10-K 1 10-K 1994 -------------------------------------------------------------------------------- -------------------------------------------------------------------------------- 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, 1994 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. / / Based on the closing sales price of $36.00 on March 1, 1995, the aggregate market value of the voting stock held by nonaffiliates of the registrant was $4,562,938,836. As of March 1, 1995, the number of shares outstanding of the registrant's common stock, par value $1.50 per share, was 127,327,034 shares. DOCUMENTS INCORPORATED IN PART BY REFERENCE Incorporated Documents Location in Form 10-K -------------------------------------------------------- --------------------- Honeywell Notice of 1995 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 page 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 control systems to centralize 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. Under the MICRO SWITCH trademark, Honeywell manufactures solid-state sensors (position, pressure, airflow, temperature and current), sensor interface devices, manual controls, explosion- 1 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, application software, sensors, artificial intelligence and advanced electronics. Solid State Electronics Center, a semiconductor facility in Minnesota, designs and manufactures integrated circuits and sensors for Honeywell, government customers and selected external 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 1994. 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 1995. 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 Honeywell provides 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 $3,340 million at December 31, 1994, and $3,128 million at December 31, 1993. All but approximately $813 million of the 1994 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 their 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 important competitive factors. Service must be offered from many areas because of the localized 3 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 1994 Honeywell spent approximately $659.5 million on research and development activities, including $340.5 million in customer-funded research, relating to the development of new products or services, or the improvement of existing products or services. Honeywell spent $742.2 million in 1993 and $703.1 million in 1992 on research and development activities, including $404.8 million and $390.5 million, respectively, in customer-funded research. 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 on Honeywell's financial position, net income, capital expenditures or competitive position. See Item 7 at page 14 for further information concerning environmental matters. EMPLOYEES Honeywell employed approximately 50,800 persons in total operations as of December 31, 1994. 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 to mitigate such risks. Financial information related to geographic areas is included in Note 19 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 3/1/95 -------------------------- ------------------------------------------------------------ ------------- ------------- M. R. Bonsignore (1) Chairman of the Board and Chief Executive Officer 1993 53 D. L. Moore (2) President and Chief Operating Officer 1993 58 J. R. Dewane (3) President, Space & Aviation Control 1993 60 E. D. Grayson (4) Vice President and General Counsel 1992 56 J. J. Grierson (5) Vice President, Business Development 1992 52 W. M. Hjerpe (6) Vice President and Chief Financial Officer 1994 43 E. T. Hurd (7) Senior Vice President 1995 56 B. M. McGourty (8) President, Home and Building Control 1994 57 P. M. Palazzari (9) Vice President and Controller 1994 47 M. I. Tambakeras (10) President, Industrial Automation and Control 1995 44 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. (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. (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 October 16, 1994. From February 1992 to October 1994, he was Vice President and Controller of the company. 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 elected to this position on February 21, 1995, effective February 1, 1995. From January 1992 to January 1995, he was President, Industrial Control. 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 President and General Manager of Honeywell's Industrial Automation and Control Division. (8) Mr. McGourty was elected to this position on April 19, 1994, effective April 1, 1994. From December 1991 to April 1994, he was Vice President, Field Operations for Home and Building Control. From January 1990 to December 1991, he was Chairman, President and Chief Executive Officer of Honeywell Limited, Canada.
5 (9) Mr. Palazzari was elected to this position on October 16, 1994. From May 1993 to October 1994, he was Vice President, Finance for Home and Building Control. From March 1992 to April 1993, he was Vice President and Assistant Controller of Operations for the company. From January 1990 to February 1992, he was Vice President for Financial Planning and Reporting for the company. (10) Mr. Tambakeras was elected to this position on February 21, 1995, effective March 1, 1995. From January 1992 to February 1995, he was President of Honeywell Asia Pacific. From February 1988 to December 1991, he was Vice President of Business Operations for Industrial Automation Control.
ITEM 2. PROPERTIES Honeywell and its subsidiaries operate facilities worldwide comprising approximately 21,331,600 square feet of space for use as manufacturing, office and warehouse space, of which approximately 12,409,100 square feet is owned and approximately 8,922,500 square feet is leased. In the judgment of management, 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 3,405,800 square feet of space, of which approximately 1,683,300 square feet is owned and approximately 1,722,500 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 184,600 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 4,138,100 square feet of previously leased space in the United States is under assignment to third parties (including 2,417,000 square feet, 441,100 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 2,472,100 square feet of space for operations in the United States, of which approximately 1,887,900 square feet is owned and approximately 584,200 square feet is leased. Outside the United States, Home and Building Control operations occupy approximately 4,101,100 square feet, of which approximately 1,487,000 square feet is owned and approximately 2,614,100 square feet is leased. Principal facilities operated outside the United States are located in Canada, Germany, The Netherlands, the United Kingdom and Australia. 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 3,191,300 square feet of space for operations in the United States, of which approximately 2,233,200 square feet is owned and approximately 958,100 square feet is leased. Outside the United States, Industrial Control operations occupy approximately 2,441,100 square feet, of which approximately 968,800 square feet is owned and approximately 1,472,300 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. 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 -------------------------- ------------------- ------------ --------- 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 5,166,300 square feet of space for operations in the United States, of which approximately 3,819,100 square feet is owned and approximately 1,347,200 square feet is leased. Outside the United States, Space and Aviation Control operations occupy approximately 553,900 square feet, of which approximately 329,800 square feet is owned and approximately 224,100 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. Manufacturing 526,600 Owned Minneapolis, Minn. Manufacturing 525,100 Owned Clearwater, Fla. Manufacturing 914,800 Owned St. Petersburg, Fla. Manufacturing 304,000 Leased
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 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 contended that the verdict was unsupported by the facts; that the Litton patent was invalid; and that Honeywell's process differed 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; Honeywell's other legal and equitable defenses; and Litton's motion to enhance the damage award. On January 9, 1995, the court issued a decision in favor of Honeywell, ruling that the Litton patent was unenforceable because it was obtained by inequitable conduct and invalid because it was an invention that would have been obvious from combining existing processes. The court further ruled that if the judgment is subsequently vacated or reversed as a result of an appeal of the court's ruling, a new trial on the issue of damages would be held on the ground that the jury's award was inconsistent with the clear weight of the evidence and to permit it to 7 stand would constitute a miscarriage of justice. Litton has filed a motion to appeal the court's ruling. The trial for the antitrust claims of Litton and Honeywell is presently scheduled to commence in November 1995. Honeywell believes that the court's ruling was correct and continues to believe that Litton's claims are without merit. 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 any losses in connection with these matters and the resolution of the environmental claims will not have a material effect on net income, financial position or liquidity. 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 1994. 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 43. Information regarding the frequency and amount of dividends paid by Honeywell on its common stock during the two most recent years is set forth in Note 23 to the financial statements in Part II, Item 8 at page 43. Further information regarding the company's payment of dividends is set forth in Part II, Item 7 at pages 17 and 18. In November 1991, as part of Honeywell's program to enhance shareholder value, the company authorized the repurchase of shares of its common stock in open market transactions during the next five years for an amount not to exceed $600 million. In 1992, 1993 and 1994, $189 million, $240 million and $168 million respectively, of share repurchases were made under this program. Stockholders of record on March 1, 1995 totaled 31,829, 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)
1994 1993 1992 1991 1990 1989 -------- -------- -------- -------- -------- -------- Results of Operations Sales................................................... $6,057.0 $5,963.0 $6,222.6 $6,192.9 $6,309.1 $6,058.6 -------- -------- -------- -------- -------- -------- Cost of sales........................................... 4,082.1 4,019.6 4,195.3 4,185.1 4,308.7 4,172.5 Research and development................................ 319.0 337.4 312.6 300.7 279.6 283.5 Selling, general and administrative..................... 1,173.8 1,075.7 1,196.8 1,150.9 1,170.0 1,127.9 Litigation settlements.................................. (32.6) (287.9) Special charges......................................... 62.7 51.2 128.4 81.6 Interest -- net......................................... 60.2 51.0 58.5 61.4 67.6 90.3 Gain on sale of assets.................................. (21.7) (340.1) Equity income........................................... (10.5) (17.8) (15.8) (14.6) (11.5) (33.0) -------- -------- -------- -------- -------- -------- 5,687.3 5,484.5 5,587.9 5,683.5 5,792.7 5,382.7 -------- -------- -------- -------- -------- -------- Income from continuing operations before income taxes... 369.7 478.5 634.7 509.4 516.4 675.9 Provision for income taxes.............................. 90.8 156.3 234.8 178.3 144.6 125.6 -------- -------- -------- -------- -------- -------- Income from continuing operations....................... 278.9 322.2 399.9 331.1 371.8 550.3 Income from discontinued operations..................... 10.1 53.8 Extraordinary item...................................... (8.6) Cumulative effect of accounting changes................. (144.5) -------- -------- -------- -------- -------- -------- Net income.............................................. $ 278.9 $ 322.2 $ 246.8 $ 331.1 $ 381.9 $ 604.1 -------- -------- -------- -------- -------- -------- -------- -------- -------- -------- -------- -------- Earnings Per Common Share Continuing operations................................... $ 2.15 $ 2.40 $ 2.88 $ 2.35 $ 2.45 $ 3.23 Discontinued operations................................. 0.07 0.32 Extraordinary item...................................... (0.06) Cumulative effect of accounting changes................. (1.04) -------- -------- -------- -------- -------- -------- Net income.............................................. $ 2.15 $ 2.40 $ 1.78 $ 2.35 $ 2.52 $ 3.55 -------- -------- -------- -------- -------- -------- -------- -------- -------- -------- -------- -------- Cash Dividends Per Common Share........................... $ 0.97 $ 0.91 $ 0.84 $ 0.77 $ 0.70 $ 0.57 Financial Position Current assets.......................................... $2,649.4 $2,550.2 $2,707.8 $2,698.9 $2,582.2 $2,800.7 Current liabilities..................................... 2,071.8 1,856.1 1,969.2 2,095.0 2,175.1 2,415.8 -------- -------- -------- -------- -------- -------- Working capital......................................... $ 577.6 $ 694.1 $ 738.6 $ 603.9 $ 407.1 $ 384.9 -------- -------- -------- -------- -------- -------- -------- -------- -------- -------- -------- -------- Short-term debt......................................... $ 360.6 $ 187.9 $ 188.4 $ 168.4 $ 109.0 $ 145.6 Long-term debt.......................................... 501.5 504.0 512.1 639.8 616.3 692.5 -------- -------- -------- -------- -------- -------- Total debt.............................................. 862.1 691.9 700.5 808.2 725.3 838.1 Stockholders' equity.................................... 1,854.7 1,773.0 1,790.4 1,850.8 1,696.9 1,918.2 -------- -------- -------- -------- -------- -------- Capitalization.......................................... $2,716.8 $2,464.9 $2,490.9 $2,659.0 $2,422.2 $2,756.3 -------- -------- -------- -------- -------- -------- -------- -------- -------- -------- -------- --------
9 (DOLLARS AND SHARES IN MILLIONS EXCEPT PER SHARE AMOUNTS)
1994 1993 1992 1991 1990 1989 -------- -------- -------- -------- -------- -------- Sales Home and Building Control............................... $2,664.5 $2,424.3 $2,393.6 $2,249.1 $2,196.7 $2,076.8 Industrial Control...................................... 1,835.3 1,691.5 1,743.9 1,626.8 1,653.5 1,491.4 Space and Aviation Control.............................. 1,432.0 1,674.9 1,933.1 2,132.3 2,071.3 2,004.1 Other................................................... 125.2 172.3 152.0 184.7 387.6 486.3 -------- -------- -------- -------- -------- -------- $6,057.0 $5,963.0 $6,222.6 $6,192.9 $6,309.1 $6,058.6 -------- -------- -------- -------- -------- -------- -------- -------- -------- -------- -------- -------- Operating Profit (1)(2) Home and Building Control............................... $ 236.5 $ 232.7 $ 193.4 $ 229.1 $ 237.0 $ 225.1 Industrial Control...................................... 206.6 189.7 156.9 224.0 219.5 136.8 Space and Aviation Control.............................. 80.9 148.1 175.8 226.1 200.4 111.5 Other................................................... (1.8) (9.5) (3.1) 18.8 20.8 -------- -------- -------- -------- -------- -------- Total operating profit.................................. 524.0 568.7 516.6 676.1 675.7 494.2 Interest expense........................................ (75.5) (68.0) (89.9) (89.4) (106.0) (135.2) Litigation settlements.................................. 32.6 287.9 Gain on sale of assets.................................. 21.7 340.1 Equity income........................................... 10.5 17.8 15.8 14.6 11.5 33.0 General corporate expense............................... (89.3) (72.6) (95.7) (91.9) (86.5) (56.2) -------- -------- -------- -------- -------- -------- Income before income taxes.............................. $ 369.7 $ 478.5 $ 634.7 $ 509.4 $ 516.4 $ 675.9 -------- -------- -------- -------- -------- -------- -------- -------- -------- -------- -------- -------- Assets Home and Building Control............................... $1,529.8 $1,327.3 $1,302.4 $1,282.8 $1,228.7 $1,202.1 Industrial Control...................................... 1,273.3 1,059.8 1,057.5 1,001.7 955.3 937.5 Space and Aviation Control.............................. 1,174.9 1,219.6 1,403.6 1,594.5 1,684.7 1,701.8 Corporate and Other..................................... 907.9 991.4 1,106.6 927.7 877.5 1,158.7 Discontinued operations................................. 258.1 -------- -------- -------- -------- -------- -------- $4,885.9 $4,598.1 $4,870.1 $4,806.7 $4,746.2 $5,258.2 -------- -------- -------- -------- -------- -------- -------- -------- -------- -------- -------- -------- Additional Information Average number of common shares outstanding............. 129.4 134.2 138.5 140.9 151.8 170.4 Return on average stockholders' equity.................. 15.6% 18.4% 13.8% 19.2% 20.6% 33.5% Stockholders' equity per common share................... $ 14.57 $ 13.48 $ 13.10 $ 13.25 $ 11.99 $ 11.99 Percent of debt to total capitalization................. 32% 28% 28% 30% 30% 30% Research and development Honeywell-funded...................................... $ 319.0 $ 337.4 $ 312.6 $ 300.7 $ 279.6 $ 283.5 Customer-funded....................................... 340.5 404.8 390.5 373.5 417.5 460.9 Capital expenditures.................................... 262.4 232.1 244.1 240.2 251.5 268.0 Depreciation............................................ 235.3 235.3 242.8 238.5 236.1 247.8 Employees at year end................................... 50,800 52,300 55,400 58,200 60,300 65,300 -------------------------- (1) Operating profit is net of special charges amounting to $62.7, $51.2, $128.4 and $81.6 in 1994, 1993, 1992 and 1989, respectively, (see Note 4 to Financial Statements) as follows: Home and Building Control, $28.7, $9.9, $42.7 and $28.4; Industrial Control, $14.4, $9.0, $38.6 and $32.7; Space and Aviation Control, $19.6, $7.4, $34.9 and $12.1; Other, $--, $16.4, $2.6 and $3.1; and General Corporate Expense, $--, $8.5, $9.6 and $5.3. (2) Operating profit is net of the additional operating expense impact of adopting SFAS 106 (see Note 21 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.
10 ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS OPERATIONS SALES Honeywell's 1994 sales were $6.057 billion, compared with $5.963 billion in 1993 and $6.223 billion in 1992. Sales in the United States of $3.825 billion were down two percent primarily due to a continuing cyclical downturn in the Space and Aviation Control commercial aviation market and reduced government spending. International sales, which represent 37 percent of total sales, increased eight percent from 1993 to $2.232 billion. The international sales increase was the result of positive sales growth of seven percent measured in local currency, along with positive currency effects as the U.S. dollar weakened an average of one percent against local currencies in countries where Honeywell does business. U.S. export sales, including exports to foreign affiliates, were $780 million in 1994, compared with $769 million in 1993 and $830 million in 1992. COST OF SALES Cost of sales was $4.082 billion in 1994, or 67.4 percent of sales, compared with $4.020 billion (67.4 percent) in 1993 and $4.195 billion (67.4 percent) in 1992. Cost as a percentage of sales remained flat for 1994 despite highly competitive conditions in all sectors of operation. Honeywell continues to closely monitor all phases of its program to reduce operating costs and improve margins, and margin expansion is anticipated in 1995. RESEARCH AND DEVELOPMENT Honeywell spent $319 million, or 5.3 percent of sales, on research and development in 1994, compared with $337 million (5.7 percent) in 1993 and $313 million (5.0 percent) in 1992. The higher 1993 percentage reflects significant investments in next-generation technologies. Honeywell expects to return to approximately the same rate of R&D spending in 1995 as in 1992. Honeywell also received $340 million in funds for customer-funded research and development in 1994, compared with $405 million in 1993 and $390 million in 1992. OTHER EXPENSES AND INCOME Selling, general and administrative expenses were $1.174 billion, or 19.4 percent of sales in 1994, compared with $1.076 billion (18.0 percent) in 1993 and $1.197 billion (19.2 percent) in 1992. Excluding royalties from autofocus licensees (see Note 3 to Financial Statements on page 26), the percent of sales would have been 19.5 percent, 18.6 percent and 19.5 percent in 1994, 1993 and 1992, respectively. The higher percentage in 1994 was primarily due to increased legal costs. The higher percentage in 1992 was due to increased international selling expenses. Royalty income from autofocus licensing agreements is expected to decline to less than $1 million in 1995 as a result of the expiration of the related patents. 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 26). 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 (see Note 3 to Financial Statements on page 26). 11 Honeywell remains committed to efforts to reduce operating costs and improve margins. As a result of the identification of additional opportunities to restructure and streamline operations, Honeywell announced on October 19, 1994, its intention to record additional special charges in 1994. In December 1994, Honeywell's management, with the approval of the Board of Directors, committed itself to a plan of action and recorded special charges of $63 million, or $38 million ($0.29 per share) after income taxes. The actions to be undertaken include a continuation of right-sizing the Space and Aviation Control business segment, a worldwide consolidation of manufacturing capacity, a streamlining and realignment of the overhead structure and corporate expense reductions. Special charges of $51 million, or $29 million ($0.22 per share) after income taxes, were recorded in 1993 for productivity initiatives to strengthen the company's competitiveness. In 1992, special charges of $128 million, or $85 million ($0.62 per share) after income taxes, were recorded to right-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 and other cost accruals. Work force reduction costs primarily include severance costs related to involuntary termination programs instituted to improve efficiency and reduce costs. These costs amounted to $53 million in 1994, $44 million in 1993 and $65 million in 1992. As a result of the 1994 plan, approximately 1,500 employees will be terminated. Facilities consolidation costs are primarily associated with consolidations of branch office space and product lines to restructure and streamline Honeywell's operations. These costs amounted to $10 million in 1994, $2 million in 1993 and $43 million in 1992. Other cost accruals include costs of exiting several product lines which were no longer considered complementary to Honeywell's businesses and amounted to $5 million in 1993 and $20 million in 1992. The estimated cost savings of the restructuring actions in 1994 will exceed $30 million annually, when fully realized. Special charge accruals remaining to be paid were $74 million, $79 million and $121 million at December 31, 1994, 1993 and 1992, respectively. Total expenditures amounted to $50 million in 1994, $93 million in 1993 and $8 million in 1992. Cash flows from operating activities have funded and are expected to fund all special charges. Further information about special charges is provided in Note 4 to Financial Statements on page 26. Net interest expense was $60 million in 1994, $51 million in 1993 and $59 million in 1992. Net interest expense increased in 1994 as a result of higher market interest rates and higher debt compared with 1993. In 1992, Honeywell reduced total debt by $108 million, including redemption of high-coupon, long-term debt. Information concerning Honeywell's exposure to and management of interest rate risk through the use of derivative financial instruments is provided on page 19 and in Notes 14 and 15 to Financial Statements on pages 31 and 33, respectively. Earnings of companies owned 20 percent to 50 percent (primarily Yamatake-Honeywell Co., Ltd.), which are accounted for using the equity method, were $11 million in 1994, $18 million in 1993 and $16 million in 1992. The decline in 1994 primarily resulted from a decline in earnings, the writedown of assets and a bad debt reserve increase. INCOME TAXES The provision for income taxes was $91 million in 1994, compared with $156 million in 1993 and $235 million in 1992. The 1994 income tax provision has been reduced by $38 million ($0.29 per share) as a result of a favorable tax settlement. 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 5 to Financial Statements on page 27. 12 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. 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. NET INCOME Honeywell's net income was $279 million ($2.15 per share) in 1994, compared with net income of $322 million ($2.40 per share) in 1993 and $247 million ($1.78 per share) in 1992. Net income in 1994 includes an after-tax provision for special charges of $38 million ($0.29 per share) and a reduction of the provision for income taxes of $38 million ($0.29 per share) from a favorable tax settlement. 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. RETURN ON EQUITY AND INVESTMENT Return on equity (ROE) was 15.6 percent in 1994, 18.4 percent in 1993 and 13.8 percent in 1992. Return on investment (ROI) was 12.3 percent in 1994, 14.6 percent in 1993 and 11.8 percent in 1992. The adoption of SFAS 106 and SFAS 112 significantly reduced ROE and ROI in 1992. CURRENCY The U.S. dollar weakened an average of one percent in 1994 compared with 1993 in relation to the principal foreign currencies in countries where Honeywell products are sold. A weaker dollar has a positive effect on international results because foreign-exchange denominated profits translate into more U.S. dollars of profit; a stronger dollar has a negative translation effect. Information about Honeywell's exposure to and management of currency risk through the use of derivative financial instruments is provided on page 19 and in Notes 6, 14 and 15 to Financial Statements on pages 28, 31 and 33, respectively. 13 INFLATION Highly competitive market conditions have 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 have largely offset the effects of inflation on other costs and expenses. EMPLOYMENT Honeywell employed 50,800 people worldwide at year-end 1994, compared with 52,300 people in 1993 and 55,400 people in 1992. Approximately 31,400 employees work in the United States, with 19,400 employed outside the country, primarily in Europe. Total compensation and benefits in 1994 were $2.7 billion, or 47 percent of total costs and expenses. Sales per employee were $118,600 in 1994, compared with $110,900 in 1993 and $109,600 in 1992. ENVIRONMENTAL MATTERS Honeywell is committed to protecting the environment, a commitment evidenced by both Honeywell's products and 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 federal 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 effect on Honeywell's financial position, net income, 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 $2.665 billion in 1994, compared with $2.424 billion in 1993 and $2.394 billion in 1992. Sales in 1994 were up moderately as U.S. sales continued to benefit from an improving economy and growing consumer confidence. International sales were aided by the beginnings of economic recovery internationally. Home Control continued to achieve greater market penetration with original equipment manufacturers worldwide and to broaden its product offerings in key markets such as burner boiler control. Honeywell acquired Metallwerke Neheim Goeke & Co. GmbH, a leading German manufacturer of water heating control products, to complement its current offerings in Europe. In addition, there were a number of new product introductions which included a new line of smart gas valves and integrated boiler and furnace controls. Building Control experienced continued success with its comprehensive energy retrofit and service solutions, particularly in the schools and industrial markets in the United States. Home and Building Control's large worldwide installed product and service base and market strategies will continue to support future sales growth. Sales in 1993 were up slightly from 1992 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 14 introductions and greater penetration of the OEM market. TotalHome-Registered Trademark- 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 energy retrofit and service solutions for schools and other institutions. Home and Building Control operating profit was $236 million in 1994, compared with $233 million in 1993 and $193 million in 1992. Operating profit included special charges of $29 million in 1994, $10 million in 1993 and $43 million in 1992. Excluding the impact of special charges, operating profit increased moderately in 1994 benefiting from increasing volume in an improving U.S. economy and growing consumer confidence. Special charges were incurred in 1994 to consolidate facilities, streamline operations and improve productivity. 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 5000-Registered Trademark- building automation platform in the United States. Special charges were incurred in 1993 and 1992 for implementation of programs to consolidate facilities and improve productivity. Orders improved moderately in 1994 for both Home Control and Building Control, primarily in the United States. Order activity in the targeted segments of schools and industrial facilities experienced double-digit growth. The backlog of orders also showed a moderate increase for 1994. INDUSTRIAL CONTROL Industrial Control sales were $1.835 billion in 1994, compared with $1.692 billion in 1993 and $1.744 billion in 1992. Excluding year-earlier results of the Keyboard Division, which was sold in the third quarter of 1993, sales increased moderately in 1994. Industrial Automation and Control experienced improving sales for TotalPlant-Registered Trademark- Open Solutions as industry continues to focus on improving productivity and meeting stringent environmental and safety regulations worldwide. Sales to the hydrocarbon processing market were strong as companies invested to comply with the U.S. Environmental Protection Agency regulations for reformulated fuels. Honeywell acquired Allied Data Communications, Pepperl & Fuchs Systems, and Profimatics during the year and forged alliances with other companies to expand its TotalPlant Open Solutions portfolio and provide more one-stop shopping and a broader range of services to its industrial customers. Sensing and Control (formerly Control Components) benefited from continued improvements in the U.S. durable goods market, particularly in the automotive, appliance and information technology industries. The business introduced SDS Smart Distributed System, a revolutionary sensor network for distributed machine control. The company expects continued growth for both Industrial Automation and Control's and Sensing and Control's systems and products in 1995. 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 Sensing and Control grew at moderate rates despite weak 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 Industrial's 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. Sensing and Control experienced significant growth in solid state sensors for on-board automotive and information technology and appliance market segments as demand for durable goods improved. Industrial Control operating profit was $207 million in 1994, $190 million in 1993 and $157 million in 1992. Operating profit included special charges of $14 million in 1994, $9 million in 1993 and $39 million in 1992. Excluding the impact of special charges, operating profit showed a moderate increase as a result of volume increases in Industrial Automation and Control where environmental 15 and safety regulations remain key drivers of spending around the world, particularly in the hydrocarbon processing and chemicals markets; and volume increases in Sensing and Control where durable goods markets continued to improve, particularly in the automotive and appliance industries. Special charges were incurred in 1994 to consolidate facilities, streamline operations and improve productivity. 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. Special charges were incurred in 1993 and 1992 for implementation of programs to consolidate facilities and improve productivity. In 1994, on a comparable basis, Industrial Automation and Control experienced strong order activity in both the United States and internationally in such key markets as hydrocarbon and chemical processing. The backlog of orders was up modestly for the year. SPACE AND AVIATION CONTROL Sales in Space and Aviation Control were $1.432 billion in 1994, compared with $1.675 billion in 1993 and $1.933 billion in 1992. Sales continued to decline in 1994 as anticipated, reflecting lower commercial aircraft production rates and reduced government spending. A cyclical recovery of the commercial aircraft industry is expected in 1996. We believe we have seen the worst of the decline, and we anticipate flat sales in 1995. Sales in 1993 declined 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. Space and Aviation Control operating profit was $81 million in 1994, compared with $148 million in 1993 and $176 million in 1992. Operating profit included special charges of $20 million in 1994, $7 million in 1993 and $35 million in 1992. Excluding the impact of special charges, there was a sharp decline in operating profit resulting from lower sales volume and continued investment in next-generation technology. This was partially offset by favorable warranty performance and termination settlements in the Military and Space businesses. Special charges were incurred in 1994 to consolidate facilities, streamline operations and improve productivity. Excluding the impact of special charges, operating profit declined in 1993 due to the sharp volume decline in sales of commercial flight systems and significant investments in next-generation avionics. Special charges were incurred in 1993 and 1992 for implementation of programs to consolidate facilities and improve productivity. Space and Aviation Control orders increased sharply in 1994 as result of contract awards in Space Systems to provide cockpit displays for the space shuttle and supply command and data-handling systems for the International Space Station Alpha, and improved orders in Business and Commuter Aviation driven by a rebound in the business jet market. The backlog of orders increased moderately from 1993 levels. OTHER Sales from other operations were $125 million in 1994, $172 million in 1993 and $152 million in 1992. These sales included the activities of various units, such as the Solid State Electronics and the Honeywell Technology research and development centers, which do not correspond with Honeywell's primary business segments. Other operations broke even in 1994 and incurred operating losses of $2 million in 1993 and $9 million in 1992. The 1993 and 1992 losses included special charges of $16 million and $3 million, respectively, for work force reductions. 16 FINANCIAL POSITION FINANCIAL CONDITION At year-end 1994, Honeywell's capital structure comprised $361 million of short-term debt, $501 million of long-term debt and $1.855 billion of stockholders' equity. The ratio of debt to total capital was 32 percent, compared with 28 percent at year-end 1993. Honeywell's debt-to-total capital policy range is 30 to 40 percent. Honeywell managed its capital structure at the low end of this range during 1994. Total debt increased $170 million during 1994 to $862 million. The increase was used to finance general corporate requirements, including capital expenditures and working capital, and $105 million of acquisitions. Stockholders' equity increased $82 million in 1994 to $1.855 billion. The increase was primarily due to an increase in retained earnings of $279 million from net income, offset by dividends of $126 million, a $55 million increase in the accumulated foreign currency translation, and a $7 million reduction in the pension liability adjustment. These increases in stockholders' equity were partially offset by a $148 million increase in treasury stock. CASH GENERATION AND DEPLOYMENT In 1994, $470 million of cash was generated from operating activities, compared with $475 million in 1993 and $532 million in 1992. The decrease in 1994 was largely due to lower earnings compared with 1993. In 1994, cash generated from investing and financing activities included $23 million of proceeds from the sale of assets and $6 million of proceeds from employee stock plans. These funds were used to support $262 million of capital expenditures, $126 million of dividend payments and $163 million of share repurchases. Cash balances increased $25 million in 1994. 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 $9 million in 1994. This portion of working capital as a percentage of sales was 28 percent, which was consistent with 1993. Trade receivables sold at year-end 1994 were $2 million, a reduction of $36 million in 1994. The increases in receivable and payable balances in 1994 were consistent with the increase in fourth quarter sales. CAPITAL EXPENDITURES AND ACQUISITIONS Capital expenditures for property, plant and equipment in 1994 were $262 million, compared with $232 million in 1993 and $244 million in 1992. The 1994 depreciation charges were $235 million. Honeywell continues to invest at levels believed to be adequate to maintain its technological position in areas providing value-added long-term returns. During 1994, Honeywell invested $105 million in complementary business acquisitions. SHARE REPURCHASE PLANS In November 1991, the Board of Directors authorized a five-year program to purchase up to $600 million of Honeywell shares. This program was completed in 1994, two years ahead of schedule. Honeywell repurchased $3 million of shares in 1991, $189 million of shares in 1992, $240 million of shares in 1993, and $168 million of shares in 1994. At year-end 1994, Honeywell had 188 million shares issued, 127 million shares outstanding and 32,025 stockholders of record. At year-end 1993, Honeywell had 188 million shares issued, 132 million shares outstanding and 33,382 stockholders of record. DIVIDENDS In November 1993, the Board of Directors approved an 8 percent increase in the regular annual dividend to $0.96 per share, from $0.89 per share, effective in the fourth quarter 1993. In November 1994, the Board of Directors approved an additional 4 percent increase in the regular annual 17 dividend to $1.00 per share effective in the fourth quarter 1994. Honeywell paid $0.97 per share in dividends in 1994, compared with $0.9075 in 1993, and $0.84125 in 1992. Honeywell has paid a quarterly dividend since 1932 and has increased the annual payout per share in each of the last 19 years. EMPLOYEE STOCK PROGRAM Honeywell contributed 634,561 shares of Honeywell common stock to employees under its U.S. employee stock match savings plan in 1994. 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 $86 million in 1994, $105 million in 1993 and $79 million in 1992. Cash contributions to the Pension Plan for U.S. union employees were $40 million in 1994, $36 million in 1993 and $27 million in 1992. TAXES In 1994, taxes paid were $79 million. Accrued income taxes and related interest decreased $11 million during 1994. FUNDING SPECIAL CHARGES During 1994, 1993 and 1992, the company established reserves for productivity initiatives to strengthen the company's competitiveness (see page 12 and Note 4 to Financial Statements on page 26). Future cash flows from operating activities are expected to be sufficient to fund these accrued costs. LIQUIDITY Short-term debt at year-end 1994 was $361 million, consisting of $125 million of commercial paper, $102 million of notes payable and $134 million of current maturities of long-term debt. Short-term debt at year-end 1993 totaled $188 million, consisting of $181 million of commercial paper and $7 million of notes payable and 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 general purpose lines of credit at year-end 1994 totaled $1.076 billion. This consisted of $737 million of committed credit lines to meet Honeywell's financing requirements, including support of commercial paper and bank note borrowings, and $339 million of uncommitted credit lines available to certain foreign subsidiaries. In addition, Honeywell had a $1.2 billion special purpose credit facility available for an appeal bond that might have been required in the Litton litigation described in Litigation below. The $1.2 billion facility was canceled in February, 1995. This compared with $2.272 billion of available credit lines at year-end 1993, consisting of $675 million of committed credit lines for general financing requirements, $397 million of uncommitted credit lines available to certain foreign subsidiaries and the $1.2 billion special purpose facility. In addition to its committed credit lines, Honeywell has access to the public debt markets as evidenced by its $500 million medium-term note program which was initiated in August 1994. The medium-term note program allows note issuances with maturities ranging from nine months to 30 years. At December 31, 1994, $101 million of notes was outstanding under this program. Long-term debt maturities consist of $133 million in 1995, $185 million in 1996 and $115 million in 1997. Cash and short-term investments totaled $275 million at year-end 1994 and $256 million at year-end 1993. Management believes its available cash, committed credit lines and access to the public debt markets through its medium-term note program, provide adequate short-term and long-term liquidity. 18 DERIVATIVE FINANCIAL INSTRUMENTS Honeywell utilizes various foreign currency exchange contracts and interest rate swaps to manage its exposure to exchange rate (see Notes 6, 14 and 15 to Financial Statements on pages 28, 31 and 33, respectively) and interest rate fluctuations and its mix of fixed and floating interest rates (see Notes 14 and 15 to Financial Statements on pages 31 and 33, respectively). At year-end 1994, the notional amount of outstanding foreign exchange contracts was $1.089 billion. The notional amount of outstanding interest rate swaps was $232 million. LITIGATION On August 31, 1993, a federal court jury in the 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 contended the verdict was unsupported by the facts; that the Litton patent was 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; Honeywell's other legal and equitable defenses; and Litton's motion to enhance the damage award. On January 9, 1995, the court issued a decision in favor of Honeywell, ruling that the Litton patent was unenforceable because it was obtained by inequitable conduct and invalid because it was an invention that would have been obvious from combining existing processes. The court further ruled that if the judgment is subsequently vacated or reversed as a result of an appeal of the court's ruling, a new trial on the issue of damages would be held on the ground that the jury's award was inconsistent with the clear weight of the evidence and to permit it to stand would constitute a miscarriage of justice. Litton has filed a motion to appeal the court's ruling. The trial for the antitrust claims of Litton and Honeywell is currently scheduled to commence in November 1995. Honeywell believes that the court's ruling was correct and continues to believe that Litton's claims are without merit. As a result, no provision has been made in the financial statements with respect to this contingent liability. CREDIT RATINGS Honeywell's credit ratings remained unchanged during 1994. 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 Investors Service, Inc. On January 10, 1995, Moody's Investors Service, Inc. removed Honeywell from credit watch and affirmed the A3/P-2 debt ratings. Moody's had placed Honeywell on credit watch status on August 31, 1993, as a result of the jury verdict in the Litton litigation. STOCK PERFORMANCE The market price of Honeywell stock ranged from $36 7/8 to $28 1/4 in 1994, and was $31 1/2 at year end. Book value per common share at year end was $14.57 in 1994 and $13.48 in 1993. 19 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, 1994 and 1993, and the related statements of income and cash flows for each of the three years in the period ended December 31, 1994. Our audits also included the financial statement schedule listed at Part IV, Item 14(a)2. These financial statements and the financial statement schedule 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, 1994 and 1993, and the results of their operations and their cash flows for each of the three years in the period ended December 31, 1994, in conformity with generally accepted accounting principles. Also, in our opinion, such financial statement schedule, when considered in relation to the basic financial statements taken as a whole, presents fairly in all material respects the information set forth therein. As discussed in Notes 1, 5 and 21 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 LLP Minneapolis, Minnesota February 13, 1995 20 INCOME STATEMENT HONEYWELL INC. AND SUBSIDIARIES (DOLLARS AND SHARES IN MILLIONS EXCEPT PER SHARE AMOUNTS)
YEARS ENDED DECEMBER 31 --------------------------------- 1994 1993 1992 --------- ---------- ---------- Sales......................................................................... $ 6,057.0 $ 5,963.0 $ 6,222.6 --------- ---------- ---------- Costs and Expenses Cost of sales............................................................... 4,082.1 4,019.6 4,195.3 Research and development.................................................... 319.0 337.4 312.6 Selling, general and administrative......................................... 1,173.8 1,075.7 1,196.8 Litigation settlements...................................................... (32.6) (287.9) Special charges............................................................. 62.7 51.2 128.4 --------- ---------- ---------- 5,637.6 5,451.3 5,545.2 --------- ---------- ---------- Interest Interest expense............................................................ 75.5 68.0 89.9 Interest income............................................................. 15.3 17.0 31.4 --------- ---------- ---------- 60.2 51.0 58.5 --------- ---------- ---------- Equity Income................................................................. 10.5 17.8 15.8 --------- ---------- ---------- Income before Income Taxes.................................................... 369.7 478.5 634.7 Provision for Income Taxes.................................................... 90.8 156.3 234.8 --------- ---------- ---------- Income before Extraordinary Item and Cumulative Effect of Accounting Changes...................................................................... 278.9 322.2 399.9 Extraordinary Item -- Loss on Early Redemption of Debt........................ (8.6) Cumulative Effect of Accounting Changes....................................... (144.5) --------- ---------- ---------- Net Income.................................................................... $ 278.9 $ 322.2 $ 246.8 --------- ---------- ---------- --------- ---------- ---------- Earnings Per Common Share Income before extraordinary item and cumulative effect of accounting changes.................................................................... $ 2.15 $ 2.40 $ 2.88 Extraordinary item -- loss on early redemption of debt...................... (0.06) Cumulative effect of accounting changes..................................... (1.04) --------- ---------- ---------- Net income.................................................................. $ 2.15 $ 2.40 $ 1.78 --------- ---------- ---------- --------- ---------- ---------- Average Number of Common Shares Outstanding................................... 129.4 134.2 138.5
See accompanying Notes to Financial Statements. 21 STATEMENT OF FINANCIAL POSITION HONEYWELL INC. AND SUBSIDIARIES (DOLLARS IN MILLIONS) ASSETS
DECEMBER 31 ----------------------- 1994 1993 ---------- ----------- Current Assets Cash and cash equivalents............................................................. $ 267.4 $ 242.3 Short-term investments................................................................ 7.4 13.8 Receivables........................................................................... 1,406.9 1,275.9 Inventories........................................................................... 760.2 760.1 Deferred income taxes................................................................. 207.5 258.1 ---------- ----------- 2,649.4 2,550.2 Investments and Advances................................................................ 242.8 227.7 Property, Plant and Equipment Property, plant and equipment......................................................... 2,716.8 2,549.4 Less accumulated depreciation......................................................... 1,617.3 1,487.4 ---------- ----------- 1,099.5 1,062.0 Other Assets Long-term receivables................................................................. 40.1 51.3 Goodwill.............................................................................. 209.8 133.0 Patents, licenses and trademarks...................................................... 66.1 89.8 Software and other intangibles........................................................ 290.3 266.3 Deferred income taxes................................................................. 98.5 63.8 Other................................................................................. 189.4 154.0 ---------- ----------- Total Assets........................................................................ $ 4,885.9 $ 4,598.1 ---------- ----------- ---------- ----------- LIABILITIES AND STOCKHOLDERS' EQUITY Current Liabilities Short-term debt....................................................................... $ 360.6 $ 187.9 Accounts payable...................................................................... 429.6 381.9 Customer advances..................................................................... 72.6 61.4 Accrued compensation and benefit costs................................................ 434.6 433.2 Accrued income taxes.................................................................. 309.6 320.8 Deferred income taxes................................................................. 10.2 Other accrued liabilities............................................................. 464.8 460.7 ---------- ----------- 2,071.8 1,856.1 Long-Term Debt.......................................................................... 501.5 504.0 Other Liabilities Accrued benefit costs................................................................. 359.0 378.6 Deferred income taxes................................................................. 39.8 27.6 Other................................................................................. 59.1 58.8 Stockholders' Equity Common stock -- $1.50 par value Authorized -- 250,000,000 shares Issued -- 1994 -- 188,286,000 shares.................................................. 282.4 1993 -- 188,328,570 shares.................................................... 282.5 Additional paid-in capital............................................................ 446.9 431.5 Retained earnings..................................................................... 2,600.4 2,447.3 Treasury stock -- 1994 -- 61,030,565 shares........................................... (1,576.5) 1993 -- 56,769,007 shares............................................. (1,428.4) Accumulated foreign currency translation.............................................. 107.4 52.9 Pension liability adjustment.......................................................... (5.9) (12.8) ---------- ----------- 1,854.7 1,773.0 ---------- ----------- Total Liabilities and Stockholders' Equity.......................................... $ 4,885.9 $ 4,598.1 ---------- ----------- ---------- -----------
See accompanying Notes to Financial Statements. 22 STATEMENT OF CASH FLOWS HONEYWELL INC. AND SUBSIDIARIES (DOLLARS IN MILLIONS)
