directors then in office, though less than a quorum; and each director so chosen shall hold office until the next annual election and until his successor shall be duly elected and qualified, unless sooner displaced. SECTION 9. PLACE OF MEETING, ETC. The Board of Directors may hold its meetings at such place or places within or without the State of Delaware as the Board may from time to time determine, or as shall be specified or fixed in the respective notices or waivers of notice thereof. The Corporation may have one or more offices, and may keep its books and records at such place or places within or without the State of Delaware as the Board shall from time to time determine. SECTION 10. FIRST MEETING. As soon as practicable after each annual election of directors and on the same day, the Board of Directors may meet for the purposes of organization and of choosing the officers of the Corporation and for the transaction of other business at the place where regular meetings of the Board of Directors are held. Notice of such meeting need not be given. Such first meeting may be held at any other time or place which shall be specified in a notice given as hereinafter provided for special meetings of the Board, or in a consent and waiver of notice thereof signed by all the directors. 16 SECTION 11. REGULAR MEETINGS. Regular meetings of the Board of Directors shall be held at such times as the Board of Directors shall by resolution from time to time determine. If any day fixed for a regular meeting shall be a legal holiday at the place where the meeting is to be held, then the meeting shall be held at the same hour and place on the next succeeding secular day not a legal holiday. Notice of regular meetings need not be given, except of the regular meetings at which it is proposed to alter or repeal these by-laws or to adopt one or more new by-laws, of each of which meetings a notice, which shall state at least the substance of the proposed change, shall be given in the same manner as is required for a special meeting. SECTION 12. SPECIAL MEETINGS; NOTICE. Special meetings of the Board of Directors shall be held whenever called by the Chairman of the Board of Directors or by the President of the Corporation or by any two of the directors. A notice shall be given as hereinafter in this section provided of each such special meeting, in which shall be stated the time and place of such meeting, but, except as otherwise expressly provided by law or by these by-laws, the purposes thereof need not be stated in such notice. Except in special cases where other provision is made by statute, notice of each such meeting shall be mailed to each director, addressed to him at his residence or usual place of business, at least two days before the day on which the meeting is to be held, or shall be sent to him at such place by telegraph or cable or be delivered personally or by telephone not later than the day before the day on which the meeting is to be held. Any meeting of the Board of Directors shall be a legal meeting without any notice thereof having been given if all the directors shall be present thereat or if notice thereof shall be waived either before or after such meeting in writing or by telegraph or cable by all absentees therefrom provided a quorum be present thereat. Notice of any adjourned meeting need not be given. 17 SECTION 13. QUORUM AND MANNER OF ACTING. One third of the directors in office at the time of any regular or special meeting of the Board of Directors shall be present in person at such meeting in order to constitute a quorum for the transaction of business and, except as specified in Sections 8, 16 and 17 of this Article III and Section 4 of Article IV of these by-laws, and except also in special cases where other provision is made by statute, the vote of a majority of the directors present at any such meeting, at which a quorum is present, shall be the act of the Board of Directors. In the absence of a quorum, a majority of directors present at any meeting may adjourn the same from time to time until a quorum be had. The directors shall act only as a board and the individual directors shall have no power as such. SECTION 14. REMOVAL OF DIRECTORS. Any director may be removed for cause at any time by the affirmative vote of the holders of a majority of all the shares of stock outstanding and entitled to vote for the election of directors, given at a special meeting of such stockholders called for the purpose; and the vacancy in the Board of Directors caused by such removal shall be filled by such stockholders at such meeting, or, if the stockholders shall fail to fill such vacancy, by the Board of Directors. SECTION 15. COMPENSATION. Directors and members of any committee of the Corporation contemplated by these by-laws or otherwise provided for by resolution of the Board of Directors, who are not salaried officers of the Corporation, shall receive such fixed sum per meeting attended, or such annual sum or sums, as shall be determined from time to time by resolution of the Board of Directors. All directors and members of any such committee shall receive their expenses, if any, of attendance at meetings of the Board of Directors or of such committee. Nothing herein contained shall be construed to preclude any director from serving the Corporation in any other capacity, and receiving proper compensation therefor. 18 SECTION 16. COMMITTEES. (a) There shall be an Executive Committee which shall have such powers and authority provided by resolution passed by a majority of the Board of Directors. (b) The Board of Directors may, by resolution passed by a majority of the whole Board, designate one or more committees, in addition to the Executive Committee, which, to the extent provided in said resolution, shall have and may exercise the powers and authority of the Board in the management of the business and affairs of the Corporation and may authorize the seal of the Corporation to be affixed to all papers which may require it. (c) Each committee, for which provision is made by paragraph (a) or (b) of this Section 16, shall consist of one or more directors of the Corporation who shall be appointed by the Chairman of the Board of Directors provided, however, that each such appointment shall be reported promptly to the Board of Directors and no member of a committee shall participate in any action by a committee which shall constitute an exercise of a power of the Board until the appointment of such member has been ratified by a majority of the full Board. Any vacancy on a committee shall be filled by appointment by the Chairman of the Board of Directors in the same manner in which original appointments to such committee were made. The chairman of each committee shall be designated by the Chairman of the Board of Directors. A majority of those entitled to vote at any meeting of any committee shall constitute a quorum for the transaction of business at that meeting. In the absence or disqualification of a member of a committee, the member or members thereof present at any meeting and not disqualified from voting, whether or not he or they constitute a quorum, may unanimously appoint another member of the Board to act at the meeting in the place of any such absent or disqualified member. 19 SECTION 17. INDEMNIFICATION OF EMPLOYEES, OFFICERS AND DIRECTORS. (a) Any person who is or was an employee, officer or director of the Corporation, or of any other corporation, partnership, joint venture, trust or other enterprise, including service with respect to employee benefit plans, which he served as such at the request of the Corporation, shall, unless prohibited by law, be indemnified by the Corporation in accordance with paragraph (b) below, against reasonable expenses, paid or incurred by him in connection with or resulting from any claim, action, suit or proceeding (whether brought by or in the right of the Corporation or otherwise), civil, criminal, administrative or investigative, including any appeal therein in which he may be involved, or threatened to be involved, as a party or otherwise, by reason of the fact he is or was an employee, officer or director, provided such person acted, in good faith, in what he reasonably believed to be in or not opposed to the best interest of the Corporation or such other corporation or organization and, in addition, with respect to any criminal actions or proceedings, had no reasonable cause to believe his conduct was unlawful, provided further the Corporation shall indemnify any such person in connection with a claim, action, suit or proceeding initiated by such person only if such matter was authorized by the Board of Directors, and provided further no indemnification shall be made in respect of any claim, issue or matter as to which such person shall have been adjudged to be liable to the corporation unless and only to the extent that the Court of Chancery or the court in which such action or suit was brought shall determine upon application that, despite the adjudication of liability but in view of all the circumstances of the case, such person is fairly and reasonably entitled to indemnity for such expenses which the Court of Chancery or such other court 20 shall deem proper. The termination of any claim, action, suit or proceeding, by judgment, settlement (whether with or without court approval), adverse decision or conviction after trial or upon a plea of guilty or of NOLO CONTENDERE, or its equivalent, shall not create a presumption that such person did not meet the standards of conduct set forth in this paragraph (a). As used in this Section 17 the term "expenses" shall include, but not be limited to, counsel fees and disbursements, amounts of judgments, fines or penalties against, and amounts paid in settlement by, such person. (b) To the extent that any person claiming indemnification under paragraph (a) of this Section 17 has been successful, on the merits or otherwise, in defense of any claim, action, suit or proceeding of the character described in paragraph (a), he shall be reimbursed by the Corporation for the amounts of all reasonable expenses paid or incurred by him in connection with such successful defense. Any person claiming indemnification under said paragraph (a) shall be reimbursed by the Corporation for his reasonable expenses if (i) the Board of Directors by a majority vote of a quorum consisting of directors who are not parties to such claim, action, suit or proceeding shall deliver to the Corporation its written findings that such person is entitled to reimbursement under the provisions of said paragraph or (ii) if such a quorum is not attainable, or even if obtainable a quorum of disinterested directors so directs, independent legal counsel (who may be regular counsel for the Corporation) selected by the Board of Directors shall deliver to the Corporation written advice that, in their judgment, such person is so entitled. (c) Any expenses incurred by an officer or director with respect to any claim, action, suit or proceeding of the character described in paragraph (a) of this Section 17 may be advanced by the Corporation prior to the final 21 disposition thereof upon receipt of an undertaking by or on behalf of the person to repay such amount if it is ultimately determined that he is not to be indemnified under this Section 17. Such expenses incurred by other employees may be so paid upon such terms and conditions, if any, as the Board of Directors shall determine to be appropriate. (d) The rights of indemnification provided in this Section 17 shall be in addition to any other rights to which any such person may otherwise be entitled by contract or as a matter of law; and such rights shall continue as to a person who has ceased to be an employee, officer or director and, in the event of such person's death, shall extend to his heirs and legal representatives. SECTION 18. ACTION WITHOUT MEETING. Any action required or permitted to be taken at any meeting of the Board of Directors or of any committee thereof may be taken without a meeting if all members of the Board or of such committee, as the case may be, consent thereto in writing, and the writing or writings are filed with the minutes of proceedings of the Board or of such committee. SECTION 19. PRESENCE AT MEETINGS. Members of the Board of Directors or of any committee designated by it may participate in a meeting of such Board or committee by means of conference telephone or similar communications equipment by means of which all persons participating in the meeting can hear each other, and participation in a meeting pursuant to this Section 19 shall constitute presence in person at such meeting. 22 ARTICLE IV. OFFICERS SECTION 1. NUMBER. The officers of the Corporation shall be a Chairman of the Board of Directors who shall be chosen by the directors from their own number, one or more Vice Chairmen of the Board of Directors if the Board of Directors shall so determine, a President of the Corporation if the Board of Directors shall so determine, one or more Presidents of the businesses of the Corporation if the Board of Directors shall so determine, one or more Vice Presidents, a Treasurer, a Secretary and such other officers as may be appointed in accordance with the provisions of this Article. The Board of Directors may designate one or more Vice Presidents to be an Executive Vice President or Senior Vice President. The Board of Directors, by resolution, the Chairman of the Board of Directors, the President of the Corporation, or the Treasurer may create the offices of and appoint one or more Assistant Treasurers. The Board of Directors, by resolution, the Chairman of the Board of Directors, the President of the Corporation, or the Secretary may create the offices of and appoint one or more Assistant Secretaries and one or more Attesting Secretaries. The term of office for each Assistant Treasurer, each Assistant Secretary and Attesting Secretary appointed by any of the foregoing officers shall be determined by the officer making such appointment but shall not in any event exceed twelve months. No more than three Assistant Treasurers and three Assistant Secretaries may be appointed by those officers at any one time. The officer making the appointment shall give to the Secretary written notification of each such appointment. The notification shall be placed in the book containing the proceedings of the Board of Directors. 23 Any two or more of the above-mentioned offices may be held by the same person. SECTION 2. ELECTION, TERM OF OFFICE AND QUALIFICATIONS. Except for Assistant Treasurers, Assistant Secretaries and Attesting Secretaries appointed by the Chairman of the Board of Directors, the President of the Corporation, the Treasurer, or the Secretary, the officers of the Corporation shall be chosen annually by the Board of Directors at the first meeting thereof held after each annual meeting of stockholders for the election of directors and shall hold office until his successor shall have been duly chosen and shall qualify, or until his earlier death or his earlier resignation or removal in the manner hereinafter provided. ARTICLE IV. SECTION 3. REMOVAL. Any officer may be removed, either with or without cause, at any time, by resolution adopted by a majority of the whole Board of Directors at a special meeting of the Board called for that purpose, or, except in the case of any officer elected or appointed by the stockholders or by the Board of Directors, by any committee or superior officer upon whom such power of removal may be conferred by the Board of Directors. SECTION 4. RESIGNATIONS. Any officer may resign at any time by giving written notice of his resignation to the Board of Directors, or to the Chairman of the Board of Directors, or to the President of the Corporation, or to the Secretary of the Corporation. Any such resignation shall take effect at any time specified therein; and, unless otherwise specified therein, the acceptance of such resignation shall not be necessary to make it effective. SECTION 5. VACANCIES. A vacancy in any office because of death, resignation, removal, disqualification or otherwise, 24 shall be filled for the unexpired portion of the term in the manner prescribed in these by-laws for regular appointments or elections to such office. SECTION 6. THE CHAIRMAN OF THE BOARD OF DIRECTORS. The Chairman of the Board of Directors shall, be the chief executive officer of the corporation and shall have general supervision over the business and affairs of the Corporation and over its several officers and employees, subject, however, to the control of the Board of Directors. He shall, if present, preside at all meetings of the Board of Directors and of the stockholders. The Chairman of the Board of Directors shall see that all orders and resolutions of the Board of Directors are carried into effect and shall from time to time report to the Board of Directors all matters within his knowledge which the interests of the Corporation may require to be brought to their notice. The Chairman of the Board of Directors may sign, execute and deliver in the name of the Corporation, certificates for shares of the capital stock of the Corporation, any deeds, mortgages, bonds, contracts or other instruments which the Board of Directors shall have authorized to be executed, except in cases where the signing and execution thereof shall be expressly delegated by the Board or by these by-laws to some other officer or agent of the Corporation or shall be required by law otherwise to be signed or executed. In general, the Chairman of the Board of Directors shall perform all duties incident to the office of the Chairman of the Board of Directors, and such other duties as from time to time may be assigned by the Board of Directors. SECTION 7. THE VICE CHAIRMAN OF THE BOARD OF DIRECTORS. In the absence of the Chairman of the Board of Directors, the Vice Chairman of the Board of Directors shall, if present, preside at meetings of the Board of Directors, and shall perform such other duties that may be assigned to him by the Board of Directors. 25 SECTION 8. THE PRESIDENT OF THE CORPORATION. The President of the Corporation shall be the chief operating officer of the Corporation and shall perform the duties assigned to him from time to time by the Chairman of the Board of Directors or by the Board of Directors. In the absence of the Chairman of the Board of Directors or a Vice Chairman of the Board of Directors (if that position has been filled by the Board of Directors) the President of the Corporation shall, if present, preside at meetings of the Board of Directors. The President of the Corporation may sign, with the Secretary or Treasurer or any other proper officer of the Corporation thereunto authorized by the Board of Directors, certificates for shares of the capital stock of the Corporation, any deeds, mortgages, bonds, contracts or other instruments which the Board of Directors shall have authorized to be executed, except in cases where the signing and execution thereof shall be expressly delegated by the Board or by these by-laws to some other officer or agent of the Corporation or shall be required by law otherwise to be signed or executed; and, in general, shall perform all duties incident to the office of the President of the Corporation. SECTION 9. AUTHORITY AND DUTIES OF THE BUSINESS PRESIDENTS, EXECUTIVE VICE PRESIDENTS, SENIOR VICE PRESIDENTS, AND VICE PRESIDENTS. Any Business President, Executive Vice President, Senior Vice President, or Vice President authorized so to do by the Board of Directors may sign, with the Secretary or the Treasurer or any other proper officer of the Corporation thereunto authorized by the Board of Directors, certificates for shares of the capital stock of the Corporation; and shall perform such other duties as from time to time may be assigned to them by the Chairman of the Board of Directors or by the President of the Corporation or by the Board of Directors. 26 SECTION 10. THE TREASURER. The Treasurer shall: (a) Have charge and custody of, and be responsible for, all funds and securities of the Corporation, receive and give receipts for moneys due and payable to the Corporation from any sources whatsoever, and deposit all such moneys in the name of the Corporation in such banks, trust companies or other depositaries as shall be selected in accordance with the provisions of Article V of these by-laws; (b) Have the right to require, from time to time, reports or statements giving such information as he may desire with respect to any and all financial transactions of the Corporation from the officers or agents transacting the same; (c) Render to the Board of Directors, whenever the Board of Directors shall require him so to do, an account of the financial condition of the Corporation and of all of his transactions as Treasurer; (d) Exhibit at all reasonable times his books of account and other records to any of the directors of the Corporation upon application during business hours at the office of the Corporation where such books and records are kept; (e) Sign (unless the Secretary or other proper officer thereunto duly authorized by the Board of Directors shall sign), with the Chairman of the Board of Directors or the President of the Corporation or an Executive Vice President or a Vice President, certificates for shares of the capital stock of the Corporation the issue of which shall have been authorized by resolution of the Board of Directors, provided that the signatures of the officers of the Corporation thereon may be facsimile as provided in Section 1 of Article VI of these by-laws; and 27 (f) In general, perform all the duties incidental to the office of Treasurer and such other duties as from time to time may be assigned to him by the Chairman of the Board of Directors or by the President of the Corporation or by the Board of Directors. SECTION 11. THE SECRETARY. The Secretary shall: (a) Record all the proceedings of the stockholders, the Board of Directors and the Executive Committee in one or more books kept for that purpose; (b) See that all notices are duly given in accordance with the provisions of these by-laws or as required by law; (c) Be custodian of the corporate records and of the seal of the Corporation and see that the seal or a facsimile thereof is affixed to or impressed or reproduced on all stock certificates prior to the issue thereof and to all documents the execution of which on behalf of the Corporation under its seal is duly authorized in accordance with the provisions of these by-laws. Unless the Board of Directors shall otherwise direct in specific instances, the seal of the Corporation when so affixed, impressed or reproduced shall always be attested by the signature of the Secretary, or, if any, of an Assistant Secretary or an Attesting Secretary, provided that signatures on certificates for shares of the capital stock of the Corporation may be facsimile as provided in Section 1 of Article VI of these by-laws; (d) Keep a register of the post office address of each stockholder which shall be furnished to the Secretary by such stockholder in accordance with the provisions of Section 1 of Article II of these by-laws; (e) See that the duties prescribed by Section 9 of Article I of these by-laws are performed; 28 (f) Sign (unless the Treasurer or other proper officer thereunto duly authorized by the Board of Directors shall sign), with the Chairman of the Board of Directors or the President of the Corporation or an Executive Vice President or a Vice President, certificates for shares of the capital stock of the Corporation the issue of which shall have been authorized by resolution of the Board of Directors, provided that the signatures of the officers of the Corporation thereon may be facsimile as provided in Section 1 of Article VI of these by-laws; (g) Have general charge of the stock certificate books of the Corporation and also of the other books and papers of the Corporation and see that the books, reports, statements, certificates and all other documents and records required by law are properly kept and filed; and (h) In general, perform all duties incident to the office of Secretary, and such other duties as from time to time may be assigned to him by the Chairman of the Board of Directors or by the President of the Corporation or by the Board of Directors. SECTION 12. ASSISTANT TREASURERS, ASSISTANT SECRETARIES AND ATTESTING SECRETARIES. The Assistant Treasurers and Assistant Secretaries, if thereunto authorized by the Board of Directors, may sign, with the Chairman of the Board of Directors, or the President of the Corporation, or an Executive Vice President, or a Vice President, certificates for shares of the capital stock of the Corporation the issue of which shall have been authorized by resolution of the Board of Directors and, in general, shall perform such duties as shall be assigned to them by the Treasurer or the Secretary, respectively, or by the Board of Directors. The Assistant Secretaries and Attesting 29 Secretaries shall have the power to affix and attest the corporate seal of the Corporation and to attest the execution of documents on behalf of the Corporation. SECTION 13. SALARIES. The salaries of the officers shall be fixed from time to time by the Board of Directors, or by one or more committees or officers to the extent so authorized from time to time by the Board of Directors, and no officer shall be prevented from receiving such salary by reason of the fact that he is also a director of the Corporation. SECTION 14. SUBORDINATE POSITIONS, ETC. The Corporation may provide titles, including the title of Vice President, for other individuals who serve in management positions with the corporate staff, or with group, division or other operational units of the Corporation but who do not perform the function of officer for the Corporation. Individuals in such positions shall hold such titles at the discretion of the appointing officer and shall have such authority and perform such duties as the Chairman of the Board of Directors, or the Vice Chairman of the Board of Directors, or any officer to whom they delegate their authority in this regard, may from time to time determine. ARTICLE V. CONTRACTS, LOANS, CHECKS, DEPOSITS, ETC. SECTION 1. CONTRACTS, ETC. HOW EXECUTED. The Board of Directors, except as in these by-laws otherwise provided, may authorize any officer or officers, agent or agents, to enter into any contract or execute and deliver any instrument in the name of and on behalf of the Corporation, and such authority may be general or confined to specific instances; and, unless so authorized by the Board of Directors or by the provisions of these by-laws, no officer, agent or employee other than the Chairman of the Board of Directors and the President shall 30 have any power or authority to bind the Corporation by any contract or engagement or to pledge its credit or to render it liable pecuniarily for any purpose or to any amount. SECTION 2. LOANS. No loans shall be contracted on behalf of the Corporation and no negotiable paper shall be issued in its name, unless authorized by vote of the Board of Directors. When so authorized by the Board of Directors any officer or agent of the Corporation designated by the Board of Directors may effect loans and advances at any time for the Corporation from any bank, trust company or other institution, or from any firm, corporation or individual, and for such loans and advances may make, execute and deliver bonds, notes and other obligations or evidences of indebtedness of the Corporation, and when authorized as aforesaid, as security for the payment of any and all loans, advances, indebtedness and liabilities of the Corporation and of the interest thereon, may pledge, hypothecate or transfer any and all stocks, securities and other personal property held or owned by the Corporation and to that end endorse, assign and deliver the same. Such authority may be general or confined to specific instances. SECTION 3. CHECKS, DRAFTS, ETC. All checks, drafts or other orders for the payment of money, notes, or other evidences of indebtedness issued in the name of the Corporation, shall be signed by such officer or officers, agent or agents of the Corporation and in such manner as shall from time to time be determined by resolution of the Board of Directors. SECTION 4. DEPOSITS. All funds of the Corporation not otherwise employed shall be deposited from time to time to the credit of the Corporation in such banks, trust companies or other depositaries as the Board of Directors may select or as may be selected by any officer or officers, agent or agents of the Corporation to whom such power may from time to time be delegated by the Board of Directors. For the purpose of 31 such deposit, checks, drafts and other orders for the payment of money which are payable to the order of the Corporation may be endorsed, assigned and delivered by the Chairman of the Board of Directors, the President of the Corporation, any Business President, any Executive Vice President, any Vice President, the Treasurer or the Secretary, or by any officer, agent or employee of the Corporation to whom any of said officers, in writing, or the Board of Directors, by resolution, shall have delegated such power. SECTION 5. GENERAL AND SPECIAL BANK ACCOUNTS. The Board of Directors may from time to time authorize the opening and keeping of general and special bank accounts with such banks, trust companies or other depositaries as the Board of Directors may select, and may make such special rules and regulations with respect thereto, not inconsistent with the provisions of these by-laws, as they may deem expedient. ARTICLE VI. SHARES AND THEIR TRANSFER SECTION 1. CERTIFICATES FOR STOCK. Every owner of stock of the Corporation shall be entitled to a certificate to be in such form as the Board of Directors shall prescribe, certifying the number and class of shares of stock of the Corporation owned by him. The certificates for the respective classes of such stock shall be numbered in the order in which they shall be issued and shall be signed in the name of the Corporation by the Chairman of the Board of Directors, or the President of the Corporation, or Executive Vice President, or a Vice President and by the Secretary or the Treasurer, or by any other proper officer of the Corporation thereunto authorized by the Board of Directors and the seal of the Corporation shall be affixed thereto, provided that the signatures of the officers of 32 the Corporation and the seal thereon may be facsimile if such certificates are signed by a transfer agent other than the Corporation or an employee of the Corporation or by a registrar other than the Corporation or an employee of the Corporation. The signature by or on behalf of the transfer agent on any such certificate may also be facsimile if such certificate is signed by a registrar other than the Corporation or an employee of the Corporation. A record shall be kept of the name of the person, firm or corporation owning the stock represented by such certificates, the number and class of shares represented by such certificates, respectively, and the respective dates thereof, and in case of cancellation, the respective dates of cancellation. Every certificate surrendered to the Corporation for exchange or transfer shall be cancelled and no new certificate or certificates shall be issued in exchange for any existing certificate until such existing certificate shall have been so cancelled, except in cases provided for in Section 4 of this Article VI. SECTION 2. TRANSFER OF STOCK. Transfers of shares of the capital stock of the Corporation shall be made only on the books of the Corporation by the registered holder thereof, or by his attorney thereunto authorized by power of attorney duly executed and filed with the Secretary of the Corporation, or with its transfer agent, and on surrender for cancellation of the certificate or certificates for such shares. The person in whose name shares of stock stand on the books of the Corporation shall be deemed the owner thereof for all purposes as regards the Corporation; provided that whenever any transfers of shares shall be made as collateral security, and not absolutely, such fact shall be so expressed in the entry of transfer if, when the certificate or certificates shall be presented to the Corporation or to said transfer agent for transfer, both the transferor and the transferee request the Corporation to do so. 33 SECTION 3. TRANSFER AND REGISTRY AGENTS. The Corporation may maintain a transfer office or agency where its stock shall be directly transferable and a registry office, which may be identical with the transfer office or agency, where its stock shall be registered; and the Corporation may, from time to time, maintain one or more other transfer offices or agencies, and registry offices; and the Board of Directors may from time to time, define the duties of such transfer agents and registrars and make such rules and regulations as it may deem expedient, not inconsistent with these By-laws, concerning the issue, transfer and registration of certificates for shares of the capital stock of the Corporation. SECTION 4. LOST, STOLEN, DESTROYED AND MUTILATED CERTIFICATES. The owner of any stock of the Corporation shall immediately notify the Corporation of any loss, theft, destruction or mutilation of the certificate therefor, and the Corporation may issue a new certificate of stock in the place of any certificate theretofore issued by it, alleged to have been lost, stolen or destroyed, and the Board of Directors may, in its discretion, require the owner of the lost, stolen or destroyed certificate or his legal representatives to give the Corporation a bond in such sum as it may direct, not exceeding double the value of the stock, to indemnify the Corporation against any claim that may be made against it on account of the alleged loss, theft or destruction of any such certificate. A new certificate may be issued without requiring any bond when, in the judgment of the Board of Directors, it is proper so to do. SECTION 5. FIXING DATE FOR DETERMINATION OF STOCKHOLDERS OF RECORD. (a) In order that the Corporation may determine the stockholders entitled to notice of or to vote at any meeting of stockholders or any adjournment thereof, or to express consent to corporate action in writing without a meeting, or entitled to receive payment of any dividend or other 34 distribution or allotment of any rights, or entitled to exercise any rights in respect of any change, conversion or exchange of stock or for the purpose of any other lawful action, the Board of Directors may fix, in advance, a record date, which shall not be more than sixty (60) nor less than ten (10) days before the date of such meeting, nor more than sixty (60) days prior to any other action. (b) If no record date is fixed: (1) The record date for determining stockholders entitled to notice of or to vote at a meeting of stockholders shall be at the close of business on the day next preceding the day on which notice is given, or, if notice is waived, at the close of business on the day next preceding the day on which the meeting is held. (2) The record date for determining stockholders entitled to express consent to corporate action in writing without a meeting, when no prior action by the Board of Directors is necessary, shall be the day on which the first written consent is expressed. (3) The record date for determining stockholders for any other purpose shall be at the close of business on the day on which the Board of Directors adopts the resolution relating thereto. (c) A determination of stockholders of record entitled to notice of or to vote at a meeting of stockholders shall apply to any adjournment of the meeting; provided, however, that the Board of Directors may fix a new record date for the adjourned meeting. 35 ARTICLE VII. OFFICES SECTION 1. REGISTERED OFFICE. The registered office of the Corporation in the State of Delaware shall be in the City of Wilmington, County of New Castle, and the registered agent of the Corporation in said State is Corporation Trust Company of America. The Corporation's "principal office or place of business" in said State and its "resident agent" in said State shall be deemed to mean said registered office and registered agent, respectively. SECTION 2. OTHER OFFICES. The Corporation shall also have an office in the City of Minneapolis, State of Minnesota, and at such other places as the Board of Directors may from time to time appoint or the business of the Corporation require. ARTICLE VIII. DIVIDENDS, SURPLUS, ETC. Subject to the provisions of law, of the Certificate of Incorporation of the Corporation and of these by-laws, the Board of Directors may declare and pay dividends upon the shares of stock of the Corporation either (a) out of its surplus as defined in and computed in accordance with the provisions of the laws of the State of Delaware or (b) in case there shall be no such surplus, out of its net profits for the fiscal year in which the dividend is declared and/or the preceding fiscal year, whenever, and in such amounts as, in its opinion, the condition of the affairs of the Corporation shall render it advisable. Subject as aforesaid, the Board of Directors in its discretion may use and apply any of the surplus or net profits of the Corporation applicable for such purpose in purchasing or acquiring any of 36 the shares of the capital stock of the Corporation in accordance with law, or any of its bonds, debentures, notes, scrip or other securities or evidences of indebtedness, or from time to time may set aside from such surplus or net profits such sum or sums as it, in its absolute discretion, may think proper, as a reserve fund to meet contingencies, or for the purpose of maintaining or increasing the property or business of the Corporation, or for any other purpose it may think conducive to the best interests of the Corporation. ARTICLE IX. SEAL The Board of Directors shall provide a corporate seal, which shall be in the form of a circle and shall bear the name of the Corporation and words and figures showing that it was incorporated in the State of Delaware in the year 1927. ARTICLE X. FISCAL YEAR AND AUDIT SECTION 1. FISCAL YEAR. The fiscal year of the Corporation shall end on the thirty-first day of December in each year. SECTION 2. AUDIT OF BOOKS AND ACCOUNTS. The books and accounts of the Corporation shall be audited at least once in each fiscal year, by certified public accountants of good standing selected by the Board of Directors. 37 ARTICLE XI. WAIVER OF NOTICES Whenever any notice whatever is required to be given by these by-laws or the Certificate of Incorporation of the Corporation or any of the corporate laws of the State of Delaware, a waiver thereof in writing, signed by the person or persons entitled to said notice, whether before or after the time stated therein, shall be deemed equivalent to notice. ARTICLE XII. INCENTIVE COMPENSATION PAYMENTS As an incentive to efficient and profitable management, there is hereby authorized to be set aside for payment, for any fiscal year, beginning with the year 1954, as additional compensation to officers, heads of departments and other executives and key employees of the Corporation and its subsidiaries whose work most affects the Corporation's earnings, amounts which, in the aggregate, shall not exceed 3% of the consolidated net income during such year of the Corporation and its subsidiaries, before deducting Federal or state taxes based on income and before any provision for such additional compensation, provided that no such additional compensation shall be paid for any year unless cash dividends shall be paid in that year on the Common Stock of the Corporation at the rate of at least $2 per share as constituted at January 1, 1954. Such consolidated net income shall exclude, to the extent that the Committee hereinafter mentioned shall in its discretion deem proper, the whole or any part of any item of unusual or non-recurring income or loss not arising in the ordinary course of business. Such aggregate amounts of 38 additional compensation for any fiscal year shall be in addition to deferred portions of additional compensation authorized for a prior year or years. Subject to the foregoing limitations (which shall not be changed without the approval of the holders of a majority of the outstanding stock of the Corporation having general voting power), the total amount of additional compensation, if any, that may be authorized for any year, the participants in such additional compensation, the apportionment thereof among such participants and the time or times of payment thereof shall be determined by a Committee of the Board of Directors consisting of not less than three nor more than five of those Directors who are not entitled to share in the payments or who shall have advised the Board of Directors in writing that they irrevocably have elected not to participate in the payments, as the Chairman of the Board of Directors shall appoint to such Committee from time to time. Said Committee, which shall act by a majority of its members, shall be authorized to determine that any award to any participant for any year shall be paid at one time or to direct the payment of all or any part thereof in such deferred installments over a period of not exceeding ten consecutive years commencing not later than the tenth year following the year for which the award was made, the payment of any such deferred installments to be subject to such conditions, if any, with respect to the continued employment of the participant, his refraining from competing with the Corporation or otherwise, as the Committee shall determine. Said Committee shall also be authorized to determine that any payment to be made to any participant in any year shall be made in cash or partly in cash and partly in Common Stock of the Corporation purchased in the open market for that purpose, in such proportions as the Committee shall determine, such stock being valued for such purpose at the mean price thereof on the New York Stock Exchange on such date as the Committee shall determine. The total amount authorized under this Article for 39 any year shall be reported to the stockholders at or before the annual meeting of stockholders following such year. The provisions of this Article shall not be deemed to preclude such forms of incentive compensation for other employees of the Corporation as shall be authorized from time to time by the Board of Directors. ARTICLE XIII. NATIONAL EMERGENCY SECTION 1. DEFINITION AND APPLICATION. For the purposes of this Article XIII the term "national emergency" is defined as an emergency situation resulting from an attack upon the United States, a nuclear disaster within the United States, a catastrophe, or other emergency condition, as a result of which attack, disaster, catastrophe or emergency condition a quorum of the Board of Directors cannot readily be convened for action. Persons not directors of the Corporation may conclusively rely upon a determination by the Board of Directors of the Corporation, at a meeting held or purporting to be held pursuant to this Article XIII that a national emergency as hereinabove defined exists regardless of the correctness of such determination made or purporting to be made as hereinafter provided. During the existence of a national emergency the provisions of this Article XIII shall become operative, but, to the extent not inconsistent with such provisions, the other provisions of these by-laws shall remain in effect during any national emergency and upon its termination the provisions of this Article XIII shall cease to be operative. SECTION 2. MEETINGS, ETC. When it is determined in good faith by any director that a national emergency exists, special meetings of the Board of Directors may be called by such director. The director calling any such special meeting shall make a reasonable effort to notify all other directors of 40 the time and place of such special meeting, and such effort shall be deemed to constitute the giving of notice of such special meeting, and every director shall be deemed to have waived any requirement, of law or otherwise, that any other notice of such special meeting be given. At any such special meeting two directors shall constitute a quorum for the transaction of business including, without limiting the generality hereof, the filling of vacancies among directors and officers of the Corporation and the election of additional Vice Presidents, Assistant Secretaries and Assistant Treasurers. The act of a majority of the directors present thereat shall be the act of the Board of Directors. If at any such special meeting of the Board of Directors there shall be only one director present, such director present may adjourn the meeting from time to time until a quorum is obtained, and no further notice thereof need be given of any such adjournment. The directors present at any such special meeting shall make reasonable effort to report any action taken thereat to all absent directors, but failure to give such report shall not affect the validity of the action taken at any such meeting. All directors, officers, employees and agents of, and all persons dealing with, the Corporation, if acting in good faith, may conclusively rely upon any action taken at any such special meeting. SECTION 3. AMENDMENT. The Board of Directors shall have the power to alter, amend, or repeal any of these by-laws by the affirmative vote of at least two-thirds (2/3) of the directors present at any special meeting attended by two (2) or more directors and held in the manner prescribed in Section 2 of this Article, if it is determined in good faith by said two-thirds (2/3) that such alteration, amendment or repeal would be conducive to the proper direction of the Corporation's affairs. 41 SECTION 4. CHIEF EXECUTIVE OFFICER. If, during the existence of a national emergency, the Chairman of the Board of Directors of the Corporation becomes incapacitated, cannot by reasonable effort be located or otherwise is unable or unavailable to perform the duties of his office, the Vice Chairman of the Board of Directors of the Corporation is hereby designated as Chairman of the Board of Directors. If the Vice Chairman of the Board of Directors is unable or unavailable to perform the duties of the Chairman of the Board, unless otherwise determined by the Board of Directors in accordance with the provisions of this Article XIII, the senior available officer of the Corporation is hereby designated as Chairman of the Board of Directors of the Corporation, the seniority of such officer to be determined in order of rank of office and within the same rank by the date on which he was first elected or appointed to such office. SECTION 5. SUBSTITUTE DIRECTORS. To the extent required to constitute a quorum at any meeting of the Board of Directors during a national emergency, the officers of the Corporation who are present shall be deemed, in order of rank of office and within the same rank in order of election or appointment to such offices, directors for such meeting. ARTICLE XIV. AMENDMENTS The Board of Directors of the Corporation is expressly authorized (except as otherwise provided in these by-laws) to make by-laws for the Corporation and from time to time to alter or repeal by-laws so made but the by-laws made or altered by the Board of Directors may be altered or repealed by the stockholders at any annual or special meeting thereof, provided that notice of the proposal so to alter or repeal such by-laws be included in the notice of such meeting. 42 CERTIFICATION I, the undersigned, Secretary of HONEYWELL INC., a Delaware corporation, DO HEREBY CERTIFY that the foregoing is a full, true and correct copy of the by-laws of said Corporation as now in effect. IN WITNESS WHEREOF, I have hereunto set my hand and affixed the seal of said Corporation, this day of , 19 . _____________________________________________________________ Secretary EX-10 3 EXHIBIT 10(I) CREDIT AND REIMBURSEMENT AGREEMENT AGREEMENT dated as of December 9, 1993 among HONEYWELL INC., the BANKS listed on the signature pages hereof, the CO-AGENTS listed on the signature pages hereof and MORGAN GUARANTY TRUST COMPANY OF NEW YORK, as Administrative Agent. WHEREAS, (Confidential treatment requested) WHEREAS, (Confidential treatment requested) WHEREAS, the Banks are willing to make such loans to the Borrower and issue such letters of credit for the account of the Borrower pursuant to the terms of this Agreement; NOW, THEREFORE, the parties hereto agree as follows: ARTICLE I DEFINITIONS SECTION 1.01. DEFINITIONS. The following terms, as used herein, have the following meanings: 1 "Abandoned Subsidiary" means any Subsidiary of the Borrower (i) as to which a determination shall have been made in accordance with Section 5.04 to terminate such Subsidiary's corporate existence and (ii) the fair market value of the assets of which, immediately prior to such termination, shall not exceed $5,000,000. "Absolute Rate Auction" means a solicitation of Money Market Quotes setting forth Money Market Absolute Rates pursuant to Section 2.03. "Action" means the civil action (No. CV-90-0093 MRP (Ex)) in the Court for patent infringement claims relating to ring laser gyroscopes used in commercial aircraft brought by the Claimant against the Borrower but excluding any claims arising out of antitrust or other allegations. "Adjusted CD Rate" has the meaning set forth in Section 2.07(b). "Adjusted London Interbank Offered Rate" has the meaning set forth in Section 2.07(c). "Administrative Questionnaire" means, with respect to each Bank, an administrative questionnaire in the form prepared by the Agent and submitted to the Agent (with a copy to the Borrower) duly completed by such Bank. "Affiliate" means, with respect to any Person, (i) any Person that directly, or indirectly through one or more intermediaries, controls such former Person (a "Controlling Person") and (ii) any Person (other than a Subsidiary of such former Person) which is controlled by or is under common control with a Controlling Person. As used herein, the term "control" means possession, directly or indirectly, of the power to direct or cause the direction of the management or policies of a Person, whether through the ownership of voting securities, by contract or otherwise. "Agent" means Morgan Guaranty Trust Company of New York in its capacity as administrative agent for the Banks hereunder, and its successors in such capacity. "Aggregate LC Amount" has the meaning set forth in Section 6.02. "Applicable Lending Office" means, with respect to any Bank, (i) in the case of its Domestic Loans, its Domestic Lending Office, (ii) in the case of its Euro-Dollar 2 Loans, its Euro-Dollar Lending Office and (iii) in the case of its Money Market Loans, its Money Market Lending Office. "Assessment Rate" has the meaning set forth in Section 2.07(b). "Assignee" has the meaning set forth in Section 9.06(c). "Available LC Amount" means at any time an amount equal to the excess, if any, of the aggregate amount of the Commitments over the aggregate outstanding amount of Loans (if any) at such time. "Bank" means each bank listed on the signature pages hereof, each Assignee which becomes a Bank pursuant to Section 9.06(c), and their respective successors. "Base Rate" means, for any day, a rate per annum equal to (Confidential treatment requested) "Base Rate Loan" means (i) a Committed Loan which bears interest at the Base Rate pursuant to the applicable Notice of Committed Borrowing or Notice of Interest Rate Election or the provisions of Article VIII or (ii) an overdue amount which was a Base Rate Loan immediately before it became overdue. "Benefit Arrangement" means at any time an employee benefit plan within the meaning of Section 3(3) of ERISA which is not a Plan or a Multiemployer Plan and which is maintained or otherwise contributed to by any member of the ERISA Group. "Borrower" means Honeywell Inc., a Delaware corporation, and its successors. "Borrower's 1992 Form 10-K" means the Borrower's annual report on Form 10-K for the year ended December 31, 1992, as amended by Form 8 Amendment dated May 3, 1993, as filed with the Securities and Exchange Commission pursuant to the Securities Exchange Act of 1934. "Borrowing" has the meaning set forth in Section 1.03. "CD Base Rate" has the meaning set forth in Section 2.07(b). 3 "CD Loan" means (i) a Committed Loan which bears interest at a CD Rate pursuant to the applicable Notice of Committed Borrowing or Notice of Interest Rate Election or (ii) an overdue amount which was a CD Loan immediately before it became overdue. "CD Margin" has the meaning set forth in Section 2.07(b). "CD Rate" means a rate of interest determined pursuant to Section 2.07(b) on the basis of an Adjusted CD Rate. "CD Reference Banks" means The Chase Manhattan Bank (National Association), Citibank, N.A., Bank of America National Trust and Savings Association, The Fuji Bank, Limited and Morgan Guaranty Trust Company of New York. "Claimant" has the meaning set forth in the first Whereas Clause. "Closing Date" means the date on or after which the Agent shall have received the documents specified in or pursuant to Section 3.01. "Co-Agents" means the Banks listed as Co-Agents on the signature pages hereof, each in its capacity as Co-Agent. "Co-Arrangers" means J.P. Morgan Securities Inc. and Chase Securities, Inc., each in its capacity as co-arranger. "Commitment" means, with respect to each Bank, the amount set forth opposite the name of such Bank on the signature pages hereof, as such amount may be reduced from time to time pursuant to Section 2.09. "Committed Loan" means a loan made by a Bank pursuant to Section 2.01; PROVIDED that, if any such loan or loans (or portions thereof) are combined or subdivided pursuant to a Notice of Interest Rate Election, the term "Committed Loan" shall refer to the combined principal amount resulting from such combination or to each of the separate principal amounts resulting from such subdivision, as the case may be. (Confidential treatment requested) 4 (Confidential treatment requested) "Consolidated Domestic Subsidiary" means any Consolidated Subsidiary organized under the laws of any jurisdiction in the United States. (Confidential treatment requested) "Consolidated Subsidiary" means at any date any Subsidiary or other entity the accounts of which would be consolidated with those of the Borrower in its consolidated financial statements if such statements were prepared as of such date. (Confidential treatment requested) "Court" means the United States District Court for the Central District of California. "Credit Availability Period" means the period from the Effective Date to but excluding the Termination Date. "Credit Event" means the making of a Loan or the issuance of a Letter of Credit. 5 "Debt" of any Person means at any date, without duplication, (i) all obligations of such Person for borrowed money, (ii) all obligations of such Person evidenced by bonds, debentures, notes or other similar instruments, (iii) all obligations of such Person to pay the deferred purchase price of property or services, except trade accounts payable arising in the ordinary course of business, (iv) all obligations of such Person as lessee which are capitalized in accordance with generally accepted accounting principles, (v) all Debt secured by a Lien on any asset of such Person, whether or not such Debt is otherwise an obligation of such Person (to the extent of the lesser of the amount of such Debt and the book value of any assets subject to such Lien),(vi) all non- contingent obligations of such Person to reimburse or prepay any bank or other Person in respect of amounts paid under a letter of credit, banker's acceptance or similar instrument and (vii) all Debt of others Guaranteed by such Person (to the extent of the lesser of the amount of such Debt Guaranteed or the amount of such Guarantee). "Default" means any condition or event which constitutes an Event of Default or which with the giving of notice or lapse of time or both would, unless cured or waived, become an Event of Default. "Domestic Business Day" means any day except a Saturday, Sunday or other day on which commercial banks in New York City are authorized by law to close. "Domestic Lending Office" means, as to each Bank, its office located at its address set forth in its Administrative Questionnaire (or identified in its Administrative Questionnaire as its Domestic Lending Office) or such other office as such Bank may hereafter designate as its Domestic Lending Office by notice to the Borrower and the Agent; PROVIDED that any Bank may so designate separate Domestic Lending Offices for its Base Rate Loans, on the one hand, and its CD Loans, on the other hand, in which case all references herein to the Domestic Lending Office of such Bank shall be deemed to refer to either or both of such offices, as the context may require. "Domestic Loans" means CD Loans or Base Rate Loans or both. "Domestic Reserve Percentage" has the meaning set forth in Section 2.07(b). 6 "Effective Date" means the date this Agreement becomes effective in accordance with Section 9.09. (Confidential treatment requested) "Environmental Laws" means any and all federal, state, local and foreign statutes, laws, judicial decisions, regulations, ordinances, rules, judgments, orders, decrees, injunctions, permits, licenses, agreements and other governmental restrictions relating to the environment, the effect of the environment on human health or to emissions, discharges or releases of pollutants, contaminants, Hazardous Substances or wastes into the environment including, without limitation, ambient air, surface water, ground water, or land, or otherwise relating to the manufacture, processing, distribution, use, treatment, storage, disposal, transport or handling of pollutants, contaminants, Hazardous Substances or wastes or the clean-up or other remediation thereof. "ERISA" means the Employee Retirement Income Security Act of 1974, as amended, or any successor statute. "ERISA Group" means the Borrower, any Subsidiary and all members of a controlled group of corporations and all trades or businesses (whether or not incorporated) under common control which, together with the Borrower or any Subsidiary, are treated as a single employer under Section 414 of the Internal Revenue Code. "Euro-Dollar Business Day" means any Domestic Business Day on which commercial banks are open for international business (including dealings in dollar deposits) in London. "Euro-Dollar Lending Office" means, as to each Bank, its office, branch or affiliate located at its address set forth in its Administrative Questionnaire (or identified in its Administrative Questionnaire as its Euro-Dollar Lending Office) or such other office, branch or affiliate of such Bank as it may hereafter designate as its Euro-Dollar Lending Office by notice to the Borrower and the Agent. "Euro-Dollar Loan" means (i) a Committed Loan which bears interest at a Euro-Dollar Rate pursuant to the applicable Notice of Committed Borrowing or Notice of Interest Rate Election or (ii) an overdue amount which was a Euro-Dollar Loan immediately before it became overdue. 7 "Euro-Dollar Margin" has the meaning set forth in Section 2.07(c). "Euro-Dollar Rate" means a rate of interest determined pursuant to Section 2.07(c) on the basis of an Adjusted London Interbank Offered Rate. "Euro-Dollar Reference Banks" means the principal London offices of The Chase Manhattan Bank (National Association), Citibank, N.A., Bank of America National Trust and Savings Association, The Fuji Bank, Limited and Morgan Guaranty Trust Company of New York. "Euro-Dollar Reserve Percentage" has the meaning set forth in Section 2.07(c). "Event of Default" has the meaning set forth in Section 6.01. "Federal Funds Rate" means, for any day, the rate per annum (rounded upward, if necessary, to the nearest 1/100th of 1%) equal to the weighted average of the rates on overnight Federal funds transactions with members of the Federal Reserve System arranged by Federal funds brokers on such day, as published by the Federal Reserve Bank of New York on the Domestic Business Day next succeeding such day, PROVIDED that (i) if such day is not a Domestic Business Day, the Federal Funds Rate for such day shall be such rate on such transactions on the next preceding Domestic Business Day as so published on the next succeeding Domestic Business Day, and (ii) if no such rate is so published on such next succeeding Domestic Business Day, the Federal Funds Rate for such day shall be the average rate quoted to Morgan Guaranty Trust Company of New York on such day on such transactions as determined by the Agent. "Final Fee Payment Date" has the meaning set forth in Section 2.08(a). "Fixed Rate Loans" means CD Loans or Euro-Dollar Loans or Money Market Loans (excluding Money Market LIBOR Loans bearing interest at the Base Rate pursuant to Section 8.01(a)) or any combination of the foregoing. "Foreign Person" means (i) any government (a "Foreign Government") other than the United States government or the government of any political subdivision thereof, (ii) any agency or representative of a Foreign Government, (iii) any form of business enterprise organized 8 under the laws of any country other than the United States or its possessions or any political subdivision thereof or (iv) any form of business enterprise owned or controlled by any of the persons described in clauses (i), (ii) or (iii) above. "Group of Loans" means at any time a group of Loans consisting of (i) all Committed Loans which are Base Rate Loans at such time or (ii) all Committed Loans which are Fixed Rate Loans of the same type having the same Interest Period at such time; PROVIDED that, if a Committed Loan of any particular Bank is converted to or made as a Base Rate Loan pursuant to Section 8.02 or 8.05, such Loan shall be included in the same Group or Groups of Loans from time to time as it would have been in if it had not been so converted or made. "Guarantee" by any Person means any obligation, contingent or otherwise, of such Person directly or indirectly guaranteeing any Debt of any other Person and, without limiting the generality of the foregoing, any obligation, direct or indirect, contingent or otherwise, of such Person (i) to purchase or pay (or advance or supply funds for the purchase or payment of) such Debt (whether arising by virtue of partnership arrangements, by agreement to keep-well, to purchase assets, goods, securities or services, to take-or-pay, or to maintain financial statement conditions or otherwise) or (ii) entered into for the purpose of assuring in any other manner the obligee of such Debt of the payment thereof or to protect such obligee against loss in respect thereof (in whole or in part), PROVIDED that the term Guarantee shall not include endorsements for collection or deposit in the ordinary course of business. The term "Guarantee" used as a verb has a corresponding meaning. "Hazardous Substances" means any toxic, radioactive, caustic or otherwise hazardous substance, including petroleum, its derivatives, by-products and other hydrocarbons, or any substance having any constituent elements displaying any of the foregoing characteristics. "Indemnitee" has the meaning set forth in Section 9.03(b). "Initial Termination Date" means January 31, 1994 or such later date as shall have been agreed to in writing by the Borrower and each of the Banks from time to time. 9 "Interest and Costs" means pre- and post-judgment interest on the Judgment and court costs and attorneys' and experts' fees, if any, required by the Court to be paid by the Borrower in the Action. "Interest Period" means: (1) with respect to each Euro-Dollar Loan, a period commencing on the date of Borrowing specified in the applicable Notice of Borrowing or on the date specified in the applicable Notice of Interest Rate Election and ending one, two, three or six months thereafter, as the Borrower may elect in the applicable Notice; PROVIDED that: (a) any Interest Period which would otherwise end on a day which is not a Euro-Dollar Business Day shall be extended to the next succeeding Euro-Dollar Business Day unless such Euro-Dollar Business Day falls in another calendar month, in which case such Interest Period shall end on the next preceding Euro-Dollar Business Day; (b) any Interest Period which begins on the last Euro-Dollar Business Day of a calendar month (or on a day for which there is no numerically corresponding day in the calendar month at the end of such Interest Period) shall, subject to clause (c) below, end on the last Euro-Dollar Business Day of a calendar month; and (c) any Interest Period which would otherwise end after the Termination Date shall end on the Termination Date. (2) with respect to each CD Loan, a period commencing on the date of Borrowing specified in the applicable Notice of Borrowing or on the date specified in the applicable Notice of Interest Rate Election and ending 30, 60, 90 or 180 days thereafter, as the Borrower may elect in the applicable Notice; PROVIDED that: (a) any Interest Period (other than an Interest Period determined pursuant to clause (b) below) which would otherwise end on a day which is not a Euro-Dollar Business Day shall be extended to the next succeeding Euro-Dollar Business Day; and (b) any Interest Period which would otherwise end after the Termination Date shall end on the Termination Date. 10 (3) with respect to each Money Market LIBOR Borrowing, the period commencing on the date of borrowing specified in the applicable Notice of Borrowing and ending such whole number of months thereafter as the Borrower may elect in accordance with Section 2.03; PROVIDED that: (a) any Interest Period which would otherwise end on a day which is not a Euro-Dollar Business Day shall be extended to the next succeeding Euro-Dollar Business Day unless such Euro-Dollar Business Day falls in another calendar month, in which case such Interest Period shall end on the next preceding Euro-Dollar Business Day; (b) any Interest Period which begins on the last Euro-Dollar Business Day of a calendar month (or on a day for which there is no numerically corresponding day in the calendar month at the end of such Interest Period) shall, subject to clause (c) below, end on the last Euro-Dollar Business Day of a calendar month; and (c) any Interest Period which would otherwise end after the Termination Date shall end on the Termination Date. (4) with respect to each Money Market Absolute Rate Borrowing, the period commencing on the date of borrowing specified in the applicable Notice of Borrowing and ending such number of days thereafter (but not less than seven days) as the Borrower may elect in accordance with Section 2.03; PROVIDED that: (a) any Interest Period (other than an Interest Period determined pursuant to clause (b) below) which would otherwise end on a day which is not a Euro-Dollar Business Day shall be extended to the next succeeding Euro-Dollar Business Day; and (b) any Interest Period which would otherwise end after the Termination Date shall end on the Termination Date. "Internal Revenue Code" means the Internal Revenue Code of 1986, as amended, or any successor statute. (Confidential treatment requested) 11 "LC Exposure" means, at any time and for any Bank, an amount equal to such Bank's share of the amount of Letter of Credit Liabilities in respect of each Letter of Credit outstanding at such time. "Letter of Credit" has the meaning set forth in Section 2.15(a). "Letter of Credit Liabilities" means, at any time and in respect of any Letter of Credit, the sum, without duplication, of (i) the amount available for drawing under such Letter of Credit plus (ii) the aggregate unpaid amount of all Reimbursement Obligations in respect of previous drawings made under such Letter of Credit. "Level I Status" exists at any date if, at such date, the Borrower's outstanding senior unsecured long-term debt securities are rated either A+ or higher by S&P OR A1 or higher by Moody's. "Level II Status" exists at any date if, at such date, (i) the Borrower's outstanding senior unsecured long-term debt securities are rated either A or higher by S&P OR A2 or higher by Moody's AND (ii) Level I Status does not exist at such date. "Level III Status" exists at any date if, at such date, (i) the Borrower's outstanding senior unsecured long-term debt securities are rated either A- or higher by S&P OR A3 or higher by Moody's AND (ii) neither Level I Status nor Level II Status exists at such date. "Level IV Status" exists at any date if, at such date, (i) the Borrower's outstanding senior unsecured long-term debt securities are rated either BBB+ or higher by S&P OR Baa1 or higher by Moody's AND (ii) none of Level I Status, Level II Status or Level III Status exists at such date. "Level V Status" exists at any date if, at such date, (i) the Borrower's outstanding senior unsecured long-term debt securities are rated BBB or higher by S&P AND Baa2 or higher by Moody's AND (ii) none of Level I Status, Level II Status, Level III Status or Level IV Status exists at such date. "Level VI Status" exists at any date if none of Level I Status, Level II Status, Level III Status, Level IV Status or Level V Status exists at such date. 12 "LIBOR Auction" means a solicitation of Money Market Quotes setting forth Money Market Margins based on the London Interbank Offered Rate pursuant to Section 2.03. "Lien" means, with respect to any asset, any mortgage, pledge or security interest, or any other type of preferential arrangement that has the practical effect of creating a security interest, in respect of such asset. "Loan" means a Domestic Loan or a Euro-Dollar Loan or a Money Market Loan and "Loans" means Domestic Loans or Euro-Dollar Loans or Money Market Loans or any combination of the foregoing. "London Interbank Offered Rate" has the meaning set forth in Section 2.07(c). "Material Adverse Effect" means a material adverse effect on the business, consolidated financial position or consolidated results of operations (such results of operations to be considered on a four fiscal quarter basis) of the Borrower and its Consolidated Subsidiaries, considered as a whole. "Material Debt" means Debt (other than the Notes) of the Borrower and/or one or more of its Subsidiaries, arising in one or more related or unrelated transactions, in an aggregate principal amount exceeding $10,000,000. "Material Plan" means at any time a Plan or Plans having aggregate Unfunded Liabilities in excess of $50,000,000. "Money Market Absolute Rate" has the meaning set forth in Section 2.03(d). "Money Market Absolute Rate Loan" means a loan to be made by a Bank pursuant to an Absolute Rate Auction. "Money Market Lending Office" means, as to each Bank, its Domestic Lending Office or such other office, branch or affiliate of such Bank as it may hereafter designate as its Money Market Lending Office by notice to the Borrower and the Agent; PROVIDED that any Bank may from time to time by notice to the Borrower and the Agent designate separate Money Market Lending Offices for its Money Market LIBOR Loans, on the one hand, and its Money Market Absolute Rate Loans, on the other hand, in which case all references herein to the Money Market Lending Office of 13 such Bank shall be deemed to refer to either or both of such offices, as the context may require. "Money Market LIBOR Loan" means a loan to be made by a Bank pursuant to a LIBOR Auction (including such a loan bearing interest at the Base Rate pursuant to Section 8.01(a)). "Money Market Loan" means a Money Market LIBOR Loan or a Money Market Absolute Rate Loan. "Money Market Margin" has the meaning set forth in Section 2.03(d). "Money Market Quote" means an offer by a Bank to make a Money Market Loan in accordance with Section 2.03. "Moody's" means Moody's Investors Service, Inc., and its successors. "Multiemployer Plan" means at any time an employee pension benefit plan within the meaning of Section 4001(a)(3) of ERISA to which any member of the ERISA Group is then making or accruing an obligation to make contributions or has within the preceding five plan years made contributions, including for these purposes any Person which ceased to be a member of the ERISA Group during such five year period. "Notes" means promissory notes of the Borrower, substantially in the form of Exhibit A hereto, evidencing the obligation of the Borrower to repay the Loans, and "Note" means any one of such promissory notes issued hereunder. "Notice of Borrowing" means a Notice of Committed Borrowing (as defined in Section 2.02) or a Notice of Money Market Borrowing (as defined in Section 2.03(f)). "Notice of Interest Rate Election" has the meaning set forth in Section 2.11. "Notice of Issuance" has the meaning set forth in Section 2.15(b). "Parent" means, at any time with respect to any Bank, any Person which at such time directly or indirectly owns securities or other ownership interests of such Bank having ordinary voting power to elect a majority of the 14 board of directors of, or other Persons performing similar functions for, such Bank. "Participant" has the meaning set forth in Section 9.06(b). "PBGC" means the Pension Benefit Guaranty Corporation or any entity succeeding to any or all of its functions under ERISA. "Person" means an individual, a corporation, a partnership, an association, a trust or any other entity or organization, including a government or political subdivision or an agency or instrumentality thereof. "Plan" means at any time an employee pension benefit plan (other than a Multiemployer Plan) which is covered by Title IV of ERISA or subject to the minimum funding standards under Section 412 of the Internal Revenue Code and either (i) is maintained, or contributed to, by any member of the ERISA Group for employees of any member of the ERISA Group or (ii) has at any time within the preceding five years been maintained, or contributed to, by any Person which was at such time a member of the ERISA Group for employees of any Person which was at such time a member of the ERISA Group. "Prime Rate" means the rate of interest publicly announced by Morgan Guaranty Trust Company of New York in New York City from time to time as its Prime Rate. "Quarterly Date" means the last Euro-Dollar Business Day of each March, June, September and December. "Reference Banks" means the CD Reference Banks or the Euro-Dollar Reference Banks, as the context may require, and "Reference Bank" means any one of such Reference Banks. "Regulation U" means Regulation U of the Board of Governors of the Federal Reserve System, as in effect from time to time. "Reimbursement Due Date" has the meaning set forth in Section 2.15(e). "Reimbursement Obligations" means at any date the obligations of the Borrower then outstanding under Section 2.15 to reimburse any Bank for the amount paid by such Bank in respect of a drawing under a Letter of Credit. 