YEARS ENDED DECEMBER 31 ------------------------------- 1994 1993 1992 --------- --------- --------- Cash Flows from Operating Activities Net income..................................................................... $ 278.9 $ 322.2 $ 246.8 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................................................................. 235.3 235.3 242.8 Amortization of intangibles.................................................. 52.1 49.6 49.9 Deferred income taxes........................................................ 14.0 28.8 6.7 Equity income, net of dividends received..................................... (7.6) (14.5) (13.8) Loss on sale of assets....................................................... 1.0 6.2 1.6 Contributions to employee stock plans........................................ 26.5 28.7 40.0 Increase in receivables...................................................... (83.8) (62.7) (136.0) Decrease in inventories...................................................... 20.9 54.2 67.7 Increase (decrease) in accounts payable...................................... 27.7 28.8 (60.8) Increase (decrease) in accrued income taxes and interest..................... (4.6) 8.3 (25.7) Other changes in working capital, excluding short-term investments and short-term debt............................................................. (93.9) (146.6) (85.6) Other noncurrent items -- net................................................ 3.0 (63.5) 44.9 --------- --------- --------- Net cash flows from operating activities......................................... 469.5 474.8 531.6 --------- --------- --------- Cash Flows from Investing Activities Reduction of investment in Sperry Aerospace Group.............................. 20.0 Proceeds from sale of assets................................................... 22.6 46.8 54.7 Capital expenditures........................................................... (262.4) (232.1) (244.1) Investment in acquisitions..................................................... (104.6) (14.2) (83.5) (Increase) decrease in short-term investments.................................. 6.7 (10.2) 6.8 Other -- net................................................................... 10.5 (23.3) (7.1) --------- --------- --------- Net cash flows from investing activities......................................... (327.2) (213.0) (273.2) --------- --------- --------- Cash Flows from Financing Activities Net increase in short-term debt................................................ 35.7 2.8 90.1 Proceeds from issuance of long-term debt....................................... 126.5 0.6 2.6 Repayment of long-term debt.................................................... (1.8) (7.3) (199.7) Purchase of treasury stock..................................................... (162.5) (241.2) (188.2) Proceeds from employee stock plans............................................. 5.9 17.6 27.4 Dividends paid................................................................. (125.6) (122.0) (116.7) --------- --------- --------- Net cash flows from financing activities......................................... (121.8) (349.5) (384.5) --------- --------- --------- Effect of exchange rate changes on cash.......................................... 4.6 (12.4) (28.7) --------- --------- --------- Increase (decrease) in cash and cash equivalents................................. 25.1 (100.1) (154.8) Cash and cash equivalents at beginning of year................................... 242.3 342.4 497.2 --------- --------- --------- Cash and cash equivalents at end of year......................................... $ 267.4 $ 242.3 $ 342.4 --------- --------- --------- --------- --------- ---------
See accompanying Notes to Financial Statements. 23 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 comprise 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 5). Interest costs related to prior years' tax issues are included in the provision for income taxes in 1994 and 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 purchases and maturities of held-to-maturity securities are classified as cash flows from investing activities. 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, four to 17 years for patents, licenses and trademarks, and three 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. 24 NOTES TO FINANCIAL STATEMENTS (CONTINUED) HONEYWELL INC. AND SUBSIDIARIES (DOLLARS IN MILLIONS EXCEPT PER SHARE AMOUNTS) NOTE 1 -- ACCOUNTING POLICIES (CONTINUED) DERIVATIVES In 1994, Honeywell adopted Statement of Financial Accounting Standards No. 119, "Disclosure about Derivative Financial Instruments and Fair Value of Financial Instruments." Honeywell uses derivative financial instruments such as foreign currency contracts (forwards, swaps and options) to manage its foreign currency exposure (see Notes 6, 14 and 15) and interest rate swaps to manage its exposure to interest rate fluctuations and its mix of fixed and floating interest rates (see Notes 14 and 15). 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. Gains and losses from other foreign currency transactions are included in selling, general and administrative expenses on the income statement and were not material in any year. The amount to be paid or received from interest rate swaps is charged or credited to interest expense over the lives of the interest rate swap agreements. 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 increased/(reduced) stockholders' equity $54.5 in 1994, $(3.0) in 1993 and $(74.8) in 1992. 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 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 1993. This change in estimate is included in cost of sales on the income statement. RECLASSIFICATIONS Certain amounts in prior years' income statements have been reclassified to conform to the current year presentation. NOTE 2 -- ACQUISITIONS AND SALE OF ASSETS Honeywell acquired 15 companies in 1994, eight companies in 1993 and nine companies in 1992 for $104.6, $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 $82.4 in 1994, $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 1994, 1993 and 1992, assuming these acquisitions had been made at the beginning of the year, would not be significantly different from reported results. 25 NOTES TO FINANCIAL STATEMENTS (CONTINUED) HONEYWELL INC. AND SUBSIDIARIES (DOLLARS IN MILLIONS EXCEPT PER SHARE AMOUNTS) NOTE 2 -- ACQUISITIONS AND SALE OF ASSETS (CONTINUED) 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 $8.6 in 1994, $22.9 in 1993 and $41.1 in 1992. 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. NOTE 3 -- 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 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 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 $8.2 in 1994, $31.4 in 1993 and $14.9 in 1992, and is included in selling, general and administrative expenses on the income statement. NOTE 4 -- SPECIAL CHARGES In December 1994, Honeywell's management, with the approval of the board of directors, committed itself to a plan of action and recorded special charges of $62.7. Honeywell remains committed to efforts to reduce operating costs and improve margins. The actions to be undertaken include a continuation of right-sizing the Space and Aviation Control business segment, a worldwide consolidation of manufacturing capacity, a streamlining and realignment of the overhead structure and corporate expense reductions. Special charges of $51.2 were recorded in 1993 for productivity initiatives to strengthen the company's competitiveness. In 1992, special charges of $128.4 were recorded to right-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 and other cost accruals. Work force reduction costs primarily include severance costs related to involuntary termination programs instituted to improve efficiency and reduce costs. These costs amounted to $52.4 in 1994, $43.7 in 1993 and $65.1 in 1992. As a result of the 1994 plan, approximately 1,500 employees will be terminated. Total expenditures of $36.0 in 1994 included $2.9, $26.4 and $6.7 related to costs incurred in 1994, 1993 and 1992, respectively. Total expenditures of $49.8 in 1993 included $7.8 and $42.0 related to costs incurred in 1993 and 1992, respectively. Total expenditures amounted to $2.3 in 1992. Special charges of $5.9 from 1993 and $3.0 from 1992 remain to be paid out as a result of longer-term agreements. Facilities consolidation costs are primarily associated with consolidations of branch office space and product lines to restructure and streamline Honeywell's operations. These costs amounted to $10.3 in 1994, $2.0 in 1993 and $42.7 in 1992. Total expenditures of $8.5 in 1994 included $1.6 and $6.9 related to costs incurred in 1993 and 1992, respectively. Total expenditures of $26.2 in 1993 26 NOTES TO FINANCIAL STATEMENTS (CONTINUED) HONEYWELL INC. AND SUBSIDIARIES (DOLLARS IN MILLIONS EXCEPT PER SHARE AMOUNTS) NOTE 4 -- SPECIAL CHARGES (CONTINUED) related to costs incurred in 1992. Total expenditures amounted to $2.0 in 1992. No expenditures have been made under the 1994 plan. Special charges of $0.4 from 1993 and $4.4 from 1992 remain to be paid out as a result of lease costs associated with vacated facilities. Other cost accruals include costs of exiting several product lines which were no longer considered complementary to Honeywell's businesses and amounted to $5.5 in 1993 and $20.6 in 1992. Total expenditures of $5.5 in 1994 related to costs incurred in 1993. Total expenditures of $17.0 in 1993 related to costs incurred in 1992. Total expenditures amounted to $3.6 in 1992. Cash flows from operating activities have funded and are expected to fund all special charges. NOTE 5 -- INCOME TAXES The components of income before income taxes consist of the following:
1994 1993 1992 ------ ------ ------ Domestic..................................... $208.4 $316.9 $467.7 Foreign...................................... 161.3 161.6 167.0 ------ ------ ------ $369.7 $478.5 $634.7
The provision for income taxes on that income is as follows:
1994 1993 1992 ------ ------ ------ Current tax expense United States.............................. $ 33.8 $ 81.7 $140.2 Foreign.................................... 40.6 36.0 52.5 State and local............................ 2.9 11.3 35.7 ------ ------ ------ Total current.............................. 77.3 129.0 228.4 ------ ------ ------ Deferred tax expense United States.............................. 13.0 17.9 3.1 Foreign.................................... (0.8) 5.8 2.5 State and local............................ 1.3 3.6 0.8 ------ ------ ------ Total deferred............................. 13.5 27.3 6.4 ------ ------ ------ Provision for income taxes................... $ 90.8 $156.3 $234.8
A favorable tax settlement reduced the provision for income taxes by $37.6 ($0.29 per share) in the fourth quarter of 1994. 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 for income taxes; however, the enactment of this legislation did result in a one-time gain of $9.2 ($0.07 per share) in 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. 27 NOTES TO FINANCIAL STATEMENTS (CONTINUED) HONEYWELL INC. AND SUBSIDIARIES (DOLLARS IN MILLIONS EXCEPT PER SHARE AMOUNTS) NOTE 5 -- INCOME TAXES (CONTINUED) A reconciliation of the provision for income taxes to the amount computed using U.S. federal statutory rates is as follows:
1994 1993 1992 ------ ------ ------ Taxes on income at U.S. federal statutory rates....................................... $129.4 $167.5 $215.8 Tax effects of foreign income................ (15.5) (26.0) (1.8) State taxes.................................. 4.2 10.9 24.1 Tax effect of settlement..................... (37.6) Adjustments to effective tax rates used in recording tax assets and liabilities........ 2.7 (1.5) Other........................................ 7.6 3.9 (1.8) ------ ------ ------ Provision for income taxes................... $ 90.8 $156.3 $234.8
Taxes paid were $79.4 in 1994, $111.2 in 1993 and $244.0 in 1992. 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:
1994 1993 ------ ------ Employee benefits............................ $142.2 $177.8 Miscellaneous accruals....................... 95.2 96.0 Excess of tax over book depreciation/amortization................... (24.0) (79.2) Asset valuation reserves..................... 43.0 42.5 Long-term contracts and installment sales.... 4.2 24.8 Losses on discontinuance of product lines.... 0.7 2.3 State taxes.................................. 28.5 29.8 Pension liability adjustment................. 3.7 8.2 Other........................................ (27.3) (18.1) ------ ------ $266.2 $284.1
The components of net deferred taxes shown on the statement of financial position are:
1994 1993 ------ ------ Deferred tax assets.......................... $463.8 $445.7 Deferred tax liabilities..................... 197.6 161.6
Provision has not been made for U.S. or additional foreign taxes on $711.0 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, 1994, foreign subsidiaries had tax operating loss carryforwards of $14.7. NOTE 6 -- FOREIGN CURRENCY Honeywell has entered into various foreign currency exchange contracts (primarily Belgian francs, Deutsche marks and Canadian dollars) designed to minimize its exposure to exchange rate fluctuations on foreign currency transactions. Honeywell only uses foreign currency exchange contracts to hedge underlying exposures such as non-functional currency receivables and payables and foreign currency imports and exports. Company policy prohibits speculation in foreign currency contracts. 28 NOTES TO FINANCIAL STATEMENTS (CONTINUED) HONEYWELL INC. AND SUBSIDIARIES (DOLLARS IN MILLIONS EXCEPT PER SHARE AMOUNTS) NOTE 6 -- FOREIGN CURRENCY (CONTINUED) Foreign exchange contracts reduce Honeywell's overall exposure to exchange rate movements, since the gains and losses on these contracts offset losses and gains on the assets, liabilities and transactions being hedged. Honeywell hedges a significant portion of all known foreign exchange exposures. The notional amount of Honeywell's outstanding foreign currency contracts, consisting of forwards, purchased options and swaps, at December 31, 1994, was approximately $1,088.6. The remaining term of the contracts is generally less than one year. The amount of hedging gains and losses deferred was not material at December 31, 1994. NOTE 7 -- INVESTMENTS IN DEBT AND EQUITY SECURITIES In 1994, Honeywell adopted Statement of Financial Accounting Standards No. 115, "Accounting for Certain Investments in Debt and Equity Securities," which specifies certain accounting and reporting for investments in equity securities that have readily determinable fair values and for all investments in debt securities. Honeywell's investments in held-to-maturity securities totaled $144.4 at December 31, 1994, and are reported at amortized cost in the statement of financial position as follows: cash equivalents, $124.9; short-term investments, $6.6; and investments and advances, $12.9. Held-to-maturity securities generally mature within one year and include the following: time deposits with financial institutions, $116.2; commercial paper, $12.0; and other, $16.2. During 1994, Honeywell purchased $233.9 of held-to-maturity securities. Proceeds from maturities of held-to-maturity securities amounted to $233.0. Honeywell has no investments in trading securities, and available-for-sale securities are not material. The estimated aggregate fair value of these securities approximates their carrying amounts in the statement of financial position. Gross unrealized holding gains and losses are not material. NOTE 8 -- RECEIVABLES Receivables have been reduced by an allowance for doubtful accounts as follows:
1994 1993 --------- --------- Receivables, current............................................... $ 31.1 $ 24.3 Long-term receivables.............................................. 0.7 0.5
Receivables include approximately $21.9 in 1994 and $21.1 in 1993 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 $295.9 in 1994 and $275.6 in 1993 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 $1.9 in 1994 and $3.6 in 1993 to an amount that approximates realizable value. In 1992, Honeywell entered into a three-year agreement with a large international banking institution, 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 and without recourse. 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. Proceeds received from the sale of receivables are included in cash flows from operating activities in the statement of cash flows and amounted to $34.4 in 1994, $193.7 in 1993 and $30.9 in 1992. The uncollected balance of receivables sold amounted to $2.4 and $37.9 at December 31, 1994, and 1993, respectively, and averaged $4.2 and $21.7 during those respective years. The discount recorded on sale of receivables is included in selling, general and 29 NOTES TO FINANCIAL STATEMENTS (CONTINUED) HONEYWELL INC. AND SUBSIDIARIES (DOLLARS IN MILLIONS EXCEPT PER SHARE AMOUNTS) NOTE 8 -- RECEIVABLES (CONTINUED) administrative expenses on the income statement and amounted to $0.4, $0.7 and $0.6 in 1994, 1993 and 1992, respectively. Honeywell, as agent for the purchaser, retains collection and administrative responsibilities for the participating interests sold. NOTE 9 -- INVENTORIES
1994 1993 --------- --------- Finished goods........................................................ $ 297.4 $ 265.3 Inventories related to long-term contracts............................ 89.1 97.7 Work in process....................................................... 156.9 168.1 Raw materials and supplies............................................ 216.8 229.0 --------- --------- $ 760.2 $ 760.1
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 $32.5 and $36.8 at December 31, 1994, and 1993, respectively. NOTE 10 -- PROPERTY, PLANT AND EQUIPMENT
1994 1993 --------- ---------- Land.................................................................. $ 78.2 $ 77.1 Buildings and improvements............................................ 623.4 589.9 Machinery and equipment............................................... 1,937.3 1,814.2 Construction in progress.............................................. 77.9 68.2 --------- ---------- $ 2,716.8 $ 2,549.4
NOTE 11 -- FOREIGN SUBSIDIARIES The following is a summary of financial data pertaining to foreign subsidiaries:
1994 1993 1992 --------- ---------- ---------- Income before extraordinary item and cumulative effect of accounting changes....................................... $ 121.5 $ 119.8 $ 112.0 Assets.................................................... $ 1,742.3 $ 1,546.5 $ 1,554.7 Liabilities............................................... 726.4 620.5 655.7 --------- ---------- ---------- Net assets................................................ $ 1,015.9 $ 926.0 $ 899.0
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. 30 NOTES TO FINANCIAL STATEMENTS (CONTINUED) HONEYWELL INC. AND SUBSIDIARIES (DOLLARS IN MILLIONS EXCEPT PER SHARE AMOUNTS) NOTE 12 -- 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.
1994 1993 1992 -------- -------- -------- Sales........................................ $1,877.0 $1,866.7 $1,656.3 Gross profit................................. 680.7 682.4 607.4 Net income................................... 48.4 69.8 62.8 Equity in net income......................... 10.5 17.8 15.8 Current assets............................... $1,371.4 $1,297.0 $1,035.4 Noncurrent assets............................ 616.8 588.2 502.8 -------- -------- -------- 1,988.2 1,885.2 1,538.2 -------- -------- -------- Current liabilities.......................... 841.6 704.5 687.0 Noncurrent liabilities....................... 225.8 359.3 200.1 -------- -------- -------- 1,067.4 1,063.8 887.1 -------- -------- -------- Net assets................................... $ 920.8 $ 821.4 $ 651.1 Equity in net assets......................... $ 225.5 $ 200.3 $ 158.3
NOTE 13 -- INTANGIBLE ASSETS Intangible assets have been reduced by accumulated amortization as follows:
1994 1993 -------- -------- Goodwill..................................... $ 42.3 $ 34.3 Patents, licenses and trademarks............. 175.4 170.0 Software and other intangibles............... 152.4 135.4
NOTE 14 -- DEBT SHORT-TERM DEBT Honeywell had general purpose lines of credit available totaling $1,075.8 at December 31, 1994. Domestic revolving credit lines with 21 banks total $737.0, which management believes is adequate to meet its financing requirements, including support of commercial paper and bank note borrowings. These domestic lines have commitment fee requirements. There were no borrowings on these lines at December 31, 1994. The remaining credit facilities of $338.8 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 $3.1 at December 31, 1994. The weighted-average interest rate on short-term borrowings outstanding at December 31, 1994, and 1993, respectively, was as follows: commercial paper, 5.7 percent and 3.3 percent; and notes payable, 5.8 percent and 10.1 percent. Short-term debt consists of the following:
1994 1993 -------- -------- Commercial paper............................. $ 125.0 $ 181.0 Notes payable................................ 102.2 6.6 Current maturities of long-term debt......... 133.4 0.3 -------- -------- $ 360.6 $ 187.9
31 NOTES TO FINANCIAL STATEMENTS (CONTINUED) HONEYWELL INC. AND SUBSIDIARIES (DOLLARS IN MILLIONS EXCEPT PER SHARE AMOUNTS) NOTE 14 -- DEBT (CONTINUED) LONG-TERM DEBT
1994 1993 --------- --------- Honeywell Inc. 8% Dual-currency yen/U.S. dollar notes due 1995......................... $ 120.2 $ 116.7 7 7/8% due 1996......................................................... 100.0 100.0 6 1/4% Deutsche mark bonds due 1997..................................... 95.2 88.0 7.25% to 7.71% medium-term notes due 1998............................... 30.0 7.36% to 7.46% medium-term notes due 1999............................... 70.5 8 5/8% due 2006......................................................... 100.0 100.0 7.7% to 10 1/2% due 1995 to 2010........................................ 10.2 12.0 Subsidiaries 9.6% Canadian dollar notes due 1996..................................... 82.0 86.4 7.0% to 10.06% due 1995 to 2001, various currencies..................... 26.8 1.2 --------- --------- 634.9 504.3 Less amount included in short-term debt................................. 133.4 0.3 --------- --------- $ 501.5 $ 504.0
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. In August 1994, Honeywell initiated a $500.0 medium-term note program whereby it may issue notes with maturities of nine months to 30 years denominated in U.S. dollars or foreign currencies with fixed or variable interest rates. Honeywell issued $100.5 of U.S. dollar fixed-rate medium-term notes in 1994. Honeywell utilizes interest rate swaps to manage its interest rate exposures and its mix of fixed and floating interest rates. 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. In 1994, Honeywell entered into interest rate swap agreements effectively converting $30.0 of medium-term notes due 1998 and $70.5 of medium-term notes due 1999 to floating rate debt based on three-month LIBOR rates. These swap agreements expire in September 1995 for the 8 5/8 percent debentures, December 1996 for the 9.6 percent Canadian dollar notes, and for the medium-term notes: $10.0 in March 1998, $20.0 in May 1998, $50.0 in August 1999 and $20.5 in September 1999. 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 32 NOTES TO FINANCIAL STATEMENTS (CONTINUED) HONEYWELL INC. AND SUBSIDIARIES (DOLLARS IN MILLIONS EXCEPT PER SHARE AMOUNTS) NOTE 14 -- DEBT (CONTINUED) 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 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, 1994, are as follows: 1995............................................... $ 133.4 1996............................................... 185.2 1997............................................... 114.9 1998............................................... 30.2 1999............................................... 70.9
Interest paid amounted to $69.1, $63.9 and $98.5 in 1994, 1993 and 1992, respectively. NOTE 15 -- FAIR VALUE OF FINANCIAL INSTRUMENTS All financial instruments are held for purposes other than trading. The estimated fair values of all nonderivative financial instruments approximate their carrying amounts in the statement of financial position with the exception of long-term debt. 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 carrying amount of long term debt was $634.9 and $504.3 at December 31, 1994, and 1993, respectively; and the fair value was $630.3 and $569.0 at December 31, 1994, and 1993, respectively. The carrying amount of interest rate swaps was zero and $0.3 at December 31, 1994, and 1993, respectively. The gross unrealized market (loss)/gain on interest rate swaps was $(7.5) and $2.8 at December 31, 1994, and 1993, respectively. The carrying amount of foreign currency contracts was $18.3 and $10.4 at December 31, 1994, and 1993, respectively. The gross unrealized market gain on foreign currency contracts was $26.6 and $19.9 and the gross unrealized market loss was $28.3 and zero at December 31, 1994, and 1993, respectively. The estimated fair value of interest rate swaps and foreign currency contracts, which is the gross unrealized market gain or loss, is based primarily on quotes obtained from various financial institutions that deal in these types of instruments. Honeywell is exposed to credit risk to the extent of nonperformance by the counterparties to the foreign currency contracts 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. 33 NOTES TO FINANCIAL STATEMENTS (CONTINUED) HONEYWELL INC. AND SUBSIDIARIES (DOLLARS IN MILLIONS EXCEPT PER SHARE AMOUNTS) NOTE 16 -- LEASING ARRANGEMENTS As lessee, Honeywell has minimum annual lease commitments outstanding at December 31, 1994, 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 ----------- 1995................................................................. $ 101.3 1996................................................................. 79.7 1997................................................................. 58.0 1998................................................................. 39.9 1999................................................................. 29.1 2000 and beyond...................................................... 130.1 ----------- $ 438.1
Rent expense for operating leases was $136.9 in 1994, $134.2 in 1993 and $128.0 in 1992. 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 17 -- CAPITAL STOCK
ADDITIONAL COMMON PAID-IN TREASURY STOCK CAPITAL STOCK ----------- ----------- ----------- Balance January 1, 1992............................................. $ 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) Purchase of treasury stock -- 5,223,800 shares.................................................. (168.0) Issued for employee stock plans -- 962,242 treasury shares........................................... 15.4 19.9 42,570 shares canceled............................................ (0.1) ----------- ----------- ----------- Balance December 31, 1994........................................... $ 282.4 $ 446.9 $ (1,576.5)
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 34 NOTES TO FINANCIAL STATEMENTS (CONTINUED) HONEYWELL INC. AND SUBSIDIARIES (DOLLARS IN MILLIONS EXCEPT PER SHARE AMOUNTS) NOTE 17 -- CAPITAL STOCK (CONTINUED) statements relating to 1992 for 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, restricted stock or other stock-based awards. The plan replaced existing similar plans, and awards currently outstanding under those plans were not affected. There were 10,539,718 shares reserved for all key employee plans at December 31, 1994. Options to purchase common stock have been granted to key employees at 100 percent of the market price on the date of grant, pursuant to stockholder-approved plans. The following is a summary of existing stock options under all plans:
1994 1993 1992 ---------- ----------- ----------- Granted -- Number of shares.................................... 1,001,250 969,173 1,353,224 Price per share..................................... $33-$36 $31-$38 $31-$37 Exercised -- Number of shares.................................... 320,337 1,020,769 1,926,649 Price per share..................................... $12-$33 $12-$33 $8-$30 Outstanding December 31 -- Number of shares.................................... 5,346,237 4,739,683 4,800,613 Price per share..................................... $15-$38 $12-$38 $12-$37
Options totaling 4,390,382 shares at prices ranging from $15 to $38 were exercisable at December 31, 1994. Restricted shares of common stock are issued to certain key employees as compensation. Restricted shares are awarded with a fixed restriction period, usually five years, or with a restriction period that may be shortened 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 141,376 in 1994, 533,995 in 1993 and 47,812 in 1992. The cost of restricted stock is charged to income over the restriction period and amounted to $5.6 in 1994, $6.3 in 1993 and $6.5 in 1992. At December 31, restricted shares outstanding pursuant to key employee plans totaled 767,209 in 1994, 775,861 in 1993 and 412,872 in 1992. 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 35 NOTES TO FINANCIAL STATEMENTS (CONTINUED) HONEYWELL INC. AND SUBSIDIARIES (DOLLARS IN MILLIONS EXCEPT PER SHARE AMOUNTS) NOTE 17 -- CAPITAL STOCK (CONTINUED) plan contributions. Shares issued under the stock match plans totaled 634,561 shares in 1994, 643,913 shares in 1993 and 977,716 shares in 1992 at a cost of $20.7, $22.3 and $33.3, respectively. There were 1,713,734 shares reserved for employee stock match plans at December 31, 1994. 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. Total shares issued under the foreign stock purchase plans amounted to 49,250 in 1992 at an average price per share of $33. There were no shares issued in 1994 or 1993 under these plans. STOCK PLEDGE In 1993, Honeywell pledged to the Honeywell Foundation a five-year option to purchase 2,000,000 shares of common stock at $33 per share. This option is transferable to charitable organizations and 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 1994 or 1993 and at December 31, 1994, there were 2,000,000 shares reserved for this pledge. PREFERENCE STOCK Twenty-five million preference shares with a par value of $1 per share have been authorized. None has been issued at December 31, 1994. NOTE 18 -- RETAINED EARNINGS
1994 1993 1991 --------- ---------- ---------- Balance January 1......................................... $ 2,447.3 $ 2,247.0 $ 2,116.9 Net income................................................ 278.9 322.2 246.8 Dividends 1994-$0.97 PER SHARE.................................... (125.8) 1993-$0.9075 per share.................................. (121.9) 1992-$0.84125 per share................................. (116.7) --------- ---------- ---------- Balance December 31....................................... $ 2,600.4 $ 2,447.3 $ 2,247.0
Included in retained earnings are undistributed earnings of companies 20 to 50 percent owned, amounting to $131.8 at December 31, 1994. NOTE 19 -- 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. 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. 36 NOTES TO FINANCIAL STATEMENTS (CONTINUED) HONEYWELL INC. AND SUBSIDIARIES (DOLLARS IN MILLIONS EXCEPT PER SHARE AMOUNTS) NOTE 19 -- SEGMENT INFORMATION (CONTINUED) 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 Honeywell Technology 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 on page 10. This information for 1994, 1993 and 1992 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:
1994 1993 1992 --------- --------- --------- Capital expenditures Home and Building Control..................................... $ 95.6 $ 73.6 $ 63.5 Industrial Control............................................ 73.6 72.8 81.9 Space and Aviation Control.................................... 54.9 58.4 67.2 Corporate and other........................................... 38.3 27.3 31.5 --------- --------- --------- $ 262.4 $ 232.1 $ 244.1 Depreciation and amortization Home and Building Control..................................... $ 71.8 $ 67.9 $ 69.0 Industrial Control............................................ 67.1 59.9 54.6 Space and Aviation Control.................................... 120.0 127.0 137.4 Corporate and other........................................... 28.5 30.1 31.7 --------- --------- --------- $ 287.4 $ 284.9 $ 292.7
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 19 -- SEGMENT INFORMATION (CONTINUED) Following is financial information relating to geographic areas:
1994 1993 1992 --------- ---------- ---------- External sales United States........................................... $ 3,824.7 $ 3,895.1 $ 4,014.9 Europe.................................................. 1,528.5 1,441.2 1,556.3 Other areas............................................. 703.8 626.7 651.4 --------- ---------- ---------- $ 6,057.0 $ 5,963.0 $ 6,222.6 Transfers between geographic areas United States........................................... $ 293.3 $ 246.7 $ 242.2 Europe.................................................. 46.3 36.9 33.0 Other areas............................................. 54.3 47.6 47.0 --------- ---------- ---------- $ 393.9 $ 331.2 $ 322.2 Total sales United States........................................... $ 4,118.0 $ 4,141.8 $ 4,257.1 Europe.................................................. 1,574.8 1,478.1 1,589.3 Other areas............................................. 758.1 674.3 698.4 Eliminations............................................ (393.9) (331.2) (322.2) --------- ---------- ---------- $ 6,057.0 $ 5,963.0 $ 6,222.6 Operating profit United States........................................... $ 343.7 $ 384.1 $ 338.1 Europe.................................................. 139.1 140.2 150.4 Other areas............................................. 41.2 44.4 28.1 --------- ---------- ---------- Operating profit........................................ 524.0 568.7 516.6 Interest expense........................................ (75.5) (68.0) (89.9) Litigation settlements.................................. 32.6 287.9 Equity income........................................... 10.5 17.8 15.8 General corporate expense............................... (89.3) (72.6) (95.7) --------- ---------- ---------- Income before income taxes.............................. $ 369.7 $ 478.5 $ 634.7 Identifiable Assets United States........................................... $ 2,356.2 $ 2,337.5 $ 2,502.7 Europe.................................................. 1,303.1 1,111.4 1,134.4 Other areas............................................. 434.9 357.1 372.5 Corporate............................................... 791.7 792.1 860.5 --------- ---------- ---------- $ 4,885.9 $ 4,598.1 $ 4,870.1
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 provisions for special charges amounting to $62.7, $51.2 and $128.4 in 1994, 1993 and 1992, respectively, (see Note 4) as follows: United States, $23.2, $22.4 and $79.8; Europe, $29.6, $20.3 and $29.7; other areas, $9.9 in 1994 and $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 $8.2 in 1994, $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 20 -- 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. The components of net periodic pension cost for U.S. defined benefit pension plans are as follows:
1994 1993 1992 --------- --------- --------- Service cost of benefits earned during the period.................. $ 53.8 $ 48.3 $ 48.1 Interest cost of projected benefit obligation...................... 201.5 198.9 192.2 Actual return on assets............................................ (73.3) (225.7) (147.7) Net amortization and deferral...................................... (92.6) 69.3 (5.1) --------- --------- --------- $ 89.4 $ 90.8 $ 87.5
Following is a summary of assumptions used in the accounting for the U.S. defined benefit plans.
1994 1993 1992 --------- --------- --------- Discount rate used in determining present values.................. 8.5% 7.5% 8.75% Annual increase in future compensation levels..................... 4.5% 4.0% 5.0% Expected long-term rate of return on assets....................... 8.5% 8.5% 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 $1.2 in 1994, $14.2 in 1993 and $9.0 in 1992. The components of net periodic pension cost for foreign defined benefit pension plans are as follows:
1994 1993 1992 --------- --------- --------- Service cost of benefits earned during the period................. $ 30.3 $ 25.8 $ 29.8 Interest cost of projected benefit obligation..................... 47.6 46.3 47.0 Actual return on assets........................................... (43.2) (111.7) (38.4) Net amortization and deferral..................................... (37.1) 50.7 (32.8) --------- --------- --------- $ (2.4) $ 11.1 $ 5.6
Assumptions used in the accounting for foreign defined benefit plans were:
1994 1993 1992 ---------- ----------- ------------ Discount rate used in determining present values.................. 4.5-9.0% 5.0-9.0% 5.0-9.5% Annual increase in future compensation levels..................... 2.0-8.0% 2.0-8.0% 2.0-8.0% Expected long-term rate of return on assets....................... 5.5-9.5% 6.0-9.5% 6.0-10.3%
39 NOTES TO FINANCIAL STATEMENTS (CONTINUED) HONEYWELL INC. AND SUBSIDIARIES (DOLLARS IN MILLIONS EXCEPT PER SHARE AMOUNTS) NOTE 20 -- 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 1994 (U.S. AND FOREIGN) Benefits Exceed Assets ----------------------------------------------------------------------------------- ------------- ------------- Actuarial present value of benefit obligations: Vested benefit obligation........................................................ $ (409.2) $ (2,412.7) Accumulated benefit obligation................................................... $ (414.7) $ (2,581.3) Projected benefit obligation..................................................... $ (587.6) $ (2,847.8) Plan assets at fair value.......................................................... 723.8 2,386.9 ------------- ------------- Projected benefit obligation (in excess of) less than plan assets.................. 136.2 (460.9) Remaining unrecognized net transition obligation (asset)........................... (76.3) 5.2 Unrecognized prior service cost.................................................... 1.7 233.4 Unrecognized net loss.............................................................. 10.6 160.4 Fourth-quarter 1994 contributions to plans......................................... 24.8 Adjustment to recognize minimum liability.......................................... (129.4) ------------- ------------- Overfunded (unfunded) pension asset (liability) recognized in the statement of financial position................................................................ $ 72.2 $ (166.5)
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)
Adjustments recorded to recognize the minimum liability required for defined benefit pension plans whose accumulated benefits exceed assets amounted to $129.4 in 1994 and $113.0 in 1993. A corresponding amount was recognized as an intangible asset to the extent of unrecognized prior service cost and unrecognized transition obligation. At December 31, 1994, $9.6 of excess minimum liability resulted in a reduction in stockholders equity, net of income taxes, of $5.9. At December 31, 1993, $21.0 of excess minimum liability resulted in a reduction in stockholders equity, net of income taxes, of $12.8. 40 NOTES TO FINANCIAL STATEMENTS (CONTINUED) HONEYWELL INC. AND SUBSIDIARIES (DOLLARS IN MILLIONS EXCEPT PER SHARE AMOUNTS) NOTE 20 -- PENSION PLANS (CONTINUED) 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. NOTE 21 -- 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. 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 funds 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 components of net periodic postretirement benefit cost are as follows:
1994 1993 1992 ----- ----- ----- Service cost of benefits earned during the period........... $10.4 $11.5 $10.5 Interest cost on accumulated post-retirement benefit obligation................................................. 18.0 22.2 20.9 Net amortization............................................ 0.5 ----- ----- ----- $28.9 $33.7 $31.4
The amounts recognized in Honeywell's statement of financial position are as follows:
1994 1993 ------ ------ Accumulated postretirement benefit obligation: Retirees.................................................. $ 87.7 $ 86.6 Fully eligible active plan participants................... 58.7 41.5 Other active plan participants............................ 151.8 129.9 Unrecognized prior service cost........................... (7.7) Unrecognized net gain..................................... 2.3 25.7 ------ ------ Accrued postretirement benefit cost......................... $292.8 $283.7
The discount rate used in determining the APBO was 8.0 percent in 1994 and 7.0 percent in 1993. The assumed health-care cost trend rate used in measuring the APBO was 10.1 percent in 1995, 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, 1994, and the net periodic postretirement benefit cost by 14 percent for 1994. NOTE 22 -- 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 41 NOTES TO FINANCIAL STATEMENTS (CONTINUED) HONEYWELL INC. AND SUBSIDIARIES (DOLLARS IN MILLIONS EXCEPT PER SHARE AMOUNTS) NOTE 22 -- CONTINGENCIES (CONTINUED) 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 contended that the verdict was unsupported by the facts; that the Litton patent was invalid; and that Honeywell's process differed 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; Honeywell's other legal and equitable defenses; and Litton's motion to enhance the damage award. On January 9, 1995, the court issued a decision in favor of Honeywell, ruling that the Litton patent was unenforceable because it was obtained by inequitable conduct and invalid because it was an invention that would have been obvious from combining existing processes. The court further ruled that if the judgment is subsequently vacated or reversed as a result of an appeal of the court's ruling, a new trial on the issue of damages would be held on the ground that the jury's award was inconsistent with the clear weight of the evidence and to permit it to stand would constitute a miscarriage of justice. Litton has filed a motion to appeal the court's ruling. The trial for the antitrust claims of Litton and Honeywell is currently scheduled to commence in November 1995. Honeywell believes that the court's ruling was correct and continues to believe that Litton's claims are without merit. 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 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, net income, 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. 42 NOTES TO FINANCIAL STATEMENTS (CONTINUED) HONEYWELL INC. AND SUBSIDIARIES (DOLLARS IN MILLIONS EXCEPT PER SHARE AMOUNTS) NOTE 22 -- CONTINGENCIES (CONTINUED) 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 any losses in connection with these matters will not have a material effect on Honeywell's net income, financial position or liquidity. NOTE 23 -- QUARTERLY DATA (UNAUDITED)
1994 1ST QTR. 2ND QTR. 3RD QTR. 4TH QTR. ------------------------------------------------------------------- --------- --------- --------- --------- Sales.............................................................. $1,347.9 $1,463.8 $1,507.6 $1,737.7 Cost of sales...................................................... 917.3 1,001.8 1,011.9 1,151.1 Net income......................................................... 47.7 56.9 69.4 104.9 Per share........................................................ 0.36 0.44 0.54 0.81
The fourth quarter of 1994 includes special charges of $62.7, or $37.6 ($0.29 per share) after income taxes (see Note 4). The fourth quarter of 1994 also includes a reduction of the provision for income taxes of $37.6 ($0.29 per share) related to a favorable tax settlement (see Note 5).
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 5). 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 4)..................................... (23.2) (28.0) After tax...................................................... (13.3) (15.5) Per share...................................................... (0.10) (0.12)
Common Stock Price (New York Stock Exchange Composite) Dividends Per Share High Low ---------- ---------- ---------- 1994 FIRST QUARTER................................ $.24 $35 1/2 $31 3/4 SECOND QUARTER............................... .24 34 1/2 30 1/2 THIRD QUARTER................................ .24 36 7/8 31 FOURTH QUARTER............................... .25 35 5/8 28 1/4 1993 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
Stockholders of record on February 1, 1995, totaled 31,940. 43 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. PART III ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT Pages 3 through 8 and page 22 of the Honeywell Notice of 1995 Annual Meeting and Proxy Statement are incorporated herein by reference. ITEM 11. EXECUTIVE COMPENSATION Pages 12 through 20 of the Honeywell Notice of 1995 Annual Meeting and Proxy Statement are incorporated herein by reference. ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT Page 11 of the Honeywell Notice of 1995 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....................................................... 20 Income Statement................................................................... 21 Statement of Financial Position.................................................... 22 Statement of Cash Flows............................................................ 23 Notes to Financial Statements...................................................... 24-43
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.................................................................. 20 Schedules for the Years Ended December 31, 1994, 1993 and 1992: II -- Valuation Reserves.................................................... 47
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. 44 3. EXHIBITS Documents Incorporated by Reference: (3)(a) Restated Certificate of Incorporation of Honeywell Inc. dated June 18, 1991. (4)(a) 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)(f) Restricted-Stock Retirement Plan for Non-Employee Directors, is incorporated by reference to Exhibit 10(iii)(g) to Honeywell's Annual Report on Form 10-K for 1993.* (10)(iii)(l) Honeywell Executive Life Insurance Agreement, is incorporated by reference to Exhibit 10(iii)(m) to Honeywell's Annual Report on Form 10-K for 1993.* (99)(ii) Honeywell Notice of 1995 Annual Meeting and Proxy Statement.** Exhibits submitted herewith: (3)(b) By-laws of Honeywell Inc., as amended through February 21, 1995. (4)(b) Indenture, dated as of August 1, 1994, between Honeywell Inc. and The Chase Manhattan Bank (National Association), as Trustee for Honeywell Inc. Medium-Term Notes, Series A. (10)(iii)(a) Honeywell Key Employee Severance Plan, as amended.* (10)(iii)(b) Honeywell Supplementary Executive Retirement Plan for Mid-Career Hires, as amended.* (10)(iii)(c) Honeywell-Norwest Rabbi Trust Agreement, as amended.* (10)(iii)(d) 1993 Honeywell Stock and Incentive Plan, as amended.* (10)(iii)(e) 1988 Honeywell Stock and Incentive Plan, as amended.* (10)(iii)(g) Honeywell Corporate Executive Compensation Plan, as amended.* (10)(iii)(h) Honeywell Supplementary Executive Retirement Plan for Compensation in Excess of $200,000, as amended.* (10)(iii)(i) Honeywell Supplementary Executive Retirement Plan for CECP Participants, as amended.* (10)(iii)(j) Honeywell Supplementary Retirement Plan, as amended.* (10)(iii)(k) Honeywell Supplementary Executive Retirement Plan for Benefits in Excess of Limits Under Tax Reform Act of 1986, as amended.* (10)(iii)(m) Form of Executive Termination Contract.* (10)(iii)(n) Honeywell Inc. Compensation Plan for Outside Directors.* (11) Computation of Earnings Per Share. (12) Computation of Ratios of Earnings to Fixed Charges. (21) Subsidiaries of Honeywell. (23) Consent of Independent Auditors. (24) Powers of Attorney. (27) Financial Data Schedule. (B) REPORTS ON FORM 8-K None ------------------------ *Management contract or compensatory plan or arrangement. **Only the portions of Exhibit (99)(ii) specifically incorporated by reference are deemed filed with the Commission.
45 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 29, 1995 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. M. HJERPE Vice President and Chief Financial Officer P. M. PALAZZARI 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 J. J. HOWARD Director B. E. KARATZ Director D. L. MOORE Director A. B. RAND Director S. G. ROTHMEIER Director M. W. WRIGHT Director By: /s/ SIGURD UELAND, JR. ----------------------------------- Sigurd Ueland, Jr., ATTORNEY-IN-FACT March 29, 1995 46 SCHEDULE II HONEYWELL INC. AND SUBSIDIARIES VALUATION RESERVES FOR THE YEARS ENDED DECEMBER 31, 1994, 1993 AND 1992 (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, 1994............................ $ 24.3 $ 12.5(1) $ 5.7(2) $ 31.1 ------------- ------ ------ ----------- ------------- ------ ------ ----------- 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 ------------- ------ ------ ----------- ------------- ------ ------ ----------- LONG-TERM RECEIVABLES -------------------------------------------------------- Year ended December 31, 1994............................ $ 0.5 $ -- $ (0.2)(2) $ 0.7 ------------- ------ ------ ----------- ------------- ------ ------ ----------- Year ended December 31, 1993............................ $ 0.8 $ -- $ 0.3(2) $ 0.5 ------------- ------ ------ ----------- ------------- ------ ------ ----------- Year ended December 31, 1992............................ $ 1.7 -- $ 0.9(2) $ 0.8 ------------- ------ ------ ----------- ------------- ------ ------ ----------- Reserves deducted from assets to which they apply -- valuation reserve: LONG-TERM RECEIVABLES -------------------------------------------------------- Year ended December 31, 1994............................ $ 3.6 $ (1.7)(1) $ -- $ 1.9 ------------- ------ ------ ----------- ------------- ------ ------ ----------- Year ended December 31, 1993............................ $ 2.9 $ 0.7(1) $ -- $ 3.6 ------------- ------ ------ ----------- ------------- ------ ------ ----------- Year ended December 31, 1992............................ $ 7.9 $ -- $ 5.0(3) $ 2.9 ------------- ------ ------ ----------- ------------- ------ ------ ----------- Reserves deducted from assets to which they apply -- allowance for amortization of intangibles: GOODWILL -------------------------------------------------------- Year ended December 31, 1994............................ $ 34.3 $ 8.6(4) $ 0.6(5) $ 42.3 ------------- ------ ------ ----------- ------------- ------ ------ ----------- Year ended December 31, 1993............................ $ 30.4 $ 6.7(4) $ 2.8(5) $ 34.3 ------------- ------ ------ ----------- ------------- ------ ------ ----------- Year ended December 31, 1992............................ $ 24.8 $ 5.3(4) $ (0.3)(5) $ 30.4 ------------- ------ ------ ----------- ------------- ------ ------ ----------- PATENTS, LICENSES AND TRADEMARKS -------------------------------------------------------- Year ended December 31, 1994............................ $ 170.0 $ 24.2(4) $ 18.8(5) $ 175.4 ------------- ------ ------ ----------- ------------- ------ ------ ----------- Year ended December 31, 1993............................ $ 144.2 $ 25.8(4) $ -- $ 170.0 ------------- ------ ------ ----------- ------------- ------ ------ ----------- Year ended December 31, 1992............................ $ 119.8 $ 24.4(4) $ -- $ 144.2 ------------- ------ ------ ----------- ------------- ------ ------ ----------- SOFTWARE AND OTHER INTANGIBLES -------------------------------------------------------- Year ended December 31, 1994............................ $ 135.4 $ 19.3(4) $ 2.3(5) $ 152.4 ------------- ------ ------ ----------- ------------- ------ ------ ----------- Year ended December 31, 1993............................ $ 117.8 $ 17.1(4) $ (0.5)(5) $ 135.4 ------------- ------ ------ ----------- ------------- ------ ------ ----------- Year ended December 31, 1992............................ $ 96.1 $ 20.2(4) $ (1.5)(5) $ 117.8 ------------- ------ ------ ----------- ------------- ------ ------ ----------- -------------------------- Notes: (1) Represents amounts included in selling, general and administrative expenses. (2) Represents uncollectible accounts written off, less recoveries and translation adjustments. (3) Represents reclassification of amount to other liabilities. (4) Represents amounts included in cost of sales. (5) Represents removal of fully amortized amounts and translation adjustments.