15 "Required Banks" means at any time Banks having at least 66-2/3% of the aggregate amount of the Commitments or, if the Commitments shall have been terminated, having at least 66 2/3% of the aggregate Total Exposures of all of the Banks. "Restricted Asset" means any real property (excluding equipment and fixtures installed thereon or affixed thereto) owned or leased by the Borrower or any of its Consolidated Domestic Subsidiaries, and any capital stock or indebtedness of any Consolidated Domestic Subsidiary having assets with a book value in excess of $10,000,000. "Sell-Down Date" means the earlier of (i) the date on which the Borrower has agreed, by notice to the Agent and the Banks, to permit each Bank to assign or sell participating interests in its Commitment, Loans and Letter of Credit Liabilities to one or more banks or other institutions pursuant to Section 9.06 and (ii) (Confidential treatment requested) "S&P" means Standard & Poor's Ratings Group and its successors. "Status" means each of Level I Status, Level II Status, Level III Status, Level IV Status, Level V Status and Level VI Status. "Subsidiary" means any corporation or other entity of which securities or other ownership interests having ordinary voting power to elect a majority of the board of directors or other persons performing similar functions are at the time directly or indirectly owned by the Borrower. 16 "Term Sheet" means the summary of Terms and Conditions, including the fee grids attached thereto, outlining the principal terms and conditions of this Agreement, delivered by the Agent to each of the Banks. "Termination Date" means the later of (i) the Initial Termination Date and (ii) if on or prior to the Initial Termination Date the Sell-Down Date has occurred, June 30, 1999; PROVIDED that if any such day is not a Euro-Dollar Business Day, the Termination Date shall be the next succeeding Euro-Dollar Business Day unless such Euro-Dollar Business Day falls in another calendar month, in which the Termination Date shall be the next preceding Euro-Dollar Business Day. "Total Exposure" means, with respect to any Bank at any time, the sum of (i) the aggregate principal amount of its Loans then outstanding and (ii) the aggregate amount of its Letter of Credit Liabilities at such time. "Unfunded Liabilities" means, with respect to any Plan at any time, the amount (if any) by which (i) the value of all benefit liabilities under such Plan, determined on a plan termination basis using the assumptions prescribed by the PBGC for purposes of Section 4044 of ERISA, exceeds (ii) the fair market value of all Plan assets allocable to such liabilities under Title IV of ERISA (excluding any accrued but unpaid contributions), all determined as of the then most recent valuation date for such Plan, but only to the extent that such excess represents a potential liability of a member of the ERISA Group to the PBGC or any other Person under Title IV of ERISA. "United States" means the United States of America, including the States and the District of Columbia, but excluding its territories and possessions. "Wholly-Owned Consolidated Subsidiary" means any Consolidated Subsidiary all of the shares of capital stock or other ownership interests of which (except directors' qualifying shares) are at the time directly or indirectly owned by the Borrower. SECTION 1.02. ACCOUNTING TERMS AND DETERMINATIONS. Unless otherwise specified herein, all accounting terms used herein shall be interpreted, all accounting determinations hereunder shall be made, and all financial statements required to be delivered hereunder shall be prepared in accordance with generally accepted accounting principles as in effect from time to time, 17 applied on a basis consistent (except for changes concurred in by the Borrower's independent public accountants) with the most recent audited consolidated financial statements of the Borrower and its Consolidated Subsidiaries delivered to the Banks; PROVIDED that, if the Borrower notifies the Agent that the Borrower wishes to amend any covenant in Article V to eliminate the effect of any change in generally accepted accounting principles on the operation of such covenant (or if the Agent notifies the Borrower that the Required Banks wish to amend Article V for such purpose), then the Borrower's compliance with such covenant shall be determined on the basis of generally accepted accounting principles in effect immediately before the relevant change in generally accepted accounting principles became effective, until either such notice is withdrawn or such covenant is amended in a manner satisfactory to the Borrower and the Required Banks. SECTION 1.03. TYPES OF BORROWINGS. The term "Borrowing" denotes the aggregation of Loans of one or more Banks to be made to the Borrower pursuant to Article II on the same date, all of which Loans are of the same type (subject to Article VIII) and, except in the case of Base Rate Loans, have the same Interest Period or initial Interest Period. Borrowings are classified for purposes of this Agreement either by reference to the pricing of Loans comprising such Borrowing (E.G., a "Euro-Dollar Borrowing" is a Borrowing comprised of Euro-Dollar Loans) or by reference to the provisions of Article II under which participation therein is determined (I.E., a "Committed Borrowing" is a Borrowing under Section 2.01 in which all Banks participate in proportion to their Commitments, while a "Money Market Borrowing" is a Borrowing under Section 2.03 in which the Bank participants are determined on the basis of their bids in accordance therewith). SECTION 1.04. BASIS FOR RATINGS; DEEMED RATINGS. (a) The credit ratings to be utilized in the determination of a Status are the ratings assigned to unsecured obligations of the Borrower without third party credit support. Ratings assigned to any obligation which is secured or which has the benefit of third party credit support shall be disregarded. (b) If at any time (i) either S&P or Moody's has not publicly rated the Borrower's outstanding senior unsecured long-term debt securities (the "Ratable Securities") or no Ratable Securities of the Borrower are outstanding at such time and (ii) at such time S&P or Moody's has provided written evidence of a rating of Ratable 18 Securities that is implied from the rating that S&P or Moody's, as the case may be, has assigned to the Borrower's outstanding subordinated unsecured long-term debt securities or the Borrower's outstanding senior secured long-term debt securities, if any, such implied rating by S&P or Moody's, as the case may be (together with the public rating or the implied rating referred to in this subsection (b) of the other rating agency, if available), shall be used for purposes of determining any Status. (c) If at any time (i) either S&P or Moody's has not publicly rated the Ratable Securities or no Ratable Securities of the Borrower are outstanding at such time, (ii) no implied rating by S&P or Moody's, as the case may be, is available in accordance with subsection (b) above at such time and (iii) at such time the Borrower has obtained a private letter rating from S&P or Moody's, as the case may be, of the Ratable Securities, such private letter rating of S&P or Moody's, as the case may be (together with the public rating or the implied rating referred to in subsection (b) above of the other rating agency, if available), shall be used for purposes of determining any Status. (d) For purposes of determining Level I Status, Level II Status, Level III Status and Level IV Status, if at any date the rating of the Borrower's Ratable Securities by Moody's shall be higher or lower than the comparable rating by S&P by two or more rating levels (it being understood that for these purposes an S&P rating of A+ is comparable to a Moody's rating of A1, an S&P rating of A is comparable to a Moody's rating of A2, and so forth), then the rating of the Ratable Securities by each of Moody's and S&P shall be deemed to be the comparable S&P and Moody's ratings at the midpoint between the two actual ratings, or, if there shall be no rating at the midpoint, the next higher rating from the midpoint between the two actual ratings. For example, if the Ratable Securities are rated A+ by S&P and A3 by Moody's, the Ratable Securities shall be deemed to be rated A by S&P and A2 by Moody's; and if the Ratable Securities are rated BBB by S&P and A2 by Moody's, the Ratable Securities shall be deemed to be rated A- by S&P and A3 by Moody's. ARTICLE II THE CREDITS SECTION 2.01. COMMITMENTS TO LEND. During the Credit Availability Period, each Bank severally agrees, on 19 the terms and conditions set forth in this Agreement, to make loans to the Borrower pursuant to this Section from time to time in amounts such that the sum of (x) the aggregate principal amount of Committed Loans by such Bank plus (y) such Bank's LC Exposure at any one time outstanding shall not exceed the amount of its Commitment. Each Borrowing under this Section 2.01 shall be in an aggregate principal amount of $25,000,000 or any larger multiple of $1,000,000 (except that any such Borrowing may be in the aggregate amount available in accordance with Section 3.02(c)) and shall be made from the several Banks ratably in proportion to their respective Commitments. Within the foregoing limits, the Borrower may borrow under this Section 2.01, repay or, to the extent permitted by Section 2.10, prepay Loans and reborrow at any time during the Credit Availability Period pursuant to this Section 2.01. SECTION 2.02. NOTICE OF COMMITTED BORROWING. (a) The Borrower shall give the Agent notice (a "Notice of Committed Borrowing") not later than 11:00 A.M. (New York City time) on (x) the date of each Base Rate Borrowing, (y) the second Domestic Business Day before each CD Borrowing and (z) the third Euro-Dollar Business Day before each Euro-Dollar Borrowing, specifying: (a) the date of such Borrowing, which shall be a Domestic Business Day in the case of a Domestic Borrowing or a Euro-Dollar Business Day in the case of a Euro-Dollar Borrowing, (b) the aggregate amount of such Borrowing, (c) whether the Loans comprising such Borrowing are to bear interest initially at the Base Rate or at a CD Rate or a Euro-Dollar Rate, and (d) in the case of a Fixed Rate Borrowing, the duration of the initial Interest Period applicable thereto, subject to the provisions of the definition of Interest Period. (b) The provisions of subsection (a) above notwithstanding, if the Borrower shall not have given a Notice of Borrowing not later than 11:00 A.M. (New York City time) on any Reimbursement Due Date, then, unless the Borrower notifies the Agent before such time that it elects not to borrow on such date, the Agent shall be deemed to have received a Notice of Committed Borrowing specifying that (i) the date of the proposed Borrowing shall be such Reimbursement Due Date, (ii) the aggregate amount of the 20 proposed Borrowing shall be the aggregate amount of the Reimbursement Obligations due and payable on such Reimbursement Due Date, and (iii) the Loans comprising the proposed Borrowing are to be Base Rate Loans. SECTION 2.03. MONEY MARKET BORROWINGS. (a) THE MONEY MARKET OPTION. In addition to Committed Borrowings pursuant to Section 2.01, the Borrower may, as set forth in this Section, request the Banks during the Credit Availability Period to make offers to make Money Market Loans to the Borrower. The Banks may, but shall have no obligation to, make such offers and the Borrower may, but shall have no obligation to, accept any such offers in the manner set forth in this Section. (b) MONEY MARKET QUOTE REQUEST. When the Borrower wishes to request offers to make Money Market Loans under this Section, it shall transmit to the Agent by telex or facsimile transmission a Money Market Quote Request substantially in the form of Exhibit B hereto so as to be received no later than 10:00 A.M. (New York City time) on (x) the fifth Euro-Dollar Business Day prior to the date of Borrowing proposed therein, in the case of a LIBOR Auction or (y) the Domestic Business Day next preceding the date of Borrowing proposed therein, in the case of an Absolute Rate Auction (or, in either case, such other time or date as the Borrower and the Agent shall have mutually agreed and shall have notified to the Banks not later than the date of the Money Market Quote Request for the first LIBOR Auction or Absolute Rate Auction for which such change is to be effective) specifying: (i) the proposed date of Borrowing, which shall be a Euro-Dollar Business Day in the case of a LIBOR Auction or a Domestic Business Day in the case of an Absolute Rate Auction, (ii) the aggregate amount of such Borrowing, which shall be $25,000,000 or a larger multiple of $1,000,000, (iii) the duration of the Interest Period applicable thereto, subject to the provisions of the definition of Interest Period, and (iv) whether the Money Market Quotes requested are to set forth a Money Market Margin or a Money Market Absolute Rate. 21 The Borrower may request offers to make Money Market Loans for more than one Interest Period in a single Money Market Quote Request. No Money Market Quote Request shall be given within five Euro-Dollar Business Days (or such other number of days as the Borrower and the Agent may agree) of any other Money Market Quote Request. (c) INVITATION FOR MONEY MARKET QUOTES. Promptly upon receipt of a Money Market Quote Request, the Agent shall send to the Banks by telex or facsimile transmission an Invitation for Money Market Quotes substantially in the form of Exhibit C hereto, which shall constitute an invitation by the Borrower to each Bank to submit Money Market Quotes offering to make the Money Market Loans to which such Money Market Quote Request relates in accordance with this Section. (d) SUBMISSION AND CONTENTS OF MONEY MARKET QUOTES. (i) Each Bank may submit a Money Market Quote containing an offer or offers to make Money Market Loans in response to any Invitation for Money Market Quotes. Each Money Market Quote must comply with the requirements of this subsection (d) and must be submitted to the Agent by telex or facsimile transmission at its offices specified in or pursuant to Section 9.01 not later than (x) 2:00 P.M. (New York City time) on the fourth Euro-Dollar Business Day prior to the proposed date of Borrowing, in the case of a LIBOR Auction or (y) 9:15 A.M. (New York City time) on the proposed date of Borrowing, in the case of an Absolute Rate Auction (or, in either case, such other time or date as the Borrower and the Agent shall have mutually agreed and shall have notified to the Banks not later than the date of the Money Market Quote Request for the first LIBOR Auction or Absolute Rate Auction for which such change is to be effective); PROVIDED that Money Market Quotes submitted by the Agent (or any affiliate of the Agent) in the capacity of a Bank may be submitted, and may only be submitted, if the Agent or such affiliate notifies the Borrower of the terms of the offer or offers contained therein not later than (x) one hour prior to the deadline for the other Banks, in the case of a LIBOR Auction or (y) 15 minutes prior to the deadline for the other Banks, in the case of an Absolute Rate Auction. Subject to Articles III and VI, any Money Market Quote so made shall be irrevocable except with the written consent of the Agent given on the instructions of the Borrower. (ii) Each Money Market Quote shall be in substantially the form of Exhibit D hereto and shall in any case specify: 22 (A) the proposed date of Borrowing, (B) the principal amount of the Money Market Loan for which each such offer is being made, which principal amount (w) may be greater than or less than the Commitment of the quoting Bank, (x) must be $5,000,000 or a larger multiple of $1,000,000, (y) may not exceed the principal amount of Money Market Loans for which offers were requested and (z) may be subject to an aggregate limitation as to the principal amount of Money Market Loans for which offers being made by such quoting Bank may be accepted, (C) in the case of a LIBOR Auction, the margin above or below the applicable London Interbank Offered Rate (the "Money Market Margin") offered for each such Money Market Loan, expressed as a percentage (specified to the nearest 1/10,000th of 1%) to be added to or subtracted from such base rate, (D) in the case of an Absolute Rate Auction, the rate of interest per annum (specified to the nearest 1/10,000th of 1%) (the "Money Market Absolute Rate") offered for each such Money Market Loan, and (E) the identity of the quoting Bank. A Money Market Quote may set forth up to five separate offers by the quoting Bank with respect to each Interest Period specified in the related Invitation for Money Market Quotes. (iii) Any Money Market Quote shall be disregarded if it: (A) is not substantially in conformity with Exhibit D hereto or does not specify all of the information required by subsection (d)(ii); (B) contains qualifying, conditional or similar language; (C) proposes terms other than or in addition to those set forth in the applicable Invitation for Money Market Quotes; or (D) arrives after the time set forth in subsection (d)(i). 23 (e) NOTICE TO BORROWER. The Agent shall promptly notify the Borrower of the terms (x) of any Money Market Quote submitted by a Bank that is in accordance with subsection (d) and (y) of any Money Market Quote that amends, modifies or is otherwise inconsistent with a previous Money Market Quote submitted by such Bank with respect to the same Money Market Quote Request. Any such subsequent Money Market Quote shall be disregarded by the Agent unless such subsequent Money Market Quote is submitted solely to correct a manifest error in such former Money Market Quote. The Agent's notice to the Borrower shall specify (A) the aggregate principal amount of Money Market Loans for which offers have been received for each Interest Period specified in the related Money Market Quote Request, (B) the respective principal amounts and Money Market Margins or Money Market Absolute Rates, as the case may be, so offered and (C) if applicable, limitations on the aggregate principal amount of Money Market Loans for which offers in any single Money Market Quote may be accepted. (f) ACCEPTANCE AND NOTICE BY BORROWER. Not later than 10:30 A.M. (New York City time) on (x) the third Euro-Dollar Business Day prior to the proposed date of Borrowing, in the case of a LIBOR Auction or (y) the proposed date of Borrowing, in the case of an Absolute Rate Auction (or, in either case, such other time or date as the Borrower and the Agent shall have mutually agreed and shall have notified to the Banks not later than the date of the Money Market Quote Request for the first LIBOR Auction or Absolute Rate Auction for which such change is to be effective), the Borrower shall notify the Agent of its acceptance or non-acceptance of the offers so notified to it pursuant to subsection (e). In the case of acceptance, such notice (a "Notice of Money Market Borrowing") shall specify the aggregate principal amount of offers for each Interest Period that are accepted. The Borrower may accept any Money Market Quote in whole or in part; PROVIDED that: (i) the aggregate principal amount of each Money Market Borrowing may not exceed the applicable amount set forth in the related Money Market Quote Request, (ii) the aggregate principal amount of each Money Market Borrowing must be $25,000,000 or a larger multiple of $1,000,000, (iii) acceptance of offers may only be made on the basis of ascending Money Market Margins or Money Market Absolute Rates, as the case may be, and 24 (iv) the Borrower may not accept any offer that is described in subsection (d)(iii) or that otherwise fails to comply with the requirements of this Agreement. (g) ALLOCATION BY AGENT. If offers are made by two or more Banks with the same Money Market Margins or Money Market Absolute Rates, as the case may be, for a greater aggregate principal amount than the amount in respect of which such offers are accepted for the related Interest Period, the principal amount of Money Market Loans in respect of which such offers are accepted shall be allocated by the Agent among such Banks as nearly as possible (in multiples of $1,000,000, as the Agent may deem appropriate) in proportion to the aggregate principal amounts of such offers. Determinations by the Agent of the amounts of Money Market Loans shall be conclusive in the absence of manifest error. SECTION 2.04. NOTICE TO BANKS; FUNDING OF LOANS. (a) Upon receipt of a Notice of Borrowing, the Agent shall promptly notify each Bank of the contents thereof and of such Bank's share (if any) of such Borrowing and such Notice of Borrowing shall not thereafter be revocable by the Borrower. (b) Not later than 1:00 P.M. (New York City time) on the date of each Borrowing, each Bank participating therein shall make available its share of such Borrowing, in Federal or other funds immediately available in New York City, to the Agent at its address referred to in Section 9.01. Unless the Agent determines that any applicable condition specified in Article III has not been satisfied, the Agent will make the funds so received from the Banks available to the Borrower promptly after being made available to the Agent at the Agent's aforesaid address in the same type of funds as those received by the Agent. (c) Unless the Agent shall have received notice from a Bank prior to the date of any Borrowing that such Bank will not make available to the Agent such Bank's share of such Borrowing, the Agent may assume that such Bank has made such share available to the Agent on the date of such Borrowing in accordance with subsection (b) of this Section 2.04 and the Agent may, in reliance upon such assumption, make available to the Borrower on such date a corresponding amount. If and to the extent that such Bank shall not have so made such share available to the Agent, such Bank and the Borrower severally agree to repay to the Agent forthwith on 25 demand such corresponding amount together with interest thereon, for each day from the date such amount is made available to the Borrower until the date such amount is repaid to the Agent, at (i) in the case of the Borrower, a rate per annum equal to the higher of the Federal Funds Rate and the interest rate applicable thereto pursuant to Section 2.07 and (ii) in the case of such Bank, the Federal Funds Rate. If such Bank shall repay to the Agent such corresponding amount, such amount so repaid shall constitute such Bank's Loan included in such Borrowing for purposes of this Agreement. SECTION 2.05. NOTES. (a) The Loans of each Bank shall be evidenced by a single Note payable to the order of such Bank for the account of its Applicable Lending Office in an amount equal to the aggregate unpaid principal amount of such Bank's Loans. (b) Each Bank may, by notice to the Borrower and the Agent, request that its Loans of a particular type be evidenced by a separate Note in an amount equal to the aggregate unpaid principal amount of such Loans. Each such Note shall be in substantially the form of Exhibit A hereto with appropriate modifications to reflect the fact that it evidences solely Loans of the relevant type. Each reference in this Agreement to the "Note" of such Bank shall be deemed to refer to and include any or all of such Notes, as the context may require. (c) Upon receipt of each Bank's Note pursuant to Section 3.01(a), the Agent shall forward such Note to such Bank. Each Bank shall record the date, amount and type of each Loan made by it and the date and amount of each payment of principal made by the Borrower with respect thereto, and may, if such Bank so elects in connection with any transfer or enforcement of its Note, endorse on the schedule forming a part thereof appropriate notations to evidence the foregoing information with respect to each such Loan then outstanding; PROVIDED that the failure of any Bank to make any such recordation or endorsement shall not affect the obligations of the Borrower hereunder or under the Notes. Each Bank is hereby irrevocably authorized by the Borrower so to endorse its Note and to attach to and make a part of its Note a continuation of any such schedule as and when required. SECTION 2.06. SCHEDULED TERMINATION OF COMMITMENTS AND MATURITY OF LOANS. (a) The Commitments shall terminate on the Termination Date and any Committed Loans then outstanding (together with accrued interest 26 thereon) and all accrued fees hereunder shall be due and payable in full on such date. (b) Each Money Market Loan included in any Money Market Borrowing shall mature, and the principal amount thereof shall be due and payable, on the last day of the Interest Period applicable to such Borrowing. SECTION 2.07. INTEREST RATES. (a) Each Base Rate Loan shall bear interest on the outstanding principal amount thereof, for each day from the date such Loan is made until it becomes due, at a rate per annum equal to the Base Rate for such day. Such interest shall be payable quarterly in arrears on each Quarterly Date and, with respect to the principal amount of any Base Rate Loan converted to a CD Loan or a Euro-Dollar Loan, on the date such Base Rate Loan is so converted. Any overdue principal of or interest on any Base Rate Loan shall bear interest, payable on demand, for each day from and including the date payment thereof was due to but excluding the actual date of payment at a rate per annum equal to the sum of 2% plus the Base Rate for such day. (b) Each CD Loan shall bear interest on the outstanding principal amount thereof, for each day during each Interest Period applicable thereto, at a rate per annum equal to the sum of the CD Margin for such day plus the Adjusted CD Rate applicable to such Interest Period; PROVIDED that if any CD Loan or any portion thereof shall, as a result of clause (2)(b) of the definition of Interest Period, have an Interest Period of less than 30 days, such portion shall bear interest during such Interest Period at the rate applicable to Base Rate Loans during such period. Such interest shall be payable for each Interest Period on the last day thereof and, if such Interest Period is longer than 90 days, 90 days after the first day thereof. Any overdue principal of or interest on any CD Loan shall bear interest, payable on demand, for each day from and including the date payment thereof was due to but excluding the actual date of payment at a rate per annum equal to the sum of 2% plus (i) if principal of or interest on such CD Loan shall have become overdue during an Interest Period applicable to such CD Loan, for each such day before the last day of such Interest Period, the sum of the CD Margin plus the Adjusted CD Rate applicable to such Loan for such Interest Period, and (ii) for the last day of such Interest Period and each day thereafter, the Base Rate for such day. "CD Margin" means (Confidential treatment requested) 27 (Confidential treatment requested) The "Adjusted CD Rate" applicable to any Interest Period means a rate per annum determined pursuant to the following formula: [ CDBR ]* ACDR = [ ---------- ] + AR [ 1.00 - DRP ] ACDR = Adjusted CD Rate CDBR = CD Base Rate DRP = Domestic Reserve Percentage AR = Assessment Rate __________ * The amount in brackets being rounded upward, if necessary, to the next higher 1/100 of 1% The "CD Base Rate" applicable to any Interest Period is the rate of interest determined by the Agent to be the average (rounded upward, if necessary, to the next higher 1/100 of 1%) of the prevailing rates per annum bid at 10:00 A.M. (New York City time) (or as soon thereafter as practicable) on the first day of such Interest Period by two or more New York certificate of deposit dealers of recognized standing for the purchase at face value from each CD Reference Bank of its certificates of deposit in an amount comparable to the principal amount of the CD Loan of such CD Reference Bank to which such Interest Period applies and having a maturity comparable to such Interest Period, excluding from the calculation of such average the rates bid by such deposit dealers for such purchase of certificates of deposit of (i) the CD Reference Bank receiving the lowest average bid rates from such deposit dealers and (ii) the CD Reference Bank receiving the highest average bid rates from such deposit dealers. "Domestic Reserve Percentage" means for any day that percentage (expressed as a decimal) which is in effect on such day, as prescribed by the Board of Governors of the Federal Reserve System (or any successor) for determining the maximum reserve requirement (including without limitation any basic, supplemental or emergency reserves) 28 for a member bank of the Federal Reserve System in New York City with deposits exceeding five billion dollars in respect of new non-personal time deposits in dollars in New York City having a maturity comparable to the related Interest Period and in an amount of $100,000 or more. The Adjusted CD Rate shall be adjusted automatically on and as of the effective date of any change in the Domestic Reserve Percentage. "Assessment Rate" means for any day the annual assessment rate in effect on such day which is payable by a member of the Bank Insurance Fund classified as adequately capitalized and within supervisory subgroup "A" (or a comparable successor assessment risk classification) within the meaning of 12 C.F.R. SECTION 327.3(d) (or any successor provision) to the Federal Deposit Insurance Corporation (or any successor) for such Corporation's (or such successor's) insuring time deposits at offices of such institution in the United States. The Adjusted CD Rate shall be adjusted automatically on and as of the effective date of any change in the Assessment Rate. (c) Each Euro-Dollar Loan shall bear interest on the outstanding principal amount thereof, for each day during each Interest Period applicable thereto, at a rate per annum equal to the sum of the Euro-Dollar Margin for such day plus the Adjusted London Interbank Offered Rate applicable to such Interest Period. Such interest shall be payable for each Interest Period on the last day thereof and, if such Interest Period is longer than three months, three months after the first day thereof. "Euro-Dollar Margin" means (Confidential treatment requested) The "Adjusted London Interbank Offered Rate" applicable to any Interest Period means a rate per annum equal to the quotient obtained (rounded upward, if necessary, to the next higher 1/100 of 1%) by dividing (i) the applicable London Interbank Offered Rate by (ii) 1.00 minus the Euro-Dollar Reserve Percentage. 29 The "London Interbank Offered Rate" applicable to any Interest Period means the average (rounded upward, if necessary, to the next higher 1/100 of 1%) of the respective rates per annum at which deposits in dollars are offered to each of the Euro-Dollar Reference Banks in the London interbank market at approximately 11:00 A.M. (London time) two Euro-Dollar Business Days before the first day of such Interest Period in an amount approximately equal to the principal amount of the Euro-Dollar Loan of such Euro-Dollar Reference Bank to which such Interest Period is to apply and for a period of time comparable to such Interest Period, excluding from the calculation of such average the rate at which such deposits are offered to (i) the Euro-Dollar Reference Bank offered the lowest such rate and (ii) the Euro-Dollar Reference Bank offered the highest such rate. "Euro-Dollar Reserve Percentage" means for any day that percentage (expressed as a decimal) which is in effect on such day, as prescribed by the Board of Governors of the Federal Reserve System (or any successor) for determining the maximum reserve requirement for a member bank of the Federal Reserve System in New York City with deposits exceeding five billion dollars in respect of "Eurocurrency liabilities" (or in respect of any other category of liabilities which includes deposits by reference to which the interest rate on Euro-Dollar Loans is determined or any category of extensions of credit or other assets which includes loans by a non-United States office of any Bank to United States residents). The Adjusted London Interbank Offered Rate shall be adjusted automatically on and as of the effective date of any change in the Euro-Dollar Reserve Percentage. (d) Any overdue principal of or interest on any Euro-Dollar Loan shall bear interest, payable on demand, for each day from and including the date payment thereof was due to but excluding the date of actual payment, at a rate per annum equal to the sum of 2% plus (i) if principal of or interest on such Euro-Dollar Loan shall have become overdue during an Interest Period applicable to such Euro-dollar Loan, for each such day before the last day of such Interest Period, the sum of the Euro-Dollar Margin plus the Adjusted London Interbank Offered Rate applicable to such Loan for such Interest Period, and (ii) for the last day of such Interest Period and each day thereafter, the Euro-Dollar Margin plus the quotient obtained (rounded upward, if necessary, to the next higher 1/100 of 1%) by dividing (x) the average (rounded upward, if necessary, to the next higher 1/100 of 1%) of the respective rates per annum at which one day (or, if such amount due remains unpaid more 30 than three Euro-Dollar Business Days, then for such other period of time not longer than six months as the Agent may select) deposits in dollars in an amount approximately equal to such overdue payment due to each of the Euro-Dollar Reference Banks are offered to such Euro-Dollar Reference Bank in the London interbank market for the applicable period determined as provided above by (y) 1.00 minus the Euro-Dollar Reserve Percentage (or, if the circumstances described in clause (a) or (b) of Section 8.01 shall exist, at a rate per annum equal to the sum of 2% plus the Base Rate for such day). (e) Subject to Section 8.01(a), each Money Market LIBOR Loan shall bear interest on the outstanding principal amount thereof, for the Interest Period applicable thereto, at a rate per annum equal to the sum of the London Interbank Offered Rate for such Interest Period (determined in accordance with Section 2.07(c) as if the related Money Market LIBOR Borrowing were a Committed Euro-Dollar Borrowing) plus (or minus) the Money Market Margin quoted by the Bank making such Loan in accordance with Section 2.03. Each Money Market Absolute Rate Loan shall bear interest on the outstanding principal amount thereof, for the Interest Period applicable thereto, at a rate per annum equal to the Money Market Absolute Rate quoted by the Bank making such Loan in accordance with Section 2.03. Such interest shall be payable for each Interest Period on the last day thereof and, if such Interest Period is longer than three months, at intervals of three months after the first day thereof. Any overdue principal of or interest on any Money Market Loan shall bear interest, payable on demand, for each day from and including the date payment thereof was due to but excluding the date of actual payment, at a rate per annum equal to the sum of 2% plus the Base Rate for such day. (f) The Agent shall determine each interest rate applicable to the Loans hereunder. The Agent shall give prompt notice to the Borrower and the participating Banks of each rate of interest so determined, and its determination thereof shall be conclusive in the absence of manifest error. (g) Each Reference Bank agrees to use its best efforts to furnish quotations to the Agent as contemplated by this Section. If any Reference Bank does not furnish a timely quotation, the Agent shall determine the relevant interest rate on the basis of the quotation or quotations furnished by the remaining Reference Bank or Banks or, if none of such quotations is available on a timely basis, the provisions of Section 8.01 shall apply. 31 SECTION 2.08. FEES. (a) FACILITY FEE. The Borrower shall pay to the Agent for the account of the Banks ratably a facility fee at the Facility Fee Rate. Such facility fee shall accrue each day (i) from and including December 9, 1993 to but excluding the Termination Date (or earlier date of termination of the Commitments in their entirety), on the aggregate amount of the Commitments (whether used or unused) on such date, and (ii) from and including the Termination Date (or such earlier date) to but excluding the Final Fee Payment Date, on the sum of (i) the aggregate outstanding principal amount of the Loans plus (ii) the aggregate amount of the Letter of Credit Liabilities, in each case on such date. Accrued fees under this subsection shall be payable on each Quarterly Date, on the Termination Date and on the Final Fee Payment Date. "Facility Fee Rate" means (Confidential treatment requested) "Final Fee Payment Date" means the latest of (i) the date on which the Loans shall be repaid in their entirety, (ii) the date on which all Letters of Credit shall have terminated, (iii) the date on which no drawings shall be available under any Letter of Credit and (iv) the date on which all Reimbursement Obligations shall be paid in full. (b) ADVISORY FEES. The Borrower shall pay to each Co-Arranger advisory fees (i) on the Effective Date, in the amount previously agreed upon between such Co-Arranger and the Borrower and (ii) on the Sell-Down Date, in the amount previously agreed upon between such Co-Arranger and the Borrower. (c) SYNDICATION FEES. The Borrower shall pay to each Co-Agent and Co-Arranger syndication fees (i) prior to the Effective Date, on the date and in the amount previously agreed upon between the Borrower and such Co-Agent or Co- Arranger, as the case may be, and (ii) on the Sell-Down Date, in the amount specified in the Term Sheet to be paid to such Co-Agent or Co-Arranger, as the case may be, upon commencement of Phase II (as defined in the Term Sheet). 32 SECTION 2.09. OPTIONAL TERMINATION OR REDUCTION OF COMMITMENTS. The Borrower may, upon at least three Domestic Business Days' notice to the Agent, (i) terminate the Commitments at any time, if no Loans are outstanding and no Letter of Credit Liabilities exist at such time or (ii) ratably reduce from time to time by an aggregate amount of $25,000,000 or any larger multiple of $1,000,000, the aggregate amount of the Commitments in excess of the sum of (x) the aggregate outstanding principal amount of the Loans and (y) the aggregate amount of Letter of Credit Liabilities at such time in respect of all Letters of Credit. SECTION 2.10. OPTIONAL PREPAYMENTS. (a) The Borrower may, upon at least one Domestic Business Day's notice to the Agent, prepay a Group of Base Rate Loans (or any Money Market Borrowing bearing interest at the Base Rate pursuant to Section 8.01(a)) in whole at any time, or from time to time in part in amounts aggregating $25,000,000 or any larger multiple of $1,000,000, by paying the principal amount to be prepaid together with accrued interest thereon to the date of prepayment. Each such optional prepayment shall be applied to prepay ratably the Loans of the several Banks included in such Group or Borrowing. (b) The Borrower may, upon at least three Domestic Business Days' notice to the Agent, in the case of a Group of CD Loans, or upon at least three Euro-Dollar Business Days' notice to the Agent, in the case of a Group of Euro-Dollar Loans, prepay the Loans comprising such Group in whole at any time, or from time to time in part in amounts aggregating $25,000,000 or any larger multiple of $1,000,000, by paying the principal amount to be prepaid together with accrued interest thereon to the date of prepayment; PROVIDED that the Borrower shall reimburse each Bank for any loss or expense incurred by it as a result of any such prepayment in accordance with Section 2.13. Each such optional prepayment shall be applied to prepay ratably the Loans of the several Banks included in such Group. (c) Except as provided in subsection (a) above, the Borrower may not prepay all or any portion of the principal amount of any Money Market Loan prior to the maturity thereof. (d) Upon receipt of a notice of prepayment pursuant to this Section, the Agent shall promptly notify each Bank of the contents thereof and of such Bank's ratable share of such prepayment (if any) and such notice shall not thereafter be revocable by the Borrower. 33 SECTION 2.11. METHOD OF ELECTING INTEREST RATES. (a) The Loans included in each Committed Borrowing shall bear interest initially at the type of rate specified by the Borrower in the applicable Notice of Borrowing. Thereafter, the Borrower may from time to time elect to change or continue the type of interest rate borne by each Group of Loans (subject in each case to the provisions of Article VIII), as follows: (i) if such Loans are Base Rate Loans, the Borrower may elect to convert such Loans to CD Loans as of any Domestic Business Day or to Euro-Dollar Loans as of any Euro-Dollar Business Day; (ii) if such Loans are CD Loans, the Borrower may elect to convert such Loans to Base Rate Loans or Euro-Dollar Loans or elect to continue such Loans as CD Loans for an additional Interest Period, in each case effective on the last day of the then current Interest Period applicable to such Loans; (iii) if such Loans are Euro-Dollar Loans, the Borrower may elect to convert such Loans to Base Rate Loans or CD Loans or elect to continue such Loans as Euro-Dollar Loans for an additional Interest Period, in each case effective on the last day of the then current Interest Period applicable to such Loans. Each such election shall be made by delivering a notice (a "Notice of Interest Rate Election") to the Agent not later than 11:00 A.M. (New York City time) (x) if the relevant Loans are to be converted to Domestic Loans or continued as Domestic Loans for an additional Interest Period, the second Domestic Business Day before such conversion or continuation is to be effective and (y) if the relevant Loans are to be converted to Euro-Dollar Loans or continued as Euro-Dollar Loans for an additional Interest Period, the third Euro-Dollar Business Day before such conversion or continuation is to be effective. A Notice of Interest Rate Election may, if it so specifies, apply to only a portion of the aggregate principal amount of the relevant Group of Loans; PROVIDED that (i) such portion is allocated ratably among the Loans comprising such Group and (ii) the portion to which such Notice applies, and the remaining portion to which it does not apply, are each $25,000,000 or any larger multiple of $1,000,000. (b) Each Notice of Interest Rate Election shall specify: 34 (i) the Group of Loans (or portion thereof) to which such notice applies, (ii) the date on which the conversion or continuation selected in such notice is to be effective, which shall comply with the applicable clause of subsection (a) above, (iii) if the Loans comprising such Group are to be converted, the new type of Loans and, if such new Loans are Fixed Rate Loans, the duration of the initial Interest Period applicable thereto, and (iv) if such Loans are to be continued as CD Loans or Euro-Dollar Loans for an additional Interest Period, the duration of such additional Interest Period. Each Interest Period specified in a Notice of Interest Rate Election shall comply with the provisions of the definition of Interest Period. The number of Groups of Loans outstanding at any one time shall not exceed the lesser of (i) thirty and (ii) the number obtained by dividing the aggregate amount of the Commitments at such time by $25,000,000 (rounded upward, if necessary, to the next higher integer). (c) Upon receipt of a Notice of Interest Rate Election from the Borrower pursuant to subsection (a) above, the Agent shall promptly notify each Bank of the contents thereof and such notice shall not thereafter be revocable by the Borrower. If the Borrower fails to deliver a timely Notice of Interest Rate Election to the Agent for any Group of Fixed Rate Loans, such Loans shall be converted into Base Rate Loans on the last day of the then current Interest Period applicable thereto. SECTION 2.12. GENERAL PROVISIONS AS TO PAYMENTS. (a) The Borrower shall make each payment of principal of, and interest on, the Loans and of fees hereunder, not later than 12:00 Noon (New York City time) on the date when due, in Federal or other funds immediately available in New York City, to the Agent at its address referred to in Section 9.01. The Agent will promptly distribute to each Bank its ratable share of each such payment received by the Agent for the account of the Banks. Whenever any payment of principal of, or interest on, the Domestic Loans or of fees shall be due on a day which is not a Domestic Business Day, the date for payment thereof shall be extended to the next succeeding Domestic Business Day. Whenever any payment of principal of, or interest on, the Euro-Dollar Loans shall be due on a 35 day which is not a Euro-Dollar Business Day, the date for payment thereof shall be extended to the next succeeding Euro-Dollar Business Day unless such Euro-Dollar Business Day falls in another calendar month, in which case the date for payment thereof shall be the next preceding Euro-Dollar Business Day. Whenever any payment of principal of, or interest on, the Money Market Loans shall be due on a day which is not a Euro-Dollar Business Day, the date for payment thereof shall be extended to the next succeeding Euro-Dollar Business Day. If the date for any payment of principal is extended by operation of law or otherwise, interest thereon shall be payable for such extended time. (b) Unless the Agent shall have received notice from the Borrower prior to the date on which any payment is due to the Banks hereunder that the Borrower will not make such payment in full, the Agent may assume that the Borrower has made such payment in full to the Agent on such date and the Agent may, in reliance upon such assumption, cause to be distributed to each Bank on such due date an amount equal to the amount then due such Bank. If and to the extent that the Borrower shall not have so made such payment, each Bank shall repay to the Agent forthwith on demand such amount distributed to such Bank together with interest thereon, for each day from the date such amount is distributed to such Bank until the date such Bank repays such amount to the Agent, at the Federal Funds Rate. SECTION 2.13. FUNDING LOSSES. If the Borrower makes any payment of principal with respect to any Fixed Rate Loan or any Fixed Rate Loan is converted to a Base Rate Loan (pursuant to Article II, VI or VIII or otherwise) on any day other than the last day of an Interest Period applicable thereto, or the end of an applicable period fixed pursuant to Section 2.07(d), or if the Borrower fails to borrow or prepay any Fixed Rate Loans after notice has been given to any Bank in accordance with Section 2.04(a) or 2.10(d), the Borrower shall reimburse each Bank within 15 days after demand for any resulting loss or expense incurred by it (or, subject to Section 9.06(e), by an existing or prospective Participant in the related Loan), including (without limitation) any loss incurred in obtaining, liquidating or employing deposits from third parties, but excluding loss of margin for the period after any such payment or conversion or failure to borrow or prepay, PROVIDED that such Bank shall have delivered to the Borrower a certificate setting forth in reasonable detail its calculation of the amount of such loss or expense, which certificate shall be conclusive in the absence of manifest error. 36 SECTION 2.14. COMPUTATION OF INTEREST AND FEES. Interest based on the Prime Rate hereunder shall be computed on the basis of a year of 365 days (or 366 days in a leap year) and paid for the actual number of days elapsed (including the first day but excluding the last day). All other interest and fees shall be computed on the basis of a year of 360 days and paid for the actual number of days elapsed (including the first day but excluding the last day). SECTION 2.15. LETTERS OF CREDIT. (a) COMMITMENT TO ISSUE LETTERS OF CREDIT. During the Credit Availability Period, the Banks severally agree, upon the terms and conditions hereinafter set forth, to issue letters of credit hereunder, ratably in proportion to their respective Commitments, from time to time upon the request of the Borrower (letters of credit so issued, the "Letters of Credit", and each a "Letter of Credit"); PROVIDED that, immediately after each Letter of Credit is issued, (i) the sum of each Bank's outstanding LC Exposure plus the aggregate principal amount of Committed Loans by such Bank shall not exceed the amount of its Commitment and (ii) the aggregate amount of the Letter of Credit Liabilities shall not exceed the Available LC Amount. (b) NOTICE OF ISSUANCE. The Borrower shall give the Agent irrevocable notice (i) at least five Domestic Business Days prior to the requested issuance of a Letter of Credit, if the form of such Letter of Credit has not been previously agreed upon by the Borrower and the Banks, and (ii) at least three Domestic Business Days prior to the requested issuance of a Letter of Credit, if the form of such Letter of Credit has been previously agreed upon by the Borrower and the Banks, in each case specifying the date such Letter of Credit is to be issued, and describing the proposed terms of such Letter of Credit, including the face amount thereof (if not specified in the form of such Letter of Credit, if any), and the nature of the transactions proposed to be supported thereby (such notice, a "Notice of Issuance"). Upon receipt of any Notice of Issuance, the Agent (i) shall promptly notify each Bank of the contents thereof and of the amount of such Bank's ratable share of such proposed Letter of Credit and (ii) shall prepare and send to the Borrower and the Lenders a proposed form or the form, as the case may be, of such Letter of Credit. The terms of each such Letter of Credit shall provide that each Bank is obligated, severally and not jointly, to pay any drawings under such Letter of Credit ratably in proportion to such Bank's Commitment as in effect on the date such 37 Letter of Credit is issued. The issuance by the Banks of each Letter of Credit shall, in addition to the conditions precedent set forth in Article III, be subject to the conditions precedent that (i) such Letter of Credit shall (x) have a minimum aggregate face amount of $25,000,000 and (y) be in such form and contain such terms as shall be reasonably satisfactory to the Banks, (ii) the Borrower shall have, or shall have caused such other Persons to have, executed and delivered such other instruments and agreements relating to such Letter of Credit as any of the Banks shall have reasonably requested, (iii) such Letter of Credit shall be used only for the purpose of staying directly or indirectly the execution of any judgment entered by the Court in the Action and (iv) such Letter of Credit shall be issued only to a beneficiary designated by the Court or to one or more bonding companies accepted by the Court that issue surety bonds in favor of such beneficiary. No Letter of Credit shall have a term extending beyond the Termination Date. (c) FEES. The Borrower agrees to pay to the Agent for the account of each Bank in respect of each Letter of Credit, ratably in proportion to its respective share of such Letter of Credit, a letter of credit fee with respect to such Letter of Credit, computed for each day from and including the date of issuance of such Letter of Credit until the date no drawings are available on such Letter of Credit, at the LC Commission Rate on the undrawn amount of such Letter of Credit on such day. Such fee shall be payable in arrears on each Quarterly Date for so long as such Letter of Credit is outstanding and on the date no drawings are available on such Letter of Credit. "LC Commission Rate" means (Confidential treatment requested) (d) DRAWINGS UNDER THE LETTER OF CREDIT. Upon receipt from the beneficiary of any Letter of Credit of a demand for payment under such Letter of Credit, the Agent shall determine in accordance with the terms and conditions of such Letter of Credit whether such demand for payment should be honored. If the Agent determines that a demand for payment by such beneficiary should be honored in 38 accordance with the terms and conditions set forth in such Letter of Credit, the Agent shall promptly notify the Borrower and each Bank of the aggregate amount to be paid as a result of such demand and shall promptly notify each Bank of its share of such amount. Upon receipt of such notice, each Bank shall make available to such beneficiary its share of the amount so demanded in accordance with the terms of such Letter of Credit. (e) REIMBURSEMENT OBLIGATION. If any Bank pays any portion of any draft presented under any Letter of Credit, the Borrower agrees to pay to such Bank (x) on the date the Agent notifies the Borrower of such payment, if such notice is given at or before 10 A.M. (New York City time), or (y) if such notice is given after 10 A.M. (New York City time) then not later than 1:00 P.M. (New York City time) on the Domestic Business Day next succeeding the date such notice is given (the "Reimbursement Due Date") an amount equal to the amount paid by such Bank under such Letter of Credit (a "Reimbursable Amount"), together with interest thereon from and including the date of such payment by such Bank to but excluding the Reimbursement Due Date at a rate per annum equal to the Base Rate for such day. If any Reimbursable Amount is not paid on the relevant Reimbursement Due Date, the overdue amount shall bear interest for each day from and including the Reimbursement Due Date to but excluding the date of actual payment at a rate per annum equal to the sum of 2% plus the Base Rate for such day. The Borrower shall be irrevocably and unconditionally obligated forthwith to reimburse each Bank for any Reimbursable Amount paid by such Bank upon any drawing under any Letter of Credit, without presentment, demand, protest or other formalities of any kind. (f) OBLIGATIONS. The obligations of the Borrower under this Section 2.15 shall be absolute, unconditional and irrevocable, and shall be performed strictly in accordance with the terms of this Agreement, under all circumstances whatsoever, including without limitation the following circumstances: (i) any lack of validity or enforceability of any Letter of Credit or any document related thereto; (ii) any amendment or waiver of or any consent to departure from all or any of the provisions of any Letter of Credit or any document related thereto; 39 (iii) the use which may be made of any Letter of Credit by, or any acts or omission of, the beneficiary of such Letter of Credit (or any Person for whom such the beneficiary may be acting); (iv) the existence of any claim, set-off, defense or other rights that the Borrower may have at any time against the beneficiary of a Letter of Credit (or any Person for whom such beneficiary may be acting), the Banks or any other Person, whether in connection with this Agreement or any Letter of Credit or any document related hereto or thereto or any unrelated transaction; (v) any statement or any other document presented under a Letter of Credit proving to be forged, fraudulent or invalid in any respect or any statement therein being untrue or inaccurate in any respect whatsoever; (vi) payment under any Letter of Credit against presentation to the Agent of a draft or certificate that does not comply with the terms of such Letter of Credit, PROVIDED that the Agent's determination that documents presented under such Letter of Credit comply with the terms thereof shall not have constituted gross negligence or willful misconduct of the Agent; or (vii) any other act or omission to act or delay of any kind by any Bank, the Agent or any other Person or any other event or circumstance whatsoever that might, but for the provisions of this subsection (f), constitute a legal or equitable discharge of the Borrower's obligations hereunder. (g) INDEMNIFICATION. The Borrower hereby indemnifies and holds harmless each Bank and the Agent from and against any and all claims, damages, losses, liabilities, costs or expenses which such Bank or the Agent may incur (or which may be claimed against such Bank or the Agent by any Person whatsoever), by reason of or in connection with the execution and delivery or transfer of or payment or failure to pay under any Letter of Credit; PROVIDED that the Borrower shall not be required to indemnify any Bank or the Agent for any claims, damages, losses, liabilities, costs or expenses, to the extent caused by (x) the willful misconduct or gross negligence of the 40 Agent in determining whether a request presented under any Letter of Credit complied with the terms of such Letter of Credit or (y) such Bank's failure to pay under any Letter of Credit after receipt of notice from the Agent pursuant to Section 2.15(b) after the presentation to the Agent by the beneficiary of such Letter of Credit of documents strictly complying with the terms and conditions of such Letter of Credit. Nothing in this subsection (g) is intended to limit the obligations of the Borrower under any other provision of this Agreement, including the Borrower's reimbursement obligation contained in Section 2.15(e). (h) LIMITED LIABILITY OF THE AGENT AND THE BANKS. The Agent, the Banks and their respective officers, directors, employees and agents shall not be liable or responsible for, and the obligations of the Borrower to reimburse the Banks for payments under this Agreement shall not be excused by, any action or inaction of the Agent or any Bank related to: (w) the use which may be made of any Letter of Credit or any acts or omissions of the beneficiary of such Letter of Credit in connection therewith; (x) the validity or genuineness of documents presented under any Letter of Credit, even if such documents should in fact prove to be in any or all respects invalid, fraudulent or forged; (y) payment by any Bank against presentation of documents to the Agent which do not comply with the terms of any Letter of Credit, including failure of any document to bear any reference or adequate reference to such Letter of Credit; or (z) any other circumstances whatsoever in making or failing to make payment under any Letter of Credit, or notifying or failing to notify any Bank that is required to make any payment under any Letter of Credit. Notwithstanding the foregoing, the Borrower shall, in the case of clause (i) of this sentence, have a claim against the Agent and, in the case of clause (ii) of this sentence, against any Bank, and the Agent or such Bank, as the case may be, shall be liable to the Borrower, to the extent, but only to the extent, of any direct, as opposed to consequential, damages suffered by the Borrower which were caused by (i) the Agent's willful misconduct or gross negligence in determining whether documents presented under any Letter of Credit comply with the terms thereof or in failing to notify any Bank in accordance with Section 2.15(d) or in accordance with the terms of any Letter of Credit or (ii) such Bank's failure to pay, after receipt of notice from the Agent pursuant to Section 2.15(b), under any Letter of Credit after the presentation to the Agent by the beneficiary of such Letter of Credit of documents strictly complying with the terms and conditions of such Letter of Credit. In furtherance and not in limitation of the 41 foregoing, the Agent may accept documents that appear on their face to be in order, without responsibility for further investigation, regardless of any notice or information to the contrary. (i) OBLIGATIONS SEVERAL. The obligations of each Bank hereunder and under any Letter of Credit are several but not joint. Failure of any Bank to carry out its obligations hereunder and under any Letter of Credit shall not relieve any other Bank, the Agent or the Borrower of any of their respective obligations hereunder or under such Letter of Credit. Neither the Agent nor any Bank shall be responsible for the obligations of any other party hereunder. ARTICLE III CONDITIONS SECTION 3.01. CLOSING. The Closing hereunder shall occur upon receipt by the Agent of the following documents, each dated the Closing Date unless otherwise indicated: (a) a duly executed Note for the account of each Bank dated on or before the Closing Date, complying with the provisions of Section 2.05; (b) a certificate signed on behalf of the Borrower by a vice president and the secretary of the Borrower stating that (i) on the Closing Date, no Default has occurred and is continuing and (ii) the representations and warranties of the Borrower contained in this Agreement are true on and as of the Closing Date; (c) opinions of Skadden, Arps, Slate, Meagher & Flom, special counsel for the Borrower, substantially in the form of Exhibit E hereto, and of the General Counsel of the Borrower, substantially in the form of Exhibit F hereto, and each covering such additional matters relating to the transactions contemplated hereby as the Required Banks may reasonably request; (d) an opinion of Davis Polk & Wardwell, special counsel for the Agent, substantially in the form of Exhibit G hereto and covering such additional matters relating to the transactions contemplated hereby as the Required Banks may reasonably request; and 42 (e) all documents the Agent may reasonably request relating to the existence of the Borrower, the corporate authority for and the validity of this Agreement, the Notes or any related document, and any other matters relevant hereto, all in form and substance reasonably satisfactory to the Agent. The Agent shall promptly notify the Borrower and the Banks of the Closing Date, and such notice shall be conclusive and binding on all parties hereto. SECTION 3.02. EACH CREDIT EVENT. The obligations of any Bank to make a Loan on the occasion of any Borrowing and to issue a Letter of Credit on the occasion of any request therefor by the Borrower are subject to the satisfaction of the following conditions: (a) the fact that the Closing Date shall have occurred; (b) receipt (or deemed receipt) by the Agent of a Notice of Borrowing as required by Section 2.02 or 2.03, or a Notice of Issuance as required by Section 2.15, as the case may be; (c) the fact that, immediately after such Credit Event, the sum of (i) the aggregate outstanding principal amount of the Loans plus (ii) the aggregate outstanding amount of Letter of Credit Liabilities will not exceed the aggregate amount of the Commitments; (d) the fact that, immediately before and after such Credit Event, no Default shall have occurred and be continuing; (e) the fact that the representations and warranties of the Borrower contained in this Agreement (except (i) the representations set forth in Sections 4.04(c) and 4.11(b) and (ii) the representations and warranties set forth in Sections 4.05 and 4.07 as to any matter which has theretofore been disclosed in writing by the Borrower to the Banks) shall be true on and as of the date of such Credit Event; 43 (f) (Confidential treatment requested) (g) (Confidential treatment requested) (h) (Confidential treatment requested) (i) (Confidential treatment requested) (j) (Confidential treatment requested) (k) in the case of the initial Credit Event, (i) the fact that the Sell-Down Date shall have occurred at least five Domestic Business Days prior to the date of the initial Credit Event and (ii) receipt by the Agent, for the account of each of the Co-Arrangers and the Co-Agents, of the fees payable to the Co-Arrangers and the Co-Agents on or before the date of the initial Credit Event. Each Credit Event hereunder shall be deemed to be a representation and warranty by the Borrower on the date of such Credit Event as to the facts specified in clauses (c) through (i), inclusive, of this Section. ARTICLE IV REPRESENTATIONS AND WARRANTIES The Borrower represents and warrants that: SECTION 4.01. CORPORATE EXISTENCE AND POWER. The Borrower is a corporation duly incorporated, validly existing and in good standing under the laws of the State of Delaware, and has all corporate powers and all material 44 governmental licenses, authorizations, consents and approvals required to carry on its business as now conducted. SECTION 4.02. CORPORATE AND GOVERNMENTAL AUTHORIZATION; NO CONTRAVENTION. The execution, delivery and performance by the Borrower of this Agreement and the Notes are within the Borrower's corporate power, have been duly authorized by all necessary corporate action, require no action by or in respect of, or filing with, any governmental body, agency or official and do not contravene, or constitute a default under, any provision of applicable law or regulation or of the restated certificate of incorporation or bylaws of the Borrower or of any material agreement, judgment, injunction, order, decree or other instrument binding upon the Borrower or any of its Subsidiaries or result in the creation or imposition of any Lien on any asset of the Borrower or any of its Subsidiaries. SECTION 4.03. BINDING EFFECT. This Agreement constitutes a valid and binding agreement of the Borrower, and the Notes, when executed and delivered in accordance with by this Agreement, will constitute valid and binding obligations of the Borrower. SECTION 4.04. FINANCIAL INFORMATION. (a) The consolidated statement of financial position of the Borrower and its Consolidated Subsidiaries as of December 31, 1992 and the related consolidated statements of income and of cash flows for the fiscal year then ended, reported on by Deloitte & Touche and set forth in the Borrower's 1992 Form 10-K, a copy of which has been delivered to each of the Banks, fairly present, in all material respects, in conformity with generally accepted accounting principles, the consolidated financial position of the Borrower and its Consolidated Subsidiaries as of such date and their consolidated results of operations and cash flows for such fiscal year. (b) The unaudited consolidated statement of financial position of the Borrower and its Consolidated Subsidiaries as of October 3, 1993 and the related unaudited consolidated statements of income and of cash flows for the three quarters then ended, set forth in the Borrower's quarterly report for the fiscal quarter ended October 3, 1993 as filed with the Securities and Exchange Commission on Form 10-Q, a copy of which has been delivered to each of the Banks, fairly present, in conformity with generally accepted 45 accounting principles applied on a basis consistent with the financial statements referred to in subsection (a) of this Section, the consolidated financial position of the Borrower and its Consolidated Subsidiaries as of such date and their consolidated results of operations and cash flows for such period of three quarters (subject to normal year-end adjustments). (c) Since December 31, 1992 there has been no material adverse change in the business, financial position, results of operations or prospects of the Borrower and its Consolidated Subsidiaries, considered as a whole; PROVIDED that the verdict rendered by the jury in the Action and the entry by the Court, and the payment by the Borrower, of the Judgment or any Settlement shall not, in and of themselves, constitute such a material adverse change. SECTION 4.05. LITIGATION. There is no action, suit or proceeding pending against, or to the knowledge of the Borrower threatened against or affecting, the Borrower or any of its Subsidiaries before any court or arbitrator or any governmental body, agency or official (i) in which there is a reasonable possibility of an adverse decision which could reasonably be expected to have a Material Adverse Effect, except for the Action or (ii) which in any manner draws into question the validity of this Agreement or the Notes. SECTION 4.06. COMPLIANCE WITH ERISA; MINIMUM FUNDING. (a) Each member of the ERISA Group has fulfilled its obligations under the minimum funding standards of ERISA and the Internal Revenue Code with respect to each Plan and is in compliance in all material respects with the presently applicable provisions of ERISA and the Internal Revenue Code with respect to each Plan, except where the failure to comply therewith could not reasonably be expected to have a Material Adverse Effect. No member of the ERISA Group has (i) sought a waiver of the minimum funding standard under Section 412 of the Internal Revenue Code in respect of any Plan, (ii) failed to make any contribution or payment to any Plan or Multiemployer Plan or in respect of any Benefit Arrangement, or made any amendment to any Plan or Benefit Arrangement, which failure or amendment has resulted or could result in the imposition of a Lien or the posting of a bond or other security under ERISA or the Internal Revenue Code or (iii) incurred any liability under Title IV of ERISA other than a liability to the PBGC for premiums or similar items under Section 4007 of ERISA. 46 (b) As of September 30 of each fiscal year of the Borrower, the fair market value of all assets, in the aggregate, of all Plans maintained or contributed to by any member of the ERISA Group (excluding any accrued but unpaid contributions) shall not be less than 80% of the accumulated benefit obligation for such Plans, calculated on the basis of the actuarial assumptions used by the Borrower for financial reporting purposes for such fiscal year. SECTION 4.07. ENVIRONMENTAL MATTERS. In the ordinary course of its business, the Borrower conducts an ongoing review of the aggregate effect of Environmental Laws on the business, operations and properties of the Borrower and its Subsidiaries, in the course of which it identifies and evaluates associated liabilities and costs (including, without limitation, capital or operating expenditures required for clean-up or closure of properties presently or previously owned, capital or operating expenditures required to achieve or maintain compliance with environmental protection standards imposed by law or as a condition of licenses, permits or contracts, related constraints on operating activities, including periodic or permanent shutdowns of facilities or reductions in the level of or changes in the nature of operations conducted thereat, costs or liabilities in connection with off-site disposal of wastes or Hazardous Substances, and any actual or potential liabilities to third parties, including employees, and any related costs and expenses). On the basis of this review, the Borrower has reasonably concluded that such associated liabilities and costs, including the costs of compliance with Environmental Laws, are unlikely to have a Material Adverse Effect. SECTION 4.08. TAXES. United States Federal income tax returns of the Borrower and its Subsidiaries have been examined and closed through the fiscal year ended December 31, 1979. The Borrower and each of its Subsidiaries have filed all United States Federal income tax returns and all other material tax returns which are required to be filed by any of them and have paid all taxes due pursuant to such returns or pursuant to any assessment received by any of them, except for any such taxes which are being contested in good faith and for which adequate reserves have been made on the books of the Borrower and its Subsidiaries in accordance with generally accepted accounting principles. The charges, accruals and reserves on the books of the Borrower and its Subsidiaries in respect of income taxes are, in the opinion of the Borrower, adequate in accordance with generally accepted accounting principles. 47 SECTION 4.09. SUBSIDIARIES. Each corporate Subsidiary of the Borrower is a corporation duly incorporated, validly existing and in good standing under the laws of its jurisdiction of incorporation, and has all corporate powers and all material governmental licenses, authorizations, consents and approvals required to carry on its business as now conducted. SECTION 4.10. NOT AN INVESTMENT COMPANY. The Borrower is not an "investment company" within the meaning of the Investment Company Act of 1940, as amended. SECTION 4.11. FULL DISCLOSURE. (a) All oral information relating to the Action and all written information (taken as a whole) heretofore furnished by or on behalf of the Borrower to the Agent, either Co-Arranger or any Bank for purposes of or in connection with this Agreement or any transaction contemplated hereby is, and all such information (taken as a whole) hereafter furnished by the Borrower to the Agent, either Co-Arranger or any Bank will be, true and accurate in all material respects on the date as of which such information is stated or certified. (b) The Borrower has disclosed to the Banks in writing any and all facts which materially and adversely affect or could reasonably be expected to materially and adversely affect (to the extent the Borrower can now reasonably foresee), the business, operations or financial condition of the Borrower and its Consolidated Subsidiaries, taken as a whole (to the extent the Borrower is required to publicly disclose such information under the federal securities laws), or the ability of the Borrower to perform its obligations under this Agreement. ARTICLE V COVENANTS The Borrower agrees that, so long as any Bank has any Commitment hereunder or any amount payable under any Note remains unpaid or any Letter of Credit Liability remains outstanding: SECTION 5.01. INFORMATION. The Borrower will deliver to each of the Banks: 48 (a) as soon as available and in any event within 100 days after the end of each fiscal year of the Borrower, a consolidated statement of financial position of the Borrower and its Consolidated Subsidiaries as of the end of such fiscal year and the related consolidated statements of income and cash flows for such fiscal year, setting forth in each case in comparative form the figures for the previous fiscal year, all reported on in a manner acceptable to the Securities and Exchange Commission by Deloitte & Touche or other independent public accountants of nationally recognized standing; (b) as soon as available and in any event within 50 days after the end of each of the first three fiscal quarters of each fiscal year of the Borrower, a consolidated statement of financial position of the Borrower and its Consolidated Subsidiaries as of the end of such quarter and the related consolidated statements of income and cash flows for such quarter and for the portion of the Borrower's fiscal year ended at the end of such fiscal quarter, setting forth in the case of such in comparative form the figures for the corresponding quarter and the corresponding portion of the Borrower's previous fiscal year, all certified (subject to normal year-end adjustments) as to fairness of presentation, generally accepted accounting principles and consistency by the chief financial officer or the chief accounting officer of the Borrower; (c) simultaneously with the delivery of each set of financial statements referred to in clauses (a) and (b) above, a certificate of the chief financial officer, the treasurer or the chief accounting officer of the Borrower (i) setting forth in reasonable detail the calculations required to establish whether the Borrower was in compliance with the requirements of Sections 5.07 to 5.09, inclusive, on the date of such financial statements and (ii) stating whether, to the best of such person's knowledge after due inquiry, any Default exists on the date of such certificate and, if any Default then exists, setting forth the details thereof and the action which the Borrower is taking or proposes to take with respect thereto; (d) simultaneously with the delivery of each set of financial statements referred to in clause (a) above, a statement of the firm of independent public accountants which reported on such statements (i) 49 whether anything has come to their attention to cause them to believe that any Default existed on the date of such statements and (ii) confirming the calculations set forth in the officer's certificate delivered simultaneously therewith pursuant to clause (c) above; (e) within five Domestic Business Days after any executive officer of the Borrower obtains knowledge of any Default, if such Default is then continuing, a certificate of the chief financial officer, the treasurer or the chief accounting officer of the Borrower setting forth the details thereof and the action which the Borrower is taking or proposes to take with respect thereto; (f) promptly upon the mailing thereof to the stockholders of the Borrower generally, copies of all financial statements, reports and proxy statements so mailed; (g) promptly upon the filing thereof, copies of all registration statements (other than the exhibits thereto and any registration statements on Form S-8 or its equivalent) and reports on Forms 10-K, 10-Q and 8-K (or their equivalents) which the Borrower shall have filed with the Securities and Exchange Commission; (h) within ten Domestic Business Days after any member of the ERISA Group (i) gives or is required to give notice to the PBGC of any "reportable event" (as defined in Section 4043 of ERISA) with respect to any Plan which could reasonably be expected to constitute grounds for a termination of such Plan under Title IV of ERISA, or knows that the plan administrator of any Plan has given or is required to give notice of any such reportable event, a copy of the notice of such reportable event given or a description of the reportable event for which notice was required to be given to the PBGC; (ii) receives notice of complete or partial withdrawal liability under Title IV of ERISA or notice that any Multiemployer Plan is in reorganization, is insolvent or has been terminated, a copy of such notice; (iii) receives notice from the PBGC under Title IV of ERISA of an intent to terminate, impose liability (other than for premiums under Section 4007 of ERISA) in respect of, or appoint a trustee to administer any Plan, a copy of such notice; (iv) applies for a waiver of the minimum funding standard under Section 412 of the Internal Revenue Code, a copy of such application; (v) gives notice of intent to 50 terminate any Plan under Section 4041(c) of ERISA, a copy of such notice and other information filed with the PBGC; (vi) gives notice of withdrawal from any Plan pursuant to Section 4063 of ERISA, a copy of such notice; or (vii) fails to make any payment or contribution to any Plan or Multiemployer Plan or in respect of any Benefit Arrangement (or makes any amendment to any Plan or Benefit Arrangement) which failure to contribute or amendment has resulted or could reasonably be expected to result in the imposition of a Lien or the posting of a bond or other security, a certificate of the chief financial officer or the chief accounting officer of the Borrower setting forth details as to such occurrence and action, if any, which the Borrower or applicable member of the ERISA Group is required or proposes to take; (i) promptly after any executive officer of the Borrower obtains knowledge of any actual or proposed change by Moody's or S&P of the rating of the Borrower's outstanding senior unsecured long-term debt securities, notice of such actual or proposed change; (j) (Confidential treatment requested) (k) from time to time such additional information regarding the Action or the financial position or business of the Borrower and its Subsidiaries as the Agent, at the request of any Bank, may reasonably request. SECTION 5.02. PAYMENT OF OBLIGATIONS. The Borrower will pay and discharge, and will cause each Subsidiary to pay and discharge, at or before maturity, all their respective material obligations and liabilities, including, without limitation, tax liabilities, except where (i) the same may be contested in good faith by appropriate proceedings or (ii) the failure to pay or discharge such obligations and liabilities could not reasonably be expected to have a Material Adverse Effect, and will maintain, and will cause each Subsidiary to maintain, in accordance with generally accepted accounting principles (or, with respect to any Subsidiary organized under the laws of any jurisdiction other than the United States, in accordance with (x) accounting principles applicable in such 51 jurisdiction and (y) and, in the case of any Consolidated Subsidiary, accounting principles adequate for the inclusion of the results of operations of such Subsidiary in the consolidated financial statements of the Borrower and its Subsidiaries), appropriate reserves for the accrual of any of the same. SECTION 5.03. MAINTENANCE OF PROPERTY; INSURANCE. (a) The Borrower will keep, and will cause each Subsidiary to keep, all property useful and necessary in its business in good working order and condition, ordinary wear and tear excepted, except where the failure to keep such property in good working order and condition could not reasonably be expected to have a Material Adverse Effect. (b) The Borrower will, and will cause each of its Subsidiaries to, provide as self-insurer to the extent provided below, or maintain (either in the name of the Borrower or in such Subsidiary's own name) with financially sound and responsible insurance companies, insurance on all their respective properties in at least such amounts and against at least such risks (and with such risk retention and such amounts of self-insurance) as are usually insured against in the same general area by companies of established repute engaged in the same or a similar business; and will furnish to the Banks, upon request from the Agent, information presented in reasonable detail as to the insurance so carried. SECTION 5.04. CONDUCT OF BUSINESS AND MAINTENANCE OF EXISTENCE. The Borrower will continue, and will cause each Subsidiary to continue, to engage in business of the same general type as now conducted by the Borrower and its Subsidiaries, and will preserve, renew and keep in full force and effect, and will cause each Subsidiary to preserve, renew and keep in full force and effect their respective corporate existence and their respective rights, privileges and franchises necessary or desirable in the normal conduct of business, except for any such rights, privileges and franchises the failure of which to be preserved could not reasonably be expected to have a Material Adverse Effect; PROVIDED that nothing in this Section 5.04 shall prohibit (i) the merger of a Subsidiary into the Borrower or the merger or consolidation of a Subsidiary with or into another Person if the corporation surviving such consolidation or merger is a Subsidiary and if, in each case, after giving effect thereto, no Default shall have occurred and be continuing, (ii) the termination of the corporate existence of any Subsidiary or the discontinuation of any line of business of the Borrower or 52 any Subsidiary if the Borrower in good faith determines that such termination or discontinuation, as the case may be, is in the best interest of the Borrower and is not materially disadvantageous to the Banks, (iii) the acquisition of new Subsidiaries by Borrower or any Subsidiary or the addition of any new line of business of the Borrower or any Subsidiary or (iv) the sale of any assets of the Borrower or any Subsidiary. SECTION 5.05. COMPLIANCE WITH LAWS. The Borrower will comply, and cause each Subsidiary to comply, in all material respects with all applicable laws, ordinances, rules, regulations, and requirements of governmental authorities (including, without limitation, Environmental Laws and ERISA and the rules and regulations thereunder) except (i) where the necessity of compliance therewith is contested in good faith by appropriate proceedings and (ii) in the case of Environmental Laws and ERISA and the rules and regulations thereunder, where the failure to be in compliance therewith could not reasonably be expected to have a Material Adverse Effect. SECTION 5.06. INSPECTION OF PROPERTY, BOOKS AND RECORDS. The Borrower will keep, and will cause each Subsidiary to keep, proper books of record and account in which full, true and correct entries shall be made of all dealings and transactions in relation to its business and activities; and, except to the extent prohibited by applicable law, rule, regulations or orders, will permit, and will cause each Subsidiary to permit, representatives of any Bank at such Bank's expense to visit and inspect any of their respective properties, to examine and make abstracts from any of their respective books and records and to discuss their respective affairs, finances and accounts with their respective officers, employees and independent public accountants, all at such reasonable times and as often as may reasonably be desired. SECTION 5.07. (Confidential treatment requested) 53 SECTION 5.08. (Confidential treatment requested) SECTION 5.09. (Confidential treatment requested) SECTION 5.10. NEGATIVE PLEDGE. Neither the Borrower nor any Consolidated Domestic Subsidiary will create or assume any Lien on any Restricted Asset now or hereafter owned by the Borrower or any Consolidated Domestic Subsidiary securing any Debt, unless provision is made to secure equally and ratably all Loans and Reimbursement Obligations then outstanding or thereafter made to or owed by the Borrower, together with any other amounts then or thereafter owed by the Borrower hereunder, with such secured Debt or obligations, so long as such secured Debt shall be so secured, except: (a) any Lien on any Restricted Asset securing Debt owed to a governmental entity; (b) any Lien on any Restricted Asset created for the sole purpose of extending, renewing or replacing, in whole or in part, the Debt secured by any existing 54 Lien which was not created in violation of this Section, if the principal amount of Debt secured thereby shall not exceed the principal amount of Debt so secured at the time of such extension, renewal or replacement and such Lien shall be limited to all or a part of the Restricted Assets which secured the Debt so extended, renewed or replaced (plus improvements on or to any such Restricted Assets and, if the Borrower shall so determine, any additional assets, Liens on which are not restricted by this Section); (c) any Lien existing on any Restricted Asset in connection with the acquisition thereof; and (d) any Lien on any Restricted Asset acquired, constructed or improved after the date hereof, including any improvements thereon; PROVIDED that (i) such Lien is created contemporaneously with such acquisition, construction or improvement or within one hundred twenty (120) days before the commencement thereof or after the completion thereof, to secure or provide for the payment of an amount not exceeding the cost of such acquisition, construction or improvement (including related expenditures capitalized for federal income tax purposes in connection therewith) incurred after the date hereof, but only if, in the case of such construction or improvement, the Lien shall not extend to any property other than that on or connected to property on which the construction or improvement is located. SECTION 5.11. CONSOLIDATION, MERGER, CONVEYANCE, TRANSFER OR LEASE. (a) The Borrower shall not consolidate with or merge into any other Person or convey, transfer or lease its properties and assets substantially as an entirety to any Person unless: (1) the Person formed by such consolidation or into which the Borrower is merged (if the Borrower is not the surviving corporation) or the Person which acquires by conveyance or transfer, or which leases, the properties and assets of the Borrower substantially as an entirety shall be a corporation, partnership or trust, shall be organized and validly existing under the laws of the United States, any State thereof or the District of Columbia and shall expressly assume, by an instrument of assumption, executed and delivered to the Agent, in form satisfactory to the Agent, the due and 55 punctual payment of the principal of and interest on the Notes and Reimbursement Obligations and the performance or observance of every covenant of this Agreement on the part of the Borrower to be performed or observed; (2) immediately after giving effect to such transaction, no Default shall have occurred and be continuing; and (3) the Borrower shall have delivered to the Agent a certificate executed by the Chairman of the Board, the President or a Vice President of the Borrower and by the Treasurer or the Secretary of the Borrower and a written opinion of counsel (who may be counsel for the Borrower), each stating that such consolidation, merger, conveyance, transfer or lease and, if an instrument of assumption is required in connection with such transaction, such an instrument of assumption, comply with this Section and that all conditions precedent herein provided for relating to such transaction have been complied with. (b) Upon any consolidation of the Borrower with, or merger by the Borrower into, any other Person or any conveyance, transfer or lease of the properties and assets of the Borrower substantially as an entirety in accordance with this Section, the successor Person formed by such consolidation or into which the Borrower is merged or to which such conveyance, transfer or lease is made shall succeed to, and be substituted for, and may exercise every right and power of, the Borrower under this Agreement with the same effect as if such successor Person had been named as the Borrower herein, and thereafter, except in the case of a lease, the predecessor Person shall be relieved of all obligations and covenants under this Agreement and the Notes. SECTION 5.12. (Confidential treatment requested) 56 ARTICLE VI DEFAULTS SECTION 6.01. EVENTS OF DEFAULT. If one or more of the following events ("Events of Default") shall have occurred and be continuing: (a) the Borrower shall fail to pay any principal of any Loan or any Reimbursement Obligation when due, or shall fail to pay within three Domestic Business Days after the due date thereof any interest on any Note or Reimbursement Obligation or any fees or any other amount payable hereunder; (b) the Borrower shall fail to observe or perform any covenant contained in Sections 5.07 to 5.12, inclusive; (c) the Borrower shall fail to observe or perform any covenant or agreement contained in this Agreement (other than those covered by clause (a) or (b) above) for 30 days after written notice thereof has been given to the Borrower by the Agent at the request of any Bank; (d) any representation, warranty, certification or statement made by the Borrower in this Agreement or in any certificate, financial statement or other document delivered pursuant to this Agreement shall prove to have been incorrect in any material respect when made (or deemed made); (e) the Borrower or any Subsidiary shall fail to make any payment in respect of any Material Debt when due or within any applicable grace period; (f) any event or condition shall occur which results in the acceleration of the maturity of any Material Debt or enables the holder of such Debt or any Person acting on such holder's behalf to accelerate the maturity thereof; (g) the Borrower or any Subsidiary (other than any Abandoned Subsidiary) shall commence a voluntary case or other proceeding seeking liquidation, reorganization or other relief with respect to itself or its debts under any bankruptcy, insolvency or other similar law now or hereafter in effect or seeking the appointment of a trustee, receiver, liquidator, 57 custodian or other similar official of it or any substantial part of its property, or shall consent to any such relief or to the appointment of or taking possession by any such official in an involuntary case or other proceeding commenced against it, or shall make a general assignment for the benefit of creditors, or shall fail generally to pay its debts as they become due, or shall take any corporate action to authorize any of the foregoing; (h) an involuntary case or other proceeding shall be commenced against the Borrower or any Subsidiary (other than any Abandoned Subsidiary) seeking liquidation, reorganization or other relief with respect to it or its debts under any bankruptcy, insolvency or other similar law now or hereafter in effect or seeking the appointment of a trustee, receiver, liquidator, custodian or other similar official of it or any substantial part of its property, and such involuntary case or other proceeding shall remain undismissed and unstayed for a period of 60 days; or an order for relief shall be entered against the Borrower or any Subsidiary (other than any Abandoned Subsidiary) under the federal bankruptcy laws as now or hereafter in effect; (i) any member of the ERISA Group shall fail to pay when due an amount or amounts aggregating in excess of $50,000,000 which it shall have become liable to pay under Title IV of ERISA in connection with a Plan or a Multiemployer Plan; or notice of intent to terminate a Material Plan under a distress termination within the meaning of Section 4041(c) of ERISA shall be filed under Title IV of ERISA by any member of the ERISA Group, any plan administrator or any combination of the foregoing; or the PBGC shall institute proceedings under Title IV of ERISA to terminate, to impose liability (other than for premiums under Section 4007 of ERISA) in respect of, or to cause a trustee to be appointed to administer any Material Plan; or a condition specified in Section 4042(a) of ERISA shall exist by reason of which the PBGC would be entitled to obtain a decree adjudicating that any Material Plan must be terminated; or there shall occur a complete or partial withdrawal from, or a default, within the meaning of Section 4219(c)(5) of ERISA, with respect to, one or more Multiemployer Plans which could cause one or more members of the ERISA Group to incur a current payment obligation in excess of $50,000,000; 58 (j) a judgment or order for the payment of money in an amount in excess of the greater of (x) $100,000,000 and (y) 10% of Consolidated Adjusted Net Worth determined as of the end of the then most recently ended fiscal quarter of the Borrower and such judgment or order shall continue unsatisfied and unstayed for a period of 30 days; or (k) any person or group of persons (within the meaning of Section 13 or 14 of the Securities Exchange Act of 1934, as amended) shall have acquired beneficial ownership (within the meaning of Rule 13d-3 promulgated by the Securities and Exchange Commission under said Act) of 20% or more of the outstanding shares of common stock of the Borrower; or, during any period of twelve consecutive calendar months, individuals (i) who were directors of the Borrower on the first day of such period or (ii) whose nomination for election to the board of directors of the Borrower was recommended or approved by a vote of at least a majority of the directors then still in office who were directors of the Borrower on the first day of such period, shall cease to constitute a majority of the board of directors of the Borrower; then, and in every such event, the Agent shall (i) if requested by Banks having more than 50% in aggregate amount of the Commitments, by notice to the Borrower terminate the Commitments and they shall thereupon terminate, and (ii) if requested by Banks holding Notes evidencing more than 50% in aggregate principal amount of the Loans, by notice to the Borrower declare the Notes (together with accrued interest thereon) to be, and the Notes shall thereupon become, immediately due and payable without presentment, demand, protest or other notice of any kind, all of which are hereby waived by the Borrower; PROVIDED that in the case of any of the Events of Default specified in clause (g) or (h) above with respect to the Borrower, without any notice to the Borrower or any other act by the Agent or the Banks, the Commitments shall thereupon terminate and the Notes (together with accrued interest thereon) shall become immediately due and payable without presentment, demand, protest or other notice of any kind, all of which are hereby waived by the Borrower. SECTION 6.02. CASH COVER. The Borrower hereby agrees, in addition to the provisions of Section 6.01 hereof, that upon the occurrence and during the continuance of any Event of Default, it shall, if requested by the Agent upon instruction of Banks having more than 50% in aggregate 59 amount of the Letter of Credit Liabilities, pay to the Agent an amount in immediately available funds equal to the then aggregate amount available for drawings under all Letters of Credit at the time outstanding (the "Aggregate LC Amount"); PROVIDED that, upon the occurrence of any Event of Default specified in clauses (g) and (h) of Section 6.01 with respect to the Borrower, the Borrower shall be obligated forthwith to pay such amount without any notice or demand or any other act by the Agent or the Banks. The Aggregate LC Amount, when received by the Agent, shall be held by the Agent in a collateral account maintained with the Agent (the "Collateral Account"), which account (and all investments held therein) shall be held in name of and subject to the dominion and control of the Agent on behalf of the Banks, as cash collateral for the Reimbursement Obligations of the Borrower in the event of any drawing under any Letter of Credit. Upon any drawing under any Letter of Credit, the Agent shall apply such amounts held in the Collateral Account to the Reimbursement Obligations in respect of such Letter of Credit. The Borrower hereby grants to the Agent, for the benefit of the Banks, a security interest in and right of set-off against any and all of the funds and investments held in the Collateral Account from time to time and any instrument evidencing the foregoing, and the proceeds thereof and the right to receive interest, dividends and other income therefrom, to secure equally and ratably the obligations of the Borrower hereunder in respect of the Letters of Credit and the Reimbursement Obligations. The Agent, on behalf of the Banks, shall have the rights, powers and remedies of a secured party under the New York Uniform Commercial Code with respect to the funds and investments held in the Collateral Account from time to time. The Agent shall exercise such rights, powers and remedies as and when requested by Banks having more than 50% in aggregate amount of the aggregate Letter of Credit Liabilities from time to time; PROVIDED that the Agent shall not be obligated to take any action which it believes to be contrary to law or inconsistent with the equal and ratable nature of the security interest provided in this paragraph. The Agent's duties under this paragraph (as well as under all other provisions of this Agreement) are subject to the provisions of Article VII. The Borrower shall take such actions from time to time as the Agent (at the request of any Bank) may reasonably request to perfect and preserve the security interests provided for in this paragraph. 60 The Agent shall invest funds held in the Collateral Account from time to time only in direct obligations of the United States or any agency thereof, or obligations guaranteed by the United States or any agency thereof (in each case maturing within 90 days from the date of acquisition thereof by the Agent) designated by the Borrower; PROVIDED that the Agent is authorized to sell investments held in the Collateral Account when and as required to make payments out of the Collateral Account as herein provided. Upon the date on which all Letters of Credit have terminated and drawings are no longer available thereunder, and the payment in full of all secured obligations, the Agent shall release all funds and investments held in the Collateral Account to or upon the order of the Borrower (or as a court of competent jurisdiction may otherwise direct). SECTION 6.03. NOTICE OF DEFAULT. The Agent shall give notice to the Borrower under Section 6.01(c) promptly upon being requested to do so by any Bank and shall thereupon notify all the Banks thereof. ARTICLE VII THE AGENT SECTION 7.01. APPOINTMENT AND AUTHORIZATION. Each Bank irrevocably appoints and authorizes the Agent to take such action as agent on its behalf and to exercise such powers under this Agreement, the Notes and the Letters of Credit as are delegated to the Agent by the terms hereof or thereof, together with all such powers as are reasonably incidental thereto. SECTION 7.02. THE AGENT AND AFFILIATES. Morgan Guaranty Trust Company of New York shall have the same rights and powers under this Agreement as any other Bank and may exercise or refrain from exercising the same as though it were not the Agent, and Morgan Guaranty Trust Company of New York and its affiliates may accept deposits from, lend money to, and generally engage in any kind of business with the Borrower or any of its Subsidiaries or affiliates of the Borrower as if it were not the Agent hereunder. SECTION 7.03. ACTION BY THE AGENT. The obligations of the Agent hereunder are only those expressly set forth herein. Without limiting the generality of the foregoing, the Agent shall not be required to take any 61 action with respect to any Default, except as expressly provided in Article VI. SECTION 7.04. CONSULTATION WITH EXPERTS. The Agent may consult with legal counsel (who may be counsel for the Borrower), independent public accountants and other experts selected by it and shall not be liable for any action taken or omitted to be taken by it in good faith in accordance with the advice of such counsel, accountants or experts. SECTION 7.05. LIABILITY OF THE AGENT. Neither the Agent nor any of its affiliates nor any of their respective directors, officers, agents or employees shall be liable for any action taken or not taken by it in connection herewith (i) with the consent or at the request of the Required Banks or (ii) in the absence of its own gross negligence or willful misconduct. Neither the Agent nor any of its affiliates nor any of their respective directors, officers, agents or employees shall be responsible for or have any duty to ascertain, inquire into or verify (i) any statement, warranty or representation made in connection with this Agreement or any Credit Event hereunder; (ii) the performance or observance of any of the covenants or agreements of the Borrower; (iii) the satisfaction of any condition specified in Article III, except receipt of items required to be delivered to the Agent; or (iv) the validity, effectiveness or genuineness of this Agreement, the Notes or any other instrument or writing furnished in connection herewith. The Agent shall not incur any liability by acting in reliance upon any notice, consent, certificate, statement, or other writing (which may be a bank wire, telex or similar writing) believed by it to be genuine or to be signed by the proper party or parties. SECTION 7.06. INDEMNIFICATION. Each Bank shall, ratably in accordance with its Commitment, indemnify the Agent, its affiliates and their respective directors, officers, agents and employees (to the extent not reimbursed by the Borrower) against any cost, expense (including reasonable counsel fees and disbursements), claim, demand, action, loss or liability (except such as result from such indemnitees' gross negligence or willful misconduct) that such indemnitees may suffer or incur in connection with this Agreement or any action taken or omitted by such indemnitees hereunder. SECTION 7.07. CREDIT DECISION. Each Bank acknowledges that it has, independently and without reliance upon the Agent or any other Bank, and based on such 62 documents and information as it has deemed appropriate, made its own credit analysis and decision to enter into this Agreement. Each Bank also acknowledges that it will, independently and without reliance upon the Agent or any other Bank, and based on such documents and information as it shall deem appropriate at the time, continue to make its own credit decisions in taking or not taking any action under this Agreement. SECTION 7.08. SUCCESSOR AGENT. The Agent may resign at any time by giving written notice thereof to the Banks and the Borrower. Upon any such resignation, the Required Banks shall have the right, with the consent of the Borrower, to appoint a successor Agent; PROVIDED that the Borrower's consent to any such appointment shall not unreasonably be withheld, but may in any event be withheld if both (i) such proposed successor Agent fails to deliver evidence reasonably satisfactory to the Borrower that such proposed successor Agent is not a Foreign Person and (ii) the Borrower in good faith concludes that the appointment of such proposed successor Agent could result in a violation of any law, rule, guideline or regulation, or a violation of, revocation of, failure to renew or modification of any, order, facility security clearance or permit. If no successor Agent shall have been so appointed by the Required Banks, and shall have accepted such appointment, within 30 days after the retiring Agent gives notice of resignation, then the retiring Agent may, on behalf of the Banks, appoint a successor Agent, which shall (i) be a commercial bank organized or licensed under the laws of the United States of America or of any State thereof, (ii) not be a Foreign Person and (iii) have a combined capital and surplus of at least $50,000,000. Upon the acceptance of its appointment as Agent hereunder by a successor Agent, such successor Agent shall thereupon succeed to and become vested with all the rights and duties of the retiring Agent, and the retiring Agent shall be discharged from its duties and obligations hereunder. After any retiring Agent's resignation hereunder as Agent, the provisions of this Article shall inure to its benefit as to any actions taken or omitted to be taken by it while it was Agent. SECTION 7.09. AGENT'S FEE. The Borrower shall pay to the Agent for its own account fees in the amounts and at the times previously agreed upon between the Borrower and the Agent. SECTION 7.10 CO-AGENTS NOT LIABLE. Nothing in this Agreement shall impose upon any Co-Agent, in such capacity, any duties or responsibilities whatsoever. 63 ARTICLE VIII CHANGE IN CIRCUMSTANCES SECTION 8.01. BASIS FOR DETERMINING INTEREST RATE INADEQUATE OR UNFAIR. If on or prior to the first day of any Interest Period for any CD Loan, Euro-Dollar Loan or Money Market LIBOR Loan: (a) the Agent is advised by the Reference Banks that deposits in dollars (in the applicable amounts) are not being offered to the Reference Banks in the relevant market for such Interest Period, or (b) in the case of CD Loans or Euro-Dollar Loans, Banks having 50% or more of the aggregate principal amount of the affected Loans advise the Agent that the Adjusted CD Rate or the Adjusted London Interbank Offered Rate, as the case may be, as determined by the Agent will not adequately and fairly reflect the cost to such Banks of funding their CD Loans or Euro-Dollar Loans, as the case may be, for such Interest Period, the Agent shall forthwith give notice thereof to the Borrower and the Banks, whereupon until the Agent notifies the Borrower that the circumstances giving rise to such suspension no longer exist, (i) the obligations of the Banks to make CD Loans or Euro-Dollar Loans, as the case may be, or to convert outstanding Loans into CD Loans or Euro-Dollar Loans, as the case may be, shall be suspended and (ii) each outstanding CD Loan or Euro-Dollar Loan, as the case may be, shall be converted into a Base Rate Loan on the last day of the then current Interest Period applicable thereto. Unless the Borrower notifies the Agent at least two Domestic Business Days before the date of any Fixed Rate Borrowing for which a Notice of Borrowing has previously been given that it elects not to borrow on such date, (i) if such Fixed Rate Borrowing is a Committed Borrowing, such Borrowing shall instead be made as a Base Rate Borrowing and (ii) if such Fixed Rate Borrowing is a Money Market LIBOR Borrowing, the Money Market LIBOR Loans comprising such Borrowing shall bear interest for each day from and including the first day to but excluding the last day of the Interest Period applicable thereto at the Base Rate for such day. SECTION 8.02. ILLEGALITY. If, on or after the date of this Agreement, the adoption of any applicable law, rule or regulation, or any change therein, or any change in 64 the interpretation or administration thereof by any governmental authority, central bank or comparable agency charged with the interpretation or administration thereof, or compliance by any Bank (or its Euro-Dollar Lending Office) with any request or directive (whether or not having the force of law) of any such authority, central bank or comparable agency shall make it unlawful or impossible for any Bank (or its Euro-Dollar Lending Office) to make, maintain or fund its Euro-Dollar Loans and such Bank shall so notify the Agent, the Agent shall forthwith give notice thereof to the other Banks and the Borrower, whereupon until such Bank notifies the Borrower and the Agent that the circumstances giving rise to such suspension no longer exist, the obligation of such Bank to make Euro-Dollar Loans, or to convert outstanding Loans into Euro-Dollar Loans, shall be suspended. Before giving any notice to the Agent pursuant to this Section, such Bank shall designate a different Euro-Dollar Lending Office if such designation will avoid the need for giving such notice and will not, in the judgment of such Bank, be otherwise disadvantageous to such Bank. If such notice is given, each Euro-Dollar Loan of such Bank then outstanding shall be converted to a Base Rate Loan either (a) on the last day of the then current Interest Period applicable to such Euro-Dollar Loan if such Bank may lawfully continue to maintain and fund such Loan to such day or (b) immediately if such Bank shall determine that it may not lawfully continue to maintain and fund such Loan to such day. SECTION 8.03. INCREASED COST AND REDUCED RETURN. (a) If on or after (x) the date hereof, in the case of any Committed Loan or any obligation to make a Committed Loan or issue Letters of Credit or (y) the date of the related Money Market Quote, in the case of any Money Market Loan, the adoption of any applicable law, rule or regulation, or any change therein, or any change in the interpretation or administration thereof by any governmental authority, central bank or comparable agency charged with the interpretation or administration thereof, or compliance by any Bank (or its Applicable Lending Office) with any request or directive (whether or not having the force of law) of any such authority, central bank or comparable agency shall impose, modify or deem applicable any reserve (including, without limitation, any such requirement imposed by the Board of Governors of the Federal Reserve System, but excluding (i) with respect to any CD Loan any such requirement included in an applicable Domestic Reserve Percentage and (ii) with respect to any Euro-Dollar Loan any such requirement included in an applicable Euro-Dollar Reserve Percentage), special deposit, insurance assessment 65 (excluding, with respect to any CD Loan, any such requirement reflected in an applicable Assessment Rate) or similar requirement against assets of, deposits with or for the account of, or credit extended by, any Bank (or its Applicable Lending Office) or shall impose on any Bank (or its Applicable Lending Office) or on the United States market for certificates of deposit or the London interbank market any other condition affecting its Fixed Rate Loans, its Note or its obligation to make Fixed Rate Loans, the Letters of Credit issued by it or its obligation to issue Letters of Credit (collectively, its "Covered Credits") and the result of any of the foregoing is to increase the cost to such Bank (or its Applicable Lending Office) (excluding any Taxes, Other Taxes and Excluded Taxes (as each such term is defined in Section 8.04)) of making or maintaining any Covered Credit, or to reduce the amount of any sum received or receivable by such Bank (or its Applicable Lending Office) under this Agreement or under its Note with respect thereto, by an amount deemed by such Bank to be material, then, within 15 days after demand by such Bank (with a copy to the Agent) accompanied by a certificate setting forth in reasonable detail its calculation of such increased cost or reduction, the Borrower shall pay to such Bank such additional amount or amounts as will compensate such Bank for such increased cost or reduction. (b) If any Bank shall have determined that, after the date hereof, the adoption of any applicable law, rule, guideline or regulation regarding capital adequacy, or any change therein, or any change in the interpretation or administration thereof by any governmental authority, central bank or comparable agency charged with the interpretation or administration thereof, or any request or directive regarding capital adequacy (whether or not having the force of law) of any such authority, central bank or comparable agency (collectively, a "Change in Law"), has or would have the effect of reducing the rate of return on capital of such Bank (or its Parent) as a consequence of such Bank's obligations hereunder to a level below that which such Bank (or its Parent) could have achieved but for such adoption, change, request or directive (taking into consideration its policies with respect to capital adequacy) by an amount deemed by such Bank to be material, then from time to time, within 15 days after demand by such Bank (with a copy to the Agent) accompanied by a certificate setting forth in reasonable detail its calculation of such reduction, the Borrower shall pay to such Bank such additional amount or amounts as will compensate such Bank (or its Parent) for such reduction; PROVIDED that to the extent that (i) a Bank shall increase its level of capital 66 above the level maintained by such Bank on the date of this Agreement and there has not been a Change in Law or (ii) there has been a Change in Law and a Bank shall increase its level of capital by an amount greater than the increase attributable (taking into consideration the same variables taken into consideration in determining the level of capital maintained by such Bank on the date of this Agreement) to such Change in Law, the Borrower shall not be required to pay any amount or amounts under this Agreement with respect to any such increase in capital. Thus, for example, a Bank which is "adequately capitalized" (as such term or any similar term is used by any applicable bank regulatory agency having authority with respect to such Bank) may not require the Borrower to make payments in respect of increases in such Bank's level of capital made under the circumstances described in clause (i) or (ii) above which improve its capital position from "adequately capitalized" to "well capitalized" (as such term or any similar term is used by any applicable bank regulatory agency having authority with respect to such Bank). (c) Each Bank will promptly notify the Borrower and the Agent of any event of which it has knowledge, occurring after the date hereof, which will entitle such Bank to compensation pursuant to this Section and will designate a different Applicable Lending Office if such designation will avoid the need for, or reduce the amount of, such compensation and will not, in the judgment of such Bank, be otherwise disadvantageous to such Bank. A certificate of any Bank claiming compensation under this Section and setting forth in reasonable detail its calculation of the additional amount or amounts to be paid to it hereunder shall be conclusive in the absence of manifest error. In determining such amount, such Bank may use any reasonable averaging and attribution methods. Notwithstanding the foregoing subsections (a) and (b) of this Section 8.03, the Borrower shall only be obligated to compensate any Bank for any amount arising or accruing during (i) any time or period commencing not more than (x) in the case of subsection (a), six months and (y) in the case of subsection (b), three months, prior to the date on which such Bank notifies the Agent and the Borrower that it proposes to demand such compensation and identifies to the Agent and the Borrower the statute, regulation or other basis upon which the claimed compensation is or will be based and (ii) any time or period during which, because of the retroactive application of such statute, regulation or other basis, such Bank did not know that such amount would arise or accrue. 67 SECTION 8.04. TAXES. (a) Any and all payments by the Borrower to or for the account of any Bank or the Agent hereunder or under any Note shall be made free and clear of and without deduction for any and all present or future taxes, duties, levies, imposts, deductions, charges or withholdings, and all liabilities with respect thereto, EXCLUDING, in the case of each Bank and the Agent, taxes imposed on its income, branch profits taxes and franchise or similar taxes imposed on it, by the jurisdiction (or any political subdivision thereof) under the laws of which such Bank or the Agent (as the case may be) is organized or has its principal office and, in the case of each Bank, taxes imposed on its income, branch profit taxes and franchise or similar taxes imposed on it, by the jurisdiction of such Bank's Applicable Lending Office or any political subdivision thereof (all such non-excluded taxes, duties, levies, imposts, deductions, charges, withholdings and liabilities being herein referred to as "Taxes" and all such excluded taxes being herein referred to as "Excluded Taxes"). If the Borrower shall be required by law to deduct any Taxes from or in respect of any sum payable hereunder or under any Note to any Bank or the Agent, (i) the sum payable shall be increased as necessary so that after making all required deductions (including deductions applicable to additional sums payable under this Section 8.04) such Bank or the Agent (as the case may be) receives an amount equal to the sum it would have received had no such deductions been made, (ii) the Borrower shall make such deductions, (iii) the Borrower shall pay the full amount deducted to the relevant taxation authority or other authority in accordance with applicable law and (iv) the Borrower shall furnish to the Agent, at its address referred to in Section 9.01, the original or a certified copy of a receipt evidencing payment thereof. Upon the reasonable request of the Borrower, each Bank agrees to promptly and diligently pursue at the expense of the Borrower any available refund of any such Taxes and Other Taxes (as defined in subsection (b) below) and to promptly remit immediately available funds to the Borrower in an amount equal to any such refund (including any interest thereon received by such Bank from the applicable taxing authority). (b) In addition, the Borrower agrees to pay any present or future stamp or documentary taxes and any other excise or property taxes, charges or similar levies which arise from any payment made hereunder or under any Note or from the execution or delivery of, or otherwise with respect to, this Agreement, any Note or any Letter of Credit (hereinafter referred to as "Other Taxes"). 68 (c) The Borrower agrees to indemnify each Bank and the Agent for the full amount of Taxes or Other Taxes (including, without limitation, any Taxes or Other Taxes imposed or asserted by any jurisdiction on amounts payable under this Section 8.04) paid by such Bank or the Agent (as the case may be) and any liability (including penalties, interest and expenses) arising therefrom or with respect thereto. This indemnification shall be made within 30 days from the date such Bank or the Agent (as the case may be) makes demand therefor. (d) Each Bank organized under the laws of a jurisdiction outside the United States, on or prior to the date of its execution and delivery of this Agreement in the case of each Bank listed on the signature pages hereof and on or prior to the date on which it becomes a Bank in the case of each other Bank, and from time to time thereafter if requested in writing by the Borrower (but only so long as such Bank remains lawfully able to do so), shall provide the Borrower with two duly completed copies of Internal Revenue Service form 1001 or 4224, as appropriate, or any successor form prescribed by the Internal Revenue Service, certifying that such Bank is entitled to benefits under an income tax treaty to which the United States is a party which reduces the rate of withholding tax on payments of interest or certifying that the income receivable pursuant to this Agreement is effectively connected with the conduct of a trade or business in the United States. If the form provided by a Bank at the time such Bank first becomes a party to this Agreement indicates a United States interest withholding tax rate in excess of zero, withholding tax at such rate shall be considered excluded from "Taxes" as defined in Section 8.04(a). Each such Bank that so delivers a form 1001 or 4224 (or applicable successor forms) agrees to deliver to the Borrower updated or modified forms, or other manner of certification acceptable to the Borrower, at any time that any such form is required to be resubmitted or modified, as a result of any action taken by such Bank, as a condition to obtaining an exemption from withholding tax. (e) For any period with respect to which a Bank has failed to provide the Borrower with the appropriate form pursuant to Section 8.04(d) (unless such failure is due to a change in treaty, law or regulation occurring subsequent to the date on which a form originally was required to be provided), such Bank shall not be entitled to indemnification under Section 8.04(a) with respect to Taxes. Should a Bank, which is otherwise exempt from or subject to a reduced rate of withholding tax, become subject to Taxes because of its failure to deliver a form required hereunder, 69 the Borrower shall take such steps as such Bank shall reasonably request to assist such Bank to recover such Taxes. (f) If the Borrower is required to pay additional amounts to or for the account of any Bank pursuant to this Section 8.04, then such Bank will change the jurisdiction of its Applicable Lending Office so as to eliminate or reduce any such additional payment which may thereafter accrue if such change, in the judgment of such Bank, is not otherwise disadvantageous to such Bank. SECTION 8.05. BASE RATE LOANS SUBSTITUTED FOR AFFECTED FIXED RATE LOANS. If (i) the obligation of any Bank to make or maintain Euro-Dollar Loans has been suspended pursuant to Section 8.02 or (ii) any Bank has demanded compensation under Section 8.03 or 8.04 with respect to its CD Loans or Euro-Dollar Loans and the Borrower shall, by at least five Euro-Dollar Business Days' prior notice to such Bank through the Agent, have elected that the provisions of this Section shall apply to such Bank, then, unless and until such Bank notifies the Borrower that the circumstances giving rise to such suspension or demand for compensation no longer exist: (a) all Loans which would otherwise be made by such Bank as (or continued as or converted into) CD Loans or Euro-Dollar Loans, as the case may be, shall instead be Base Rate Loans (on which interest and principal shall be payable contemporaneously with the related Fixed Rate Loans of the other Banks), and (b) after each of its CD Loans or Euro-Dollar Loans, as the case may be, has been repaid (or converted to a Base Rate Loan), all payments of principal which would otherwise be applied to repay such Fixed Rate Loans shall be applied to repay its Base Rate Loans instead. If such Bank notifies the Borrower that the circumstances giving rise to such notice no longer apply, the principal amount of each such Base Rate Loan shall be converted into a CD Loan or Euro-Dollar Loan, as the case may be, on the first day of the next succeeding Interest Period applicable to the related CD Loans or Euro-Dollar Loans of the other Banks. SECTION 8.06. SUBSTITUTION OF BANK. If (i) the obligation of any Bank to make Euro-Dollar Loans has been suspended pursuant to Section 8.02 or (ii) any Bank has 70 demanded compensation under Section 8.03 or 8.04, the Borrower shall have the right, with the assistance of the Agent, to seek a substitute bank or banks reasonably satisfactory to the Agent and the Borrower (which may be one or more of the Banks) to purchase the Note and Letter of Credit Liabilities in respect of unpaid Reimbursement Obligations and assume the Commitment and contingent obligations with respect to undrawn amounts under outstanding Letters of Credit of such Bank, if such substitution is not prohibited by the terms of any outstanding Letter of Credit, and the Borrower, the Agent, such Bank and substitute bank or banks shall execute and deliver an appropriately completed Assignment and Assumption Agreement pursuant to Section 9.06(c) hereof to effect the assignment of rights to and assumption of obligations by such substitute bank or banks. ARTICLE IX MISCELLANEOUS SECTION 9.01. NOTICES. All notices, requests and other communications to any party hereunder shall be in writing (including bank wire, telex, facsimile transmission or similar writing) and shall be given to such party: (x) in the case of the Borrower or the Agent, at its address, facsimile number or telex number set forth on the signature pages hereof, (y) in the case of any Bank, at its address, facsimile number or telex number set forth in its Administrative Questionnaire or (z) in the case of any party, such other address, facsimile number or telex number as such party may hereafter specify for the purpose by notice to the Agent and the Borrower. Each such notice, request or other communication shall be effective (i) if given by telex, when such telex is transmitted to the telex number specified in this Section and the appropriate answerback is received, (ii) if given by mail, 72 hours after such communication is deposited in the mails with first class postage prepaid, addressed as aforesaid, (iii) if given by facsimile transmission, when such transmission is confirmed by telephone or (iv) if given by any other means, when delivered at the address specified in this Section; PROVIDED that notices to the Agent under Article II or Article VIII shall not be effective until received. SECTION 9.02. NO WAIVERS. No failure or delay by the Agent or any Bank in exercising any right, power or privilege hereunder or under any Note shall operate as a waiver thereof nor shall any single or partial exercise 71 thereof preclude any other or further exercise thereof or the exercise of any other right, power or privilege. The rights and remedies herein provided shall be cumulative and not exclusive of any rights or remedies provided by law. SECTION 9.03. EXPENSES; INDEMNIFICATION. (a) The Borrower shall pay (i) all reasonable out-of-pocket expenses of the Agent, including reasonable fees and disbursements of special counsel for the Agent, in connection with the preparation of this Agreement, any Letter of Credit, any waiver or consent hereunder or thereunder or any amendment hereof or thereof or any Default or alleged Default hereunder and (ii) if an Event of Default occurs, all out-of-pocket expenses incurred by the Agent and each Bank, including fees and disbursements of counsel (including allocated costs of staff counsel), in connection with such Event of Default and collection, bankruptcy, insolvency and other enforcement proceedings resulting therefrom; PROVIDED that the foregoing clauses (i) and (ii) shall exclude Taxes, Other Taxes and Excluded Taxes (as each such term is defined in Section 8.04). (b) The Borrower agrees to indemnify the Agent and each Bank, their respective affiliates and the respective directors, officers, agents and employees of the foregoing (each an "Indemnitee") and hold each Indemnitee harmless from and against any and all liabilities, losses, damages, costs and expenses of any kind, including, without limitation, the reasonable fees and disbursements of counsel, but excluding Taxes, Other Taxes and Excluded Taxes, which may be incurred by such Indemnitee in connection with any investigative, administrative or judicial proceeding (whether or not such Indemnitee shall be designated a party thereto) brought or threatened relating to or arising out of this Agreement, any Letter of Credit, or any actual or proposed use of proceeds of Loans hereunder or any actual or proposed use of any Letter of Credit; PROVIDED that (i) no Indemnitee shall have the right to be indemnified hereunder for any liabilities, losses, damages, costs or expenses arising out of or resulting from such Indemnitee's own gross negligence or willful misconduct and (ii) the Borrower shall not be liable for the cost of any settlement effected without its consent, which consent shall not be unreasonably withheld. Each of the Banks agrees to use reasonable efforts to notify the Borrower prior to retaining any counsel or consultants, and to review with the Borrower the need for, the circumstances of and compensation arrangements relating to any such retention, with a view to controlling the cost to the Borrower thereof; PROVIDED that 72 the failure of any Bank to do so shall not affect the obligations of the Borrower under this Section 9.03. SECTION 9.04. SHARING OF SET-OFFS. Each Bank agrees that if it shall, by exercising any right of set-off or counterclaim or otherwise, receive payment of a proportion of the aggregate amount of principal and interest due with respect to any Note held by it and any Reimbursement Obligation owed to it and interest (if any) thereon (collectively, the "Relevant Debt") which is greater than the proportion received by any other Bank in respect of the aggregate amount of the Relevant Debt of such other Bank, the Bank receiving such proportionately greater payment shall purchase such participations in the Relevant Debt of the other Banks, and such other adjustments shall be made, as may be required so that all such payments of principal and interest with respect to the Relevant Debt of the Banks shall be shared by the Banks pro rata; PROVIDED that nothing in this Section shall impair the right of any Bank to exercise any right of set-off or counterclaim it may have and to apply the amount subject to such exercise to the payment of indebtedness of the Borrower other than its indebtedness under its Relevant Debt. The Borrower agrees, to the fullest extent it may effectively do so under applicable law, that any holder of a participation in a Note or a Letter of Credit, whether or not acquired pursuant to the foregoing arrangements, may exercise rights of set-off or counterclaim and other rights with respect to such participation as fully as if such holder of a participation were a direct creditor of the Borrower in the amount of such participation. SECTION 9.05. AMENDMENTS AND WAIVERS. Any provision of this Agreement or the Notes may be amended or waived if, but only if, such amendment or waiver is in writing and is signed by the Borrower and the Required Banks (and, if the rights or duties of the Agent are affected thereby, by the Agent); PROVIDED that no such amendment or waiver shall, unless signed by all the Banks, (i) increase or decrease the Commitment of any Bank (except for a ratable decrease in the Commitments of all Banks) or subject any Bank to any additional obligation, (ii) reduce the principal of or rate of interest on any Loan or any Reimbursement Obligation or any fees hereunder, (iii) postpone the date fixed for any scheduled payment of principal of or interest on any Loan or any Reimbursement Obligation or any fees hereunder or for any termination of any Commitment, (iv) change the percentage of the Commitments or of the aggregate unpaid principal amount of the Notes or the aggregate amount of the Letter of Credit Liabilities, or the number of Banks, 73 which shall be required for the Banks or any of them to take any action under this Section or any other provision of this Agreement or (v) amend any provision of Sections 2.15(b)(iii) or 5.12. SECTION 9.06. SUCCESSORS AND ASSIGNS. (a) The provisions of this Agreement shall be binding upon and inure to the benefit of the parties hereto and their respective successors and assigns, except that the Borrower may not assign or otherwise transfer any of its rights or obligations under this Agreement without the prior written consent of all Banks, except pursuant to and in accordance with the terms of Section 5.11(b), and no Bank may assign or otherwise transfer any of its rights or obligations under this Agreement except in compliance with this Section 9.06. (b) Any Bank may, at any time on or after the Sell-Down Date, grant to one or more banks or other institutions (each a "Participant") participating interests in its Commitment or any or all of its Loans or Letter of Credit Liabilities. In the event of any such grant by a Bank of a participating interest to a Participant, whether or not upon notice to the Borrower and the Agent, such Bank shall remain responsible for the performance of its obligations hereunder, and the Borrower and the Agent shall continue to deal solely and directly with such Bank in connection with such Bank's rights and obligations under this Agreement. Any agreement pursuant to which any Bank may grant such a participating interest shall provide that such Bank shall retain the sole right and responsibility to enforce the obligations of the Borrower hereunder including, without limitation, the right to approve any amendment, modification or waiver of any provision of this Agreement; PROVIDED that such participation agreement may provide that such Bank will not agree to any modification, amendment or waiver of this Agreement described in clause (i), (ii), (iii) or (iv) of Section 9.05, without the consent of the Participant. Subject to Section 9.06(e), the Borrower agrees that each Participant shall, to the extent provided in its participation agreement, be entitled to the benefits of Article VIII with respect to its participating interest; PROVIDED that the Bank granting such participating interest and such Participant comply with all duties and obligations under Article VIII (as if, in the case of a Participant, it were a Bank). An assignment or other transfer which is not permitted by subsection (c) or (d) below shall be given effect for purposes of this Agreement only to the extent of a participating interest granted in accordance with this subsection (b). 74 (c) Any Bank may, at any time on or after the Sell-Down Date, assign to one or more banks or other institutions (each an "Assignee") all, or a proportionate part (such portion to be in an amount equal to or greater than $10,000,000) of all, of its rights and obligations under this Agreement, the Notes and the Letters of Credit (provided that after giving effect to each such assignment, such assigning Bank shall have retained a portion in an amount equal to or greater than (i) in the case of any Bank that is not a Co-Agent or the Agent on the Effective Date, $10,000,000, and (ii) in the case of any Bank that is a Co-Agent or the Agent on the Effective Date, the lesser of (x) $30,000,000 and (y) 25% of such Bank's Commitment outstanding on the Effective Date (each such amount, a "Minimum Hold Amount"); PROVIDED that if at any time the aggregate amount of the Commitments shall be reduced, each Minimum Hold Amount shall be reduced by the same percentage that the aggregate amount by which the Commitments were reduced bears to the aggregate amount of the Commitments immediately before such reduction), and such Assignee shall assume such rights and obligations, pursuant to an Assignment and Assumption Agreement in substantially the form of Exhibit H hereto executed by such Assignee and such transferor Bank, with (and subject to) the subscribed consent of the Borrower (which consent shall not unreasonably be withheld, but which may in any event be withheld if both (i) such proposed Assignee fails to deliver evidence reasonably satisfactory to the Borrower that such Assignee is not a Foreign Person and (ii) the Borrower in good faith concludes that such assignment could result in a violation of any law, rule or regulation, or a violation of, revocation of, failure to renew or modification of any order, facility security clearance or permit) and the consent of the Agent (which consent shall not be unreasonably withheld); PROVIDED that if an Assignee is an Affiliate of such transferor Bank and is not a Foreign Person and such assignment would not render any Letter of Credit unacceptable to the Court or any beneficiary of such Letter of Credit, no such consent shall be required; and PROVIDED FURTHER that such assignment may, but need not, include rights of the transferor Bank in respect of outstanding Money Market Loans; and PROVIDED FURTHER that (A) if a Bank has any contingent obligations with respect to undrawn amounts under any Letters of Credit, such Bank may assign its rights and obligations under this Agreement, the Notes and the Letters of Credit pursuant to this subsection (c) only if the assignment of such contingent obligations is permitted by the terms of such Letters of Credit and (B) a Bank may assign its Commitment only to a Qualifying Bank (it being understood that compliance with this clause (B) shall 75 not eliminate the requirement of the Borrower's consent in accordance with this subsection (c)). "Qualifying Bank" means: (i) a bank having (x) senior unsecured long-term debt securities, long-term certificates of deposit or long-term letters of credit which are rated A- or higher by S&P AND (y) senior unsecured long-term debt securities, long-term bank deposits or long-term letters of credit which are rated A3 or higher by Moody's, or (ii) a bank (x) having (a) senior unsecured long-term debt securities or long-term certificates of deposit rated A- or higher by S&P OR (b) having senior unsecured long-term debt securities, long-term bank deposits or long-term letters of credit rated A3 or higher by Moody's, (y) having no long-term securities rated by the other rating agency and (z) having (A) short-term certificates of deposit or short-term letters of credit which are rated A1 or higher by S&P AND (B) short-term bank deposits or short- term letters of credit which are rated P1 or higher by Moody's. Upon execution and delivery of such instrument and payment by such Assignee to such transferor Bank of an amount equal to the purchase price agreed between such transferor Bank and such Assignee, such Assignee shall be a Bank party to this Agreement and, subject to Section 9.06(e), shall have all the rights and obligations of a Bank with a Commitment as set forth in such instrument of assumption, and the transferor Bank shall be released from its obligations hereunder to a corresponding extent, and no further consent or action by any party shall be required. Upon the consummation of any assignment pursuant to this subsection (c), the transferor Bank, the Agent and the Borrower shall make appropriate arrangements so that, if required, a new Note is issued to the Assignee. In connection with any such assignment occurring after the earlier of (i) the 90th date after the Sell-Down Date and (ii) the date as of which the Agent has notified the Banks that general syndication has been completed, the transferor Bank shall pay to the Agent an administrative fee for processing such assignment in the amount of $2,500. If the Assignee is not incorporated under the laws of the United States of America or a state thereof, it shall deliver to the Borrower and the Agent certification as to exemption from deduction or withholding of any United States federal income taxes in accordance with Section 8.04. 