47 EX-3.B 2 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 February 21, 1995 ---------------------------------------- ---------------------------------------- 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 twelve, 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. 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-4.B 3 EXHIBIT 4(B) ------------------------------------------------------------------------------- HONEYWELL INC. TO THE CHASE MANHATTAN BANK (NATIONAL ASSOCIATION) TRUSTEE --------------------- INDENTURE DATED AS OF AUGUST 1, 1994 --------------------- ------------------------------------------------------------------------------- HONEYWELL INC. Reconciliation and tie between Trust Indenture Act of 1939 and Indenture, dated as of August 1, 1994 Trust Indenture Act Section Indenture Section --------------- ----------------- Section 310(a)(1) . . . . . . . . . . . . . . . . . . 609 (a)(2) . . . . . . . . . . . . . . . . . . 609 (a)(3) . . . . . . . . . . . . . . . . . . Not Applicable (a)(4) . . . . . . . . . . . . . . . . . . Not Applicable (a)(5) . . . . . . . . . . . . . . . . . . 609 (b) . . . . . . . . . . . . . . . . . . 608, 610 Section 311 . . . . . . . . . . . . . . . . . . 613 Section 312(a) . . . . . . . . . . . . . . . . . . 701, 702(a) (b) . . . . . . . . . . . . . . . . . . 702(b) (c) . . . . . . . . . . . . . . . . . . 702(c) Section 313 . . . . . . . . . . . . . . . . . 703 Section 314(a) . . . . . . . . . . . . . . . . . . 704 (b) . . . . . . . . . . . . . . . . . . Not Applicable (c)(1) . . . . . . . . . . . . . . . . . . 102 (c)(2) . . . . . . . . . . . . . . . . . . 102 (c)(3) . . . . . . . . . . . . . . . . . . Not Applicable (d) . . . . . . . . . . . . . . . . . . Not Applicable (e) . . . . . . . . . . . . . . . . . . 102 Section 315(a) . . . . . . . . . . . . . . . . . . 601 (b) . . . . . . . . . . . . . . . . . . 602 (c) . . . . . . . . . . . . . . . . . . 601 (d) . . . . . . . . . . . . . . . . . . 601 (e) . . . . . . . . . . . . . . . . . . 514 Section 316(a) . . . . . . . . . . . . . . . . . . 101 (a)(1)(A) . . . . . . . . . . . . . . . . . . 502, 512 (a)(1)(B) . . . . . . . . . . . . . . . . . . 513 (a)(2) . . . . . . . . . . . . . . . . . . Not Applicable (b) . . . . . . . . . . . . . . . . . . 508 Section 317(a)(1) . . . . . . . . . . . . . . . . . . 503 (a)(2) . . . . . . . . . . . . . . . . . . 504 (b) . . . . . . . . . . . . . . . . . . 1003 Section 318(a) . . . . . . . . . . . . . . . . . . 107 ------------------- Note: This reconciliation and tie shall not, for any purpose, be deemed to be part of the Indenture. TABLE OF CONTENTS PAGE PARTIES. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1 RECITALS OF THE COMPANY. . . . . . . . . . . . . . . . . . . . . . . . . . 1 ARTICLE ONE DEFINITIONS AND OTHER PROVISIONS OF GENERAL APPLICATION SECTION 101. Definitions. . . . . . . . . . . . . . . . . . . . . . . . . 1 Act . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2 Affiliate . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2 Attributable Debt . . . . . . . . . . . . . . . . . . . . . . . . . . 2 Authenticating Agent. . . . . . . . . . . . . . . . . . . . . . . . . 2 Board of Directors. . . . . . . . . . . . . . . . . . . . . . . . . . 2 Board Resolution. . . . . . . . . . . . . . . . . . . . . . . . . . . 3 Business Day. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3 Commission. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3 Company . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3 Company Request . . . . . . . . . . . . . . . . . . . . . . . . . . . 3 Consolidated Net Tangible Assets. . . . . . . . . . . . . . . . . . . 3 Corporate Trust Office. . . . . . . . . . . . . . . . . . . . . . . . 3 Corporation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4 Debt. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4 Defaulted Interest. . . . . . . . . . . . . . . . . . . . . . . . . . 4 Depositary. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4 Event of Default. . . . . . . . . . . . . . . . . . . . . . . . . . . 4 Exchange Act. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4 Funded Debt . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4 Global Security . . . . . . . . . . . . . . . . . . . . . . . . . . . 4 Holder. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4 Indenture . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4 interest. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5 Interest Payment Date . . . . . . . . . . . . . . . . . . . . . . . . 5 Lien or Liens . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5 Maturity. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5 Officers' Certificate . . . . . . . . . . . . . . . . . . . . . . . . 5 Opinion of Counsel. . . . . . . . . . . . . . . . . . . . . . . . . . 5 Original Issue Discount Security. . . . . . . . . . . . . . . . . . . 5 Outstanding . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5 Paying Agent. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6 Periodic Offering . . . . . . . . . . . . . . . . . . . . . . . . . . 7 Person. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7 i Place of Payment. . . . . . . . . . . . . . . . . . . . . . . . . . . 7 Predecessor Security. . . . . . . . . . . . . . . . . . . . . . . . . 7 Principal Property. . . . . . . . . . . . . . . . . . . . . . . . . . 7 Redemption Date . . . . . . . . . . . . . . . . . . . . . . . . . . . 7 Redemption Price. . . . . . . . . . . . . . . . . . . . . . . . . . . 7 Regular Record Date . . . . . . . . . . . . . . . . . . . . . . . . . 8 Required Currency . . . . . . . . . . . . . . . . . . . . . . . . . . 8 Responsible Officer . . . . . . . . . . . . . . . . . . . . . . . . . 8 Restricted Subsidiary . . . . . . . . . . . . . . . . . . . . . . . . 8 Sale and Leaseback Transaction. . . . . . . . . . . . . . . . . . . . 8 Securities. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8 Security Register and Security Registrar. . . . . . . . . . . . . . . 8 Special Record Date . . . . . . . . . . . . . . . . . . . . . . . . . 8 Stated Maturity . . . . . . . . . . . . . . . . . . . . . . . . . . . 8 Subsidiary. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8 Trustee . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8 Trust Indenture Act or TIA. . . . . . . . . . . . . . . . . . . . . . 9 U.S. Government Obligations . . . . . . . . . . . . . . . . . . . . . 9 Vice President. . . . . . . . . . . . . . . . . . . . . . . . . . . . 9 Voting Stock. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9 SECTION 102. Compliance Certificates and Opinions . . . . . . . . . . . . 9 SECTION 103. Form of Documents Delivered to Trustee . . . . . . . . . . . 10 SECTION 104. Acts of Holders. . . . . . . . . . . . . . . . . . . . . . . 11 SECTION 105. Notices, Etc., to Trustee and Company. . . . . . . . . . . . 12 SECTION 106. Notice to Holders; Waiver. . . . . . . . . . . . . . . . . . 12 SECTION 107. Compliance with Trust Indenture Act. . . . . . . . . . . . . 13 SECTION 108. Effect of Headings and Table of Contents . . . . . . . . . . 13 SECTION 109. Successors and Assigns . . . . . . . . . . . . . . . . . . . 13 SECTION 110. Separability Clause. . . . . . . . . . . . . . . . . . . . . 13 SECTION 111. Benefits of Indenture. . . . . . . . . . . . . . . . . . . . 13 SECTION 112. Governing Law. . . . . . . . . . . . . . . . . . . . . . . . 14 SECTION 113. Legal Holidays . . . . . . . . . . . . . . . . . . . . . . . 14 ARTICLE TWO SECURITY FORMS SECTION 201. Forms Generally. . . . . . . . . . . . . . . . . . . . . . . 14 SECTION 202. Form of Face of Security . . . . . . . . . . . . . . . . . . 15 SECTION 203. Form of Reverse of Security. . . . . . . . . . . . . . . . . 18 SECTION 204. Form of Trustee's Certificate of Authentication. . . . . . . 22 SECTION 205. Form of Legend for Global Securities . . . . . . . . . . . . 22 ii ARTICLE THREE THE SECURITIES SECTION 301. Amount Unlimited; Issuable in Series . . . . . . . . . . . . 23 SECTION 302. Denominations. . . . . . . . . . . . . . . . . . . . . . . . 26 SECTION 303. Execution, Authentication, Delivery and Dating . . . . . . . 26 SECTION 304. Temporary Securities . . . . . . . . . . . . . . . . . . . . 29 SECTION 305. Registration, Registration of Transfer and Exchange. . . . . 29 SECTION 306. Mutilated, Destroyed, Lost and Stolen Securities . . . . . . 31 SECTION 307. Payment of Interest; Interest Rights Preserved . . . . . . . 32 SECTION 308. Persons Deemed Owners. . . . . . . . . . . . . . . . . . . . 33 SECTION 309. Cancellation . . . . . . . . . . . . . . . . . . . . . . . . 34 SECTION 310. Computation of Interest. . . . . . . . . . . . . . . . . . . 34 SECTION 311. Payment to be in Proper Currency . . . . . . . . . . . . . . 34 ARTICLE FOUR SATISFACTION AND DISCHARGE SECTION 401. Satisfaction and Discharge of Indenture. . . . . . . . . . . 35 SECTION 402. Application of Trust Money . . . . . . . . . . . . . . . . . 36 SECTION 403. Defeasance and Discharge of Indenture. . . . . . . . . . . . 36 ARTICLE FIVE REMEDIES SECTION 501. Events of Default. . . . . . . . . . . . . . . . . . . . . . 38 SECTION 502. Acceleration of Maturity; Rescission and Annulment . . . . . 40 SECTION 503. Collection of Indebtedness and Suits for Enforcement by Trustee . . . . . . . . . . . . . . . . . . 41 SECTION 504. Trustee May File Proofs of Claim . . . . . . . . . . . . . . 42 SECTION 505. Trustee May Enforce Claims Without Possession of Securities . . . . . . . . . . . . . . . . . 43 SECTION 506. Application of Money Collected . . . . . . . . . . . . . . . 44 SECTION 507. Limitation on Suits. . . . . . . . . . . . . . . . . . . . . 44 SECTION 508. Unconditional Right of Holders to Receive Principal, Premium and Interest. . . . . . . . . . 45 SECTION 509. Restoration of Rights and Remedies . . . . . . . . . . . . . 45 SECTION 510. Rights and Remedies Cumulative . . . . . . . . . . . . . . . 45 SECTION 511. Delay or Omission Not Waiver . . . . . . . . . . . . . . . . 46 SECTION 512. Control by Holders . . . . . . . . . . . . . . . . . . . . . 46 SECTION 513. Waiver of Past Defaults. . . . . . . . . . . . . . . . . . . 46 SECTION 514. Undertaking for Costs. . . . . . . . . . . . . . . . . . . . 47 SECTION 515. Waiver of Stay or Extension Laws . . . . . . . . . . . . . . 47 iii ARTICLE SIX THE TRUSTEE SECTION 601. Certain Duties and Responsibilities. . . . . . . . . . . . . 48 SECTION 602. Notice of Defaults . . . . . . . . . . . . . . . . . . . . . 48 SECTION 603. Certain Rights of Trustee. . . . . . . . . . . . . . . . . . 49 SECTION 604. Not Responsible for Recitals or Issuance of Securities . . . 50 SECTION 605. May Hold Securities. . . . . . . . . . . . . . . . . . . . . 50 SECTION 606. Money Held in Trust. . . . . . . . . . . . . . . . . . . . . 51 SECTION 607. Compensation and Reimbursement . . . . . . . . . . . . . . . 51 SECTION 608. Disqualification; Conflicting Interests. . . . . . . . . . . 52 SECTION 609. Corporate Trustee Required; Eligibility. . . . . . . . . . . 52 SECTION 610. Resignation and Removal; Appointment of Successor. . . . . . 52 SECTION 611. Acceptance of Appointment by Successor . . . . . . . . . . . 54 SECTION 612. Merger, Conversion, Consolidation or Succession to Business. 55 SECTION 613. Preferential Collection of Claims Against Company. . . . . . 56 SECTION 614. Appointment of Authenticating Agent. . . . . . . . . . . . . 56 ARTICLE SEVEN HOLDERS' LISTS AND REPORTS BY TRUSTEE AND COMPANY SECTION 701. Company to Furnish Trustee Names and Addresses of Holders . . . . . . . . . . . . . . . . . 58 SECTION 702. Preservation of Information; Communications to Holders . . . 58 SECTION 703. Reports by Trustee . . . . . . . . . . . . . . . . . . . . . 59 SECTION 704. Reports by Company . . . . . . . . . . . . . . . . . . . . . 59 ARTICLE EIGHT CONSOLIDATION, MERGER, CONVEYANCE, TRANSFER OR LEASE SECTION 801. Company May Consolidate, Etc., Only on Certain Terms . . . . 60 SECTION 802. Successor Substituted. . . . . . . . . . . . . . . . . . . . 61 iv ARTICLE NINE SUPPLEMENTAL INDENTURES SECTION 901. Supplemental Indentures Without Consent of Holders . . . . . 61 SECTION 902. Supplemental Indentures with Consent of Holders. . . . . . . 63 SECTION 903. Execution of Supplemental Indentures . . . . . . . . . . . . 64 SECTION 904. Effect of Supplemental Indentures. . . . . . . . . . . . . . 64 SECTION 905. Conformity with Trust Indenture Act. . . . . . . . . . . . . 65 SECTION 906. Reference in Securities to Supplemental Indentures . . . . . 65 SECTION 907. Notice of Supplemental Indentures. . . . . . . . . . . . . . 65 ARTICLE TEN COVENANTS SECTION 1001. Payment of Principal, Premium and Interest. . . . . . . . . 65 SECTION 1002. Maintenance of Office or Agency . . . . . . . . . . . . . . 66 SECTION 1003. Money for Securities Payments to Be Held in Trust . . . . . 66 SECTION 1004. Existence . . . . . . . . . . . . . . . . . . . . . . . . . 68 SECTION 1005. Maintenance of Properties . . . . . . . . . . . . . . . . . 68 SECTION 1006. Payment of Taxes and Other Claims . . . . . . . . . . . . . 68 SECTION 1007. Restriction on Secured Debt . . . . . . . . . . . . . . . . 68 SECTION 1008. Restriction on Sale and Leaseback Transactions. . . . . . . 71 SECTION 1009. Defeasance of Certain Obligations . . . . . . . . . . . . . 72 SECTION 1010. Waiver of Certain Covenants . . . . . . . . . . . . . . . . 73 ARTICLE ELEVEN REDEMPTION OF SECURITIES SECTION 1101. Applicability of Article. . . . . . . . . . . . . . . . . . 74 SECTION 1102. Election to Redeem; Notice to Trustee . . . . . . . . . . . 74 SECTION 1103. Selection by Trustee of Securities to Be Redeemed . . . . . 75 SECTION 1104. Notice of Redemption. . . . . . . . . . . . . . . . . . . . 75 SECTION 1105. Deposit of Redemption Price . . . . . . . . . . . . . . . . 76 SECTION 1106. Securities Payable on Redemption Date . . . . . . . . . . . 76 SECTION 1107. Securities Redeemed in Part . . . . . . . . . . . . . . . . 77 ARTICLE TWELVE SINKING FUNDS SECTION 1201. Applicability of Article. . . . . . . . . . . . . . . . . . 77 SECTION 1202. Satisfaction of Sinking Fund Payments with Securities . . . 78 SECTION 1203. Redemption of Securities for Sinking Fund . . . . . . . . . 78 v INDENTURE, dated as of August 1, 1994 between Honeywell Inc., a corporation duly organized and existing under the laws of the State of Delaware (herein called the "Company"), having its principal office at Honeywell Plaza, Minneapolis, Minnesota 55408, and The Chase Manhattan Bank (National Association), as Trustee (herein called the "Trustee"). RECITALS OF THE COMPANY The Company has duly authorized the execution and delivery of this Indenture to provide for the issuance from time to time of its unsecured debentures, notes or other evidences of indebtedness (herein called the "Securities"), to be issued in one or more series as in this Indenture provided. All things necessary to make this Indenture a valid agreement of the Company, in accordance with its terms, have been done. NOW, THEREFORE, THIS INDENTURE WITNESSETH: For and in consideration of the premises and the purchase of the Securities by the Holders thereof, it is mutually covenanted and agreed, for the equal and proportionate benefit of all Holders of the Securities or of series thereof, as follows: ARTICLE ONE DEFINITIONS AND OTHER PROVISIONS OF GENERAL APPLICATION SECTION 101. Definitions. For all purposes of this Indenture, except as otherwise expressly provided or unless the context otherwise requires: (1) the terms defined in this Article have the meanings assigned to them in this Article and include the plural as well as the singular; (2) all other terms used herein which are defined in the Trust Indenture Act, either directly or by reference therein, have the meanings assigned to them therein; (3) any gender used in this Indenture shall be deemed and construed to include correlative words of the masculine, feminine or neuter gender; (4) all accounting terms not otherwise defined herein have the meanings assigned to them in accordance with generally accepted accounting principles, and, except as otherwise herein expressly provided, the term "generally accepted accounting principles" with respect to any computation required or permitted hereunder shall mean such accounting principles as are generally accepted at the date of such computation; and (5) the words "herein", "hereof" and "hereunder" and other words of similar import refer to this Indenture as a whole and not to any particular Article, Section or other subdivision. Certain terms, used principally in Article Six, are defined in that Article. "Act", when used with respect to any Holder, has the meaning specified in Section 104. "Affiliate" of any specified Person means any other Person directly or indirectly controlling or controlled by or under direct or indirect common control with such specified Person. For the purposes of this definition, "control", when used with respect to any specified Person, means the power to direct the management and policies of such Person, directly or indirectly, whether through the ownership of voting securities, by contract or otherwise; and the terms "controlling" and "controlled" have meanings correlative to the foregoing. "Attributable Debt" in respect of any Sale and Leaseback Transaction means, at the date of determination, the present value (discounted at the rate of interest implicit in the terms of the lease) of the obligation of the lessee for net rental payments during the remaining term of the lease (including any period for which such lease has been extended or may, at the option of the lessor, be extended). "Net rental payments" under any lease for any period means the sum of the rental and other payments required to be paid in such period by the lessee thereunder, excluding any amounts required to be paid by such lessee (whether or not designated as rental or additional rental) on account of maintenance and repairs, insurance, taxes, assessments, water rates or similar charges required to be paid by such lessee thereunder or any amounts required to be paid by such lessee thereunder contingent upon the amount of sales, main tenance and repairs, insurance, taxes, assessments, water rates or similar charges. "Authenticating Agent" means any Person authorized by the Trustee pursuant to Section 614 to act on behalf of the Trustee to authenticate Securities of one or more series. "Board of Directors" means either the board of directors of the Company or any duly authorized committee appointed by that board. -2- "Board Resolution" means a copy of a resolution certified by the Secretary or an Assistant Secretary of the Company to have been duly adopted by the Board of Directors and to be in full force and effect on the date of such certification. Where any provision of this Indenture refers to action to be taken pursuant to a Board Resolution (including establishment of any series of the Securities and the forms and terms thereof), such action may be taken by any committee, officer or employee of the Company authorized to take such action by a Board Resolution. "Business Day", when used with respect to any Place of Payment, means each Monday, Tuesday, Wednesday, Thursday and Friday which is not a day on which banking institutions generally in that Place of Payment are authorized or obligated by law or executive order to close, unless otherwise specified in a form of Security. "Commission" means the Securities and Exchange Commission, as from time to time constituted, created under the Securities Exchange Act of 1934, as amended, or, if at any time after the execution of this instrument such Commission is not existing and performing the duties now assigned to it under the Trust Indenture Act, then the body performing such duties at such time. "Company" means the Person named as the "Company" in the first paragraph of this instrument until a successor corporation shall have become such pursuant to the applicable provisions of this Indenture, and thereafter "Company" shall mean such successor corporation. "Company Request" or "Company Order" means a written request or order signed in the name of the Company by its Chairman of the Board, its President or a Vice President, and by its Treasurer, an Assistant Treasurer, its Secretary or an Assistant Secretary and delivered to the Trustee. "Consolidated Net Tangible Assets" means the aggregate amount of assets (less applicable reserves and other properly deductible items) after deducting therefrom (a) all current liabilities (excluding any indebtedness for money borrowed having a maturity of less than 12 months from the date of the most recent consolidated balance sheet of the Company but which by its terms is renewable or extendable beyond 12 months from such date at the option of the borrower) and (b) all goodwill, trade names, patents, unamortized debt discount and expense and any other like intangibles, all as set forth on the most recent consolidated balance sheet of the Company and computed in accordance with generally accepted accounting principles. -3- "Corporate Trust Office" means the office of the Trustee in The City of New York, New York at which at any particular time its corporate trust business shall be principally administered. "Corporation" includes corporations, associations, companies, joint stock companies and business trusts. "Debt" has the meaning specified in Section 1007. "Defaulted Interest" has the meaning specified in Section 307. "Depositary" means, with respect to the Securities of any series issuable or issued in whole or in part in the form of one or more Global Securities, the clearing agency registered under the Exchange Act, specified for that purpose as contemplated by Section 301 or any successor clearing agency registered under the Exchange Act as contemplated by Section 305, and if at any time there is more than one such Person, "Depositary" as used with respect to the Securities of any series shall mean the Depositary with respect to the Securities of such series. "Event of Default" has the meaning specified in Section 501. "Exchange Act" means the Securities Exchange Act of 1934, as amended. "Funded Debt" means Debt which by its terms matures at or is extendible or renewable at the option of the obligor to a date more than 12 months after the date of the creation of such Debt. "Global Security" means a Security bearing the legend specified in Section 205 evidencing all or part of a series of Securities, issued to the Depositary for such series or its nominee, and registered in the name of such Depositary or nominee. "Holder" means a Person in whose name a Security is registered in the Security Register. "Indenture" means this instrument as originally executed or as it may from time to time be supplemented or amended by one or more indentures supplemental hereto entered into pursuant to the applicable provisions hereof and shall include the terms of particular series of Securities established as contemplated by Section 301; provided, however, that, if at any time more than one Person is acting as Trustee under this instrument due to the appointment of one or more separate Trustees for any one or more separate series of Securities pursuant to Section 610(e), "Indenture" shall mean, with respect to such series of Securities for which any such Person is Trustee, this instrument as originally executed or as it may from time to time be supplemented or amended by one or more indentures supplemental hereto -4- entered into pursuant to the applicable provisions hereof and shall include the terms of particular series of Securities for which such Person is Trustee established as contemplated by Section 301, exclusive, however, of any provisions or terms which relate solely to other series of Securities for which such Person is not Trustee, regardless of when such terms or provisions were adopted, and exclusive of any provisions or terms adopted by means of one or more indentures supplemental hereto executed and delivered after such Person had become such Trustee but to which such Person, as such Trustee, was not a party. "interest", when used with respect to an Original Issue Discount Security which by its terms bears interest only after Maturity, means interest payable after Maturity. "Interest Payment Date", when used with respect to any Security, means the Stated Maturity of an installment of interest on such Security. "Lien" or "Liens" has the meaning specified in Section 1007. "Maturity", when used with respect to any Security, means the date on which the principal of such Security or an installment of principal becomes due and payable as therein or herein provided, whether at the Stated Maturity or by declaration of acceleration, call for redemption or otherwise. "Officers' Certificate" means a certificate signed by the Chairman of the Board, the President, a Vice President or an Assistant Vice President of the Company, and by the Treasurer, an Assistant Treasurer, the Secretary or an Assistant Secretary of the Company, and delivered to the Trustee. "Opinion of Counsel" means a written opinion of counsel, who may be counsel for the Company. "Original Issue Discount Security" means any Security which provides for an amount less than the principal amount thereof to be due and payable upon a declaration of acceleration of the Maturity thereof pursuant to Section 502. "Outstanding", when used with respect to Securities, means, as of the date of determination, all Securities theretofore authenticated and delivered under this Indenture, except: (i) Securities theretofore canceled by the Trustee or delivered to the Trustee for cancellation; -5- (ii) Securities for whose payment or redemption money in the necessary amount has been theretofore deposited with the Trustee or any Paying Agent (other than the Company) in trust or set aside and segregated in trust by the Company (if the Company shall act as its own Paying Agent) for the Holders of such Securities; provided that, if such Securities are to be redeemed, notice of such redemption has been duly given pursuant to this Indenture or provision therefor satisfactory to the Trustee has been made; and (iii) Securities which have been paid pursuant to Section 306 or in exchange for or in lieu of which other Securities have been authenticated and delivered pursuant to this Indenture, other than any such Securities in respect of which there shall have been presented to the Trustee proof satisfactory to it that such Securities are held by a bona fide purchaser in whose hands such Securities are valid obligations of the Company; provided, however, that in determining whether the Holders of the requisite principal amount of the Outstanding Securities have given any request, demand, authorization, direction, notice, consent or waiver hereunder or whether a quorum is present at a meeting of Holders of Securities, (i) the principal amount of an Original Issue Discount Security that shall be deemed to be Outstanding shall be the amount of the principal thereof that would be due and payable as of the date of such determination upon acceleration of the Maturity thereof pursuant to Section 502, (ii) the principal amount of a Security denominated in one or more foreign currencies or currency units that shall be deemed to be Outstanding shall be the U.S. dollar equivalent, determined in the manner provided as contemplated by Section 301 as of the date of original issuance of such Security, of the principal amount (or, in the case of an Original Issue Discount Security, the U.S. dollar equivalent, determined as of the date of original issuance of such Security, of the amount determined as provided in (i) above) of such Security as determined by the Company pursuant to Section 301, and (iii) Securities owned by the Company or any other obligor upon the Securities or any Affiliate of the Company or of such other obligor shall be disregarded and deemed not to be Outstanding, except that, in determining whether the Trustee shall be protected in relying upon any such request, demand, authorization, direction, notice, consent or waiver, only Securities which the Trustee knows to be so owned shall be so disregarded. Securities so owned which have been pledged in good faith may be regarded as Outstanding if the pledgee establishes to the satisfaction of the Trustee the pledgee's right so to act with respect to such Securities and that the pledgee is not the Company or any other obligor upon the Securities or any Affiliate of the Company or of such other obligor. "Paying Agent" means any Person authorized by the Company to pay the principal of (and premium, if any) and/or interest on any Securities on behalf of the Company. -6- "Periodic Offering" means an offering of Securities of a series from time to time the specific terms of which Securities, including without limitation the rate or rates of interest (or formula for determining the rate or rates of interest), if any, thereon, the Stated Maturity or Maturities thereof and the redemption provisions, if any, with respect thereto, are to be determined by the Company or its agents upon the issuance of such Securities. "Person" means any individual, Corporation, partnership, joint venture, association, joint stock company, trust, unincorporated organization or government or any agency or political subdivision thereof. "Place of Payment", when used with respect to the Securities of any series, means the place or places where the principal of (and premium, if any) and/or interest on the Securities of that series are payable, where Securities of that series may be surrendered for registration of transfer or exchange and where notices and demands to or upon the Company in respect of the Securities of that series and this Indenture may be served. "Predecessor Security" of any particular Security means every previous Security evidencing all or a portion of the same debt as that evidenced by such particular Security, and, for the purposes of this definition, any Security authenticated and delivered under Section 306 in exchange for or in lieu of a mutilated, destroyed, lost or stolen Security shall be deemed to evidence the same debt as the mutilated, destroyed, lost or stolen Security. "Principal Property" means any manufacturing plant located within the United States of America (other than its territories or possessions) and owned by the Company or any Subsidiary, the gross book value (without deduction of any depreciation reserves) of which on the date as of which the determination is being made exceeds 1% of Consolidated Net Tangible Assets of the Company, except any such plant (i) which is financed by obligations issued by a State or local governmental unit pursuant to Section 142(a)(5), 142(a)(6), 142(a)(8) or 144(a) of the Internal Revenue Code of 1986, or any successor provision thereof, or (ii) which is not of material importance to the business conducted by the Company and its Subsidiaries, taken as a whole (as determined by any two of the following: the Chairman or a Vice Chairman of the Board of the Company, its President, its Chief Financial Officer, its Vice President of Finance, its Treasurer or its Controller). "Redemption Date", when used with respect to any Security to be redeemed, means the date fixed for such redemption pursuant to this Indenture. "Redemption Price", when used with respect to any Security to be redeemed, means the price at which it is to be redeemed pursuant to this Indenture. -7- "Regular Record Date" for the interest payable on any Interest Payment Date on the Securities of any series means the date specified for that purpose as contemplated by Section 301. "Required Currency" has the meaning specified in Section 311. "Responsible Officer", when used with respect to the Trustee, means any officer of the Trustee assigned by it to administer its corporate trust matters. "Restricted Subsidiary" means any Subsidiary which owns or leases a Principal Property. "Sale and Leaseback Transaction" has the meaning specified in Section 1008. "Securities" has the meaning stated in the first recital of this Indenture and more particularly means any Securities authenticated and delivered under this Indenture; provided, however, that if at any time there is more than one Person acting as Trustee under this Indenture, "Securities" with respect to the Indenture as to which such Person is Trustee shall have the meaning stated in the first recital of this Indenture and shall more particularly mean Securities authenticated and delivered under this Indenture, exclusive, however, of Securities of any series as to which such Person is not Trustee. "Security Register" and "Security Registrar" have the respective meanings specified in Section 305. "Special Record Date" for the payment of any Defaulted Interest means a date fixed by the Trustee pursuant to Section 307. "Stated Maturity", when used with respect to any Security or any installment of principal thereof or interest thereon, means the date specified in such Security as the fixed date on which the principal of such Security or such installment of principal or interest is due and payable. "Subsidiary" means any Corporation of which securities (excluding securities entitled to vote for directors only by reason of the happening of a contingency) entitled to elect at least a majority of the corporation's directors shall at the time be owned, directly or indirectly, by the Company, or one or more Subsidiaries, or by the Company and one or more Subsidiaries. "Trustee" means the Person named as the "Trustee" in the first paragraph of this instrument until a successor Trustee shall have become such pursuant to the applicable provisions of this Indenture, and thereafter "Trustee" shall mean or -8- include each Person who is then a Trustee hereunder, and if at any time there is more than one such Person, "Trustee" as used with respect to the Securities of any series shall mean the Trustee with respect to Securities of that series. "Trust Indenture Act" or "TIA" means the Trust Indenture Act of 1939 as in force at the date as of which this instrument was executed, except as provided in Section 905. "U.S. Government Obligations" means direct obligations of the United States of America, backed by its full faith and credit. "Vice President", when used with respect to the Company, means any vice president, whether or not designated by a number or a word or words added before or after the title "vice president". "Voting Stock", when used with respect to a Corporation, means stock of the class or classes having general voting power under ordinary circumstances to elect at least a majority of the board of directors, managers or trustees of such Corporation (irrespective of whether at the time stock or securities of any other class or classes shall have or might have voting power by reason of the happening of any contingency). SECTION 102. Compliance Certificates and Opinions. Upon any application or request by the Company to the Trustee to take any action under any provision of this Indenture, the Company shall furnish to the Trustee an Officers' Certificate stating that all conditions precedent, if any, provided for in this Indenture relating to the proposed action have been complied with and an Opinion of Counsel stating that in the opinion of such counsel all such conditions precedent, if any, have been complied with, except that in the case of any such application or request as to which the furnishing of such documents is specifically required by any provision of this Indenture relating to such particular application or request, no additional certificate or opinion need be furnished. Every certificate or opinion with respect to compliance with a condition or covenant provided for in this Indenture shall include: (1) a statement that each individual signing such certificate or opinion has read such covenant or condition and the definitions herein relating thereto; -9- (2) a brief statement as to the nature and scope of the examination or investigation upon which the statements or opinions contained in such certificate or opinion are based; (3) a statement that, in the opinion of each such individual, he has made such examination or investigation as is necessary to enable him to express an informed opinion whether such covenant or condition has been complied with; and (4) a statement whether, in the opinion of each such individual, such condition or covenant has been complied with. SECTION 103. Form of Documents Delivered to Trustee. In any case where several matters are required to be certified by, or covered by an opinion of, any specified Person, it is not necessary that all such matters be certified by, or covered by the opinion of, only one such Person, or that they be so certified or covered by only one document, but one such Person may certify or give an opinion with respect to some matters and one or more other such Persons as to other matters, and any such Person may certify or give an opinion as to such matters in one or several documents. Any certificate or opinion of any officer of the Company may be based, insofar as it relates to legal matters, upon a certificate or opinion of, or representations by, counsel, unless such officer knows, or in the exercise of reasonable care should know, that the certificate or opinion or representations with respect to the matters upon which such officer's certificate or opinion is based are erroneous. Any such certificate or Opinion of Counsel may be based, insofar as it relates to factual matters, upon a certificate or opinion of, or representations by, an officer or officers of the Company stating that the information with respect to such factual matters is in the possession of the Company, unless such counsel knows, or in the exercise of reasonable care should know, that the certificate or opinion or representations with respect to such matters are erroneous. Where any Person is required to make, give or execute two or more applications, requests, consents, certificates, statements, opinions or other instruments under this Indenture, they may, but need not, be consolidated and form one instrument. -10- SECTION 104. Acts of Holders. (a) Any request, demand, authorization, direction, notice, consent, waiver or other action provided by this Indenture to be given or taken by Holders may be embodied in and evidenced by one or more instruments of substantially similar tenor signed by such Holders in person or by an agent duly appointed in writing, and, except as herein otherwise expressly provided, such action shall become effective when such instrument or instruments are delivered to the Trustee and, where it is hereby expressly required, to the Company. Such instrument or instruments (and the action embodied therein and evidenced thereby) are herein sometimes referred to as the "Act" of the Holders signing such instrument or instruments. Proof of execution of any such instrument or of a writing appointing any such agent shall be sufficient for any purpose of this Indenture and (subject to Section 601) conclusive in favor of the Trustee and the Company, if made in the manner provided in this Section. (b) The fact and date of the execution by any Person of any such instrument or writing may be proved by the affidavit of a witness of such execution or by a certificate of a notary public or other officer authorized by law to take acknowledgments of deeds, certifying that the individual signing such instrument or writing acknowledged to him the execution thereof. Where such execution is by a signer acting in a capacity other than such signer's individual capacity, such certificate or affidavit shall also constitute sufficient proof of such signer's authority. The fact and date of the execution of any such instrument or writing, or the authority of the Person executing the same, may also be proved in any other manner which the Trustee deems sufficient. (c) The ownership of Securities shall be proved by the Security Register. The Company may fix any day as the record date for the purpose of determining the Holders of Securities of any series entitled to give or take any request, demand, authorization, direction, notice, consent, waiver or other action, or to vote on any action, authorized or permitted to be given or taken by Holders of Securities of such series. If not set by the Company prior to the first solicitation of a Holder of Securities of such series made by any Person in respect of any such action, or, in the case of any such vote, prior to such vote, the record date for any such action or vote shall be the 30th day (or, if later, the date of the most recent list of Holders required to be provided pursuant to Section 701) prior to such first solicitation or vote, as the case may be. With regard to any record date for action to be taken by the Holders of one or more series of Securities, only the Holders of Securities of such series on such date (or their duly designated proxies) shall be entitled to give or take, or vote on, the relevant action. -11- (d) Any request, demand, authorization, direction, notice, consent, waiver or other Act of the Holder of any Security shall bind every future Holder of the same Security and the Holder of every Security issued upon the registration of transfer thereof or in exchange therefor or in lieu thereof in respect of anything done, omitted or suffered to be done by the Trustee or the Company in reliance thereon, whether or not notation of such action is made upon such Security. SECTION 105. Notices, Etc., to Trustee and Company. Any request, demand, authorization, direction, notice, consent, waiver or Act of Holders or other document provided or permitted by this Indenture to be made upon, given or furnished to, or filed with, (1) the Trustee by any Holder or by the Company shall be sufficient for every purpose hereunder if made, given, furnished or filed in writing to or with a Responsible Officer of the Trustee at its Corporate Trust Office, Attention: Corporate Trust Department, or (2) the Company by the Trustee or by any Holder shall be sufficient for every purpose hereunder (unless otherwise herein expressly provided) if in writing and mailed, first-class postage prepaid, to the Company addressed to it at the address of its principal office specified in the first paragraph of this instrument (Attention: Treasurer) or at any other address previously furnished in writing to the Trustee by the Company. SECTION 106. Notice to Holders; Waiver. Where this Indenture provides for notice to Holders of any event, such notice shall be sufficiently given (unless otherwise herein expressly provided) if in writing and mailed, first-class postage prepaid, to each Holder affected by such event, at such Holder's address as it appears in the Security Register, not later than the latest date, and not earlier than the earliest date, prescribed for the giving of such notice. In any case where notice to Holders is given by mail, neither the failure to mail such notice, nor any defect in any notice so mailed, to any particular Holder shall affect the sufficiency of such notice with respect to other Holders. Where this Indenture provides for notice in any manner, such notice may be waived in writing by the Person entitled to receive such notice, either before or after the event, and such waiver shall be the equivalent of such notice. Waivers of notice by Holders shall be filed with the Trustee, but such filing shall not be a condition precedent to the validity of any action taken in reliance upon such waiver. -12- In case by reason of the suspension of regular mail service or by reason of any other cause it shall be impracticable to give such notice by mail, then such notification as shall be made by or with the approval of the Trustee shall constitute a sufficient notification for every purpose hereunder. SECTION 107. Compliance with Trust Indenture Act. This Indenture is subject to, and shall be governed by, the provisions of the Trust Indenture Act that are required to be part of this Indenture. If any provision hereof limits, qualifies or conflicts with a provision of the Trust Indenture Act that is required under such Act to be a part of and govern this Indenture, the latter provision shall control. If any provision of this Indenture modifies or excludes any provision of the Trust Indenture Act that may be so modified or excluded, the latter provision shall be deemed to apply to this Indenture as so modified or to be excluded, as the case may be. SECTION 108. Effect of Headings and Table of Contents. The Article and Section headings herein and the Table of Contents are for convenience only and shall not affect the construction hereof. SECTION 109. Successors and Assigns. All covenants and agreements in this Indenture by the Company or the Trustee shall bind its successors and assigns, whether so expressed or not. SECTION 110. Separability Clause. In case any provision in this Indenture or in the Securities shall be invalid, illegal or unenforceable, the validity, legality and enforceability of the remaining provisions shall not in any way be affected or impaired thereby. SECTION 111. Benefits of Indenture. Nothing in this Indenture or in the Securities, express or implied, shall give to any Person, other than the parties hereto, any Authenticating Agent, any Paying Agent, any Securities Registrar, and their successors hereunder and the Holders, any benefit or any legal or equitable right, remedy or claim under this Indenture. -13- SECTION 112. Governing Law. This Indenture and the Securities shall be governed by and construed in accordance with the laws of the State of New York. SECTION 113. Legal Holidays. Except as may be otherwise specified with respect to any particular Securities, in any case where any Interest Payment Date, Redemption Date or Stated Maturity of any Security shall not be a Business Day at any Place of Payment, then (notwithstanding any other provision of this Indenture or of the Securities) payment of interest or principal (and premium, if any) need not be made at such Place of Payment on such date, but may be made on the next succeeding Business Day at such Place of Payment with the same force and effect as if made on the Interest Payment Date or Redemption Date, or at the Stated Maturity, provided that no interest shall accrue for the period from and after such Interest Payment Date, Redemption Date or Stated Maturity, as the case may be. ARTICLE TWO SECURITY FORMS SECTION 201. Forms Generally. The Securities of each series shall be in substantially the form set forth in this Article, or in such other form as shall be established by or pursuant to a Board Resolution and set forth in an Officers' Certificate or established by one or more indentures supplemental hereto, in each case with such appropriate insertions, omissions, substitutions and other variations as are required or permitted by this Indenture, and may have such letters, numbers or other marks of identification and such legends or endorsements placed thereon as may be required to comply with the rules of any securities exchange or as may, consistently herewith, be determined by the officers executing such Securities, as evidenced by their execution of the Securities. If the form of Securities of any series is established by action taken pursuant to a Board Resolution, a copy of an appropriate record of such action shall be certified by the Secretary or an Assistant Secretary of the Company and delivered to the Trustee at or prior to the delivery of the Company Order contemplated by Section 303 for the authentication and delivery of such Securities. -14- The Trustee's certificates of authentication shall be in substantially the form set forth in this Article with such appropriate insertions, omissions, substitutions and other variations as are required or permitted by this Indenture. The definitive Securities may be printed, lithographed or engraved on steel engraved borders or may be produced in any other manner, all as determined by the officers executing such Securities, as evidenced by their execution of such Securities. SECTION 202. Form of Face of Security. [INSERT ANY LEGEND REQUIRED BY THE INTERNAL REVENUE CODE AND THE REGULATIONS THEREUNDER.] -15- HONEYWELL INC. -------------------------- No._________ [$]_________________ Honeywell Inc., a corporation duly organized and existing under the laws of Delaware (herein called the "Company", which term includes any successor Person under the Indenture hereinafter referred to), for value received, hereby promises to pay to___________________, or registered assigns, the principal sum of _________________ [Dollars] on _______________[IF THE SECURITY IS TO BEAR INTEREST PRIOR TO MATURITY, INSERT ---, and to pay interest thereon from ___________or from the most recent Interest Payment Date to which interest has been paid or duly provided for, [semi-annually in arrears on________________ and ________________in each year] [annually in arrears on ______________], commencing __________________, at the rate of_____ % per annum, until the principal hereof is paid or made available for payment [IF APPLICABLE INSERT --, and (to the extent that the payment of such interest shall be legally enforceable) at the rate of ____% per annum on any overdue principal and premium and on any overdue installment of interest]. The interest so payable, and punctually paid or duly provided for, on any Interest Payment Date will, as provided in such Indenture, be paid to the Person in whose name this Security (or one or more Predecessor Securities) is registered at the close of business on the Regular Record Date for such interest, which shall be the _______________ or __________________ (whether or not a Business Day), as the case may be, next preceding such Interest Payment Date. Any such interest not so punctually paid or duly provided for will forthwith cease to be payable to the Holder on such Regular Record Date and may either be paid to the Person in whose name this Security (or one or more Predecessor Securities) is registered at the close of business on a Special Record Date for the payment of such Defaulted Interest to be fixed by the Trustee, notice whereof shall be given to holders of Securities of this series not less than 10 days prior to such Special Record Date, or be paid at any time in any other lawful manner not inconsistent with the requirements of any securities exchange on which the Securities of this series may be listed, and upon such notice as may be required by such exchange, all as more fully provided in said Indenture]. [IF THE SECURITY IS NOT TO BEAR INTEREST PRIOR TO MATURITY, INSERT --. The principal of this Security shall not bear interest except in the case of a default in payment of principal upon acceleration, upon redemption or at Stated Maturity and in such case the overdue principal of this Security shall bear interest at the rate of____% per annum (to the extent that the payment of such interest shall be legally enforceable), which shall accrue from the date of such default in payment to the date payment of such principal has been made or duly provided for. Interest on any overdue principal shall be payable on demand. Any such interest on any overdue principal that is not so paid on demand shall bear interest at the rate of _____% per annum (to the extent that the payment of such interest shall be legally enforceable), which shall accrue -16- from the date of such demand for payment to the date payment of such interest has been made or duly provided for, and such interest shall also be payable on demand.] Payment of the principal of (and premium, if any) and [If applicable, insert -- any such] interest on this Security will be made at the office or agency of the Company maintained for that purpose in ________, in such coin or currency [of the United States of America] as at the time of payment is legal tender for payment of public and private debts [IF APPLICABLE, INSERT --; provided, however, that at the option of the Company payment of interest may be made by check mailed to the address of the Person entitled thereto as such address shall appear in the Security Register]. [IF APPLICABLE, INSERT -- [The Securities of this series are/This Security is] subject to redemption prior to the Stated Maturity as described on the reverse hereof.] Reference is hereby made to the further provisions of this Security set forth on the reverse hereof, which further provisions shall for all purposes have the same effect as if set forth at this place. Unless the certificate of authentication hereon has been executed by or on behalf of the Trustee referred to on the reverse hereof by manual signature, this Security shall not be entitled to any benefit under the Indenture or be valid or obligatory for any purpose. IN WITNESS WHEREOF, the Company has caused this instrument to be duly executed under its corporate seal. Dated: HONEYWELL INC. By ------------------------------- Attest: ----------------------------- -17- SECTION 203. Form of Reverse of Security. This Security is one of a duly authorized issue of securities of the Company (herein called the "Securities"), issued and to be issued in one or more series under an Indenture, dated as of [DATE], 1993 (herein called the "Indenture"), between the Company and The Chase Manhattan Bank (National Association), as Trustee (herein called the "Trustee", which term includes any successor trustee under the Indenture), to which Indenture and all indentures supplemental thereto reference is hereby made for a statement of the respective rights, limitations of rights, duties and immunities thereunder of the Company, the Trustee and the Holders of the Securities and of the terms upon which the Securities are, and are to be authenticated and delivered. This Security is one of the series designated on the face hereof [, limited in aggregate principal amount to [$]______________ ]. By the terms of the Indenture, additional Securities [IF APPLICABLE, INSERT -- of this series and] of other separate series, which may vary as to date, amount, Stated Maturity, interest rate or method of calculating the interest rate and in other respects as therein provided, may be issued in an unlimited principal amount. [IF APPLICABLE, INSERT -- [The Securities of this series are/This Security is] subject to redemption prior to the Stated Maturity hereof upon not less than 30 days' notice by mail to the Person[s] in whose name[s] [the Securities to be redeemed are/this Security is] registered at the address specified in the Security Register, [IF APPLICABLE, INSERT -- (1) on ______ in any year commencing with the year ______ and ending with the year ______ through operation of the sinking fund for this series at a Redemption Price equal to 100% of the principal amount, and (2)] at any time [on or after _________ ], as a whole or in part, at the election of the Company, at the following Redemption Prices (expressed as percentages of the principal amount): if redeemed [on or before ________, ______%, and if redeemed] during the 12-month period beginning _______ of the years indicated, Redemption Redemption Year Price Year Price ---- ---------- ---- ---------- and thereafter at a Redemption Price equal to _____% of the principal amount, [If APPLICABLE, INSERT -- together in the case of any such redemption [IF APPLICABLE, INSERT -- (whether through operation of the sinking fund or otherwise)] with accrued interest to the Redemption Date, provided, however, that installments of interest whose Stated Maturity is on or prior to such Redemption Date will be payable to the [Holders of such Securities/Holder of this Security] (or one or more Predecessor Securities) of record at the close of business on the relevant Record -18- Dates referred to on the face hereof, all as provided in the Indenture]. [IF THERE IS NO SINKING FUND, INSERT -- [The Securities of this series are/This Security is] not subject to any sinking fund.] [IF APPLICABLE, INSERT -- [The Securities of this series are/This Security is] subject to redemption prior to the Stated Maturity hereof upon not less than 30 days' notice by mail to the Person[s] in whose name[s] [the Securities to be redeemed are/this Security is] registered at the address specified in the Security Register, (1) on ________ in any year commencing with the year ______ and ending with the year _____ through operation of the sinking fund for this series at the Redemption Prices for redemption through operation of the sinking fund (expressed as percentages of the principal amount) set forth in the table below, and (2) at any time [on or after _____________ ], as a whole or in part, at the election of the Company, at the Redemption Prices for redemption otherwise than through operation of the sinking fund (expressed as percentages of the principal amount) set forth in the table below: If redeemed during the 12-month period beginning ______________ of the years indicated, Redemption Price for Redemption Redemption Price for Through Operation Redemption Otherwise of the Than Through Operation Year Sinking Fund of the Sinking Fund ---- ----------------- ---------------------- and thereafter at a Redemption Price equal to ____% of the principal amount [IF APPLICABLE, INSERT ---, together in the case of any such redemption (whether through operation of the sinking fund or otherwise) with accrued interest to the Redemption Date, provided, however, that installments of interest whose Stated Maturity is on or prior to such Redemption Date will be payable to the [Holders of such Securities/Holder of this Security] (or one or more Predecessor Securities) of record at the close of business on the relevant Record Dates referred to on the face hereof, all as provided in the Indenture].] [Notwithstanding the foregoing, the Company may not, prior to ____, redeem any Securities of this series as contemplated by [Clause (2) of] the preceding paragraph as a part of, or in anticipation of, any refunding operation by the application, directly or indirectly, of moneys borrowed having an interest cost to the Company (calculated in accordance with generally accepted financial practice) of less than ___% per annum.] [The sinking fund for this series provides for the redemption on __________ in each year beginning with the year _____ and ending with the year ____ of [not less than] -19- [$]__________ [("mandatory sinking fund") and not more than [$]______ ] aggregate principal amount of Securities of this series. [Securities of this series acquired or redeemed by the Company otherwise than through [mandatory] sinking fund payments may be credited against subsequent [mandatory] sinking fund payments otherwise required to be made -- in the inverse order in which they become due.]] [In the event of redemption of this Security in part only, a new Security or Securities of this series and of like tenor or an authorized denomination for the unredeemed portion hereof will be issued in the name of the Holder hereof upon the cancellation hereof, and, in the event of transfer or exchange, a new Security or Securities of this series and of like tenor and for a like aggregate principal amount will be issued to the Holder, in the case of exchange, or the designated transferee or transferees, in the case of transfer.] [If the Security is not an Original Issue Discount Security, -- If an Event of Default with respect to Securities of this series shall occur and be continuing, the principal of the Securities of this series may (subject to the conditions set forth in the Indenture) be declared due and payable in the manner and with the effect provided in the Indenture.] [IF THE SECURITY IS AN ORIGINAL ISSUE DISCOUNT SECURITY, -- If an Event of Default with respect to Securities of this series shall occur and be continuing, a lesser amount than the principal amount due at the Stated Maturity of the Securities of this series may (subject to the conditions set forth in the Indenture) be declared due and payable in the manner and with the effect provided in the Indenture. The amount due and payable on this Security in the event that this Security is declared due and payable prior to the Stated Maturity hereof shall be -- INSERT FORMULA FOR DETERMINING THE AMOUNT -- or in the event that this Security is redeemed shall be the specified percentage -- INSERT FORMULA FOR DETERMINING THE AMOUNT. Upon payment (i) of the amount of principal so declared due and payable and (ii) of interest on any overdue principal and overdue interest (in each case to the extent that the payment of such interest shall be legally enforceable), all of the Company's obligations in respect of the payment of the principal of and interest, if any, on the Securities of this series shall terminate.] [IF APPLICABLE, INSERT -- The Indenture contains provisions for defeasance at any time of the Company's obligations in respect of (i) the entire indebtedness of this Note or (ii) certain restrictive covenants with respect to this Note, in each case upon compliance with certain conditions set forth therein.] The Indenture permits, with certain exceptions as therein provided, the amendment thereof and the modification of the rights and obligations of the Company and the rights of the Holders of the Securities of each series to be affected under the Indenture at any time by the Company and the Trustee with the consent -20- of the Holders of not less than a majority in aggregate principal amount of the Securities at the time Outstanding of each series to be affected and, for certain purposes, without the consent of the Holders of any Securities at the time Outstanding. The Indenture also contains provisions permitting the Holders of specified percentages in aggregate principal amount of the Securities of each series at the time Outstanding, on behalf of the Holders of all Securities of such series, to waive compliance by the Company with certain provisions of the Indenture and certain past defaults under the Indenture and their consequences. Any such consent or waiver by the Holder of this Security shall be conclusive and binding upon such Holder and upon all future Holders of this Security and of any Security issued upon the registration of transfer hereof or in exchange hereof or in lieu hereof, whether or not notation of such consent or waiver is made upon this Security. [IF THE SECURITY IS AN ORIGINAL ISSUE DISCOUNT SECURITY, -- In determining whether the Holders of the requisite principal amount of the Outstanding Securities have given any request, demand, authorization, direction, notice, consent or waiver under the Indenture or whether a quorum is present at a meeting of Holders of Securities, the principal amount of any Original Issue Discount Security that shall be deemed to be Outstanding shall be the amount of the principal thereof that would be due and payable as of the date of such determination upon the acceleration of the Maturity thereof.] No reference herein to the Indenture and no provision of this Security or of the Indenture shall alter or impair the obligation of the Company, which is absolute and unconditional, to pay the principal of (and premium, if any) and interest on this Security at the times, place and rate, and in the coin or currency, herein prescribed. As provided in the Indenture and subject to certain limitations therein set forth, the transfer of this Security is registrable in the Security Register, upon surrender of this Security for registration of transfer at the office or agency of the Company in any place where the principal of (and premium, if any) and interest on this Security are payable, duly endorsed by, or accompanied by a written instrument of transfer in form satisfactory to the Company and the Security Registrar duly executed by, the Holder hereof or such Holder's attorney duly authorized in writing, and thereupon one or more new Securities of this series and of like tenor of authorized denominations and for the same aggregate principal amount, will be issued to the designated transferee or transferees. The Securities of this series are issuable only in registered form without coupons in denominations of [$1,000] and any amount in excess thereof which is an integral multiple of [$1,000]. As provided in the Indenture and subject to certain limitations therein set forth, Securities of this series are exchangeable for a like aggregate principal amount of Securities of this series and of like tenor of a different authorized denomination, as requested by the Holder surrendering the same. -21- No service charge shall be made for any such registration of transfer or exchange, but the Company may require payment of a sum sufficient to cover any tax or other governmental charge payable in connection therewith. Prior to due presentment of this Security for registration of transfer, the Company, the Trustee and any agent of the Company or the Trustee may treat the Person in whose name this Security is registered in the Security Register as the owner hereof for all purposes, whether or not this Security be overdue, and neither the Company, the Trustee nor any such agent shall be affected by notice to the contrary. The Securities shall be governed by and construed in accordance with the laws of the State of New York. All terms used in this Security which are defined in the Indenture shall have the meanings assigned to them in the Indenture. SECTION 204. Form of Trustee's Certificate of Authentication. This is one of the Securities of the series designated therein and issued pursuant to the within-mentioned Indenture. THE CHASE MANHATTAN BANK (NATIONAL ASSOCIATION) as Trustee By -------------------------------- Authorized Officer SECTION 205. Form of Legend for Global Securities. Any Global Security authenticated and delivered hereunder shall, in addition to the provisions contained in Sections 202 and 203, bear a legend in substantially the following form or such similar form as may be required by the Depositary: "Unless this certificate is presented by an authorized representative of The Depository Trust Company (55 Water Street, New York, New York) to the issuer or to its agent for registration of transfer, exchange or payment, and any certificate issued is registered in the name of Cede & Co. or such other name as requested by an -22- authorized representative of The Depository Trust Company and any payment is made to Cede & Co., ANY TRANSFER, PLEDGE OR OTHER USE HEREOF FOR VALUE OR OTHERWISE BY OR TO ANY PERSON IS WRONGFUL since the registered owner hereof, Cede & Co., has an interest herein. ARTICLE THREE THE SECURITIES SECTION 301. Amount Unlimited; Issuable in Series. The aggregate principal amount of Securities which may be authenticated and delivered under this Indenture is unlimited. The Securities may be issued in one or more series. There shall be established by or pursuant to a Board Resolution and, subject to Section 303, set forth or determined in the manner provided in an Officers' Certificate or established in one or more indentures supplemental hereto, prior to the initial issuance of Securities of any series, (1) the title of the Securities of the series (which shall distinguish the Securities of the series from Securities of any other series); (2) any limit upon the aggregate principal amount of the Securities of the series which may be authenticated and delivered under this Indenture (except for Securities authenticated and delivered upon registration of transfer of, or in lieu of, other Securities of the series pursuant to Section 304, 305, 306, 906, 1107 and except for any Securities which, pursuant to Section 303, are deemed never to have been authenticated and delivered hereunder); (3) the Person to whom any interest on a Security of the series shall be payable, if other than the Person in whose name that Security (or one or more Predecessor Securities) is registered at the close of business on the Regular Record Date for such interest; (4) the date or dates on which the principal or installments of principal of the Securities of the series is or are payable and any rights to extend such date or dates; -23- (5) the rate or rates at which the Securities of the series shall bear interest, if any, or the formula pursuant to which such rate or rates shall be determined, the date or dates from which such interest shall accrue, the Interest Payment Dates on which such interest shall be payable and the Regular Record Date for the interest payable on any Interest Payment Date; (6) the place or places where the principal of (and premium, if any) and interest on Securities of the series shall be payable, any Securities of the series may be surrendered for registration of transfer or exchange and notices and demands to or upon the Company with respect to the Securities of the series and this Indenture may be served; (7) the period or periods within which, the price or prices at which and the terms and conditions upon which Securities of the series may be redeemed, in whole or in part, at the option of the Company; (8) the obligation, if any, of the Company to redeem or purchase Securities of the series pursuant to any sinking fund or analogous provisions or at the option of a Holder thereof and the period or periods within which, the price or prices at which and the terms and conditions upon which Securities of the series shall be redeemed or purchased, in whole or in part, pursuant to such obligation; (9) if other than denominations of $1,000 or any amount in excess thereof which is an integral multiple of $1,000, the denominations in which Securities of the series shall be issuable; (10) the currency, currencies or currency units in which payment of the principal of and any premium and interest on any Securities of the series shall be payable if other than the currency of the United States of America, the manner of determining the U.S. dollar equivalent of the principal amount thereof for purposes of the definition of "Outstanding" in Section 101, and, if the principal of or any premium or interest on any Securities of the series is to be payable, at the election of the Company or a Holder thereof, in one or more currencies or currency units other than that or those in which the Securities are stated to be payable, the currency, currencies or currency units in which payment of the principal of and any premium and interest on Securities of such series as to which such election is made shall be payable, and the periods within which and the terms and conditions upon which such election is to be made; (11) any other event or events of default applicable with respect to Securities of the series in addition to or in lieu of those provided in Section 501(1)-(7); -24- (12) if less than the principal amount thereof, the portion of the principal amount of Securities of the series which shall be payable upon declaration of acceleration of the Maturity thereof pursuant to Section 502; (13) whether the Securities of the series shall be issued in whole or in part in the form of one or more Global Securities and, if so, (a) the Depositary with respect to such Global Security or Securities and (b) the circumstances under which any such Global Security may be exchanged for Securities registered in the name of, and any transfer of such Global Security may be registered to, a Person other than such Depositary or its nominee, if other than as set forth in Section 305; (14) if principal of or any premium or interest on the Securities of a series is denominated or payable in a currency or currencies other than the currency of the United States of America, whether and under what terms and conditions the Company may be discharged from obligations pursuant to Sections 403 and 1107 with respect to Securities of such series; and (15) any other terms of the series (which terms shall not be inconsistent with the provisions of this Indenture, except as permitted by Section 901(5)). All Securities of any one series (other than Securities offered in a Periodic Offering) shall be substantially identical except as to denomination and except as may otherwise be provided by or pursuant to the Board Resolution referred to above and, subject to Section 303, set forth, or determined in the manner provided, in the Officers' Certificate referred to above or in any such indenture supplemental hereto. If any of the terms of the series are established by action taken pursuant to a Board Resolution, a copy of an appropriate record of such action shall be certified by the Secretary or an Assistant Secretary of the Company and delivered to the Trustee at or prior to the delivery of the Officers' Certificate setting forth the terms of the series. With respect to Securities of a series offered in a Periodic Offering, such Board Resolution and Officers' Certificate or supplemental indenture may provide general terms or parameters for Securities of such series and provide either that the specific terms of particular Securities of such series shall be specified in a Company Order or that such terms shall be determined by the Company or its agents in accordance with other procedures specified in a Company Order as contemplated by the third paragraph of Section 303. -25- SECTION 302. Denominations. Unless otherwise provided in the applicable Officers' Certificate or supplemental indenture, the Securities of each series shall be issued in registered form without coupons in such denominations as shall be specified as contemplated by Section 301. In the absence of any such provisions with respect to the Securities of any series, the Securities of such series shall be issuable in denominations of $1,000 or any amount in excess thereof which is an integral multiple of $1,000. SECTION 303. Execution, Authentication, Delivery and Dating. The Securities shall be executed on behalf of the Company by its Chairman of the Board, its President or one of its Vice Presidents, under its corporate seal affixed thereto or reproduced thereon attested by its Secretary or one of its Assistant Secretaries. The signature of any of these officers on the Securities may be manual or facsimile. Securities bearing the manual or facsimile signatures of individuals who were at any time the proper officers of the Company shall bind the Company, notwithstanding that such individuals or any of them have ceased to hold such offices prior to the authentication and delivery of such Securities or did not hold such offices at the date of such Securities. At any time and from time to time after the execution and delivery of this Indenture, the Company may deliver Securities of any series executed by the Company to the Trustee for authentication, together with a Company Order for the authentication and delivery of such Securities, or, in the case of Securities offered in a Periodic Offering, from time to time in accordance with such other procedures (including, without limitation, the receipt by the Trustee of electronic instructions from the Company or its duly authorized agents, promptly confirmed in writing by the Company) acceptable to the Trustee as may be specified from time to time by a Company Order for establishing the specific terms of particular Securities being so offered, and the Trustee in accordance with the Company Order shall authenticate and deliver such Securities. If the form or forms or terms of the Securities of the series have been established by or pursuant to one or more Board Resolutions as permitted by Sections 201 and 301, in authenticating such Securities and accepting the additional responsibilities under this Indenture in relation to such Securities, the Trustee shall be entitled to receive, and (subject to Section 601) shall be fully protected in relying upon, an Opinion of Counsel stating, -26- (a) that the form or forms of such Securities have been established in conformity with the provisions of this Indenture; (b) that the terms of such Securities have been established in conformity with the provisions of this Indenture; (c) that such Securities, when authenticated and delivered by the Trustee and issued by the Company in the manner and subject to any conditions specified in such Opinion of Counsel, will constitute valid and legally binding obligations of the Company, enforceable in accordance with their terms, subject to bankruptcy, insolvency, reorganization and other laws of general applicability relating to or affecting the enforcement of creditors' rights and to general equity principles; (d) that authentication and delivery of such Securities and the execution and delivery of the supplemental indenture, if any, by the Trustee will not violate the terms of the Indenture; (e) that the Company has the corporate power to issue such Securities, and has duly taken all necessary corporate action with respect to such issuance; and (f) that the issuance of such Securities will not contravene the certificate of incorporation or bylaws of the Company or result in any violation of any of the terms or provisions of any law or regulation or of any indenture, mortgage or other agreement known to such Counsel by which the Company is bound; provided, however, that, with respect to Securities of a series offered in a Periodic Offering, the Trustee shall be entitled to receive such Opinion of Counsel in connection only with the first authentication of each form of Securities of such series and that the opinions described in Clauses (b) and (c) above may state, respectively, that (b) if the terms of such Securities are to be established pursuant to a Company Order or pursuant to such procedures as may be specified from time to time by a Company Order, all as contemplated by a Board Resolution or action taken pursuant thereto, such terms will have been duly authorized by the Company and established in conformity with the provisions of this Indenture; and -27- (c) that such Securities, when executed by the Company, completed, authenticated and delivered by the Trustee in accordance with this Indenture, and issued and delivered by the Company and paid for, all in accordance with any agreement of the Company relating to the offering, issuance and sale of such Securities, will be duly issued under this Indenture and will constitute valid and legally binding obligations of the Company, enforceable in accordance with their terms, subject to bankruptcy, insolvency, reorganization, moratorium and other laws relating to or affecting generally the enforcement of creditors' rights and to general principles of equity. With respect to Securities of a series offered in a Periodic Offering, the Trustee may rely, as to the authorization by the Company of any of such Securities, the form or forms and terms thereof and the legality, validity, binding effect and enforceability thereof, upon the Opinion of Counsel, Company Order and other documents delivered pursuant to Sections 201 and 301 and this Section, as applicable, in connection with the first authentication of a form of Securities of such series and it shall not be necessary for the Company to deliver such Opinion of Counsel and other documents (except as may be required by the specified other procedures, if any, referred to above) at or prior to the time of authentication of each Security of such series unless and until the Trustee receives notice that such Opinion of Counsel or other documents have been superseded or revoked, and may assume compliance with any conditions specified in such Opinion of Counsel (other than any conditions to be performed by the Trustee). If such form or forms or terms have been so established, the Trustee shall not be required to authenticate such Securities if the issue of such Securities pursuant to this Indenture will affect the Trustee's own rights, duties or immunities under the Securities and this Indenture or otherwise in a manner which is not reasonably acceptable to the Trustee. Each Security shall be dated the date of its authentication. No Security shall be entitled to any benefit under this Indenture or be valid or obligatory for any purpose unless there appears on such Security a certificate of authentication substantially in the form provided for herein executed by the Trustee by manual signature, and such certificate upon any Security shall be conclusive evidence, and the only evidence, that such Security has been duly authenticated and delivered hereunder and is entitled to the benefits of this Indenture. Notwithstanding the foregoing, if any Security shall have been authenticated and delivered hereunder but never issued and sold by the Company, and the Company shall deliver such Security to the Trustee for cancellation as provided in Section 309 together with a written statement (which need not comply with Section 102 and need not be accompanied by an Opinion of Counsel) stating that such Security has never been issued and sold by the Company, for all purposes of this Indenture such Security shall be deemed never to have been authenticated and delivered hereunder and shall never be entitled to the benefits of this Indenture. -28- SECTION 304. Temporary Securities. Pending the preparation of definitive Securities of any Series, the Company may execute, and upon Company Order the Trustee shall authenticate and deliver, temporary Securities which are printed, lithographed, typewritten or otherwise produced, in any authorized denomination, substantially of the tenor of the definitive Securities in lieu of which they are issued and with such appropriate insertions, omissions, substitutions and other variations as the officers executing such Securities may determine, as evidenced by their execution of such Securities. If temporary Securities of any series are issued, the Company will cause definitive Securities of that series to be prepared without unreasonable delay. After the preparation of definitive Securities of such series, the temporary Securities of such series shall be exchangeable for definitive Securities of like tenor of such series upon surrender of the temporary Securities of such series at the office or agency of the Company in a Place of Payment for that series, without charge to the Holder. Upon surrender for cancellation of any one or more temporary Securities of any series the Company shall execute and the Trustee shall authenticate and deliver in exchange therefor a like principal amount of definitive Securities of the same series and of like tenor and of any authorized denominations. Until so exchanged the temporary Securities of any series shall in all respects be entitled to the same benefits under this Indenture as definitive Securities of such series and tenor. SECTION 305. Registration, Registration of Transfer and Exchange. The Company shall cause to be kept at the Corporate Trust Office of the Trustee a register (the "Security Register") in which, subject to such reasonable regulations as it may prescribe, the Company shall provide for the registration of Securities and of transfers of Securities. The Trustee is hereby appointed "Security Registrar" for the purpose of registering Securities and transfers of Securities as herein provided. Upon surrender for registration of transfer of any Security of any series at the office or agency of the Company in any Place of Payment for such series, the Company shall execute and the Trustee shall authenticate and deliver (in the name of the designated transferee or transferees) one or more new Securities of the same series, of any authorized denominations and of a like aggregate principal amount and tenor. -29- At the option of the Holder, Securities of any series may be exchanged for other Securities of the same series, of any authorized denominations and of a like aggregate principal amount and tenor, upon surrender of the Securities to be exchanged at the office or agency of the Company in any Place of Payment for such series. Whenever any Securities are so surrendered for exchange, the Company shall execute, and the Trustee shall authenticate and deliver, the Securities which the Holder making the exchange is entitled to receive. All Securities issued upon any registration of transfer or exchange of Securities shall be the valid obligations of the Company, evidencing the same debt and entitled to the same benefits under this Indenture as the Securities surrendered upon such registration of transfer or exchange. Every Security presented or surrendered for registration of transfer or for exchange shall (if so required by the Company or the Trustee) be duly endorsed, or be accompanied by a written instrument of transfer in form satisfactory to the Company and the Security Registrar duly executed, by the Holder thereof or such Holder's attorney duly authorized in writing. No service charge shall be made for any registration of transfer or exchange of Securities, but the Company may require payment of a sum sufficient to cover any tax or other governmental charge that may be imposed in connection with any registration of transfer or exchange of Securities, other than exchanges pursuant to Section 304, 906 or 1107 not involving any transfer. The Company may but shall not be required (i) to issue, register the transfer of or exchange Securities of any series during a period beginning at the opening of business 15 days before the day of the mailing of a notice of redemption of Securities of that series selected for redemption under Section 1103 and ending at the close of business on the day of such mailing, or (ii) to register the transfer of or exchange any Security so selected for redemption in whole or in part, except the unredeemed portion of any Security being redeemed in part. Notwithstanding the foregoing, except as otherwise specified a contemplated by Section 301, any Global Security shall be exchangeable pursuant to this Section 305 for Securities registered in the name of Persons other than the Depositary for such Security or its nominee only if (i) such Depositary notifies the Company that it is unwilling or unable to continue as Depositary for such Global Security or if at any time such Depositary ceases to be a clearing agency registered under the Exchange Act, (ii) the Company executes and delivers to the Trustee a Company Order that such Global Security shall be so exchangeable or (iii) there shall have occurred and be continuing an Event of Default with respect to the Securities of such series. Upon the occurrence in respect of any Global Security of any series of any one or more of the conditions specified in Clauses (i), (ii) or (iii) of the preceding sentence or such -30- other conditions as may be specified as contemplated by Section 301 for such series, such Global Security may be exchanged for Securities not bearing the legend specified in Section 205 and registered in the names of such Persons as may be specified by the Depositary (including Persons other than the Depositary). Notwithstanding any other provision of this Indenture, a Global Security may not be transferred except as a whole by the Depositary for such Global Security to a nominee of the Depositary or by a nominee of the Depositary to the Depositary or another nominee of the Depositary. SECTION 306. Mutilated, Destroyed, Lost and Stolen Securities. If any mutilated Security is surrendered to the Trustee, the Company shall execute and the Trustee shall authenticate and deliver in exchange therefor a new Security of the same series and of like tenor and principal amount and bearing a number not contemporaneously outstanding. If there shall be delivered to the Company and the Trustee (i) evidence to their satisfaction of the destruction, loss or theft of any Security and (ii) such security or indemnity as may be required by them to save each of them and any agent of either of them harmless, then, in the absence of notice to the Company or the Trustee that such Security has been acquired by a bona fide purchaser, the Company shall execute and upon its written request the Trustee shall authenticate and deliver, in lieu of any such destroyed, lost or stolen Security, a new Security of the same series and of like tenor and principal amount and bearing a number not contemporaneously outstanding. In case any such mutilated, destroyed, lost or stolen Security has become or is about to become due and payable, the Company in its discretion may, instead of issuing a new Security, pay such Security. Upon the issuance of any new Security under this Section, the Company may require the payment of a sum sufficient to cover any tax or other governmental charge that may be imposed in relation thereto and any other expenses (including the fees and expenses of the Trustee) connected therewith. Every new Security of any series issued pursuant to this Section in lieu of any destroyed, lost or stolen Security shall constitute an original additional contractual obligation of the Company, whether or not the destroyed, lost or stolen Security shall be at any time enforceable by anyone, and shall be entitled to all the benefits of this Indenture equally and proportionately with any and all other Securities of that series duly issued hereunder. -31- The provisions of this Section are exclusive and shall preclude (to the extent lawful) all other rights and remedies with respect to the replacement or payment of mutilated, destroyed, lost or stolen Securities. SECTION 307. Payment of Interest; Interest Rights Preserved. Unless otherwise provided as contemplated by Section 301 with respect to any series of Securities, interest on any Security which is payable, and is punctually paid or duly provided for, on any Interest Payment Date shall be paid to the Person in whose name that Security (or one or more Predecessor Securities) is registered in the Security Register at the close of business on the Regular Record Date for such Interest Payment Date. Any interest on any Security of any series which is payable but is not punctually paid or duly provided for on any Interest Payment Date (herein called "Defaulted Interest") shall forthwith cease to be payable to the Holder on the relevant Regular Record Date by virtue of having been such Holder, and such Defaulted Interest may be paid by the Company, at its election in each case, as provided in Clause (1) or (2) below: (1) The Company may elect to make payment of any Defaulted Interest to the Persons in whose names the Securities of such series (or their respective Predecessor Securities) are registered at the close of business on a Special Record Date for the payment of such Defaulted Interest, which shall be fixed in the following manner. The Company shall notify the Trustee in writing of the amount of Defaulted Interest proposed to be paid on each Security of such series and the date of the proposed payment, and at the same time the Company shall deposit with the Trustee an amount of money equal to the aggregate amount proposed to be paid in respect of such Defaulted Interest or shall make arrangements satisfactory to the Trustee for such deposit prior to the date of the proposed payment, such money when deposited to be held in trust for the benefit of the Persons entitled to such Defaulted Interest as in this Clause provided. Thereupon the Trustee shall fix a Special Record Date for the payment of such Defaulted Interest which shall be not more than 15 days and not less than 10 days prior to the date of the proposed payment and not less than 10 days after the receipt by the Trustee of the notice of the proposed payment. The Trustee shall promptly notify the Company of such Special Record Date and, in the name and at the expense of the Company, shall cause notice of the proposed payment of such Defaulted Interest and the Special Record Date therefor to be mailed, first-class postage prepaid, to each Holder of Securities of such series at such Holder's address as it appears in the Security Register, not less than 10 days prior to such Special Record Date. Notice of the proposed payment of such Defaulted Interest and -32- the Special Record Date therefor having been so mailed, such Defaulted Interest shall be paid to the Persons in whose names the Securities of such series (or their respective Predecessor Securities) are registered at the close of business on such Special Record Date and shall no longer be payable pursuant to the following Clause (2). (2) The Company may make payment of any Defaulted Interest on the Securities of any series in any other lawful manner not inconsistent with the requirements of any securities exchange on which such Securities may be listed, and upon such notice as may be required by such exchange, if, after notice given by the Company to the Trustee of the proposed payment pursuant to this Clause, such manner of payment shall be deemed practicable by the Trustee. Subject to the foregoing provisions of this Section, each Security delivered under this Indenture upon registration of transfer of, or in exchange for, or in lieu of, any other Security shall carry the rights to interest accrued and unpaid, and to accrue, which were carried by such other Security. SECTION 308. Persons Deemed Owners. Prior to due presentment of a Security for registration of transfer, the Company, the Trustee and any agent of the Company or the Trustee may treat the Person in whose name such Security is registered in the Security Register as the owner of such Security for the purpose of receiving payment of principal of (and premium, if any) and (subject to Section 307) interest on such Security and for all other purposes whatsoever, whether or not such Security be overdue, and neither the Company, the Trustee nor any agent of the Company or the Trustee shall be affected by notice to the contrary. No holder of any beneficial interest in any Global Security held on its behalf by a Depositary (or its nominee) shall have any rights under this Indenture with respect to such Global Security or any Security represented thereby, and such Depositary may be treated by the Company, the Trustee, and any agent of the Company or the Trustee as the owner of such Global Security or any Security represented thereby for all purposes whatsoever. Notwithstanding the foregoing, with respect to any Global Security, nothing herein shall prevent the Company, the Trustee, or any agent of the Company or the Trustee, from giving effect to any written certification, proxy or other authorization furnished by a Depositary or impair, as between a Depositary and such holders of beneficial interest, the operation of customary practices governing the exercise of the rights of the Depositary (or its nominees) as Holder of any Security. -33- SECTION 309. Cancellation. All Securities surrendered for payment, redemption, registration of transfer or exchange or for credit against any sinking fund payment shall, if surrendered to any Person other than the Trustee, be delivered to the Trustee and shall be promptly canceled by it. The Company may at any time deliver to the Trustee for cancellation any Securities previously authenticated and delivered hereunder which the Company may have acquired in any manner whatsoever, and may deliver to the Trustee (or to any other Person for delivery to the Trustee) for cancellation any Securities previously authenticated hereunder which the Company has not issued and sold, and all Securities so delivered shall be promptly canceled by the Trustee. No Securities shall be authenticated in lieu of or in exchange for any Securities canceled as provided in this Section, except as expressly permitted by this Indenture. All canceled Securities held by the Trustee shall be destroyed unless otherwise directed by a Company Order. SECTION 310. Computation of Interest. Except as otherwise specified as contemplated by Section 301 for Securities of any series, interest on the Securities of each series shall be computed on the basis of a 360-day year of twelve 30-day months. SECTION 311. Payment to be in Proper Currency. In the case of any Securities denominated in any currency (the "Required Currency") other than United States of America dollars, except as otherwise provided therein, the obligation of the Company to make any payment of principal, premium or interest thereon shall not be discharged or satisfied by any tender by the Company, or recovery by the Trustee, in any currency other than the Required Currency, except to the extent that such tender or recovery shall result in the Trustee timely holding the full amount of the Required Currency then due and payable. If any such tender or recovery is in a currency other than the Required Currency, the Trustee may take such actions as it considers appropriate to exchange such currency for the Required Currency. The costs and risks of any such exchange, including without limitation the risks of delay and exchange rate fluctuation, shall be borne by the Company, the Company shall remain fully liable for any shortfall or delinquency in the full amount of Required Currency then due and payable, and in no circumstances shall the Trustee be liable therefor except in the case of its negligence or willful misconduct. -34- ARTICLE FOUR SATISFACTION AND DISCHARGE SECTION 401. Satisfaction and Discharge of Indenture. This Indenture shall upon Company Request cease to be of further effect (except as to any surviving rights of registration of transfer or exchange of Securities herein expressly provided for), and the Trustee, at the expense of the Company, shall execute proper instruments acknowledging satisfaction and discharge of this Indenture, when (1) either (A) all Securities theretofore authenticated and delivered (other than (i) Securities which have been destroyed, lost or stolen and which have been replaced or paid as provided in Section 306 and (ii) Securities for whose payment money has theretofore been deposited in trust or segregated and held in trust by the Company and thereafter repaid to the Company or discharged from such trust, as provided in Section 1003) have been delivered to the Trustee for cancellation; or (B) all such Securities not theretofore delivered to the Trustee for cancellation (i) have become due and payable, or (ii) will become due and payable at their Stated Maturity within one year, or (iii) are to be called for redemption within one year under arrangements satisfactory to the Trustee for the giving of notice of redemption by the Trustee in the name, and at the expense, of the Company, and the Company, in the case of (i), (ii) or (iii) above, has deposited or caused to be deposited with the Trustee as trust funds in trust for the purpose an amount, in the currency in which such Securities are payable, sufficient to pay and discharge the entire indebtedness on such Securities not theretofore delivered to the Trustee for cancellation, for principal (and premium, if any) and interest to the date of such deposit (in the case of Securities which have become due and payable) or to the respective Stated Maturity or Redemption Date, as the case may be; -35- (2) the Company has paid or caused to be paid all other sums payable hereunder by the Company, and (3) the Company has delivered to the Trustee an Officers' Certificate and an Opinion of Counsel, each stating that all conditions precedent herein provided for relating to the satisfaction and discharge of this Indenture have been complied with. Notwithstanding the satisfaction and discharge of this Indenture, the obligations of the Company to the Trustee under Section 607, the obligations of the Trustee to any Authenticating Agent under Section 614, and, if money shall have been deposited with the Trustee pursuant to Subclause (B) of Clause (1) of this Section, the obligations of the Trustee under Section 402 and the last paragraph of Section 1003, shall survive. SECTION 402. Application of Trust Money. Subject to provisions of the last paragraph of Section 1003, all money deposited with the Trustee pursuant to Section 401 shall be held in trust and applied by it, in accordance with the provisions of the Securities and this Indenture, to the payment, either directly or through any Paying Agent (including the Company acting as its own Paying Agent) as the Trustee may determine, to the Persons entitled thereto, of the principal (and premium, if any) and interest for whose payment such money has been deposited with the Trustee but such money need not be segregated from other funds except to the extent required by law. SECTION 403. Defeasance and Discharge of Indenture. If principal of and any premium and interest on Securities of any series are denominated and payable in United States of America dollars, the Company shall be deemed to have paid and discharged the entire indebtedness on all the Outstanding Securities of such series on the 91st day after the date of the deposit referred to in subparagraph (d) hereof, and the provisions of this Indenture, as it relates to such Outstanding Securities, shall no longer be in effect (and the Trustee, at the expense of the Company, shall at Company Request, execute proper instruments acknowledging the same), except as to: -36- (a) the rights of Holders of Securities to receive, from the trust funds described in subparagraph (d) hereof, (i) payment of the principal of (and premium, if any) or interest on the Outstanding Securities on the Stated Maturity of such principal or installment of principal or interest and (ii) the benefit of any mandatory sinking fund payments applicable to the Securities on the day on which such payments are due and payable in accordance with the terms of this Indenture and the Securities; (b) the Company's obligations with respect to such Securities under Sections 305, 306, 1002 and 1003; and (c) the rights, powers, trusts, duties and immunities of the Trustee hereunder; provided that, the following conditions shall have been satisfied: (d) The Company has deposited or caused to be irrevocably deposited with the Trustee (or another trustee satisfying the requirements of Section 609) as trust funds in the trust, specifically pledged as security for, and dedicated solely to, the benefit of the Holders of the Securities, (i) money in an amount, or (ii) U.S. Government Obligations which through the payment of interest and principal in respect thereof in accordance with their terms will provide not later than one day before the due date of any payment referred to in clause (A) or (B) of this subparagraph (d) money in an amount or (iii) a combination thereof, sufficient, in the opinion of a nationally recognized firm of independent certified public accountants expressed in a written certification thereof delivered to the Trustee, to pay and discharge (A) the principal of (and premium, if any) and each installment of principal of (and premium, if any) and interest on the Outstanding Securities on the Stated Maturity of such principal or installment of principal and interest and (B) any mandatory sinking fund payments applicable to the Securities on the day on which such payments are due and payable in accordance with the terms of this Indenture and of the Securities; (e) such deposit shall not cause the Trustee with respect to the Securities to have a conflicting interest as defined in Section 608 and for purposes of the Trust Indenture Act with respect to the Securities; (f) such deposit will not result in a breach or violation of, or constitute a default under, this Indenture or any other agreement or instrument to which the Company is a party or by which it is bound; -37- (g) such provision would not cause any Outstanding Securities then listed on the New York Stock Exchange or other securities exchange to be delisted as a result thereof; (h) no Event of Default or event which with notice or lapse of time would become an Event of Default with respect to the Securities shall have occurred and be continuing on the date of such deposit or during the period ending on the 91st day after such date; (i) the Company has delivered to the Trustee an Officers' Certificate and an Opinion of Counsel to the effect that there has been a change in applicable Federal law such that, or the Company has received from, or there has been published by, the Internal Revenue Service a ruling to the effect that, Holders of the Securities will not recognize income, gain or loss for Federal income tax purposes as a result of such deposits, defeasance and discharge and will be subject to Federal income tax on the same amount and in the same manner and at the same times, as would have been the case if such deposit, defeasance and discharge had not occurred; and (j) the Company has delivered to the Trustee an Officers' Certificate and an Opinion of Counsel, each stating that all conditions precedent relating to the defeasance contemplated by this Section have been complied with. ARTICLE FIVE REMEDIES SECTION 501. Events of Default. "Event of Default", wherever used herein with respect to Securities of any series, and unless otherwise provided with respect to Securities of any series pursuant to Section 301(12), means any one of the following events (whatever the reason for such Event of Default and whether it shall be voluntary or involuntary or be effected by operation of law or pursuant to any judgment, decree or order of any court or any order, rule or regulation of any administrative or governmental body): (1) default in the payment of any interest upon any Security of that series when it becomes due and payable, and continuance of such default for a period of 30 days; or -38- (2) default in the payment of the principal of (or premium, if any, on) any Security of that series at its Maturity; or (3) default in the deposit of any sinking fund payment, when and as due by the terms of a Security of that series; or (4) default in the performance, or breach, of any covenant or warranty of the Company in this Indenture (other than a covenant or warranty a default in whose performance or whose breach is elsewhere in this Section specifically dealt with or which has expressly been included in this Indenture solely for the benefit of a series of one or more Securities other than that series), and continuance of such default or breach for a period of 60 days after there has been given, by registered or certified mail, to the Company by the Trustee or to the Company and the Trustee by the Holders of at least 25% in aggregate principal amount of the Outstanding Securities of that series a written notice specifying such default or breach and requiring it to be remedied and stating that such notice is a "Notice of Default" hereunder; or (5) an event of default, as defined in any indenture or instrument under which the Company or any Restricted Subsidiary shall have outstanding at least $10,000,000 aggregate principal amount of indebtedness for money borrowed, shall happen and be continuing and such indebtedness shall, as a result thereof, have been accelerated so that the same shall be or become due and payable prior to the date on which the same would otherwise have become due and payable, and such acceleration shall not be rescinded or annulled within 10 days after notice thereof shall have been given, by registered or certified mail, to the Company by the Trustee, or to the Company and the Trustee by the Holders of at least 25% in aggregate principal amount of the Securities at the time Outstanding; provided, however, that if such event of default under such indenture or instrument shall be remedied or cured by the Company or waived by the Holders of such indebtedness, then, unless the Securities of any series shall have been accelerated as provided herein, the Event of Default hereunder by reason thereof shall be deemed likewise to have been thereupon remedied, cured or waived without further action upon the part of either the Trustee or any Holders of the Securities of any series; or (6) the entry by a court having jurisdiction in the premises of (A) a decree or order for relief in respect of the Company in an involuntary case or proceeding under any applicable Federal or State bankruptcy, insolvency, reorganization or other similar law or (B) a decree or order adjudging the Company a bankrupt or insolvent, or approving as properly filed a petition seeking reorganization, arrangement, adjustment or composition of or in respect of the Company under any applicable Federal or State law, or -39- appointing a custodian, receiver, liquidator, assignee, trustee, sequestrator or other similar official of the Company or of any substantial part of its property, or ordering the winding up or liquidation of its affairs, and the continuance of any such decree or order for relief or any such other decree or order unstayed and in effect for a period of 60 consecutive days; or (7) the commencement by the Company of a voluntary case or proceeding under any applicable Federal or State bankruptcy, insolvency, reorganization or other similar law or of any other case or proceeding to be adjudicated a bankrupt or insolvent, or the consent by it to the entry of a decree or order for relief in respect of the Company in an involuntary case or proceeding under any applicable Federal or State bankruptcy, insolvency, reorganization or other similar law or to the commencement of any bankruptcy or insolvency case or proceeding against it, or the filing by it of a petition or answer or consent seeking reorganization or relief under any applicable Federal or State law, or the consent by it to the filing of such petition or to the appointment of or taking possession by a custodian, receiver, liquidator, assignee, trustee, sequestrator or other similar official of the Company or of any substantial part of its property, or the making by it of an assignment for the benefit of creditors, or the admission by it in writing of its inability to pay its debts generally as they become due, or the taking of corporate action by the Company in furtherance of any such action; or (8) any other Event of Default provided with respect to Securities of that series. SECTION 502. Acceleration of Maturity; Rescission and Annulment. If an Event of Default with respect to Outstanding Securities of any series occurs and is continuing, then and in every such case the Trustee or the Holders of not less than 25% in aggregate principal amount of the Outstanding Securities of that series may declare the principal amount (or, if any of the Securities of that series are Original Issue Discount Securities, such lesser portion of the principal amount of such Securities as may be specified in the terms thereof) of all of the Securities of that series to be due and payable immediately, by a notice in writing to the Company (and to the Trustee if given by Holders), and upon any such declaration such principal amount (or specified portion thereof) shall become immediately due and payable. -40- At any time after such a declaration of acceleration with respect to Outstanding Securities of any series has been made and before a judgment or decree for payment of the money due has been obtained by the Trustee as hereinafter in this Article provided, the Holders of a majority in aggregate principal amount of the Outstanding Securities of that series, by written notice to the Company and the