76 (d) Any Bank may at any time assign all or any portion of its rights under this Agreement and its Note to a Federal Reserve Bank. No such assignment shall release the transferor Bank from its obligations hereunder. (e) No Assignee, Participant or other transferee of any Bank's rights (and no Bank on behalf of any Assignee, Participant or other transferee) shall be entitled to receive any greater payment under Article VIII or Section 2.13 (whether individually or in aggregate with any such payments received by such Bank) than such Bank would have been entitled to receive with respect to the rights transferred, unless such transfer is made with the Borrower's prior written consent or by reason of the provisions of Section 8.02, 8.03 or 8.04 requiring such Bank to designate a different Applicable Lending Office under certain circumstances. SECTION 9.07. COLLATERAL. Each of the Banks represents to the Agent and each of the other Banks that it in good faith is not relying upon any "margin stock" (as defined in Regulation U) as collateral in the extension or maintenance of the credit provided for in this Agreement. SECTION 9.08. GOVERNING LAW; SUBMISSION TO JURISDICTION. This Agreement and each Note shall be governed by and construed in accordance with the laws of the State of New York. The Borrower hereby submits to the nonexclusive jurisdiction of the United States District Court for the Southern District of New York and of any New York State court sitting in New York City for purposes of all legal proceedings arising out of or relating to this Agreement or the transactions contemplated hereby. The Borrower irrevocably waives, to the fullest extent permitted by law, any objection which it may now or hereafter have to the laying of the venue of any such proceeding brought in such a court and any claim that any such proceeding brought in such a court has been brought in an inconvenient forum. SECTION 9.09. COUNTERPARTS; INTEGRATION; EFFECTIVENESS. This Agreement may be signed in any number of counterparts, each of which shall be an original, with the same effect as if the signatures thereto and hereto were upon the same instrument. This Agreement constitutes the entire agreement and understanding among the parties hereto and supersedes any and all prior agreements and understandings, oral or written, relating to the subject matter hereof. This Agreement shall become effective upon receipt, on or prior to December 16, 1993, by the Agent of counterparts hereof signed by each of the parties hereto 77 (or, in the case of any party as to which an executed counterpart shall not have been received, receipt by the Agent in form satisfactory to it of telegraphic, telex or other written confirmation from such party of execution of a counterpart hereof by such party). SECTION 9.10. WAIVER OF JURY TRIAL. EACH OF THE BORROWER, THE AGENT AND THE BANKS HEREBY IRREVOCABLY WAIVES ANY AND ALL RIGHT TO TRIAL BY JURY IN ANY LEGAL PROCEEDING ARISING OUT OF OR RELATING TO THIS AGREEMENT OR THE TRANSACTIONS CONTEMPLATED HEREBY. 78 IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be duly executed by their respective authorized officers as of the day and year first above written. HONEYWELL INC. By /s/ Michael A. Rocca ----------------------------------- Title: Vice President and Treasurer Honeywell Plaza Minneapolis, MN 55408 Telex number: Facsimile number: Commitments - ----------- MORGAN GUARANTY TRUST COMPANY OF NEW YORK By /s/ Charles C. O'Brien ----------------------------------- Title: Managing Director THE CHASE MANHATTAN BANK (NATIONAL ASSOCIATION) By /s/ Alexander H. Danzberger, Jr. ----------------------------------- Title: Vice President BANK OF AMERICA NATIONAL TRUST AND SAVINGS ASSOCIATION By /s/ Patricia DelGrande ----------------------------------- Title: Vice President THE FUJI BANK, LIMITED By /s/ Peter L. Chinnici ----------------------------------- Title: Joint General Manager 79 CITICORP USA, INC. By /s/ Robert M. Spence ----------------------------------- Title: Vice President Total Commitments - ------------- - -------------- - -------------- MORGAN GUARANTY TRUST COMPANY OF NEW YORK, as Administrative Agent By /s/ Charles C. O'Brien ----------------------------------- Title: Managing Director 60 Wall Street New York, New York 10260 Attention: John O'Hara Telex number: 177615 Facsimile number: (212) 648-5336 THE CHASE MANHATTAN BANK (NATIONAL ASSOCIATION), as Co-Agent By /s/ Alexander H. Danzberger, Jr. ----------------------------------- Title: Vice President BANK OF AMERICA NATIONAL TRUST AND SAVINGS ASSOCIATION, as Co-Agent By /s/ Patricia DelGrande ----------------------------------- Title: Vice President THE FUJI BANK, LIMITED, as Co-Agent By /s/ Peter L. Chinnici ----------------------------------- 80 Title: Joint General Manager CITICORP USA, INC., as Co-Agent By /s/ Robert M. Spence ----------------------------------- Title: Vice President 81 EX-10 4 EXHIBIT 10(III)(E) 1993 HONEYWELL STOCK AND INCENTIVE PLAN ARTICLE 1. PURPOSE AND DURATION 1.1 PURPOSE. The purpose of the 1993 Honeywell Stock and Incentive Plan (the "Plan") is to further the growth, development and financial success of Honeywell Inc. (the "Company") and its Subsidiaries by aligning the personal interests of key employees, through the ownership of shares of the Company's Common Stock and through other incentives, to those of the Company's shareholders. The Plan is further intended to provide flexibility to the Company in its ability to compensate key employees and to motivate, attract and retain the services of such key employees who have the ability to enhance the value of the Company and its Subsidiaries. In addition, the Plan provides for incentive awards to key employees of Affiliates in those cases where the success of the Company or its Subsidiaries may be enhanced by the award of incentives to such persons. The Plan permits the granting of Stock Options, Stock Appreciation Rights and Other Stock Based Awards. 1.2 DURATION. Upon approval by the Board of Directors of the Company, subject to ratification by an affirmative vote of a majority of the Shares present and entitled to vote at the annual meeting of shareholders of the Company to be held on April 20, 1993, or at any adjournment thereof, the Plan, if so approved, shall become effective April 21, 1993 (the "Effective Date"), and shall remain in effect, subject to the right of the Board of Directors to terminate the Plan at any time pursuant to Article 10 herein, until December 31, 1998 (the "Termination Date"). No Award may be granted under the Plan on or after the Termination Date, but Awards made prior to the Termination Date may be exercised, vested or otherwise effectuated beyond that date unless otherwise limited. ARTICLE 2. DEFINITIONS 2.1 DEFINITIONS. Whenever used in the Plan, the following terms shall have the meanings set forth below and, when the meaning is intended, the initial letter of the word is capitalized: (a) "AFFILIATE" means any corporation (other than a Subsidiary), partnership, association, joint venture or other entity in which the Company or any Subsidiary participates directly or indirectly in the decisions regarding the management thereof or the production or marketing of products or services. (b) "AWARD" means, individually or collectively, a grant under this Plan of Stock Options, Stock Appreciation Rights or Other Stock Based Awards. (c) "AWARD AGREEMENT" means the document which evidences an Award and which sets forth the terms, conditions and limitations relating to such Award. (d) "BOARD" or "BOARD OF DIRECTORS" means the Board of Directors of the Company. (e) "CHANGE IN CONTROL" shall have the meaning set forth in Article 9 herein. (f) "CHANGE IN CONTROL VALUE" means the highest price paid for a Share by a third party in connection with a Change in Control. (g) "CODE" means the Internal Revenue Code of 1986, as amended from time to time or any successor Code thereto. 1 (h) "COMMITTEE" means the group of individuals administering the Plan, which shall be the Personnel Committee of the Board or any other committee of the Board performing similar functions as appointed from time to time by the Board and constituted so as to permit the Plan to comply with Rule 16b-3 under the Exchange Act, or any successor rule thereto. (i) "COMPANY" means Honeywell Inc., a Delaware corporation. (j) "EFFECTIVE DATE" means April 21, 1993. (k) "ELIGIBLE EMPLOYEE" means any executive, managerial, professional, technical or administrative employee of the Company, any Subsidiary or any Affiliate who is expected to contribute to its success. (l) "EXCHANGE ACT" means the Securities Exchange Act of 1934, as amended from time to time, or any successor Act thereto. (m) "FAIR MARKET VALUE" means, with respect to any particular date, the average of the highest and lowest price of a Share as reported on the consolidated tape for New York Stock Exchange listed securities (or other principal reporting system, as determined by the Committee). (n) "INCENTIVE STOCK OPTION" or "ISO" means an option to purchase Shares, granted pursuant to Article 6 herein, which is designated as an Incentive Stock Option and is intended to meet the requirements of Section 422 of the Code. (o) "INSIDER" means an officer of the Company or any Subsidiary as defined under Rule 16a-1(f) under the Exchange Act. (p) "NONQUALIFIED STOCK OPTION" or "NQSO" means an option to purchase Shares, granted pursuant to Article 6 herein, which is not intended to be an Incentive Stock Option. (q) "OTHER STOCK BASED AWARD" means an Award, granted pursuant to Article 6 herein, other than a Stock Option or SAR, that is paid with, valued in whole or in part by reference to, or is otherwise based on Shares. (r) "PARTICIPANT" means an Eligible Employee selected by the Committee to receive an Award under the Plan. (s) "PLAN" means the 1993 Honeywell Stock and Incentive Plan. (t) "SHARES" means the issued or unissued shares of the common stock, par value $1.50 per share, of Honeywell Inc. (u) "STOCK APPRECIATION RIGHT" or "SAR" means the grant, pursuant to Article 6 herein, of a right to receive a payment from the Company, in the form of stock, cash or a combination of both, equal to the difference between the Fair Market Value of one or more Shares and the exercise price of such Shares under the terms of such Stock Appreciation Right. (v) "STOCK OPTION" means the grant, pursuant to Article 6 herein, of a right to purchase a specified number of Shares during a specified period at a designated price, which may be an Incentive Stock Option or a Nonqualified Stock Option. (w) "SUBSIDIARY" means a corporation as defined in Section 425(f) of the Code with the Company being treated as the employer corporation for purposes of this definition. (x) "TERMINATION DATE" means the earlier of: the date on which all Shares subject to the Plan have been purchased or acquired according to the Plan's provisions, the date the Plan is terminated pursuant to Article 10, or December 31, 1998. (y) "WITHHOLDING EVENT" means an event related to an Award which results in the Participant being subject to taxation at the federal, state, local or foreign level. 2 ARTICLE 3. ADMINISTRATION 3.1 AUTHORITY. The Plan shall be administered by the Committee which shall have full and exclusive power, except as limited by law or by the Restated Certificate of Incorporation or By-laws of the Company, and subject to the provisions herein, to: (a) select Eligible Employees to whom Awards are granted; (b) determine the size and types of Awards; (c) determine the terms and conditions of such Awards in a manner consistent with the Plan; (d) determine whether, to what extent and under what circumstances, Awards may be: settled, paid or exercised in cash, shares, or other Awards, or other property or canceled, forfeited or suspended. (e) construe and interpret the Plan and any agreement or instrument entered into under the Plan; (f) establish, amend or waive rules and regulations for the Plan's administration; (g) amend (subject to the provisions of Section 4.4 and Article 10 herein) the terms and conditions, other than price, of any outstanding Award to the extent such terms and conditions are within its discretion; and (h) make all other determinations which may be necessary or advisable for the administration of the Plan. All Awards hereunder shall be made by the Committee, except that Awards made other than during the normal period for granting Awards may, subject to ratification by the Committee, be made by the Chief Executive Officer of the Company, or a designee approved by the Committee, provided, however, that notwithstanding the foregoing, all Awards to Insiders, must be approved by the Committee prior to the grant of the Award. 3.2 DECISIONS BINDING. All determinations and decisions made by the Committee pursuant to the provisions of the Plan and all related orders or resolutions of the Board of Directors shall be final, conclusive and binding on all persons, including the Company, its Subsidiaries and Affiliates, its shareholders, Participants, and their estates and beneficiaries. ARTICLE 4. SHARES SUBJECT TO THE PLAN 4.1 NUMBER OF SHARES. Subject to adjustment as provided in Section 4.4 herein, no more than 7,500,000 Shares may be issued under the Plan, of which a maximum of fifty percent (50%) of such Shares may be issued pursuant to Other Stock Based Awards. These Shares may consist in whole or in part, of authorized and unissued Shares, or of treasury Shares. No fractional Shares shall be issued under the Plan; however, cash may be paid in lieu of any fractional Shares in settlements of Awards under the Plan. For purposes of determining the number of Shares available for issuance under the Plan: (a) The grant of an Award shall reduce the authorized pool of Shares by the number of Shares subject to such Award while such Award is outstanding, except to the extent that such an Award is in tandem with another Award covering the same or fewer Shares. (b) Any Shares tendered by a Participant in payment of the price of a Stock Option or stock option exercised under any other Company plan shall be credited to the authorized pool of Shares. (c) To the extent that any Shares covered by SARs are not issued upon the exercise of such SAR, the authorized pool of Shares shall be credited for such number of Shares. 3 (d) To the extent that an Award is settled in cash or any form other than in Shares, the authorized pool of Shares shall be credited with the appropriate number of Shares represented by such settlement of the Award, as determined at the sole discretion of the Committee (subject to the limitation set forth in Section 4.2 herein). (e) If Shares are used to pay dividends and dividend equivalents in conjunction with outstanding Awards, an equivalent number of Shares shall be deducted from the Shares available for issuance. 4.2 LAPSED AWARDS. If any Award granted under the Plan is cancelled, terminates, expires or lapses for any reason, any Shares subject to such Award shall again be available for the grant of an Award under the Plan; except, however, to the extent that such Award was granted in tandem with another Award, any Shares issued pursuant to the exercise or settlement of such other Award shall not be credited back. 4.3 EFFECT OF ACQUISITION. Any Awards granted by the Company in substitution for awards or rights issued by a company whose shares or assets are acquired by the Company or a Subsidiary shall not reduce the number of Shares available for grant under the Plan. 4.4 ADJUSTMENTS IN AUTHORIZED SHARES. Subject to Article 9 herein, in the event of any merger, reorganization, consolidation, recapitalization, separation, spin-off, liquidation, stock dividend, split-up, Share combination or other change in the corporate or capital structure of the Company affecting the Shares, such adjustment shall be made in the number and class of Shares which may be delivered under the Plan, and in the number and class of and/or price of Shares subject to outstanding Awards granted under the Plan, as may be determined to be appropriate and equitable by the Committee, in its sole discretion, to prevent dilution or enlargement of rights; provided that the number of Shares subject to any Award shall always be a whole number. 4.5 COMMITTEE DETERMINATION. In determining the number of Shares available for issuance under the Plan as contemplated by this Article 4, the Committee shall interpret and apply the provisions of this Article so as to permit the Plan to comply with Rule 16b-3 under the Exchange Act, or any successor rule thereto. ARTICLE 5. PARTICIPATION 5.1 SELECTION OF PARTICIPANTS. Subject to the provisions of the Plan, the Committee may, from time to time, select from all Eligible Employees, those to whom Awards shall be granted and shall determine the nature and amount of each Award. No Eligible Employee shall have the right to receive an Award under the Plan, or, if selected to receive an Award, the right to continue to receive same. Further, no Participant shall have any rights, by reason of the grant of any award under the Plan to continued employment by the Company or any Subsidiary or Affiliate. There is no obligation for uniformity of treatment of Participants under the Plan. 5.2 AWARD AGREEMENT. All Awards granted under the Plan shall be evidenced by an Award Agreement that shall specify the terms, conditions, limitations and such other provisions applicable to the Award as the Committee shall determine. ARTICLE 6. AWARDS Except as otherwise provided for in Section 3.1 herein, Awards may be granted by the Committee to Eligible Employees at any time, and from time to time as the Committee shall determine. The Committee shall have complete discretion in determining the number of Awards to grant (subject to the Share limitations set forth in Section 4.1 herein) and, consistent with the provisions of the Plan, the terms, conditions and limitations pertaining to such Awards. The Committee may provide that the Participant shall have the right to utilize Shares to pay all or any part of the purchase price of the exercise of any Stock Option or option to acquire Shares 4 under any another Honeywell incentive compensation plan, if permitted under such plan; provided that the number of Shares, bearing restrictive legends, if any, which are used for such exercise, shall be subject to the same restrictions following such exercise. 6.1 STOCK OPTIONS. Stock Options may be granted at a price which shall not be less than one hundred percent (100%) of the Fair Market Value of a Share on the date the Stock Option is granted. A Stock Option may be exercised at such times as may be specified in an Award Agreement, in whole or in installments, which may be cumulative and shall expire at such time as the Committee shall determine at the time of grant; provided that no Stock Option shall be exercisable later than ten (10) years after the date granted. Prior to the exercise of a Stock Option, the holder thereof shall not have any rights of a shareholder with respect to any of the Shares covered by the Stock Option. Stock Options shall be exercised by the delivery of a written notice of exercise to the Director of Executive Compensation of the Company or such other person specified by the Committee, setting forth the number of Shares with respect to which the Stock Option is to be exercised, accompanied by full payment of the total Stock Option price and any required withholding taxes. Payment shall be made either (a) in cash or its equivalent, (b) by tendering previously acquired Shares having a Fair Market Value at the time of exercise equal to the total price of the Stock Option, or (c) by a combination of (a) and (b). The Committee also may allow exercises to be made with the delivery of payment as permitted under Federal Reserve Board Regulation T, subject to applicable securities law restrictions, or by any other means which the Committee determines to be consistent with the Plan's purpose and applicable law. The Committee may provide that the exercise of a Stock Option, by tendering previously acquired shares, will entitle the exercising Participant to receive another Stock Option covering the same number of shares tendered and with a price of no less than the Fair Market Value on the date of grant of such other option. 6.2 STOCK APPRECIATION RIGHTS. SARs may be granted at a price which shall not be less than one hundred percent (100%) of the Fair Market Value of a Share on the date the SAR is granted, in tandem with a Stock Option, such that the exercise of the SAR or related Stock Option will result in a forfeiture of the right to exercise the related Stock Option for an equivalent number of shares, or independently of any Stock Option. An SAR may be exercised at such times as may be specified in an Award Agreement, in whole or in installments, which may be cumulative and shall expire at such time as the Committee shall determine at the time of grant; provided that no SAR shall be exercisable later than ten (10) years after the date granted. SARs shall be exercised by the delivery of a written notice of exercise to the Director of Executive Compensation of the Company or such other person specified by the Committee, setting forth the number of Shares with respect to which the SAR is to be exercised. 6.3 OTHER STOCK BASED AWARDS. Other Stock Based Awards may be granted to such Eligible Employees as the Committee may select, at any time and from time to time as the Committee shall determine. The Committee shall have complete discretion in determining the number of Shares subject to such Awards, the consideration for such Awards and the terms, conditions and limitations pertaining to same including, without limitation, restrictions based upon the achievement of specific business objectives, tenure, and other measurements of individual or business performance, and/or restrictions under applicable federal or state securities laws, and conditions under which same will lapse. Such Awards may include the issuance of Shares in payment of amounts earned under other incentive compensation plans of the Company. The terms, restrictions and conditions of the Award need not be the same with respect to each Participant. The Committee may, at its sole discretion, direct the Company to issue Shares subject to such restrictive legends and/or stop transfer instructions as the Committee deems appropriate. 5 ARTICLE 7. DIVIDENDS AND DIVIDEND EQUIVALENTS The Committee may provide that Awards earn dividends or dividend equivalents. Such dividend equivalents may be paid currently or may be credited to an account established by the Committee under the Plan in the name of the Participant. In addition, dividends or dividend equivalents paid on outstanding Awards or issued Shares may be credited to such account rather than paid currently. Any crediting of dividends or dividend equivalents may be subject to such restrictions and conditions as the Committee may establish, including reinvestment in additional Shares or Share equivalents. ARTICLE 8. DEFERRALS AND SETTLEMENTS Payment of Awards may be in the form of cash, shares, other Awards, or in such combinations thereof as the Committee shall determine at the time of grant, and with such restrictions as it may impose. Payment may be made in a lump sum or in installments as prescribed by the Committee. The Committee may also require or permit participants to elect to defer the issuance of Shares or the settlement of Awards in cash under such rules and procedures as it may establish under the Plan. It may also provide that deferred settlements include the payment or crediting of interest on the deferral amounts or the payment or crediting of dividend equivalents on deferred settlements denominated in Shares. ARTICLE 9. CHANGE IN CONTROL 9.1 CHANGE IN CONTROL. In the event of a Change in Control of the Company, all Awards granted under the Plan that are still outstanding and not yet exercisable or are subject to restrictions, shall, unless otherwise provided for in the Award Agreement, become immediately exercisable, and all restrictions shall be removed, as of the first date that the Change in Control has been deemed to have occurred, and shall remain as such for the remaining life of the Award, as such life is provided herein and within the provisions of the related Award Agreements. For purposes of this Section 9.1, a Change in Control of the Company shall be deemed to have occurred if the conditions set forth in any one or more of the following paragraphs shall have been satisfied: (a) Any "person", as such term is used in Sections 13(d) and 14(d) of the Exchange Act (other than the Company, any trustee or other fiduciary holding securities under an employee benefit plan of the Company or any corporation owned, directly or indirectly, by the shareholders of the Company in substantially the same proportions as their ownership of stock of the Company), is or becomes the "beneficial owner" (as defined in Rule 13d-3 under the Exchange Act), directly or indirectly, of securities of the Company representing thirty percent (30%) or more of the combined voting power of the Company's then outstanding securities; or (b) During any period of two consecutive years (not including any period prior to the Effective Date of the Plan), individuals who at the beginning of such period constitute the Board, and any new director (other than a director designated by a person who has entered into an agreement with the Company to effect a transaction described in paragraphs (a), (b) or (c) of this Section 9.1) whose election by the Board or nomination for election by the Company's shareholders was approved by a vote of at least two-thirds (2/3) of the directors then still in office who either were directors at the beginning of the period or whose election or nomination for election was previously so approved, cease for any reason to constitute at least a majority thereof; (c) The shareholders of the Company approve a merger or consolidation of the Company with any other person, other than (i) a merger or consolidation which would result in the voting securities of the Company outstanding immediately prior thereto continuing to represent (either by remaining outstanding or by being converted into voting securities of the surviving entity) more than fifty percent (50%) of the combined voting power of the voting securities of the Company or such surviving entity outstanding immediately after such merger or consolidation, or (ii) a merger 6 or consolidation effected to implement a recapitalization of the Company (or similar transaction) in which no "person" (as hereinabove defined) acquires more than thirty percent (30%) of the combined voting power of the Company's then outstanding securities; or (d) The shareholders of the Company approve a plan of complete liquidation of the Company or an agreement for the sale or disposition by the Company of all or substantially all of the Company's assets (or any transaction having a similar effect). ARTICLE 10. AMENDMENT, MODIFICATION AND TERMINATION 10.1 AMENDMENT, MODIFICATION AND TERMINATION. The Committee may terminate, amend or modify the Plan at any time and from time to time, with the approval of the Board. The termination, amendment or modification of the Plan may be in response to changes in the Code, the Exchange Act, national securities exchange regulations or for other reasons deemed appropriate by the Committee. However, without the approval of the shareholders of the Company, no amendment or modification may: (a) Materially increase the total amount of Shares which may be issued under the Plan, except as provided in Sections 4.3 and 4.4 herein; or (b) Cause the Plan not to comply with Rule 16b-3 under the Exchange Act, or any successor rule thereto. 10.2 AWARDS PREVIOUSLY GRANTED. No termination, amendment or modification of the Plan shall in any manner adversely affect any Award previously granted under the Plan, without the written consent of the Participant. ARTICLE 11. WITHHOLDING 11.1 TAX WITHHOLDING. The Company shall have the power and the right to deduct or withhold, or require a Participant to remit to the Company, an amount in cash or Shares having a Fair Market Value sufficient to satisfy federal, state and local taxes (including the Participant's FICA obligation) required by law to be withheld with respect to any Withholding Event which occurs because of a grant, exercise or payment made under or as a result of the Plan. 11.2 SHARE WITHHOLDING. Upon a Withholding Event, the Committee may require one or more classes of Participants to satisfy the withholding requirement, in whole or in part, by having the Company withhold Shares having a Fair Market Value, on the date the tax is to be determined, equal to the amount of withholding (federal, FICA, state or local) which is required by law. Absent such a mandate, the Committee may allow a Participant to elect Share withholding for tax purposes subject to such terms and conditions as the Committee shall establish. ARTICLE 12. TRANSFERABILITY No Award granted under the Plan may be sold, transferred, pledged, assigned or otherwise alienated or hypothecated, other than by will or by the laws of descent and distribution or pursuant to a qualified domestic relations order as defined by the Code, or Title I of the Employee Retirement Income Security Act, or the rules thereunder. Further, all Awards granted to a Participant under the Plan shall be exercisable during the Participant's lifetime only by the Participant. Notwithstanding the foregoing, the designation of a beneficiary by a Participant does not constitute a transfer. ARTICLE 13. INDEMNIFICATION 13.1 INDEMNIFICATION. Each person who is or shall have been a member of the Committee, or of the Board, shall be indemnified and held harmless by the Company against and from any loss, cost, liability or expense that may be imposed upon or reasonably incurred by such person in connection with or resulting from any claim, action, suit or proceeding to which such person may be a party or in which such person may be involved by reason of any action taken or failure to act under the 7 Plan and against and from any and all amounts paid by such person in settlement thereof, with the Company's approval, or paid by such person in satisfaction of any judgment in any such action, suit or proceeding against such person, provided such person shall give the Company an opportunity, at its own expense, to handle and defend the same before such person undertakes to handle and defend it on such person's own behalf. The foregoing right of indemnification shall not be exclusive of any other rights of indemnification to which such persons may be entitled under the Company's Restated Certificate of Incorporation or By-laws, as a matter of law, or otherwise, or any power that the Company may have to indemnify them or hold them harmless. ARTICLE 14. UNFUNDED PLAN 14.1 UNFUNDED PLAN. The Plan shall be unfunded and the Company shall not be required to segregate any assets that may at any time be represented by Awards under the Plan. Any liability of the Company to any person with respect to any Award under the Plan shall be based solely upon any contractual obligations that may be effected pursuant to the Plan. No such obligation of the Company shall be deemed to be secured by any pledge of, or other encumbrance on, any property or assets of the Company. ARTICLE 15. SUCCESSORS 15.1 SUCCESSORS. All obligations of the Company under the Plan, with respect to Awards granted hereunder, shall be binding on any successor to the Company, whether the existence of such successor is the result of a direct or indirect purchase, merger, consolidation or otherwise, of all or substantially all of the business and/or assets of the Company. ARTICLE 16. SECURITIES LAW COMPLIANCE 16.1 SECURITIES LAW COMPLIANCE. The Plan is intended to comply with all applicable conditions of Rule 16b-3 or any successor rule thereto under the Exchange Act. To the extent any provision of the Plan or action by the Committee fails to so comply, it shall be deemed null and void, to the extent permitted by law and deemed advisable by the Committee. Further, each Award shall be subject to the requirement that, if at any time the Committee shall determine, in its sole discretion, that the listing, registration or qualification of any Award under the Plan upon any securities exchange or under any state or federal law, or the consent or approval of any government regulatory body, is necessary or desirable as a condition of, or in connection with, the granting of such Award or the grant or settlement thereof, such Award may not be exercised or settled in whole or in part unless such listing, registration, qualification, consent or approval shall have been effected or obtained free of any conditions not acceptable to the Committee. ARTICLE 17. REQUIREMENTS OF LAW 17.1 REQUIREMENTS OF LAW. The granting of Awards and the issuance of Shares under the Plan shall be subject to all applicable laws, rules and regulations, and to such approvals by any governmental agencies or national securities exchanges as may be required. 17.2 SEVERABILITY. In the event any provision of the Plan shall be held illegal or invalid for any reason, the illegality or invalidity shall not affect the remaining parts of the Plan, and the Plan shall be construed and enforced as if the illegal or invalid provision had not been included. 17.3 GOVERNING LAW. To the extent not preempted by federal law, the Plan and all Award Agreements, shall be construed in accordance with and governed by the laws of the State of Minnesota. 8 EX-10 5 EXHIBIT 10(III)(F) Amended Effective: 01/17/89 Printed: 03/21/89 1988 HONEYWELL STOCK AND INCENTIVE PLAN 1. DEFINITIONS The following words and phrases, as used in the Plan, shall have these meanings: 1.01 "Affiliate" means any corporation (other than a Subsidiary), partnership, association, joint venture or other entity in which the Company or any Subsidiary participates directly or indirectly in the decisions regarding the management thereof or the production or marketing of products or services. 1.02 "Award" means, individually or collectively, any Option, Earned Performance Share Award, Restricted Stock Award or other award, whether contingent or absolute, made pursuant to this Plan. 1.03 "Board" means the Board of Directors of the Company. 1.04 "Change in Control" means a change of control of the Company as defined in Section 13 of the Plan. 1.05 "Code" means the Internal Revenue Code of 1986, as amended. 1.06 "Commission" means the United States Securities and Exchange Commission. 1.07 "Committee" shall mean the Personnel Committee of the Board, composed of not less than three directors, each of whom is a Disinterested Person. 1.08 "Company" means Honeywell Inc. 1.09 "Disability" means disability as defined from time to time pursuant to the Company's policies then in effect. 1.10 "Disinterested Person" shall have the meaning set forth in Rule 16b-3(d)(3) promulgated by the Securities and Exchange commission under the Exchange Act, or any successor definition adopted by the Commission. 1.11 "Earned Performance Share" means a Share earned under the Earned Performance Share Program. 1.12 "Effective Date" means the date on which the Plan is approved by the stockholders of the Company, as provided in Section 3. 1.13 "Eligible Company" means Company, any Subsidiary, and any Affiliate. 1.14 "Eligible Employee" means any executive, professional, or administrative employee of an Eligible Company who is expected to contribute to the success of an Eligible Company. 1.15 "Exchange Act" means the Securities Exchange Act of 1934, as amended. 1.16 "Fair Market Value" means, with respect to any particular date, the average of the highest and lowest price of the Stock as reported on the consolidated tape for New York Stock Exchange listed securities (or other principal reporting system, as determined by the Committee). 1.17 "Fiscal Year" means the fiscal year of the company, which is presently the calendar year. 1.18 "Incentive Stock option" means an Option within the meaning of Section 422A of the Code. 1.19 "Nonqualified Stock Option" means an Option granted under the Plan other than an Incentive Stock Option. 1.20 "Option" means a Nonqualified Stock Option or an Incentive Stock option to purchase Stock. 1.21 "Option Agreements" means option agreements entered into as provided in Section 7 of the Plan. 1.22 "Option Price" means the price at which Stock may be purchased under an option as provided in Section 7. 1.23 "Participant" means an individual selected by the Committee from among the Eligible Employees to receive an Award under the Plan. 1.24 "Performance Goal" means target performance levels of an individual, an Eligible company or business unit. 1.25 "Performance Incentive Award" means an award in addition to those described elsewhere in the Plan, that is paid with, valued in whole or in part by reference to, or is otherwise based on Shares as further described in Section 10. 1.26 "Performance Period" means the period of time, as determined by the Committee at the time any Award is granted or at any time thereafter, over which a Participants performance is measured. -2- 1.27 "Personal Representative" means the person or persons who, upon the death, Disability, or incompetency of a Participant, shall have acquired, by will or by the laws of descent and distribution or by other legal proceedings, the right to the benefits of an Award. 1.28 "Plan" means the 1988 Honeywell Stock and Incentive Plan. 1.29 "Programs" means the Stock option Plan described in Section 7, the Earned Performance Share Program described in Section 8, the Restricted Stock Plan described in Section 9, and the Other Performance Incentive Awards described in Section 10. 1.30 "Restricted Stock" means Stock subject to the terms, restrictions and conditions provided in Section 9. 1.31 "Restriction Period" means a period of time determined under Section 9 during which Restricted Stock is subject to the terms and conditions provided in Section 9. 1.32 "Shares" means either authorized and previously unissued or treasury shares of Stock. 1.33 "Stock" means the common stock, par value $1.50 of the Company. 1.34 "Subsidiary" means a corporation as defined in section 425(f) of the Code with the Company being treated as the employer corporation for purposes of this definition. 2. PURPOSES 2.01 The purpose of the Plan is to provide a means through which Honeywell and its subsidiaries may attract and employ key employees and provide such key employees with additional incentive and reward opportunities designed to enhance the profitable growth of the Company and its Subsidiaries. A further purpose of the Plan is to provide a means whereby those key employees upon whom the successful administration and management of the Company and its Subsidiaries rests, and whose present and potential contributions to the success of the Company and its Subsidiaries are of importance, can acquire and maintain stock ownership, thereby strengthening their commitment to the success of the Company and its Subsidiaries and their desire to remain in its employ. In addition, the Plan provides for Awards to employees of Affiliates in those cases where the success of the Company or its Subsidiaries may be enhanced by the award of incentives to employees of Affiliates. So that the appropriate incentives can be provided, the Plan provides for the award of Stock options, Restricted Stock Awards, Earned Performance Shares, other Performance Incentive Awards or any combination of the foregoing. -3- 3. EFFECTIVE DATE AND EXPIRATION OF PLAN 3.01 The Plan is subject to approval by holders of a majority of the outstanding shares of capital stock of the Company present in person or represented by proxy and entitled to vote at the annual meeting of stockholders of the Company to be held on April 21, 1988, or at any adjournment thereof, and, if so approved, shall be effective as of such date. Unless earlier terminated pursuant to Section 14, the Plan shall terminate on the fifth anniversary of its Effective Date. No Award shall be made pursuant to the Plan after its termination date, but Awards made prior to the termination date may be exercised, vested or otherwise effectuated beyond that date unless otherwise limited. 4. ADMINISTRATION 4.01 The Plan shall be administered by the Committee, which shall take action upon approval of a majority of its members. The Committee shall have authority to establish rules for the administration and interpretation of the Plan, subject to such orders or resolutions of the Board not inconsistent with the express terms hereof, as it deems appropriate or necessary. Any decision of the Committee with respect to the interpretation, construction, administration and application of the Plan shall be conclusive and binding. No employee or Participant shall have any claim to be granted any Award under the Plan and there is no obligation for uniformity of treatment of Participants under the Plan. All Awards hereunder shall be made by the Committee, except that Awards made other than during the normal period for granting Awards may, subject to ratification by the Committee, be made by the Chairman of the Board or Chief Executive officer, provided, however, that notwithstanding the foregoing, all Awards to Participants in Grade F (or the equivalent, it no grades are designated) and above, regardless of the date of award, must receive Committee approval prior to making the Award. 5. ELIGIBLE EMPLOYEES 5.01 Awards hereunder may be granted only to Eligible Employees. 6. MAXIMUM SHARES UNDER PLAN 6.01 MAXIMUM - subject to adjustment under Subsection 6.03, the maximum number of Shares available for distribution under the Plan shall be 3,000,000. In the event of a lapse, expiration, termination or cancellation, in whole or in part, of any Award granted under the Plan without the issuance of Shares, or if Shares are issued under an Option hereunder and are reacquired by the Company pursuant to rights reserved upon issuance thereof, the Shares subject to or reserved for such Award may be again used for new Awards hereunder, provided that in no event may the number of Shares issued hereunder exceed 3,000,000, the total number of Shares reserved for issuance hereunder. -4- 6.02 EFFECT OF ACQUISITION - Any Awards made by the Company in substitution for awards or rights issued by a company whose shares or assets are acquired by the Company or a Subsidiary shall not reduce the number of Shares available for Awards under the Plan pursuant to Section 6.01. 6.03 ADJUSTMENT UPON CHANGES IN CAPITALIZATION - in the event of any merger, reorganization, consolidation, recapitalization, stock dividend, or other change in corporate structure, affecting the Awards, such adjustment shall be made in the aggregate number and class of Shares which may be delivered under the Plan, in the number, class and option price of Shares subject to outstanding options granted under the Plan, and in the value of, or number or class of Shares subject to, Awards granted under the Plan as may be deemed appropriate by the Committee in its sole discretion, provided, that the number of Shares subject to any Award shall always be a whole number. 7. STOCK OPTIONS 7.01 LIMITATION ON VALUE OF INCENTIVE STOCK OPTION GRANTS - The aggregate Fair Market Value (determined at the time the Option is granted) of Shares with respect to which options designated and qualifying as Incentive Stock Options, as amended, are exercisable for the first time by any one Eligible Employee in any calendar year under all plans of the Company and its Subsidiaries shall not exceed $100,000. 7.02 POWERS OF THE COMMITTEE - In addition to and not in limitation of any powers which the Committee shall have under other Sections of the Plan, the Committee shall have plenary authority in its discretion, but subject to the express provisions of the Plan, to designate each Option as an Incentive Stock Option or as a Nonqualified Stock Option; to determine the purchase price of the Shares covered by each Option, the Eligible Employees to whom, and the time or times at which options shall be granted and exercisable and the number of Shares to be covered by each Option. 7.03 ELIGIBILITY - In addition to the eligibility requirements set forth in Section 5.01 hereof, the Committee shall take into account in determining the Eligible Employees to whom Options shall be granted and the number of Shares to be covered by each option, the nature of the services rendered by the respective Eligible Employee, their present and potential contributions to the success of the Company, its Subsidiaries or Affiliates and such other factors as the Committee in its discretion shall deem relevant. A Participant who has been granted an Option may be granted additional Options. Incentive Stock Options may be granted to any Eligible Employee of the Company or its Subsidiaries. Notwithstanding the foregoing, no Incentive Stock Option may be issued to any person who, at the time of grant, owns more than 10% percent of the total combined -5- voting power of all classes of stock of the Company or any Subsidiary. 7.04 OPTION PRICES - The purchase price of the Shares covered by each option shall be determined by the Committee, but shall not be less than 100% of the Fair Market Value of the Shares at the time the Option is granted PROVIDED, HOWEVER, that to the extent permitted by law, the Committee in its discretion may reprice existing options if the exercise price of the option exceeds the Fair Market Value of the Stock on the date of Committee action. The Option Agreements may contain such provisions regarding the form (which may include, without limitation, securities of the Company) and time of payment of the purchase price and withholding taxes in connection with an exercise of an Option as the Committee shall approve. 7.05 EXERCISE OF OPTIONS (a) The Committee shall have authority in its discretion to prescribe in any Option Agreement that the Option will be exercisable in full at any time or in part from time to time during the term of the Option. The Committee shall have similar authority to prescribe in any Option Agreement a minimum number of Shares as to which the Option may be exercised at any time, but otherwise, an option may be exercised at any time or from time to time during the term of the Option as to any or all full Shares which have become purchasable under the provisions of the Option. Any exercise of an Option shall be accomplished by the giving of a notice, together with a payment or commitment to pay the purchase price and any required withholding taxes. Payment of the option price and withholding taxes may be made by the delivery of cash, Shares or other consideration as permitted by law and provided by the Committee in the Option Agreement. The term of each Option shall be fixed by the Committee at the time of grant but shall not be more than ten years from the date of granting thereof. An Option granted by the Company prior to January 1, 1987 as an Incentive Stock Option shall not be exercisable at a time when there remains outstanding (within the meaning of Section 422A(c)(7) of the Code, the whole or part of any Stock Option which then is (or has been) an Incentive Stock Option which was granted before the granting of such Option to the same Participant to purchase Stock in the Company or in a corporation which (at the time of the granting of such option) is the parent corporation or Subsidiary of the Company or is a predecessor corporation of any such corporations. (b) Except as provided in Sections 12 and 13, no Option may be exercised at any time unless the holder thereof is then an employee of the Company, a subsidiary or Affiliate. The holder of an Option shall not have any rights of a shareholder with respect to any of the Shares covered by the Option prior to the date the option is properly exercised. The Committee shall have authority in its discretion to prescribe in any Option Agreement the action which shall constitute proper exercise of an Option. -6- Upon proper exercise of an Option, the person so exercising it shall be treated for all purposes as having become the registered owner of the Shares as to which the Option has been exercised as of the close of business on the date of exercise, provided that the Company shall not be obligated to deliver a certificate for such Shares prior to its receipt of payment in full of the purchase price thereof and any required withholding taxes. 7.06 PARTICIPANT'S AGREEMENT TO SERVE - Each Participant receiving an Option shall, as one of the terms of the Option Agreement, agree to remain in the service of the Company, its Subsidiaries or Affiliates for a period determined by the Committee (or until such earlier date on which the Participant may take disability, early or normal retirement in accordance with the Company's policies then in effect), and to devote his or her entire time, energy and skill during such employment to the service of the Company, such Subsidiary or Affiliate and the promotion of its interests, subject to vacations, sick leave and other absences and employments in accordance with the regular policies of the Eligible Company. Such employment shall (subject to the terms of any contract between the Company and such employee) be at the pleasure of the management of the Company and at such compensation as management shall reasonably determine from time to time. 7.07 ACCEPTANCE OF OPTIONS - No Option granted under the Plan shall be exercisable unless the Participant to whom the Option is granted shall have executed and delivered to the Company an Option Agreement within 45 days after the Option Agreement shall have been sent to the employee by or on behalf of the Company; provided that such period may, for good cause, be extended by the Company to no more than 90 days. 8. EARNED PERFORMANCE SHARES 8.01 EARNED PERFORMANCE SHARE AWARDS - The Committee may grant Awards under which payment may be in Shares, cash or a combination of Shares and cash if the performance of the Participant, the Company, a Subsidiary or Affiliate during the Performance Period meets Performance Goals established by the Committee. Such Earned Performance Share Awards shall be subject to the following terms and conditions and such other terms and conditions an the Committee may prescribe. 8.02 POWERS OF THE COMMITTEE The Committee shall select the Participants, determine the Performance Periods and the Performance Goals separately for each Performance Period. Participants for an Award Period may be identified after the beginning of the Performance Period. Performance Goals applicable to a Participant may also be modified by the Committee if during the Performance Period the Participant transfers to a business unit to which different Performance Goals apply. -7- 8.03 PAYMENT (a) As soon as practicable after the Performance Period, Earned Performance Shares shall be paid to Participants. In the discretion of the Committee, Earned Performance Shares shall be paid in Stock or in cash or a combination of Stock and cash. b) No Participant shall have any rights as a stockholder with respect to Shares represented by Earned Performance Shares until such Shares are issued. 9. RESTRICTED STOCK 9.01 ISSUANCE - Restricted Stock Awards may be issued hereunder to Participants, for no cash consideration or for such consideration as may be determined by the Committee. 9.02 RESTRICTION PERIOD - At the time a Restricted Stock Award is made, the Committee shall establish the Restriction Period applicable to such Award and the terms and conditions under which the restrictions shall lapse. The terms, restrictions and conditions of the Restricted Stock Awards need not be the same with respect to each Participant. 9.03 OTHER TERMS AND CONDITIONS - Shares awarded pursuant to a Restricted Stock Award shall be represented by a stock certificate registered in the name of the Participant. The Participant shall have the right to enjoy all shareholder rights during the Restriction Period, including the right to vote and to receive cash dividends, with the exception that: (a) The Participant shall not be entitled to delivery of a stock certificate until the Restriction Period shall have expired; provided that the Committee,. in its sole discretion, may direct the Company to issue Shares subject to such restrictive legends and/or stop-transfer instructions as the Committee deems appropriate. (b) Except as provided in section 9.06, the Participant may not sell, transfer, pledge, exchange, hypothecate, encumber or otherwise dispose of the Shares during the Restriction Period. (c) A breach of the terms and conditions set forth in the Restricted Stock Award shall cause a forfeiture of the Restricted Stock Award, and any stock dividends withheld thereon. (d) Stock dividends may be either currently paid to the Participant or withheld by the Company for the Participant's account. -8- 9.04 FORFEITURE PROVISIONS - Subject to Section 9.05, in the event a Participant ceases to be an employee of the Company, a subsidiary or Affiliate during the Restriction Period, the Award (including for purposes of this Section 9.04, any restricted shares issued in respect thereof) will be forfeited, depending an the cause of such cessation, as follows: (a) For cause or voluntary on the part of the Participant: - The Award will be completely forfeited. (b) Disability or Early or Normal Retirement pursuant to the Company retirement plan provisions then in effect: - The Award will be prorated for service during the Restriction Period. (c) Death: - The Award will be prorated for service during the Restriction Period. (d) Leave of Absence or Termination for convenience: - The Committee shall determine the forfeiture provisions to be applied in the event of leave of absence or termination for convenience. 9.05 WAIVER OF RESTRICTIONS - In the event of cessation of employment pursuant to Section 9.04, the Committee may, in its sole discretion, accelerate or waive all or any portion of the restrictions remaining in respect of a Restricted Stock Award. This right may be exercised for any or all Participants. 9.06 SWAP IN CONNECTION WITH OPTIONS - The Committee may provide that the Participant shall have the right to utilize restricted shares awarded pursuant to Section 9 to pay all or any part of the purchase price of the exercise of any option to acquire Stock under any Honeywell stock option plan, if permitted under such option plan; provided that the number of shares, bearing the same restrictive legends, which are used to exercise the option, shall be retained as Restricted Stock following exercise of any such option. 10. OTHER PERFORMANCE INCENTIVE AWARDS 10.01 ADMINISTRATION - Performance Incentive Awards may be granted hereunder to Participants, either alone or in addition to other Awards granted under the Plan. Such Performance Incentive Awards may be paid in Shares, other securities of the company, cash or other form of property as the Committee shall determine. Subject to the provisions of the Plan, the Committee -9- shall have sole and complete authority to determine the Eligible Employees to whom and the time or times at which such Awards shall be made, the number of Shares to be granted pursuant to such Awards or the amount of such Awards, and all other conditions of the Awards. 10.02 TERMS AND CONDITIONS - Subject to the provisions of this Plan and any applicable agreement, Shares subject to Awards made under this.Section 10, may not be sold, assigned, transferred, pledged or otherwise encumbered prior to the date on which the Shares are issued, or, if later, the date on which any applicable restriction or performance period lapses. Shares granted under this Section 10 may be issued for no cash consideration or for such consideration as may be determined by the Committee. 11. TRANSFERABILITY 11.01 OPTIONS - No option granted to a Participant under the Plan shall be transferable otherwise than to a beneficiary (as provided in Section 11.02), or by will or the laws of descent and distribution, and only the Participant, or the guardian or legal representative of the Participant, may exercise the Option during the Participant's lifetime. 11.02 If any Participant to whom an Option has been granted under the Plan shall die while employed by the Company, a subsidiary or Affiliate or within the period after termination of employment during which the Participant could have exercised the Option pursuant to the provisions of Section 7.05, the Option may (subject to any conditions or limitations provided in the Option Agreement) be exercised by a surviving beneficiary designated (pursuant to rules outlined by the Committee) by the Participant during his lifetime or, in the absence of such a designation, by the person designated by will or, in the absence of either such designation, by the Participant's legal representative at any time within a period of two years (or such shorter period as may be prescribed in the Option Agreement) after the date of death, but in no event after the normal termination date of such option, to the extent provided by the Option Agreement. 12. TERMINATION OF EMPLOYMENT 12.01 STOCK OPTIONS (a) Termination of a Participant's services during the period when any Option Agreement is outstanding, where the termination is either (i) for cause or (ii) voluntary on the par,, of the Participant and without the written consent of the Chairman of the Board or Chief Executive officer of the Company, shall be deemed a violation by the Participant of such Option Agreement. In the event of such violation, any option or Options granted to the Participant under the Plan, to the extent not theretofore exercised, shall forthwith terminate and the Company -10- shall have the right and options, exercisable within 190 days after the date of any exercise of any such Option, to purchase from the Participant or from the estate, legal representative or surviving joint tenant of the Participant, that number of Shares which is equal to the number of Shares which had been purchased pursuant to exercise of any such Option within six months prior to the employment termination date, together with any Shares received from adjustments which pertained to the purchased Shares and which were made as a result of any of the types of transactions referred to in Section 6.03, for a purchase price equal to the total amount paid by the Participant for the Shares so purchased; provided, however, that any such purchase option shall not apply to United Kingdom employees of the Company, its Subsidiaries or Affiliates who receive approved share option schemes pursuant to the United Kingdom Finance Act 1984. (b) (i) In the event of the termination, by reason of any retirement which, under the Company's policy then in effect, is a disability, early or normal retirement, of the employment of a Participant to whom an option has been granted, the Participant may exercise the option at any time within sixty (60) months (or such shorter period as may be provided in the Option Agreement but in no event after the end of the original term of the option) after such termination of employment to the extent of the number of Shares covered by Option which were purchasable at the date of such termination of employment. The option Agreements may contain such provisions as the Committee shall approve as to when termination of employment shall be deemed to have occurred in the event of a termination for convenience or leave of absence. (ii) In the event of the termination, with express approval of the Chairman of the Board or Chief Executive Officer of the Company, of the employment of a Participant to whom an Option has been granted, the Committee may, in its sole discretion, extend the period during which an Option granted under this Plan may be exercised after such termination of employment, but in no event shall the Option be exercisable after the end of the original term as stated in the Option Agreement. (iii) In the event of the termination of the employment of a Participant to whom an option has been granted for any reason except as provided in Sections 11.02, 12.01(a), 12.01(b)(i) and (ii) hereof, the Participant may, subject to Section 12-01(a), exercise the Option at any time within three (3) months (or such shorter period as may be provided in the option Agreement), but in no case after the normal termination of such Option, such exercise being limited to the extent of the number of Shares covered by the option which were purchasable at the date of such termination of employment. (iv) Options granted under the Plan shall not be affected by any change of duties or position so long as the Participant continues to be an employee of the Company, a Subsidiary or Affiliate. -11- 12.02 EARNED PERFORMANCE SHARES (a) Subject to Section 12.02(b), in the event a Participant ceases to be an employee of the Company, a subsidiary or Affiliate during the Performance Period, the Earned Performance Shares will be awarded, depending upon the cause of such cessation, as follows: (i) For cause or voluntary on the part of the Participant: - The Earned Performance Shares will be completely forfeited. (ii) Disability or Early or Normal Retirement pursuant to the Company retirement plan provisions then in effect: - The Earned performance Shares will be prorated for service during the Performance Period. (iii) Death: - The Earned Performance Shares will be prorated for service during the Performance Period. (iv) Leave of Absence or Termination for Convenience: - The Committee shall determine the forfeiture provisions to be applied in the event of leave of absence or termination for convenience. (b) In the event of cessation of employment pursuant to Section 12.02(a), the Committee may, in its sole discretion, modify the forfeiture provisions with respect to an Earned Performance Share Award. This right may be exercised for any or all Participants. 12.03 EFFECT OF CHANGE OF CONTROL - In the event of a termination of employment as a result of events described in Section 13 hereof, Section 13 shall govern in lieu of section 12. 12.04 EMPLOYMENT RELATIONSHIPS - Nothing in the Plan or in any Award granted pursuant thereto shall confer on any Participant any right to continue in the employ of the Company, a Subsidiary or Affiliate or affect in any way the right of the Company, any Subsidiary or Affiliate to terminate such employment at any time. 13. CHANGE IN CONTROL 13.01 DEFINITION - For purposes of the Plan, a "Change in Control" of the Company shall have occurred if: (a) any "person", an such term is used in Sections 13(d) and 14(d) of the Securities Exchange Act of 1934, as -12- amended (the "Exchange Act") (other than the Company, any trustee or other fiduciary holding securities under an employee benefit plan of the Company or any corporation owned, directly or indirectly, by the stockholders of the Company in substantially the same proportions as their ownership of stock of the Company), is or becomes the "beneficial owner" (as defined in Rule 13d-3 under the Exchange Act), directly or indirectly, of securities of the Company representing 30% or more of the combined voting power of the Company's then outstanding securities; (b) during any period of two consecutive years (not including any period prior to the execution of this amendment to the Plan), individuals who at the beginning of such period constitute the Board, and any new director (other than a director designated by a person who has entered into an agreement with the Company to effect a transaction described in clause (a), (b) or (d) of this Section) whose election by the Board or nomination for election by the Company's stockholders was approved by a vote of at least two-thirds (2/3) of the directors then still in office who either were directors at the beginning of the period or whose election or nomination for election was previously so approved, cease for any reason to constitute at least a majority thereof; (c) the stockholders of the Company approve a merger or consolidation of the Company with any other corporation, other than (i) a merger or consolidation which would result in the voting securities of the Company outstanding immediately prior thereto continuing to represent (either by remaining outstanding or by being converted into voting securities of the surviving entity) more than 50% of the combined voting power of the voting securities of the Company or such surviving entity outstanding immediately after such merger or consolidation, or (ii) a merger or consolidation effected to implement a recapitalization of the company (or similar transaction) in which no "Person" (as hereinabove defined) acquires more than 30% of the combined voting power of the Company's then outstanding securities; or (d) the stockholders of the Company approve a plan of complete liquidation of the Company or an agreement for the sale or disposition by the Company of all or substantially all of the Company's assets (or any transaction having a similar effect). 13.02 PAYMENTS UPON A CHANGE IN CONTROL. (a) In the event of a Change in Control, (i) any options granted under the Plan not previously exercisable and vested shall become fully exercisable and vested, (ii) the Restrictions applicable to Restricted stock or Performance Incentive Awards, if any, awarded under the Plan shall lapse and such shares shall become fully vested and (iii) Earned Performance Share Awards and Performance Incentive Awards shall be paid an described in paragraph (b) of this Section 13.02. -13- (b) Notwithstanding any other provision of the Plan, a Participant shall receive with respect to each Performance Period in progress at the time of the change in Control a lump sum cash amount, within five days after the change in control, equal to the "Change in Control Value" of the Earned Performance Share Awards and Performance Incentive Awards the Participant would have earned if 100% of the relevant Performance Goals were met, multiplied by a fraction, the numerator of which is the number of months (rounded to the nearest whole month) of actual service in the relevant Performance Period and the denominator being the number of months in the relevant Performance Period. For purposes of this Section 13.02, Change in Control Value means the highest price paid for a share of Stock by a third party in connection with the Change in Control. 14. TERMINATION AND AMENDMENT 14.01 POWERS OF BOARD - The Board, or the Committee, acting on the Board's behalf, may terminate the Plan or make such amendments to the Plan as it shall deem advisable except that the approval by a majority of those stockholders of the Company present or represented by proxy at a meeting duly held shall be required for any amendment which would: (a) materially modify the requirements as to eligibility for Awards under the Plan; (b) materially increase the maximum number of Shares available under the Plan; (c) extend the period during which Awards can be granted beyond April 21, 1993; or (d) materially increase the benefits accruing to Participants under the Plan. The approval of the Company's stockholders for such amendment shall be solicited in a manner which substantially conforms to the rules and regulations in effect under Section 14(a) of the Exchange Act. 14.02 EFFECT OF TERMINATION OR AMENDMENT ON EXISTING AWARDS - No termination, modification or amendment of the Plan may, without the consent of the Participant, adversely affect the rights of such Participant under an Award previously made, and no such modification or termination shall affect the right of any Participant to receive payment for a Performance Period which has previously ended. 15. SECURITIES REGULATION 15.01 Anything in the Plan to the contrary notwithstanding: (a) the Company may, if it shall determine it necessary or desirable for any reason, at the time of Award or issuance of -14- Shares pursuant to an Award, require the Participants, as a condition to the receipt of the Award or Shares, to deliver to the Company a written representation of present intention to acquire the Shares for his or her own account for investment and not for distribution; and (b) if at any time the Company further determines, in its sole discretion, that the listing, registration or qualification (or any updating of any such document) of any Shares is necessary on any securities exchange or under any federal or state securities or blue sky law, or that the consent or approval of any governmental regulatory body is necessary or desirable as a condition of, or in connection with the Award or the issuance of Shares, or the removal of any restrictions imposed on such Shares, such Award or such Shares shall not be issued or such restrictions shall not be removed, as the case may be, in whole or in part, unless such listing, registration, qualification, consent or approval shall have been effected or obtained free of any conditions not acceptable to the Company. 16. GENERAL PROVISIONS 16.01 ADJUSTMENTS IN AWARD CRITERIA - The Committee shall be authorized to make adjustments in performance award criteria or in the terms and conditions of other Awards in recognition of unusual or nonrecurring events affecting the Company, a Subsidiary or Affiliate or their respective financial statements or changes in applicable laws, regulations or accounting principles. In the event of the promotion or demotion of a Participant during a Performance Period, the Committee may adjust or eliminate the performance award as it deems appropriate. The Committee may correct any defect, supply any omission or reconcile any inconsistency in the Plan or any Award in the manner and to the extent it shall deem desirable to carry it into effect. In the event the Company shall assume outstanding employee benefit awards or the right or obligation to make future such awards in connection with the acquisition of another corporation or business entity, the Committee may, in its discretion, make such adjustments in the terms of Awards under the Plan as it shall deem appropriate. 16.02 FOREIGN EMPLOYEES - The Committee, in its discretion, may make such adjustments or modifications to Awards to Eligible Employees working outside the United States as are necessary an advisable to cause the Awards to fulfill the fundamental purposes of this Plan. 16.03 EXPENSES - All expenses of administering the Plan shall be borne by the Company. 16.04 GOVERNING LAW - The place of administration of the Plan shall conclusively be deemed to be within the State of Minnesota and the validity, construction, interpretation, administration and effect of the Plan and of its rules and regulations and the rights of any and all personnel having or claiming to have an interest therein or thereunder shall be governed by and determined exclusively and solely in accordance with the laws of the State Minnesota. -15- EX-10 6 EXHIBIT 10(III)(G) Amended Effective: 01/17/89 Printed: 03/21/89 RESTRICTED-STOCK RETIREMENT PLAN FOR NON-EMPLOYEE DIRECTORS ---------------------------------------- 1. PURPOSE OF THE PLAN. The purpose of the Honeywell Restricted-Stock Retirement Plan for Non-Employee Directors ("Plan") is to grant to non-employee directors of Honeywell Inc. ("Company") awards ("Awards") of shares of Common Stock, par value $1.50 per share, of the Company ("Stock") that will be available without restriction on retirement from the Board and will increase their proprietary interest in the Company and their identification with the interests of the Company's stockholders ("Stockholders"). The Plan shall become effective on the date ("Effective Date") the Plan is approved by the Stockholders or such later date as may be established by the Board of Directors of the Company ("Board"). 2. GRANT OF AWARDS. Each non-employee director ("Director") of the Company elected at or after the 1988 Annual Meeting of Stockholders shall be granted Awards under the Plan as follows: (a) ANNUAL AWARDS. On the date of each Annual Meeting of Stockholders ("Annual Meeting"), each person who has served as a Director since the prior Annual Meeting shall receive an Award of Stock having the Fair Market Value (as defined in Section 3) equal to one-half the fees earned by the Director since the date of the prior Annual Meeting. (b) INITIAL AWARD. Each Director who, at the time of the 1988 Annual Meeting, has served at least two full years as Director shall receive an additional initial award of Stock having the Fair Market Value equal to the number of full years of service as a Director ending with the 1987 Annual Meeting times the Fair Market Value of the Award that Director receives under Section 2(a). 3. FAIR MARKET VALUE. For purposes of determining the number of shares of Stock granted under any Award, the "Fair Market Value" of the Stock shall equal the average of the reported closing prices for the Stock on the New York Stock Exchange for the twenty (20) consecutive trading business days immediately preceding the Annual Meeting; and all fractional shares shall be rounded to the nearest whole number. 4. ISSUANCE OF STOCK. As promptly as practical following the Annual Meeting for each Award, the Company shall issue certificates ("Certificates"), registered in the name of each Director receiving an Award, representing the number of shares of Stock covered by the Award. The Stock shall have the rights and be subject to the restrictions and other terms and conditions of the Plan. -2- 5. RIGHTS. Upon issuance of the Certificates, the Directors in whose names they are registered shall, subject to the restrictions of the Plan, have all of the rights of a Stockholder with respect to the Stock, including the right to vote the Stock and receive cash dividends and other cash distributions thereon. 6. RESTRICTED PERIOD. The Stock shall be subject to the restrictions of the Plan for a period ("Restricted Period") running until the Director has served five years as a Director (including time served prior to issuance of a Certificate) and until the first to occur of the following events: (a) the Director retires from the Board in compliance with the Board's retirement policy as then in effect; (b) the Director's service on the Board terminates as a result of not being nominated for reelection by the Board, but not as a result of the Director's declining to serve again; (c) the Director's service on the Board terminates because the Director, although nominated for reelection by the Board, is not reelected by the Stockholders; (d) the Director is unable to serve because of disabilities; (e) the Director dies; or (f) the occurrence of a Change in Control (as defined below). For purposes of the Plan, a "Change in Control" of the Company shall have occurred if: (i) any "person", as such term is used in Sections 13(d) and 14(d) of the Securities Exchange Act of 1934, as amended (the "Exchange Act") (other than the Company any trustee or other fiduciary holding securities under an employee benefit plan of the Company or any corporation owned, directly or indirectly, by the stockholders of the Company in substantially the same proportions as their ownership of stock of the Company), is or becomes the "beneficial owner" (as defined in Rule 13d-3 under the Exchange Act), directly or indirectly, of securities of the Company representing 30% or more of the combined voting power of the Company's then outstanding securities; -3- (ii) during any period of two consecutive years (not including any period prior to the execution of this amendment to the Plan), individuals who at the beginning of such period constitute the Board of Directors of the Company (the "Board"), and any new director (other than a director designated by a person who has entered into an agreement with the Company to effect a transaction described in clause (i), (iii) or (iv) of this Section) whose election by the Board or nomination for election by the Company's stockholders was approved by a vote of at least two-thirds (2/3) of the directors then still in office who either were directors at the beginning of the period or whose election or nomination for election was previously so approved, cease for any reason to constitute at least a majority thereof; (iii) the stockholders of the Company approve a merger or consolidation of the Company with any other corporation, other than (A) a merger or consolidation which would result in the voting securities of the Company outstanding immediately prior thereto continuing to represent (either by remaining outstanding or by being converted into voting securities of the surviving entity) more than 50% of the combined voting power of the voting securities of the Company or such surviving entity outstanding immediately after such merger or consolidation or (B) a merger or consolidation effected to implement a recapitalization of the Company (or similar transaction) in which no "person" (as hereinabove defined) acquires more than 30% of the combined voting power of the Company's then outstanding securities; or (iv) the stockholders of the Company approve a plan of complete liquidation of the Company or an agreement for the sale or disposition of the Company of all or substantially all of the Company's assets (or any transaction having a similar effect). 7. FORFEITURE OF STOCK. If the date ("Termination Date") a Director's service on the Board terminates is before the end of the Restricted Period, the Director shall forfeit and return to the Company all Stock awarded to the Director under the Plan. 8. RECEIPT OF STOCK. If a Director's Termination Date is at or after the end of the Restricted Period, the Director shall receive, free and clear of the restrictions of the Plan, all Stock previously awarded under the Plan. 9. RESTRICTIONS. The Stock shall be subject to the following restrictions during the Restricted Period: (a) The Stock shall be subject to forfeiture to the Company as provided in the Plan. -4- (b) The Stock may not be sold, assigned, transferred, pledged, hypothecated or otherwise disposed of; and neither the right to receive Stock nor any interest under the Plan may be assigned by a Director, and any attempted assignment shall be void. (c) The Certificates shall be held by the Company and shall, at the option of the Company, bear an appropriate restrictive legend and be subject to appropriate "stop transfer" orders. The Director shall deliver to the Company a stock power endorsed in blank to the Company. (d) Any additional Stock or other securities or property (other than cash) that may be issued with respect to Stock awarded under the Plan as a result of any stock dividend, stock split, business combination or other event, shall be subject to the restrictions and other terms and conditions of the Plan. (e) A Director shall not be entitled to receive any Stock prior to the completion of any registration or qualification of the Stock under any federal or state law or governmental rule or regulation that the Company, in its sole discretion, determines to be necessary or advisable. 10. WAIVER. In the event a Director's service on the Board terminates, the Board, in its sole discretion, may waive the forfeiture provisions of Section 7 as to some or all of the Stock subject to forfeiture thereunder. 11. ADMINISTRATION OF THE PLAN. The Plan shall be administered by a committee ("Committee") that shall be the Nominating Committee of the Board or such other committee of Directors as may be designated by the Board. The Committee shall have full power, discretion and authority to interpret and administer the Plan, except that the Committee shall have no power to (a) determine the eligibility for Awards or the number of shares of Stock or timing or value of Awards to be granted to any Director, or (b) take any action specifically delegated to the Board under the Plan. The Committee's interpretations and actions shall, except as otherwise determined by the Board, be final, conclusive and binding on all persons for all purposes. 12. AMENDMENT OR TERMINATION OF THE PLAN. The Board may, at any time, amend or terminate the Plan; but no amendment or termination shall, without the written consent of a Director, reduce the Director's rights under previously granted Awards. No amendment shall, without approval of the Stockholders, increase the percentage of fees on which an Annual Award is based in Section 2(a), or modify the requirements of Sections 1 and 2 as to eligibility for participation in the Plan. -5- 13. NO RIGHT TO RENOMINATION. Nothing in the Plan or in any Award shall confer upon any Director the right to be nominated for reelection to the Board. 14. STATEMENT OF ACCOUNT. Each Director shall receive an annual statement, within thirty days following each Annual Meeting, showing the number of shares of Stock that have been awarded to the Director under the Plan. EX-10 7 EXHIBIT 10(III)(H) CECP2-93.CLN HONEYWELL CORPORATE EXECUTIVE COMPENSATION PLAN (Amended and Restated Effective February 15, 1993) SECTION 1 - PURPOSE OF THE PLAN The purpose of the Honeywell Corporate Executive Compensation Plan is to provide compensation to executives that (a) is compatible with the diverse sizes and characteristics of the operating units within Honeywell, (b) is equitable internally and competitive externally, and (c) meets Honeywell's "pay for performance" philosophy by directly relating individual, unit, and company-wide performance to compensation. SECTION 2 - DEFINITIONS 2.1 BASE PLAN. The Honeywell Retirement Benefit Plan, as from time to time amended. 2.2 BASE SALARY. The regular, monthly, straight-time cash earnings, including salary continuations because of illness, disability or other authorized leave of absence. Excluded are any other salary continuations, stock incentives, special payments or allowances because of work location, or any other benefits or special payments. 2.3 BOARD OF DIRECTORS. The Board of Directors of Honeywell. 2.4 COMMITTEE. The Personnel Committee of the Board of Directors. 2.5 COMPANY. Honeywell and any domestic or foreign subsidiary of Honeywell in which it owns a majority of the voting stock. 2.6 COMPOSITE INCENTIVE PERCENTAGE. That percentage obtained by weighing the Leveraged Incentive Percentage of a Unit in accordance with approved Influence Weightings. 2.7 COMPOSITE PERFORMANCE PERCENTAGE. The percent of actual performance of On-Plan objectives by a Unit after applying any Unit Performance Adjustment and weighting such Unit performance in accordance with predetermined financial measures assigned by Corporate Management. 2.8 CORPORATE MANAGEMENT. The Chief Executive Officer and the Chief Operating Officer of Honeywell, respectively, and any other officials to whom they delegate responsibility hereunder. 2 2.9 DEFERRED AWARD ACCOUNT OR ACCOUNT. The unfunded bookkeeping account maintained by the Company for a Participant who elects to defer payment of his or her Incentive Award(s) pursuant to Section 6.1. 2.10 EARLY RETIREMENT DATE. Retirement by a Participant under his or her Base Plan, which is defined as the termination of employment on or after his or her 55th birthday and after he or she has been credited with 10 or more years of "Credited Service for Benefit Accrual" under the Base Plan. 2.11 FINAL INCENTIVE FUND. The actual fund available for allocation of incentive awards to a Unit's Participants after making any Incentive Fund Adjustments. 2.12 HONEYWELL. Honeywell Inc., a Delaware corporation. 2.13 INCENTIVE AWARD OR AWARD. An award of incentive pay to a Participant under Section 5 of the Plan. 2.14 INCENTIVE FUND ADJUSTMENT. An adjustment to a Unit's Incentive Fund by the Unit's cognizant President of a dollar amount equal to a plus or minus percentage no greater than 20 percent of the Unit's On-Plan Incentive Fund to reflect his or her assessment of the Unit's total performance. 2.15 INCENTIVE UNIT OR UNIT. The Company or a part thereof (for example, Strategic Business Unit, operation, division, group, business, or major corporate staff department) for which Unit objectives are set. 2.16 INFLUENCE WEIGHTINGS. Multipliers resulting from an assessment of the degree of interdependence between Incentive Units based on a percentage relationship established by Corporate Management. 3 2.17 LEVERAGED INCENTIVE PERCENTAGE. A percentage which equals 100 percent plus or minus specified multiples, as determined by Corporate Management prior to the beginning of the calendar year to which an award relates, times the Unit's variance from On-Plan performance and which is not less than 0 percent nor greater than 200 percent. 2.18 NORMAL RETIREMENT DATE. Retirement by a Participant on or after his or her "Social Security Retirement Age" as defined under his or her Base Plan. 2.19 ON-PLAN. A financial performance of a Participant or Unit which equals 100 percent of his or her or its annual approved objectives. 2.20 ON-PLAN INCENTIVE FUND. The sum of On-Plan incentive amounts for each Participant in a Unit. 2.21 ON-PLAN INCENTIVE PERCENTAGE. That percentage of a Participant's Base Salary determined from time to time by Corporate Management for each Honeywell salary grade level which determines the On-Plan incentive amount for such Participant. 2.22 PARTICIPANT. An employee of the Company employed in a position which satisfies the eligibility requirements of Section 3.4, whose participation is recommended by the top management of his Unit and approved by a level of management designated by the Company as appropriate on the job level involved, during any portion of the Term of the Plan during which such employee is within the grade levels "A" through "U" under the Plan. 2.23 PERMANENT AND TOTAL DISABILITY. The disability of a Participant whereby such Participant is wholly disabled by bodily injury or disease and will be permanently, continuously and wholly prevented thereby for life from engaging in his or her customary occupation or employment for wage or profit, as determined by the Committee. 4 2.24 PLAN. This Honeywell Corporate Executive Compensation Plan, as amended and restated effective February 15, 1993. 2.25 TERM. The term of the Plan shall be indefinite and continuing subject to amendment, cancellation or termination at any time by the Board of Directors. 2.26 TOP MANAGEMENT OF UNIT. The manager with the highest level of authority, as designated by Corporate Management, of an Incentive Award Unit. 2.27 UNIT INCENTIVE FUND. The dollar amount available to a Unit for Incentive Awards, prior to the application of the Incentive Fund Adjustment, obtained by multiplying the Unit's Composite Incentive Percentage by the Unit's On-Plan Incentive Fund. 2.28 UNIT OBJECTIVES. The annual financial objectives set for the Company and each Unit by Corporate Management (for example, operating profit, net income, and return on investment). With approval by Corporate Management, Unit Objectives may also include specified non-financial objectives. 2.29 UNIT PERFORMANCE ADJUSTMENT. A dollar or percentage adjustment applied by Corporate Management to compensate for unforeseen circumstances which significantly impact the Unit's attainment of its established financial objectives (for example, unplanned acquisitions, divestitures, or foreign exchange effects). 5 SECTION 3 - ADMINISTRATION OF THE PLAN 3.1 AMENDMENT AND TERMINATION. The Board of Directors may amend, cancel, or terminate the Plan at any time and any such amendment, cancellation or termination may be retroactively effective except that no amendment, cancellation or termination shall adversely affect Awards earned under the Plan for calendar years completed before adoption of any such amendment, cancellation or termination. The Plan shall not be deemed to be a contract for employment or a guarantee of compensation. 3.2 COMMITTEE. The Plan shall be administered by the Committee, with the assistance of the Honeywell Corporate Compensation Department. All payments of Incentive Awards under the Plan are subject to the discretion of the Committee. The Committee shall have authority to establish, administer, and interpret such rules with respect to the Plan as it deems appropriate. Any decision of the Committee with respect to such rules and the interpretation, construction, administration and application of the Plan shall be conclusive and binding. 3.3 ESTABLISHMENT OF OBJECTIVES. Corporate Management shall recommend to the Committee what objectives and performance measures shall be utilized for the Company and each Unit and Participant for purposes of the Plan. The Committee shall have the authority to make final decisions as to such annual objectives and appropriate performance measures which shall be applied under the Plan. Honeywell shall maintain an appropriate recordkeeping system for Incentive Awards. 3.4 ELIGIBILITY OF EMPLOYEE'S POSITION. The employee's position must be recommended for participation by the top management of his or her unit, and satisfy the following criteria: (A) ACCOUNTABILITY OF POSITION. The employee's position must be sufficiently accountable to directly impact the financial results of Honeywell or one or more of its operating Units. 6 (B) REPORTING LEVEL OF POSITION. The employee's position must report at a sufficiently high level in the organization to regularly impact management decisions of Honeywell or one or more of its operating Units. 7 SECTION 4 - SALARY STRUCTURE OF PARTICIPANTS 4.1 DETERMINATION OF BASE SALARY. The Base Salary of Participants is determined from time to time as follows: (A) JOB EVALUATION. The Honeywell executive job evaluation method is used for preparing position descriptions, assessing position responsibilities, and assigning positions to salary grades and ranges. Each position is evaluated by the Honeywell Corporate Compensation Department and approved by a level of management designated by the Company as appropriate for the job level involved. (B) SALARY GRADES AND RANGES. Each salary grade is assigned a salary range. A salary grade encompasses positions whose market pay typically falls within a plus or minus 20 percent of the salary grade midpoint. Salary grade midpoints generally have a 13 to 15 percent differential. 4.2 ADJUSTMENTS TO BASE SALARY. The Base Salary of Participants may be adjusted from time to time as follows: (A) REVIEW OF SALARY RANGES. Salary ranges are reviewed at least annually and adjusted as necessary to assure that they are competitive with pay opportunities provided by selected, large, high-technology companies. Changes in salary ranges are approved by the Committee. (B) CHANGES IN BASE SALARY. Changes in Base Salary are designed to reflect performance of the Participant over time, as measured against the performance requirements of the Participant's position. Such adjustments to Base Salary must be approved by the next two higher levels of Company management or, if no such levels exist, the Committee. 8 SECTION 5 - CALCULATION OF INCENTIVE AWARD 5.1 ESTABLISHING UNIT OBJECTIVES. At the beginning of each year, Unit Objectives are approved by Corporate Management for the Company and each of the Incentive Units for the year. Such objectives may vary by Unit to reflect the characteristics and emphases of the Units. 5.2 ASSESSING UNIT PERFORMANCE. After the end of each year, actual performance against unit objectives is measured for the Company and each of its Units. Actual results for each objective are expressed as a percentage of the objective or plan. Performance against any one objective is limited to 200 percent after leveraging under Section 5.5. 5.3 ADJUSTING UNIT FINANCIAL RESULTS. A Unit Performance Adjustment to compensate for unforeseen circumstances which significantly impact the Unit's performance may be applied by Corporate Management to reflect a dollar impact which was not taken into account in establishing Unit objectives for the calendar year. 5.4 WEIGHTING UNIT PERFORMANCE. The percentage of the Unit's performance determined under Section 5.2, after application of any Unit Performance Adjustment, shall thereupon be weighted by the respective percentage assigned by Corporate Management to each objective (for example, 50 percent ROI, 50 percent Operating Profit), equal to a 100 percent total, to arrive at the Composite Performance Percentage for the Unit. 5.5 CALCULATING LEVERAGED INCENTIVE PERCENTAGE. The Unit's Composite Performance Percentage is then adjusted up or down by a Leveraged Incentive Percentage for each one percent deviation from On-Plan performance between 70 and 130 percent, or such other range as determined by Corporate Management and approved by the Committee prior to the beginning of the calendar year to which an Award relates, to arrive at the Unit's Leveraged Incentive Percentage. 9 5.6 DETERMINING ORGANIZATIONAL INFLUENCE WEIGHTINGS. Unless otherwise approved by the Chief Executive Officer, the Unit's Leveraged Incentive Percentage shall be weighted according to Influence Weightings to determine the Composite Incentive Percentage of the Unit: (A) COMPANY INFLUENCE. From 0 to 20 percent of a Unit's Composite Incentive Percentage, as determined in the sole discretion of the Chief Executive Officer, shall be based upon the performance of the Company. (B) UNIT INFLUENCE. At least 40 percent of a Unit's Composite Incentive Performance shall be based on its own performance. (C) OTHER UNIT INFLUENCE. Where a Unit has a significant interdependence with another Unit, additional approved Influence Weightings may be used in determining the Unit's Composite Incentive Percentage. 5.7 ESTABLISHING ON-PLAN INCENTIVE FUND. The On-Plan Incentive Percentage for each Participant is multiplied by his or her annual Base Salary for the calendar year or, (i) in the event that the Participant is promoted or demoted during the calendar year by each Base Salary applicable to the Participant on a pro-rata basis for that portion of the calendar year, (ii) in the event a Participant retires, was laid off, or left work because of death or Permanent and Total Disability, or who became a Participant in the Plan after January 1 of the calendar year, by his or her Base Salary for the months he or she was a Participant in the Plan. Such amounts shall then be added to an amount calculated in that manner for all other Participants in the Unit in order to arrive at the On-Plan Incentive Fund for the Unit. 5.8 COMPUTING UNIT INCENTIVE FUND. The Unit's Composite Incentive Percentage is multiplied by the On-Plan Incentive Fund of the Unit and may then be increased or decreased by Corporate Management provided that the sum of Unit Incentive Funds so adjusted may not exceed the sum of such funds prior to such adjustment. 10 5.9 DETERMINING FINAL INCENTIVE FUND. At the end of each calendar year, Corporate Management assesses a Unit's performance against both its financial and non-financial objectives and may, in its discretion, adjust the Unit Incentive Fund by an Incentive Fund Adjustment of a plus or minus percentage no greater than 20 percent of the Unit's On Plan Incentive Fund to reflect his or her assessment of the Unit's total performance, including its attainment of non-financial objectives, to determine the Final Incentive Fund of the Unit. Non-financial objectives may vary by Unit and may include, among other factors, innovation, risk taking, human resource productivity improvement, equal opportunity, Company image, customer service, product development, and progress toward long-term objectives. In the case of individual Presidents and inside directors of Honeywell, the Committee assesses the performance of these Participants against such objectives which it may select and may adjust the Incentive Fund applicable to those Participants in the same manner as provided above for other Participants in this Section 5.9 to reflect its assessment of such Participants' performance. 5.10 ALLOCATING THE UNIT'S FINAL INCENTIVE FUND TO PARTICIPANTS. The Unit's Final Incentive Fund is allocated to individual Participants by the Top Management of Unit, reviewed by appropriate higher level management, approved by Corporate Management and, except as otherwise provided in Section 7, paid to the Participant in the month of February of the calendar year following the incentive year during which the Award was earned unless the Participant has elected to defer payment of the Award in accordance with Section 8. Individual Awards are based on the Unit's Final Incentive Fund adjusted to reflect the Participant's actual performance against individual goals and objectives. The sum of individual awards for a Unit cannot exceed such Unit's Final Incentive Fund. 5.11 LIMITATIONS. The amount of total Incentive Awards distributed under the Plan is limited as follows: (A) PERCENTAGE OF ON-PLAN INCENTIVE. No Participant or Unit may receive more than 200 percent of his or its On-Plan Incentive Fund. 11 (B) AMOUNT OF INCENTIVE COMPENSATION. The amount which the Company may distribute as Awards for any calendar year pursuant to the Plan to those Participants that are determined by the Committee to be the executives subject to the limit on incentive compensation under Article XI of Honeywell's By-laws shall not exceed the amount which, when added to the amount of incentive compensation accrued for such year under the Honeywell Long-Range Stock Incentive Plan and any performance-related award under the Honeywell Stock and Incentive Plan with respect to such executives, would equal the limit on incentive compensation for such year under that Article of the By-Laws, as in effect at the end of such year. Individual payments under this Plan to such Participants shall be reduced pro rata to the extent necessary to comply with this limitation after any payments under the Honeywell Long-Range Stock Incentive Plan to these Participants have first been reduced. 12 SECTION 6 - LOCATION EXECUTIVE COMPENSATION PLANS 6.1 GENERAL. An Incentive Unit may, with the approval of the Committee, administer a "location executive compensation plan" under and pursuant to the provisions of this Plan. Such plans shall be administered by the Unit's president with all payments of Incentive awards subject to his or her discretion as exercised in accordance with the rules established by the Committee as permitted by Section 3.2. 6.2 HOME AND BUILDING CONTROL/INTERNATIONAL EXECUTIVE COMPENSATION PLAN. The Home and Building Control/International Executive Compensation Plan constitutes a location executive compensation plan which has been approved by the Committee. It shall be administered by the President, Home and Building Control/International, pursuant to the terms of this Plan except that Section 5.6(a) shall not be applicable. 6.3 INDUSTRIAL AUTOMATION CONTROL EXECUTIVE COMPENSATION PLAN. The Industrial Automation Control Executive Compensation Plan constitutes a location executive compensation plan which has been approved by the Committee. It shall be administered by the President, Industrial Automation and Control, pursuant to the terms of this Plan except that Section 5.6(a) shall not be applicable. 6.4 MICROSWITCH EXECUTIVE COMPENSATION PLAN. The Microswitch Executive Compensation Plan constitutes a location executive compensation plan which has been approved by the Committee. It shall be administered by the President, Industrial Automation Control, pursuant to the terms of this Plan except that Section 5.6(a) shall not be applicable. 13 SECTION 7 - DEFERRED PAYMENT OF AWARDS 7.1 ELECTION TO DEFER. Not later than the last day of the first calendar quarter during 1985 and not later than the last day of the year prior to the year to which an Incentive Award relates during calendar years thereafter, each Participant shall be provided the opportunity to make an irrevocable election to defer the payment of the Award for that respective calendar year. 7.2 AMOUNT OF DEFERRAL. Each Participant may elect to defer the payment of a specified dollar amount, any excess over a specified dollar amount, or a designated percentage of the Award. The minimum amount of the Award which may be deferred with respect to a calendar year is $1,000. 7.3 PERIOD OF DEFERRAL. Subject to earlier payment under Section 7.6, a Participant may elect to defer commencement of payment of the Award until the earlier of March 15 of the calendar year following the Participant's Early Retirement Date or Normal Retirement following the Participant's Normal Retirement Date. 7.4 DESIGNATION OF FORM OF PAYMENT. Each Participant who elects to receive deferred payment of his Award may specify whether such deferred amount is to be paid in a lump sum on or about March 15 of the year following the earlier of the year in which the Participant's Early Retirement Date or Normal Retirement Date occurs, or in approximately equal annual installments over a period of not more than ten (10) years commencing on or about March 15 of the year following the earlier of the year in which the Participant's Early Retirement Date or Normal Retirement Date occurs. 7.5 CREDITS TO DEFERRED AWARD ACCOUNT. In the event that the Participant elects to defer payment of his or her Award, a credit in the amount of such deferred payment shall be made to the Participant's Deferred Award Account no later than February 28 of the calendar year following the incentive year during which the Award was earned. During the term of the Plan, interest shall be credited to each Participant's Deferred Award 14 Account (a) annually as of February 15, (b) as of the last day of the month preceding a Change in Control of the Company, and (c) at the time of distribution of the entire balance of or annual installment from such Account for the year or portion thereof then ended, based on the average daily balance of the Account for such year or portion thereof, at the average effective interest rate on the composite of long-term and short-term borrowings of Honeywell Inc. and designated finance company subsidiaries for the five (5) years ending with the calendar year in which interest is being credited, as such rate may be determined for purposes of the financial reports prepared for the Honeywell Corporate Treasurer. 7.6 EVENT TRIGGERING PAYMENT OF DEFERRED AWARD ACCOUNT. Participant's Deferred Award Account shall be paid or commenced to be paid by Honeywell to such Participant, or, in the event of his or her death or incapacity, to the person or persons legally entitled thereto, after the earliest to occur of the following events: (a) the Participant's Early Retirement Date, (b) the Participant's Normal Retirement Date, (c) the Participant's death, (d) termination of the Participant's employment with the Company for any reason other than death, Early Retirement, or retirement on or after his or her Normal Retirement Date, or (e) a Change in Control as defined in Section 8, with the form and commencement of such payment being determined by the provisions of Section 7.7. 7.7 MANNER OF PAYMENT OF DEFERRED AWARD ACCOUNT. The manner of payment of the Deferred Award Account to a Participant where clauses (a) and (b) of Section 7.6 are 15 applicable shall be in a lump sum which shall be paid to him or her on or about March 15 of the year following the year in which the earlier of such events set forth in clauses (a) or (b) occur unless the Participant has elected installment payments pursuant to Section 7.4 whereby approximately equal annual installments over a period of not more than ten (10) years shall be made beginning with an initial installment to be paid on or about March 15 of the year following the year in which such event occurs. The form of payment of the Deferred Award Account to a Participant where clauses (c) or (d) of Section 7.6 are applicable shall be in a lump sum which shall be paid to the Participant within sixty (60) days following the occurrence of any event set forth in such clauses. The form of payment of the Deferred Award Account to a Participant upon a Change in Control shall be in a manner set forth in Section 8. 7.8 EARLY PAYMENT OF DEFERRED AWARD ACCOUNT. Notwithstanding any contrary provisions of Section 7, in the event that the Participant or beneficiary incurs a financial hardship, he or she may apply to the Committee to receive an amount from the Participant's Deferred Award Account sufficient to satisfy the emergency need. If the application is approved by the Committee, it will direct Honeywell to pay an amount necessary to meet the emergency need. The term "financial hardship" shall mean an event resulting from an illness or accident of the Participant or of a dependent of the Participant, loss of the Participant's property due to casualty, the layoff of the Participant or other circumstances arising as a result of events beyond the control of the Participant. An event shall not constitute a "financial hardship" to the extent that such hardship may be relieved through reimbursement or compensation by insurance or otherwise or by liquidation of the Participant's assets, to the extent that the liquidation of such assets would not itself cause a financial hardship. Also, a "financial hardship" shall not include the need to send a Participant's child to college or the desire to purchase a home. 7.9 ADMINISTRATIVE PROCEDURES. The Committee may adopt such rules and regulations governing such deferrals and specifications as it deems appropriate. All deferred payments hereunder shall be paid in cash from the general funds of the 16 Company and no special or separate fund shall be established and no other segregation of assets shall be made to assure the payment of benefits hereunder. 17 SECTION 8 - CHANGE IN CONTROL 8.1 PAYMENTS UPON CHANGE IN CONTROL. Notwithstanding any provision in the Plan to the contrary, in the event of a "Change in Control", as defined in this Section, each Participant shall receive payment of: (a) the Participant's Incentive Award, based upon an assumption of On-Plan performance for the incentive year during which such Change in Control occurs, multiplied by a fraction, the numerator of which is the number of months (calculated to the nearest whole month) of such Participant's participation in the Plan during the incentive year in which the Change in Control occurs and the denominator being twelve and (b) all amounts, if any, credited to the Participant's Deferred Award Account, as of the effective date of such Change in Control, including any interest accrued in accordance with Section 7.5 of the Plan, which payments shall be distributed on the fifth business day after such Change in Control as a lump sum cash payment. 8.2 DEFINITION OF CHANGE OF CONTROL. For all purposes of the Plan, a "Change in Control" of the Company shall have occurred if: (a) any "person", as such term is used in Sections 13(d) and 14(d) of the Securities Exchange Act of 1934, as amended (the "Exchange Act") (other than the Company, any trustee or other fiduciary holding securities under an employee benefit plan of the Company or any corporation owned, directly or indirectly, by the stockholders of the Company in substantially the same proportions as their ownership of stock of the Company), is or becomes the "beneficial owner" (as defined in Rule 13d-3 under the Exchange Act), directly or indirectly, of securities of the Company 18 representing 30 percent or more of the combined voting power of the Company's then outstanding securities; (b) during any period of two consecutive years (not including any period prior to the execution of this amendment to the Plan), individuals who at the beginning of such period constitute the Board of Directors of the Company (the "Board"), and any new director (other than a director designated by a person who has entered into an agreement with the Company to effect a transaction described in clause (a), (c) or (d) of this Section) whose election by the Board or nomination for election by the Company's stockholders was approved by a vote of at least two-thirds (2/3) of the directors then still in office who either were directors at the beginning of the period or whose election or nomination for election was previously so approved, cease for any reason to constitute at least a majority thereof; (c) the stockholders of the Company approve a merger or consolidation of the Company with any other corporation, other than (i) a merger or consolidation which would result in the voting securities of the Company outstanding immediately prior thereto continuing to represent (either by remaining outstanding or by being converted into voting securities of the surviving entity) more than 50 percent of the combined voting power of the voting securities of the Company or such surviving entity outstanding immediately after such merger or consolidation or (ii) a merger or consolidation effected to implement a recapitalization of the Company (or similar transaction) in which no "person" (as hereinabove defined) acquires more than 30 percent of the combined voting power of the Company's then outstanding securities; or (d) the stockholders of the Company approve a plan of complete liquidation of the Company or an agreement for the sale or disposition by the Company 19 of all or substantially all of the Company's assets (or any transaction having a similar effect). 20 SECTION 9 - CHANGES IN EMPLOYEE STATUS 9.1 TRANSFERS BETWEEN UNITS. A Participant who transfers between Units before the end of a calendar year shall be eligible to receive an Award based on the performance of either the old or new Unit or a combination thereof. The determination will be made by Corporate Management on a case-by-case basis. Generally, a pro rata allocation will be made, but if an individual transfers early in a calendar year, the Award may be calculated as if the Participant had been in the new Unit all year. If the transfer is late in the year, it may be calculated as if the Participant had been in the former Unit the entire year. Transfers in the second or third quarter generally result in a prorated calculation (for example, six months based on the old Unit and six months based on the new Unit). 9.2 PARTICIPATION FOR A PARTIAL YEAR. A Participant who (i) ceases to be a Participant in the Plan during a calendar year because of voluntary retirement, layoff, position assignment, Permanent and Total Disability, or death, or (ii) becomes a Participant in the Plan after January 1 of any year, shall be eligible for an Incentive Award determined under Section 5, but pro-rated to reflect the portion of the year in which he or she was a Participant. A Participant whose employment terminates because of resignation or Company- initiated employment termination shall not be eligible for an Incentive Award for the calendar year in which such employment termination occurs. 9.3 DISCHARGE. If a Participant is discharged from the Company before an Incentive Award has been made for a calendar year because of malfeasance (which shall include, among other reasons, neglect of duties, divulgence of Company secrets, or breach of Company policy), the Participant shall forfeit any and all rights he or she would have had to an Incentive Award under the Plan for that year, unless a specific contrary decision is made by Corporate Management. 21 SECTION 10 - ASSIGNMENT AND BENEFICIARIES 10.1 DESIGNATION OF BENEFICIARY. Neither amounts awarded to a Participant or credited to the Participant's Deferred Award Compensation Account nor any other rights or benefits of a Participant under the Plan may be assigned, transferred, pledged or alienated in any way; provided, however, that a Participant may designate a beneficiary or beneficiaries to receive after the Participant's death payments at the times and in the amounts to which the Participant would have been entitled under the Plan if he or she were alive. The beneficiary or beneficiaries last designated by the Participant to receive the proceeds under the Company Basic Life Insurance Plan upon his or her death shall be the designated beneficiary or beneficiaries for purposes of this Plan. Such designation of a Participant's beneficiary or beneficiaries may be replaced by a new designation or may be revoked by the Participant at any time. The designation or revocation of a beneficiary shall not be effective unless it is on a form provided for that purpose by the Company, signed by the Participant and delivered to the Company prior to the Participant's death. 10.2 DISTRIBUTION TO DESIGNATED BENEFICIARY. In the case of death of a Participant who has made a valid beneficiary designation which has not been subsequently replaced or revoked, amounts to which the Participant would have been entitled under the Plan shall be distributed in accordance with the Plan to the designated beneficiary or beneficiaries to the extent the designation of such beneficiary or beneficiaries is valid and enforceable under applicable law. Any amount distributable to a Participant upon death and not subject to such a designation shall be distributed to the Participant's legal representative or estate. If there is any question as to the legal right of any beneficiary to receive the distribution under the Plan, the amount in question may be paid to the legal representative or estate of the Participant, at the option of the Committee, in which event the Company shall have no further liability to anyone with respect to such amount. 22 SECTION 11 - GENERAL CONDITIONS 11.1 LIMITATION OF RIGHTS. Nothing in this Plan and no action taken pursuant to its provisions shall be construed to: (a) give any employee of the Company any right to any compensation, except as specifically provided herein; (b) be evidence of any agreement, contract, or understanding, expressed or implied, that the Company will employ a Participant in any particular position or at any particular rate of remuneration; (c) limit in any way the right of the Company to terminate a Participant's employment at any time; (d) give any Participant any right, title, or interest whatever in or to any investments which the Company may make to aid it in meeting its obligations hereunder; (e) create a trust of any kind or a fiduciary relationship between the Company and a Participant or any other person; and no assets of the Company or any of its subsidiaries shall be segregated with respect to any deferred amounts and all such amounts shall constitute unsecured contractual obligations of the Company and its subsidiaries. 11.2 APPLICABLE LAW. All questions pertaining to the construction, validity and effect of the Plan shall be determined in accordance with the laws of the United States and the State of Minnesota, other than its laws respecting choice of law. 23 EX-10 8 EXHIBIT 10(III)(I) 2SRP 12/93 HONEYWELL SUPPLEMENTARY EXECUTIVE RETIREMENT PLAN FOR COMPENSATION IN EXCESS OF $200,000 ($200K SERP) (Amended Through December 21, 1993) TABLE OF CONTENTS ARTICLE I - DEFINITIONS. . . . . . . . . . . . . . . . . . . . . . . . . . . .1 1.1 Act. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .1 1.2 Base Plan. . . . . . . . . . . . . . . . . . . . . . . . . . . . .1 1.3 Code . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .1 1.4 Company. . . . . . . . . . . . . . . . . . . . . . . . . . . . . .1 1.5 Early Retirement . . . . . . . . . . . . . . . . . . . . . . . . .1 1.6 Earnings Limitation. . . . . . . . . . . . . . . . . . . . . . . .1 1.7 Effective Date . . . . . . . . . . . . . . . . . . . . . . . . . .2 1.8 Honeywell. . . . . . . . . . . . . . . . . . . . . . . . . . . . .2 1.9 Mid-Career SERP. . . . . . . . . . . . . . . . . . . . . . . . . .2 1.10 Normal Retirement. . . . . . . . . . . . . . . . . . . . . . . . .2 1.11 Participant. . . . . . . . . . . . . . . . . . . . . . . . . . . .2 1.12 Permanent and Total Disability . . . . . . . . . . . . . . . . . .2 1.13 Plan . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .2 1.14 Spouse . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .2 ARTICLE II - PLAN FORMULA. . . . . . . . . . . . . . . . . . . . . . . . . . .3 2.1 $200K SERP Formula . . . . . . . . . . . . . . . . . . . . . . . .3
ARTICLE III - BENEFITS . . . . . . . . . . . . . . . . . . . . . . . . . . . .5 3.1 Normal Retirement . . . . . . . . . . . . . . . . . . . . . . . .5 3.2 Early Retirement. . . . . . . . . . . . . . . . . . . . . . . . .5 3.3 Change In Control . . . . . . . . . . . . . . . . . . . . . . . .5 3.4 Permanent and Total Disability. . . . . . . . . . . . . . . . . .7 3.5 Immediate Pre-retirement Surviving Spouse Benefit . . . . . . . .7 3.6 Deferred Surviving Spouse Benefit . . . . . . . . . . . . . . . .7 3.7 Surviving Children's Benefit. . . . . . . . . . . . . . . . . . .7 ARTICLE IV - PAYMENT OF BENEFITS . . . . . . . . . . . . . . . . . . . . . . .9 4.1 Form of Payment to Participant. . . . . . . . . . . . . . . . . .9 4.2 Time of Payments. . . . . . . . . . . . . . . . . . . . . . . . 10 4.3 Payment Subsequent to a Change in Control . . . . . . . . . . . 10 4.4 Payments Subsequent to the Participant's Retirement . . . . . . 12 ARTICLE V - ADMINISTRATION OF THE PLAN . . . . . . . . . . . . . . . . . . . 13 5.1 Personnel Committee . . . . . . . . . . . . . . . . . . . . . . 13 ARTICLE VI - AMENDMENT AND TERMINATION . . . . . . . . . . . . . . . . . . . 14 6.1 Amendment and Termination . . . . . . . . . . . . . . . . . . . 14 ARTICLE VII - GENERAL CONDITIONS . . . . . . . . . . . . . . . . . . . . . . 15 7.1 Non-assignability of the Right to Receive Benefits. . . . . . . 15 7.2 Applicable Law. . . . . . . . . . . . . . . . . . . . . . . . . 15 ARTICLE VIII - FUNDING . . . . . . . . . . . . . . . . . . . . . . . . . . . 16 8.1 Source of Payments. . . . . . . . . . . . . . . . . . . . . . . 16 8.2 Status of Participants. . . . . . . . . . . . . . . . . . . . . 16 8.3 FICA and FUTA Contributions on Plan Benefits. . . . . . . . . . 16
ARTICLE IX - CLAIMS PROCEDURE. . . . . . . . . . . . . . . . . . . . . . . . 18 9.1 Filing of a Claim for Benefits. . . . . . . . . . . . . . . . . 18 9.2 Notification to Claimant of Decision. . . . . . . . . . . . . . 18 9.3 Content of Notice . . . . . . . . . . . . . . . . . . . . . . . 18 9.4 Review Procedure. . . . . . . . . . . . . . . . . . . . . . . . 19 9.5 Decision on Review. . . . . . . . . . . . . . . . . . . . . . . 19 Table I. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
2SRP 12/93 HONEYWELL SUPPLEMENTARY EXECUTIVE RETIREMENT PLAN FOR COMPENSATION IN EXCESS OF $200,000 ($200K SERP) (Amended Through December 21, 1993) ARTICLE I - DEFINITIONS 1.1 ACT. The Employee Retirement Income Security Act of 1974, as from time to time amended. 1.2 BASE PLAN. The Honeywell Retirement Benefit Plan, as from time to time amended. 1.3 CODE. The Internal Revenue Code of 1986, as from time to time amended. 1.4 COMPANY. Honeywell Inc. and any subsidiary which is designated for inclusion in the Plan, as hereafter defined, by the Board of Directors of Honeywell Inc. 1.5 EARLY RETIREMENT. "Early Retirement" by a Participant under his or her Base Plan, which is defined as the termination of employment on or after his or her 55th birthday and after he or she has been credited with 10 or more years of "Credited Service for Benefit Accrual", as determined under the Base Plan. 1.6 EARNINGS LIMITATION. The maximum amount of compensation of a Participant and his or her family members permitted to be taken into account during the plan year commencing on and after July 1, 1989 under the Base Plan pursuant to Section 401(a)(17) of the Code (as it may be adjusted from time to time pursuant to Section 415(d) of the Code), which is $209,200 for 1990. 1.7 EFFECTIVE DATE. The original effective date of this Plan was July 1, 1989. 1.8 HONEYWELL. Honeywell Inc., a Delaware corporation. 1.9 MID-CAREER SERP. The Honeywell Supplementary Executive Retirement Plan for Mid-Career Hires, as it may be amended from time to time, maintained for certain executives or highly compensated employees of the Company to provide augmented credited service for retirement benefit determination. 1.10 NORMAL RETIREMENT. "Normal Retirement" by a Participant on or after his or her "Social Security Retirement Age" as defined under his or her Base Plan. 1.11 PARTICIPANT. An employee of the Company who is a participant in the Base Plan on or after January 1, 1985, whose earnings are in excess of the Earnings Limitation under the Base Plan. No controlling shareholder or independent contractor shall be a Participant. 1.12 PERMANENT AND TOTAL DISABILITY. The disability of a Participant whereby such Participant is wholly disabled by bodily injury or disease and will be permanently, continuously and wholly prevented thereby for life from engaging in any occupation or employment for wage or profit. 1.13 PLAN. The Honeywell Supplementary Executive Retirement Plan for Compensation in Excess of $200,000 ("$200K SERP"), as amended through September 15, 1992. 1.14 SPOUSE. A person who is formally married to a Participant as determined by the Honeywell Pension and Retirement Administrative Committee for purposes of the Base Plan. ARTICLE II - PLAN FORMULA 2.1 $200K SERP FORMULA. That annual benefit equal to Paragraph (a) minus Paragraph (b). (a) The applicable benefit computed under the Base Plan: (i) by including under the definition of "Earnings" for the purposes of arriving at "Final Average Earnings" under the Base Plan his or her "Earnings" under the Base Plan which are in excess of the Earnings Limitation; (ii) by excluding under the definition of "Earnings" for purposes of arriving at "Final Average Earnings" under the Base Plan the amount of any defined incentive award in the year in which the award would otherwise have been paid by the Corporate Executive Compensation Plan; (iii) by disregarding the provisions of such Base Plan limiting the maximum benefit payable thereunder to the maximum benefit permitted by the provisions of Section 415 of the Code in a pension plan qualifying under Section 401 of the Code; (iv) by not exceeding the Participant's frozen "Accrued Benefit" determined under the Base Plan as of June 30, 1989 (or June 30, 1990, whichever may be applicable) as required by Section 8.2 of that Plan; and (v) by excluding "Augmented Credited Service for Benefit Accrual" under the Mid-Career SERP, if such Plan is applicable to the Participant. 3 (b) the applicable benefit computed under the Base Plan: (i) by excluding under the definition of "Earnings" for the purpose of arriving at "Final Average Earnings" under the Base Plan his or her "Earnings" under the Base Plan which are in excess of the Earnings Limitation; (ii) by excluding under the definition of "Earnings" for purposes of arriving at "Final Average Earnings" under the Base Plan the amount of any defined incentive award in the year in which the award would otherwise have been paid by the Corporate Executive Compensation Plan; (iii) by disregarding the provisions of such Base Plan limiting the maximum benefit payable thereunder to the maximum benefit permitted by the provisions of Section 415 of the Code in a pension plan qualifying under Section 401 of the Code; (iv) by not exceeding the Participant's frozen "Accrued Benefit" determined under the Base Plan as of June 30, 1989 (or June 30, 1990, whichever may be applicable) as required by Section 8.2 of that Plan; and (v) by excluding "Augmented Credited Service for Benefit Accrual" under the Mid-Career SERP, if such Plan is applicable to the Participant. 4 ARTICLE III - BENEFITS 3.1 NORMAL RETIREMENT. Upon Normal Retirement, a Participant shall be eligible for life for an annual benefit determined by calculating the Participant's annual "Normal Retirement Benefit" under the Base Plan in accordance with the $200K SERP Formula as prescribed in Section 2.1. 3.2 EARLY RETIREMENT. Upon Early Retirement, a Participant shall be eligible for life for an annual benefit determined by calculating the Participant's annual "Early Retirement Benefit" under the Base Plan in accordance with the $200K SERP Formula as prescribed in Section 2.1. 3.3 CHANGE IN CONTROL. In the event of a "Change in Control," as defined in this Section for all purposes of the Plan, each Participant's accrued benefit under the Plan shall become immediately and fully vested and shall be paid to the Participant in accordance with Section 4.3(a) of the Plan. For purposes of this Plan, a "Change in Control" of the Company shall have occurred if: (a) any "person," as such term is used in Sections 13(d) and 14(d) of the Securities Exchange Act of 1934, as amended (the "Exchange Act") (other than the Company, any trustees or other fiduciary holding securities under an employee benefit plan of the Company or any corporation owned, directly or indirectly, by the stockholders of the Company in substantially the same proportions as their ownership of stock of the Company), is or becomes the "beneficial owner" (as defined in Rule 13d-3 under the Exchange Act), directly or indirectly, of securities of the Company representing 30% or more of the combined voting power of the Company's then outstanding securities; 5 (b) during any period of two consecutive years (not including any period prior to the execution of this amendment to the Plan), individuals who at the beginning of such period constitute the Board of Directors of the Company (the "Board"), and any new director (other than a director designated by a person who has entered into an agreement with the Company to effect a transaction described in clause (a), (c) or (d) of this Section) whose election by the Board of nomination for election by the Company's stockholders was approved by a vote of at least two- thirds of the directors then still in office who either were directors at the beginning of the period or whose election or nomination for election was previously so approved, cease for any reason to constitute at least a majority thereof; (c) the stockholders of the Company approve a merger or consolidation of the Company with any other corporation, other than (i) a merger or consolidation which would result in the voting securities of the Company outstanding immediately prior thereto continuing to represent (either by remaining outstanding or by being converted into voting securities of the surviving entity) more than 50 percent of the combined voting power of the voting securities of the Company or such surviving entity outstanding immediately after such merger or consolidation or (ii) a merger or consolidation effected to implement a recapitalization of the Company (or similar transaction) in which no "person" (as hereinabove defined) acquires more than 30 percent of the combined voting power of the Company's then outstanding securities; or (d) the stockholders of the Company approve a plan of complete liquidation of the Company or an agreement for the sale or disposition by the Company of all or substantially all of the Company's assets (or any transaction having a similar effect). 6 3.4 PERMANENT AND TOTAL DISABILITY. Upon the receipt of benefits by a Participant under his or her Base Plan, based on a determination of Permanent and Total Disability, he or she shall be eligible for life for an annual benefit determined by calculating the Participant's annual "Disability Retirement Benefit" under the Base Plan in accordance with the $200K SERP Formula as prescribed in Section 2.1. 3.5 IMMEDIATE PRE-RETIREMENT SURVIVING SPOUSE BENEFIT. Upon the death of a married Participant who is eligible for Early Retirement under his or her Base Plan but who has not yet retired under such plan, his or her surviving Spouse on the date of his or her death shall be eligible for life for an annual benefit determined by calculating the surviving Spouse's annual "Pre-retirement Surviving Spouse Benefit" under the Participant's Base Plan in accordance with the $200K SERP Formula as prescribed in Section 2.1. 3.6 DEFERRED SURVIVING SPOUSE BENEFIT. Upon the death of a married Participant who is vested but not eligible for Early Retirement under his or her Base Plan and who is in the "Active Service" of the Company (as defined in the Base Plan) on the date of his or her death, on the first day of the month following the date such Participant would have attained his or her earliest retirement eligibility under his or her Base Plan as a vested Participant, his or her surviving Spouse the date of his or her death shall be eligible for life for an annual benefit determined by calculating the surviving Spouse's annual "Deferred Pre-retirement Surviving Spouse Benefit" under the Participant's Base Plan in accordance with the $200K SERP Formula as prescribed in Section 2.1. 3.7 SURVIVING CHILDREN'S BENEFIT. Upon the death of a Participant who is eligible for Early Retirement under his or her Base Plan and who is in the "Active Service" of the Company (as defined in the Base Plan), the surviving "Child" (as defined in the Base Plan) of a Participant (a) who has no surviving Spouse on the date of his or her death, or (b) whose surviving Spouse dies while receiving or while eligible to receive survivor benefits under the Base Plan shall be eligible until such Child's attainment of age 23 for an annual benefit determined by calculating the Child's annual "Surviving Children's Benefit" under 7 the Participant's Base Plan in accordance with the $200K SERP Formula as prescribed in Section 2.1. The benefit shall be divided equally among all such Children as defined in the Base Plan and an equal share shall be paid to such Child while he qualifies as a Child. The portion of the benefit payable to each such Child shall be redetermined as of the last day of the month following the date a recipient ceases to be a Child and the remaining such Children shall thereupon receive an equal share of such benefit. 8 ARTICLE IV - PAYMENT OF BENEFITS 4.1 FORM OF PAYMENT TO PARTICIPANT. (a) NORMAL FORM OF PAYMENT. Except as otherwise provided in Paragraph (b) of this Section 4.1, a benefit under the Plan shall be paid in the form of the benefit paid with respect to the Participant under his or her Base Plan. Any election, designation of a beneficiary(ies) or contingent annuitant(s), or revocation made prior to the Participant's "Benefit Starting Date" and in effect under the Participant's Base Plan shall be in effect under the Plan. (b) LUMP SUM FORM OF PAYMENT. Notwithstanding the provisions of Paragraph (a) of this Section 4.1, a Participant, who is eligible for Early Retirement or who will become eligible for Early Retirement within 13 months, may elect to receive the present value of the benefits payable to him or her under the Plan, as computed as of the last day of the month in which the earlier of the dates of the Participant's Early Retirement or Normal Retirement occurs by utilizing the interest rate and mortality assumptions set forth in Table I, which may be modified from time to time by the Board of Directors of Honeywell Inc. (or, in the case of the Participant's earlier death, the present value of such benefits so computed as of the later of the last day of the month in which the Participant's death or the Participant's earliest retirement eligibility under his or her Base Plan occurs) in a lump sum cash payment. The Participant's written election to receive a lump sum cash payment shall be submitted on a form provided for that purpose by the Company, and consented to by the Participant's Spouse in writing if the Participant is married, and delivered to the Vice President, Corporate Compensation and Benefits, at least 13 months prior to the Participant's Early Retirement or Normal Retirement. Such Spouse's consent must acknowledge the effect 9 of such election and be witnessed by a notary public. If a Participant dies after making such election and prior to his or her Early Retirement or Normal Retirement, the lump sum cash payment shall be made to the Participant's surviving Spouse in accordance with Section 3.5 or Section 3.6, whichever may be applicable, or to the Participant's surviving Children in accordance with Section 3.7. 4.2 TIME OF PAYMENTS. Benefit payments paid pursuant to Sections 3.1 or 3.2, respectively, shall begin (or, in lieu thereof, in the event that the Participant has complied with Section 4.1(b), be paid) 30 days after the Participant's Normal Retirement or Early Retirement, as the case may be. Payments pursuant to Section 3.4 of the Plan shall commence 30 days after the later of (a) the last day of the calendar month in which the Participant is determined to be Permanently and Totally disabled under his or her Base Plan or (b) 6 months after his or her last full day of active employment if he or she elects an immediate disability benefit under his or her Base Plan; but if he or she elects a deferred disability benefit under his or her Base Plan, payments shall commence (or, in the event that the Participant has complied with Section 4.1(b), the present value of such benefits shall be paid) 30 days after his or her Early Retirement or Normal Retirement. Payments pursuant to Section 3.5 and 3.6 of the Plan, shall commence (or, in the event that the Participant has complied with Section 4.1(b), the present value of such benefits shall be paid) 30 days after the Participant's death if he or she was eligible for Early Retirement or 30 days after the date he or she would have attained his or her earliest retirement eligibility under his or her Base Plan. Payments pursuant to Section 3.7 of the Plan shall commence (or, in the event that the Participant has complied with Section 4.1(b), the present value of such benefits shall be paid) 30 days after the date of the Participant's death. 4.3 PAYMENT SUBSEQUENT TO A CHANGE IN CONTROL. (a) Payments upon Termination of Employment. Notwithstanding any Plan provision to the contrary, if subsequent to a Change in Control, a 10 Participant's employment shall be terminated by the Participant for "Good Reason" (as defined in the Honeywell Key Employee Severance Plan) or by the Company other than for "Cause" (as defined in the Honeywell Key Employee Severance Plan) or Permanent and Total Disability, the present value of the benefits payable pursuant to Section 3.3 (utilizing the interest rate and mortality assumptions set forth in Table I, which may be modified from time to time by the Board of Directors of Honeywell Inc.) shall be paid as a lump sum cash payment to the Participant on the fifth day after such termination. (b) PAYMENTS UPON IMPOSITION OF FEDERAL OR STATE TAXES. If subsequent to a Change in Control, any Participant is determined to be subject to Federal or state income tax on any amount accrued on his or her behalf under this Plan prior to the time of payment hereunder, Federal or state taxes attributable to the amount determined to be so taxable shall be distributed by the Plan to such Participant. An amount accrued on his or her behalf under this Plan shall be determined to be subject to Federal income tax upon the earliest of: (i) a final determination by the United States Internal Revenue Service addressed to the Participant which is not appealed to the courts; (ii) a final determination by the United States Tax Court or any other Federal Court affirming any such determination by the Internal Revenue Service; or (iii) an opinion by the Tax Counsel of the Company, addressed to the Company and the Trustee, that, by reason of Treasury Regulations, amendments to the Internal Revenue Code, published Internal Revenue Service rulings, court decisions or other substantial 11 precedent, amounts accrued on a Participant's behalf hereunder are subject to Federal or state income tax prior to payment. The Company shall undertake at its sole expense to defend any tax claims described herein which are asserted by the Internal Revenue Service or by any state revenue authority against any Participant subsequent to a Change in Control, including attorney fees and costs of appeal, and shall have the sole authority to determine whether or not to appeal any determination made by the Service, by any state revenue authority or by a lower court. The Company also agrees to reimburse any Executive for any interest or penalties in respect of Federal or state tax claims hereunder upon receipt of documentation of same. Any distributions from the Plan to a Participant under this Section 4.3(b) shall be applied in an equitable manner to reduce Company liabilities to such Participant under the Plans. 4.4 PAYMENTS SUBSEQUENT TO THE PARTICIPANT'S RETIREMENT. At any time before or after a Change in Control, a Participant, after he or she has retired under the provisions of the Base Plan on or after December 17, 1991, or the surviving Spouse or beneficiary of the Participant, after the Participant's death subsequent to such retirement on or after December 17, 1991, may elect to receive the present value of such benefits or remaining benefits to which he or she is entitled under this Plan in one lump-sum cash payment at any time after the Participant's date of retirement or death, respectively, as computed as of the last day of the month in which the request is received by the Vice President, Corporate Compensation and Benefits, by utilizing the interest rate and mortality assumptions set forth in Table I, which may be modified from time to time by the Board of Directors of Honeywell Inc., and then reduced by a penalty, which shall be forfeited to the Company, (a) which is equal, before a Change in Control occurs, to 10 percent of the present value of any unpaid benefits, and (b) which is equal, after a Change in Control occurs, to 6 percent of the present value of such unpaid benefits. Payment of such benefits shall be effected on the last day of the next month following the month in which the request is received. 12 ARTICLE V - ADMINISTRATION OF THE PLAN 5.1 PERSONNEL COMMITTEE. The Plan shall be administered by the Personnel Committee of Honeywell's Board of Directors which shall have the authority to determine Plan eligibility and the amount of Plan benefits to which a Participant or beneficiary is entitled to receive, interpret the Plan, maintain records and issue such regulations as it shall from time to time deem appropriate. The interpretations of such Committee shall be final. The Committee shall have absolute discretion in carrying out its responsibilities. No Participant or beneficiary of this Plan may be a member of this Committee. 13 ARTICLE VI - AMENDMENT AND TERMINATION 6.1 AMENDMENT AND TERMINATION. The Board of Directors of Honeywell Inc. may amend or terminate the Plan at any time, provided, however, that no such amendment or termination shall adversely affect a benefit payable on the Normal or Early Retirement, death or Total and Permanent Disability of a Participant with respect to the Participant's employment by the Company prior to the date of such amendment or termination unless such benefit is or becomes payable under another plan or practice adopted by such Board of Directors. In the event of termination of the Plan, any benefits which have accrued hereunder shall be paid in the form and at the time determined under Section 4.1(a) of the Plan. 14 ARTICLE VII - GENERAL CONDITIONS 7.1 NON-ASSIGNABILITY OF THE RIGHT TO RECEIVE BENEFITS. The right to receive benefits under the Plan may not be anticipated, alienated, sold, transferred, assigned, pledged, encumbered, or subjected to any charge or legal process. 7.2 APPLICABLE LAW. All questions pertaining to the construction, validity and effect of the Plan shall be determined in accordance with the laws of the United States and the State of Minnesota, other than its laws respecting choice of law. 15 ARTICLE VIII - FUNDING 8.1 SOURCE OF PAYMENTS. All payments hereunder shall be paid in cash from the general funds of the Company, and no special or separate fund shall be established since it is the intent to pay benefits as they become payable from operating revenue. The Company may, however, in its sole discretion, establish a separate reserve which may be held by it from which such benefits may be paid. The foregoing shall not preclude the establishment by the Company of a "rabbi trust" or the use of assets contributed to a "rabbi trust" to pay benefits under the Plan. 8.2 STATUS OF PARTICIPANTS. A Participant shall have no right, title, or interest whatever in or to any investments which the Company may make to aid it in meeting its obligations hereunder. Nothing contained in this Plan, and no action taken pursuant to its provisions, shall create or be construed to create a trust of any kind, or a fiduciary relationship, between the Company and a Participant or any other person. To the extent that any person acquires a right to receive payments from the Company, such right shall be no greater than the right of an unsecured creditor. 8.3 FICA AND FUTA CONTRIBUTIONS ON PLAN BENEFITS. All amounts which have accrued to a Participant under this Plan with respect to a Participant's service with the Company after December 31, 1983, as provided in this Section 8.3 shall be considered "wages" for purposes of the Federal Insurance Contribution Act ("FICA") and the Federal Unemployment Tax Act ("FUTA") as of the earliest of (i) the date of the commencement of the Participant's Normal Retirement benefits, Early Retirement benefits, Total and Permanent Disability benefits, or commencement of Pre-retirement Surviving Spouse Benefits to the Participant's Spouse or Surviving Children's Benefit to his or her Child or Children ("Benefit Commencement Date"); (ii) the date in 1993 on which an active Participant submitted an application for retirement benefits under the Base Plan or resigned his or her employment with the Company, effective in 1994 but prior to July 1, 1994; or (iii) the date in 1993 on which a specified accrued benefit is determined with 16 respect to any other Participant in the Plan who is designated by the Vice President Corporate Human Resources and approved by the Chief Executive Officer of the Company prior to December 31, 1993. Effective with the first payment made under the Plan after December 31, 1990, any amount taken into account as wages with respect to a Participant's Benefit Commencement Date occurring after the applicable effective date specified in the Social Security Amendment of 1983 by reason of this Section 8.3 shall not again be treated as wages for FICA or FUTA purposes. However, no Participant shall be entitled to a refund from the Company of any previously paid FICA or FUTA contributions as a result of the application of this Section 8.3. In order to compute the present value of a Participant's benefit under this Plan for purposes of determining the amount of any FICA or FUTA contribution payable with respect to such benefit, such present value shall be determined in accordance with Table I. 17 ARTICLE IX - CLAIMS PROCEDURE 9.1 FILING OF A CLAIM FOR BENEFITS. Upon denial of benefits by the Company, the Participant or the Participant's beneficiary shall make a claim to the Personnel Committee or its delegatee(s) for the benefits provided under the Plan in the manner provided in this Article. 9.2 NOTIFICATION TO CLAIMANT OF DECISION. If a claim is wholly or partially denied, notice of the decision, meeting the requirements of Section 9.3 shall be furnished to the claimant within 90 days after receipt of the claim by the Personnel Committee, unless special circumstances, such as the need to hold a hearing, require an extension of time for processing the claim. If an extension of time is required, written notice of the extension shall be furnished to the claimant prior to the end of the initial 90 day period, indicating the special circumstances requiring the extension and the date by which a final decision is expected. An extension of time shall in no event exceed a period of 90 days from the end of the initial 90 day period. If notice of the denial of a claim is not furnished in accordance with the provisions of this Section, the claim shall be deemed denied and the claimant may proceed with the review procedure set forth in Section 9.3. 9.3 CONTENT OF NOTICE. The Personnel Committee or its delegatee(s) shall provide to any claimant who is denied a claim for benefits written notice setting forth in a manner calculated to be understood by the claimant, the following: (a) The specific reason or reasons for the denial; (b) Specific reference to pertinent provisions of the Plan on which the denial is based; (c) A description of any additional material or information necessary for the claimant to perfect the claim and an explanation of why such material or 18 information necessary for the claimant to perfect the claim and an explanation of why such material or information is necessary; and (d) An explanation of the Plan's claim review procedure, as set forth in this Section 9.4 and 9.5, together with any review procedures specified by the Personnel Committee. 9.4 REVIEW PROCEDURE. The purpose of the review procedures set forth in this Section 9.4 as follows is to provide a procedure by which a claimant under this Plan may have a reasonable opportunity to appeal a denial of a claim to the Personnel Committee for a full and fair review. To accomplish that purpose, the claimant or his or her duly authorized representative: (a) May request a review upon written application to the Personnel Committee, (b) May review pertinent documents; and (c) May submit issues and comments in writing. A claimant (or his or her duly authorized representative) shall request a review by filing a written application for review with the Personnel Committee at any time within 60 days after receipt by the claimant of written notice of the denial of the claim. 9.5 DECISION ON REVIEW. A decision of a denied claim shall be made in the following manner: (a) The decision on review shall be made by the Personnel Committee or by its delegatee(s), which may in its discretion hold a hearing on the denied claim. The Personnel Committee shall make its decision promptly, and not later than 60 days after receipt of the request for review, unless special 19 circumstances (such as the need to hold a hearing) require an extension of time for processing, in which case a decision shall be rendered as soon as possible, but not later than 120 days after receipt of the request for review. If an extension of time for review is required because of special circumstances, written notice of the extension shall be furnished to the claimant prior to the commencement of the extension. If the decision on review is not furnished within the time specified, the claim shall be deemed denied on review. (b) The decision on review shall be in writing and shall include specific reasons for the decision, written in a manner calculated to be understood by the claimant, and specific references to the pertinent provisions of the Plan on which the decision is based. 20 TABLE I ACTUARIAL ASSUMPTIONS FOR LUMP SUM PAYMENT (amended through December 21, 1993) The present value of Plan benefits for purposes of Section 4.1(b), Section 4.3(a), Section 4.4, and Section 8.3 shall be calculated using the following actuarial assumptions and factors: Interest: 8-1/2 percent per annum discount rate Mortality: 1983 Group Annuity Mortality Table for healthy males EX-10 9 EXHIBIT 10(III)(J) CSRP12/93 HONEYWELL SUPPLEMENTARY EXECUTIVE RETIREMENT PLAN FOR CECP PARTICIPANTS (CECP SERP) (Amended Through December 21, 1993) TABLE OF CONTENTS ARTICLE I - DEFINITIONS. . . . . . . . . . . . . . . . . . . . . . . . . . . 1 1.1 ACT. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1 1.2 BASE PLAN. . . . . . . . . . . . . . . . . . . . . . . . . . . . 1 1.3 CODE . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1 1.4 COMPANY. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1 1.5 CORPORATE EXECUTIVE COMPENSATION PLAN (CECP) . . . . . . . . . . 1 1.6 EARLY RETIREMENT . . . . . . . . . . . . . . . . . . . . . . . . 1 1.7 EARNINGS LIMITATION. . . . . . . . . . . . . . . . . . . . . . . 2 1.8 EFFECTIVE DATE . . . . . . . . . . . . . . . . . . . . . . . . . 2 1.9 HONEYWELL. . . . . . . . . . . . . . . . . . . . . . . . . . . . 2 1.10 MID-CAREER SERP. . . . . . . . . . . . . . . . . . . . . . . . . 2 1.11 NORMAL RETIREMENT. . . . . . . . . . . . . . . . . . . . . . . . 2 1.12 PARTICIPANT. . . . . . . . . . . . . . . . . . . . . . . . . . . 2 1.13 PERMANENT AND TOTAL DISABILITY . . . . . . . . . . . . . . . . . 2 1.14 PLAN . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3 1.15 SPOUSE . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