Trustee, may rescind and annul such declaration and its consequences if (1) the Company has paid or deposited with the Trustee a sum sufficient to pay (A) all overdue interest on all Securities of that series, (B) the principal of (and premium, if any, on) any Securities of that series which have become due otherwise than by such declaration of acceleration and interest thereon at the rate or rates prescribed therefor in such Securities, (C) to the extent that payment of such interest is lawful, interest upon overdue interest at the rate or rates prescribed therefor in such Securities, and (D) all sums paid or advanced by the Trustee hereunder and the reasonable compensation, expenses, disbursements and advances of the Trustee, its agents and counsel, and any other amounts due the Trustee under Section 607; and (2) all Events of Default with respect to Securities of that series, other than the non-payment of the principal of Securities of that series which have become due solely by such declaration of acceleration, have been cured or waived as provided in Section 513. No such rescission shall affect any subsequent default or impair any right consequent thereon. SECTION 503. Collection of Indebtedness and Suits for Enforcement by Trustee. The Company covenants that if (1) default is made in the payment of any interest on any Security when such interest becomes due and payable and such default continues for a period of 30 days, or -41- (2) default is made in the payment of the principal of (or premium, if any, on) any Security at the Maturity thereof, the Company will, upon demand of the Trustee, pay to it, for the benefit of the Holders of such Security, the whole amount then due and payable on such Security for principal (and premium, if any) and interest and, to the extent that payment of such interest shall be legally enforceable, interest on any overdue principal (and premium, if any) and on any overdue interest at the rate or rates prescribed therefor in such Security, and, in addition thereto, such further amount as shall be sufficient to cover the costs and expenses of collection, including the reasonable compensation, expenses, disbursements and advances of the Trustee, its agents and counsel. If the Company fails to pay such amounts forthwith upon such demand, the Trustee, in its own name and as trustee of an express trust, may institute a judicial proceeding for the collection of the sums so due and unpaid, may prosecute such proceeding to judgment or final decree and may enforce the same against the Company or any other obligor upon such Security and collect the moneys adjudged or decreed to be payable in the manner provided by law out of the property of the Company or any other obligor upon such Security, wherever situated. If an Event of Default with respect to Securities of any series occurs and is continuing, the Trustee may in its discretion proceed to protect and enforce its rights and the rights of the Holders of Securities of such series by such appropriate judicial proceedings as the Trustee shall deem most effectual to protect and enforce any such rights, whether for the specific enforcement of any covenant or agreement in this Indenture or in aid of the exercise of any power granted herein, or to enforce any other proper remedy. SECTION 504. Trustee May File Proofs of Claim. In case of the pendency of any receivership, insolvency, liquidation, bankruptcy, reorganization, arrangement, adjustment, composition or other judicial proceeding relative to the Company or any other obligor upon the Securities or the property of the Company or of such other obligor or their creditors, the Trustee (irrespective of whether the principal of the Securities shall then be due and payable as therein expressed or by declaration or otherwise and irrespective of whether the Trustee shall have made any demand on the Company for the payment of overdue principal or interest) shall be entitled and empowered, by intervention in such proceeding or otherwise, -42- (i) to file and prove a claim for the whole amount of principal (and premium, if any) or such portion of the principal amount of any series of Original Issue Discount Securities as may be specified in the terms of such series and interest owing and unpaid in respect of the Securities and to file such other papers or documents as may be necessary or advisable in order to have the claims of the Trustee (including any claim for the reasonable compensation, expenses, disbursements and advances of the Trustee, its agents and counsel, and any other amounts due the Trustee under Section 607) and of the Holders allowed in such judicial proceeding, and (ii) to collect and receive any moneys or other property payable or deliverable on any such claims and to distribute the same; and any custodian, receiver, assignee, trustee, liquidator, sequestrator or other similar official in any such judicial proceeding is hereby authorized by each Holder to make such payments to the Trustee and, in the event that the Trustee shall consent to the making of such payments directly to the Holders, to pay to the Trustee any amount due it for the reasonable compensation, expenses, disbursements and advances of the Trustee, its agents and counsel, and any other amounts due the Trustee under Section 607. Nothing herein contained shall be deemed to authorize the Trustee to authorize or consent to or accept or adopt on behalf of any Holder any plan of reorganization, arrangement, adjustment or composition affecting the Securities or the rights of any Holder thereof or to authorize the Trustee to vote in respect of the claim of any Holder in any such proceeding. SECTION 505. Trustee May Enforce Claims Without Possession of Securities. All rights of action and claims under this Indenture or the Securities may be prosecuted and enforced by the Trustee without the possession of any of the Securities or the production thereof in any proceeding relating thereto, and any such proceeding instituted by the Trustee shall be brought in its own name as trustee of an express trust, and any recovery of judgment shall, after provision for the payment of the reasonable compensation, expenses, disbursements and advances of the Trustee, its agents and counsel, and for any other amounts due the Trustee under Section 607, be for the ratable benefit of the Holders of the Securities in respect of which such judgment has been recovered. -43- SECTION 506. Application of Money Collected. Any money collected by the Trustee pursuant to this Article shall be applied in the following order, at the date or dates fixed by the Trustee and, in case of the distribution of such money on account of principal (or premium, if any) or interest, upon presentation of the Securities and the notation thereon of the payment if only partially paid and upon surrender thereof if fully paid: FIRST: To the payment of all amounts due the Trustee under Section 607; and SECOND: To the payment of the amounts then due and unpaid for principal of (and premium, if any) and interest on the Securities in respect of which or for the benefit of which such money has been collected, ratably, without preference or priority of any kind, according to the amounts due and payable on such Securities for principal (and premium, if any) and interest, respectively; and THIRD: The balance, if any, to the Person or Persons entitled thereto. SECTION 507. Limitation on Suits. No Holder of any Security of any series shall have any right to institute any proceeding, judicial or otherwise, with respect to this Indenture, or for the appointment of a receiver or trustee, or for any other remedy hereunder, unless (1) such Holder has previously given written notice to the Trustee of a continuing Event of Default with respect to the Securities of that series; (2) the Holders of not less than 25% in principal amount of the Outstanding Securities of that series shall have made written request to the Trustee to institute proceedings in respect of such Event of Default in its own name as Trustee hereunder; (3) such Holder or Holders have offered to the Trustee reasonable indemnity against the costs, expenses and liabilities to be incurred in compliance with such request; (4) the Trustee, for 60 days after its receipt of such notice, request and offer of indemnity, has failed to institute any such proceeding; and -44- (5) no direction inconsistent with such written request has been given to the Trustee during such 60-day period by the Holders of a majority in principal amount of the Outstanding Securities of that series; it being understood and intended that no one or more of such Holders shall have any right in any manner whatever by virtue of, or by availing of, any provision of this Indenture to affect, disturb or prejudice the rights of any other of such Holders, or to obtain or to seek to obtain priority or preference over any other of such Holders or to enforce any right under this Indenture, except in the manner herein provided and for the equal and ratable benefit of all of such Holders. SECTION 508. Unconditional Right of Holders to Receive Principal, Premium and Interest. Notwithstanding any other provision in this Indenture, the Holder of any Security shall have the right, which is absolute and unconditional, to receive payment of the principal of (and premium, if any) and (subject to Section 307) interest on such Security on the Stated Maturity or Maturities expressed in such Security (or, in the case of redemption, on the Redemption Date) and to institute suit for the enforcement of any such payment, and such rights shall not be impaired without the consent of such Holder. SECTION 509. Restoration of Rights and Remedies. If the Trustee or any Holder has instituted any proceeding to enforce any right or remedy under this Indenture and such proceeding has been discontinued or abandoned for any reason, or has been determined adversely to the Trustee or to such Holder, then and in every such case, subject to any determination in such proceeding, the Company, the Trustee and the Holders shall be restored severally and respectively to their former positions hereunder and thereafter all rights and remedies of the Trustee and the Holders shall continue as though no such proceeding had been instituted. SECTION 510. Rights and Remedies Cumulative. Except as otherwise provided with respect to the replacement or payment of mutilated, destroyed, lost or stolen Securities in the last paragraph of Section 306, no right or remedy herein conferred upon or reserved to the Trustee or to the Holders is intended to be exclusive of any other right or remedy, and every right and remedy shall, to the extent permitted by law, be cumulative and in addition to every other right and remedy given hereunder or now or hereafter existing at law or in equity or -45- otherwise. The assertion or employment of any right or remedy hereunder, or otherwise, shall not prevent the concurrent assertion or employment of any other appropriate right or remedy. SECTION 511. Delay or Omission Not Waiver. No delay or omission of the Trustee or of any Holder of any Securities to exercise any right or remedy accruing upon any Event of Default shall impair any such right or remedy or constitute a waiver of any such Event of Default or an acquiescence therein. Every right and remedy given by this Article or by law to the Trustee or to the Holders may be exercised from time to time, and as often as may be deemed expedient, by the Trustee or by the Holders, as the case may be. SECTION 512. Control by Holders. The Holders of a majority in aggregate principal amount of the Outstanding Securities of any series shall have the right to direct the time, method and place of conducting any proceeding for any remedy available to the Trustee, or exercising any trust or power conferred on the Trustee, with respect to the Securities of such series, provided that (1) such direction shall not be in conflict with any rule of law or with this Indenture, and (2) the Trustee may take any other action deemed proper by the Trustee which is not inconsistent with such direction. SECTION 513. Waiver of Past Defaults. The Holders of not less than a majority in aggregate principal amount of the Outstanding Securities of any series may, on behalf of the Holders of all the Securities of such series, waive any past default hereunder with respect to such series and its consequences, except a default (1) in the payment of the principal of (or premium, if any) or interest on any Security of such series, or (2) in respect of a covenant or provision hereof which under Article Nine cannot be modified or amended without the consent of the Holder of each Outstanding Security of such series affected. -46- The Company may, but shall not be obligated to, fix a record date for the purpose of determining the Persons entitled to waive any past default hereunder. If a record date is fixed, the Holders on such record date, or their duly designated proxies, and only such Persons, shall be entitled to waive any default hereunder, whether or not such Holders remain Holders after such record date; provided, that unless such majority in principal amount shall have waived such default prior to the date which is 90 days after such record date, any such waiver of such default previously given shall automatically and without further action by any Holder be canceled and of no further effect. Upon any such waiver, such default shall cease to exist, and any Event of Default arising therefrom shall be deemed to have been cured, for every purpose of this Indenture; but no such waiver shall extend to any subsequent or other default or impair any right consequent thereon. SECTION 514. Undertaking for Costs. All parties to this Indenture agree, and each Holder of any Security by such Holder's acceptance thereof shall be deemed to have agreed, that any court may in its discretion require, in any suit for the enforcement of any right or remedy under this Indenture, or in any suit against the Trustee for any action taken, suffered or omitted by it as Trustee, the filing by any party litigant in such suit of an undertaking to pay the costs of such suit, and that such court may in its discretion assess reasonable costs, including reasonable attorneys' fees, against any party litigant in such suit, having due regard to the merits and good faith of the claims or defenses made by such party litigant; provided, however, that the provisions of this Section shall not apply to any suit instituted by the Company, to any suit instituted by the Trustee, to any suit instituted by any Holder, or group of Holders, holding in the aggregate more than 10% in principal amount of the Outstanding Securities of any series, or to any suit instituted by any Holder for the enforcement of the payment of the principal of (or premium, if any) or interest on any Security on or after the Stated Maturity or Maturities expressed in such Security (or, in the case of redemption, on or after the Redemption Date). SECTION 515. Waiver of Stay or Extension Laws. The Company covenants (to the extent that it may lawfully do so) that it will not at any time insist upon, or plead, or in any manner whatsoever claim or take the benefit or advantage of, any stay or extension law wherever enacted, now or at any time hereafter in force, which may affect the covenants or the performance of this Indenture; and the Company (to the extent that it may lawfully do so) hereby expressly waives all benefit or advantage of any such law and covenants that it will -47- not hinder, delay or impede the execution of any power herein granted to the Trustee, but will suffer and permit the execution of every such power as though no such law had been enacted. ARTICLE SIX THE TRUSTEE SECTION 601. Certain Duties and Responsibilities. The provisions of TIA Section 315 shall apply to the Trustee. SECTION 602. Notice of Defaults. Within 90 days after the occurrence of any default hereunder with respect to the Securities of any series, the Trustee shall transmit by mail to all Holders of Securities of such series, as their names and addresses appear in the Security Register, notice of such default hereunder known to the Trustee, unless such default shall have been cured or waived; provided however, that, except in the case of a default in the payment of the principal of (or premium, if any) or interest on any Security of such series or in the payment of any sinking fund installment with respect to Securities of such series, the Trustee shall be protected in withholding such notice if and so long as the board of directors, the executive committee or a trust committee of directors and/or Responsible Officers of the Trustee in good faith determine that the withholding of such notice is in the interest of the Holders of Securities of such series; and provided, further, that in the case of any default of the character specified in Section 501(4) with respect to Securities of such series, no such notice to Holders shall be given until at least 30 days after the occurrence thereof. For the purpose of this Section, the term "default" means any event which is, or after notice or lapse of time or both would become, an Event of Default with respect to Securities of such series. -48- SECTION 603. Certain Rights of Trustee. Subject to the provisions of TIA Section 315(a) through 315(d): (a) the Trustee may rely and shall be protected in acting or refraining from acting upon any resolution, certificate, statement, instrument, opinion, report, notice, request, direction, consent, order, bond, debenture, note, other evidence of indebtedness or other paper or document believed by it to be genuine and to have been signed or presented by the proper party or parties; (b) any request or direction of the Company mentioned herein shall be sufficiently evidenced by a Company Request or Company Order or as otherwise expressly provided herein and any resolution of the Board of Directors may be sufficiently evidenced by a Board Resolution; (c) whenever in the administration of this Indenture the Trustee shall deem it desirable that a matter be proved or established prior to taking, suffering or omitting any action hereunder, the Trustee (unless other evidence be herein specifically prescribed) may, in the absence of bad faith on its part, rely upon an Officers' Certificate; (d) the Trustee may consult with counsel and the written advice of such counsel or any Opinion of Counsel shall be full and complete authorization and protection in respect of any action taken, suffered or omitted by it hereunder in good faith and in reliance thereon; (e) the Trustee shall be under no obligation to exercise any of the rights or powers vested in it by this Indenture at the request or direction of any of the Holders pursuant to this Indenture, unless such Holders shall have offered to the Trustee reasonable security or indemnity against the costs, expenses and liabilities which might be incurred by it in compliance with such request or direction; (f) the Trustee shall not be bound to make any investigation into the facts or matters stated in any resolution, certificate, statement, instrument, opinion, report, notice, request, direction, consent, order, bond, debenture, note, other evidence of indebtedness or other paper or document, but the Trustee, in its discretion, may make such further inquiry or investigation into such fact or matters as it may see fit, and, if the Trustee shall determine to make such further inquiry or investigation, it shall be entitled to examine the books, records and premises of the Company, personally or by agent or attorney; -49- (g) the Trustee may execute any of the trusts or powers hereunder or perform any duties hereunder either directly or by or through agents or attorneys and the Trustee shall not be responsible for any misconduct or negligence on the part of any agent or attorney appointed with due care by it hereunder; (h) the Trustee shall not be liable for any action taken, suffered or omitted by it in good faith and believed by it to be authorized or within the discretion, rights or powers conferred upon it by this Indenture; and (i) the Trustee shall not be required to expend or risk its own funds or otherwise incur any financial liability in the performance of any of its duties hereunder or in the exercise of any of its rights or powers if it shall have reasonable grounds for believing that repayment of such funds or adequate indemnity against such risk or liability is not reasonably assured to it. SECTION 604. Not Responsible for Recitals or Issuance of Securities. The recitals contained herein and in the Securities, except the Trustee's certificates of authentication, shall be taken as the statements of the Company, and neither the Trustee nor any Authenticating Agent assumes any responsibility for their correctness. The Trustee makes no representations as to the validity or sufficiency of this Indenture or of the Securities. The Trustee or any Authenticating Agent shall not be accountable for the use or application by the Company of Securities or the proceeds thereof. SECTION 605. May Hold Securities. The Trustee, any Authenticating Agent, any Paying Agent, any Security Registrar or any other agent of the Company, in its individual or any other capacity, may become the owner or pledgee of Securities and, subject to TIA Sections 310(b) and 311, may otherwise deal with the Company with the same rights it would have if it were not Trustee, Authenticating Agent, Paying Agent, Security Registrar or such other agent. -50- SECTION 606. Money Held in Trust. Money held by the Trustee in trust hereunder need not be segregated from other funds except to the extent required by law. The Trustee shall be under no liability for interest on any money received by it hereunder except as otherwise agreed with the Company. SECTION 607. Compensation and Reimbursement. The Company agrees (1) to pay to the Trustee from time to time reasonable compensation for all services rendered by it hereunder (which compensation shall not be limited by any provision of law in regard to the compensation of a trustee of an express trust); (2) except as otherwise expressly provided herein, to reimburse the Trustee upon its request for all reasonable expenses, disbursements and advances incurred or made by the Trustee in accordance with any provision of this Indenture (including the reasonable compensation and the expenses and disbursements of its agents and counsel), except any such expense, disbursement or advance as may be attributable to its negligence or bad faith; and (3) to indemnify the Trustee and its agents for, and to hold it harmless against, any loss, liability or expense incurred without negligence or bad faith on its part, arising out of or in connection with the acceptance or administration of the trust or trusts hereunder, including the costs and expenses of defending itself against any claim or liability in connection with the exercise or performance of any of its powers or duties hereunder. The obligations of the Company under this Section 607 to compensate and indemnify the Trustee and to pay or reimburse the Trustee for expenses, disbursements and advances shall constitute additional indebtedness hereunder and shall survive the satisfaction and discharge of this Indenture. Such additional indebtedness shall be a senior claim to that of the Securities upon all property and funds held or collected by the Trustee as such, except funds held in trust for the payment of principal of (and premium, if any) or interest on particular Securities, and the Securities are hereby subordinated to each senior claim. -51- SECTION 608. Disqualification; Conflicting Interests. The provisions of TIA Section 310(b) shall apply to the Trustee. SECTION 609. Corporate Trustee Required; Eligibility. There shall at all times be a Trustee hereunder which shall be eligible to act under TIA Section 310(a)(1) and shall have a combined capital and surplus of at least $50,000,000 and subject to supervision or examination by Federal, State or District of Columbia authority. If such Corporation publishes reports of condition at least annually, pursuant to law or to the requirements of said supervising or examining authority, then for the purposes of this Section, the combined capital and surplus of such Corporation shall be deemed to be its combined capital and surplus as set forth in its most recent report of condition so published. If at any time the Trustee shall cease to be eligible in accordance with the provisions of this Section, it shall resign immediately in the manner and with the effect hereinafter specified in this Article. Neither the Company, nor any Person directly or indirectly controlling, controlled by or under common control with the Company, shall act as Trustee hereunder. SECTION 610. Resignation and Removal; Appointment of Successor. (a) No resignation or removal of the Trustee and no appointment of a successor Trustee pursuant to this Article shall become effective until the acceptance of appointment by the successor Trustee in accordance with the applicable requirements of Section 611. (b) The Trustee may resign at any time with respect to the Securities of one or more series by giving written notice thereof to the Company. If the instrument of acceptance by a successor Trustee required by Section 611 shall not have been delivered to the Trustee within 30 days after the giving of such notice of resignation, the resigning Trustee may petition any court of competent jurisdiction for the appointment of a successor Trustee with respect to the Securities of such series. (c) The Trustee may be removed at any time with respect to the Securities of any series by Act of the Holders of a majority in principal amount of the Outstanding Securities of such series, delivered to the Trustee and to the Company. -52- (d) If at any time: (1) the Trustee shall fail to comply with TIA Section 310(b) after written request therefor by the Company or by any Holder who has been a bona fide Holder of a Security for at least six months, or (2) the Trustee shall cease to be eligible under Section 609 and shall fail to resign after written request therefor by the Company or by any such Holder, or (3) the Trustee shall become incapable of acting or shall be adjudged a bankrupt or insolvent or a receiver of the Trustee or of its property shall be appointed or any public officer shall take charge or control of the Trustee or of its property or affairs for the purpose of rehabilitation, conservation or liquidation, then, in any such case, (i) the Company by a Board Resolution may remove the Trustee with respect to all Securities, or (ii) subject to Section 514, any Holder who has been a bona fide Holder of a Security for at least six months may, on behalf of himself and all others similarly situated, petition any court of competent jurisdiction for the removal of the Trustee with respect to all Securities and the appointment of a successor Trustee or Trustees. (e) If the Trustee shall resign, be removed or become incapable of acting, or if a vacancy shall occur in the office of Trustee for any cause, with respect to the Securities of one or more series, the Company, by a Board Resolution, shall promptly appoint a successor Trustee or Trustees with respect to the Securities of that or those series (it being understood that any such successor Trustee may be appointed with respect to the Securities of one or more or all of such series and that at any time there shall be only one Trustee with respect to the Securities of any particular series) and shall comply with the applicable requirements of Section 611. If, within one year after such resignation, removal or incapability, or the occurrence of such vacancy, a successor Trustee with respect to the Securities of any series shall be appointed by Act of the Holders of a majority in principal amount of the Outstanding Securities of such series delivered to the Company and the retiring Trustee, the successor Trustee so appointed shall, forthwith upon its acceptance of such appointment in accordance with the applicable requirements of Section 611, become the successor Trustee with respect to the Securities of such series and to that extent supersede the successor Trustee appointed by the Company. If no successor Trustee with respect to the Securities of any series shall have been so appointed by the Company or the Holders and accepted appointment in the manner required by Section 611, any Holder who has been a bona fide Holder of a Security of such series for at least six months may, on behalf of himself and all others similarly situated, -53- petition any court of competent jurisdiction for the appointment of a successor Trustee with respect to the Securities of such series. (f) The Company shall give notice of each resignation and each removal of the Trustee with respect to the Securities of any series and each appointment of a successor Trustee with respect to the Securities of any series by mailing written notice of such event by first-class mail, postage prepaid, to all Holders of Securities of such series as their names and addresses appear in the Security Register. Each notice shall include the name of the successor Trustee with respect to the Securities of such series and the address of its Corporate Trust Office. SECTION 611. Acceptance of Appointment by Successor. (a) In case of the appointment hereunder of a successor Trustee with respect to all Securities, every such successor Trustee so appointed shall execute, acknowledge and deliver to the Company and to the retiring Trustee an instrument accepting such appointment, and thereupon the resignation or removal of the retiring Trustee shall become effective and such successor Trustee, without any further act, deed or conveyance, shall become vested with all the rights, powers, trusts and duties of the retiring Trustee; but, on the request of the Company or the successor Trustee, such retiring Trustee shall, upon payment of its charges, execute and deliver an instrument transferring to such successor Trustee all the rights, powers and trusts of the retiring Trustee and shall duly assign, transfer and deliver to such successor Trustee all property and money held by such retiring Trustee hereunder. (b) In case of the appointment hereunder of a successor Trustee with respect to the Securities of one or more (but not all) series, the Company, the retiring Trustee and each successor Trustee with respect to the Securities of one or more series shall execute and deliver an indenture supplemental hereto wherein each successor Trustee shall accept such appointment and which (1) shall contain such provisions as shall be necessary or desirable to transfer and confirm to, and to vest in, each successor Trustee all the rights, powers, trusts and duties of the retiring Trustee with respect to the Securities of that or those series to which the appointment of such successor Trustee relates, (2) if the retiring Trustee is not retiring with respect to all Securities, shall contain such provisions as shall be deemed necessary or desirable to confirm that all the rights, powers, trusts and duties of the retiring Trustee with respect to the Securities of that or those series as to which the retiring Trustee is not retiring shall continue to be vested in the retiring Trustee, and (3) shall add to or change any of the provisions of this Indenture as shall be necessary to provide for or facilitate the administration of the trusts hereunder by more than one Trustee, it being understood that nothing herein or in such supplemental indenture shall constitute such Trustees co-trustees of the -54- same trust and that each such Trustee shall be trustee of a trust or trusts hereunder separate and apart from any trust or trusts hereunder administered by any other such Trustee; and upon the execution and delivery of such supplemental indenture the resignation or removal of the retiring Trustee shall become effective to the extent provided therein and each such successor Trustee, without any further act, deed or conveyance, shall become vested with all the rights, powers, trusts and duties of the retiring Trustee with respect to the Securities of that or those series to which the appointment of such successor Trustee relates; but, on request of the Company or any successor Trustee, such retiring Trustee shall duly assign, transfer and deliver to such successor Trustee all property and money held by such retiring Trustee hereunder with respect to the Securities of that or those series to which the appointment of such successor Trustee relates. Whenever there is a successor Trustee with respect to one or more (but less than all) series of securities issued pursuant to this Indenture, the terms "Indenture" and "Securities" shall have the meanings specified in the provisos to the respective definitions of those terms in Section 101 which contemplate such situation. (c) Upon request of any such successor Trustee, the Company shall execute any and all instruments for more fully and certainly vesting in and confirming to such successor Trustee all such rights, powers and trusts referred to in paragraph (a) and (b) of this Section, as the case may be. (d) No successor Trustee shall accept its appointment unless at the time of such acceptance such successor Trustee shall be qualified and eligible under this Article. SECTION 612. Merger, Conversion, Consolidation or Succession to Business. Any Corporation into which the Trustee may be merged or converted or with which it may be consolidated, or any Corporation resulting from any merger, conversion or consolidation to which the Trustee shall be a party, or any Corporation succeeding to all or substantially all the corporate trust business of the Trustee, shall be the successor of the Trustee hereunder, provided such Corporation shall be otherwise qualified and eligible under this Article, without the execution or filing of any paper or any further act on the part of any of the parties hereto. In case any Securities shall have been authenticated, but not delivered, by the Trustee then in office, any successor by merger, conversion or consolidation to such authenticating Trustee may adopt such authentication and deliver the Securities so authenticated with the same effect as if such successor Trustee had itself authenticated such Securities; in case any of the Securities shall not have been authenticated by the Trustee then in office, any successor by merger, conversion or consolidation to such Trustee may authenticate such Securities either in the name of such predecessor hereunder or in the name of the successor Trustee; and in all -55- such cases such certificates shall have the full force which it is anywhere in the Securities or in this Indenture provided that the certificate of the Trustee shall have; provided, however, that the right to adopt the certificate of authentication of any predecessor Trustee or to authenticate Securities in the name of any predecessor Trustee shall apply only to its successor or successors by merger, conversion or consolidation. SECTION 613. Preferential Collection of Claims Against Company. The Trustee shall comply with TIA Section 311(a). A Trustee which has resigned or been removed is subject to TIA Section 311(a) to the extent indicated therein. SECTION 614. Appointment of Authenticating Agent. At any time when any of the Securities remain Outstanding the Trustee, with the concurrence of the Company, may appoint an Authenticating Agent or Agents with respect to one or more series of Securities which shall be authorized to act on behalf of the Trustee to authenticate Securities of such series, and Securities so authenticated shall be entitled to the benefits of this Indenture and shall be valid and obligatory for all purposes as if authenticated by the Trustee hereunder. Wherever reference is made in this Indenture to the authentication and delivery of Securities by the Trustee or the Trustee's certificate of authentication, such reference shall be deemed to include authentication and delivery on behalf of the Trustee by an Authenticating Agent and a certificate of authentication executed on behalf of the Trustee by an Authenticating Agent. Each Authenticating Agent shall be acceptable to the Company and shall at all times be a Corporation organized and doing business under the laws of the United States of America, any State thereof or the District of Columbia authorized under such laws to act as Authenticating Agent, having a combined capital and surplus of not less than $50,000,000 and subject to supervision or examination by Federal, State or District of Columbia authority. If such Authenticating Agent publishes reports of condition at least annually, pursuant to law or to the requirements of said supervising or examining authority, then for the purposes of this Section, the combined capital and surplus of such Authenticating Agent shall be deemed to be its combined capital and surplus as set forth in its most recent report of condition so published. If at any time an Authenticating Agent shall cease to be eligible in accordance with the provisions of this Section, such Authenticating Agent shall resign immediately in the manner and with the effect specified in this Section. -56- Any Corporation into which an Authenticating Agent may be merged or converted or with which it may be consolidated, or any Corporation resulting from any merger, conversion or consolidation to which such Authenticating Agent shall be a party, or any Corporation succeeding to the corporate agency or corporate trust business of an Authenticating Agent, shall continue to be an Authenticating Agent, provided such Corporation shall be otherwise eligible under this Section, without the execution or filing of any paper or any further act on the part of the Trustee or the Authenticating Agent. An Authenticating Agent may resign at any time by giving written notice thereof to the Trustee and to the Company. The Trustee may at any time terminate the agency of an Authenticating Agent by giving written notice thereof to such Authenticating Agent and to the Company. Upon receiving such a notice of resignation or upon such a termination, or in case at any time such Authenticating Agent shall cease to be eligible in accordance with the provisions of this Section, the Trustee may appoint a successor Authenticating Agent which shall be acceptable to the Company and shall mail written notice of such appointment by first class mail, postage prepaid, to all Holders of Securities of the series with respect to which such Authenticating Agent will serve, as their names and addresses appear in the Security Register. Any successor Authenticating Agent upon acceptance of its appointment hereunder shall become vested with all the rights, powers and duties of its predecessor hereunder, with like effect as if originally named as an Authenticating Agent. No successor Authenticating Agent shall be appointed unless eligible under the provisions of this Section. The Company agrees to pay to each Authenticating Agent from time to time reasonable compensation for its services under this Section. If an appointment with respect to one or more series is made pursuant to this Section, the Securities of such series may have endorsed thereon, in addition to the Trustee's certificate of authentication, an alternate certificate of authentication in the following form: -57- This is one of the Securities of the series designated herein and issued pursuant to the within-mentioned Indenture. THE CHASE MANHATTAN BANK (NATIONAL ASSOCIATION) as Trustee By ------------------------------------- As Authenticating Agent By ------------------------------------- Authorized Officer ARTICLE SEVEN HOLDERS' LISTS AND REPORTS BY TRUSTEE AND COMPANY SECTION 701. Company to Furnish Trustee Names and Addresses of Holders. If the Trustee is not acting as Security Registrar for the Securities of any series, the Company will furnish or cause to be furnished to the Trustee. (a) at intervals of no more than six months commencing after the first issue of such series, a list, in such form as the Trustee may reasonably require, of the names and addresses of the Holders as of a date not more than 15 days prior to the time such information is furnished, and (b) at such other times as the Trustee may request in writing, within 30 days after the receipt by the Company of any such request, a list of similar form and content as of a date not more than 15 days prior to the time such list is furnished. SECTION 702. Preservation of Information; Communications to Holders. (a) The Trustee shall preserve, in as current a form as is reasonably practicable, the names and addresses of Holders contained in the most recent list furnished to the Trustee as provided in Section 701 and the names and addresses of Holders received by the Trustee in its capacity as Security Registrar. The Trustee -58- may destroy any list furnished to it as provided in Section 701 upon receipt of a new list so furnished. (b) The rights of Holders to communicate with other Holders with respect to their rights under this Indenture or under the Securities, and the corresponding rights and privileges of the Trustee, shall be as provided by TIA Section 312(b). (c) Every Holder of Securities, by receiving and holding the same, agrees with the Company and the Trustee that neither the Company nor the Trustee nor any agent of either of them shall be held accountable by reason of the disclosure of any such information as to the names and addresses of the Holders in accordance with Section 702(b), regardless of the source from which such information was derived, and that the Trustee shall not be held accountable by reason of mailing any material pursuant to a request made under Section 702(b). SECTION 703. Reports by Trustee. Within 60 days after May 1 of each year commencing with the later of May 1, 1993 or the first May 1 after the first issuance of Securities pursuant to this Indenture, the Trustee shall transmit by mail to all Holders of Securities as provided in TIA Section 313(c) a brief report dated as of such May 1 if required by TIA Section 313(a). A copy of each such report shall, at the time of such transmission to Holders, be filed by the Trustee with each stock exchange upon which any Securities are listed, with the Commission and with the Company. The Company will notify the Trustee when any Securities are listed on any stock exchange. SECTION 704. Reports by Company. The Company shall: (1) file with the Trustee, within 15 days after the Company is required to file the same with the Commission, copies of the annual reports and of the information, documents and other reports (or copies of such portions of any of the foregoing as the Commission may from time to time by rules and regulations prescribe) which the Company may be required to file with the Commission pursuant to Section 13 or Section 15 (d) of the Securities Exchange Act of 1934; or, if the Company is not required to file information, documents or reports pursuant to either of said Sections, then it shall file with the Trustee and the Commission, in accordance with rules and regulations prescribed from time to time by the Commission, such of the supplementary and periodic information, documents and reports which may be required pursuant to Section 13 of the Securities Exchange Act of 1934 in -59- respect of a security listed and registered on a national securities exchange as may be prescribed from time to time in such rules and regulations; (2) file with the Trustee and the Commission, in accordance with rules and regulations prescribed from time to time by the Commission, such additional information, documents and reports with respect to compliance by the Company with the conditions and covenants of this Indenture as may be required from time to time by such rules and regulations; (3) transmit by mail to all Holders, as their names and addresses appear in the Security Register, within 30 days after the filing thereof with the Trustee, such summaries of any information, documents and reports required to be filed by the Company pursuant to paragraphs (1) and (2) of this Section as may be required by rules and regulations prescribed from time to time by the Commission; and (4) furnish to the Trustee, within 120 days after the end of each fiscal year of the Company ending after the date hereof, a brief certificate of the Company's principal executive officer, principal financial officer or principal accounting officer as to his or her knowledge of the Company's compliance with all conditions and covenants under this Indenture. For purposes of this paragraph, such compliance shall be determined without regard to any period of grace or requirement of notice provided under this Indenture. ARTICLE EIGHT CONSOLIDATION, MERGER, CONVEYANCE, TRANSFER OR LEASE SECTION 801. Company May Consolidate, Etc., Only on Certain Terms. The Company 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 Company is merged or the Person which acquires by conveyance or transfer, or which leases, the properties and assets of the Company substantially as an entirety shall be a Corporation, partnership or trust, shall be organized and validly existing under the laws of the United States of America any State thereof or the District of Columbia and shall expressly assume, by an indenture supplemental hereto, executed and delivered to the Trustee, in form satisfactory to the Trustee, the due and punctual payment of the -60- principal of (and premium, if any) and interest on all the Securities and the performance or observance of every covenant of this Indenture on the part of the Company to be performed or observed; (2) immediately after giving effect to such transaction, no Event of Default, and no event which, after notice or lapse of time or both, would become an Event of Default, shall have happened and be continuing; and (3) the Company has delivered to the Trustee an Officers' Certificate and an Opinion of Counsel, each stating that such consolidation, merger, conveyance, transfer or lease and, if a supplemental indenture is required in connection with such transaction, such supplemental indenture, comply with this Article and that all conditions precedent herein provided for relating to such transaction have been complied with. SECTION 802. Successor Substituted. Upon any consolidation of the Company with, or merger by the Company into, any other Person or any conveyance, transfer or lease of the properties and assets of the Company substantially as an entirety in accordance with Section 801, the successor Person formed by such consolidation or into which the Company 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 Company under this Indenture with the same effect as if such successor Person had been named as the Company herein, and thereafter, except in the case of a lease, the predecessor Person shall be relieved of all obligations and covenants under this Indenture and the Securities. ARTICLE NINE SUPPLEMENTAL INDENTURES SECTION 901. Supplemental Indentures Without Consent of Holders. Without the consent of any Holders, the Company, when authorized by or pursuant to a Board Resolution, and the Trustee, at any time and from time to time, may enter into one or more indentures supplemental hereto, in form satisfactory to the Trustee, for any of the following purposes: -61- (1) to evidence the succession of another Person to the Company and the assumption by any such successor of the covenants of the Company herein and in the Securities; or (2) to add to the covenants of the Company for the benefit of the Holders of all or any series of Securities (and if such covenants are to be for the benefit of less than all series of Securities, stating that such covenants are expressly being included solely for the benefit of one or more specified series) or to surrender any right or power herein conferred upon the Company; or (3) to add any additional Events of Default (and if such Events of Default are to be for the benefit of less than all series of Securities, stating that such Events of Default are being included solely for the benefit of such series); or (4) to add to or change any of the provisions of this Indenture to such extent as shall be necessary to permit or facilitate the issuance of Securities in bearer form, registrable or not registrable as to principal, and with or without interest coupons; or (5) to add to, change or eliminate any of the provisions of this Indenture in respect of one or more series of Securities, provided that any such addition, change or elimination (i) shall neither (A) apply to any Security of any series created prior to the execution of such supplemental indenture and entitled to the benefit of such provision nor (B) modify the rights of the Holder of any such Security with respect to such provision or (ii) shall become effective only when there is no such Security Outstanding; or (6) to secure the Securities; or (7) to establish the form or terms of Securities of any series as permitted by Sections 201 and 301; or (8) to evidence and provide for the acceptance of appointment hereunder by a successor Trustee with respect to the Securities of one or more series and to add to or change any of the provisions of this Indenture as shall be necessary to provide for or facilitate the administration of the trusts hereunder by more than one Trustee, pursuant to the requirements of Section 611(b); or (9) to cure any ambiguity, to correct or supplement any provision herein which may be inconsistent with any other provision herein, or to make any other provisions with respect to matters or questions arising under -62- this Indenture, provided such action shall not adversely affect the interests of the Holders of Securities of any series in any material respect. SECTION 902. Supplemental Indentures with Consent of Holders. With the consent of the Holders of not less than a majority in aggregate principal amount of the Outstanding Securities of each series affected by such supplemental indenture, by Act of said Holders delivered to the Company and the Trustee, the Company, when authorized by a Board Resolution, and the Trustee may enter into an indenture or indentures supplemental hereto for the purpose of adding any provisions to or changing in any manner or eliminating any of the provisions of this Indenture or of modifying in any manner the rights of the Holders of Securities of such series under this Indenture; provided, however, that no such supplemental indenture shall, without the consent of the Holder of each Outstanding Security affected thereby, (1) change the Stated Maturity of the principal of, or any installment of principal of or interest on, any such Security, or reduce the principal amount thereof or the rate of interest thereon or any premium payable upon the redemption thereof, or reduce the amount of the principal of an Original Issue Discount Security that would be due and payable upon a declaration of acceleration of the Maturity thereof pursuant to Section 502, or change any Place of Payment where, or the coin or currency in which, any such Security or any premium or the interest thereon is payable, or impair the right to institute suit for the enforcement of any such payment on or after the Stated Maturity thereof (or, in the case of redemption or repayment, on or after the Redemption Date or any repayment date), or (2) reduce the percentage in principal amount of the Outstanding Securities of any series, the consent of whose Holders is required for any such supplemental indenture, or the consent of whose Holders is required for any waiver of compliance with certain provisions of this Indenture or certain defaults hereunder and their consequences provided for in this Indenture, or (3) modify any of the provisions of this Section 902, Section 513 or Section 1010, except to increase any such percentage or to provide that certain other provisions of this Indenture cannot be modified or waived without the consent of the Holder of each Outstanding Security affected thereby; provided however, that this Clause shall not be deemed to require the consent of any Holder with respect to changes in the references to "the Trustee" and concomitant changes in this Section 902 and Section 1010, or the deletion of this proviso, in accordance with the requirements of Sections 611(b) and 901(8). -63- A supplemental indenture which changes or eliminates any covenant or other provision of this Indenture which has expressly been included solely for the benefit of one or more particular series of Securities, or which modifies the rights of the Holders of Securities of such series with respect to such covenant or other provision, shall be deemed not to affect the rights under this Indenture of the Holders of Securities of any other series. The Company may, but shall not be obligated to, fix a record date for the purpose of determining the Persons entitled to consent to any indenture supplemental hereto. If a record date is fixed for such purpose, the Holders on such record date or their duly designated proxies, and only such Persons, shall be entitled to consent to such supplemental indenture, whether or not such Holders remain Holders after such record date; provided, that unless such consent shall have become effective by virtue of the requisite percentage having been obtained prior to the date which is 90 days after such record date, any such consent previously given shall automatically and without further action by any Holder be canceled and of no further effect. It shall not be necessary for any Act of Holders under this Section to approve the particular form of any proposed supplemental indenture, but it shall be sufficient if such Act shall approve the substance thereof. SECTION 903. Execution of Supplemental Indentures. In executing, or accepting the additional trusts created by, any supplemental indenture permitted by this Article or the modifications thereby of the trusts created by this Indenture, the Trustee shall be entitled to receive, and (subject to Section 601) shall be fully protected in relying upon, an Opinion of Counsel stating that the execution of such supplemental indenture is authorized or permitted by this Indenture. The Trustee may, but shall not be obligated to, enter into any such supplemental indenture which affects the Trustee's own rights, duties or immunities under this Indenture or otherwise. SECTION 904. Effect of Supplemental Indentures. Upon the execution of any supplemental indenture under this Article, this Indenture shall be modified in accordance therewith, and such supplemental indenture shall form a part of this Indenture for all purposes; and every Holder of Securities theretofore or thereafter authenticated and delivered hereunder shall be bound thereby to the extent provided therein. -64- SECTION 905. Conformity with Trust Indenture Act. Every supplemental indenture executed pursuant to this Article shall conform to the requirements of the Trust Indenture Act as then in effect. SECTION 906. Reference in Securities to Supplemental Indentures. Securities authenticated and delivered after the execution of any supplemental indenture pursuant to this Article may, and shall if required by the Trustee, bear a notation in a form approved by the Trustee as to any matter provided for in such supplemental indenture. If the Company shall so determine, new Securities of any series so modified as to