ARTICLE II - PLAN FORMULA. . . . . . . . . . . . . . . . . . . . . . . . . . 4 2.1 CECP SERP FORMULA. . . . . . . . . . . . . . . . . . . . . . . . 4 ARTICLE III - BENEFITS . . . . . . . . . . . . . . . . . . . . . . . . . . . 6 3.1 NORMAL RETIREMENT. . . . . . . . . . . . . . . . . . . . . . . . 6 3.2 EARLY RETIREMENT . . . . . . . . . . . . . . . . . . . . . . . . 6 3.3 CHANGE IN CONTROL. . . . . . . . . . . . . . . . . . . . . . . . 6 3.4 PERMANENT AND TOTAL DISABILITY . . . . . . . . . . . . . . . . . 8 3.5 IMMEDIATE PRE-RETIREMENT SURVIVING SPOUSE BENEFIT. . . . . . . . 8 3.6 DEFERRED PRE-RETIREMENT SURVIVING SPOUSE BENEFIT . . . . . . . . 8 3.7 SURVIVING CHILDREN'S BENEFIT . . . . . . . . . . . . . . . . . . 8 ARTICLE IV - PAYMENT OF BENEFITS . . . . . . . . . . . . . . . . . . . . . . 10 4.1 FORM OF PAYMENT. . . . . . . . . . . . . . . . . . . . . . . . . 10 4.2 TIME OF PAYMENTS . . . . . . . . . . . . . . . . . . . . . . . . 11 4.3 PAYMENT SUBSEQUENT TO CHANGE IN CONTROL. . . . . . . . . . . . . 11 4.4 PAYMENTS SUBSEQUENT TO THE PARTICIPANT'S RETIREMENT. . . . . . . 13 ARTICLE V - ADMINISTRATION OF THE PLAN . . . . . . . . . . . . . . . . . . . 14 5.1 PERSONNEL COMMITTEE. . . . . . . . . . . . . . . . . . . . . . . 14 ARTICLE VI - AMENDMENT AND TERMINATION . . . . . . . . . . . . . . . . . . . 15 6.1 AMENDMENT AND TERMINATION. . . . . . . . . . . . . . . . . . . . 15 ARTICLE VII - GENERAL CONDITIONS . . . . . . . . . . . . . . . . . . . . . . 16 7.1 NON-ASSIGNABILITY OF THE RIGHT TO RECEIVE BENEFITS . . . . . . . 16 7.2 APPLICABLE LAW . . . . . . . . . . . . . . . . . . . . . . . . . 16
2 ARTICLE VIII - FUNDING . . . . . . . . . . . . . . . . . . . . . . . . . . . 17 8.1 SOURCE OF PAYMENTS . . . . . . . . . . . . . . . . . . . . . . . 17 8.2 STATUS OF PARTICIPANTS . . . . . . . . . . . . . . . . . . . . . 17 8.3 FICA AND FUTA CONTRIBUTIONS ON PLAN BENEFITS . . . . . . . . . . 17 ARTICLE IX - CLAIMS PROCEDURE. . . . . . . . . . . . . . . . . . . . . . . . 19 9.1 FILING OF A CLAIM FOR BENEFITS . . . . . . . . . . . . . . . . . 19 9.2 NOTIFICATION TO CLAIMANT OF DECISION . . . . . . . . . . . . . . 19 9.3 CONTENT OF NOTICE. . . . . . . . . . . . . . . . . . . . . . . . 19 9.4 REVIEW PROCEDURE . . . . . . . . . . . . . . . . . . . . . . . . 20 9.5 DECISION ON REVIEW . . . . . . . . . . . . . . . . . . . . . . . 20 TABLE I. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22 Actuarial Assumptions for Lump Sum Payments . . . . . . . . . . . . . . 22
3 CSRP12/93 HONEYWELL SUPPLEMENTARY EXECUTIVE RETIREMENT PLAN FOR CECP PARTICIPANTS (CECP SERP) (Amended Through December 21, 1993) ARTICLE I - DEFINITIONS 1.1 ACT. The Employee Retirement Income Security Act of 1974, as from time to time amended. 1.2 BASE PLAN. The Honeywell Retirement Benefit Plan, as from time to time amended. 1.3 CODE. The Internal Revenue Code of 1986, as from time to time amended. 1.4 COMPANY. Honeywell Inc. and any subsidiary which is designated for inclusion in the Plan, as hereafter defined, by the Board of Directors of Honeywell Inc. 1.5 CORPORATE EXECUTIVE COMPENSATION PLAN (CECP). An incentive compensation plan maintained by the Company to provide incentive compensation for a select group of management or highly compensated employees, as from time to time amended. 1.6 EARLY RETIREMENT. Retirement by a Participant under his or her Base Plan, which is defined as the termination of employment on or after his or her 55th birthday and after he or she has been credited with 10 or more years of "Credited Service for Benefit Accrual," under the Base Plan. 1.7 EARNINGS LIMITATION. The maximum amount of compensation of a Participant and his or her family members permitted to be taken into account under the Base Plan pursuant to Section 401(a)(17) of the Code. 1.8 EFFECTIVE DATE. The original effective date of this Plan was January 1, 1985. 1.9 HONEYWELL. Honeywell Inc., a Delaware corporation. 1.10 MID-CAREER SERP. The Honeywell Supplementary Executive Retirement Plan for Mid-Career Hires, as it may be amended from time to time, maintained for certain executives or highly compensated employees of the Company to provide augmented credited service for retirement benefit determination. 1.11 NORMAL RETIREMENT. Retirement by a Participant on or after his or her "Social Security Retirement Age" as defined under his or her Base Plan. 1.12 PARTICIPANT. An employee of the Company who is both a participant in the Base Plan on or after January 1, 1985 and a participant in the Corporate Executive Compensation Plan on or after January 1, 1985, whose earnings recognized under the Base Plan do not include deferred incentive payments under the Corporate Executive Compensation Plan. No controlling shareholder or independent contractor shall be a Participant 1.13 PERMANENT AND TOTAL DISABILITY. The disability of a Participant whereby such Participant is wholly disabled by bodily injury or disease and will be permanently, continuously and wholly prevented thereby for life from engaging in any occupation or employment for wage or profit. 2 1.14 PLAN. The Honeywell Supplementary Executive Retirement Plan for Corporate Executive Compensation Plan ("CECP SERP") Participants, effective January 1, 1985 and amended through September 15, 1992. 1.15 SPOUSE. A person who is formally married to a Participant as determined by the Honeywell Pension and Retirement Administrative Committee for purposes of the Base Plan. 3 ARTICLE II - PLAN FORMULA 2.1 CECP SERP FORMULA. That annual benefit equal to Paragraph (a) minus Paragraph (b). (a) The applicable benefit computed with respect to a Participant under the Base Plan: (i) by including under the definition of "Earnings" for the purpose of arriving at "Final Average Earnings" under the Base Plan his or her "Earnings" under the Base Plan which are in excess of the Earnings Limitation; (ii) by including under the definition of "Earnings" for purposes of arriving at "Final Average Earnings" under the Base Plan the amount of any deferred incentive award in the year in which the award would otherwise have been paid by the Corporate Executive Compensation Plan; (iii) by disregarding the provisions of the Base Plan limiting the maximum benefit payable thereunder to the maximum benefit permitted by the provisions of Section 415 of the Code in a pension plan qualifying under Section 401 of the Code; (iv) by not exceeding the Participant's frozen "Accrued Benefit" determined under the Base Plan as of June 30, 1989 (or June 30, 1990, whichever may be applicable) as required by Section 8.2 of that Plan; and 4 (v) by excluding "Augmented Credited Service for Benefit Accrual" under the Mid-Career SERP, if such plan is applicable to the Participant. (b) the applicable benefit computed with respect to a Participant under the Base Plan: (i) by including under the definition of "Earnings" for the purpose of arriving at "Final Average Earnings" under the Base Plan his or her "Earnings" under the Base Plan which are in excess of the Earnings Limitation; (ii) by excluding under the definition of "Earnings" for purposes of arriving at "Final Average Earnings" under the Base Plan the amount of any defined incentive award in the year in which the award would otherwise have been paid by the Corporate Executive Compensation Plan; (iii) by disregarding the provisions of the Base Plan limiting the maximum benefit payable thereunder to the maximum benefit permitted by the provisions of Section 415 of the Code in a pension plan qualifying under Section 401 of the Coded; (iv) by not exceeding the Participant's frozen "Accrued Benefit" determined under the Base Plan as of June 30, 1989 (or June 30, 1990, whichever may be applicable) as required by Section 8.2 of that Plan; and (v) by excluding "Augmented Credited Service for Benefit Accrual" under the Mid-Career SERP, if applicable. 5 ARTICLE III - BENEFITS 3.1 NORMAL RETIREMENT. Upon Normal Retirement, a Participant shall be eligible for life for an annual benefit determined by calculating the Participant's annual "Normal Retirement Benefit" under the Base Plan in accordance with the CECP SERP Formula as prescribed in Section 2.1. 3.2 EARLY RETIREMENT. Upon Early Retirement, a Participant shall be eligible for life for an annual benefit determined by calculating the Participant's annual "Early Retirement Benefit" under the Base Plan in accordance with the CECP SERP Formula as prescribed in Section 2.1. 3.3 CHANGE IN CONTROL. In the event of a "Change in Control," as defined in this Section for all purposes of the Plan, each Participant's accrued benefit under the Plan shall become immediately and fully vested and shall be paid to the Participant in accordance with Section 4.3(a) of the Plan. For purposes of this Plan, a "Change in Control" of the Company shall have occurred if: (a) any "person," as such term is used in Sections 13(d) and 14(d) of the Securities Exchange Act of 1934, as amended (the "Exchange Act") (other than the Company, any trustees or other fiduciary holding securities under an employee benefit plan of the Company or any corporation owned, directly or indirectly, by the stockholders of the Company in substantially the same proportions as their ownership of stock of the Company), is or becomes the "beneficial owner" (as defined in Rule 13d-3 under the Exchange Act), directly or indirectly, of securities of the Company representing 30% or more of the combined voting power of the Company's then outstanding securities; 6 (b) during any period of two consecutive years (not including any period prior to the execution of this amendment to the Plan), individuals who at the beginning of such period constitute the Board of Directors of the Company (the "Board"), and any new director (other than a director designated by a person who has entered into an agreement with the Company to effect a transaction described in clause (a), (c) or (d) of this Section) whose election by the Board of nomination for election by the Company's stockholders was approved by a vote of at least two- thirds of the directors then still in office who either were directors at the beginning of the period or whose election or nomination for election was previously so approved, cease for any reason to constitute at least a majority thereof; (c) the stockholders of the Company approve a merger or consolidation of the Company with any other corporation, other than (i) a merger or consolidation which would result in the voting securities of the Company outstanding immediately prior thereto continuing to represent (either by remaining outstanding or by being converted into voting securities of the surviving entity) more than 50 percent of the combined voting power of the voting securities of the Company or such surviving entity outstanding immediately after such merger or consolidation or (ii) a merger or consolidation effected to implement a recapitalization of the Company (or similar transaction) in which no "person" (as hereinabove defined) acquires more than 30 percent of the combined voting power of the Company's then outstanding securities; or (d) the stockholders of the Company approve a plan of complete liquidation of the Company or an agreement for the sale or disposition by the Company of all or substantially all of the Company's assets (or any transaction having a similar effect). 7 3.4 PERMANENT AND TOTAL DISABILITY. Upon the receipt of benefits by a Participant under his or her Base Plan based on a determination of Permanent and Total Disability, he or she shall be eligible for life for an annual benefit determined by calculating the Participant's annual "Disability Retirement Benefit" under the Base Plan in accordance with the CECP SERP Formula as prescribed in Section 2.1. 3.5 IMMEDIATE PRE-RETIREMENT SURVIVING SPOUSE BENEFIT. Upon the death of a married Participant who is eligible for Early Retirement under his or her Base Plan but who has not yet retired under such plan, his or her surviving Spouse on the date of his or her death shall be eligible for life for an annual benefit determined by calculating the surviving Spouse's annual "Pre-Retirement Surviving Spouse Benefit" under the Participant's Base Plan in accordance with the CECP SERP Formula as prescribed in Section 2.1. 3.6 DEFERRED PRE-RETIREMENT SURVIVING SPOUSE BENEFIT. Upon the death of a married Participant who is vested but not eligible for Early Retirement under his or her Base Plan and who is in the "Active Service" of the Company (as defined in the Base Plan) on the date of his or her death, on the first day of the month following the date such Participant would have attained his or her earliest retirement eligibility under his or her Base Plan as a vested Participant, his or her surviving Spouse on the date of his or her death shall be eligible for life for an annual benefit determined by calculating the surviving Spouse's annual "Deferred Pre-retirement Surviving Spouse Benefit" under the Participant's Base Plan in accordance with the CECP SERP Formula as prescribed in Section 2.1. 3.7 SURVIVING CHILDREN'S BENEFIT. Upon the death of a Participant who is eligible for Early Retirement under his or her Base Plan and who is in the "Active Service" of the Company (as defined in the Base Plan), the surviving "Child" (as defined in the Base Plan) of a Participant (a) who has no surviving Spouse on the date of his or her death, or (b) whose surviving Spouse dies while receiving or while eligible to receive survivor benefits under the Base Plan shall be eligible until such Child's attainment of age 23 for an annual benefit determined by calculating the Child's annual "Surviving Children's Benefit" under 8 the Participant's Base Plan in accordance with the CECP SERP Formula as prescribed in Section 2.1. The benefit shall be divided equally among all such Children as defined in the Base Plan and an equal share shall be paid to such Child while he qualifies as a Child. The portion of the benefit payable to each such Child shall be redetermined as of the last day of the month following the date a recipient ceases to be a Child and the remaining such Children shall thereupon receive an equal share of such benefit. 9 ARTICLE IV - PAYMENT OF BENEFITS 4.1 FORM OF PAYMENT. (A) NORMAL FORM OF PAYMENT. Except as otherwise provided in Paragraph (b) of this Section 4.1, a benefit under the Plan shall be paid in the form of the benefit paid with respect to the Participant under his or her Base Plan. Any election, designation of a beneficiary(ies) or contingent annuitant(s), or revocation made prior to the Participant's "Benefit Starting Date" and in effect under the Participant's Base Plan shall be in effect under the Plan. (B) LUMP SUM FORM OF PAYMENT. Notwithstanding the provisions of Paragraph (a) of this Section 4.1, a Participant, who is eligible for Early Retirement or who will become eligible for Early Retirement within 13 months, may elect to receive the present value of the benefits payable to him or her under the Plan, as computed as of the last day of the month in which the earlier of the date of the Participant's Early Retirement or Normal Retirement occurs by utilizing the interest rate and mortality assumptions set forth in Table I, which may be modified from time to time by the Board of Directors of Honeywell Inc. (or, in the case of the Participant's earlier death, the present value of such benefits so computed as of the later of the last day of the month in which the Participant's death or the Participant's earliest retirement eligibility under his or her Base Plan occurs) in a lump sum cash payment. The Participant's written election to receive a lump sum cash payment shall be submitted on a form provided for that purpose by the Company, and consented to by the Participant's Spouse in writing if the Participant is married, and delivered to the Vice President, Corporate Compensation and Benefits, at least 13 months prior to the Participant's Early Retirement or Normal Retirement. Such Spouse's consent must acknowledge the effect of such election and 10 be witnessed by a notary public. If a Participant dies after making such election and prior to his or her Early Retirement or Normal Retirement, the lump sum cash payment shall be made to the Participant's surviving Spouse in accordance with Section 3.5 or Section 3.6, whichever may be applicable, or to the Participant's surviving Children in accordance with Section 3.7. 4.2 TIME OF PAYMENTS. Benefit payments pursuant to Sections 3.1 or 3.2, respectively, shall begin (or, in the event that the Participant has complied with Section 4.1(b), be paid) 30 days after the Participant's Normal Retirement or Early Retirement, as the case may be. Payments pursuant to Section 3.4 of the Plan shall commence 30 days after the later of (a) the last day of the calendar month in which the Participant is determined to be Permanently and Totally Disabled , or (b) 6 months after his or her last full day of active employment if he or she elects an immediate disability benefit under his or her Base Plan; but if he or she elects a deferred disability benefit under his or her Base Plan, payments shall commence (or, in the event that the Participant has complied with Section 4.1(b), the present value of such benefits shall be paid) 30 days after his or her Early Retirement or Normal Retirement. Payments pursuant to Section 3.5 and 3.6 of the Plan, shall commence (or, in the event that the Participant has complied with Section 4.1(b), the present value of such benefits shall be paid) 30 days after the Participant's death if he or she was eligible for Early Retirement of 30 days after the date he or she would have attained his or her earliest retirement eligibility under his or her Base Plan. Payments pursuant to Section 3.7 of the Plan shall commence (or, in the event that the Participant has complied with Section 4.1(b), the present value of such benefits shall be paid) 30 days after the date of the Participant's death. 4.3 PAYMENT SUBSEQUENT TO CHANGE IN CONTROL. (A) PAYMENT UPON TERMINATION OF EMPLOYMENT. Notwithstanding any Plan provision to the contrary, if subsequent to a Change in Control, a Participant's employment shall be terminated by the Participant for "Good Reason" (as defined in the Honeywell Key Employee Severance Plan) or by 11 the Company other than for "Cause" (as defined in the Honeywell Key Employee Severance Plan) or Permanent and Total Disability, the present value of the benefits payable pursuant to Section 3.3 (utilizing the interest rate and mortality assumptions set forth in Table I, which may be modified from time to time by the Board of Directors of Honeywell Inc.) and mortality assumptions shall be paid as a lump sum cash payment to the Participant on the fifth day after such termination. (B) PAYMENTS UPON IMPOSITION OF FEDERAL OR STATE TAXES. If subsequent to a Change in Control, any Participant is determined to be subject to Federal or state income tax on any amount accrued on his or her behalf under this Plan prior to the time of payment hereunder, Federal or state taxes attributable to the amount determined to be so taxable shall be distributed by the Plan to such Participant. An amount accrued on his or her behalf under this Plan shall be determined to be subject to Federal income tax upon the earliest of: (i) a final determination by the United States Internal Revenue Service addressed to the Participant which is not appealed to the courts; (ii) a final determination by the United States Tax Court or any other Federal Court affirming any such determination by the Internal Revenue Service; or (iii) an opinion by the Tax Counsel of the Company, addressed to the Company and the Trustee, that, by reason of Treasury Regulations, amendments to the Internal Revenue Code, published Internal Revenue Service rulings, court decisions or other substantial precedent, amounts accrued on a Participant's behalf hereunder are subject to Federal or state income tax prior to payment. 12 The Company shall undertake at its sole expense to defend any tax claims described herein which are asserted by the Internal Revenue Service or by any state revenue authority against any Participant subsequent to a Change in Control, including attorney fees and costs of appeal, and shall have the sole authority to determine whether or not to appeal any determination made by the Service, by any state revenue authority or by a lower court. The Company also agrees to reimburse any Executive for any interest or penalties in respect of Federal or state tax claims hereunder upon receipt of documentation of same. Any distributions from the Plan to a Participant under this Section 4.3(b) shall be applied in an equitable manner to reduce Company liabilities to such Participant under the Plans. 4.4 PAYMENTS SUBSEQUENT TO THE PARTICIPANT'S RETIREMENT. At any time before or after a Change in Control, a Participant, after he or she has retired under the provisions of the Base Plan on or after December 17, 1991, or the surviving Spouse or beneficiary of the Participant, after the Participant's death subsequent to such retirement on or after December 17, 1991, may elect to receive the present value of such benefits or remaining benefits to which he or she is entitled under this Plan in one lump sum cash payment at any time after the Participant's date of retirement or death, respectively, as computed as of the last day of the month in which the request is received by the Vice President, Corporate Compensation and Benefits, by utilizing the interest rate and mortality assumptions set forth in Table I, which may be modified from time to time by the Board of Directors of Honeywell Inc, and then reduced by a penalty, which shall be forfeited to the Company, (a) which is equal, before a Change in Control occurs, to 10 percent of the present value of any unpaid benefits, and (b) which is equal, after a Change in Control, to 6 percent of the present value of such unpaid benefits. Payment of such benefits shall be effected on the last day of the next month following the month in which the request is received. 13 ARTICLE V - ADMINISTRATION OF THE PLAN 5.1 PERSONNEL COMMITTEE. The Plan shall be administered by the Personnel Committee of Honeywell's Board of Directors which shall have the authority to determine Plan eligibility and the amount of Plan benefits to which a Participant or beneficiary is entitled to receive, to interpret the Plan, maintain records and issue such regulations as it shall from time to time deem appropriate. The Committee shall have absolute discretion in carrying out its responsibilities. No Participant or beneficiary of this Plan may be a member of this Committee. The interpretations of such Committee shall be final. 14 ARTICLE VI - AMENDMENT AND TERMINATION 6.1 AMENDMENT AND TERMINATION. The Board of Directors of Honeywell Inc. may amend or terminate the Plan at any time, provided, however, that no such amendment or termination shall adversely affect a benefit payable on the Normal or Early Retirement, death or Permanent and Total Disability of a Participant with respect to the Participant's employment by the Company prior to the date of such amendment or termination unless such benefit is or becomes payable under another plan or practice adopted by such Board of Directors. In the event of termination of the Plan, any benefits which have accrued hereunder shall be paid in the form and at the time determined under Section 4.1(a) of the Plan. 15 ARTICLE VII - GENERAL CONDITIONS 7.1 NON-ASSIGNABILITY OF THE RIGHT TO RECEIVE BENEFITS. The right to receive benefits under the Plan may not be anticipated, alienated, sold, transferred, assigned, pledged, encumbered, or subjected to any charge or legal process. 7.2 APPLICABLE LAW. All questions pertaining to the construction, validity and effect of the Plan shall be determined in accordance with the laws of the United States and the State of Minnesota, other than its laws respecting choice of law. 16 ARTICLE VIII - FUNDING 8.1 SOURCE OF PAYMENTS. All payments hereunder shall be paid in cash from the general funds of the Company, and no special or separate fund shall be established since it is the intent to pay benefits as they become payable from operating revenue. The Company may, however, in its sole discretion, establish a separate reserve which may be held by it from which such benefits may be paid. The foregoing shall not preclude the establishment by the Company of a "rabbi trust" or the use of assets contributed to a "rabbi trust" to pay benefits under the Plan. 8.2 STATUS OF PARTICIPANTS. A Participant shall have no right, title, or interest whatever in or to any investments which the Company may make to aid it in meeting its obligations hereunder. Nothing contained in this Plan, and no action taken pursuant to its provisions, shall create or be construed to create a trust of any kind, or a fiduciary relationship, between the Company and a Participant or any other person. To the extent that any person acquires a right to receive payments from the Company, such right shall be no greater than the right of an unsecured creditor. 8.3 FICA AND FUTA CONTRIBUTIONS ON PLAN BENEFITS. All amounts which have accrued to a Participant under this Plan with respect to a Participant's service with the Company after December 31, 1983, as provided in this Section 8.3 shall be considered "wages" for purposes of the Federal Insurance Contribution Act ("FICA") and the Federal Unemployment Tax Act ("FUTA") as of the earliest of (i) the date of the commencement of the Participant's Normal Retirement benefits, Early Retirement benefits, Total and Permanent Disability benefits, or commencement of Pre-retirement Surviving Spouse Benefits to the Participant's spouse or Surviving Children's Benefit to his or her Child or Children ("Benefit Commencement Date"); (ii) the date in 1993 on which an active Participant submitted an application for retirement benefits under the Base Plan or resigned his or her employment with the Company, effective in 1994 but prior to July 1, 1994; or (iii) the date in 1993 on which a specified accrued benefit is determined with 17 respect to any other Participant in the Plan who is designated by the Vice President Corporate Human Resources and approved by the Chief Executive Officer of the Company prior to December 31, 1993. Effective with the first payment made under the Plan after December 31, 1990, any amount taken into account as wages with respect to a Participant's Benefit Commencement Date occurring after the applicable effective date specified in the Social Security Amendment of 1983 by reason of this Section 8.3 shall not again be treated as wages for FICA or FUTA purposes. However, no Participant shall be entitled to a refund from the Company of any previously paid FICA or FUTA contributions as a result of the application of this Section 8.3. In order to compute the present value of a Participant's benefit under this Plan for purposes of determining the amount of any FICA or FUTA contribution payable with respect to such benefit, such present value shall be determined in accordance with Table I. 18 ARTICLE IX - CLAIMS PROCEDURE 9.1 FILING OF A CLAIM FOR BENEFITS. Upon denial of benefits by the Company, the Participant or the Participant's beneficiary shall make a claim to the Personnel Committee or its delegatee(s) for the benefits provided under the Plan in the manner provided in this Article. 9.2 NOTIFICATION TO CLAIMANT OF DECISION. If a claim is wholly or partially denied, notice of the decision, meeting the requirements of Section 9.3 shall be furnished to the claimant within 90 days after receipt of the claim by the Personnel Committee, unless special circumstances, such as the need to hold a hearing, require an extension of time for processing the claim. If an extension of time is required, written notice of the extension shall be furnished to the claimant prior to the end of the initial 90 day period, indicating the special circumstances requiring the extension and the date by which a final decision is expected. An extension of time shall in no event exceed a period of 90 days from the end of the initial 90 day period. If notice of the denial of a claim is not furnished in accordance with the provisions of this Section, the claim shall be deemed denied and the claimant may proceed with the review procedure set forth in Section 9.4. 9.3 CONTENT OF NOTICE. The Personnel Committee or its delegatee(s) shall provide to any claimant who is denied a claim for benefits written notice setting forth in a manner calculated to be understood by the claimant, the following: (a) The specific reason or reasons for the denial; (b) Specific reference to pertinent provisions of the Plan on which the denial is based; (c) A description of any additional material or information necessary for the claimant to perfect the claim and an explanation of why such material or 19 information necessary for the claimant to perfect the claim and an explanation of why such material or information is necessary; and (d) An explanation of the Plan's claim review procedure, as set forth in Sections 9.4 and 9.5, together with any review procedures specified by the Personnel Committee. 9.4 REVIEW PROCEDURE. The purpose of the review procedures set forth in this Section 9.4 as follows is to provide a procedure by which a claimant under this Plan may have a reasonable opportunity to appeal a denial of a claim to the Personnel Committee for a full and fair review. To accomplish that purpose, the claimant or his or her duly authorized representative: (a) May request a review upon written application to the Personnel Committee, (b) May review pertinent documents; and (c) May submit issues and comments in writing. A claimant (or his or her duly authorized representative) shall request a review by filing a written application for review with the Personnel Committee at any time within 60 days after receipt by the claimant of written notice of the denial of the claim. 9.5 DECISION ON REVIEW. A decision of a denied claim shall be made in the following manner: (a) The decision on review shall be made by the Personnel Committee or by its delegatee(s), which may in its discretion hold a hearing on the denied claim. The Personnel Committee shall make its decision promptly, and not later than 60 days after receipt of the request for review, unless special 20 circumstances (such as the need to hold a hearing) require an extension of time for processing, in which case a decision shall be rendered as soon as possible, but not later than 120 days after receipt of the request for review. If an extension of time for review is required because of special circumstances, written notice of the extension shall be furnished to the claimant prior to the commencement of the extension. If the decision on review is not furnished within the time specified, the claim shall be deemed denied on review. (b) The decision on review shall be in writing and shall include specific reasons for the decision, written in a manner calculated to be understood by the claimant, and specific references to the pertinent provisions of the Plan on which the decision is based. 21 TABLE I Actuarial Assumptions for Lump Sum Payments (Amended through December 21, 1993) The present value of Plan benefits for purposes of Section 4.1(b), Section 4.3(a), Section 4.4, and Section 8.3 shall be calculated using the following actuarial assumptions: Interest: 8-1/2 percent per annum discount rate Mortality: 1983 Group Annuity Mortality Table for healthy males EX-10 10 EXHIBIT 10(III)(K) SRP12/93 HONEYWELL SUPPLEMENTARY RETIREMENT PLAN (SRP SERP) (Amended Through December 21, 1993) TABLE OF CONTENTS ARTICLE I - DEFINITIONS. . . . . . . . . . . . . . . . . . . . . . . . . . . 1 1.1 ACT. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1 1.2 BASE PLAN. . . . . . . . . . . . . . . . . . . . . . . . . . . . 1 1.3 CODE . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1 1.4 COMPANY. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1 1.5 EARLY RETIREMENT . . . . . . . . . . . . . . . . . . . . . . . . 1 1.6 HONEYWELL. . . . . . . . . . . . . . . . . . . . . . . . . . . . 1 1.7 NORMAL RETIREMENT. . . . . . . . . . . . . . . . . . . . . . . . 2 1.8 PARTICIPANT. . . . . . . . . . . . . . . . . . . . . . . . . . . 2 1.9 PERMANENT AND TOTAL DISABILITY . . . . . . . . . . . . . . . . . 2 1.10 PLAN . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2 1.11 SPOUSE . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2 ARTICLE II - SRP SERP FORMULA. . . . . . . . . . . . . . . . . . . . . . . . 3 2.1 PLAN FORMULA . . . . . . . . . . . . . . . . . . . . . . . . . . 3 ARTICLE III - BENEFITS . . . . . . . . . . . . . . . . . . . . . . . . . . . 5 3.1 NORMAL RETIREMENT. . . . . . . . . . . . . . . . . . . . . . . . 5
3.2 EARLY RETIREMENT . . . . . . . . . . . . . . . . . . . . . . . . 5 3.3 CHANGE IN CONTROL. . . . . . . . . . . . . . . . . . . . . . . . 5 3.4 PERMANENT AND TOTAL DISABILITY . . . . . . . . . . . . . . . . . 7 3.5 IMMEDIATE PRE-RETIREMENT SURVIVING SPOUSE BENEFIT. . . . . . . . 7 3.6 DEFERRED PRE-RETIREMENT SURVIVING SPOUSE BENEFIT . . . . . . . . 7 3.7 SURVIVING CHILDREN'S BENEFIT . . . . . . . . . . . . . . . . . . 7 ARTICLE IV - PAYMENT OF BENEFITS . . . . . . . . . . . . . . . . . . . . . . 9 4.1 FORM OF PAYMENT. . . . . . . . . . . . . . . . . . . . . . . . . 9 4.2 TIME OF PAYMENTS . . . . . . . . . . . . . . . . . . . . . . . . 10 4.3 PAYMENT SUBSEQUENT TO A CHANGE IN CONTROL. . . . . . . . . . . . 10 4.4 PAYMENTS SUBSEQUENT TO THE PARTICIPANT'S RETIREMENT. . . . . . . 12 ARTICLE V - ADMINISTRATION OF THE PLAN . . . . . . . . . . . . . . . . . . . 13 5.1 PERSONNEL COMMITTEE. . . . . . . . . . . . . . . . . . . . . . . 13 ARTICLE VI - AMENDMENT AND TERMINATION . . . . . . . . . . . . . . . . . . . 14 6.1 AMENDMENT AND TERMINATION. . . . . . . . . . . . . . . . . . . . 14 ARTICLE VII - GENERAL CONDITIONS . . . . . . . . . . . . . . . . . . . . . . 15 7.1 NON-ASSIGNABILITY OF THE RIGHT TO RECEIVE BENEFITS . . . . . . . 15 7.2 APPLICABLE LAW . . . . . . . . . . . . . . . . . . . . . . . . . 15 ARTICLE VIII - FUNDING . . . . . . . . . . . . . . . . . . . . . . . . . . . 16 8.1 SOURCE OF PAYMENTS . . . . . . . . . . . . . . . . . . . . . . . 16 8.2 STATUS OF PARTICIPANTS . . . . . . . . . . . . . . . . . . . . . 16 8.3 FICA AND FUTA CONTRIBUTIONS ON PLAN BENEFITS . . . . . . . . . . 16 TABLE I. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
SRP12/93 HONEYWELL SUPPLEMENTARY RETIREMENT PLAN (SRP SERP) (Amended Through December 21, 1993) ARTICLE I - DEFINITIONS 1.1 ACT. The Employee Retirement Income Security Act of 1974, as from time to time amended. 1.2 BASE PLAN. The Honeywell Retirement Benefit Plan, as from time to time amended. 1.3 CODE. The Internal Revenue Code of 1986, as from time to time amended. 1.4 COMPANY. Honeywell Inc. and any subsidiary which is designated for inclusion in the Plan as hereafter defined by the Board of Directors of Honeywell Inc. 1.5 EARLY RETIREMENT. Retirement by a Participant under his or her Base Plan, which is defined as the termination of employment on or after his or her 55th birthday and after he or she has been credited with 10 or more years of "Credited Service for Benefit Accrual" under his or her Base Plan. 1.6 HONEYWELL. Honeywell Inc., a Delaware corporation. 1.7 NORMAL RETIREMENT. Retirement by a Participant on or after his or her "Social Security Retirement age as defined under his or her Base Plan. 1.8 PARTICIPANT. An employee of the Company who is a participant in the Base Plan on or after February 1, 1976, whose benefit under such plan on his or her Normal Retirement Date, if he or she continued as a Participant with earnings as defined in the Base Plan at or in excess of his or her current earnings, if computed without regard to the provisions of the Base Plan limiting the maximum benefit payable thereunder to the maximum benefit permitted by Section 415 of the Code for a pension plan qualifying under Section 401 of the Code, would exceed such maximum. No controlling shareholder or independent contractor shall be a Participant. 1.9 PERMANENT AND TOTAL DISABILITY. The disability of a Participant whereby such Participant is wholly disabled by bodily injury or disease and will be permanently, continuously and wholly prevented thereby for life from engaging in any occupation or employment for wage or profit. 1.10 PLAN. The Honeywell Supplementary Retirement Plan, as amended through September 15, 1992. 1.11 SPOUSE. A person who is formally married to a Participant as determined by the Honeywell Pension and Retirement Administrative Committee for purposes of the Base Plan. 2 ARTICLE II - SRP SERP FORMULA 2.1 PLAN FORMULA. That annual benefit equal to Paragraph (a) minus Paragraph (b); (a) The applicable benefit computed under the Base Plan: (i) by excluding under the definition of "Earnings" for the purpose of arriving at "Final Average Earnings" under the Base Plan his or her "Earnings" under the Base Plan which are in excess of the Earnings Limitation; (ii) by excluding under the definition of "Earnings" for purposes of arriving at "Final Average Earnings" under the Base Plan the amount of any defined incentive award in the year in which the award would otherwise have been paid by the Corporate Executive Compensation Plan; (iii) by disregarding the provisions of such Base Plan limiting the maximum benefit payable thereunder to the maximum benefit permitted by the provisions of Section 415 of the Code in a pension plan qualifying under Section 401 of the Code; (iv) by not exceeding the Participant's frozen "Accrued Benefit" determined under the Base Plan as of June 30, 1989 (or June 30, 1990, whichever may be applicable) as required by Section 8.2 of that Plan; and (v) by excluding "Augmented Credited Service for Benefit Accrual" under the Mid-Career SERP, if such Plan is applicable to the Participant. 3 (b) the applicable benefit computed under the Base Plan: (i) by excluding under the definition of "Earnings" for the purpose of arriving at "Final Average Earnings" under the Base Plan his or her "Earnings" under the Base Plan which are in excess of the Earnings Limitation; (ii) by excluding under the definition of "Earnings" for purposes of arriving at "Final Average Earnings" under the Base Plan the amount of any defined incentive award in the year in which the award would otherwise have been paid by the Corporate Executive Compensation Plan; (iii) by applying the provisions of such Base Plan limiting the maximum benefit payable thereunder to the maximum benefit permitted by the provisions of Section 415 of the Code in a pension plan qualifying under Section 401 of the Code; (iv) by not exceeding the Participant's frozen "Accrued Benefit" determined under the Base Plan as of June 30, 1989 (or June 30, 1990, whichever may be applicable) as required by Section 8.2 of that Plan; and (v) by excluding "Augmented Credited Service for Benefit Accrual" under the Mid-Career SERP, if such Plan is applicable to the Participant. 4 ARTICLE III - BENEFITS 3.1 NORMAL RETIREMENT. Upon Normal Retirement, a Participant shall be eligible for life for an annual benefit determined by calculating the Participant's annual "Normal Retirement Benefit" under the Base Plan in accordance with the SRP SERP Formula as prescribed in Section 2.1. 3.2 EARLY RETIREMENT. Upon Early Retirement, a Participant shall be eligible for life for an annual benefit determined by calculating the Participant's annual "Early Retirement Benefit" under the Base Plan in accordance with the SRP SERP Formula as prescribed in Section 2.1. 3.3 CHANGE IN CONTROL. In the event of a "Change in Control," as defined in this Section for all purposes of the Plan, each Participant's accrued benefit under the Plan shall become immediately and fully vested and shall be paid to the Participant in accordance with Section 3.3 of the Plan. For purposes of this Plan, a "Change in Control" of the Company shall have occurred if: (a) any "person," as such term is used in Sections 13(d) and 14(d) of the Securities Exchange Act of 1934, as amended (the "Exchange Act") (other than the Company, any trustees or other fiduciary holding securities under an employee benefit plan of the Company or any corporation owned, directly or indirectly, by the stockholders of the Company in substantially the same proportions as their ownership of stock of the Company), is or becomes the "beneficial owner" (as defined in Rule 13d-3 under the Exchange Act), directly or indirectly, of securities of the Company representing 30 percent or more of the combined voting power of the Company's then outstanding securities; 5 (b) during any period of two consecutive years (not including any period prior to the execution of this amendment to the Plan), individuals who at the beginning of such period constitute the Board of Directors of the Company (the "Board"), and any new director (other than a director designated by a person who has entered into an agreement with the Company to effect a transaction described in clause (a), (c) or (d) of this Section) whose election by the Board of nomination for election by the Company's stockholders was approved by a vote of at least two- thirds of the directors then still in office who either were directors at the beginning of the period or whose election or nomination for election was previously so approved, cease for any reason to constitute at least a majority thereof; (c) the stockholders of the Company approve a merger or consolidation of the Company with any other corporation, other than (i) a merger or consolidation which would result in the voting securities of the Company outstanding immediately prior thereto continuing to represent (either by remaining outstanding or by being converted into voting securities of the surviving entity) more than 50 percent of the combined voting power of the voting securities of the Company or such surviving entity outstanding immediately after such merger or consolidation or (ii) a merger or consolidation effected to implement a recapitalization of the Company (or similar transaction) in which no "person" (as hereinabove defined) acquires more than 30 percent of the combined voting power of the Company's then outstanding securities; or (d) the stockholders of the Company approve a plan of complete liquidation of the Company or an agreement for the sale or disposition by the Company of all or substantially all of the Company's assets (or any transaction having a similar effect). 6 3.4 PERMANENT AND TOTAL DISABILITY. Upon the receipt of benefits by a Participant under his or her Base Plan, based on a determination of Permanent and Total Disability, he or she shall be eligible for life for an annual benefit determined by calculating the Participant's annual "Disability Retirement Benefit" under the Base Plan in accordance with the SRP SERP Formula as prescribed in Section 2.1. 3.5 IMMEDIATE PRE-RETIREMENT SURVIVING SPOUSE BENEFIT. Upon the death of a married Participant who is eligible for Early Retirement under his or her Base Plan but who has not yet retired under such Plan, his or her surviving Spouse on the date of his or her death shall be eligible for life for an annual benefit determined by calculating the surviving Spouse's annual "Pre-Retirement Surviving Spouse Benefit" under the Participant's Base Plan in accordance with the SRP SERP Formula as prescribed in Section 2.1. 3.6 DEFERRED PRE-RETIREMENT SURVIVING SPOUSE BENEFIT. Upon the death of a married Participant who is vested but not eligible for Early Retirement under his or her Base Plan and who is in the "Active Service" of the Company (as defined in the Base Plan) on the date of his or her death, on the first day of the month following the date such married Participant would have attained his or her earliest retirement eligibility under his or her Base Plan as a vested Participant, his or her surviving Spouse the date of his or her death shall be eligible for life for an annual benefit determined by calculating the surviving Spouse's annual "Deferred Pre-Retirement Surviving Spouse Benefit" under the Participant's Base Plan in accordance with the SRP SERP Formula as prescribed in Section 2.1. 3.7 SURVIVING CHILDREN'S BENEFIT. Upon the death of a Participant who is eligible for Early Retirement under his or her Base Plan and who is in the "Active Service" of the Company (as defined in the Base Plan), the surviving "Child" (as defined in the Base Plan) of a Participant (a) who has no surviving Spouse on the date of his or her death, or (b) whose surviving Spouse dies while receiving or while eligible to receive survivor benefits under the Base Plan shall be eligible until such Child's attainment of age 23 for an annual 7 benefit determined by calculating the Child's annual "Surviving Children's Benefit" under the Participant's Base Plan in accordance with the SRP SERP Formula as prescribed in Section 2.1. The benefit shall be divided equally among all such Children as defined in the Base Plan and an equal share shall be paid to such Child while he qualifies as a Child. The portion of the benefit payable to each such Child shall be redetermined as of the last day of the month following the date a recipient ceases to be a Child and the remaining such Children shall thereupon receive an equal share of such benefit. 8 ARTICLE IV - PAYMENT OF BENEFITS 4.1 FORM OF PAYMENT. (A) NORMAL FORM OF PAYMENT. Except as otherwise provided in Paragraph (b) of this Section 4.1, a benefit under the Plan shall be paid in the form of the benefit paid with respect to the Participant under his or her Base Plan. Any election, designation of a beneficiary(ies) or contingent annuitant(s), or revocation made prior to the Participant's "Benefit Starting Date" and in effect under the Participant's Base Plan shall be in effect under the Plan. (B) LUMP SUM FORM OF PAYMENT. Notwithstanding the provisions of Paragraph (a) of this Section 4.1, a Participant, who is eligible for Early Retirement or who will be eligible for Early Retirement within 13 months, may elect to receive the present value of the benefits payable to him or her under the Plan, as computed as of the last day of the month in which the earlier of the date of the Participant's Early Retirement or Normal Retirement occurs by utilizing the interest rate and mortality assumptions set forth on Table I, which may be modified from time to time by the Board of Directors of Honeywell Inc. (or, in the case of the Participant's earlier death, the present value of such benefits so computed as of the later of the last day of the month in which the Participant's death or the Participant's earliest retirement eligibility under his or her Base Plan occurs) in a lump sum cash payment. The Participant's written election to receive a lump sum cash payment shall be submitted on a form provided for that purpose by the Company, and consented to by the Participant's Spouse in writing if the Participant is married, and delivered to the Vice President, Corporate Compensation and Benefits, at least 13 months prior to the Participant's Early Retirement or Normal Retirement. Such Spouse's consent must acknowledge the effect of such election and 9 be witnessed by a notary public. If a Participant dies after making such election and prior to his or her Early Retirement or Normal Retirement, the lump sum cash payment shall be made to the Participant's surviving Spouse in accordance with Section 3.5 or Section 3.6, whichever may be applicable, or to the Participant's surviving Children in accordance with Section 3.7. 4.2 TIME OF PAYMENTS. Benefit payments paid pursuant to Sections 3.1 or 3.2, respectively, shall begin (or, in the event that the Participant has complied with Section 4.1(b), be paid) 30 days after the Participant's Normal Retirement or Early Retirement, as the case may be. Payments pursuant to Section 3.4 of the Plan shall commence 30 days after the later of (a) the last day of the calendar month in which the Participant is determined to have become Permanently and Totally Disabled under his or her Base Plan or (b) 6 months after his or her last full day of active employment if he or she elects an immediate disability benefit under his or her Base Plan; but if he or she elects a deferred disability benefit under his or her Base Plan, payments shall commence (or, in the event that the Participant has complied with Section 4.1(b), the present value of such benefits shall be paid) 30 days after his or her Early Retirement or Normal Retirement. Payments pursuant to Sections 3.5 and 3.6 of the Plan shall commence (or, in the event that the Participant has complied with Section 4.1(b), the present value of such benefits shall be paid) 30 days after the Participant's death if he or she was eligible for Early Retirement or 30 days after the date he or she would have attained his or her earliest retirement eligibility under his or her Base Plan. Payments pursuant to Section 3.7 of the Plan shall commence (or, in the event that the Participant has complied with Section 4.1(b), the present value of such benefits shall be paid) 30 days after the date of the Participant's death. 4.3 PAYMENT SUBSEQUENT TO A CHANGE IN CONTROL. (A) PAYMENT UPON TERMINATION OF EMPLOYMENT. Notwithstanding any Plan provision to the contrary, if subsequent to a Change in Control, a Participant's employment shall be terminated by the 10 Participant for "Good Reason" (as defined in the Honeywell Key Employee Severance Plan) or by the Company other than for "Cause" (as defined in the Honeywell Key Employee Severance Plan) or Permanent and Total Disability, the present value of the benefits payable pursuant to Section 3.3 (utilizing the interest rate and mortality assumptions set forth in Table I, which may be modified from time to time by the Board of Directors of Honeywell Inc.) shall be paid as a lump sum cash payment to the Participant on the fifth business day after such termination. (B) PAYMENT UPON IMPOSITION OF FEDERAL OR STATE INCOME TAXES. If subsequent to a Change in Control, any Participant is determined to be subject to Federal or state income tax on any amount accrued on his or her behalf under this Plan prior to the time of payment hereunder, Federal or state taxes attributable to the amount determined to be so taxable shall be distributed by the Plan to such Participant. An amount accrued on his or her behalf under this Plan shall be determined to be subject to Federal income tax upon the earliest of: (i) a final determination by the United States Internal Revenue Service addressed to the Participant which is not appealed to the courts; (ii) a final determination by the United States Tax Court or any other federal Court affirming any such determination by the Internal Revenue Services; or (iii) an opinion by the Tax Counsel of the Company addressed to the Company and the Trustee, that, by reason of Treasury Regulations, amendments to the Internal Revenue Code, published Internal Revenue Service rulings, court decisions or other substantial 11 precedent, amounts accrued on a Participants behalf hereunder are subject to Federal or state income tax prior to payment. The Company shall undertake at its sole expense to defend any tax claims described herein which are asserted by the Internal Revenue Service or by any state revenue authority against any Participant subsequent to a Change in Control, including attorney fees and costs of appeal, and shall have the sole authority to determine whether or not to appeal any determination made by the Service, by any state revenue authority or by a lower court. The Company also agrees to reimburse any Participant for any interest or penalties in respect of Federal or state tax claims hereunder upon receipt of documentation of same. Any distribution from the Plan to the Participant under this Section 4.3(b) shall be applied in an equitable manner to reduce Company liabilities to such Participant under the Plan. 4.4 PAYMENTS SUBSEQUENT TO THE PARTICIPANT'S RETIREMENT. At any time before or after a Change in Control, a Participant, after he or she has retired under the provisions of the Base Plan on or after December 17, 1991, or the surviving Spouse or beneficiary of the Participant, after the Participant's death subsequent to such retirement on or after December 17, 1991, may elect to receive the present value of his or her remaining benefits to which he or she is entitled under this Plan in one lump sum cash payment at any time after the Participant's date of retirement or death, respectively, as computed as of the last day of the month in which the request is received by the Vice President, Corporate Compensation and Benefits, by utilizing the interest rate and mortality assumptions set forth on Table I, which may be modified from time to time by the Board of Directors of Honeywell Inc., and then reduced by a penalty, which shall be forfeited to the Company, (a) which is equal, before a Change in Control, to 10 percent of the present value of any unpaid benefits, and (b) which is equal, after a Change in Control, to 6 percent of the present value of such unpaid benefits. Payment of such benefits shall be effected on the last day of the next month following the month in which the request is received. 12 ARTICLE V - ADMINISTRATION OF THE PLAN 5.1 PERSONNEL COMMITTEE. The Plan shall be administered by the Personnel Committee of Honeywell's Board of Directors which shall have the authority to determine Plan eligibility and the amount of Plan benefits to which a Participant or beneficiary is entitled to receive, interpret the Plan, maintain records and issue such regulations as it shall from time to time deem appropriate. The interpretations of such Committee shall be final. The Committee shall have absolute discretion in carrying out its responsibilities. No Participant or beneficiary of this Plan may be a member of this Committee. 13 ARTICLE VI - AMENDMENT AND TERMINATION 6.1 AMENDMENT AND TERMINATION. The Board of Directors of Honeywell Inc. may amend or terminate the Plan at any time, provided, however, that no such amendment or termination shall adversely affect a benefit payable on the Normal or Early Retirement, death or Permanent and Total Disability of a Participant with respect to the Participant's employment by the Company prior to the date of such amendment or termination unless such benefit is or becomes payable under another plan or practice adopted by such Board of Directors. In the event of termination of the Plan, any benefits which have accrued hereunder shall be paid in the form and at the time determined under Section 4.1(a) of the Plan. 14 ARTICLE VII - GENERAL CONDITIONS 7.1 NON-ASSIGNABILITY OF THE RIGHT TO RECEIVE BENEFITS. The right to receive benefits under the Plan may not be anticipated, alienated, sold, transferred, assigned, pledged, encumbered, or subjected to any charge or legal process. 7.2 APPLICABLE LAW. All questions pertaining to the construction, validity and effect of the Plan shall be determined in accordance with the laws of the United States and the State of Minnesota, other than its laws respecting choice of law. 15 ARTICLE VIII - FUNDING 8.1 SOURCE OF PAYMENTS. All payments hereunder shall be paid in cash from the general funds of the Company, and no special or separate fund shall be established since it is the intent to pay benefits as they become payable from operating revenue. The Company may, however, in its sole discretion, establish a separate reserve which may be held by it from which such benefits may be paid. The foregoing shall not preclude the establishment by the Company of a "rabbi trust" or the use of assets contributed to a "rabbi trust" to pay benefits under the Plan. 8.2 STATUS OF PARTICIPANTS. A Participant shall have no right, title, or interest whatever in or to any investments which the Company may make to aid it in meeting its obligations hereunder. Nothing contained in this Plan, and no action taken pursuant to its provisions, shall create or be construed to create a trust of any kind, or a fiduciary relationship, between the Company and a Participant or any other person. To the extent that any person acquires a right to receive payments from the Company, such right shall be no greater than the right of an unsecured creditor. 8.3 FICA AND FUTA CONTRIBUTIONS ON PLAN BENEFITS. All amounts which have accrued to a Participant under this Plan with respect to a Participant's service with the Company after December 31, 1983, as provided in this Section 8.3 shall be considered "wages" for purposes of the Federal Insurance Contribution Act ("FICA") and the Federal Unemployment Tax Act ("FUTA") as of the earliest of (i) the date of the commencement of the Participant's Normal Retirement benefits, Early Retirement benefits, Total and Permanent Disability benefits, or commencement of Pre-retirement Surviving Spouse Benefits to the Participant's spouse or Surviving Children's Benefits to his or her Child or Children ("Benefit Commencement Date"); (ii) the date in 1993 on which an active Participant submitted an application for retirement benefits under the Base Plan or resigned his or her employment with the Company, effective in 1994 but prior to July 1, 1994; or (iii) the date in 1993 on which a specified accrued benefit is determined with 16 respect to any other Participant in the Plan who is designated by the Vice President Corporate Human Resources and approved by the Chief Executive Officer of the Company prior to December 31, 1993. Effective with the first payment made under the Plan after December 31, 1990, any amount taken into account as wages with respect to a Participant's Benefit Commencement Date occurring after the applicable effective date specified in the Social Security Amendment of 1983 by reason of this Section 8.3 shall not again be treated as wages for FICA or FUTA purposes. However, no Participant shall be entitled to a refund from the Company of any previously paid FICA or FUTA contributions as a result of the application of this Section 8.3. In order to compute the present value of a Participant's benefit under this Plan for purposes of determining the amount of any FICA or FUTA contribution payable with respect to such benefit, such present value shall be determined in accordance with Table I. 17 TABLE I ACTUARIAL ASSUMPTIONS FOR LUMP SUM PAYMENTS (Amended through December 21, 1993) The present value of Plan benefits for purposes of Section 4.1(b), Section 4.3(a), Section 4.4 and Section 8.3 shall be calculated using the following actuarial assumptions: Interest: 8-1/2 percent per annum discount rate Mortality: 1983 Group Annuity Mortality Table for healthy males EX-10 11 EXHIBIT 10(III)(L) TSRP 12/93 HONEYWELL SUPPLEMENTARY EXECUTIVE RETIREMENT PLAN FOR BENEFITS IN EXCESS OF LIMITS UNDER TAX REFORM ACT OF 1986 (TRA SERP) (Amended Through December 21, 1993) TABLE OF CONTENTS ARTICLE I - DEFINITIONS. . . . . . . . . . . . . . . . . . . . . . . . . . . 1 1.1 ACT. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1 1.2 BASE PLAN. . . . . . . . . . . . . . . . . . . . . . . . . . . . 1 1.3 CODE . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1 1.4 COMPANY. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1 1.5 CORPORATE EXECUTIVE COMPENSATION PLAN (CECP) . . . . . . . . . . 1 1.6 CORPORATE EXECUTIVE COMPENSATION PLAN SERP . . . . . . . . . . . 1 1.7 EARLY RETIREMENT . . . . . . . . . . . . . . . . . . . . . . . . 2 1.8 EARNINGS LIMITATION. . . . . . . . . . . . . . . . . . . . . . . 2 1.9 EFFECTIVE DATE . . . . . . . . . . . . . . . . . . . . . . . . . 2 1.10 EXCESS BENEFIT PLAN. . . . . . . . . . . . . . . . . . . . . . . 2 1.11 HONEYWELL. . . . . . . . . . . . . . . . . . . . . . . . . . . . 2 1.12 MID-CAREER SERP. . . . . . . . . . . . . . . . . . . . . . . . . 2 1.13 NORMAL RETIREMENT. . . . . . . . . . . . . . . . . . . . . . . . 2 1.14 PARTICIPANT. . . . . . . . . . . . . . . . . . . . . . . . . . . 2 1.15 PERMANENT AND TOTAL DISABILITY . . . . . . . . . . . . . . . . . 3 1.16 PLAN . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3 1.17 SPOUSE . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
1.18 TRA '86 AMENDMENT DATE . . . . . . . . . . . . . . . . . . . . . 3 1.19 TWO HUNDRED THOUSAND ($200K) SERP. . . . . . . . . . . . . . . . 3 ARTICLE II - PLAN SERP FORMULA . . . . . . . . . . . . . . . . . . . . . . . 4 2.1 TRA SERP FORMULA . . . . . . . . . . . . . . . . . . . . . . . . 4 ARTICLE III - BENEFITS . . . . . . . . . . . . . . . . . . . . . . . . . . . 6 3.1 NORMAL RETIREMENT. . . . . . . . . . . . . . . . . . . . . . . . 6 3.2 EARLY RETIREMENT . . . . . . . . . . . . . . . . . . . . . . . . 7 3.3 CHANGE IN CONTROL. . . . . . . . . . . . . . . . . . . . . . . . 8 3.4 PERMANENT AND TOTAL DISABILITY . . . . . . . . . . . . . . . . . 10 3.5 IMMEDIATE PRE-RETIREMENT SURVIVING SPOUSE BENEFIT. . . . . . . . 11 3.6 DEFERRED SURVIVING SPOUSE BENEFIT. . . . . . . . . . . . . . . . 13 3.7 SURVIVING CHILDREN'S BENEFIT . . . . . . . . . . . . . . . . . . 14 ARTICLE IV - PAYMENT OF BENEFITS . . . . . . . . . . . . . . . . . . . . . . 15 4.1 FORM OF PAYMENT. . . . . . . . . . . . . . . . . . . . . . . . . 15 4.2 TIME OF PAYMENTS . . . . . . . . . . . . . . . . . . . . . . . . 16 4.3 PAYMENT SUBSEQUENT TO A CHANGE IN CONTROL. . . . . . . . . . . . 16 4.4 PAYMENTS SUBSEQUENT TO THE PARTICIPANT'S RETIREMENT. . . . . . . 18 ARTICLE V - ADMINISTRATION OF THE PLAN . . . . . . . . . . . . . . . . . . . 19 5.1 PERSONNEL COMMITTEE. . . . . . . . . . . . . . . . . . . . . . . 19 ARTICLE VI - AMENDMENT AND TERMINATION . . . . . . . . . . . . . . . . . . . 20 6.1 AMENDMENT AND TERMINATION. . . . . . . . . . . . . . . . . . . . 20 ARTICLE VII - GENERAL CONDITIONS . . . . . . . . . . . . . . . . . . . . . . 21 7.1 NON-ASSIGNABILITY OF THE RIGHT TO RECEIVE BENEFITS . . . . . . . 21 7.2 APPLICABLE LAW . . . . . . . . . . . . . . . . . . . . . . . . . 21