conform, in the opinion of the Trustee and the Company, to any such supplemental indenture may be prepared and executed by the Company and authenticated and delivered by the Trustee in exchange for Outstanding Securities of such series. SECTION 907. Notice of Supplemental Indentures. Promptly after the execution by the Company and the Trustee of any supplemental indenture pursuant to the provisions of Section 902, the Company shall give notice thereof to the Holders of each Outstanding Security so affected, pursuant to Section 106, setting forth in general terms the substance of such supplemental indenture. ARTICLE TEN COVENANTS SECTION 1001. Payment of Principal, Premium and Interest. The Company covenants and agrees for the benefit of each series of Securities that it will duly and punctually pay the principal of (and premium, if any) and interest on the Securities of that series in accordance with the terms of the Securities and this Indenture. In the absence of contrary provisions with respect to the Securities of any series, interest on the Securities of any series may, at the option of the Company, be paid by check mailed to the address of the Person entitled thereto as it appears on the Security Register. -65- SECTION 1002. Maintenance of Office or Agency. The Company will maintain in each Place of Payment for any series of Securities an office or agency where Securities of that series may be presented or surrendered for payment, where Securities of that series may be surrendered for registration of transfer or exchange and where notices and demands to or upon the Company in respect of the Securities of that series and this Indenture may be served. The Company will give prompt written notice to the Trustee of the location and any change in the location of such office or agency. If at any time the Company shall fail to maintain any such required office or agency or shall fail to furnish the Trustee with the address thereof, such presentations, surrenders, notices and demands may be made or served at the Corporate Trust Office of the Trustee, and the Company hereby appoints the Trustee as its agent to receive all such presentations, surrenders, notices and demands. The Company may also from time to time designate one or more other offices or agencies where the Securities of one or more series may be presented or surrendered for any or all such purposes and may from time to time rescind such designations; provided, however, that no such designation or rescission shall in any manner relieve the Company of its obligation to maintain an office or agency in each Place of Payment for Securities of any series for such purposes. The Company will give prompt written notice to the Trustee of any such designation or rescission and of any change in the location of any such other office or agency. SECTION 1003. Money for Securities Payments to Be Held in Trust. If the Company shall at any time act as its own Paying Agent with respect to any series of Securities, it will, on or before each due date of the principal of (and premium, if any) or interest on any of the Securities of that series, segregate and hold in trust for the benefit of the Persons entitled thereto a sum in the currency in which such series of Securities is payable sufficient to pay the principal (and premium, if any) or interest so becoming due until such sums shall be paid to such Persons or otherwise disposed of as herein provided and will promptly notify the Trustee of its failure so to act. Whenever the Company shall have one or more Paying Agents for any series of Securities, it will, prior to each due date of the principal of (and premium, if any) or interest on any Securities of that series, deposit with a Paying Agent a sum sufficient to pay the principal (and premium, if any) or interest so becoming due, such sum to be held in trust for the benefit of the Persons entitled to such principal, premium or interest, and (unless such Paying Agent is the Trustee) the Company will promptly notify the Trustee of its failure so to act. -66- The Company will cause each Paying Agent for any series of Securities other than the Trustee to execute and deliver to the Trustee an instrument in which such Paying Agent shall agree with the Trustee, subject to the provisions of this Section, that such Paying Agent will: (1) hold all sums held by it for the payment of the principal of (and premium, if any) or interest on Securities of that series in trust for the benefit of the Persons entitled thereto until such sums shall be paid to such Persons or otherwise disposed of as herein provided; (2) give the Trustee notice of any default by the Company (or any other obligor upon the Securities of that series) in the making of any payment of principal (and premium, if any) or interest on the Securities of that series; and (3) at any time during the continuance of any such default, upon the written request of the Trustee, forthwith pay to the Trustee all sums so held in trust by such Paying Agent. The Company may at any time, for the purpose of obtaining the satisfaction and discharge of this Indenture or for any other purpose, pay, or by Company Order direct any Paying Agent to pay, to the Trustee all sums held in trust by the Company or such Paying Agent, such sums to be held by the Trustee upon the same trusts as those upon which such sums were held by the Company or such Paying Agent, and, upon such payment by any Paying Agent to the Trustee, such Paying Agent shall be released from all further liability with respect to such money. Any money deposited with the Trustee or any Paying Agent, or then held by the Company, in trust for the payment of the principal of (and premium, if any) or interest on any Security of any series and remaining unclaimed for two years after such principal (and premium, if any) or interest has become due and payable shall be paid to the Company on Company Request, or (if then held by the Company) shall be discharged from such trust; and the Holder of such Security shall thereafter, as an unsecured general creditor, look only to the Company for payment thereof, and all liability of the Trustee or such Paying Agent with respect to such trust money, and all liability of the Company as trustee thereof, shall thereupon cease; provided, however, that the Trustee or such Paying Agent, before being required to make any such repayment, may at the expense of the Company cause to be published once, in a newspaper published in the English language, customarily published on each Business Day and of general circulation in the Borough of Manhattan, The City of New York, notice that such money remains unclaimed and that, after a date specified therein, which shall not be less than 30 days from the date of such publication, any unclaimed balance of such money then remaining will be repaid to the Company on Company Request. -67- SECTION 1004. Existence. Subject to Article Eight, the Company will do or cause to be done all things necessary to preserve and keep in full force and effect its existence, rights (charter and statutory) and franchises; provided, however, that the Company shall not be required to preserve any such right or franchise if the Board of Directors shall determine that the preservation thereof is no longer desirable in the conduct of the business of the Company and that the loss thereof is not disadvantageous in any material respect to the Holders. SECTION 1005. Maintenance of Properties. The Company will cause all properties used or useful in the conduct of its business or the business material to be maintained and kept in good condition, repair and working order and supplied with all necessary equipment and will cause to be made all necessary repairs, renewals, replacements, betterments and improvements thereof, all as in the judgment of the Company may be necessary so that the business carried on in connection therewith may be properly and advantageously conducted at all times; provided, however, that nothing in this Section shall prevent the Company from discontinuing the operation or maintenance of any of such properties if such discontinuance is, in the judgment of the Company, desirable in the conduct of its business and not disadvantageous in any material respect to the Holders. SECTION 1006. Payment of Taxes and Other Claims. The Company will pay or discharge or cause to be paid or discharged, before the same shall become delinquent, (1) all taxes, assessments and governmental charges levied or imposed upon it or upon its income, profits or property, and (2) all lawful claims for labor, materials and supplies which, if unpaid, might by law become a lien upon its property; PROVIDED, HOWEVER, that the Company shall not be required to pay or discharge or cause to be paid or discharged any such tax, assessment, charge or claim whose amount, applicability or validity is being contested in good faith. SECTION 1007. Restriction on Secured Debt. (a) The Company will not itself, and will not permit any Restricted Subsidiary to, incur, issue, assume or guarantee any notes, bonds, debentures or other similar -68- evidences of indebtedness for money borrowed (notes, bonds, debentures or other similar evidences of indebtedness for money borrowed being hereinafter in this Article called "Debt"), secured by pledge of, or mortgage or other lien on, any Principal Property, now owned or hereafter owned by the Company or any Restricted Subsidiary, or any shares of stock or Debt of any Restricted Subsidiary (pledges, mortgages and other liens being hereinafter in this Article called "Lien" or "Liens"), without effectively providing that the Securities of each series then Outstanding (together with, if the Company shall so determine, any other Debt of the Company or such Restricted Subsidiary then existing or thereafter created which is not subordinate to the Securities of each series then Outstanding) shall be secured equally and ratably with (or prior to) such secured Debt, so long as such secured Debt shall be so secured; PROVIDED, HOWEVER, that this Section shall not apply to, and there shall be excluded from secured Debt in any computation under this Section, Debt secured by: (1) Liens on any Principal Property acquired, constructed or improved by the Company or any Restricted Subsidiary after the date of this Indenture which are created or assumed contemporaneously with such acquisition, construction or improvement, or within 120 days before or after the completion thereof, to secure or provide for the payment of all or any part of the cost of such acquisition, construction or improvement (including related expenditures capitalized for Federal income tax purposes in connection therewith) incurred after the date of this Indenture; (2) Liens of or upon any property, shares of capital stock or Debt existing at the time of acquisition thereof, whether by merger, consolidation, purchase, lease or otherwise (including Liens of or upon property, shares of capital stock or indebtedness of a corporation existing at the time such corporation becomes a Restricted Subsidiary); (3) Liens in favor of the Company or any Restricted Subsidiary; (4) Liens in favor of the United States of America or any State thereof, or any department, agency or instrumentality or political subdivision of the United States of America or any State thereof or political entity affiliated therewith, or in favor of any other country, or any political subdivision thereof, to secure partial, progress, advance or other payments, or other obligations, pursuant to any contract or statute or to secure any Debt incurred for the purpose of financing all or any part of the cost of acquiring, constructing or improving the property subject to such Liens (including Liens incurred in connection with pollution control, industrial revenue or similar financings); -69- (5) Liens imposed by law, such as mechanics', workmen's, repairmen's, materialmen's, carriers', warehousemen's, vendors' or other similar liens arising in the ordinary course of business, or governmental (federal, state or municipal) liens arising out of contracts for the sale of products or services by the Company or any Restricted Subsidiary, or deposits or pledges to obtain the release of any of the foregoing; (6) pledges or deposits under workmen's compensation laws or similar legislation and Liens of judgments thereunder which are not currently dischargeable, or good faith deposits in connection with bids, tenders, contracts (other than for the payment of money) or leases to which the Company or any Restricted Subsidiary is a party, or deposits to secure public or statutory obligations of the Company or any Restricted Subsidiary, or deposits in connection with obtaining or maintaining self-insurance or to obtain the benefits of any law, regulation or arrangement pertaining to unemployment insurance, old age pensions, social security or similar matters, or deposits of cash or obligations of the United States of America to secure surety, appeal or customs bonds to which the Company or any Restricted Subsidiary is a party, or deposits in litigation or other proceedings such as, but not limited to, interpleader proceedings; (7) Liens created by or resulting from any litigation or other proceeding which is being contested in good faith by appropriate proceedings, including Liens arising out of judgments or awards against the Company or any Restricted Subsidiary with respect to which the Company or such Restricted Subsidiary is in good faith prosecuting an appeal or proceedings for review; or Liens incurred by the Company or any Restricted Subsidiary for the purpose of obtaining a stay or discharge in the course of any litigation or other proceeding to which the Company or such Restricted Subsidiary is a party; (8) Liens for taxes or assessments or governmental charges or levies not yet due or delinquent, or which can thereafter be paid without penalty, or which are being contested in good faith by appropriate proceedings; (9) Liens consisting of easements, rights-of-way, zoning restrictions, restrictions on the use of real property, and defects and irregularities in the title thereto, landlords' liens and other similar liens and encumbrances none of which interfere materially with the use of the property covered thereby in the ordinary course of the business of the Company or such Restricted Subsidiary and which do not, in the opinion of the Company, materially detract from the value of such properties; or (10) any extension, renewal or replacement (or successive extensions, renewals or replacements), as a whole or in part, of any Lien referred to in the -70- foregoing clauses (1) to (9), inclusive; provided, that (i) such extension, renewal or replacement Lien shall be limited to all or a part of the same property, shares of stock or Debt that secured the Lien extended, renewed or replaced (plus improvements on such property) and (ii) the Debt secured by such Lien at such time is not increased. (b) Notwithstanding the restrictions contained in subdivision (a) of this Section, the Company and its Restricted Subsidiaries, or any of them, may incur, issue, assume or guarantee Debt secured by Liens without equally and ratably securing the Securities of each series then Outstanding, provided, that at the time of such incurrence, issuance, assumption or guarantee, after giving effect thereto and to the retirement of any Debt which is concurrently being retired, the aggregate amount of all outstanding Debt secured by Liens which could not have been incurred, issued, assumed or guaranteed by the Company or a Restricted Subsidiary without equally and ratably securing the Securities of each series then Outstanding except for the provisions of this subdivision (b) does not at such time exceed 10% of Consolidated Net Tangible Assets of the Company. SECTION 1008. Restriction on Sale and Leaseback Transactions. (a) The Company will not itself, and it will not permit any Restricted Subsidiary to, enter into any arrangement with any bank, insurance company or other lender or investor (not including the Company or any Restricted Subsidiary) or to which any such lender or investor is a party, providing for the leasing by the Company or a Restricted Subsidiary for a period, including renewals, in excess of three years of any Principal Property which has been or is to be sold or transferred by the Company or any Restricted Subsidiary to such lender or investor or to any person to whom funds have been or are to be advanced by such lender or investor on the security of such Principal Property (herein referred to as a "Sale and Leaseback Transaction") unless either: (1) The Company or such Restricted Subsidiary would, at the time of entering into such arrangement, be entitled, without equally and ratably securing the Securities of each series then Outstanding, to incur Debt secured by a Lien on such property, pursuant to paragraphs (1) to (10), inclusive, of Section 1007; or (2) the Company within 120 days after the sale or transfer shall have been made by the Company or by a Restricted Subsidiary, applies an amount equal to the greater of (i) the net proceeds of the sale of the Principal Property sold and leased back pursuant to such arrangement or (ii) the fair market value of the Principal Property so sold and leased back at the time of entering into such arrangement (as determined by any two of the following: the -71- Chairman or a Vice Chairman of the Board of the Company, its President, its Chief Financial Officer, its Vice President of Finance, its Treasurer or its Controller) to the retirement of Funded Debt of the Company; provided, that the amount to be applied to the retirement of Funded Debt of the Company shall be reduced by (A) the principal amount of any Securities delivered within 120 days after such sale to the Trustee for retirement and cancellation, and (B) the principal amount of Funded Debt, other than Securities, voluntarily retired by the Company within 120 days after such sale. Notwithstanding the foregoing, no retirement referred to in this clause (a)(2) may be effected by payment at maturity or pursuant to any mandatory sinking fund payment or mandatory prepayment provision. (b) Notwithstanding the restrictions contained in subdivision (a) of this Section, the Company and its Restricted Subsidiaries, or any of them, may enter into a Sale and Leaseback Transaction, provided, that at the time of such transaction, after giving effect thereto, the aggregate amount of all Attributable Debt in respect of Sale and Leaseback Transactions existing at such time which could not have been entered into except for the provisions of this subdivision (b) does not at such time exceed 10% of Consolidated Net Tangible Assets of the Company. (c) A Sale and Leaseback Transaction shall not be deemed to result in the creation of a Lien. SECTION 1009. Defeasance of Certain Obligations. The following provisions shall apply to the Securities of each series unless specifically otherwise provided in a Board Resolution, Officers' Certificate or indenture supplemental hereto provided pursuant to Section 301. The Company may omit to comply with any term, provision or condition set forth in Sections 1005, 1006, 1007 and 1008 and any such omission with respect to Sections 1005, 1006, 1007 and 1008 shall not be an Event of Default, in each case with respect to the Securities of that series, provided that the following conditions have been satisfied: (1) with reference to this Section 1009, the Company has deposited or caused to be irrevocably deposited with the Trustee (or another trustee satisfying the requirements of Section 609) as trust funds in trust, specifically pledged as security for, and dedicated solely to, the benefit of the Holders of the Securities of that series, (i) money in an amount, or (ii) U.S. Government Obligations which through the payment of interest and principal in respect thereof in accordance with their terms will provide not later than one day before the due date of any payment referred to in clause (A) or (B) of this subparagraph (1) money in an amount, or (iii) a combination thereof, sufficient, in the opinion of a nationally recognized firm of independent -72- public accountants expressed in a written certification thereof delivered to the Trustee, to pay and discharge (A) the principal of (and premium, if any) and each instalment of principal (and premium, if any) and interest on the Outstanding Securities on the Stated Maturity of such principal or installments of principal and interest and (B) any mandatory sinking fund payments or analogous payments applicable to the Securities of such series on the day on which such payments are due and payable in accordance with the terms of this Indenture and of such Securities; (2) such deposit shall not cause the Trustee with respect to the Securities of that series to have a conflicting interest as defined in Section 608 and for purposes of the Trust Indenture Act with respect to the Securities of any series; (3) such deposit will not result in a breach or violation of, or constitute a default under, this Indenture or any other agreement or instrument to which the Company is a party or by which it is bound; (4) no Event of Default or event which with notice or lapse of time would become an Event of Default with respect to the Securities of that series shall have occurred and be continuing on the date of such deposit; (5) the Company has delivered to the Trustee an Opinion of Counsel to the effect that Holders of the Securities of such series will not recognize income, gain or loss for Federal income tax purposes as a result of such deposit and defeasance of certain obligations and will be subject to Federal income tax on the same amount and in the same manner and at the same times as would have been the case if such deposit and defeasance had not occurred; and (6) the Company has delivered to the Trustee an Officers' Certificate and an Opinion of Counsel, each stating that all conditions precedent herein provided for relating to the defeasance contemplated in this Section have been complied with. SECTION 1010. Waiver of Certain Covenants. The Company may omit in any particular instance to comply with any term, provision or condition set forth in Sections 1004 to 1008, inclusive, with respect to the Securities of any series if before the time for such compliance the Holders of not less than a majority in aggregate principal amount of the Outstanding Securities of such series shall, by Act of such Holders, either waive such compliance in such instance or generally waive compliance with such term, provision or condition, but -73- no such waiver shall extend to or affect such term, provision or condition except to the extent so expressly waived, and, until such waiver shall become effective, the obligations of the Company and the duties of the Trustee in respect of any such term, provision or condition shall remain in full force and effect. The Company may, but shall not be obligated to, fix a record date for the purpose of determining the Persons entitled to waive any such term, provision or condition. If a record date is fixed for such purpose, the Holders on such record date or their duly designated proxies, and only such Persons, shall be entitled to waive any such term, provision or condition hereunder, whether or not such Holders remain Holders after such record date; provided that unless the Holders of not less than a majority in principal amount of the Outstanding Securities of such series shall have waived such term, provision or condition prior to the date which is 90 days after such record date, any such waiver previously given shall automatically and without further action by any Holder be canceled and of no further effect. ARTICLE ELEVEN REDEMPTION OF SECURITIES SECTION 1101. Applicability of Article. Securities of any series which are redeemable before their Stated Maturity shall be redeemable in accordance with their terms and (except as otherwise specified as contemplated by Section 301 for Securities of any series) in accordance with this Article. SECTION 1102. Election to Redeem; Notice to Trustee. The election of the Company to redeem any Securities shall be evidenced by an Officers' Certificate. The Company shall, at least 45 days prior to the Redemption Date fixed by the Company (unless a shorter notice shall be satisfactory to the Trustee), notify the Trustee of (1) such Redemption Date, (2) if the Securities of such series have different terms and less than all of the Securities of such series are to be redeemed, the terms of the Securities to be redeemed, and -74- (3) if less than all the Securities of such series with identical terms are to be redeemed, the principal amount of such Securities to be redeemed. In the case of any redemption of Securities prior to the expiration of any restriction on such redemption provided in the terms of such Securities or elsewhere in this Indenture, the Company shall furnish the Trustee with an Officers' Certificate evidencing compliance with such restriction. SECTION 1103. Selection by Trustee of Securities to Be Redeemed. If less than all the Securities of like tenor of any series are to be redeemed, the particular Securities to be redeemed shall be selected not more than 60 days prior to the Redemption Date by the Trustee, from the Outstanding Securities of like tenor of such series not previously called for redemption, by such method as the Trustee shall deem fair and appropriate and which may provide for the selection for redemption of portions (equal to the minimum authorized denomination for Securities of like tenor of that series or any integral multiple thereof) of the principal amount of Securities of such series of a denomination larger than the minimum authorized denomination for Securities of that series. The Trustee shall promptly notify the Company in writing of the Securities selected for redemption and, in the case of any Securities selected for partial redemption, the principal amount thereof to be redeemed. For all purposes of this Indenture, unless the context otherwise requires, all provisions relating to the redemption of Securities shall relate, in the case of any Securities redeemed or to be redeemed only in part, to the portion of the principal amount of such Securities which has been or is to be redeemed. SECTION 1104. Notice of Redemption. Notice of redemption shall be given by first-class mail, postage prepaid, mailed not less than 30 nor more than 60 days prior to the Redemption Date, to each Holder of Securities to be redeemed, at each such Holder's address appearing in the Security Register. All notices of redemption shall state: (1) the Redemption Date, (2) the Redemption Price, -75- (3) if less than all the Outstanding Securities of like tenor of any series are to be redeemed, the identification (and, in the case of partial redemption, the principal amounts) of the particular Securities to be redeemed, (4) that on the Redemption Date the Redemption Price will become due and payable upon each such Security to be redeemed and, if applicable, that interest thereon will cease to accrue on and after said date, (5) the place or places where such Securities are to be surrendered for payment of the Redemption Price, and (6) that the redemption is for a sinking fund, if such is the case. Notice of redemption of Securities to be redeemed at the election of the Company shall be given by the Company or, at the Company's request, by the Trustee in the name and at the expense of the Company. SECTION 1105. Deposit of Redemption Price. On or prior to any Redemption Date, the Company shall deposit with the Trustee or with a Paying Agent (or, if the Company is acting as its own Paying Agent, segregate and hold in trust as provided in Section 1003) an amount of money in immediately available funds sufficient to pay the Redemption Price of, and (except if the Redemption Date shall be an Interest Payment Date) accrued interest on, all the Securities which are to be redeemed on that date. SECTION 1106. Securities Payable on Redemption Date. Notice of redemption having been given as aforesaid, the Securities so to be redeemed shall, on the Redemption Date, become due and payable at the Redemption Price therein specified, and from and after such date (unless the Company shall default in the payment of the Redemption Price and accrued interest) such Securities shall cease to bear interest. Upon surrender of any such Security for redemption in accordance with said notice, such Security shall be paid by the Company at the Redemption Price, together with accrued interest to the Redemption Date; provided, however, that, unless otherwise specified as contemplated by Section 301, installments of interest whose Stated Maturity is on or prior to the Redemption Date shall be payable to the Holders of such Securities, or one or more Predecessor Securities, registered as such at the close of business on the relevant Regular Record Dates according to their terms and the provisions of Section 307. -76- If any Security called for redemption shall not be so paid upon surrender thereof for redemption, the principal (and premium, if any) shall, until paid, bear interest from the Redemption Date at the rate prescribed therefor in the Security. SECTION 1107. Securities Redeemed in Part. Any Security which is to be redeemed in part shall be surrendered at a Place of Payment for such series (with, if the Company or the Trustee so requires, due endorsement by, or a written instrument of transfer in form satisfactory to the Company and the Trustee duly executed by, the Holder thereof or such Holder's attorney duly authorized in writing), and the Company shall execute, and the Trustee shall authenticate and deliver to the Holder of such Security without service charge, a new Security or Securities of the same series and of like tenor, of any authorized denomination as requested by such Holder, in aggregate principal amount equal to and in exchange for the unredeemed portion of the principal of the Security so surrendered; provided, however, that if a Global Security is so surrendered, such new Security so issued shall be a new Global Security in a denomination equal to the unredeemed portion of the principal of the Global Security so surrendered. ARTICLE TWELVE SINKING FUNDS SECTION 1201. Applicability of Article. The provisions of this Article shall be applicable to any sinking fund for the retirement of Securities of a series except as otherwise specified as contemplated by Section 301 for Securities of such series. The minimum amount of any sinking fund payment provided for by the terms of Securities of any series is herein referred to as a "mandatory sinking fund payment", and any payment in excess of such minimum amount provided for by the terms of Securities of any series is herein referred to as an "optional sinking fund payment". If provided for by the terms of Securities of any series, the cash amount of any sinking fund payment may be subject to reduction as provided in Section 1202. Each sinking fund payment shall be applied to the redemption of Securities of any series as provided for by the terms of Securities of such series. -77- SECTION 1202. Satisfaction of Sinking Fund Payments with Securities. The Company (1) may deliver Outstanding Securities of like tenor of a series (other than any previously called for redemption) and (2) may apply as a credit Securities of like tenor of a series which have been redeemed either at the election of the Company pursuant to the terms of such Securities or through the application of permitted optional sinking fund payments pursuant to the terms of such Securities, in each case in satisfaction of all or any part of any sinking fund payment with respect to the Securities of like tenor of such series required to be made pursuant to the terms of such Securities as provided for by the terms of such series; provided that such Securities have not been previously so credited. Such Securities shall be received and credited for such purpose by the Trustee at the Redemption Price specified in such Securities for redemption through operation of the sinking fund and the amount of such sinking fund payment shall be reduced accordingly. SECTION 1203. Redemption of Securities for Sinking Fund. Not less than 60 days prior to each sinking fund payment date for Securities of like tenor of a series, the Company will deliver to the Trustee an Officers' Certificate specifying the amount of the next ensuing sinking fund payment for such Securities pursuant to the terms of such Securities, the portion thereof, if any, which is to be satisfied by payment of cash and the portion thereof, if any, which is to be satisfied by delivering and crediting Securities of like tenor of that series pursuant to Section 1202 and, at the time of delivery of such Officers' Certificate, will also deliver to the Trustee any Securities to be so delivered. Not less than 45 days before each such sinking fund payment date the Trustee shall select the Securities to be redeemed upon such sinking fund payment date in the manner specified in Section 1103 and cause notice of the redemption thereof to be given in the name of and at the expense of the Company in the manner provided in Section 1104. Such notice having been duly given. the redemption of such Securities shall be made upon the terms and in the manner stated in Sections 1106 and 1107. This instrument may be executed in any number of counterparts, each of which so executed shall be deemed to be an original, but all such counterparts shall together constitute but one and the same instrument. -78- IN WITNESS WHEREOF, the parties hereto have caused this Indenture to be duly executed, and the respective corporate seals to be hereunto affixed and attested, all as of the day and year first above written. HONEYWELL INC. By /s/ Paul N. Saleh ------------------------------- Paul N. Saleh Vice President and Treasurer Attest: /s/ Sigurd Ueland, Jr. --------------------------------- Sigurd Ueland, Jr. Vice President and Secretary [SEAL] THE CHASE MANHATTAN BANK (NATIONAL ASSOCIATION) as Trustee By /s/ Ronald A. DeSorbo -------------------------------- Ronald A. DeSorbo Vice President Attest: /s/ Mary Lewicki --------------------------------- Mary Lewicki Assistant Secretary [SEAL] -79- STATE OF MINNESOTA ) ) SS. COUNTY OF HENNEPIN ) On the day of August, ___ 1994 before me personally came Paul N. Saleh to me known, who, being by me duly sworn, did depose and say that he is Vice President and Treasurer of Honeywell Inc., one of the Corporations described in and which executed the foregoing instrument; that he knows the seal of said Corporation; that the seal affixed to said instrument is such corporate seal; that it was so affixed by authority of the Board of Directors of said Corporation, and that he signed his name thereto by like authority. [SEAL] ---------------------------------- Notary Public STATE OF NEW YORK ) ) SS. COUNTY OF KINGS ) On the day of August,____ 1994 before me personally came Ronald A. DeSorbo to me known, who, being by me duly sworn, did depose and say that he is Vice President of The Chase Manhattan Bank (National Association), one of the Corporations described in and which executed the foregoing instrument; that he knows the seal of said Corporation; that the seal affixed to said instrument is such corporate seal; that it was so affixed by authority of the Board of Directors of said Corporation, and that he signed his name thereto by like authority. [SEAL] ---------------------------------- Notary Public -80- EX-10.III(A) 4 EXHIBIT 10III(A) Exhibit(10)(iii)(a) HONEYWELL KEY EMPLOYEE SEVERANCE PLAN (AMENDED AND RESTATED EFFECTIVE SEPTEMBER 20, 1994) 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 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 order to induce the Corporation's key employees to remain in the employ of the Corporation, the Corporation has established the Honeywell Key Employee Severance Plan (this "Plan") under which the severance benefits set forth herein shall be paid to covered employees designated by the Personnel Committee of the Board from time to time (the "Key Employees") in the event their 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 PLAN. Before a change in control of the Corporation, this Plan shall continue until such time as the Board, acting in its sole discretion, elects to modify, supersede or terminate this Plan as provided in Section 7. This Plan shall automatically continue in effect for a period of two (2) years following a change in control of the Corporation; provided, however, that the expiration of the term of this Plan shall not adversely affect the rights of any Key Employee under this Plan which have accrued prior to the expiration of the term of this Plan. 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 Plan, 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 subsidiary of the Corporation, any "person" (as hereinabove defined) acting on behalf of the Corporation as underwriter pursuant to an offering who is temporarily holding securities in connection with such offering, 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 thirty percent (30%) or more of the combined voting power of the Corporation's then outstanding securities; or (ii) during any period of not more than two (2) consecutive years (not including any period prior to the adoption of this Plan), individuals who at the beginning of such period constitute the Board, and any new director (other than a director designated by a "person" (as hereinabove defined) 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, 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 (1) 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) more than fifty percent (50%) of the combined voting power of the voting securities of the Corporation or such surviving entity outstanding immediately after such merger or consolidation or (2) 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 thirty percent (30%) of the combined voting power of the Corporation's then outstanding securities; 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). 2 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, a Key Employee shall be entitled to the benefits provided in Subsection 4(iii) upon the subsequent termination of such Key Employee's employment during the term of this Plan unless such termination is (a) because of the Key Employee's death or Disability, (b) by the Corporation for Cause, or (c) by the Key Employee other than for Good Reason. In the event a Key Employee's 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, the Key Employee shall not be entitled to any benefits hereunder. (ii) DISABILITY. If, as a result of a Key Employee's incapacity due to physical or mental illness, the Key Employee shall have been absent from the full-time performance of the Key Employee's duties with the Corporation for six (6) consecutive months, and within thirty (30) days after written notice of termination is given, the Key Employee shall not have returned to the full-time performance of duties, for purposes of this Plan the Key Employee's employment may be terminated for "Disability." (iii) CAUSE. Termination by the Corporation of a Key Employee's employment for "Cause" shall mean termination (a) upon the willful and continued failure by the Key Employee to substantially perform the Key Employee's duties with the Corporation (other than any such failure resulting from the Key Employee's 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)) or by the Key Employee for Good Reason (as defined in Subsection 3(iv))), after a written demand for substantial performance is delivered to the Key Employee by the Board, which demand specifically identifies the manner in which the Board believes that the Key Employee has not substantially performed the Key Employee's duties, or (b) the willful engaging by the Key Employee in conduct which is demonstrably and materially injurious to the Corporation, monetarily or otherwise. For purposes of this Subsection 3(iii), no act, or failure to act, on the Key Employee's part shall be deemed "willful" unless done, or omitted to be done, by the Key Employee in bad faith and without reasonable belief that the Key Employee's action or omission was in or not opposed to the best interest of the Corporation. Notwithstanding the foregoing, the Key Employee shall not be deemed to have been terminated for Cause unless and until there shall have been delivered to the Key Employee 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 the Key Employee and an opportunity for the Key Employee, together with the Key Employee's counsel, to be heard before the Board), finding that in the good faith opinion of the Board the Key Employee was guilty of conduct set forth above in this Subsection 3(iii) and specifying the particulars thereof in detail. 3 (iv) GOOD REASON. A Key Employee shall be entitled to terminate employment for Good Reason. For purposes of this Plan, "Good Reason" shall mean, without the Key Employee's 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 Subsection 3(vi)) specified in the Notice of Termination (as defined in Subsection 3(v)) given in respect thereof: (a) the assignment to the Key Employee of any duties inconsistent with the position in the Corporation that such Key Employee held immediately prior to the change in control of the Corporation, or an adverse alteration in the nature or status of the Key Employee's responsibilities or the conditions of the Key Employee's employment from those in effect immediately prior to such change in control of the Corporation; (b) a reduction by the Corporation in the Key Employee's 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 requiring the Key Employee to be based more than fifty (50) miles from the Corporation's offices at which such Key Employee is 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 the Key Employee's business travel obligations immediately prior to the change in control of the Corporation; (d) the failure by the Corporation to pay to the Key Employee any portion of such Key Employee's current compensation or compensation under any deferred compensation program of the Corporation within seven (7) days of the date such compensation is due; (e) the failure by the Corporation to continue in effect any compensation or benefit plan or perquisites in which the Key Employee participates immediately prior to the change in control of the Corporation which is material to the Key Employee's total compensation (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 4 the Corporation to continue such Key Employee's 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 the Key Employee's 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 the Key Employee with benefits substantially similar to those enjoyed by such Key Employee under any of the Corporation's life insurance, medical, dental, accident, or disability plans in which the Key Employee was 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 the Key Employee with the number of paid vacation days to which the Key Employee is entitled on the basis of the Key Employee's 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 the obligations and liabilities under this Plan, as contemplated in Section 5 hereof; or (h) any purported termination of the Key Employee's 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 Plan. The Key Employee's right to terminate employment pursuant to this Subsection (iv) shall not be affected by such Key Employee's incapacity due to physical or mental illness. A Key Employee's continued employment shall not constitute consent to, or a waiver of rights with respect to, any circumstance constituting Good Reason hereunder. (v) NOTICE OF TERMINATION. Any purported termination of a Key Employee's employment by the Corporation or by such Key Employee 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 Plan relied upon and shall set forth in reasonable detail the facts and circumstances claimed to provide a basis for termination of the Key Employee's employment under the provision so indicated. 5 (vi) DATE OF TERMINATION. "Date of Termination" shall mean (a) if a Key Employee's employment is terminated for Disability, thirty (30) days after Notice of Termination is given (provided that such Key Employee shall not have returned to the full-time performance of such Key Employee's duties during such thirty (30)-day period), and (b) if a Key Employee's employment is terminated pursuant to Subsections (iii) or (iv) hereof or for any other reason (other than death or Disability), the date specified in the Notice of Termination (which, in the case of a termination for Cause shall not be less than thirty (30) days from the date such Notice of Termination is given, and 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); 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 shall be the date on which the dispute is finally determined, whether 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 a Key Employee such Key Employee's full compensation in effect when the notice giving rise to the dispute was given and continue the Key Employee as a participant in all Compensation Plans, life insurance, medical, dental, accident or liability plans and any similar plans in which the Key Employee was participating when the notice giving rise to the dispute was given, until the dispute is finally resolved in accordance with this Subsection (vi). Amounts paid under this Subsection (vi) are in addition to all other amounts due under this Plan, and shall not be offset against or reduce any other amounts due under this Plan and shall not be reduced by any compensation earned by a Key Employee as the result of employment by another employer. 4. COMPENSATION DURING DISABILITY OR UPON TERMINATION. Following a change in control of the Corporation, a Key Employee shall be entitled to the following during a period of disability, or upon termination of such Key Employee's employment, as the case may be, provided that such period or termination occurs during the term of this Plan: (i) During any period that the Key Employee fails to perform the Key Employee's full-time duties with the Corporation as a result of incapacity due to physical or mental illness, the Key Employee shall continue to receive such Key Employee's base salary at a rate in effect at the commencement of any such period, together with all compensation payable to the Key Employee under the Corporation's disability plan or program or other similar plan during such period, until the Key Employee's participation in 6 this Plan is terminated pursuant to Section 3(ii) hereof. Thereafter, or in the event the Key Employee's employment shall be terminated by reason of the Key Employee's death, the Key Employee's 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 the Key Employee's employment shall be terminated by the Corporation for Cause or by the Key Employee other than for Good Reason, the Corporation shall pay such Key Employee the Key Employee's full base salary through the Date of Termination at the rate in effect at the time Notice of Termination is given or in effect on the date immediately preceding the date of the change in control of the Corporation, whichever is higher, plus all other amounts or benefits to which the Key Employee is entitled under any Compensation Plan then in effect, and the Corporation shall have no further obligations to the Key Employee under this Plan. (iii) If the Key Employee's employment by the Corporation shall be terminated by the Key Employee for Good Reason or by the Corporation other than for Cause or Disability, then the Key Employee shall be entitled to the following: (a) the Corporation shall pay to such Key Employee the Key Employee's full base salary through the Date of Termination at the rate in effect at the time Notice of Termination is given, or in effect on the date immediately preceding the date of the change in control of the Corporation, whichever is higher, no later than the fifth day following the Date of Termination, plus all other amounts to which the Key Employee is entitled under any Compensation Plan of the Corporation, at the time such payments are due; (b) in lieu of any further salary payments to the Key Employee for periods subsequent to the Date of Termination, the Corporation shall pay as severance pay to such Key Employee, at the time specified in Subsection (iv), a lump sum severance payment equal to one and one-half times the sum of the Key Employee's annual salary and "on-plan" bonus under the Corporate Executive Compensation Plan based on (i) in the case of salary, the Key Employee's annual salary in effect as of the Date of Termination or in effect on the date immediately preceding the date of the change in control of the Corporation, whichever is higher, and (ii) in the case of "on-plan" bonus, the "on-plan" bonus under the Corporate Executive Compensation Plan in effect as of the Date of Termination or the average of the annual bonuses paid to the Key Employee during the three (3) year period immediately preceding the date of the change in control of the Corporation, 7 whichever is higher, and in either case, without regard to any prorata adjustment for any portion of the year; (c) the Key Employee's rights under the Compensation Plans shall be governed by the terms of those respective plans; (d) the Corporation shall pay to the Key Employee all legal fees and expenses incurred by the Key Employee as a result of such termination (including all such fees and expenses, if any, incurred in contesting or disputing any such termination or in seeking to obtain or enforce any right or benefit provided by this Plan 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) for a one and one-half year period after such termination, the Corporation shall arrange to provide the Key Employee with benefits substantially similar to those which the Key Employee was receiving or entitled to receive under the Corporation's life, disability, accident and group health insurance plans (including organ transplant, dental, vision, hearing, and prescription drug coverage), or any similar plans in which the Key Employee was participating immediately prior to the Date of Termination at a cost to the Key Employee which is no greater than that cost in effect at the Date of Termination or the date immediately preceding the date of the change in control of the Corporation, whichever is lower. Benefits otherwise receivable by the Key Employee pursuant to this Paragraph (e) shall be reduced to the extent comparable benefits are actually received by the Key Employee during the one and one-half year period following the Key Employee's termination, and the Key Employee shall report to the Corporation any such comparable benefits actually received by him or her. (iv) PAYMENT YIELDING HIGHEST NET AMOUNT. Notwithstanding the provisions of Subsection (iii) hereof, if: (i) any payments or benefits received or to be received by the Key Employee, whether pursuant to the terms of this Plan or any other plan, arrangement or agreement with the Corporation, any person whose actions result in a change in control of the Corporation or any person affiliated with the Corporation or such person, 8 constitute "parachute payments" (such payments or benefits being hereinafter referred to as the "Parachute Payments") within the meaning of Section 280G(b)(2) of the Code, and (ii) the aggregate present value of the Parachute Payments reduced by any excise tax imposed under Section 4999 of the Code (or any similar tax that may hereafter be imposed) (the "Excise Tax") would be less than three (3) times the Key Employee's "base amount", as defined in Section 280G(b)(3) of the Code, then, in lieu of that portion of the Parachute Payments to which the Key Employee would otherwise be entitled under Subsection (iii) hereof, the Corporation shall pay to such Key Employee under this Subsection (iv), no later than the fifth day following the Date of Termination, a lump sum amount (if any) such that the aggregate present value of the Parachute Payments is equal to 2.99 times the Key Employee's base amount. For purposes of the preceding paragraph, the Key Employee's base amount, the present value of the Parachute Payments, the amount of the Excise Tax and all other appropriate matters shall be determined by the Corporation's independent auditors in accordance with the principles of Section 280G of the Code and based upon the advice of tax counsel selected by such auditors. (v) The payments provided for in Subsections 4(iii)(a), (b) and (d) above, shall be made not later than the fifth day following the Date of Termination; provided, however, that if the amounts of such payments cannot be finally determined on or before such day, the Corporation shall pay to a Key Employee 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 rate provided in Section 1274(b)(2)(8) of the Code (the "Applicable Rate")) from the date that the estimated payments were made to the date the remainder of such payments is made as soon as the amount thereof can be determined but in no event later than the thirtieth day after the Date of Termination. 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 the Key Employee, payable on the fifth day after demand by the Corporation (together with interest at the Applicable Rate). (vi) Except as required in Subsection 4(iii)(e) hereof, a Key Employee shall not be required to mitigate the amount of any payment provided for in this Section 4 by seeking other 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 the Key Employee as the result of employment by another employer, by retirement benefits, by offset against any amount claimed to be owed by the Key Employee to the Corporation, or otherwise; provided, however, that if during the one and one-half year period subsequent to such Key Employee's Date of Termination, the Key Employee directly competes with 9 the Corporation by making use of trade secrets or other proprietary knowledge that the Key Employee obtained while employed by 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 the Key Employee under this Section 4. 5. SUCCESSORS: BINDING PLAN. (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 the obligations and liabilities under this Plan in the same manner and to the same extent that the Corporation would be bound if no such succession had taken place. Failure of the Corporation to obtain such assumption prior to the effectiveness of any such succession shall entitle the Key Employee to compensation from the Corporation in the same amount and on the same terms to which such Key Employee would be entitled hereunder if the Key Employee terminated 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 Plan, "Corporation" shall mean the Corporation as hereinbefore defined and any successor to its business and/or assets as aforesaid which assumes and agrees to be bound by the terms of this Plan by operation of law, or otherwise. (ii) The rights created under this Plan shall inure to the benefit of and be enforceable by a Key Employee and such Key Employee's personal or legal representatives, executors, administrators, successors, heirs, distributees, devisees and legatees. If the Key Employee should die while any amount would still be payable to such Key Employee hereunder had the Key Employee continued to live, all such amounts, unless otherwise provided herein, shall be paid in accordance with the terms of this Plan to the Key Employee's devisee, legatee or other designee or, if there is no such designee, to the Key Employee's estate. 6. NOTICES. Any notice or other communication required or permitted pursuant to the terms of this Plan shall be in writing, addressed to the intended recipient at his or her last known address, or to such other address as either party may have furnished to the other in writing in accordance herewith, provided that notice of change of address shall be effective only upon receipt and provided further that all notices to the Corporation shall be directed to the attention of the Personnel Committee. All such notices shall be sent (i) by certified or registered mail and shall be deemed received three (3) business days after the date of mailing; (ii) by Federal Express or similar overnight courier and shall be deemed received one (1) business day after delivery to Federal Express or similar overnight courier; or (iii) by personal service and shall be deemed received on the same day as service. 10 7. AMENDMENT, SUSPENSION AND TERMINATION. Prior to a change in control of the Corporation, the Board retains the right, at any time and from time to time, to alter, amend, change, suspend, substitute, delete, revoke or terminate this Plan in whole or in part, for any reason, and without either the consent of, or prior notification to any person. The Board shall have the right to delegate its authority and power hereunder, or any portion thereof, to any committee of the Board, and the right to rescind any such delegation to such committee in whole or in part. Following the occurrence of a change in control of the Corporation, the Board may not terminate this Plan or amend this Plan in any manner adverse to any Key Employee. 8. MISCELLANEOUS. 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 Plan. The validity, interpretation, construction and performance of the terms of this Plan 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. The obligations of the Corporation under this Plan shall survive the expiration of the term of this Plan. 9. VALIDITY. The invalidity or unenforceability of any provision of this Plan shall not affect the validity or enforceability of any other provision of this Plan, which shall remain in full force and effect. 10. ARBITRATION. Any dispute or controversy arising under or in connection with this Plan shall be settled exclusively by binding arbitration, conducted before a panel of three arbitrators in the city of Minneapolis, in accordance with the rules of the American Arbitration Association then in effect; provided, however, that a Key Employee shall be entitled to seek specific performance of such Key Employee's rights under Subsection 3(vi) during the pendency of any dispute or controversy arising under or in connection with this Plan. Judgment may be entered on the arbitrator's award in any court having jurisdiction. 11. PRIOR AGREEMENTS. This Plan sets forth the entire agreement of the parties hereto in respect of the subject matter contained herein. Any other prior agreements, arrangements or understandings between a Key Employee and the Corporation remain binding and in full force and effect consistent with the terms and conditions thereof and shall not be affected by this Plan. 11 EX-10.III(B) 5 EXHIBIT 10III(B) Exhibit (10)(iii)(b) HONEYWELL SUPPLEMENTARY EXECUTIVE RETIREMENT PLAN FOR MID-CAREER HIRES (MID-CAREER SERP) (Effective September 20, 1994) TABLE OF CONTENTS ARTICLE I - DEFINITIONS. . . . . . . . . . . . . . . . . . . . . . . . . . . 1 1.1 ACT. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1 1.2 AUGMENTED YEARS OF CREDITED SERVICE FOR BENEFIT ACCRUAL. . . . . 1 1.3 BASE PLAN. . . . . . . . . . . . . . . . . . . . . . . . . . . . 2 1.4 CODE . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2 1.5 COMPANY. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2 1.6 CORPORATE EXECUTIVE COMPENSATION PLAN (CECP) . . . . . . . . . . 2 1.7 EARLY RETIREMENT . . . . . . . . . . . . . . . . . . . . . . . . 2 1.8 EARNINGS LIMITATION. . . . . . . . . . . . . . . . . . . . . . . 2 1.9 EFFECTIVE DATE . . . . . . . . . . . . . . . . . . . . . . . . . 2 1.10 HONEYWELL. . . . . . . . . . . . . . . . . . . . . . . . . . . . 2 1.11 NORMAL RETIREMENT. . . . . . . . . . . . . . . . . . . . . . . . 3 1.12 PARTICIPANT. . . . . . . . . . . . . . . . . . . . . . . . . . . 3 1.13 PERMANENT AND TOTAL DISABILITY . . . . . . . . . . . . . . . . . 3 1.14 PLAN . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3 1.15 PREDECESSOR EMPLOYER . . . . . . . . . . . . . . . . . . . . . . 3 1.16 SPOUSE . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3 ARTICLE II - PLAN FORMULA. . . . . . . . . . . . . . . . . . . . . . . . . . 4 2.1 MID-CAREER 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 SURVIVING SPOUSE BENEFIT. . . . . . . . . . . . . . . . 8 3.7 SURVIVING CHILDREN'S BENEFIT . . . . . . . . . . . . . . . . . . 8 3.8 VESTED PARTICIPANT'S BENEFIT . . . . . . . . . . . . . . . . . . 9 ARTICLE IV - PAYMENT OF BENEFITS . . . . . . . . . . . . . . . . . . . . . . 10 4.1 FORM OF PAYMENT TO PARTICIPANT . . . . . . . . . . . . . . . . . 10 4.2 TIME OF PAYMENTS . . . . . . . . . . . . . . . . . . . . . . . . 11 4.3 PAYMENT SUBSEQUENT TO A 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 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 ACTUARIAL ASSUMPTIONS FOR LUMP SUM PAYMENTS . . . . . . . . . . . . . . 22 TABLE II: VESTED ACCRUED BENEFITS UNDER THE MID-CAREER SERP THROUGH DECEMBER 31, 1993 . . . . . . . . . . . . . . . . . . . . . . . . . . . 23 TABLE III: ACTUARIAL EQUIVALENT OF ANNUITY AND INDIVIDUALIZED SERP ARRANGEMENTS. . 24 HONEYWELL SUPPLEMENTARY EXECUTIVE RETIREMENT PLAN FOR MID-CAREER HIRES (MID-CAREER SERP) (Amended and Restated Effective September 20, 1994) ARTICLE I - DEFINITIONS 1.1 ACT. The Employee Retirement Income Security Act of 1974, as from time to time amended. 1.2 AUGMENTED YEARS OF CREDITED SERVICE FOR BENEFIT ACCRUAL. One year of credited service for benefits for each of the first 5 "Years of Credited Service For Benefit Accrual" which the Participant has completed under the Base Plan, and one-half year of credited service for benefits for each of the next 10 "Years of Credited Service for Benefit Accrual" subsequently completed by the Participant under the Base Plan. In no event shall the Augmented Years of Credited Service for Benefit under this Plan exceed (i) ten; or (ii) the number of years and months of the Participant's employment with his or her Predecessor Employer (unless such prior employment is less than 5 full years); or (iii) that number of Augmented Years of Credited Service for Benefit Accrual which when added to his or her "Years of Credited Service for Benefit Accrual" under the Base Plan equals 30, 1 whichever is least. Augmented Years of Credited Service for Benefit Accrual will be computed on the basis of years and full months of "Credited Service for Benefit Accrual" under the Base Plan; if such aggregate includes a fraction of a month, such fraction, if less than 15 days, will be disregarded, and if 15 days or more, will be treated as a full month. 1.3 BASE PLAN. The Honeywell Retirement Benefit Plan, as from time to time amended. 1.4 CODE. The Internal Revenue Code of 1986, as from time to time amended. 1.5 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. 1.6 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. 1.7 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. 1.8 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 (as it may be adjusted from time to time pursuant to the Code). 1.9 EFFECTIVE DATE. The effective date of this Plan is September 15, 1992. 1.10 HONEYWELL. Honeywell Inc., a Delaware corporation. 2 1.11 NORMAL RETIREMENT. "Normal Retirement" by a Participant on or after his or her "Social Security Retirement Age" as defined in his or her Base Plan. 1.12 PARTICIPANT. An employee of the Company who was covered under the Corporate Executive Compensation Plan at the time of his or her cessation of active work with the Company, who is a participant in the Base Plan on or after the Effective Date, and who is nominated by the Personnel Committee to participate in this Plan. 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. 1.14 PLAN. This Honeywell Mid-Career Hire Supplementary Executive Retirement Plan ("Mid-Career SERP"). 1.15 PREDECESSOR EMPLOYER. The last employer for whom Participant was engaged on a substantially full-time basis prior to his or her date of hire by Honeywell as an employee, partner, officer, director, or principal. The term shall also include any "Affiliated Company", as defined in the Base Plan, of the Predecessor Employer. 1.16 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 by applying the laws of the state or country in which it determines that the Participant is domiciled at the time of such determination of status. 3 ARTICLE II - PLAN FORMULA 2.1 MID-CAREER SERP FORMULA. That annual benefit equal to Paragraph (a), minus Paragraph (b), less Paragraph (c). (a) The applicable benefit computed with respect to the Participant 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 the amount of any "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 the Base Plan; and (v) by including "Augmented Credited Service for Benefit Accrual" under this Mid-Career SERP, if the Mid-Career SERP is applicable to the Participant. 4 (b) the applicable benefit computed with respect to the Participant 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 the amount of any "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 the Base Plan; and (v) by excluding "Augmented Credited Service for Benefit Accrual" under this Mid-Career SERP, if such Plan is applicable to the Participant. (c) the actuarial equivalent of the annual benefit payable with respect to the Participant under individualized annuity or supplementary executive retirement arrangements provided by Honeywell and specified on Table III. 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 and benefits under any other annuity or supplementary retirement arrangement provided by the Company, in accordance with the Mid-Career 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 and benefits under any other annuity or supplementary retirement arrangement provided by the Company, in accordance with the Mid-Career 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 this Plan, each Participant's accrued benefit under this Plan shall become immediately and fully vested and shall be paid to the Participant in accordance with Section 4.3(a) of this Plan. For purposes of this Plan, a "Change in Control" of Honeywell 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 Honeywell, any subsidiary of Honeywell, any "person" (as hereinabove defined) acting on behalf of Honeywell as underwriter pursuant to an offering who is temporarily holding securities in connection with such offering, any trustee or other fiduciary holding securities under an employee benefit plan of Honeywell or any corporation owned, directly or indirectly, by the stockholders of Honeywell in substantially the same proportions as their ownership of stock of Honeywell), is or becomes the "beneficial owner" (as defined in Rule 13d-3 under the Exchange Act), directly or indirectly, of securities of Honeywell representing 30 percent or 6 more of the combined voting power of Honeywell's then outstanding securities; (b) during any period not to exceed two consecutive years (not including any period prior to the Effective Date), individuals who at the beginning of such period constitute the Board of Directors of Honeywell (the "Board"), and any new director (other than a director designated by a "person" who has entered into an agreement with Honeywell to effect a transaction described in clause (a), (c) or (d) of this Section) whose election by the Board of nomination for election by Honeywell'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 Honeywell approve a merger or consolidation of Honeywell with any other corporation, other than (i) a merger or consolidation which would result in the voting securities of Honeywell 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 Honeywell or such surviving entity outstanding immediately after such merger or consolidation or (ii) a merger or consolidation effected to implement a recapitalization of Honeywell (or similar transaction) in which no "person" (as hereinabove defined) acquires more than 30 percent of the combined voting power of Honeywell's then outstanding securities; or (d) the stockholders of Honeywell approve a plan of complete liquidation of Honeywell or an agreement for the sale or disposition by Honeywell 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 less the benefits under any other individualized annuity or supplementary retirement arrangement provided by the Company, 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 less the benefits under any other individualized annuity or supplementary retirement arrangement provided by the Company, in accordance with the Mid-Career 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 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 less the benefits under any other individualized annuity or supplementary retirement arrangement provided by the Company, in accordance with the Mid-Career 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 8 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 less the benefits under any other individualized annuity or supplementary retirement arrangement provided by the Company, in accordance with the Mid- Career 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 any recipient ceases to be a Child and the remaining such Children shall thereupon receive an equal share of such benefit. 3.8 VESTED PARTICIPANT'S BENEFIT. Upon the receipt of benefits by a Participant under his or her Base Plan who is not eligible for Early Retirement but for whom a specified accrued benefit has been determined under this Plan in accordance with Section 8.3 of this Plan, he or she shall be eligible for life for an annual benefit determined by calculating the Participant's "Vested Terminated Participant Benefit" under the Participant's Base Plan in accordance with the Mid-Career SERP Formula as prescribed in Section 2.1. 9 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 this 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 this Plan. (b) LUMP SUM FORM OF PAYMENT. Notwithstanding the provisions of Paragraph (a) of 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 this 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 of Honeywell, 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 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 10 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 Sections 3.5 and 3.6 of this 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 this 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 within 3 years 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 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 11 in Table I, which may be modified from time to time by the Board of Directors of Honeywell) 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 (hereinafter referred to as "IRS") 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 IRS; 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 Code, published IRS 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. The Company shall undertake at its sole expense to defend any tax claims described herein which are asserted by the IRS 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 IRS, by any state revenue authority or by a lower court. The Company also agrees to 12 reimburse any Participant for any interest or penalties in respect of Federal or state tax claims hereunder upon receipt of documentation of same. Any distributions from this 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 of Honeywell, 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 and then reduced by a penalty, which shall be forfeited to the Company which is equal to 10 percent of the present value of any 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, 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. 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 except in the event of a Change in Control as defined in Section 3.3; 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 a Change in Control as defined in Section 3.3, the Board may not amend or terminate the Plan in any manner that shall adversely affect a benefit payable on the Normal or Early Retirement, death or Permanent and Total Disability of, or any available optional form of payment to, a Participant for a period of 3 years from the date of the Change in Control. 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 4.3(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 this 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 beneficiary. 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 vested accrued benefit is determined with respect to any other Participant in this 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. Attached hereto 17 as Table II is a list of the Participants described in subparts (ii) and (iii) above and the amount of their accrued benefits under this Plan which became vested in 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 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 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 this 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 that material or information is necessary; and 19 (d) An explanation of this 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, 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 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 20 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 (Effective 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 22 TABLE II VESTED ACCRUED BENEFITS UNDER THE MID-CAREER SERP THROUGH DECEMBER 31, 1993 The following Participant, who was determined in accordance with the provisions of Section 8.3(iii) of this Plan, has a vested accrued benefit under this Plan payable at his "Social Security Retirement Age", as defined in the Base Plan, in the indicated monthly amounts as calculated on a life annuity basis: NAME MONTHLY LIFE ANNUITY PAYABLE AT SOCIAL SECURITY RETIREMENT AGE ------------------------------------------------------------------------------- Grierson, James J. . . . . . . . . . . . . . . . . . . . . . . . . . . $3,505.43 23 TABLE III ACTUARIAL EQUIVALENT OF ANNUITY AND INDIVIDUALIZED SERP ARRANGEMENTS The following are the actuarial equivalents computed on a monthly life only basis of the individualized annuity or SERP arrangements provided by the Company to the specified Participants: PARTICIPANT ARRANGEMENT MONTHLY AMOUNT 24 EX-10.III(C) 6 EXHIBIT 10III(C) Exhibit (10)(iii)(c) HONEYWELL-NORWEST RABBI TRUST AGREEMENT (Amended and Restated Effective September 20, 1994) TABLE OF CONTENTS ARTICLE I - THE TRUST AND TRUST FUND . . . . . . . . . . . . . . . . . . . . 3 1.1 ESTABLISHMENT OF TRUST . . . . . . . . . . . . . . . . . . . . . 3 1.2 PAYMENTS TO PLANS' PARTICIPANTS AND THEIR BENEFICIARIES. . . . . 5 ARTICLE II - RELEASE OF THE TRUST FUNDS . . . . . . . . . . . . . . . . . . 8 2.1 TRUSTEE RESPONSIBILITY REGARDING PAYMENTS TO PLANS' PARTICIPANTS AND THEIR BENEFICIARIES WHEN COMPANY IS INSOLVENT. . . . . . . . . . . . . . . . . . . . . . . . . . . . 8 2.2 RECAPTURE OF EXCESS ASSETS . . . . . . . . . . . . . . . . . . . 10 2.3 RETURN OF ASSETS TRANSFERRED TO TRUSTEE UPON POTENTIAL CHANGE IN CONTROL . . . . . . . . . . . . . . . . . . . . . . . . . . . 11 ARTICLE III - TRUST FUND AND INVESTMENT AUTHORITY. . . . . . . . . . . . . . 12 3.1 TRUST FUND . . . . . . . . . . . . . . . . . . . . . . . . . . . 12 3.2 INVESTMENT AUTHORITY . . . . . . . . . . . . . . . . . . . . . . 12 3.3 INVESTMENT MANAGERS. . . . . . . . . . . . . . . . . . . . . . . 15 ARTICLE IV - CHANGE IN CONTROL . . . . . . . . . . . . . . . . . . . . . . . 16 4.1 CHANGE IN CONTROL. . . . . . . . . . . . . . . . . . . . . . . . 16 4.2 POTENTIAL CHANGE IN CONTROL. . . . . . . . . . . . . . . . . . . 17 4.3 NOTICE TO TRUSTEE. . . . . . . . . . . . . . . . . . . . . . . . 18 ARTICLE V - TRUSTEE ACCOUNTING; RESPONSIBILITY . . . . . . . . . . . . . . . 19 5.1 TRUSTEE ACCOUNTING . . . . . . . . . . . . . . . . . . . . . . . 19 5.2 RESPONSIBILITIES OF TRUSTEE. . . . . . . . . . . . . . . . . . . 20 ARTICLE VI - RESIGNATION AND REMOVAL OF TRUSTEE, SUCCESSOR TRUSTEE . . . . . 23 6.1 RESIGNATION AND REMOVAL OF TRUSTEE . . . . . . . . . . . . . . . 23 6.2 APPOINTMENT OF SUCCESSOR . . . . . . . . . . . . . . . . . . . . 24 ARTICLE VII - AMENDMENT OR TERMINATION . . . . . . . . . . . . . . . . . . . 26 7.1 AMENDMENT. . . . . . . . . . . . . . . . . . . . . . . . . . . . 26 7.2 TERMINATION. . . . . . . . . . . . . . . . . . . . . . . . . . . 26 ARTICLE VIII - MISCELLANEOUS . . . . . . . . . . . . . . . . . . . . . . . . 27 8.1 INVALID PROVISIONS . . . . . . . . . . . . . . . . . . . . . . . 27 8.2 NON-ASSIGNMENT . . . . . . . . . . . . . . . . . . . . . . . . . 27 8.3 GOVERNING LAW. . . . . . . . . . . . . . . . . . . . . . . . . . 27 8.4 EFFECTIVE DATE . . . . . . . . . . . . . . . . . . . . . . . . . 27 8.5 FURTHER ASSURANCES . . . . . . . . . . . . . . . . . . . . . . . 27 8.6 NOTICES. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27 8.7 STATUS OF EXECUTIVES . . . . . . . . . . . . . . . . . . . . . . 28 8.8 GENDER . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28 8.9 SUCCESSORS . . . . . . . . . . . . . . . . . . . . . . . . . . . 29 8.10 COUNTERPARTS . . . . . . . . . . . . . . . . . . . . . . . . . . 29 EXHIBIT A. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30 HONEYWELL SUPPLEMENTARY RETIREMENT PLANS. . . . . . . . . . . . . . . . 30 EXHIBIT B. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 31 HONEYWELL SUPPLEMENTARY RETIREMENT PLANS' PAYMENT SCHEDULE AND PARTICIPANTS' VALUATION AS OF MARCH 1, 1993 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 31 EXHIBIT C. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 32 ACTUARIAL ASSUMPTIONS AND METHODOLOGY . . . . . . . . . . . . . . . . . 32 EXHIBIT D. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 33 SCHEDULE OF TRUSTEE FEES. . . . . . . . . . . . . . . . . . . . . . . . 33 ii HONEYWELL-NORWEST RABBI TRUST AGREEMENT (Amended and Restated Effective September 20, 1994) AGREEMENT made as of the 26 day of February, 1993, and amended as of September 20, 1994, by and between Honeywell Inc., a corporation organized under the laws of the State of Delaware (hereinafter referred to as the "Company"), and Norwest Bank Minnesota, NA, a national banking association (hereinafter referred to as the "Trustee"). WITNESSETH: WHEREAS, in addition to the benefits provided under the Honeywell Retirement Benefit Plan to certain management employees and retirees under said plan (who are sometimes hereinafter called "Executives" or referred to singly as "Executive"), or their beneficiaries, selected by the Company, the Company has adopted supplemental retirement plans as listed in Exhibit A as the same have been or may hereafter be amended or restated (hereinafter called the "Plans" or, where the context requires the singular, the "Plan"); and WHEREAS, the Company has incurred, or expects to incur liability under the terms of such Plans, with respect to the individuals participating in such Plans; WHEREAS, the Company wishes to establish a trust (hereinafter called "Trust") and to contribute to the Trust assets that shall be held therein, subject to the claims of the Company's creditors in the event of the Company's Insolvency, as herein defined, until paid to the Plans' participants and their beneficiaries in such manner and at such times as specified in the Plans; 1 WHEREAS, it is the intention of the parties that the Trust shall constitute an unfunded arrangement and shall not affect the status of the Plans as unfunded plans maintained for the purpose of providing deferred compensation for a select group of management or highly compensated employees for purposes of Title I of the Employee Retirement Income Security Act of 1974, as amended; WHEREAS, it is the intention of the Company to make contributions to the Trust to provide itself with a source of funds to assist it in the meeting of its liabilities under the Plans; NOW, THEREFORE, the parties do hereby establish the Trust and agree that the Trust shall be comprised, held and disposed of as follows: 2 ARTICLE I - THE TRUST AND TRUST FUND 1.1 ESTABLISHMENT OF TRUST. (a) The Company hereby deposits with the Trustee in trust $4 million, which shall become the principal of the Trust to be held, administered and disposed of by Trustee as provided in this Trust Agreement. (b) The Trust hereby established shall be irrevocable. (c) The Trust is intended to be a grantor trust, of which the Company is the grantor, within the meaning of subpart E, part I, subchapter J, chapter 1, subtitle A of the Internal Revenue Code of 1986, as amended (hereinafter referred to as the "Code"), and shall be construed accordingly. (d) The principal of the Trust, and any earnings thereon shall be held separate and apart from other funds of the Company and shall be used exclusively for the uses and purposes of the Plans' participants and general creditors as herein set forth. The Plans' participants and their beneficiaries shall have no preferred claim on, or any beneficial ownership interest in any assets of the Trust. Any rights created under the Plans and this Trust Agreement shall be mere unsecured contractual rights of the Plans' participants and their beneficiaries against the Company. Any assets held by the Trust will be subject to the claims of the Company's general creditors under federal and state law in the event of Insolvency, as defined in Section 2.1 herein. (e) The Company, in its sole discretion, may at any time, or from time to time, make additional deposits of cash or other property in trust with the Trustee to augment the principal to be held, administered and disposed of by the Trustee as provided in this Trust Agreement. Neither the Trustee nor any Plan's participant or beneficiary shall have any right to compel such additional deposits. Not later than seven (7) days after the occurrence of a Potential Change in Control of the Company (as defined in Article IV hereof), the Company shall deliver to the Trustee to be held 3 in trust hereunder an additional amount of cash (or marketable securities having a fair market value equal to such amount, or some combination thereof) representing the sum of the amounts, after taking into account the current cash surrender value of life insurance contacts owned by the Trust and the fair market value of other assets then held in the Trust, determined by the Company's actuaries, using the assumptions and methodology set forth in Exhibit B, that will be sufficient to fund the Company's obligations to pay the Executives' or their beneficiaries' projected benefits under the Plans, plus such other amounts as may be necessary for expenses and other costs of maintaining the Trust (such sum, collectively, the "Funding Amount"). In the event of a Potential Change in Control of the Company, the Company may at six-month intervals commencing on the date of such Potential Change in Control or more frequently as determined by the Company, unless the Trust Funds (as defined in Section 3.1(a)) shall theretofore have been released pursuant to Article II hereof, recalculate the Funding Amount as of the end of the month immediately preceding such six-month or such other more frequent interval date, treating the Potential Change in Control as having occurred at the end of such month. If the amount so calculated exceeds the fair market value of the assets then held in the Trust (as determined above), the Company may pay to the Trustee an amount in cash (or marketable securities having a fair market value equal to such amount, or some combination thereof) equal to such excess. If the Funding Amount so calculated is less than the fair market value of the assets held in trust, the Trustee, upon receipt of a written request from the Company, which written request is received by the Trustee prior to the occurrence of a Change in Control of the Company, shall distribute to the Company such difference in cash. (f) Upon a Change in Control of the Company, the Company shall, as soon as possible, but in no event longer than 10 days following the Change in Control of the Company, as defined herein, make an irrevocable contribution to the Trust of the excess, if any, of the Funding Amount over fair market value of the assets then held in the Trust (as determined 4 above) determined as of the date on which the Change in Control of the Company occurred. (g) The Company shall provide the Trustee with a certified copy of the Plans and all amendments thereto and of the resolutions of the Board of Directors of the Company approving the Plans and all amendments thereto, promptly upon their adoption or, if later, the date of this Trust Agreement. 1.2 PAYMENTS TO PLANS' PARTICIPANTS AND THEIR BENEFICIARIES. (a) The Company shall deliver to the Trustee a schedule (the "Payment Schedule") in the format and as initially provided in Exhibit C that indicates the amounts payable in respect of each Plan's participant (and his or her beneficiaries), that provides a formula or other instructions acceptable to Trustee for determining the amounts so payable, the form in which such amount is to be paid (as provided for or available under the Plans), and the time of commencement for payment of such amounts. Except as otherwise provided herein, the Trustee shall make payments to the Plans' participants and their beneficiaries in accordance with such Payment Schedule. The Trustee shall make provision for the reporting and withholding of any federal or state taxes that may be required to be withheld with respect to the payment of benefits pursuant to the terms of the Plans and shall pay amounts withheld to the appropriate taxing authorities or determine that such amounts have been reported, withheld and paid by the Company. A modified Payment Schedule shall be delivered by the Company to the Trustee annually upon each anniversary of the effective date of this Trust Agreement and upon the occurrence of any event requiring a modification of the Payment Schedule. Following a Change in Control of the Company, the Company shall also furnish a Payment Schedule or modified Payment Schedule for any or all Plan(s) upon request by the Trustee at any other time. (b) The entitlement of a Plan participant or his or her beneficiaries to benefits under the Plans shall be determined by the Company or such party as it 5 designates under the Plans, and any claim for such benefits shall be considered and reviewed under the procedures set out in the Plans. (c) The Company may make payment of benefits directly to Plans' participants or their beneficiaries as they become due under the terms of the Plans. The Company shall notify the Trustee of its decision to make payment of benefits directly prior to the time amounts are payable to participants or their beneficiaries. In addition, if the principal of the Trust, and any earnings thereon, are not sufficient to make payments of benefits in accordance with the terms of the Plans, the Company shall make the balance of each such payment as it falls due. The Trustee shall notify the Company where principal and earnings are not sufficient and shall thereafter reduce the amounts payable to the Plans' participants or their beneficiaries by multiplying such amounts by a fraction, the numerator of which is the value of the Trust Fund and the denominator of which is the sum of the actuarial present value of the Plans' participants' (or their beneficiaries') estimated monthly accrued benefits shown on Exhibit C. The actuarial present values shall be calculated as of the date that the monthly benefits are to be paid. Upon a Change in Control of the Company, a modified Payment Schedule will be prepared. (d) In the event any Executive is determined to be subject to federal income tax on any amount payable under the Trust prior to the time of payment hereunder, the entire amount determined to be so taxable shall be distributed by the Trustee to such Executive. An amount 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 (hereinafter referred to as the "IRS") addressed to the Executive 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 IRS; or 6 (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 Code, published IRS rulings, court decisions or other substantial precedent, amounts hereunder are subject to federal 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 IRS or by any state revenue authority against any Executive, including attorneys' fees and costs of appeal, and shall have the sole authority to determine whether or not to appeal any determination made by the IRS, by any state revenue authority or by a lower court. The Company shall also reimburse any Executive for any interest or penalties in respect of federal or state tax claims hereunder upon receipt of documentation of same. In addition, the Company shall reimburse any Executive for the amount of excise taxes paid by the Executive pursuant to a determination of the IRS under Section 4999 of the Code, as it may be amended from time to time, with respect to the payment made to the Executive by the Trust and with respect to any such reimbursement, following a final determination of a federal court affirming any such determination by the IRS. Any distributions from the Trust Fund to an Executive under this Section 1.2(d) shall be applied to reduce Company liabilities to such Executive under the Plans. 7 ARTICLE II - RELEASE OF THE TRUST FUNDS 2.1 TRUSTEE RESPONSIBILITY REGARDING PAYMENTS TO PLANS' PARTICIPANTS AND THEIR BENEFICIARIES WHEN COMPANY IS INSOLVENT. (a) The Trustee shall cease payment of benefits to the Plans' participants and their beneficiaries if the Company is Insolvent. The Company shall be considered "Insolvent" for purposes of this Trust Agreement if: (i) the Company is unable to pay its debts as they become due; or (ii) the Company is subject to a pending proceeding as a debtor under the United States Bankruptcy Code; or (iii) the Company shall commence a voluntary case under any applicable bankruptcy, insolvency or other similar law now or hereafter in effect, or consent to the entry of an order for relief in an involuntary case under any such law, or consent to the appointment of taking possession by receiver, liquidator, assignee, custodian, trustee, sequestrator (or similar official) of the Company or for any substantial part of its property, or make any assignment for the benefit of creditors, or take any corporate action in furtherance of any of the foregoing. (b) At all times during the continuance of the Trust, as provided in Section 1.1(d) hereof, the principal and income of the Trust shall be subject to claims of general creditors of the Company under federal and state law as set forth below: (i) The Board of Directors and the Chief Executive Officer of the Company shall have the duty to inform the Trustee in writing of the Company's Insolvency. If a person claiming to be a creditor of the Company alleges in writing to Trustee that the Company has become Insolvent, the Trustee shall determine whether the Company is Insolvent and, pending such determination, the 8 Trustee shall discontinue payment of benefits to Plans' participants or their beneficiaries. (ii) Unless the Trustee has actual knowledge of the Company's Insolvency, or has received notice from the Company or a person claiming to be a creditor alleging that the Company is Insolvent, the Trustee shall have no duty to inquire whether the Company is Insolvent. The Trustee may in all events rely on such evidence concerning the Company's solvency as may be furnished to the Trustee and that provides the Trustee with a reasonable basis for making a determination concerning the Company's solvency. (iii) If at any time the Trustee has determined that the Company is Insolvent, the Trustee shall discontinue payments to Plans' participants or their beneficiaries and shall hold the assets of the Trust for the benefit of the Company's general creditors. Nothing in this Trust Agreement shall in any way diminish any rights as general creditors of the Company with respect to benefits due under the Plans or otherwise. (iv) The Trustee shall resume the payment of benefits to the Plans' participants or their beneficiaries in accordance with Section 1.2 of this Trust Agreement only after the Trustee has determined that the Company is not Insolvent (or is no longer Insolvent). (c) Provided that there are sufficient assets, if the Trustee discontinues the payment of benefits from the Trust pursuant to Section 2.1(b) hereof and subsequently resumes such payments, the first payment following such discontinuance shall include the aggregate amount of all payments due to the Plans' participants or their beneficiaries under the terms of the Plans for the period of such discontinuance, less the aggregate amount of any payments made to the Plans' participants or their beneficiaries by the Company in lieu of the payments provided for hereunder during any such period of discontinuance. 9 2.2 RECAPTURE OF EXCESS ASSETS. (a) In the event the Trust shall hold Excess Assets (as defined in subsection (b)), the Company, at its option, may direct the Trustee to return part or all of such Excess Assets to the Company. (b) "Excess Assets" is that market value of assets of the Trust which are in excess of one hundred twenty-five percent (125%) of the present value of all benefits payable under the Plans on a pre-tax basis to the Plans' participants and their beneficiaries. (c) The calculation required by Section 2.2(b) shall be based on the terms of the Plans and the actuarial assumptions and methodology set forth in Exhibit B, except that life insurance contracts owned by the Trust shall be valued at their current cash surrender value. Before a Change in Control of the Company, the calculation shall be made by the Company or a qualified actuary or consultant selected by the Company. After a Change in Control of the Company, the calculation shall be made by a qualified actuary or consultant selected by the Trustee. (d) Excess Assets shall be returned to the Company in the following order of priority: (i) Cash and cash equivalents; (ii) All taxable investments of the Trust (other than cash and cash equivalents and contracts with insurers), in such order as the Company may request; (iii) All non-taxable investments of the Trust (other than cash and cash equivalents and contracts with insurers), in such order as the Company may request; and (iv) Contracts with insurers. 10 2.3 RETURN OF ASSETS TRANSFERRED TO TRUSTEE UPON POTENTIAL CHANGE IN CONTROL. In the event the Company delivers funds to the Trustee pursuant to Section 1.1(e) upon a Potential Change in Control of the Company, any such amount which shall have been transferred pursuant to Section 1.1(e), including any additional amounts transferred as a result of recalculations at six-month intervals, shall be returned to the Company no later than the 30th day following receipt by the Trustee of a notice that the Board of Directors has adopted a resolution that such Potential Change of Control of the Company has lapsed unless at any time prior to such return date a Change in Control of the Company or another Potential Change in Control of the Company shall have occurred; provided, however, that in no event shall the corpus of the Trust after any transfer of funds pursuant to this Section 2.3 be less than the corpus of the Trust immediately prior to the initial transfer of additional funds to the Trust after the occurrence of a Potential Change in Control of the Company pursuant to Section 1.1(e). 11 ARTICLE III - TRUST FUND AND INVESTMENT AUTHORITY 3.1 TRUST FUND. (a) As used in this Trust Agreement, the term "Trust Fund" shall mean the amounts delivered to the Trustee as described in Section 1.1(a) hereof all amounts delivered thereafter pursuant to Section 1.1(e) and Section 1.1(f) hereof, plus all interest and dividends paid in respect thereof (and less such amounts distributed from the Trust pursuant to Sections 1.2, 2.1, 2.2 and 5.2(i) hereof), in whatever form held or invested as provided in this Trust Agreement. (b) The Trust is intended to be a trust of which the Company is treated as the owner for federal income tax purposes in accordance with the provisions of Sections 671 through 679 of the Code. If the Trustee, in its sole discretion, deems it necessary or advisable for the Company or the Trustee to undertake or refrain from undertaking any actions (including, but not limited to, making or refraining from making any elections or filings) in order to ensure that the Company is at all times treated as the owner of the Trust for federal income tax purposes, the Company or the Trustee will undertake or refrain from undertaking (as the case may be) such actions. The Company hereby irrevocably authorizes the Trustee to be its attorney-in-fact for the purpose of performing any act which the Trustee, in its sole discretion, deems necessary or advisable in order to accomplish the purposes and the intent of this Agreement. (c) During the term of the Trust, all income received by the Trust, net of expenses and taxes, shall be accumulated and reinvested. 3.2 INVESTMENT AUTHORITY. Prior to a Change in Control of the Company, the Trust Fund shall be invested primarily in insurance contracts or policies. The Trustee shall have the investment discretion and power to invest and reinvest in, or exchange assets for, any such insurance contracts or policies (including, by way of example and not by limitation, variable insurance policies where the cash value is invested in equity or other funds subject to the control of the insurance carrier and which may increase or 12 decrease in value with the performance of the fund over time), or other properties (as investments in such other properties may be directed by the Company or, absent such direction, as the Trustee deems advisable without being limited in the selection of investments by any statutes, rules of law, custom or usage). After a Change in Control of the Company, the Trustee shall have and exercise sole investment discretion with respect to all assets of the Trust, including the power to appoint an Investment Manager (who may be an affiliate of the Trustee). Subject to the foregoing, the Trustee shall possess the powers conferred upon the Trustee either expressly by, or by necessary implication of, the other provisions of this Trust Agreement, and all other powers, not inconsistent with law or equity, as may be necessary and proper to attain the objectives of this Trust Agreement. By way of illustration, and not by way of limitation, the Trustee shall have power: (i) to enter into any annuity or other contract or policy with an insurance company or companies, either as an investment or otherwise, provided that the Trustee shall be the sole owner of all such contracts or policies and all such contracts or policies shall be held as assets of the Trust; (ii) to invest such amounts as it reasonably determines to be appropriate for administrative convenience or short term liquidity needs in interest-bearing depository accounts established within the Trustee's banking department; (iii) to purchase, receive or subscribe for any securities or other property; (iv) to exercise any conversion privilege or subscription right available in connection with any such property; to oppose or to consent to the reorganization, consolidation, merger or readjustments of the finances of any corporation, entity or association, or to the sale, mortgage, pledge or lease of the property of any corporation, entity or association any of the securities of which may at any time be held by it and to do any act with reference thereto, including the exercise of options, the making of agreements or subscriptions and 13 the payment of expenses, assessments or subscriptions, which may be deemed necessary or advisable in connection therewith and to hold and retain any securities or other property which it may so acquire; and to deposit any such property with any protective, reorganization or similar committee, and to pay part of the expenses and compensation of any such committee and any assessments levied with respect to any property so deposited; (v) to commence or defend suits or legal proceedings and to represent the Trust in all suits or legal proceedings; to settle, compromise or submit to arbitration any claims, debts or damages due or owing to or from the Trust; (vi) subject to Section 5.2(e) and Section 5.2(f), to have and possess any or all of the rights of an owner with respect to any life insurance contract or policy held in the Trust Fund including, without limiting the generality of the foregoing, the rights to receive or apply dividends or distributive shares or loans on account of any such policy as may be available; to sell, assign or pledge the policy; to surrender the policy; and to exercise any option or privilege granted in the policy; (vii) to register any securities held by it hereunder in its own name or in the name of a nominee with or without the addition of words indicating that such securities are held in a fiduciary capacity and to hold any securities in bearer form and to deposit any securities or other property in a depository or a clearing corporation; (viii) to make, execute and deliver, as Trustee, any and all deeds, leases, mortgages, conveyances, waivers, releases or other instruments in writing necessary or desirable for the accomplishment of any of the powers listed in this Section 3.2; (ix) to invest in securities (including stock or rights to acquire stock) or obligations issued by the Company; and 14 (x) to take any and all actions as may be necessary or desirable for the administration of the Trust and the protection of the Trust Fund. All rights associated with assets of the Trust shall be exercised by the Trustee or the person designated by the Trustee, and shall in no event be exercisable by or rest with Plan participants except that voting rights with respect to Trust assets will be exercised by the Company. Provided, however, the Company shall have the right at anytime prior to a Change in Control of the Company, and from time to time prior to a Change in Control of the Company in its sole discretion, to substitute assets of equal fair market value for any asset held by the Trust. This right is exercisable by the Company in a non-fiduciary capacity without the approval or consent of any person in a fiduciary capacity. Prior to a Change in Control of the Company, if an investment requirement or directed investment transaction under or pursuant to this Section 3.2 violates any duty to diversify, to maintain liquidity or to meet any other investment standard under the Trust or applicable law, the entire responsibility shall rest upon the Company. 3.3 INVESTMENT MANAGERS. After a Change in Control of the Company, the Trustee may from time to time appoint one or more Investment Managers to manage any portion of the Trust Fund and, with respect to such portion, to direct the Trustee with respect to effecting investment transactions on behalf of the Trust Fund and exercising such other powers as may be granted to Investment Managers hereunder. 15 ARTICLE IV - CHANGE IN CONTROL 4.1 CHANGE IN CONTROL. For purposes of this Trust Agreement, 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 subsidiary of the Company, any "person" (as hereinabove defined) acting on behalf of the Company as underwriter pursuant to an offering who is temporarily holding securities in connection with such offering, 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 owners" (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; (b) during any period of not more than 2 consecutive years (not including any period prior to January 17, 1989), 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 4.1) whose election by the Board or 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 16 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 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. 4.2 POTENTIAL CHANGE IN CONTROL. For purposes of this Trust Agreement, a "Potential Change in Control" of the Company shall have occurred if: (a) the Company enters into any agreement the consummation of which would result in the occurrence of a Change in Control of the Company; or (b) any "person" (as defined in Section 4.1(a)) (including the Company) publicly announces an intention to take actions which if consummated would result in a Change in Control of the Company; or (c) securities representing more than l0 percent of the combined voting power of the Company's then outstanding securities are acquired by any person (as defined in Section 4.1(a)), (other than the Company, any subsidiary of the Company, any "person" (as defined in Section 4.1(a)) acting on behalf of the Company as underwriter pursuant to an offering who is temporarily holding securities in connection with such offering, 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), unless such person has reported or is 17 required to report such ownership (which shall not represent in excess of 25 percent of the combined voting power of the Company's then outstanding securities) on Schedule 13G under the Exchange Act (or any comparable or successor report) or on Schedule 13D under the Exchange Act (or any comparable or successor report) which Schedule 13D does not state any intention to, or reserve the right to, control or influence the management or policies of the Company or engage in any of the actions specified in Item 4 (or any comparable Item) of such Schedule 13D (other than the disposition of the securities) and, within 10 days of being requested by the Company to advise it regarding the same, certifies to the Company that (i) such person acquired such securities of the Company in excess of 14.9 percent of the combined voting power of the Company's than outstanding securities inadvertently and (ii) such person, together with its affiliates, will not acquire any additional securities of the Company while the beneficial owner (as defined in Rule 13d-3 under the Exchange Act) of more than 14.9 percent of the combined voting power of the Company's then outstanding securities; provided, however, that if the person requested to so certify fails to do so within 10 days, then such occurrence shall become a Potential Change in Control of the Company immediately after the expiration of such 10 day period; or (d) the Board adopts a resolution to the effect that a Potential Change in Control of the Company has occurred. 4.3 NOTICE TO TRUSTEE. The Board of Directors and the Chief Executive Officer of the Company shall have the duty to inform the Trustee in writing that a Potential Change in Control of the Company or Change in Control of the Company has occurred and such notice shall be given within 5 days of the occurrence of such Potential Change in Control of the Company or Change in Control of the Company. The Trustee may rely on such notice or on any other actual notice reasonably satisfactory to the Trustee, of such a Change in Control of the Company or Potential Change in Control of the Company which the Trustee may receive. 18 ARTICLE V - TRUSTEE ACCOUNTING; RESPONSIBILITY 5.1 TRUSTEE ACCOUNTING. (a) The duties and responsibilities of the Trustee shall be limited to those expressly set forth in this Trust Agreement, and no implied covenants or obligations shall be read into this Trust Agreement against the Trustee. (b) If, pursuant to Section 2.1 hereof, all or any part of the Trust Fund is at any time attached, garnished, or levied upon by any court order, or in case the payment, assignment, transfer, conveyance or delivery of any such property shall be stayed or enjoined by any court order, or in case any order, judgment or decree shall be made or entered by a court affecting such property or any part thereof, then and in any of such events the Trustee shall notify the Company and, upon its direction, the Trustee shall rely upon and comply with any such order, writ, judgment or decree, or take such other steps which the Company may direct, and it shall not be liable to the Company (or any of its subsidiaries) or any Executive by reason of following such directive or taking any action thereon, in the event that direction is not provided by the Company, even though such order, writ, judgment or decree subsequently may be reversed, modified, annulled, set aside or vacated. (c) The Trustee shall maintain such books, records and accounts as may be necessary for the proper administration of the Trust Fund, and shall render to the Company, on or prior to each February 15 following the date of this Trust Agreement until the termination of this Trust Agreement (and within 45 days of such termination), an accounting with respect to the Trust Fund as of the end of the then most recent calendar year (or as of the date of such termination). In the absence of the filing in writing with the Trustee by the Company of exceptions or objections to any such report within one year the Company shall be deemed to have approved such account; and in such case, the Trustee shall, to the maximum extent permitted by law, be released, relieved and discharged with respect to all matters and things set forth in such accounts as though such account had 19 been settled by the decree of a court of competent jurisdiction in any action or proceeding in which the Company, all other persons having fiduciary responsibility with respect to the Trust, and all persons having any beneficial interest in the Plans were parties. No person other than the Company may require an accounting or bring any action against the Trustee with respect to the Trust or its actions as Trustee. 