ARTICLE VIII - FUNDING . . . . . . . . . . . . . . . . . . . . . . . . . . . 22 8.1 SOURCE OF PAYMENTS . . . . . . . . . . . . . . . . . . . . . . . 22 8.2 STATUS OF PARTICIPANTS . . . . . . . . . . . . . . . . . . . . . 22 8.3 FICA AND FUTA CONTRIBUTIONS ON PLAN BENEFITS . . . . . . . . . . 22 ARTICLE IX - CLAIMS PROCEDURE. . . . . . . . . . . . . . . . . . . . . . . . 24 9.1 FILING OF A CLAIM FOR BENEFITS . . . . . . . . . . . . . . . . . 24 9.2 NOTIFICATION TO CLAIMANT OF DECISION . . . . . . . . . . . . . . 24 9.3 CONTENT OF NOTICE. . . . . . . . . . . . . . . . . . . . . . . . 24 9.4 REVIEW PROCEDURE . . . . . . . . . . . . . . . . . . . . . . . . 25 9.5 DECISION ON REVIEW . . . . . . . . . . . . . . . . . . . . . . . 25 Table I. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27
TSRP 12/93 HONEYWELL SUPPLEMENTARY EXECUTIVE RETIREMENT PLAN FOR BENEFITS IN EXCESS OF LIMITS UNDER TAX REFORM ACT OF 1986 (TRA SERP) (Amended Through December 21, 1993) ARTICLE I - DEFINITIONS 1.1 ACT. The Tax Reform Act of 1986. 1.2 BASE PLAN. The Honeywell Retirement Benefit Plan, as from time to time amended. 1.3 CODE. The Internal Revenue Code of 1986, as from time to time amended. 1.4 COMPANY. Honeywell Inc. and any subsidiary which is designated for inclusion in the Plan, as hereafter defined, by the Board of Directors of Honeywell Inc. 1.5 CORPORATE EXECUTIVE COMPENSATION PLAN (CECP). An incentive compensation plan maintained by the Company to provide incentive compensation for a select group of management or highly compensated employees, as from time to time amended. 1.6 CORPORATE EXECUTIVE COMPENSATION PLAN SERP. The Honeywell Supplementary Executive Compensation Plan for CECP Participants, as it may be amended from time to time, maintained to provide benefits for a select group of management or highly compensated employees who have deferred their incentive awards under the Honeywell Corporate Executive Compensation Plan. 1.7 EARLY RETIREMENT. Retirement by a Participant under his or her Base Plan, which is defined as the termination of employment on or after his or her 55th birthday and after he or she has been credited with 10 or more years of "Credited Service for Benefit Accrual" under the Base Plan. 1.8 EARNINGS LIMITATION. The maximum amount of compensation of a Participant and his or her family members permitted to be taken into account under the Base Plan pursuant to Section 401(a)(17) of the Code. 1.9 EFFECTIVE DATE. The original effective date of this Plan was July 1, 1989. The effective date of this amended and restated Plan is September 15, 1992. 1.10 EXCESS BENEFIT PLAN. The Honeywell Supplementary Retirement Plan, as it may be amended from time to time, maintained to provide benefits for a select group of management or highly compensated employees in excess of the limitations on contributions and benefits imposed by Section 415 of the Code. 1.11 HONEYWELL. Honeywell Inc., a Delaware corporation. 1.12 MID-CAREER SERP. The Honeywell Supplementary Executive Retirement Plan for Mid-Career Hires, as it may be amended from time to time, maintained for certain executives or highly compensated employees of the Company to provide augmented credited service for retirement benefit determination. 1.13 NORMAL RETIREMENT. Retirement by a Participant on or after his or her "Social Security Retirement Age" as defined under his or her Base Plan. 1.14 PARTICIPANT. An employee of the Company who is a participant in the Base Plan on or after July 1, 1989, and whose accrued benefit under the Base Plan, as a highly 2 compensated employee as defined under Section 414(q)(1)(A) or (B) of the Code, was frozen as of June 30, 1989, or June 30, 1990, in compliance with IRS Notice 88-131, Alternative IID. No controlling shareholder or independent contractor shall be a Participant. 1.15 PERMANENT AND TOTAL DISABILITY. The disability of a Participant whereby such Participant is wholly disabled by bodily injury or disease and will be permanently, continuously and wholly prevented thereby for life from engaging in any occupation or employment for wage or profit. 1.16 PLAN. The Honeywell Supplementary Executive Retirement Plan for Benefits in Excess of Limits under Tax Reform Act of 1986 ("TRA SERP"), maintained to provide benefits for a select group of management or highly compensated employees, effective July 1, 1989 and amended through September 15, 1992. 1.17 SPOUSE. A person who is formally married to a Participant as determined by the Honeywell Pension and Retirement Administrative Committee for purposes of the Base Plan. 1.18 TRA '86 AMENDMENT DATE. That date on which the Base Plan was amended to comply with the Act, January 2, 1991. 1.19 TWO HUNDRED THOUSAND ($200K) SERP. The Honeywell Supplementary Executive Retirement Plan for Compensation in Excess of $200,000. 3 ARTICLE II - PLAN SERP FORMULA 2.1 TRA SERP FORMULA. That annual benefit equal to Paragraph (a) minus Paragraph (b). (a) The applicable benefit computed under the Base Plan: (i) by including under the definition of "Earnings" for the purposes of arriving at "Final Average Earnings" under the Base Plan his or her "Earnings" under the Base Plan which are in excess of the Earnings Limitation; (ii) by including under the definition of "Earnings" for purposes of arriving at "Final Average Earnings" under the Base Plan the amount of any deferred incentive award in the year in which the award would otherwise have been paid by the Corporate Executive Compensation Plan; (iii) by disregarding the provisions of such Base Plan limiting the maximum benefit payable thereunder to the maximum benefit permitted by the provisions of Section 415 of the Code in a pension plan qualifying under Section 401 of the Code; (iv) by disregarding the Base Plan's amendment in compliance with IRS Notice 88-131, Alternative IID, which served to freeze the "Accrued Benefit" which highly compensated Base Plan participants were eligible to receive under the Base Plan pursuant to Section 5.8 of the Base Plan in effect on June 30, 1989, so as to apply the Base Plan formula in effect through the TRA '86 Amendment Date; and 4 (v) by excluding "Augmented Credited Service for Benefits Accrual" under the Mid-Career SERP, if such plan is applicable to the Participant. (b) the applicable benefit computed under the Base Plan: (i) by including under the definition of "Earnings" for the purposes of arriving at "Final Average Earnings" under the Base Plan his or her "Earnings" under the Base Plan which are in excess of the Earnings Limitation; (ii) by including under the definition of "Earnings" for purposes of arriving at "Final Average Earnings" under the Base Plan the amount of any deferred incentive award in the year in which the award would otherwise have been paid by the Corporate Executive Compensation Plan; (iii) by disregarding the provisions of such Base Plan limiting the maximum benefit payable thereunder to the maximum benefit permitted by the provisions of Section 415 of the Code in a pension plan qualifying under Section 401 of the Code; (iv) by not exceeding the Participant's frozen "Accrued Benefit" determined under the Base Plan as of June 30, 1989 (or June 30, 1990, whichever may be applicable) as required by Section 8.2 of that Plan; and (v) by excluding "Augmented Credited Service for Benefit Accrual" under the Mid-Career SERP, if applicable to the Participant. 5 ARTICLE III - BENEFITS 3.1 NORMAL RETIREMENT. (a) PRIOR TO TRA '86 AMENDMENT DATE Upon retirement before the TRA '86 Amendment Date, the Participant's annual "Normal Retirement Benefit" under his or her Base Plan computed (i) without regard to the Base Plan's amendment in compliance with IRS Notice 88-131, Alternative IID, which served to freeze the accrued benefit which highly compensated Base Plan participants are eligible to receive under the Base Plan pursuant to Section 5.8 of the Base Plan, (ii) by including under the definition of "Earnings" for the purpose of arriving at "Final Average Earnings" under the Base Plan his or her "Earnings" under the Base Plan which are in excess of the Earnings Limitation, (iii) by including under the definition of "Earnings" for purposes of arriving at "Final Average Earnings" under the Base Plan the amount of any deferred incentive award in the year in which the award would otherwise have been paid by the Corporate Executive Compensation Plan, and (iv) without regard to the provisions of such Base Plan limiting the maximum benefit payable thereunder to the maximum benefit permitted under the provisions of Section 415 of the Code in a pension plan qualifying under Section 401 of the Code, LESS (A) the amount of the greater of his or her annual "Normal Retirement Benefit" or "Minimum Normal Retirement Benefit" determined under his or her Base Plan, as limited pursuant to Section 5.8 of the Base Plan as a result of its amendment in compliance with IRS Notice 88-131, Alternative IID, which served to freeze his or her accrued benefit under the Base Plan, (B) the amount of his or her annual "Normal Retirement Benefit" provided to him or her under the $200K SERP, (C) the amount of his or her annual "Normal Retirement Benefit" provided to him or her under the Corporate Executive Compensation Plan SERP, and (D) the amount of the 6 annual "Normal Retirement Benefit" provided to him or her under the Excess Benefit Plan. (b) ON AND AFTER TRA '86 AMENDMENT DATE Upon retirement on or after the TRA '86 Amendment Date, a Participant shall be eligible for life for an annual benefit determined by calculating the Participant's annual "Normal Retirement Benefit" under the Base Plan in accordance with the TRA SERP Formula prescribed in Section 2.1. 3.2 EARLY RETIREMENT. Upon Early Retirement at or after his or her Early Retirement Date, a Participant shall be eligible for life for an annual benefit in an amount equal to the greater of his or her "Early Retirement Benefit" or "Minimum Early Retirement Benefit" under his or her Base Plan determined as follows: (a) PRIOR TO TRA '86 AMENDMENT DATE Upon Early Retirement before the TRA '86 Amendment Date, the Participant's annual "Early Retirement Benefit" under his or her Base Plan computed (i) without regard to the Base Plan's amendment in compliance with IRS Notice 88-131, Alternative IID, which served to freeze the accrued benefit which highly compensated Base Plan participants are eligible to receive under the Base Plan pursuant to Section 5.8 of the Base Plan, (ii) by including under the definition of "Earnings" for the purpose of arriving at "Final Average Earnings" under the Base Plan his or her "Earnings" under the Base Plan which are in excess of the Earnings Limitation, (iii) by including under the definition of "Earnings" for purposes of arriving at "Final Average Earnings" under the Base Plan the amount of any deferred incentive award in the year in which the award would otherwise have been paid by the Corporate Executive Compensation Plan, and (iv) without regard to the provisions of such Base Plan limiting the maximum benefit payable thereunder to the maximum benefit permitted under the provisions of 7 Section 415 of the Code in a pension plan qualifying under Section 401 of the Code, LESS (A) the greater of the amount of his or her annual "Early Retirement Benefit" or "Minimum Early Retirement Benefit" determined under his or her Base Plan, as limited pursuant to Section 5.8 of the Base Plan as a result of its amendment in compliance with IRS Notice 88-131, Alternative IID, which served to freeze his or her accrued benefit under the Base Plan, (B) the amount of his or her annual "Early Retirement Benefit" provided to him or her under the $200K SERP, (C) the amount of his or her annual "Early Retirement Benefit" provided to him or her under the Corporate Executive Compensation Plan SERP, and (D) the amount of the annual "Early Retirement Benefit" provided to him or her under the Excess Benefit Plan. (b) ON OR AFTER TRA '86 AMENDMENT DATE Upon Early Retirement on or after the TRA '86 Amendment Date, a Participant shall be eligible for life for an annual benefit determined by calculating the Participant's annual "Early Retirement Benefit" under the Base Plan in accordance with the TRA SERP Formula as prescribed in Section 2.1. 3.3 CHANGE IN CONTROL. In the event of a "Change in Control," as defined in this Section for all purposes of the Plan, each Participant's accrued benefit under the Plan shall become immediately and fully vested and shall be paid to the Participant in accordance with Section 4.3 of the Plan. For purposes of this Plan, a "Change in Control" of the Company shall have occurred if: (a) any "person," as such term is used in Sections 13(d) and 14(d) of the Securities Exchange Act of 1934, as amended (the "Exchange Act") (other than the Company, any trustees or other fiduciary holding securities under an employee benefit plan of the Company or any corporation owned, 8 directly or indirectly, by the stockholders of the Company in substantially the same proportions as their ownership of stock of the Company), is or becomes the "beneficial owner" (as defined in Rule 13d-3 under the Exchange Act), directly or indirectly, of securities of the Company representing 30% or more of the combined voting power of the Company's then outstanding securities; (b) during any period of two consecutive years (not including any period prior to the execution of this amendment to the Plan), individuals who at the beginning of such period constitute the Board of Directors of the Company (the "Board"), and any new director (other than a director designated by a person who has entered into an agreement with the Company to effect a transaction described in clause (a), (c) or (d) of this Section) whose election by the Board of nomination for election by the Company's stockholders was approved by a vote of at least two- thirds of the directors then still in office who either were directors at the beginning of the period or whose election or nomination for election was previously so approved, cease for any reason to constitute at least a majority thereof; (c) the stockholders of the Company approve a merger or consolidation of the Company with any other corporation, other than (i) a merger or consolidation which would result in the voting securities of the Company outstanding immediately prior thereto continuing to represent (either by remaining outstanding or by being converted into voting securities of the surviving entity) more than 50 percent of the combined voting power of the voting securities of the Company or such surviving entity outstanding immediately after such merger or consolidation or (ii) a merger or consolidation effected to implement a recapitalization of the Company (or similar transaction) in which no "person" (as hereinabove defined) acquires 9 more than 30 percent of the combined voting power of the Company's then outstanding securities; or (d) the stockholders of the Company approve a plan of complete liquidation of the Company or an agreement for the sale or disposition by the Company of all or substantially all of the Company's assets (or any transaction having a similar effect). 3.4 PERMANENT AND TOTAL DISABILITY. Upon the commencement of benefits by a Participant under his or her Base Plan, based on a determination of Permanent and Total Disability, he shall be eligible for life for an annual benefit in an amount equal to the annual "Disability Retirement Benefit" being paid to him or her under the Base Plan determined as follows: (a) PRIOR TO TRA '86 AMENDMENT DATE Upon the receipt of benefits before the TRA '86 Amendment Date, the Participant's "Disability Benefit" being paid to him/her under the Base Plan computed (i) without regard to the Base Plan's amendment in compliance with IRS Notice 88-131, Alternative IID, which served to freeze the accrued benefit which highly compensated Base Plan participants are eligible to receive under the Base Plan pursuant to Section 5.8 of the Base Plan, (ii) by including under the definition of "Earnings" for the purpose of arriving at "Final Average Earnings" under the Base Plan his or her "Earnings" under the Base Plan which are in excess of the Earnings Limitation, (iii) by including under the definition of "Earnings" for purposes of arriving at "Final Average Earnings" under the Base Plan the amount of any deferred incentive award in the year in which the award would otherwise have been paid by the Corporate Executive Compensation Plan, and (iv) without regard to the provisions of such Base Plan limiting the maximum benefit payable thereunder to the maximum benefit permitted under the provisions of 10 Section 415 of the Code in a pension plan qualifying under Section 401 of the Code, LESS (A) the amount of his or her annual "Disability Benefit" determined under his or her Base Plan, as limited pursuant to Section 5.8 of the Base Plan as a result of its amendment in compliance with IRS Notice 88-131, Alternative IID, which served to freeze his or her accrued benefit under the Base Plan, (B) the amount of his or her annual Disability Benefit provided to him or her under the $200K SERP, (C) the amount of his or her annual Disability Benefit provided to him or her under the Corporate Executive Compensation Plan SERP, and (D) the amount of the annual "Disability Benefit" provided to him or her under the Excess Benefit Plan. (b) ON OR AFTER TRA '86 AMENDMENT DATE Upon receipt of benefits on and after the TRA '86 Amendment Date, an annual benefit determined by calculating the Participant's annual "Disability Retirement Benefit" under the Base Plan in accordance with the TRA SERP Formula as prescribed in Section 2.1. 3.5 IMMEDIATE PRE-RETIREMENT SURVIVING SPOUSE BENEFIT. Upon the death of a married Participant who is eligible for Early Retirement under his or her Base Plan but who has not yet retired under such plan, his or her surviving Spouse on the date of his or her death shall be eligible for life for an annual benefit in an amount equal to such surviving Spouse's annual "Pre-retirement Surviving Spouse Benefit" under the Participant's Base Plan determined as follows: (a) PRIOR TO TRA '86 AMENDMENT DATE Upon the Participant's death before the TRA '86 Amendment Date, an annual surviving Spouse benefit computed (i) without regard to the Base Plan's amendment in compliance with IRS Notice 88-131, Alternative IID, which served to freeze the accrued benefit which highly compensated Base Plan participants are eligible to receive under the Base Plan pursuant to 11 Section 5.8 of the Base Plan, (ii) by including under the definition of "Earnings" for the purpose of arriving at "Final Average Earnings" under the Base Plan the deceased Participant's "Earnings" under the Base Plan which are in excess of the Earnings Limitation, (iii) by including under the definition of "Earnings" for purposes of arriving at "Final Average Earnings" under the Base Plan the amount of any deferred incentive award in the year in which the award would otherwise have been paid to the deceased Participant by the Corporate Executive Compensation Plan, and (iv) without regard to the provisions of such Base Plan limiting the maximum benefit payable thereunder to the maximum benefit permitted under the provisions of Section 415 of the Code in a pension plan qualifying under Section 401 of the Code, LESS (A) the amount of the surviving Spouse's annual "Pre-retirement Surviving Spouse Benefit" determined under the deceased Participant's Base Plan, as limited pursuant to Section 5.8 of the Base Plan as a result of its amendment in compliance with IRS Notice 88-131, Alternative IID, which served to freeze the Participant's accrued benefit under the Base Plan, (B) the amount of the surviving Spouse's annual "Pre-retirement Surviving Spouse Benefit" provided to such surviving Spouse under the $200K SERP, (C) the amount of the annual "Pre-retirement Surviving Spouse Benefit" provided to the surviving Spouse under the Corporate Executive Compensation Plan SERP, and (D) the amount of the annual "Pre-retirement Surviving Spouse Benefit" provided to such surviving Spouse under the Excess Benefit Plan. (b) ON OR AFTER TRA '86 AMENDMENT DATE Upon death of the Participant on or after the TRA '86 Amendment Date, an annual benefit determined by calculating the surviving Spouse's annual "Pre-Retirement Surviving Spouse Benefit" under the Participant's Base Plan in accordance with the TRA SERP Formula as prescribed in Section 2.1. 12 3.6 DEFERRED SURVIVING SPOUSE BENEFIT. Upon the death of a married Participant who is vested but not eligible for Early Retirement under his or her Base Plan and who is in the "Active Service" of the Company (as defined in the Base Plan) on the date of his or her death, on the first day of the month following the date such Participant would have attained his or her earliest retirement eligibility under his or her Base Plan as a vested Participant, his or her surviving Spouse the date of his or her death shall be eligible for life for an annual benefit in an amount equal to such surviving Spouse's annual "Deferred Pre-retirement Surviving Spouse Benefit" under the Participant's Base Plan, after any reductions have been applied, determined as follows: (a) PRIOR TO TRA '86 AMENDMENT DATE Upon the death of the Participant before the TRA '86 Amendment Date, an annual benefit computed (i) without regard to the Base Plan's amendment in compliance with IRS Notice 88-131, Alternative IID, which served to freeze the accrued benefit which highly compensated Base Plan participants are eligible to receive under the Base Plan pursuant to Section 5.8 of the Base Plan, (ii) by including under the definition of "Earnings" for the purpose of arriving at "Final Average Earnings" under the Base Plan the deceased Participant's "Earnings" under the Base Plan which are in excess of the Earnings Limitation, (iii) by including under the definition of "Earnings" for purposes of arriving at "Final Average Earnings" under the Base Plan the amount of any deferred incentive award in the year in which the award would otherwise have been paid to the deceased Participant by the Corporate Executive Compensation Plan, and (iv) without regard to the provisions of such Base Plan limiting the maximum benefit payable thereunder to the maximum benefit permitted under the provisions of Section 415 of the Code in a pension plan qualifying under Section 401 of the Code, LESS (A) the amount of the Surviving spouse's annual "Deferred Surviving Spouse Benefit" determined under the deceased Participant's Base Plan, as limited pursuant to Section 5.8 of the Base Plan as a result 13 of its amendment in compliance with IRS Notice 88-131, Alternative IID, which served to freeze his or her accrued benefit under the Base Plan, (B) the amount of the annual "Deferred Surviving Spouse Benefit" provided to such surviving Spouse under the $200K SERP, (C) the amount of the annual "Deferred Surviving Spouse Benefit" provided to the surviving Spouse under the Corporate Executive Compensation Plan SERP, and (D) the amount of the annual "Deferred Surviving Spouse Benefit" provided to the surviving Spouse under the Excess Benefit Plan. (b) ON OR AFTER TRA '86 AMENDMENT DATE Upon the death of a Participant on or after the TRA '86 Amendment Date, an annual benefit determined by calculating the surviving Spouse's annual "Deferred Pre-Retirement Surviving Spouse Benefit" under the Participant's Base Plan in accordance with the TRA SERP Formula as prescribed in Section 2.1. 3.7 SURVIVING CHILDREN'S BENEFIT. Upon the death of a Participant who is eligible for Early Retirement under his or her Base Plan and who is in the "Active Service" of the Company (as defined in the Base Plan), the surviving "Child" (as defined in the Base Plan) of a Participant (a) who has no surviving Spouse on the date of his or her death, or (b) whose surviving Spouse dies while receiving or while eligible to receive survivor benefits under the Base Plan shall be eligible until such Child's attainment of age 23 for an annual benefit determined by calculating the Child's annual "Surviving Children's Benefit" under the Participant's Base Plan in accordance with the TRA SERP Formula as prescribed in Section 2.1. 14 ARTICLE IV - PAYMENT OF BENEFITS 4.1 FORM OF PAYMENT. (a) NORMAL FORM OF PAYMENT. Except as otherwise provided in Paragraph (b) of this Section 4.1, a benefit under the Plan shall be paid in the form of the benefit paid with respect to the Participant under his or her Base Plan. Any election, designation of a beneficiary(ies) or contingent annuitant(s), or revocation made prior to the Participant's "Benefit Starting Date" and in effect under the Participant's Base Plan shall be in effect under the Plan. (b) LUMP SUM FORM OF PAYMENT. Notwithstanding the provisions of Paragraph (a) of this Section 4.1, a Participant, who is eligible for Early Retirement or who will be eligible for Early Retirement within 13 months, may elect to receive the present value of the benefits payable to him or her under the Plan, as computed as of the last day of the month in which the earlier of the dates of the Participant's Early Retirement or Normal Retirement occurs by utilizing the interest rate and mortality assumptions set forth in Table I, which may be modified from time to time by the Board of Directors of Honeywell Inc. (or, in the case of the Participant's earlier death, the present value of such benefits so computed as of the later of the last day of the month in which the Participant's death or the Participant's earliest retirement eligibility under his or her Base Plan occurs) in a lump sum cash payment. The Participant's written election to receive a lump sum cash payment shall be submitted on a form provided for that purpose by the Company and consented to by the Participant's Spouse in writing if the Participant is married and delivered to the Vice President, Corporate Compensation and Benefits, at least 13 months prior to the Participant's Early Retirement or Normal Retirement. Such Spouse's consent must acknowledge the effect of such election and 15 be witnessed by a notary public. If a Participant dies after making such election and prior to his or her Early Retirement or Normal Retirement, the lump sum cash payment shall be made to the Participant's surviving Spouse in accordance with Section 3.5 or Section 3.6, whichever may be applicable, or to the Participant's surviving Children in accordance with Section 3.7. 4.2 TIME OF PAYMENTS. Benefit payments paid pursuant to Sections 3.1 or 3.2, respectively, shall begin (or, in the event that the Participant has complied with Section 43.1(b), be paid) 30 days after the Participant's Normal Retirement or Early Retirement, as the case may be. Payments pursuant to Section 3.4 of the Plan shall commence 30 days after the later of (a) the last day of the calendar month in which the Participant is determined to be Permanently and Totally Disabled under his or her Base Plan or (b) 6 months after his or her last full day of active employment if he or she elects an immediate disability benefit under his or her Base Plan; but if he or she elects a deferred disability benefit under his or her Base Plan, payments shall commence (or, in the event that the Participant has complied with Section 4.1(b), the present value of such benefits shall be paid) 30 days after his or her Early Retirement or Normal Retirement. Payments pursuant to Section 3.5 and 3.6 of the Plan, shall commence (or, in the event that the Participant has complied with Section 4.1(b), the present value of such benefits shall be paid) 30 days after the Participant's death if he or she was eligible for Early Retirement or 30 days after the date he or she would have attained his or her earliest retirement eligibility under his or her Base Plan. Payments pursuant to Section 3.7 of the Plan shall commence (or, in the event that the Participant has complied with Section 4.1(b), the present value of such benefits shall be paid) 30 days after the date of the Participant's death. 4.3 PAYMENT SUBSEQUENT TO A CHANGE IN CONTROL. (a) PAYMENT UPON TERMINATION OF EMPLOYMENT. Notwithstanding any Plan provision to the contrary, if subsequent to a Change in Control, a Participant's employment shall be terminated by the Participant for "Good Reason" (as defined in the Honeywell Key Employee Severance Plan) or by 16 the Company other than for "Cause" (as defined in the Honeywell Key Employee Severance Plan) or Permanent and Total Disability, the present value of the benefits payable pursuant to Section 3.3, (utilizing the interest rate and mortality assumptions set forth in Table I, which may be modified from time to time by the Board of Directors of Honeywell Inc.) shall be paid as a lump sum cash payment to the Participant on the fifth day after such termination. (b) PAYMENT UPON IMPOSITION OF FEDERAL OR STATE TAXES. If subsequent to a Change in Control, any Participant is determined to be subject to Federal or state income tax on any amount accrued on his or her behalf under this Plan prior to the time of payment hereunder, Federal or state taxes attributable to the amount determined to be so taxable shall be distributed by the Plan to such Participant. An amount accrued on his or her behalf under this Plan shall be determined to be subject to Federal income tax upon the earliest of: (i) a final determination by the United States Internal Revenue Service addressed to the Participant which is not appealed to the courts; (ii) a final determination by the United States Tax Court or any other Federal Court affirming any such determination by the Internal Revenue Service; or (iii) an opinion by the Tax Counsel of the Company, addressed to the Company and the Trustee, that, by reason of Treasury Regulations, amendments to the Internal Revenue Code, published Internal Revenue Service rulings, court decisions or other substantial precedent, amounts accrued on a Participant's behalf hereunder are subject to Federal or state income tax prior to payment. 17 The Company shall undertake at its sole expense to defend any tax claims described herein which are asserted by the Internal Revenue Service or by any state revenue authority against any Participant subsequent to a Change in Control, including attorney fees and costs of appeal, and shall have the sole authority to determine whether or not to appeal any determination made by the Service, by any state revenue authority or by a lower court. The Company also agrees to reimburse any Executive for any interest or penalties in respect of Federal or state tax claims hereunder upon receipt of documentation of same. Any distributions from the Plan to a Participant under this Section 4.3(b) shall be applied in an equitable manner to reduce Company liabilities to such Participant under the Plans. 4.4 PAYMENTS SUBSEQUENT TO THE PARTICIPANT'S RETIREMENT. At any time before or after a Change in Control, a Participant, after he or she has retired under the provisions of the Base Plan on or after December 17, 1991, or the surviving Spouse or beneficiary of the Participant, after the Participant's death subsequent to such retirement on or after December 17, 1991, may elect to receive the present value of such benefits or remaining benefits to which he or she is entitled to under this Plan in one lump sum cash payment at any time after the Participant's date of retirement or death, respectively, as computed as of the last day of the month in which the request is received by the Vice President, Corporate Compensation and Benefits, by utilizing the interest rate and mortality assumptions set forth in Table I, which may be modified from time to time by the Board of Directors of Honeywell Inc., and then reduced by a penalty, which shall be forfeited to the Company, (a) which is equal, before a Change in Control occurs, to 10 percent of the present value of any unpaid benefits, and (b) which is equal, after a Change in Control occurs, to 6 percent of the present value of such unpaid benefits. Payment of such benefits shall be effected on the last day of the next month following the month in which the request is received. 18 ARTICLE V - ADMINISTRATION OF THE PLAN 5.1 PERSONNEL COMMITTEE. The Plan shall be administered by the Personnel Committee of Honeywell's Board of Directors which shall have the authority to determine Plan eligibility and the amount of Plan benefits to which a Participant or beneficiary is entitled to receive, interpret the Plan, maintain records and issue such regulations as it shall from time to time deem appropriate. The interpretations of such Committee shall be final. The Committee shall have absolute discretion in carrying out its responsibilities. No Participant or beneficiary of this Plan may be a member of this Committee. 19 ARTICLE VI - AMENDMENT AND TERMINATION 6.1 AMENDMENT AND TERMINATION. The Board of Directors of Honeywell Inc. may amend or terminate the Plan at any time, provided, however, that no such amendment or termination shall adversely affect a benefit payable on the Normal or Early Retirement, death or Permanent and Total Disability of a Participant with respect to the Participant's employment by the Company prior to the date of such amendment or termination unless such benefit is or becomes payable under another plan or practice adopted by such Board of Directors. In the event of termination of the Plan, any benefits which have accrued hereunder shall be paid in the form and at the time determined under Section 3.1(a) of the Plan. 20 ARTICLE VII - GENERAL CONDITIONS 7.1 NON-ASSIGNABILITY OF THE RIGHT TO RECEIVE BENEFITS. The right to receive benefits under the Plan may not be anticipated, alienated, sold, transferred, assigned, pledged, encumbered, or subjected to any charge or legal process. 7.2 APPLICABLE LAW. All questions pertaining to the construction, validity and effect of the Plan shall be determined in accordance with the laws of the United States and the State of Minnesota, other than its laws respecting choice of law. 21 ARTICLE VIII - FUNDING 8.1 SOURCE OF PAYMENTS. All payments hereunder shall be paid in cash from the general funds of the Company, and no special or separate fund shall be established since it is the intent to pay benefits as they become payable from operating revenue. The Company may, however, in its sole discretion, establish a separate reserve which may be held by it from which such benefits may be paid. The foregoing shall not preclude the establishment by the Company of a "rabbi trust" or the use of assets contributed to a "rabbi trust" to pay benefits under the Plan. 8.2 STATUS OF PARTICIPANTS. A Participant shall have no right, title, or interest whatever in or to any investments which the Company may make to aid it in meeting its obligations hereunder. Nothing contained in this Plan, and no action taken pursuant to its provisions, shall create or be construed to create a trust of any kind, or a fiduciary relationship, between the Company and a Participant or any other person. To the extent that any person acquires a right to receive payments from the Company, such right shall be no greater than the right of an unsecured creditor. 8.3 FICA AND FUTA CONTRIBUTIONS ON PLAN BENEFITS. All amounts which have accrued to a Participant under this Plan with respect to a Participant's service with the Company after December 31, 1983, as provided in this Section 7.3 shall be considered "wages" for purposes of the Federal Insurance Contribution Act ("FICA") and the Federal Unemployment Tax Act ("FUTA") as of the earliest of (i) the date of the commencement of the Participant's Normal Retirement benefits, Early Retirement benefits, Total and Permanent Disability benefits, or commencement of Pre-retirement Surviving Spouse Benefits to the Participant's spouse or Surviving Children's Benefit to his or her Child or Children ("Benefit Commencement Date"); (ii) the date in 1993 on which an active Participant submitted an application for retirement benefits under the Base Plan or resigned his or her employment with the Company, effective in 1994 but prior to July 1, 1994; or (iii) the date in 1993 on which a specified accrued benefit is determined with 22 respect to any other Participant in the Plan who is designated by the Vice President Corporate Human Resources and approved by the Chief Executive Officer of the Company prior to December 31, 1993. Effective with the first payment made under the Plan after December 31, 1990, any amount taken into account as wages with respect to a Participant's Benefit Commencement Date occurring after the applicable effective date specified in the Social Security Amendment of 1983 by reason of this Section 7.3 shall not again be treated as wages for FICA or FUTA purposes. However, no Participant shall be entitled to a refund from the Company of any previously paid FICA or FUTA contributions as a result of the application of this Section 7.3. In order to compute the present value of a Participant's benefit under this Plan for purposes of determining the amount of any FICA or FUTA contribution payable with respect to such benefit, such present value shall be determined in accordance with Table I. 23 ARTICLE IX - CLAIMS PROCEDURE 9.1 FILING OF A CLAIM FOR BENEFITS. Upon denial of benefits by the Company, the Participant or the Participant's beneficiary shall make a claim to the Personnel Committee or its delegatee(s) for the benefits provided under the Plan in the manner provided in this Article. 9.2 NOTIFICATION TO CLAIMANT OF DECISION. If a claim is wholly or partially denied, notice of the decision, meeting the requirements of Section 8.3 shall be furnished to the claimant within 90 days after receipt of the claim by the Personnel Committee, unless special circumstances, such as the need to hold a hearing, require an extension of time for processing the claim. If an extension of time is required, written notice of the extension shall be furnished to the claimant prior to the end of the initial 90 day period, indicating the special circumstances requiring the extension and the date by which a final decision is expected. An extension of time shall in no event exceed a period of 90 days from the end of the initial 90 day period. If notice of the denial of a claim is not furnished in accordance with the provisions of this Section, the claim shall be deemed denied and the claimant may proceed with the review procedure set forth in Section 8.3. 9.3 CONTENT OF NOTICE. The Personnel Committee or its delegatee(s) shall provide to any claimant who is denied a claim for benefits written notice setting forth in a manner calculated to be understood by the claimant, the following: (a) The specific reason or reasons for the denial; (b) Specific reference to pertinent provisions of the Plan on which the denial is based; (c) A description of any additional material or information necessary for the claimant to perfect the claim and an explanation of why such material or 24 information necessary for the claimant to perfect the claim and an explanation of why such material or information is necessary; and (d) An explanation of the Plan's claim review procedure, as set forth in Sections 8.4 and 8.5, together with any review procedures specified by the Personnel Committee. 9.4 REVIEW PROCEDURE. The purpose of the review procedures set forth in this Section 8.4 as follows is to provide a procedures by which a claimant under this Plan may have a reasonable opportunity to appeal a denial of a claim to the Personnel Committee for a full and fair review. To accomplish that purpose, the claimant or his or her duly authorized representative: (a) May request a review upon written application to the Personnel Committee, (b) May review pertinent documents; and (c) May submit issues and comments in writing. A claimant (or his or her duly authorized representative) shall request a review by filing a written application for review with the Personnel Committee at any time within 60 days after receipt by the claimant of written notice of the denial of the claim. 9.5 DECISION ON REVIEW. A decision of a denied claim shall be made in the following manner: (a) The decision on review shall be made by the Personnel Committee (or its delegatee(s), which may in its discretion hold a hearing on the denied claim. The Personnel Committee shall make its decision promptly, and not later 25 than 60 days after receipt of the request for review, unless special circumstances (such as the need to hold a hearing) require an extension of time for processing, in which case a decision shall be rendered as soon as possible, but not later than 120 days after receipt of the request for review. If an extension of time for review is required because of special circumstances, written notice of the extension shall be furnished to the claimant prior to the commencement of the extension. If the decision on review is not furnished within the time specified, the claim shall be deemed denied on review. (b) The decision on review shall be in writing and shall include specific reasons for the decision, written in a manner calculated to be understood by the claimant, and specific references to the pertinent provisions of the Plan on which the decision is based. 26 TABLE I (amended through December 21, 1993) The present value of Plan benefits for purposes of Section 4.1(b), Section 4.3(a), and Section 4.4 shall be calculated using the following actuarial assumptions and factors: Interest: 8-1/2 percent per annum discount rate Mortality: 1983 Group Annuity Mortality Table for healthy males EX-10 12 EXHIBIT 10(III)(M) 12/30/89 HONEYWELL EXECUTIVE LIFE INSURANCE AGREEMENT THIS AGREEMENT made and entered into effective the __________ day of _________________, 199___, by and between HONEYWELL INC. ("Employer"), and ________________________________________________________________ ("Owner"); WHEREAS, _______________________________________________ ("Employee") is a valued employee of Employer and Employer wishes to retain him in its employ; and WHEREAS, as an inducement to Employee's continued employment, Employer wishes to assist Employee with his personal life insurance program by entering into the Honeywell Executive Life Insurance Agreement with the Owner. NOW, THEREFORE, the Employer and Owner agree as follows: 1. IDENTIFICATION OF POLICY. The policy number of the life insurance policy to which this Agreement relates ("Policy"), the name of the Company issuing such Policy ("Insurer"), and the Owner's death benefit payable in the event of the Employee's death shall be set forth on Exhibit A to this Agreement as determined by the Employer effective each January 1 during the term of this Agreement. 2. OWNERSHIP OF POLICY. Owner or his (or its) transferee shall be the owner of the Policy, and may exercise all ownership rights granted to the Owner by the terms of the Policy. Notwithstanding any other provisions of this Agreement or any form of policy assignment executed by Owner or his (or its) transferee in connection with this Agreement, it is the express intention of the parties to reserve to the Owner all rights in and to the Policy granted to the Owner by its terms, including, but not limited to, the right to assign the Owner's interest in the Policy, the right to change the beneficiary of the Policy, the right to exercise settlement options, the right to borrow against the cash value of the Policy, and the right to surrender or cancel the Policy, in whole or in part. Employer shall neither have nor exercise any right in or to the Policy which could, in any way, endanger, defeat or impair any of the rights of the Owner in the Policy, including the right to collect the proceeds of the Policy in excess of the amount due the Employer, as provided in this Agreement. The only rights in and to the Policy granted to the Employer shall be limited to its security interest in the "surrender value" of the Policy, which for all purposes of this Agreement shall be as defined in the Policy, and a portion of the death benefit of the Policy, as hereinafter provided. The Employer shall not assign any of its rights in the Policy to anyone other than the Owner (or the Owner's transferee, if the Owner has transferred his or its rights in the Policy). 3. PREMIUM. The Owner shall contribute to the Employer an amount equal to the annual economic benefit derived by the Owner (as determined by the Employer in accordance with Revenue Rulings 64-328 and 66-110 and set forth in item 7 of Exhibit A), or, if less, the premium for that year as set forth in item 6 of Exhibit A. If the Owner is also the Employee, such contribution shall be made by periodic payroll deductions. If the Owner is other than the Employee, the Owner shall pay the Owner's portion of the premium to the Employer in a lump sum at the beginning of each Policy year. The Employer shall pay the remainder of each total premium on the Policy. The total annual premium due on such Policy, effective January 1 for each year during the term of this Agreement, shall be set forth in item 6 on Exhibit A of this Agreement, as determined by the Employer. 4. ASSIGNMENT. Contemporaneously with this Agreement, the Owner has assigned the Policy to the Employer under the form of Assignment attached as Exhibit B, as it may be amended from time to time to reflect any modifications to Exhibit A with respect to the Insurer or policy number, which Assignment gives the Employer the right to recover the premiums it has paid on the Policy less amounts received under the Agreement from the Owner ("net premium outlay") from the surrender value of the Policy and to recover a portion of the death benefit of the Policy. The interest of the Employer in and to the Policy shall be specifically limited to the following rights: a. The right to recover the lesser of its net premium outlay or the surrender value of the Policy in the event the Policy is totally surrendered or cancelled by the Owner, or the right to receive the surrender proceeds to the extent of its net premium outlay in the event the Policy is partially surrendered by the Owner as provided in paragraph 5; b. The right to recover the death benefit proceeds remaining after the Owner's death benefit set forth in item 5 of Exhibit A has been paid to the Owner's designated beneficiary upon the death of Employee, as provided in paragraph 7 below; c. The right to recover the lesser of its net premium outlay or the surrender value of the Policy, or to receive ownership of the Policy, in the event of termination of this Agreement, as provided in paragraphs 6(a) and 6(b) below; and d. The right to recover its net premium outlay to the extent a Policy loan made by the Owner in any year exceeds the lesser of the Owner's portion of the premium for that year as specified in item 7 of Exhibit A or the increase for that year in the surrender value of the Policy, as provided in paragraph 8. -2- 5. SURRENDER OR CANCELLATION. The Owner shall have the sole right to surrender or cancel the Policy, in whole or in part, and to receive its surrender value. The parties agree that the Owner shall partially surrender the Policy within thirty (30) days following the later of Employee's termination of employment with the Employer and the tenth anniversary of the effective date of this Agreement. In the event of any partial or complete surrender or cancellation, the Employer shall be provided at least fifteen (15) days written notice of the surrender or cancellation of the Policy, in whole or in part, by the Owner prior to the Owner's receipt of the surrender value of the Policy from the Insurer. In the event of a complete surrender or cancellation of the Policy, the balance of the surrender value remaining after the payment provided for in paragraph 4(a), if any, shall belong to the Owner. It is agreed that the entire amount of the surrender value of the Policy shall be payable to the Owner who shall immediately upon receipt remit to the Employer the amount to which it is entitled pursuant to paragraph 4(a). It is the purpose of this provision specifically to provide that the sole and exclusive right to surrender or cancel the Policy, in whole or in part, is vested in the Owner, and that the Employer shall have no right to cancel or surrender the Policy, in whole or in part, subject to the Employer's right to terminate the Agreement pursuant to paragraph 6. 6. TERMINATION OF AGREEMENT. This Agreement may be terminated, subject to the provisions of subparagraphs (a) and (b) below, by either party's giving notice in writing to the other party. In the event of the termination of Employee's employment with the Employer after the tenth anniversary of the effective date of this Agreement for any reason other than Employee's death, this Agreement shall terminate automatically, subject to the provisions of the subparagraphs (a) and (b) below: a. In the event of termination of this Agreement as provided in this paragraph 6, the Owner shall have the right to obtain the release of the Assignment of the Policy to the Employer. To obtain a release of the Assignment, the Owner shall, within thirty (30) days after the date of termination of the Agreement, surrender, in whole or in part, or cancel the Policy, and after providing at least fifteen (15) days written notice to the Employer prior to the receipt of the surrender value of the Policy, pay to the Employer immediately upon the Owner's receipt thereof the lesser of the Employer's net premium outlay or the surrender value of the Policy, computed as of the date of termination of the Agreement. Upon receipt of such amount, the Employer shall execute an appropriate instrument of release of the Assignment of the Policy. -3- b. If the Owner fails to surrender or cancel the Policy within thirty (30) days of the date of termination of the Agreement, then, after such 30-day period, the Owner shall execute any and all instruments that may be required to vest ownership of the Policy in the Employer. Thereafter, the Owner shall have no further interest in the Policy or this Agreement. 7. DEATH. Upon the death of Employee, the Owner shall be entitled to receive a death benefit in the amount specified in item 5 of Exhibit A. The balance of the death benefit provided under the Policy, if any, shall be paid directly to the Employer. 8. LOANS. The Owner shall have the sole right to borrow against the Policy, and the Employer shall have no right to obtain loans against the Policy, directly or indirectly, from the Insurer or from any other person, or to pledge or assign the Policy as security for any loan. If the Owner in any Policy year borrows from the Policy an amount in excess of the Owner's portion of the annual premium specified in item 7 of Exhibit A for that year or the increase in the surrender value of the Policy for the year, whichever is less, the Employer shall be entitled to receive such excess amount, to the extent of its net premium outlay under this Agreement. The Owner shall pay any interest due on any Policy loan it obtains. 9. TRANSFEREE. In the event Owner shall transfer all of his (or its) interest in the Policy, then all of Owner's interest in the Policy and in this Agreement shall be vested in his (or its) transferee, who shall be substituted as a party under this Agreement, and the transferring Owner shall have no further interest in the Policy or in this Agreement. 10. SUCCESSORS AND ASSIGNS. This Agreement shall bind Employer, its successors and assigns, and Employee and Owner and their heirs, executors, administrators and transferees, and any Policy beneficiary. The Employer agrees that it will not merge or consolidate with another employer, corporation, or organization, or permit its business and activities to be taken over by any other organization unless or until the succeeding or continuing employer, corporation or other organization shall expressly assume the rights and obligations of the Employer set forth in this Agreement. 11. EFFECT ON EMPLOYMENT. This Agreement shall not be deemed to constitute a contract of employment between the parties, nor shall any provision restrict the right of Employee to terminate his employment, at any time not in contravention of any applicable employment agreement. -4- 12. INSURER. The Insurer shall be bound only by the provisions of and endorsements on the Policy, and any payments made or action taken by it in accordance with the Policy shall fully discharge it from all claims, suits and demands of all persons whatsoever. Except as specifically provided by endorsement on the Policy, the Insurer shall in no way be bound by the provisions of this Agreement. 13. CLAIMS PROCEDURE. The following claims procedure shall apply to this Agreement under the Honeywell Executive Life Insurance Agreement: a. FILING OF A CLAIM FOR BENEFITS. The Owner or the Owner's beneficiary shall make a claim to the Employer for the benefits provided under the Agreement in the manner provided in this Agreement. b. NOTIFICATION TO CLAIMANT OF DECISION. If a claim is wholly or partially denied, notice of the decision, meeting the requirements of paragraph 13(c) following, shall be furnished to the claimant within ninety (90) days after receipt of the claim by the Employer, unless special circumstances, such as the need to hold a hearing, require an extension of time for processing the claim. If an extension of time is required, written notice of the extension shall be furnished to the claimant prior to the end of the initial ninety (90) day period, indicating the special circumstances requiring the extension and the date by which a final decision is expected. An extension of time shall in no event exceed a period of ninety (90) days from the end of the initial ninety (90) day period. If notice of the denial of a claim is not furnished in accordance with the provisions of this paragraph, the claim shall be deemed denied and the claimant may proceed with the review procedure set forth in paragraph 13(d) following. c. CONTENT OF NOTICE. The Employer shall provide to any claimant who is denied a claim for benefits written notice setting forth in a manner calculated to be understood by the claimant, the following: 1. The specific reason or reasons for the denial; 2. Specific reference to pertinent provisions of the Agreement on which the denial is based; 3. A description of any additional material or information necessary for the claimant to perfect the claim and an explanation of why such material or information necessary for the claimant to perfect the claim and an explanation of why such material or information is necessary; and 4. An explanation of the Agreement's claim review procedure, as set forth in paragraphs 13(d) and (e) following, together with any review procedures specified by the Employer. -5- d. REVIEW PROCEDURE. The purpose of the review procedures set forth in this paragraph 13(d) and in paragraph 13(e) following is to provide a procedure by which a claimant under this Agreement may have a reasonable opportunity to appeal a denial of a claim to the Employer as named fiduciary for a full and fair review. To accomplish that purpose, the claimant or his or her duly authorized representative: 1. May request a review upon written application to the Employer; 2. May review pertinent documents; and 3. May submit issues and comments in writing. A claimant (or his or her duly authorized representative) shall request a review by filing a written application for review with the Employer at any time within sixty (60) days after receipt by the claimant of written notice of the denial of the claim. e. DECISION ON REVIEW. A decision of a denied claim shall be made in the following manner: 1. The decision on review shall be made by the Employer, which may in its discretion hold a hearing on the denied claim. The Employer shall make its decision promptly, and not later than sixty (60) days after receipt of the request for review, unless special circumstances (such as the need to hold a hearing) require an extension of time for processing, in which case a decision shall be rendered as soon as possible, but not later than one hundred and twenty (120) days after receipt of the request for review. If an extension of time for review is required because of special circumstances, written notice of the extension shall be furnished to the claimant prior to the commencement of the extension. If the decision on review is not furnished within the time specified, the claim shall be deemed denied on review. 2. The decision on review shall be in writing and shall include specific reasons for the decision, written in a manner calculated to be understood by the claimant, and specific references to the pertinent provisions of the Agreement on which the decision is based. 14. AMENDMENT. Except as provided in paragraph 6 and in paragraphs 1 and 3 pertaining to Exhibit A, this Agreement may not be cancelled, amended, altered or modified, except by a written instrument signed by all of the parties. -6- 15. NOTICES. Any notice, consent or demand required or permitted to be given under the provisions of this Agreement by one party to another shall be in writing, shall be signed by the party giving or making the same, and may be given either by delivering the same to such other party personally, or by mailing the same, by United States certified mail, postage prepaid, to such party, addressed to his, her or its last known address as shown on the records of the Employer. The date of such mailing shall be deemed the date of such mailed notice, consent or demand. 16. GENDER AND NUMBER. Whenever any words are used herein in the masculine gender, they shall be construed as though they were also used in the feminine or neuter gender in all cases where they would so apply, and whenever any words are used herein in the singular or plural form, they shall be construed as though they were also used in the other form in all cases where they would so apply. 17. CONTROLLING LAW. This Agreement, and the rights of the parties hereunder, shall be governed by and construed pursuant to the laws of the State of Minnesota. IN WITNESS WHEREOF, the parties have executed this Agreement effective the day and year first above written. OWNER HONEYWELL INC. ___________________________________ By_________________________________ By______________________________________ Its Authorized Vice President ___________________________________ ________________________________________ Witness Witness -7- EX-10 13 EXHIBIT 10(III)(N) September 23, 1993 Name Address City Dear _____________________: Honeywell Inc. (the "Corporation") considers it essential to the best interests of its stockholders to foster the continuous employment of key management personnel. In this connection, the Board of Directors (the "Board") recognizes that, as is the case with many publicly held corporations, the possibility of a change in control of the Corporation may exist and that such possibility, and the uncertainty and questions which it may raise among management, may result in the departure or distraction of management personnel to the detriment of the Corporation and its stockholders. The Board has determined that appropriate steps should be taken to reinforce and encourage the continued attention and dedication of members of the Corporation's management, including you, to their assigned duties without distraction in the face of potentially disturbing circumstances arising from the possibility of a change in control of the Corporation. In that regard, the Board has determined that this letter agreement (the "Agreement") will better serve the above-stated objective than the letter agreement entered into between you and the Corporation dated January 15, 1992 (the "Prior Agreement"), which is hereby terminated. In order to induce you to remain in the employ of the Corporation, the Corporation agrees that you shall receive the severance benefits set forth in this Agreement in the event your employment with the Corporation is terminated under the circumstances described below subsequent to a "change in control of the Corporation" (as defined in Section 2). 1. TERM OF AGREEMENT. This Agreement shall replace the Prior Agreement, shall commence as of the date hereof, and shall continue in effect through December 31, 1993; provided, however, that commencing on January 1, 1994 and each January 1 thereafter, the September 23, 1993 Page 2 term of this Agreement shall automatically be extended for one additional year unless, not later than October 1 of the preceding year, the Corporation shall have given notice that it does not wish to extend this Agreement; and provided, further, that if a change in control of the Corporation, as defined in Section 2, shall have occurred during the original or extended term of this Agreement, this Agreement shall continue in effect for a period of not less than thirty-six (36) months beyond the month in which such change in control occurred. In no event, however, shall the term of this Agreement extend beyond the end of the calendar month in which your 65th birthday occurs. 2. CHANGE IN CONTROL. No benefits shall be payable hereunder unless there shall have been a change in control of the Corporation, as set forth below. For purposes of this Agreement, a "change in control of the Corporation" shall be deemed to have occurred if: (i) any "person," as such term is used in Sections 13(d) and 14(d) of the Securities Exchange Act of 1934, as amended (the "Exchange Act") (other than the Corporation, any trustee or other fiduciary holding securities under an employee benefit plan of the Corporation, or any corporation owned, directly or indirectly, by the stockholders of the Corporation in substantially the same proportions as their ownership of stock of the Corporation), is or becomes the "beneficial owner" (as defined in Rule 13d-3 under the Exchange Act), directly or indirectly, of securities of the Corporation representing 30%, or more of the combined voting power of the Corporation's then outstanding securities eligible to vote; or (ii) during any period of two consecutive years (not including any period prior to the execution of this Agreement), individuals who at the beginning of such period constitute the Board, and any new director (other than a director designated by a person who has entered into an agreement with the Corporation to effect a transaction described in clause (i), (iii) or (iv) of this Section) whose election by the Board or nomination for election by the Corporation's stockholders was approved by a vote of at least two-thirds (2/3) of the directors then still in office who either were directors at the beginning of the period or whose election or nomination for election was previously so approved (hereinafter referred to as "Continuing Directors"), cease for any reason to constitute at least a majority thereof; (iii) the stockholders of the Corporation approve a merger or consolidation of the Corporation with any other corporation, other than a merger or consolidation which would result in the voting securities of the Corporation outstanding immediately prior thereto continuing to represent (either by remaining outstanding or by being converted into voting securities of the surviving entity) September 23, 1993 Page 3 more than 50% of the combined voting power of the voting securities of the Corporation or such surviving entity outstanding immediately after such merger or consolidation; provided, however, that a merger or consolidation effected to implement a recapitalization of the Corporation (or similar transaction) in which no "person" (as hereinabove defined) acquires more than 30% of the combined voting power of the Corporation's then outstanding securities shall not constitute a change in control of the Corporation; or (iv) the stockholders of the Corporation approve a plan of complete liquidation of the Corporation or an agreement for the sale or disposition by the Corporation of all or substantially all of the Corporation's assets (or any transaction having a similar effect). 3. TERMINATION FOLLOWING CHANGE IN CONTROL. (i) GENERAL. If any of the events described in Section 2 constituting a change in control of the Corporation shall have occurred, you shall be entitled to such benefits provided in Section 4 which may be applicable, upon the subsequent termination of your employment during the term of this Agreement, unless such termination is (a) because of your death or Disability, (b) by the Corporation for Cause, or (c) by you other than for Good Reason. In the event your employment with the Corporation is terminated for any reason prior to the occurrence of a change in control of the Corporation and subsequently a change in control of the Corporation shall have occurred, you shall not be entitled to any benefits hereunder. (ii) DISABILITY. If, as a result of your incapacity due to physical or mental illness, you shall have been absent from the full-time performance of your duties with the Corporation for six (6) consecutive months, and within thirty (30) days after written notice of termination is given, you shall not have returned to the full-time performance of your duties, for purposes of this Agreement your employment may be terminated for "Disability." (iii) CAUSE. Termination by the Corporation of your employment for "Cause" shall mean termination (a) upon the willful and continued failure by you to substantially perform your duties with the Corporation (other than any such failure resulting from your incapacity due to physical or mental illness or any such actual or anticipated failure after the issuance of a Notice of Termination (as defined in Subsection 3(v)) by you for Good Reason (as defined in Subsection 3(iv))), within ten (10) days after a written demand for substantial performance is delivered to you by the Board, which demand specifically identifies the manner in which the Board believes that you have not substantially performed your duties, or (b) the willful engaging by you in conduct which is clearly and materially injurious to the Corporation, monetarily or September 23, 1993 Page 4 otherwise. For purposes of this Subsection, no act, or failure to act, on your part shall be deemed "willful" unless done, or omitted to be done, by you in bad faith and without reasonable belief that your action or omission was in or not opposed to the best interest of the Corporation. Notwithstanding the foregoing, you shall not be deemed to have been terminated for Cause unless and until there shall have been delivered to you a copy of a resolution duly adopted by the affirmative vote of not less than three-quarters (3/4) of the entire membership of the Board at a meeting of the Board (after reasonable notice to you and an opportunity for you, together with your counsel, to be heard before the Board), finding that in the good faith opinion of the Board you were guilty of conduct set forth above in this Subsection and specifying the particulars thereof in detail. (iv) GOOD REASON. You shall be entitled to terminate your employment for Good Reason. For purposes of this Agreement, "Good Reason" shall mean, without your express written consent, the occurrence after a change in control of the Corporation of any of the following circumstances unless, in the case of paragraphs (a), (e), (f), (g) or (h), such circumstances are fully corrected prior to the Date of Termination (as defined in Section 3(vi)) specified in the Notice of Termination (as defined in Section 3(v)) given in respect thereof: (a) the assignment to you of any duties inconsistent with the status of the position in the Corporation that you held immediately prior to the change in control of the Corporation or an adverse alteration in the nature or status of your responsibilities or in the quality or amount of office accommodations or assistance provided to you, from those in effect immediately prior to such change in control; (b) a reduction by the Corporation in your annual base salary as in effect on the date immediately prior to the change in control of the Corporation or as the same may be increased from time to time thereafter; (c) the Corporation's moving you to be based more than 50 miles from the Corporation's offices at which you are principally employed immediately prior to the date of the change in control of the Corporation except for required travel on the Corporation's business to an extent substantially consistent with your present business travel obligations; (d) the failure by the Corporation to pay to you any portion of your current compensation or compensation under any deferred compensation program of the Corporation within seven (7) days of the date such compensation is due: September 23, 1993 Page 5 (e) the failure by the Corporation to continue in effect any compensation or benefit plan or perquisites in which you participate immediately prior to the change in control of the Corporation which is material to your total compensation, including but not limited to the Corporation's Corporate Executive Compensation Plan, Performance Stock Program, 1988 Stock and Incentive Plan, Stock Recognition Plan, Supplementary Retirement Plan, Financial Planning Program, Corporate Club Membership Plan, Honeywell Executive Automobile Plan or Personal Automobile Plan, any supplementary executive retirement plans of the Corporation you may be covered under, or any successor plans (collectively, the "Compensation Plans"), unless an equitable arrangement (embodied in an ongoing substitute or alternative plan) has been made with respect to such plan, or the failure by the Corporation to continue your participation therein (or in such substitute or alternative plan) on a basis not materially less favorable, both in terms of the amount of benefits provided and the level of your participation relative to other participants, than existed at the time of the change in control of the Corporation; (f) the failure by the Corporation to continue to provide you with benefits substantially similar to those enjoyed by you under any of the Corporation's life insurance, medical, dental, accident or disability plans in which you were participating at the time of the change in control of the Corporation, the taking of any action by the Corporation which would directly or indirectly materially reduce any of such benefits, or the failure by the Corporation to provide you with the number of paid vacation days to which you are entitled on the basis of your years of service with the Corporation in accordance with the Corporation's normal vacation policy in effect at the time of the change in control of the Corporation; (g) the failure of the Corporation to obtain a satisfactory agreement from any successor to assume and agree to perform this Agreement, as contemplated in Section 5 hereof; or (h) any purported termination of your employment that is not effected pursuant to a Notice of Termination satisfying the requirements of Subsection (v) hereof (and, if applicable, the requirements of Subsection (iii) hereof), which purported termination shall not be effective for purposes of this Agreement. Your right to terminate your employment pursuant to this Subsection shall not be affected by your incapacity due to physical or mental illness. Your continued employment shall not constitute consent September 23, 1993 Page 6 to, or a waiver of rights with respect to, any circumstance constituting Good Reason hereunder. (v) NOTICE OF TERMINATION. Any purported termination of your employment by the Corporation or by you shall be communicated by written Notice of Termination to the other party hereto in accordance with Section 6. "Notice of Termination" shall mean a notice that shall indicate the specific termination provision in this Agreement relied upon and shall set forth in reasonable detail the facts and circumstances claimed to provide a basis for termination of your employment under the provision so indicated. (vi) DATE OF TERMINATION. "Date of Termination" shall mean (a) if your employment is terminated for Disability, thirty (30) days after Notice of Termination is given (provided that you shall not have returned to the full-time performance of your duties during such thirty (30)-day period), (b) if your employment is terminated pursuant to Subsection (iii) or (iv) hereof, the date specified in the Notice of Termination (which, in the case of a termination for Good Reason shall not be less than fifteen (15) nor more than sixty (60) days from the date such Notice of Termination is given, (c) in the case of a termination by you for any other reason shall not be less than thirty (30) days from the date such Notice of Termination is given); and (d) if your employment is terminated by the Corporation for any other reason (other than for Cause or for Disability), the date specified in the Notice of Termination, which shall be the last day of a layoff period specified in paragraph (e) of Section 4 (iv); provided, however, that if within fifteen (15) days after any Notice of Termination is given, or, if later, prior to the Date of Termination (as determined without regard to this proviso), the party receiving such Notice of Termination notifies the other party that a dispute exists concerning the termination, then the Date of Termination (other than the Date of Termination where clause (d) of this Subsection (vi) is applicable) shall be the date on which the dispute is finally determined, either by mutual written agreement of the parties, by a binding arbitration award, or by a final judgment, order or decree of a court of competent jurisdiction (which is not appealable or with respect to which the time for appeal therefrom has expired and no appeal has been perfected); and provided, further, that the Date of Termination shall be extended by a notice of dispute only if such notice is given in good faith and the party giving such notice pursues the resolution of such dispute with reasonable diligence. Notwithstanding the pendency of any such dispute, the Corporation will continue to pay you your full compensation in effect when the notice giving rise to the dispute was given and continue you as a participant in all Compensation Plans, life insurance, medical, dental, accident or disability plans and any similar plans in which you were participating when the notice giving rise to the dispute was given, until the dispute is finally resolved in accordance with this September 23, 1993 Page 7 Subsection. Amounts paid under this Subsection are in addition to all other amounts due under this Agreement, and shall not be offset against or reduce any other amounts due under this Agreement and shall not be reduced by any compensation earned by you as the result of employment by another employer. 4. COMPENSATION DURING DISABILITY OR UPON TERMINATION. Following a change in control of the Corporation, you shall be entitled to the following during a period of Disability, upon termination of your employment, or upon the cessation of your active service during a layoff period, as the case may be, provided that such period, termination, or cessation of your active service occurs during the term of this Agreement: (i) During any period that you fail to perform your full-time duties with the Corporation as a result of incapacity due to physical or mental illness, you shall continue to receive your base salary at the rate in effect at the commencement of any such period, together with all compensation payable to you under the Corporation's disability plan or program or other similar plan during such period, until this Agreement is terminated pursuant to Section 3(ii) hereof. Thereafter, or in the event your employment shall be terminated by reason of your death, your benefits shall be determined under the Corporation's retirement, insurance and other compensation programs then in effect in accordance with the terms of such programs. (ii) If your employment shall be terminated by the Corporation for Cause or by you other than for Good Reason, the Corporation shall pay you your full base salary through the Date of Termination at the rate in effect at the time Notice of Termination is given, plus all other amounts or benefits to which you are entitled under any Compensation Plan of the Corporation then in effect, and the Corporation shall have no further obligations to you under this Agreement. (iii) If your employment by the Corporation shall be terminated by you for Good Reason, then you shall be entitled to the following: (a) the Corporation shall pay to you your full base salary through the Date of Termination at the rate in effect at the time Notice of Termination is given, no later than the fifth day following the Date of Termination, plus all other amounts to which you are entitled under any compensation plan of the Corporation, at the time such payments are due; (b) in lieu of any further salary payments to you for periods subsequent to the Date of Termination, the Corporation shall pay as severance pay to you, at the time specified in Subsection (vi), a lump sum severance payment equal to three September 23, 1993 Page 8 times the sum of your (1) annual salary as in effect as of your Date of Termination and (2) "on-plan" bonus under the Corporate Executive Compensation Plan (without regard to any attempted or purported termination or reduction of such salary or bonus; (c) your rights under the Compensation Plans shall be governed by the terms of those respective plans; (d) the Corporation shall pay to you all legal fees and expenses incurred by you as a result of such termination (including all such fees and expenses, if any, reasonably incurred in contesting or disputing by arbitration or otherwise, any such termination or in seeking to obtain or enforce any right or benefit provided by this Agreement or in connection with any tax audit or proceeding to the extent attributable to the application of section 4999 of the Internal Revenue Code of 1986, as amended, (the "Code"), to any payment or benefit provided hereunder; and (e) for a three year period after such termination, the Corporation shall arrange to provide you with benefits substantially similar to those which you were receiving or entitled to receive under the Corporation's life, disability, accident and group health insurance plans or any similar plans in which you were participating immediately prior to the Date of Termination ("Welfare Plan Benefits") at a cost to you which is no greater than that cost to you in effect at the Date of Termination; provided, however, that to the extent any such coverage is prohibited by any judicial or legislative authority, the Corporation shall make alternative arrangements to provide you with Welfare Plan Benefits, including, but not limited to, providing you with a payment in an amount equal to your cost of purchasing the Welfare Plan Benefits. Benefits otherwise receivable by you pursuant to this paragraph (e) shall be reduced to the extent comparable benefits are actually received on your behalf during the three year period following your termination, and such benefits actually received by you shall be reported to the Corporation. (iv) If your employment by the Corporation shall be terminated by the Corporation other than for Cause or Disability, then you shall be entitled to the following: (a) the Corporation shall pay to you your full base salary through the date the Notice of Termination is given at the rate in effect at the time Notice of Termination is given, no later than the fifth day following the date of the Notice of Termination, plus all other amounts to which you are entitled under any compensation plan of the Corporation, at the time such payments are due; September 23, 1993 Page 9 (b) in lieu of any further salary payments to you for periods subsequent to the date the Notice of Termination is given, the Corporation shall pay as severance pay to you, at the time specified in Subsection (vi), a lump sum severance payment equal to three times the sum of your (1) annual salary as in effect at the time Notice of Termination is given and (2) "on-plan" bonus under the Corporate Executive Compensation Plan (without regard to any attempted or purported termination or reduction of such salary or bonus; (c) your rights under the Compensation Plans shall be governed by the terms of those respective plans which are applicable to a laid off employee; (d) the Corporation shall pay to you all legal fees and expenses incurred by you as a result of such cessation of active service and placement on layoff or termination (including all such fees and expenses, if any, incurred in contesting or disputing any such layoff or termination or in seeking to obtain or enforce any right or benefit provided by this Agreement or in connection with any tax audit or proceeding to the extent attributable to the application of Section 4999 of the Internal Revenue Code of 1986, as amended, (the "Code"), to any payment or benefit provided hereunder); (e) you shall be placed on layoff status without recall rights for all purposes in accordance with the Corporation's policies in effect immediately prior to the date of the change in control of the Corporation, receive continued accrual of credited service for benefits under the provisions of the Honeywell Retirement Benefit Plan in effect immediately prior to the change in control during such layoff period, and retention of your employment status for (1) two years from the date of the cessation of your active service if your years of credited service for benefits under such Plan are less than two years or (2) the number of your years of such credited service for benefits under such Plan which are not in excess of five years; and (f) for a three year period after your cessation of active service, the Corporation shall arrange to provide you with benefits substantially similar to those which you were receiving or entitled to receive under the Corporation's life, disability, accident and group health insurance plans or any similar plans in which you were participating immediately prior to the date the Notice of Termination was given ("Welfare Plan Benefits") including but not limited to providing you with a payment in an amount equal to your cost of purchasing the Welfare Plan Benefits at a cost to you which is no greater than that cost to you in effect at the time the Notice of Termination is given; provided, however, that to the September 23, 1993 Page 10 extent any such coverage is prohibited by any judicial or legislative authority, the Corporation shall make alternative arrangements to provide you with Welfare Plan Benefits, including but not limited to providing you with a payment in an amount equal to your cost of purchasing the Welfare Plan Benefits. Benefits otherwise receivable by you pursuant to this paragraph (f) shall be reduced to the extent comparable benefits are actually received by you during the three year period following your cessation of active service, and such benefits actually received by you shall be reported to the Corporation. (v) If any payments under this Agreement or any other payments or benefits received or to be received by you in connection with a change in control of the Corporation, your termination of employment, or your cessation of active service (whether pursuant to the terms of this agreement or any other plan, arrangement or agreement with the Corporation, or any person affiliated with the Corporation) (the "Severance Payments"), will be subject to the tax (the "Excise Tax") imposed by section 4999 of the Code (or any similar tax that may hereafter be imposed), the Corporation shall pay at the time specified below, an additional amount (the "Gross-Up Payment") such that the net amount retained by you, after deduction of any Excise Tax on the Severance Payments and any federal, state and local income tax and Excise Tax upon the payment provided for by this Subsection 4(v), shall be equal to the Severance Payments. For purposes of determining whether any of the Severance Payments will be subject to the Excise Tax and the amount of such Excise Tax, (a) all Severance Payments shall be treated as "parachute payments" within the meaning of section 280G(b)(2) of the Code, and all "excess parachute payments" within the meaning of section 280G(b)(1) shall be treated as subject to the Excise Tax, unless in the opinion of tax counsel selected by the Corporation's independent auditors and acceptable to you such Severance Payments (in whole or in part) do not constitute parachute payments, or such excess parachute payments (in whole or in part) represent reasonable compensation for services actually rendered within the meaning of section 280G(b)(4) of the Code in excess of the base amount within the meaning of section 280G(b)(3) of the Code, or are otherwise not subject to the Excise Tax, (b) the amount of the Severance Payments which shall be treated as subject to the Excise Tax shall be equal to the lesser of (1) the total amount of the Severance Payments or (2) the amount of excess parachute payments within the meaning of section 280G(b)(1) (after applying clause (a), above), and (c) the value of any non-cash benefits or any deferred payment or benefit shall be determined by the Corporation's independent auditors in accordance with the principles of section 280G(d)(3) and (4) of the Code. For purposes of determining the amount of the Gross-Up Payment, you shall be deemed to pay federal income taxes at your highest marginal rate of federal income taxation in the calendar year in which the Gross-Up September 23, 1993 Page 11 Payment is to be made and state and local income taxes at your highest marginal rate of taxation in the state and locality of your residence on the Date of Termination (or earlier cessation of your active service), net of the maximum reduction in federal income taxes which could be obtained from deduction of such state and local taxes. In the event that the Excise Tax is subsequently determined to be less than the amount taken into account hereunder at the time of termination of your employment (or earlier cessation of your active service), you shall repay to the Corporation at the time that the amount of such reduction in Excise Tax is finally determined the portion of the Gross-Up Payment attributable to such reduction (plus the portion of the Gross-Up Payment attributable to the Excise Tax and federal and state and local income tax imposed on the Gross-Up Payment being repaid by you if such repayment results in a reduction in Excise Tax and/or a federal and state and local income tax deduction) plus interest on the amount of such repayment at the rate provided in section 1274(b)(2)(B) of the Code (the "Applicable Rate"). In the event that the Excise Tax is determined to exceed the amount taken into account hereunder at the time of the termination of your employment or earlier cessation of your active service (including by reason of any payment the existence or amount of which cannot be determined at the time of the Gross-Up Payment), the Corporation shall make an additional Gross-Up Payment in respect of such excess (plus any interest payable with respect to such excess at the Applicable Rate) at the time that the amount of such excess is finally determined. Any payment to be made to you under this paragraph shall be payable within five (5) days of your Date of Termination (or within five (5) days of your earlier cessation of active service). (vi) The payments provided for in Subsection (iii)(b) and Subsection (iv)(b), shall be made not later than the fifth day following the Date of Termination or the date of your cessation of active service, whichever is earlier, provided, however, that if the amounts of such payments cannot be finally determined on or before such day, the Corporation shall pay to you on such day an estimate, as determined in good faith by the Corporation, of the minimum amount of such payments and shall pay the remainder of such payments (together with interest at the Applicable Rate) as soon as the amount thereof can be determined but in no event later than the thirtieth day after the Date of Termination or date of cessation of your active service, whichever may be earlier. In the event that the amount of the estimated payments exceeds the amount subsequently determined to have been due, such excess shall constitute a loan by the Corporation to you, payable on the fifth day after demand by the Corporation (together with interest at the Applicable Rate). (vii) Except as required in Subsection (iii)(e) and Subsection (iv)(f) hereof, you shall not be required to mitigate the amount of any payment provided for in this Section 4 by seeking other September 23, 1993 Page 12 employment or otherwise, nor shall the amount of any payment or benefit provided for in this Section 4 be reduced by any compensation earned by you as the result of employment by another employer, by retirement benefits, by offset against any amount claimed to be owed by you to the Corporation, or otherwise; provided, however, that if during the three year period subsequent to your Date of Termination or earlier cessation of your active service, you directly compete with the Corporation by making use of trade secrets or other proprietary knowledge you obtained while employed by the Corporation in violation of the commitment to protect such proprietary or trade secret information set forth in the "Honeywell Employment Agreement" attached to your "Application for Employment" with the Corporation, all income earned as a result of such use of information shall be remitted to the Corporation to the extent payments were made to you under this Section 4. 5. SUCCESSORS; BINDING AGREEMENT. (i) The Corporation will require any successor (whether direct or indirect, by purchase, merger, consolidation or otherwise) to all or substantially all of the business and/or assets of the Corporation to (A) expressly assume and agree to perform this Agreement in the same manner and to the same extent that the Corporation would be required to perform it if no such succession had taken place and (B) agree to notify the executive of the assumption of the Agreement within 10 days of such assumption. Failure of the Corporation to obtain any such assumption and agreement prior to the effectiveness of any such succession shall be a breach of this Agreement and shall entitle you to compensation from the Corporation in the same amount and on the same terms to which you would be entitled hereunder if you terminate your employment for Good Reason following a change in control of the Corporation, except that for purposes of implementing the foregoing, the date on which any such succession becomes effective shall be deemed the Date of Termination. As used in this Agreement, "Corporation" shall mean the Corporation and any successor to its business and/or assets as aforesaid which assumes and agrees to perform this Agreement by operation of law, or otherwise. (ii) This Agreement shall inure to the benefit of and be enforceable by you and your personal or legal representatives, executors, administrators, successors, heirs, distributees, devisees and legatees. If you should die while any amount would still be payable to you hereunder had you continued to live, all such amounts, unless otherwise provided herein, shall be paid in accordance with the terms of this Agreement to your devisee, legatee or other designee or, if there is no such designee, to your estate. 6. NOTICE. For the purpose of this Agreement, notices and all other communications provided for in this Agreement shall be in writing and shall be deemed to have been duly given when delivered September 23, 1993 Page 13 or mailed by United States certified or registered mail, return receipt requested, postage prepaid, addressed to the respective addresses set forth on the first page of this Agreement, provided that all notice to the Corporation shall be directed to the attention of the Board with a copy to the Secretary of the Corporation, or to such other address as either party may have furnished to the other in writing in accordance herewith, except that notice of change of address shall be effective only upon receipt. 7. MISCELLANEOUS. No provision of this Agreement may be modified, waived or discharged unless such waiver, modification or discharge is agreed to in writing and signed by you and such officer as may be authorized by the Board. No waiver by either party hereto at any time of any breach by the other party hereto of, or compliance with, any condition or provision of this Agreement to be performed by such other party shall be deemed a waiver of similar of dissimilar provisions or conditions at the same or at any prior or subsequent time. No agreements or representations, oral or otherwise, express or implied, with respect to the subject matter hereof have been made by either party which are not expressly set forth in this Agreement. The validity, interpretation, construction and performance of this Agreement shall be governed by the laws of the State of Minnesota without regard to its conflicts of law principles. All references to sections of the Code shall be deemed also to refer to any successor provisions to such sections. Any payments provided for hereunder shall be paid net of any applicable withholding required under federal, state or local law, except for any withholding that may be required under Section 4999 of the Code. The obligations of the Corporation under Section 4 shall survive the expiration of the term of this Agreement. 8. VALIDITY. The invalidity or unenforceability of any provision of this Agreement shall not affect the validity or enforceability of any other provision of this Agreement, which shall remain in full force and effect. 9. COUNTERPARTS. This Agreement may be executed in several counterparts, each of which shall be deemed to be an original but all of which together will constitute one and the same instrument. 10. ARBITRATION. Any dispute or controversy arising under or in connection with this Agreement shall be settled exclusively by binding arbitration, conducted before a panel of three arbitrators in the city of Minneapolis or, at your option, in the city where you are principally employed immediately prior to the date of a change in control, in accordance with the rules of the American Arbitration Association then in effect; provided, however, that you shall be entitled to seek specific performance of your rights under Section 3(vi) during the pendency of any dispute or controversy September 23, 1993 Page 14 arising under or in connection with this Agreement. Judgment may be entered on the arbitrator's award in any court having jurisdiction. 11. ENTIRE AGREEMENT. This Agreement sets forth the entire agreement of the parties hereto in respect of the subject matter contained herein and supersedes all prior agreements, promises, covenants, arrangements, communications, representations or warranties, whether oral or written, by any officer, employee or representative of any party hereto; and any prior agreement of the parties hereto in respect of the subject matter contained herein including the Prior Agreement, is hereby terminated and canceled. If this letter sets forth our agreement on the subject matter hereof, kindly sign and return this original letter to the Corporation which will then constitute our agreement on this subject. The enclosed copy is for your personal records. Sincerely, Honeywell Inc. _____________________________ By:__________________________ Michael R. Bonsignore Chairman and Chief Executive Officer Agreed to as of this 23rd day of September, 1993 - ----------------------------- EX-10 14 EXHIBIT 10(III)(O) HONEYWELL INC. COMPENSATION PLAN FOR OUTSIDE DIRECTORS 1. NAME OF PLAN. This plan shall be known as the Honeywell Inc. Compensation Plan for Outside Directors and is hereinafter referred to as the "Plan". 2. PURPOSE OF PLAN. The purpose of the Plan is to enable Honeywell Inc., a Delaware corporation (the "Company"), to attract and retain persons of exceptional ability to serve as non-employee directors of the Company ("Directors"). The Plan provides for compensation through the payment of a Director's Annual Retainer and Meeting Fees in cash, or Common Stock, or for the deferral of such fees. 3. ELIGIBLE PARTICIPANTS. Each member of the Board of Directors of the Company ("Board") from time to time who is not a full-time employee of the Company or any of its subsidiaries shall be a participant ("Participant") in the Plan. 4. EFFECTIVE DATE. The Plan as herein amended shall be effective as of April 20, 1993. 5. FEES RETAINER. The term "Annual Retainer" shall mean the retainer fee paid to a Participant for services on the Board for a Director Year. MEETING FEES. The term "Meeting Fees" shall mean the fees paid to a Participant for attending a meeting of the Board or a Committee of the Board. This term shall include all fees paid to a Participant for extraordinary or special Board and/or Committee meetings. PER DIEM FEES. The Chief Executive Officer, in his or her sole discretion, may authorize payment of a $1,000 per diem to a Participant who is asked to work on board issues for a significant part of a day outside of normal board or committee meetings. 6. DIRECTORS ELECTIONS. (a) Each Participant shall be given an opportunity by the Company on an annual basis to elect ("Annual Election") to receive his or her Annual Retainer and Meeting Fees: (i) in cash, (ii) in shares of Common Stock, or (iii) in a combination of cash and Common Stock; and in addition a Participant may elect to defer receipt of the Annual Retainer and Meeting Fees, which the Participant has the opportunity to earn during the next succeeding Director Year. The "Director Year" is the fiscal year commencing on the date of the Company's Annual Meeting of Shareholders and ending on the date immediately preceding the next Annual Meeting of Shareholders. (b) The Annual Election must be in writing and shall be delivered to the Corporate Secretary of the Company no later than the day preceding the date of the Annual Meeting of Shareholders. (The Annual Election shall be irrevocable after the beginning of the Director Year.) The Annual Election shall specify the applicable percentage of the Annual Retainer and Meeting Fees that such Participant wishes to receive in cash, or shares of Common Stock, or to defer. (c) Any person who becomes a non-employee director following the Company's Annual Meeting of Shareholders, whether by appointment or election as a director (or by change in status from a full-time employee), shall receive an Annual Retainer prorated for the balance of that Director Year. 7. PAYMENTS CASH. If selected, cash payment for the Annual Retainer shall be paid as soon as practicable after the beginning of a Director Year, and cash payment for Meeting Fees shall be paid as soon as practicable after a meeting. SHARES. (a) If selected, the amount of shares payable in lieu the of the Annual Retainer shall be determined at the Fair Market Value (as defined in Section 9 hereunder) on the date of the Company's Annual Meeting of Shareholders and a certificate shall be delivered to the Participant as soon as practicable thereafter. (b) If selected, payment in shares for Meeting Fees occurring within a calendar quarter shall be paid as soon as practicable following the end of the calendar quarter. The number of shares of Common Stock payable shall equal the total cash amount in fees for the quarterly period divided by the Fair Market Value determined as of the last trading day for such quarter. DEFERRED FEES. (a) If selected by the Participant, deferred fees shall be credited to a deferred compensation account for each Participant. The amount of fees credited to a Participant's account shall equal the deferred cash amount for the Annual Retainer and/or Meeting Fees. Interest shall be credited to each account annually, as of December 31, and at the time of distribution of the entire balance of such an account, on the daily average balance of such account for such year or portion thereof. For account balances through December 31, 1990, the rate of interest for such year shall be the Company's return on investment for such year (or, in the case of a deferral made other than as of December 31, for the prior year), as calculated for management information purposes pursuant to the Company's applicable policy or practice then in effect. Commencing January 1, 1991, and, in any event, following retirement from the Board, the applicable interest rate is to be calculated at the Company's average five-year borrowing rate. (b) A Participant's deferred compensation account shall be paid to him or her in annual installments over a period of ten years, beginning with an initial installment to be paid on or about June 1 of the year following his or her retirement from the Board; provided, however, that the Chief Executive Officer shall have the discretion to direct the Company to make payments at different dates (but not before retirement by the Participant), over a longer or shorter period of time, or in a lump sum, all as the Chairman may direct from time to time and subject to change from time to time. For this purpose, retirement is defined as termination from service on the Board due to the first to occur of the following events: (i) retirement in compliance with the Board's retirement policy then in effect; (ii) retirement due to not being nominated for re-election to the Board; (iii) retirement due to not being re-elected by stockholders; (iv) disability or death; or (v) retirement due to the occurrence of a Change in Control. (c) In the event of a Participant's death, payments shall be made to the beneficiary designated by the Participant, or in the absence of an executed beneficiary form, to the person legally entitled thereto, as designated under his or her will, or to such heirs as determined under the laws of intestacy for the state of his or her domicile. Deferred amounts shall be nontransferable and shall not be assignable, alienable, salable or otherwise transferable by the Participant other than by will or the laws of descent and distribution, or pursuant to a qualified domestic relations order. VOLUNTARY MID-YEAR TERMINATION. In the event a Participant voluntarily resigns from the Board during a Director Year, the Participant shall return to the Company a cash payment covering the prorated portion of the Annual Retainer for the balance of that Director Year. No return of any portion of the Annual Retainer shall be required in the event a Participant leaves the Board as the result of retirement, incapacity or death. 8. SHARE CERTIFICATES, VOTING AND OTHER RIGHTS. The certificates for Common Stock issued under Section 7 may be registered in the name of the Participant, or in the name of the Participant and one other individual as joint tenants, and shall be held by such Participant. All Common Stock that shall be issued hereunder shall be fully paid and non-assessable. The Company shall pay all original issue taxes with respect to the issue of shares and all other fees and expenses necessarily incurred by Company in connection therewith. 9. FAIR MARKET VALUE. "Fair Market Value" means, as of any valuation date, the median of the high and low trading price of Honeywell Inc. Common Stock, par value $1.50 per share, as quoted in the New York Stock Exchange Composite Transactions, on such date as reported in the Wall Street Journal (or, if there is no reported sale on such date, on the last preceding date on which any reported sale occurred). 10. FRACTIONS OF SHARES. The Company shall not issue fractions of shares. Whenever under the terms of the Plan, a fractional share would otherwise be required to be issued, the Participant shall be paid in cash for such fractional share; or for Participants electing to receive Meeting Fees in stock, the unpaid amount shall be added to the fees for the next quarterly period. 11. GENERAL RESTRICTIONS. The issuance of Common Stock or the delivery of certificates for such shares to Participants under the Plan shall be subject to the requirement that, if at any time the General Counsel or Corporate Secretary of the Company shall reasonably determine, in his or her discretion, that the listing, registration or qualification of such Common Stock upon any securities exchange or under any state or federal law, or the consent or approval of any governmental body, is necessary or desirable as a condition of, or in connection with, the issuance or payment or delivery shall not take place unless such listing, registration, qualification, consent or approval shall have been effected or obtained free of any conditions not reasonably acceptable to the General Counsel or Corporate Secretary. 12. SHARES AVAILABLE. Shares of Common Stock issuable under the Plan shall be taken from authorized but unissued or treasury shares of the Company, as shall from time to time be necessary for issuance pursuant to the Plan. 13. CHANGE IN CAPITAL STRUCTURE. In the event of any change in the Common Stock by reason of any stock dividend, split, combination of shares, exchange of shares, warrants or rights offering to purchase Common Stock at a price below its fair market value, reclassification, recapitalization, merger, consolidation or other change in capitalization, appropriate adjustment shall be made by the Company in the number and kind of shares subject to the Plan and any other relevant provisions of the Plan, whose determination shall be binding and conclusive on all persons. 14. INCOME TAX PROVISIONS. No income will be recognized by a Participant at the time of the deferral of Annual Retainer and/or Meeting Fees. Upon payment to a Participant with respect to amounts previously deferred, the Participant will recognize ordinary income in an amount equal to the sum of the cash received from a Participant's deferred compensation account. 15. ADMINISTRATION. The Plan shall be administered by the Chief Executive Officer, who shall have full authority to construe and interpret the Plan, to establish, amend and rescind rules and regulations relating to the Plan, and to take all such actions and make all such determinations in connection with the Plan as he or she may deem necessary or desirable. The Chief Executive Officer may from time to time make such amendments to the Plan as he or she may deem proper, necessary, and in the best interests of the Company. 16. RIGHTS OF DIRECTORS. Nothing in the plan shall confer upon any Participant any right to serve on the Board for any period of time or to continue his or her current or any other rate of compensation. 17. GOVERNING LAW. The Plan and all actions taken thereunder shall be governed by and construed in accordance with the laws of the State of Minnesota. EX-11 15 EXHIBIT 11 EXHIBIT (11) HONEYWELL INC. AND SUBSIDIARIES COMPUTATION OF EARNINGS PER SHARE FOR THE FIVE YEARS ENDED DECEMBER 31, 1993 (DOLLARS IN MILLIONS EXCEPT PER SHARE AMOUNTS)
1993 1992 1991 1990 1989 ----------- ----------- ----------- ----------- ----------- Primary: Income: Income from continuing operations........................... $ 322.2 $ 399.9 $ 331.1 $ 371.8 $ 550.3 Income from discontinued operations......................... 10.1 53.8 ----------- ----------- ----------- ----------- ----------- Income before extraordinary item and cumulative effect of accounting changes......................................... 322.2 399.9 331.1 381.9 604.1 Extraordinary item -- loss on early redemption of debt...... (8.6) Cumulative effect of accounting changes (Note).............. (144.5) ----------- ----------- ----------- ----------- ----------- Net income................................................ $ 322.2 $ 246.8 $ 331.1 $ 381.9 $ 604.1 ----------- ----------- ----------- ----------- ----------- ----------- ----------- ----------- ----------- ----------- Shares: Weighted average of shares outstanding during the year...... 134,242,394 138,525,414 140,868,222 151,759,942 170,404,548 ----------- ----------- ----------- ----------- ----------- ----------- ----------- ----------- ----------- ----------- Earnings per share: Continuing operations....................................... $ 2.40 $ 2.88 $ 2.35 $ 2.45 $ 3.23 Discontinued operations..................................... 0.07 0.32 ----------- ----------- ----------- ----------- ----------- Income before extraordinary item and cumulative effect of accounting changes........................................ 2.40 2.88 2.35 2.52 3.55 Extraordinary item -- loss on early redemption of debt...... (0.06) Cumulative effect of accounting changes (Note).............. (1.04) ----------- ----------- ----------- ----------- ----------- Net income................................................ $ 2.40 $ 1.78 $ 2.35 $ 2.52 $ 3.55 ----------- ----------- ----------- ----------- ----------- ----------- ----------- ----------- ----------- ----------- Assuming full dilution: Income: Income from continuing operations........................... $ 322.2 $ 399.9 $ 331.1 $ 371.8 $ 550.3 Income from discontinued operations......................... 10.1 53.8 ----------- ----------- ----------- ----------- ----------- Income before extraordinary item and cumulative effect of accounting changes........................................ 322.2 399.9 331.1 381.9 604.1 Extraordinary item -- loss on early redemption of debt...... (8.6) Cumulative effect of accounting changes (Note).............. (144.5) ----------- ----------- ----------- ----------- ----------- Net income................................................ $ 322.2 $ 246.8 $ 331.1 $ 381.9 $ 604.1 ----------- ----------- ----------- ----------- ----------- ----------- ----------- ----------- ----------- ----------- Shares: Weighted average of shares outstanding during the year...... 134,242,394 138,525,414 140,868,222 151,759,942 170,404,548 Shares issuable in connection with stock plans less shares purchaseable from proceeds................................ 1,069,901 1,599,395 2,120,234 1,410,826 2,426,676 ----------- ----------- ----------- ----------- ----------- Total shares.............................................. 135,312,295 140,124,809 142,988,456 153,170,768 172,831,224 ----------- ----------- ----------- ----------- ----------- ----------- ----------- ----------- ----------- ----------- Earnings per share: Continuing operations....................................... $ 2.38 $ 2.85 $ 2.32 $ 2.43 $ 3.19 Discontinued operations..................................... 0.06 0.31 ----------- ----------- ----------- ----------- ----------- Income before extraordinary item and cumulative effect of accounting changes........................................ 2.38 2.85 2.32 2.49 3.50 Extraordinary item -- loss on early redemption of debt...... (0.06) Cumulative effect of accounting changes (Note).............. (1.03) ----------- ----------- ----------- ----------- ----------- Net income................................................ $ 2.38 $ 1.76 $ 2.32 $ 2.49 $ 3.50 ----------- ----------- ----------- ----------- ----------- ----------- ----------- ----------- ----------- ----------- - ------------------------------ Note: The cumulative effect of accounting changes in 1992 are the result of adopting Statement of Financial Accounting Standards (SFAS) No. 106, "Employers' Accounting for Postretirement Benefits Other Than Pensions," which reduced net income by $151.3 ($1.09 per share); SFAS No. 109, "Accounting for Income Taxes," which increased net income by $31.4 ($0.23 per share); and SFAS No. 112, "Employers' Accounting for Postemployment Benefits," which reduced net income by $24.6 ($0.18 per share).
50 EX-22 16 EXHIBIT 22 Exhibit 22
HONEYWELL INC. AFFILIATES -- MARCH 1, 1994 A % I COUNTRY OWNED COMPANY * - - --------------------- ----- ----------------------------------------------------------------------------------- A UNITED STATES:NY 100 AHLSTROM AUTOMATION INC. A UNITED STATES:DEL. 50 GE/MICROSWITCH CONTROL INC. I UNITED STATES:CALIF. 100 HONEYWELL ADVANCED SYSTEMS INC. A UNITED STATES:DEL. 100 HONEYWELL ASIA PACIFIC INC. A UNITED STATES:DEL. 100 HONEYWELL BUILDING MANAGEMENT SERVICES INC. A UNITED STATES:DEL. 100 HONEYWELL CHINA INC. I UNITED STATES:MINN. 100 HONEYWELL COMMUNICATIONS COMPANY A UNITED STATES:DEL. 100 HONEYWELL DISC INC. A UNITED STATES:DEL. 100 HONEYWELL ENVIRONMENTAL AIR CONTROL INC. I UNITED STATES:DEL. 100 HONEYWELL EUROPE INC. (HEI) A UNITED STATES:DEL. 100 HONEYWELL FINANCE INC. A UNITED STATES:DEL. 100 HONEYWELL FINANCE INTERNATIONAL INC. I UNITED STATES:DEL. 100 HONEYWELL HIGH-TECH TRADING INC. A BRAZIL 50 HONEYWELL DO BRASIL & CIA. (Partnership) (Other partner is HONEYWELL OVERSEAS FINANCE CO., owning 50%) A UNITED STATES:COLO. 100 HONEYWELL LOVELAND CONTROLS COMPANY A UNITED STATES:IL. 49 HONEYWELL INC./FOSTER ELECTRIC JOINT VENTURE A UNITED STATES:MINN. 100 HONEYWELL NEIGHBORHOOD IMPROVEMENT PROGRAM, INC. A UNITED STATES:DEL. 100 HONEYWELL OVERSEAS FINANCE COMPANY (HOFC) A UNITED STATES:DEL. 100 HONEYWELL REALTY, INC. I UNITED STATES:MICH. 100 ETKIN TOWERS, INC. I UNITED STATES:DEL. 100 MINNEAPOLIS-HONEYWELL REGULATOR COMPANY INC. A UNITED STATES:DEL. 100 HONEYWELL TCAS INC. A UNITED STATES:CALIF. 100 TETRA TECH DATA SYSTEMS INC. A UNITED STATES:CALIF. 100 TETRA TECH SYSTEMS, INC. A UNITED STATES:CALIF. 100 TETRA TECH MANAGEMENT SERVICES, INC. I SAUDI ARABIA 75 SAUDI ARABIAN TETRA TECH LIMITED A UNITED STATES:DEL. 100 HONEYWELL ELECTRONICS CORPORATION A UNITED STATES:DEL. 100 COEUR D'ALENE DEVELOPMENT INC. A ENGLAND 100 HONEYWELL LIMITED A ENGLAND 100 HONEYWELL CONTROL SYSTEMS LIMITED A SOUTH AFRICA 100 HONEYWELL SOUTHERN AFRICA (PROPRIETARY) LIMITED A ENGLAND 100 HONEYWELL AVIONICS SYSTEMS LIMITED A ENGLAND 100 HONEYWELL AEROSPACE AND DEFENCE LIMITED A ENGLAND 100 KODEN MAINTENANCE COMPANY LIMITED I ENGLAND 100 KODEN GROUP SERVICES LIMITED I ENGLAND 100 HONEYWELL INFORMATION SYSTEMS LIMITED I ENGLAND 100 HONEYWELL LEASING LIMITED A ENGLAND 100 HONEYWELL ICOTRON LTD. A ENGLAND 100 HONEYWELL PENSION TRUSTEES LIMITED I ENGLAND 100 HONEYWELL I.S. LIMITED A ENGLAND 100 HONEYWELL PCS LIMITED I ENGLAND 100 LIPPKE (UK) LIMITED A ENGLAND 100 COMFORT COOLING LIMITED I ENGLAND 100 SACDA (U.K.) LIMITED A ARGENTINA 100 HONEYWELL S.A.I.C. I ARGENTINA 100 CONTROLES HONEYWELL S.A.C.I. A AUSTRALIA 100 HONEYWELL HOLDINGS PTY. LIMITED A AUSTRALIA 100 BLENDAIR PTY. LIMITED A AUSTRALIA 100 HONEYWELL LIMITED A NEW ZEALAND 100 HONEYWELL HOLDINGS LIMITED A NEW ZEALAND 100 HONEYWELL LIMITED I NEW ZEALAND 100 HONEYWELL (WHOLESALE) LIMITED A BELGIUM 100 HONEYWELL S.A. A BELGIUM 100 HONEYWELL EUROPE S.A. A BERMUDA 100 HONEYWELL ASSURANCE LIMITED I BRAZIL 49 EMBRASID S.A. A CANADA 100 HONEYWELL LIMITED - HONEYWELL LIMITEE I CANADA 100 TORONTO CABLE & TOWER RENTALS LIMITED A CANADA 100 SACDA, INC. A NETHERLANDS ANTILLES 100 HONEYWELL LIMITED FINANCE N.V. A CANADA 100 2526-9630 QUEBEC INC. A CANADA 100 2526-9648 QUEBEC INC. A CANADA 50 AERONOX (P.A.B.) LIMITEE (other 50% is owned by 2526-9630 QUEBEC INC.)
HONEYWELL INC. AFFILIATES -- MARCH 1, 1994 A % I COUNTRY OWNED COMPANY * - - --------------------- ----- ----------------------------------------------------------------------------------- A CHILE 50 HONEYWELL CHILE S.A. (Also, MINNEAPOLIS-HONEYWELL REGULATOR COMPANY INC. owns 50%) A CHINA 55 SINOPEC HONEYWELL (TIANJIN) LIMITED A DENMARK 100 HONEYWELL A/S I DOMINICAN REPUBLIC 100 HONEYWELL DOMINICANA C. POR A. A FINLAND 100 HONEYWELL OY A FINLAND 100 KIINTEISTOHUOLTO MERATEK OY A FINLAND 100 VM-KIINTEISTOHUOLTO OY A FINLAND 80.1 HONEYWELL-AHLSTROM ADVANCED CONTROLS OY FINLAND A FRANCE 99.9 HONEYWELL S.A. A FRANCE 99.9 DAVILOR TECHNOLOGIE S.A. A FRANCE 99.9 HONEYWELL AEROSPACE S.A. A GERMANY 100 HONEYWELL HOLDING AG A GERMANY 100 INGIENEURBURO FUR AUTOMATISIERUNGSTECHNIK G.m.b.H. A GERMANY 100 HONEYWELL REGELSYSTEME G.m.b.H. A GERMANY 70 HONEYWELL IAL VERTRIEBS G.m.b.H. A GERMANY 100 HONEYWELL PAPER MACHINE AUTOMATION CENTER G.m.b.H. A BULGARIA 100 HONEYWELL EOOD A CZECH REPUBLIC 100 HONEYWELL SERVICE AND ENGINEERING CSFR spol.s.r.o. A HUNGARY 100 HONEYWELL SZABALYOZASTECHNIKAI ES AUTOMATIZALASI KFT A POLAND 100 HONEYWELL SP.Z.O.O. A RUSSIA 100 HONEYWELL AVIATION CONTROL MOSCOW A RUSSIA 100 HONEYWELL HOME AND BUILDING CONTROL A GERMANY 100 HONEYWELL AG A GERMANY 100 HONEYWELL UNTERSTUTZUNGSKASSE G.m.b.H. A GERMANY 100 HONEYWELL BRAUKMANN UNTERSTUTZUNGSKASSE G.m.b.H. A GERMANY 100 HONEYWELL-ELAC-NAUTIK G.m.b.H. A GERMANY 100 HONEYWELL-ELAC-NAUTIK UNTERSTUTZUNGSKASSE G.m.b.H. A GERMANY 20 ARBEITSMEDIZINISCHE BETREUUNGSGESELLSCHAFT KIELER BETRIEBE m.b.H. A GERMANY 10.7 GEOMAR TECHNOLOGIE G.m.b.H. A GERMANY 100 CENTRA-BUERKLE G.m.b.H. A SWITZERLAND 100 HONEYWELL CENTRABUERKLE AG A AUSTRIA 100 HONEYWELL AUSTRIA Ges.m.b.H. I AUSTRIA 100 PAPIERMASCHINEN HANDELSGESELLSCHAFT m.b.H. I AUSTRIA 90 PAPIERMASCHINEN HANDELSGESELLSCHAFT m.b.H. & CO., KG (a Partnership: Other partner is PAPIERMASCHINEN HANDELSGESELLSCHAFT m.b.H., owning 10% ) A RUSSIA 50 STERCH CONTROLS A UKRAINE 100 HONEYWELL A HONG KONG 100 HONEYWELL LIMITED A INDIA 39.9 TATA HONEYWELL LIMITED I INDIA 40 HONEYWELL INDIA LIMITED A ITALY 100 HONEYWELL S.p.A. A ITALY 100 UNIVERSAL GAS VALVES S.r.l. A ITALY 100 STRUMENTECNICA S.r.l. A ITALY 25 SINTED S.p.A. A ITALY 40 SPACE CONTROLS ALENIA-HONEYWELL S.p.A. A PORTUGAL 70 HONEYWELL PORTUGAL AUTOMACAO E CONTROLE LDA. [Also, HONEYWELL S.A. (Spain) owns 30%] I JAPAN 50 NEC HONEYWELL SPACE SYSTEMS LTD. A JAPAN 24.2 YAMATAKE-HONEYWELL CO., LTD. A JAPAN 71.9 YAMATAKE & CO., LTD A JAPAN 50 TAISHIN CO., LTD. A JAPAN 100 YAMATAKE KEISO CO., LTD. A JAPAN 60 YAMATAKE ENGINEERING CO., LTD. A JAPAN 100 YAMATAKE CONTROL PRODUCTS CO., LTD. A JAPAN 100 YAMATAKE TECHNO-SYSTEMS CO., LTD. A KOREA 40 GOLDSTAR-HONEYWELL COMPANY, LTD. (Also, YAMATAKE-HONEYWELL CO., LTD. owns 10%) A MALAYSIA 100 HONEYWELL AUTOMATION AND CONTROLS SDN. BHD. A MALAYSIA 100 HONEYWELL ENGINEERING SDN. BHD. A MALAYSIA 30 BERKAT HONEYWELL SDN. BHD. A MEXICO 100 HONEYWELL S.A. DE C.V. A MEXICO 100 HONEYWELL OPTOELECTRONICA, S.A. DE C.V. A MEXICO 100 MEXHON S.A. DE C.V. A MEXICO 100 HONEYWELL MANUFACTURAS DE CHIHUAHUA, S.A. DE C.V.
HONEYWELL INC. AFFILIATES -- MARCH 1, 1994 A % I COUNTRY OWNED COMPANY * - - --------------------- ----- ----------------------------------------------------------------------------------- A NETHERLANDS ANTILLES 100 HONEYWELL INTERNATIONAL FINANCE N.V. A NETHERLANDS ANTILLES 100 HONEYWELL CAPITAL N.V. A NETHERLANDS 100 HONEYWELL FAR EAST B.V. A NETHERLANDS 100 HONEYWELL MIDDLE EAST B.V. A BULGARIA 40 SYSTEMATICS A KUWAIT 40 HONEYWELL KUWAIT K.S.C. A EGYPT 90 HONEYWELL (EGYPT) (Also, HONEYWELL S.p.A. owns 10%) A OMAN 60 HONEYWELL & CO. OMAN L.L.C. A TURKEY 80 HONEYWELL OTOMASYON VE KONTROL SISTEMLERI SAN. VE TIC.A.S. A SWITZERLAND 100 HONEYWELL-LUCIFER S.A. A GERMANY 100 HONEYWELL EUROPE HOLDING G.m.b.H. A NETHERLANDS 100 HONEYWELL EUROPEAN DISTRIBUTION CENTER B.V. A NETHERLANDS 100 SKINNER EUROPA B.V. A NETHERLANDS 92.6 HONEYWELL B.V. (Other 7.4% owned by SKINNER EUROPA B.V.) A NETHERLANDS 100 ELECTRONICS FOR MEDICINE EUROPE B.V. A NETHERLANDS 100 GASMODUL B.V. A NETHERLANDS 50 TURNKIEK PROCESS CONTROL B.V. A NETHERLANDS 100 HONEYWELL FOREIGN SALES CORPORATION B.V. A NETHERLANDS 100 HONEYWELL FINANCE B.V. A NORWAY 100 HONEYWELL A/S A SAUDI ARABIA 50 HONEYWELL TURKI-ARABIA LTD. A SINGAPORE 100 HONEYWELL PRIVATE LIMITED A SINGAPORE 100 HONEYWELL AEROSPACE PTE. LTD. I SINGAPORE 100 HONEYWELL COMPUTERS PRIVATE LIMITED I SINGAPORE 100 HONEYWELL-SYNERTEK PTE. LTD. A SPAIN 100 HONEYWELL S.A. A SWEDEN 100 HONEYWELL AB A SWEDEN 100 HONEYWELL AUTOMATION AB A SWITZERLAND 100 HONEYWELL AG A TAIWAN 100 HONEYWELL TAIWAN LIMITED I THAILAND 100 HONEYWELL SYSTEMS (THAILAND) LIMITED A VENEZUELA 100 HONEYWELL C.A. A VENEZUELA 100 SERVICIOS HONEYWELL C.A. A PANAMA 100 HONEYWELL PANAMA, S.A. NOTE: A = ACTIVE I = INACTIVE * SUBSIDIARIES OF HONEYWELL INC.s AFFILIATES OR SUBSIDIARIES ARE INDICATED BY THE INDENTATION OF THE NAME BELOW THE NAME OF THE OWNING COMPANY: e.g., HONEYWELL KUWAIT K.S.C. IS 40% OWNED BY HONEYWELL MIDDLE EAST B.V., WHICH IS 100% OWNED BY HONEYWELL CAPITAL N.V., WHICH IS 100% OWNED BY HONEYWELL INC.
EX-24 17 EXHIBIT 24 EXHIBIT (24) CONSENT OF INDEPENDENT AUDITORS Honeywell Inc.: We consent to the incorporation by reference in Registration Statements Nos. 2-64351, 2-98660, 33-29442, 33-44282, 33-44283, 33-44284 and 33-49819 on Form S-8, and No. 33-62300 on Form S-3, of our reports dated February 11, 1994, appearing in and incorporated by reference in the Annual Report on Form 10-K of Honeywell Inc. for the year ended December 31, 1993. Deloitte & Touche Minneapolis, Minnesota March 3, 1994 51 EX-25 18 EXHIBIT 25 Exhibit 25 POWER OF ATTORNEY KNOW ALL BY THESE PRESENTS, that the undersigned director of HONEYWELL INC., a Delaware corporation, constitutes and appoints SIGURD UELAND, JR. and WILLIAM L. TRUBECK, each of them with full power to act without the other, as true and lawful attorneys-in-fact, for him in his name, place and stead in any and all capacities to sign the Form 10-K Annual Report to be filed pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 as amended for the fiscal year ended December 31, 1993, with full power to file such report, with all amendments and exhibits thereto and other documents in connection therewith. I certify that I have read a draft of such Form 10-K Annual Report for fiscal year ended December 31, 1993, and am aware of the contents thereof. I hereby grant to said attorneys-in-fact, and each of them, full power and authority to do and perform any and all acts necessary to be done, hereby ratifying and confirming all that said attorneys-in-fact, or either of them, may lawfully do or cause to be done pursuant hereto. IN WITNESS WHEREOF, the undersigned has hereunto set his hand as of the 15th day of February, 1994. /s/ J. J. Renier --------------------------------------- J. J. Renier, Director POWER OF ATTORNEY KNOW ALL BY THESE PRESENTS, that the undersigned director of HONEYWELL INC., a Delaware corporation, constitutes and appoints SIGURD UELAND, JR. and WILLIAM L. TRUBECK, each of them with full power to act without the other, as true and lawful attorneys-in-fact, for him in his name, place and stead in any and all capacities to sign the Form 10-K Annual Report to be filed pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 as amended for the fiscal year ended December 31, 1993, with full power to file such report, with all amendments and exhibits thereto and other documents in connection therewith. I certify that I have read a draft of such Form 10-K Annual Report for fiscal year ended December 31, 1993, and am aware of the contents thereof. I hereby grant to said attorneys-in-fact, and each of them, full power and authority to do and perform any and all acts necessary to be done, hereby ratifying and confirming all that said attorneys-in-fact, or either of them, may lawfully do or cause to be done pursuant hereto. IN WITNESS WHEREOF, the undersigned has hereunto set his hand as of the 15th day of February, 1994. /s/ M. R. Bonsignore ---------------------------------------- M. R. Bonsignore Chairman of the Board and Chief Executive Officer, and Director POWER OF ATTORNEY KNOW ALL BY THESE PRESENTS, that the undersigned director of HONEYWELL INC., a Delaware corporation, constitutes and appoints SIGURD UELAND, JR. and WILLIAM L. TRUBECK, each of them with full power to act without the other, as true and lawful attorneys-in-fact, for him in his name, place and stead in any and all capacities to sign the Form 10-K Annual Report to be filed pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 as amended for the fiscal year ended December 31, 1993, with full power to file such report, with all amendments and exhibits thereto and other documents in connection therewith. I certify that I have read a draft of such Form 10-K Annual Report for fiscal year ended December 31, 1993, and am aware of the contents thereof. I hereby grant to said attorneys-in-fact, and each of them, full power and authority to do and perform any and all acts necessary to be done, hereby ratifying and confirming all that said attorneys-in-fact, or either of them, may lawfully do or cause to be done pursuant hereto. IN WITNESS WHEREOF, the undersigned has hereunto set his hand as of the 15th day of February, 1994. /s/ D. L. Moore ---------------------------------------- D. L. Moore President and Chief Operating Officer, and Director POWER OF ATTORNEY KNOW ALL BY THESE PRESENTS, that the undersigned officer of HONEYWELL INC., a Delaware corporation, constitutes and appoints SIGURD UELAND, JR. as true and lawful attorney-in-fact, for him in his name, place and stead in any and all capacities to sign the Form 10-K Annual Report to be filed pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 as amended for the fiscal year ended December 31, 1993, with full power to file such report, with all amendments and exhibits thereto and other documents in connection therewith. I certify that I have read a draft of such Form 10-K Annual Report for fiscal year ended December 31, 1993, and am aware of the contents thereof. I hereby grant to said attorney-in-fact full power and authority to do and perform any and all acts necessary to be done, hereby ratifying and confirming all that said attorney-in-fact may lawfully do or cause to be done pursuant hereto. IN WITNESS WHEREOF, the undersigned has hereunto set his hand as of the 15th day of February, 1994. /s/ W. L. Trubeck ---------------------------------------- W. L. Trubeck Senior Vice President and Chief Financial Officer POWER OF ATTORNEY KNOW ALL BY THESE PRESENTS, that the undersigned officer of HONEYWELL INC., a Delaware corporation, constitutes and appoints SIGURD UELAND, JR. as true and lawful attorney-in-fact, for him in his name, place and stead in any and all capacities to sign the Form 10-K Annual Report to be filed pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 as amended for the fiscal year ended December 31, 1993, with full power to file such report, with all amendments and exhibits thereto and other documents in connection therewith. I certify that I have read a draft of such Form 10-K Annual Report for fiscal year ended December 31, 1993, and am aware of the contents thereof. I hereby grant to said attorney-in-fact full power and authority to do and perform any and all acts necessary to be done, hereby ratifying and confirming all that said attorney-in-fact may lawfully do or cause to be done pursuant hereto. IN WITNESS WHEREOF, the undersigned has hereunto set his hand as of the 15th day of February, 1994. /s/ W. M. Hjerpe ---------------------------------------- W. M. Hjerpe Vice President and Controller POWER OF ATTORNEY KNOW ALL BY THESE PRESENTS, that the undersigned director of HONEYWELL INC., a Delaware corporation, constitutes and appoints SIGURD UELAND, JR. and WILLIAM L. TRUBECK, each of them with full power to act without the other, as true and lawful attorneys-in-fact, for him in his name, place and stead in any and all capacities to sign the Form 10-K Annual Report to be filed pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 as amended for the fiscal year ended December 31, 1993, with full power to file such report, with all amendments and exhibits thereto and other documents in connection therewith. I certify that I have read a draft of such Form 10-K Annual Report for fiscal year ended December 31, 1993, and am aware of the contents thereof. I hereby grant to said attorneys-in-fact, and each of them, full power and authority to do and perform any and all acts necessary to be done, hereby ratifying and confirming all that said attorneys-in-fact, or either of them, may lawfully do or cause to be done pursuant hereto. IN WITNESS WHEREOF, the undersigned has hereunto set his hand as of the 15th day of February, 1994. /s/ A. J. Baciocco, Jr. ---------------------------------------- A. J. Baciocco, Jr. Director POWER OF ATTORNEY KNOW ALL BY THESE PRESENTS, that the undersigned director of HONEYWELL INC., a Delaware corporation, constitutes and appoints SIGURD UELAND, JR. and WILLIAM L. TRUBECK, each of them with full power to act without the other, as true and lawful attorneys-in-fact, for her in her name, place and stead in any and all capacities to sign the Form 10-K Annual Report to be filed pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 as amended for the fiscal year ended December 31, 1993, with full power to file such report, with all amendments and exhibits thereto and other documents in connection therewith. I certify that I have read a draft of such Form 10-K Annual Report for fiscal year ended December 31, 1993, and am aware of the contents thereof. I hereby grant to said attorneys-in-fact, and each of them, full power and authority to do and perform any and all acts necessary to be done, hereby ratifying and confirming all that said attorneys-in-fact, or either of them, may lawfully do or cause to be done pursuant hereto. IN WITNESS WHEREOF, the undersigned has hereunto set her hand as of the 15th day of February, 1994. /s/ E. E. Bailey ---------------------------------------- E. E. Bailey Director POWER OF ATTORNEY KNOW ALL BY THESE PRESENTS, that the undersigned director of HONEYWELL INC., a Delaware corporation, constitutes and appoints SIGURD UELAND, JR. and WILLIAM L. TRUBECK, each of them with full power to act without the other, as true and lawful attorneys-in-fact, for him in his name, place and stead in any and all capacities to sign the Form 10-K Annual Report to be filed pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 as amended for the fiscal year ended December 31, 1993, with full power to file such report, with all amendments and exhibits thereto and other documents in connection therewith. I certify that I have read a draft of such Form 10-K Annual Report for fiscal year ended December 31, 1993, and am aware of the contents thereof. I hereby grant to said attorneys-in-fact, and each of them, full power and authority to do and perform any and all acts necessary to be done, hereby ratifying and confirming all that said attorneys-in-fact, or either of them, may lawfully do or cause to be done pursuant hereto. IN WITNESS WHEREOF, the undersigned has hereunto set his hand as of the 15th day of February, 1994. /s/ E. H. Clark, Jr. ---------------------------------------- E. H. Clark, Jr. Director POWER OF ATTORNEY KNOW ALL BY THESE PRESENTS, that the undersigned director of HONEYWELL INC., a Delaware corporation, constitutes and appoints SIGURD UELAND, JR. and WILLIAM L. TRUBECK, each of them with full power to act without the other, as true and lawful attorneys-in-fact, for him in his name, place and stead in any and all capacities to sign the Form 10-K Annual Report to be filed pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 as amended for the fiscal year ended December 31, 1993, with full power to file such report, with all amendments and exhibits thereto and other documents in connection therewith. I certify that I have read a draft of such Form 10-K Annual Report for fiscal year ended December 31, 1993, and am aware of the contents thereof. I hereby grant to said attorneys-in-fact, and each of them, full power and authority to do and perform any and all acts necessary to be done, hereby ratifying and confirming all that said attorneys-in-fact, or either of them, may lawfully do or cause to be done pursuant hereto. IN WITNESS WHEREOF, the undersigned has hereunto set his hand as of the 15th day of February, 1994. /s/ W. H. Donaldson ---------------------------------------- W. H. Donaldson Director POWER OF ATTORNEY KNOW ALL BY THESE PRESENTS, that the undersigned director of HONEYWELL INC., a Delaware corporation, constitutes and appoints SIGURD UELAND, JR. and WILLIAM L. TRUBECK, each of them with full power to act without the other, as true and lawful attorneys-in-fact, for him in his name, place and stead in any and all capacities to sign the Form 10-K Annual Report to be filed pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 as amended for the fiscal year ended December 31, 1993, with full power to file such report, with all amendments and exhibits thereto and other documents in connection therewith. I certify that I have read a draft of such Form 10-K Annual Report for fiscal year ended December 31, 1993, and am aware of the contents thereof. I hereby grant to said attorneys-in-fact, and each of them, full power and authority to do and perform any and all acts necessary to be done, hereby ratifying and confirming all that said attorneys-in-fact, or either of them, may lawfully do or cause to be done pursuant hereto. IN WITNESS WHEREOF, the undersigned has hereunto set his hand as of the 15th day of February, 1994. /s/ R. D. Fullerton ---------------------------------------- R. D. Fullerton Director POWER OF ATTORNEY KNOW ALL BY THESE PRESENTS, that the undersigned director of HONEYWELL INC., a Delaware corporation, constitutes and appoints SIGURD UELAND, JR. and WILLIAM L. TRUBECK, each of them with full power to act without the other, as true and lawful attorneys-in-fact, for him in his name, place and stead in any and all capacities to sign the Form 10-K Annual Report to be filed pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 as amended for the fiscal year ended December 31, 1993, with full power to file such report, with all amendments and exhibits thereto and other documents in connection therewith. I certify that I have read a draft of such Form 10-K Annual Report for fiscal year ended December 31, 1993, and am aware of the contents thereof. I hereby grant to said attorneys-in-fact, and each of them, full power and authority to do and perform any and all acts necessary to be done, hereby ratifying and confirming all that said attorneys-in-fact, or either of them, may lawfully do or cause to be done pursuant hereto. IN WITNESS WHEREOF, the undersigned has hereunto set his hand as of the 15th day of February, 1994. /s/ G. Greenwald ---------------------------------------- G. Greenwald Director POWER OF ATTORNEY KNOW ALL BY THESE PRESENTS, that the undersigned director of HONEYWELL INC., a Delaware corporation, constitutes and appoints SIGURD UELAND, JR. and WILLIAM L. TRUBECK, each of them with full power to act without the other, as true and lawful attorneys-in-fact, for him in his name, place and stead in any and all capacities to sign the Form 10-K Annual Report to be filed pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 as amended for the fiscal year ended December 31, 1993, with full power to file such report, with all amendments and exhibits thereto and other documents in connection therewith. I certify that I have read a draft of such Form 10-K Annual Report for fiscal year ended December 31, 1993, and am aware of the contents thereof. I hereby grant to said attorneys-in-fact, and each of them, full power and authority to do and perform any and all acts necessary to be done, hereby ratifying and confirming all that said attorneys-in-fact, or either of them, may lawfully do or cause to be done pursuant hereto. IN WITNESS WHEREOF, the undersigned has hereunto set his hand as of the 15th day of February, 1994. /s/ J. J. Howard ---------------------------------------- J. J. Howard Director POWER OF ATTORNEY KNOW ALL BY THESE PRESENTS, that the undersigned director of HONEYWELL INC., a Delaware corporation, constitutes and appoints SIGURD UELAND, JR. and WILLIAM L. TRUBECK, each of them with full power to act without the other, as true and lawful attorneys-in-fact, for her in her name, place and stead in any and all capacities to sign the Form 10-K Annual Report to be filed pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 as amended for the fiscal year ended December 31, 1993, with full power to file such report, with all amendments and exhibits thereto and other documents in connection therewith. I certify that I have read a draft of such Form 10-K Annual Report for fiscal year ended December 31, 1993, and am aware of the contents thereof. I hereby grant to said attorneys-in-fact, and each of them, full power and authority to do and perform any and all acts necessary to be done, hereby ratifying and confirming all that said attorneys-in-fact, or either of them, may lawfully do or cause to be done pursuant hereto. IN WITNESS WHEREOF, the undersigned has hereunto set her hand as of the 15th day of February, 1994. /s/ G. M. Joseph ---------------------------------------- G. M. Joseph Director POWER OF ATTORNEY KNOW ALL BY THESE PRESENTS, that the undersigned director of HONEYWELL INC., a Delaware corporation, constitutes and appoints SIGURD UELAND, JR. and WILLIAM L. TRUBECK, each of them with full power to act without the other, as true and lawful attorneys-in-fact, for him in his name, place and stead in any and all capacities to sign the Form 10-K Annual Report to be filed pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 as amended for the fiscal year ended December 31, 1993, with full power to file such report, with all amendments and exhibits thereto and other documents in connection therewith. I certify that I have read a draft of such Form 10-K Annual Report for fiscal year ended December 31, 1993, and am aware of the contents thereof. I hereby grant to said attorneys-in-fact, and each of them, full power and authority to do and perform any and all acts necessary to be done, hereby ratifying and confirming all that said attorneys-in-fact, or either of them, may lawfully do or cause to be done pursuant hereto. IN WITNESS WHEREOF, the undersigned has hereunto set his hand as of the 15th day of February, 1994. /s/ B. E. Karatz ---------------------------------------- B. E. Karatz Director POWER OF ATTORNEY KNOW ALL BY THESE PRESENTS, that the undersigned director of HONEYWELL INC., a Delaware corporation, constitutes and appoints SIGURD UELAND, JR. and WILLIAM L. TRUBECK, each of them with full power to act without the other, as true and lawful attorneys-in-fact, for him in his name, place and stead in any and all capacities to sign the Form 10-K Annual Report to be filed pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 as amended for the fiscal year ended December 31, 1993, with full power to file such report, with all amendments and exhibits thereto and other documents in connection therewith. I certify that I have read a draft of such Form 10-K Annual Report for fiscal year ended December 31, 1993, and am aware of the contents thereof. I hereby grant to said attorneys-in-fact, and each of them, full power and authority to do and perform any and all acts necessary to be done, hereby ratifying and confirming all that said attorneys-in-fact, or either of them, may lawfully do or cause to be done pursuant hereto. IN WITNESS WHEREOF, the undersigned has hereunto set his hand as of the 15th day of February, 1994. /s/ A. B. Rand ---------------------------------------- A. B. Rand Director POWER OF ATTORNEY KNOW ALL BY THESE PRESENTS, that the undersigned director of HONEYWELL INC., a Delaware corporation, constitutes and appoints SIGURD UELAND, JR. and WILLIAM L. TRUBECK, each of them with full power to act without the other, as true and lawful attorneys-in-fact, for him in his name, place and stead in any and all capacities to sign the Form 10-K Annual Report to be filed pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 as amended for the fiscal year ended December 31, 1993, with full power to file such report, with all amendments and exhibits thereto and other documents in connection therewith. I certify that I have read a draft of such Form 10-K Annual Report for fiscal year ended December 31, 1993, and am aware of the contents thereof. I hereby grant to said attorneys-in-fact, and each of them, full power and authority to do and perform any and all acts necessary to be done, hereby ratifying and confirming all that said attorneys-in-fact, or either of them, may lawfully do or cause to be done pursuant hereto. IN WITNESS WHEREOF, the undersigned has hereunto set his hand as of the 15th day of February, 1994. /s/ S. G. Rothmeier ---------------------------------------- S. G. Rothmeier Director POWER OF ATTORNEY KNOW ALL BY THESE PRESENTS, that the undersigned director of HONEYWELL INC., a Delaware corporation, constitutes and appoints SIGURD UELAND, JR. and WILLIAM L. TRUBECK, each of them with full power to act without the other, as true and lawful attorneys-in-fact, for him in his name, place and stead in any and all capacities to sign the Form 10-K Annual Report to be filed pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 as amended for the fiscal year ended December 31, 1993, with full power to file such report, with all amendments and exhibits thereto and other documents in connection therewith. I certify that I have read a draft of such Form 10-K Annual Report for fiscal year ended December 31, 1993, and am aware of the contents thereof. I hereby grant to said attorneys-in-fact, and each of them, full power and authority to do and perform any and all acts necessary to be done, hereby ratifying and confirming all that said attorneys-in-fact, or either of them, may lawfully do or cause to be done pursuant hereto. IN WITNESS WHEREOF, the undersigned has hereunto set his hand as of the 15th day of February, 1994. /s/ M. W. Wright ---------------------------------------- M. W. Wright Director -----END PRIVACY-ENHANCED MESSAGE-----