5.2 RESPONSIBILITIES OF TRUSTEE. (a) The Trustee shall act with the care, skill, prudence and diligence under the circumstances then prevailing that a prudent person acting in like capacity and familiar with such matters would use in the conduct of an enterprise of a like character and with like aims; provided, however, that the Trustee shall incur no liability to any person for any action taken pursuant to a direction, request or approval given by the Company which is contemplated by, and in conformity with, the terms of the Plans or this Trust and is given in writing by the Company. In the event of a dispute between the Company and an Executive, the Trustee may apply to a court of competent jurisdiction to resolve the dispute. (b) If the Trustee undertakes or defends any litigation arising in connection with this Trust Agreement, the Company agrees to indemnify the Trustee against the Trustee's costs, expenses and liabilities (including, without limitation, reasonable attorneys' fees and expenses) relating thereto and to be primarily liable for such payments. If the Company does not pay such costs, expenses and liabilities in a reasonably timely manner, the Trustee may obtain payment from the Trust. (c) The Trustee may consult with legal counsel (who may also be counsel for the Company generally) with respect to any of its duties or obligations hereunder and may receive reimbursement for the payment of its reasonable and proper expenses and compensation from the Company, or, if not paid by the Company, directly from the Trust Fund. 20 (d) The Trustee may hire agents, accountants, actuaries, investment advisors, financial consultants or other professionals to assist it in performing any of its duties or obligations hereunder and may receive reimbursement for the payment of their reasonable and proper expenses and compensation from the Company, or, if not paid by the Company, directly from the Trust Fund. (e) The Trustee shall have, without exclusion, all powers conferred on trustees by applicable law, unless expressly provided otherwise herein, provided, however, that if an insurance policy is held as an asset of the Trust, the Trustee shall have no power to name a beneficiary of the policy other than the Trust, to assign the policy (as distinct from conversion of the policy to a different form) other than to a successor Trustee, or to loan to any person the proceeds of any borrowing against such policy. (f) However, notwithstanding the provisions of paragraph Section 5.2(e) above, the Trustee may, prior to a Change in Control of the Company, loan to the Company the proceeds of any borrowing against an insurance policy held as an asset of the Trust. (g) Notwithstanding any powers granted to the Trustee pursuant to this Trust Agreement or by applicable law, the Trustee shall not have any power that could give this Trust the objective of carrying on a business and dividing the gains therefrom, within the meaning of section 301.7701-2 of the Procedure and Administrative Regulations promulgated pursuant to the Code. (h) The Trustee shall also be fully protected in relying upon any notice given hereunder which it in good faith believes to be genuine and executed and delivered in accordance with this Trust. (i) The Trustee shall be reimbursed by the Company for its reasonable expenses incurred in connection with the performance of its duties hereunder and shall be paid reasonable fees for the performance of such duties in accordance with Exhibit D attached to this Trust Agreement, 21 which may be revised upon agreement of the parties effective as of each anniversary of the effective date of this Trust Agreement commencing with the second anniversary of this Trust Agreement. Such fees and expenses shall be deducted by the Trustee from the Trust Fund at the times stipulated in Exhibit D. (j) The Trustee shall not be responsible for the preparation and filing of any reports or returns required by law to be filed with any federal or state governmental authorities with respect to the Trust; provided, however, that the Trustee shall, upon request of the Company, supply the necessary information for preparation of such reports or returns and shall, if necessary and at the direction of the Company, sign any such reports or returns as Trustee. (k) In the event that the Company engages a third party administrator to assist the Company in the performance of its duties under this Trust Agreement, all directions to the Trustee shall be made by the Company. 22 ARTICLE VI - RESIGNATION AND REMOVAL OF THE TRUSTEE, SUCCESSOR TRUSTEE 6.1 RESIGNATION AND REMOVAL OF TRUSTEE. (a) The Trustee may resign at any time by written notice to the Company, which shall be effective 120 days after receipt of such notice unless the Company and the Trustee agree otherwise. (b) The Trustee may be removed by the Company on 15 days written notice to the Trustee or upon shorter notice accepted by Trustee; (c) Upon a Change in Control of the Company, as defined herein, the Trustee may not be removed by the Company for 2 years after the Change in Control of the Company; (d) If the Trustee resigns within 2 years after a Change in Control of the Company, as defined herein, the Company shall apply to a court of competent jurisdiction for the appointment of a successor Trustee or for instructions; (e) If the Trustee is removed by the Company more than 2 years after a Change in Control of the Company, as defined herein, the Trustee shall select a successor Trustee in accordance with the provisions of Section 6.2(b) hereof prior to the effective date of the Trustee's removal. (f) Upon resignation or removal of the Trustee and appointment of a successor Trustee, all assets of the Trust shall subsequently be transferred to the successor Trustee. The transfer shall be completed within 180 days after receipt of notice of resignation, removal or transfer, unless the Company extends the time limit. (g) If the Trustee resigns or is removed, a successor shall be appointed, in accordance with Section 6.2 or 6.1(d), as the case may be, hereof, by the effective date or resignation or removal under paragraphs (a) or (b) of this 23 Section 6.1. If no such appointment has been made, the Trustee may apply to a court of competent jurisdiction for appointment of a successor or for instructions. All expenses of the Trustee in connection with the proceeding shall be allowed as administrative expenses of the Trust. 6.2 APPOINTMENT OF SUCCESSOR. (a) If the Trustee resigns in accordance with Section 6.1(a) hereof, more than 2 years after a Change in Control of the Company or the Trustee is removed pursuant to Section 6.1(b) prior to a Change in Control of the Company, the Company may appoint any third party, such as a bank trust department or other party that may be granted corporate trustee powers under state law, as a successor to replace the Trustee upon resignation or removal. The appointment shall be effective when accepted in writing by the new Trustee, who shall have all of the rights and powers of the former Trustee, including ownership rights in the Trust assets. The former Trustee shall execute any instrument necessary or reasonably requested by Company or the successor Trustee to evidence the transfer. (b) If the Trustee is removed pursuant to the provisions of Section 6.1(e) hereof more than 2 years after a Change in Control of the Company and selects a successor Trustee, the Trustee may appoint any third party such as a bank trust department or other party that may be granted corporate trustee powers under state law. The appointment of a successor Trustee shall be effective when accepted in writing by the new Trustee. The new Trustee shall have all the rights and powers of the former Trustee, including ownership rights in Trust assets. The former Trustee shall execute any instrument necessary or reasonably requested by the successor Trustee to evidence the transfer. (c) The successor Trustee need not examine the records and acts of any prior Trustee and may retain or dispose of existing Trust assets, subject to Sections 5.1 and 5.2 hereof. The successor Trustee shall not be responsible for and the Company shall indemnify and defend the successor Trustee from any claim or liability resulting from any action or 24 inaction of any prior Trustee or from any other past event, or any condition existing at the time it becomes successor Trustee. 25 ARTICLE VII - AMENDMENT OR TERMINATION 7.1 AMENDMENT. This Trust Agreement may be amended by a written instrument executed by Trustee and the Company. Notwithstanding the foregoing, no such amendment shall conflict with the terms of the Plans or shall make the Trust revocable. 7.2 TERMINATION. (a) The Trust shall not terminate until the date on which Plan participants and their beneficiaries are no longer entitled to benefits pursuant to the terms of the Plans. Upon termination of the Trust, any assets remaining in the Trust shall be returned to the Company. (b) Upon written approval of participants or beneficiaries entitled to payment of benefits pursuant to the terms of the Plans, the Company may terminate this Trust prior to the time all benefit payments under the Plans have been made. All assets in the Trust at termination shall be returned to the Company. (c) This Agreement may not be amended by the Company for 2 years following a Change in Control of the Company, as defined herein. 26 ARTICLE VIII - MISCELLANEOUS 8.1 INVALID PROVISIONS. Any provision of this Trust Agreement prohibited by law shall be ineffective to the extent of any such prohibition, without invalidating the remaining provisions hereof. 8.2 NON-ASSIGNMENT. Benefits payable to Plans' participants and their beneficiaries under this Trust Agreement may not be anticipated, assigned (either at law or in equity), alienated, pledged, encumbered or subjected to attachment, garnishment, levy, execution or other legal or equitable process. 8.3 GOVERNING LAW. This Trust Agreement shall be governed by and construed in accordance with the laws of the State of Minnesota without regard to its principles of conflicts of laws. 8.4 EFFECTIVE DATE. The effective date of this amended and restated Trust Agreement shall be September 20, 1994. 8.5 FURTHER ASSURANCES. The Company shall at any time and from time to time, upon the reasonable request of the Trustee, execute and deliver such further instruments and do such further acts as may be necessary or proper to effectuate the purposes of this Trust. 8.6 NOTICES. Whenever in this Trust Agreement it shall be required or permitted that notice or demand be given or served by either party to this Trust Agreement, or by an Executive, such notice or demand shall be given or served in writing and sent to the parties at the addresses set forth below: If to Company: Honeywell Inc. ATTN: Vice President, Corporate Compensation and Benefits Honeywell Plaza Minneapolis, MN 55408 Fax: (612)951-2266 If to Trustee: Norwest Bank Minnesota, NA 27 ATTN: Ms. Jill Greene 6th Street and Marquette Minneapolis, MN 55479-0035 Fax: (612) 667-4620 If to an Executive, to the address of such Executive as listed next to his or her name on his or her Payment Schedule. All such notices shall be sent (i) by certified or registered mail and shall be deemed to be received 3 days after the date of mailing; (ii) by Federal Express or similar overnight courier and shall be deemed to be received one business day after delivery to Federal Express or similar overnight courier; (iii) by facsimile transmission and shall be deemed to be received on the date of transmission on a business day, or on the first business day following transmission if transmitted on a non-business day, or on the first business day following transmission if transmitted on a non-business day provided that telephonic confirmation of receipt of the transmission has been received promptly after transmission; or (iv) by personal service and shall be deemed to be received on the same day as service. Any such address or facsimile number may be changed from time to time by either party serving notices as above provided. 8.7 STATUS OF EXECUTIVES. Executives have only the Company's unfunded and unsecured promise to pay benefits under the Plans and the status of a general unsecured creditor. 8.8 GENDER. Neither the gender nor the number (singular or plural) of any word shall be construed to exclude another gender or number when a different gender or number would be appropriate. 28 8.9 SUCCESSORS. This Trust Agreement shall be binding upon and inure to the benefit of any successor to the Company or its business as the result of merger, consolidation, reorganization, transfer of assets or otherwise and any subsequent successor thereto. In the event of any such merger, consolidation, reorganization, transfer of assets or other similar transaction, the successor thereto shall promptly notify the Trustee in writing of its successorship and furnish the Trustee with the Payment Schedule specified in Section 1.2 of this Trust Agreement. In no event shall any such transaction described herein suspend or delay the rights of Executives to receive payments hereunder. 8.10 COUNTERPARTS. This Trust Agreement may be executed in any number of counterparts, each of which shall be deemed to be an original, but all of which shall together constitute only one Trust Agreement. IN WITNESS WHEREOF, the parties have executed this amended and restated Trust Agreement as of the effective date set forth in Section 8.4 hereof. HONEYWELL INC. NORWEST BANK MINNESOTA, NA By ____________________________ By_____________________________ Michael R. Bonsignore Name _______________________ Its Chairman and Chief Its Authorized Vice President Executive Officer 29 EXHIBIT A HONEYWELL SUPPLEMENTARY RETIREMENT PLANS (AMENDED AND RESTATED EFFECTIVE SEPTEMBER 20, 1994) Honeywell Supplementary Retirement Plan Honeywell Supplementary Executive Retirement Plan for Benefits in Excess of Limits under Tax Reform Act of 1986 Honeywell Supplementary Executive Retirement Plan for CECP Participants Honeywell Supplementary Executive Retirement Plan for Compensation in Excess of $200,000 Honeywell Supplementary Executive Retirement Plan for Mid-Career Hires G. Nichols Simonds Supplementary Executive Retirement Plan D. Larry Moore Supplementary Executive Retirement Agreement Pelham Supplementary Executive Retirement Agreement Yamashita Supplementary Executive Retirement Agreement EXHIBIT B ACTUARIAL ASSUMPTIONS AND METHODOLOGY Mortality: 85% of 1983 Group Annuity Mortality Table has been used, with separate rates for males and females, for healthy lives, and the OASDI Mortality Table has been used for disabled lives. Discount Rate: 8.5% per annum, compounded annually. Future Earnings Levels: 6.0% per year Employee Turnover: None Retirement Age: It has been assumed that the following early retirement utilization scale will be experienced: Age % Retiring Age % Retiring ----------------------------------- 55 2 62 20 56 3 63 15 57 3 64 20 58 4 65 40 59 5 66 25 60 8 67 25 61 10 68 100 Disability: None Expenses and Contingencies: None Inflation: 4% per year Wage Base Increases: 6% per year Form of Benefit Distribution: Life Annuity or actual retirement form for participants in pay status. Cost Method: Aggregate method (Actuarial Present Value of Total Projected Benefits under the Plans were determined). EXHIBIT C HONEYWELL SUPPLEMENTARY RETIREMENT PLANS' PAYMENT SCHEDULE AND PARTICIPANTS' VALUATION AS OF _______________________
Estimated Monthly Social Active/ Accrued Benefit Actuarial Present Security Retired Form of Payable_____in the Value of Estimated Lump Sum Optional Name Number Status Payment Event of Retirement* Monthly Accrued Benefit** Form of Distribution ------------------------------------------------------------------------------------------------------------------- * All Plans Combined (Total Benefit less Qualified Plan Benefit) ** Calculated as of ____________________, assuming early retirement on that date and using actuarial equivalent factors pursuant to the Plan documents. This schedule will be revised as of each benefit distribution date. Actual benefit payment amounts will be provided by Honeywell prior to any benefit distribution.
EXHIBIT D SCHEDULE OF TRUSTEE FEES 1. BASIC TRUSTEE FEE The basic annual trustee fee for all services contemplated by the Trust Agreement other than the annual Additional Trustee Fees attributable to enhanced services set forth in Paragraph 2 $10,000.00 2. ADDITIONAL ANNUAL TRUSTEE FEES (a) Monitoring and processing of Recapture of Excess Assets by Company pursuant to Section 2.2 $5,000.00 (b) Payment of Benefits directly to retired Executives (including federal and state tax withholding) $10,000.00 (c) Exercise of sole investment discretion with respect to all assets of the Trust $20,000.00 3. ACTIVITY-RELATED FEES (a) Security transactions (other than money market buys and sells) $25 per transaction (b) Money market buys and sells $3 per transaction (c) Reimbursement of benefit payments or expenses to Honeywell $15 per transaction (d) Lumps sum payment of benefits directly to retired executives $15 per payment (e) Recurring (periodic) payments directly to retirees $3 per payment The basic Trustee fee for the initial 12 months of Trustee services and each anniversary thereafter shall be paid in advance and deducted from the Trust Fund. Activity related fees and additional Trustee fees (determined on a pro rata basis which is based upon the period of time during which the applicable services are rendered) shall be paid in arrears and deducted from the Trust Fund on each anniversary of the effective date of the Trust Agreement. EX-10.III(D) 7 EXHIBIT 10III(D) Exhibit (10)(iii)(d) 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 DEFINITION. 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 subsidiary of the Company, any "person" (as hereinabove defined) acting on behalf of the Company as underwriter pursuant to an offering who is temporarily holding securities in connection with such offering, 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 not more than 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), (c) or (d) 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). 9.2 EFFECT. 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. 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.III(E) 8 EXHIBIT 10III(E) Exhibit (10)(iii)(e) 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 subsidiary of the Company, any "person" (as hereinabove defined) acting on behalf of the Company as underwriter pursuant to an offering who is temporarily holding securities in connection with such offering, 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 not more than 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), (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% 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.III(G) 9 EXHIBIT 10III(G) Exhibit (10)(iii)(g) HONEYWELL CORPORATE EXECUTIVE COMPENSATION PLAN (Amended and Restated Effective February 21, 1995) 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. 1 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. 2.9 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 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. 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. 3 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. 2.24 PLAN. This Honeywell Corporate Executive Compensation Plan, as amended and restated effective February 21, 1995. 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 4 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. 5.6 DETERMINING ORGANIZATIONAL INFLUENCE WEIGHTINGS. Unless otherwise approved by the Chief Executive Officer, the Unit's Leveraged Incentive Percentage 9 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. 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 10 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. (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- 11 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 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 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 14 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 prior to 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 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 15 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 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. 16 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 subsidiary of the Company, any "person" (as hereinabove defined) acting on behalf of the Company as underwriter pursuant to an offering who is temporarily holding securities in connection with such offering, 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 17 representing 30 percent or more of the combined voting power of the Company's then outstanding securities; (b) during any period of not more than 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 of all or substantially all of the Company's assets (or any transaction having a similar effect). 18 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. Notwithstanding the foregoing, the Incentive Award for any Participant who becomes a Participant in the Plan after January 1 of any year solely as a result of ceasing to be a participant in the Honeywell Senior Management Performance Incentive Plan, shall be pro-rated only to the extent such person was not an employee of the Company during such year. 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. 19 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. 20 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. 21 EX-10.III(H) 10 EXHIBIT 10III(H) Exhibit (10)(iii)(h) HONEYWELL SUPPLEMENTARY EXECUTIVE RETIREMENT PLAN FOR COMPENSATION IN EXCESS OF $200,000 ($200K SERP) (Amended and Restated Effective September 20, 1994) TABLE OF CONTENTS ARTICLE I - DEFINITIONS. . . . . . . . . . . . . . . . . . . . . . . . . . 2 1.1 ACT. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2 1.2 BASE PLAN. . . . . . . . . . . . . . . . . . . . . . . . . . . 2 1.3 CODE . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2 1.4 COMPANY. . . . . . . . . . . . . . . . . . . . . . . . . . . . 2 1.5 CORPORATE EXECUTIVE COMPENSATION PLAN (CECP) . . . . . . . . . 2 1.6 EARLY RETIREMENT . . . . . . . . . . . . . . . . . . . . . 2 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 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2 1.15 SPOUSE . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2 ARTICLE II - PLAN FORMULA. . . . . . . . . . . . . . . . . . . . . . . . . 4 2.1 $200K 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 . . . . . . . . . . . . . . . . 7 3.5 IMMEDIATE PRE-RETIREMENT SURVIVING SPOUSE BENEFIT. . . . . . . 8 3.6 DEFERRED SURVIVING SPOUSE BENEFIT. . . . . . . . . . . . . . . 8 3.7 SURVIVING CHILDREN'S BENEFIT . . . . . . . . . . . . . . . . . 8 ARTICLE IV - PAYMENT OF BENEFITS . . . . . . . . . . . . . . . . . . . . . 10 4.1 FORM OF PAYMENT TO PARTICIPANT . . . . . . . . . . . . . . . . 10 4.2 TIME OF PAYMENTS . . . . . . . . . . . . . . . . . . . . . . . 11 4.3 PAYMENT SUBSEQUENT TO A 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 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 ACTUARIAL ASSUMPTIONS FOR LUMP SUM PAYMENT. . . . . . . . . . . . . . 22 TABLE II VESTED ACCRUED BENEFITS UNDER THE $200K SERP THROUGH DECEMBER 31, 1993 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23 HONEYWELL SUPPLEMENTARY EXECUTIVE RETIREMENT PLAN FOR COMPENSATION IN EXCESS OF $200,000 ($200K SERP) (Amended and Restated Effective September 20, 1994) 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. "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. 1.7 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 (as it may be adjusted from time to time pursuant to the Code). 1 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 (as it may be adjusted from time to time pursuant to the Code). 1.8 EFFECTIVE DATE. The original effective date of this Plan is July 1, 1989. 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. "Normal 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 was covered under the Corporate Executive Compensation Plan at the time of his or her cessation of active work with the Company, and 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. 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. 1.14 PLAN. This Honeywell Supplementary Executive Retirement Plan for Compensation in Excess of $200,000 ($200K SERP). 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 2 Plan by applying the laws of the state or country in which it determines that the Participant is domiciled at the time of such determination of status. 3 ARTICLE II - PLAN FORMULA 2.1 $200K SERP FORMULA. That annual benefit equal to Paragraph (a) minus Paragraph (b). (a) The applicable benefit computed for a Participant 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 the amount of any "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 the Base Plan; and (v) by excluding "Augmented Credited Service for Benefit Accrual" under the Mid-Career SERP, if the Mid-Career SERP is applicable to the Participant. (b) the applicable benefit computed for a Participant under the Base Plan: 4 (i) by excluding under the definition of "Earnings" for the purpose of arriving at "Final Average Earnings" under the Base Plan the amount of any "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. 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 $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 this Plan, each Participant's accrued benefit under this Plan shall become immediately and fully vested and shall be paid to the Participant in accordance with Section 4.3(a) of this Plan. For purposes of this Plan, a "Change in Control" of Honeywell 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 Honeywell, any subsidiary of Honeywell, any "person" (as hereinabove defined) acting on behalf of Honeywell as underwriter pursuant to an offering who is temporarily holding securities in connection with such offering, any trustee or other fiduciary holding securities under an employee benefit plan of Honeywell or any corporation owned, directly or indirectly, by the stockholders of Honeywell in substantially the same proportions as their ownership of stock of Honeywell), is or becomes the "beneficial owner" (as defined in Rule 13d-3 under the Exchange Act), directly or indirectly, of securities of Honeywell representing 30% or more of the combined voting power of Honeywell's then outstanding securities; 6 (b) during any period of not more than two consecutive years (not including any period prior to the Effective Date), individuals who at the beginning of such period constitute the Board of Directors of Honeywell (the "Board"), and any new director (other than a director designated by a "person" who has entered into an agreement with Honeywell to effect a transaction described in clause (a), (c) or (d) of this Section) whose election by the Board or nomination for election by Honeywell'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 Honeywell approve a merger or consolidation of Honeywell with any other corporation, other than (i) a merger or consolidation which would result in the voting securities of Honeywell 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 Honeywell or such surviving entity outstanding immediately after such merger or consolidation or (ii) a merger or consolidation effected to implement a recapitalization of Honeywell (or similar transaction) in which no "person" (as hereinabove defined) acquires more than 30 percent of the combined voting power of Honeywell's then outstanding securities; or (d) the stockholders of Honeywell approve a plan of complete liquidation of Honeywell or an agreement for the sale or disposition by Honeywell 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 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 7 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 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 $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 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 8 portion of the benefit payable to each such Child shall be redetermined as of the last day of the month following the date any recipient ceases to be a Child and the remaining such Children shall thereupon receive an equal share of such benefit. 3.8 VESTED PARTICIPANT'S BENEFIT. Upon the receipt of benefits by a Participant under his or her Base Plan who is not eligible for Early Retirement but for whom a specified accrued benefit has been determined under this Plan in accordance with Section 8.3 of this Plan, he or she shall be eligible for life for an annual benefit determined by calculating the Participant's "Vested Terminated Participant Benefit" under the Participant's Base Plan in accordance with the $200K SERP Formula as prescribed in Section 2.1 9 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 this 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 this 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 this 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 (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 of Honeywell, 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 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 10 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 this 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 this 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 within 3 years 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 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 11 I, which may be modified from time to time by the Board of Directors of Honeywell) 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 (hereinafter referred to as "IRS") 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 IRS; 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 Code, published IRS 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. The Company shall undertake at its sole expense to defend any tax claims described herein which are asserted by the IRS 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 IRS, by any state revenue authority or by a lower court. The Company also agrees to reimburse 12 any Participant for any interest or penalties in respect of Federal or state tax claims hereunder upon receipt of documentation of same. Any distributions from this 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 of Honeywell, 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, and then reduced by a penalty, which shall be forfeited to the Company which is equal, to 10 percent of the present value of any 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, 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. 14 ARTICLE VI - AMENDMENT AND TERMINATION 6.1 AMENDMENT AND TERMINATION. The Board of Directors of Honeywell may amend or terminate the Plan at any time except in the event of a Change in Control as defined in Section 3.3; 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 a Change in Control, this Plan may not be amended or terminated in any manner that shall adversely affect a benefit payable on the Normal or Early Retirement, death or Permanent and Total Disability of, or any available optional form of payment to, a Participant for a period of 3 years from the date of the Change in Control. 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. 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 this 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 beneficiary. 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 vested accrued benefit is determined with respect to any other Participant in this 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. Attached hereto 17 as Table II is a list of the Participants described in subparts (ii) and (iii) above and the amount of their accrued benefits under this Plan which became vested in 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 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 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 this 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 that material or information is necessary; and 19 (d) An explanation of this 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, 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 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 20 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 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 22 TABLE II VESTED ACCRUED BENEFITS UNDER THE $200K SERP THROUGH DECEMBER 31, 1993 The following Participants, who were determined in accordance with the provisions of Section 8.3(ii) or Section 8.3(iii) of this Plan, have a vested accrued benefit under this Plan payable at his or her "Social Security Retirement Age", as defined in the Base Plan, or, for those shown with earlier dates, on the earlier designated actual retirement date, in the indicated monthly amounts as calculated on a life annuity basis: NAME SOCIAL SECURITY RETIREMENT AGE MONTHLY LIFE ANNUITY OR ACTUAL EARLIER RETIREMENT DATE -------------------------------------------------------------------------------- Bonsignore, Michael R. . . .66 . . . . . . . . . . . . . . . . . . . .$12,338.72 Boyle, Fosten A. . . . . .3-31-94. . . . . . . . . . . . . . . . . . . $3,942.94 Burns, John R. . . . . . .2-28-94. . . . . . . . . . . . . . . . . . . . .$56.21 Dewane, John R.. . . . . . .65 . . . . . . . . . . . . . . . . . . . . $3,863.15 Grierson, James J. . . . . .66 . . . . . . . . . . . . . . . . . . . . $2,658.61 Hurd, Edward T.. . . . . . .66 . . . . . . . . . . . . . . . . . . . . $5,233.47 Larkin, David. . . . . . . .66 . . . . . . . . . . . . . . . . . . . . $2,269.38 Moore, D. Larry. . . . . . .65 . . . . . . . . . . . . . . . . . . . .$16,971.85 Renier, James J. . . . . .4-30-94. . . . . . . . . . . . . . . . . . .$27,377.00 Rosso, Jean-Pierre P.. . . .66 . . . . . . . . . . . . . . . . . . . . $2,771.88 Vignali, Carl L. . . . . . .65 . . . . . . . . . . . . . . . . . . . . $1,852.22 Woessner, Gregg C. . . . .2-28-94. . . . . . . . . . . . . . . . . . . $2,040.16 23 EX-10.III(I) 11 EXHIBIT 10III(I) Exhibit (10)(iii)(i) HONEYWELL SUPPLEMENTARY EXECUTIVE RETIREMENT PLAN FOR CECP PARTICIPANTS (CECP SERP) (Amended Through September 20, 1994) 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 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2 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 . . . . . . . . . . . . . . . . . 7 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 3.8 VESTED PARTICIPANT'S BENEFIT . . . . . . . . . . . . . . . . . . 9 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 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: ACTUARIAL ASSUMPTIONS FOR LUMP SUM PAYMENTS . . . . . . . . . . . . . . 22 TABLE II: VESTED ACCRUED BENEFITS UNDER THE CECP SERP THROUGH DECEMBER 31, 1993 . . . . . . . . . . . . . . . . . . . . . . . . . . . 23 HONEYWELL SUPPLEMENTARY EXECUTIVE RETIREMENT PLAN FOR CECP PARTICIPANTS (CECP SERP) (Amended Through September 20, 1994) 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 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 (as it may be adjusted from time to time pursuant to the Code). 1.8 EFFECTIVE DATE. The original effective date of this Plan is 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 was covered under the Corporate Executive Compensation Plan at the time of his or her cessation of active work with the Company, and 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. 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. 1.14 PLAN. This Honeywell Supplementary Executive Retirement Plan for Corporate Executive Compensation Plan ("CECP SERP") Participants, effective January 1, 1985 and amended through September 15, 1992. 2 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 by applying the laws of the state or country in which it determines that the Participant is domiciled at the time of such determination of status. 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 for 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 the amount of any "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 the Base Plan; and (v) by excluding "Augmented Credited Service for Benefit Accrual" under the Mid-Career SERP, if the Mid-Career SERP is applicable to the Participant. (b) the applicable benefit computed for a Participant under the Base Plan: 4 (i) by including under the definition of "Earnings" for the purpose of arriving at "Final Average Earnings" under the Base Plan the amount of any "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 this Plan, each Participant's accrued benefit under this Plan shall become immediately and fully vested and shall be paid to the Participant in accordance with Section 4.3(a) of this Plan. For purposes of this Plan, a "Change in Control" of Honeywell 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 Honeywell, any subsidiary of Honeywell, any "person" (as hereinabove defined) acting on behalf of Honeywell as underwriter pursuant to an offering who is temporarily holding securities in connection with such offering, any trustees or other fiduciary holding securities under an employee benefit plan of Honeywell or any corporation owned, directly or indirectly, by the stockholders of Honeywell in substantially the same proportions as their ownership of stock of Honeywell and excluding Honeywell subsidiaries and underwriters), is or becomes the "beneficial owner" (as defined in Rule 13d-3 under the Exchange Act), directly or indirectly, of securities of Honeywell representing 30% or more of the combined voting power of Honeywell's then outstanding securities; 6 (b) during any period not to exceed two consecutive years (not including any period prior to the Effective Date), individuals who at the beginning of such period constitute the Board of Directors of Honeywell (the "Board"), and any new director (other than a director designated by a "person" who has entered into an agreement with Honeywell to effect a transaction described in clause (a), (c) or (d) of this Section) whose election by the Board of nomination for election by Honeywell'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 Honeywell approve a merger or consolidation of Honeywell with any other corporation, other than (i) a merger or consolidation which would result in the voting securities of Honeywell 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 Honeywell or such surviving entity outstanding immediately after such merger or consolidation or (ii) a merger or consolidation effected to implement a recapitalization of Honeywell (or similar transaction) in which no "person" (as hereinabove defined) acquires more than 30 percent of the combined voting power of Honeywell's then outstanding securities; or (d) the stockholders of Honeywell approve a plan of complete liquidation of Honeywell or an agreement for the sale or disposition by Honeywell 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 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 7 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 the Participant's Base Plan in accordance with the CECP SERP Formula as prescribed in Section 2.1. 8 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 any recipient ceases to be a Child and the remaining such Children shall thereupon receive an equal share of such benefit. 3.8 VESTED PARTICIPANT'S BENEFIT. Upon the receipt of benefits by a Participant under his or her Base Plan who is not eligible for Early Retirement but for whom a specified accrued benefit has been determined under this Plan in accordance with Section 8.3 of this Plan, he or she shall be eligible for life for an annual benefit determined by calculating the Participant's "Vested Terminated Participant Benefit" under the Participant's Base Plan in accordance with the CECP SERP Formula as prescribed in Section 2.1. 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 this 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 this 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 this 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 of Honeywell, at least 13 months prior to the Participant's Early Retirement, Normal Retirement. Such Spouse's consent must acknowledge the effect 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 10 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 this 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 this 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 within 3 years 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 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 11 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 (hereinafter referred to as "IRS") 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 IRS; 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 Code, published IRS 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. The Company shall undertake at its sole expense to defend any tax claims described herein which are asserted by the IRS 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 IRS, by any state revenue authority or by a lower court. The Company also agrees to reimburse 12 any Participant for any interest or penalties in respect of Federal or state tax claims hereunder upon receipt of documentation of same. Any distributions from this 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 of Honeywell, 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, and then reduced by a penalty, which shall be forfeited to the Company which is equal, to 10 percent of the present value of any 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. 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 except in the event of a Change in Control as defined in Section 3.3; 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 a Change in Control as defined in Section 3.3, the Board may not amend or terminate the Plan in any manner that shall adversely affect a benefit payable on the Normal or Early Retirement, death or Permanent and Total Disability of, or any available optional form of payment to, a Participant for a period of 3 years from the date of the Change in Control. 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 4.3(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 this 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 beneficiary. 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 vested accrued benefit is determined with respect to any other Participant in this 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. Attached hereto 17 as Table II is a list of the Participants described in subparts (ii) and (iii) above and the amount of their accrued benefits under this Plan which became vested in 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 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 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 this 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 that material or information is necessary; and 19 (d) An explanation of this 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 , 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 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 20 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 22 TABLE II VESTED ACCRUED BENEFITS UNDER THE CECP SERP THROUGH DECEMBER 31, 1993 The following Participant, who was determined in accordance with the provisions of Section 8.3 (ii) or Section 8.3(iii) of this Plan, has a vested accrued benefit under this Plan payable at his actual early retirement date under the Base Plan, in the indicated monthly amount as calculated on a life annuity basis: NAME MONTHLY LIFE ANNUITY -------------------------------------------------------------------------------- Burns, John R. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $286.98 23 EX-10.III(J) 12 EXHIBIT 10III(J) Exhibit (10)(iii)(j) HONEYWELL SUPPLEMENTARY RETIREMENT PLAN (SRP) (Amended and Restated Effective September 20, 1994) 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 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2 1.15 SPOUSE . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2 ARTICLE II - PLAN FORMULA. . . . . . . . . . . . . . . . . . . . . . . . . . 4 2.1 SRP 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 . . . . . . . . . . . . . . . . . 7 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 3.8 VESTED PARTICIPANT'S BENEFIT . . . . . . . . . . . . . . . . . . . 9 ARTICLE IV - PAYMENT OF BENEFITS . . . . . . . . . . . . . . . . . . . . . . 10 4.1 FORM OF PAYMENT. . . . . . . . . . . . . . . . . . . . . . . . . . 10 4.2 TIME OF PAYMENTS . . . . . . . . . . . . . . . . . . . . . . . . . 11 4.3 PAYMENT SUBSEQUENT TO A 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 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 TABLE I: ACTUARIAL ASSUMPTIONS FOR LUMP SUM PAYMENTS . . . . . . . . . . . . . . 19 TABLE II: VESTED ACCRUED BENEFITS UNDER THE SRP THROUGH DECEMBER 31, 1993 . . . . . . . . . . . . . . . . . . . . . . . . . . . 20 HONEYWELL SUPPLEMENTARY RETIREMENT PLAN (SRP) (Amended and Restated Effective September 20, 1994) 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 his or her Base Plan. 1 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 (as it may be adjusted from time to time pursuant to the Code). 1.8 EFFECTIVE DATE. The original effective date of this Plan is April 20, 1976. 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 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. 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. 1.14 PLAN. This Honeywell Supplementary Retirement Plan. 1.15 SPOUSE. A person who is formally married to a Participant as determined by the 2 Honeywell Pension and Retirement Administrative Committee for purposes of the Base Plan by applying the laws of the state or country in which it determines that the Participant is domiciled at the time of such determination of status. 3 ARTICLE II - PLAN FORMULA 2.1 SRP FORMULA. That annual benefit equal to Paragraph (a) minus Paragraph (b); (a) The applicable benefit computed for a Participant 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 the amount of any "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 the Base Plan; and (v) by excluding "Augmented Credited Service for Benefit Accrual" under the Mid-Career SERP, if such Mid-Career SERP is applicable to the Participant. (b) the applicable benefit computed for a Participant under the Base Plan: 4 (i) by excluding under the definition of "Earnings" for the purpose of arriving at "Final Average Earnings" under the Base Plan the amount of any "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. 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 SRP 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 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 this Plan, each Participant's accrued benefit under this Plan shall become immediately and fully vested and shall be paid to the Participant in accordance with Section 3.3 of this Plan. For purposes of this Plan, a "Change in Control" of Honeywell 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 Honeywell, any subsidiary of Honeywell, any "person" (as hereinabove defined) acting on behalf of Honeywell as underwriter pursuant to an offering who is temporarily holding securities in connections with such offering, any trustee or other fiduciary holding securities under an employee benefit plan of Honeywell or any corporation owned, directly or indirectly, by the stockholders of Honeywell in substantially the same proportions as their ownership of stock of Honeywell), is or becomes the "beneficial owner" (as defined in Rule 13d-3 under the Exchange Act), directly or indirectly, of securities of Honeywell representing 30 percent or more of the combined voting power of Honeywell's then outstanding securities; (b) during any period of not more than two consecutive years (not including 6 any period prior to the Effective Date), individuals who at the beginning of such period constitute the Board of Directors of Honeywell (the "Board"), and any new director (other than a director designated by a "person" who has entered into an agreement with Honeywell to effect a transaction described in clause (a), (c) or (d) of this Section) whose election by the Board of nomination for election by Honeywell'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 Honeywell approve a merger or consolidation of Honeywell with any other corporation, other than (i) a merger or consolidation which would result in the voting securities of Honeywell 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 Honeywell or such surviving entity outstanding immediately after such merger or consolidation or (ii) a merger or consolidation effected to implement a recapitalization of Honeywell (or similar transaction) in which no "person" (as hereinabove defined) acquires more than 30 percent of the combined voting power of Honeywell's then outstanding securities; or (d) the stockholders of Honeywell approve a plan of complete liquidation of Honeywell or an agreement for the sale or disposition by Honeywell 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 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 7 in accordance with the SRP 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 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 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 SRP 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 SRP 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 8 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. 3.8 VESTED PARTICIPANT'S BENEFIT. Upon the receipt of benefits by a Participant under his or her Base Plan who is not eligible for Early Retirement but for whom a specified accrued benefit has been determined under this Plan in accordance with Section 8.3 of this Plan, he or she shall be eligible for life for an annual benefit determined by calculating the Participant's "Vested Terminated Participant Benefit" under the Participant's Base Plan in accordance with the SRP Formula as prescribed in Section 2.1. 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 this 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 this 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 this 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 of Honeywell, 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 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 10 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 this 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 this 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 within 3 years 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 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 11 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 (hereinafter referred to as "IRS") 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 IRS; 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 Code, published IRS rulings, court decisions or other substantial 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 IRS 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 IRS, by any state 12 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 this 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 of Honeywell, 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 which is equal to 10 percent of the present value of any 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, 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. 14 ARTICLE VI - AMENDMENT AND TERMINATION 6.1 AMENDMENT AND TERMINATION. The Board of Directors of Honeywell may amend or terminate the Plan at any time except in the event of a Change in Control as defined in Section 3.3; 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 a Change in Control, this Plan may not be amended or terminated in any manner that shall adversely affect a benefit payable on the Normal or Early Retirement, death or Permanent and Total Disability of, or any available optional form of payment to, a Participant for a period of 3 years from the date of the Change in Control. 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 4.3(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 this 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 this 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 beneficiary. 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 vested accrued benefit is determined with respect to any other Participant in this 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. Attached hereto 17 as Table II is a list of the Participants described in subparts (ii) and (iii) above and the amount of their accrued benefits under this Plan which became vested in 1993, if any. 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 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 19 TABLE II VESTED ACCRUED BENEFITS UNDER THE SRP THROUGH DECEMBER 31, 1993 The following Participants, who were determined in accordance with the provisions of Section 8.3(ii) or Section 8.3(iii) of this Plan, have a vested accrued benefit under this Plan payable at his or her "Social Security Retirement Age", as defined in the Base Plan, or, for those shown with earlier dates, on the earlier designated actual retirement date, in the indicated monthly amounts as calculated on a life annuity basis: NAME SOCIAL SECURITY RETIREMENT AGE MONTHLY LIFE ANNUITY OR ACTUAL EARLIER RETIREMENT DATE -------------------------------------------------------------------------------- Boyle, Fosten A. . . . . . . . . . . 3-31-94 . . . . . . . . . . . . . $1,786.50 Burns, Dallas. . . . . . . . . . . . 2-28-94 . . . . . . . . . . . . . $1,718.97 Moore, D. Larry. . . . . . . . . . . . 65. . . . . . . . . . . . . . . $1,979.95 Renier, James J. . . . . . . . . . . 4-30-94 . . . . . . . . . . . . .$14,884.88 Woessner, Gregg. . . . . . . . . . . 2-28-94 . . . . . . . . . . . . . $2,093.01 20 EX-10.III(K) 13 EXHIBIT 10III(K) Exhibit (10)(iii)(k) HONEYWELL SUPPLEMENTARY EXECUTIVE RETIREMENT PLAN FOR BENEFITS IN EXCESS OF LIMITS UNDER TAX REFORM ACT OF 1986 (TRA SERP) (Amended and Restated Effective September 20, 1994) 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 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. . . . . . . . . . . . . . . 12 3.7 SURVIVING CHILDREN'S BENEFIT . . . . . . . . . . . . . . . . . 14 3.8 Vested Participant'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. . . . . . . . . . . . . . . . . . . . . . . 23 9.1 FILING OF A CLAIM FOR BENEFITS . . . . . . . . . . . . . . . . 23 9.2 NOTIFICATION TO CLAIMANT OF DECISION . . . . . . . . . . . . . 23 9.3 CONTENT OF NOTICE. . . . . . . . . . . . . . . . . . . . . . . 23 9.4 REVIEW PROCEDURE . . . . . . . . . . . . . . . . . . . . . . . 24 9.5 DECISION ON REVIEW. . . . . . . . . . . . . . . . . . . . . . . . . 25 TABLE I: ACTUARIAL ASSUMPTIONS FOR LUMP SUM PAYMENTS . . . . . . . . . . . . 27 TABLE II: VESTED ACCRUED BENEFITS UNDER THE TRA SERP THROUGH DECEMBER 31, 1993. . . . . . . . . . . . . . . . . . . 28 HONEYWELL SUPPLEMENTARY EXECUTIVE RETIREMENT PLAN FOR BENEFITS IN EXCESS OF LIMITS UNDER TAX REFORM ACT OF 1986 (TRA SERP) (Amended and Restated Effective September 20, 1994) 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 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 (as it may be adjusted from time to time pursuant to the Code). 1.9 EFFECTIVE DATE. The original effective date of this Plan is July 1, 1989. 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 was covered under the Corporate Executive Compensation Plan at the time of his or her cessation of active work with 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 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. 2 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. This 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 by applying the laws of the state or country in which it determines that the Participant is domiciled at the time of such determination of status. 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 FORMULA 2.1 TRA SERP FORMULA. That annual benefit equal to Paragraph (a) minus Paragraph (b). (a) The applicable benefit computed for a Participant 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 the amount of any "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 the Mid-Career SERP is applicable to the Participant. (b) the applicable benefit computed for a Participant 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 the amount of any "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 annual "Normal Retirement Benefit" provided to him or her under the Excess Benefit Plan. 6 (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 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 7 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 this 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 this Plan. For purposes of this Plan, a "Change in Control" of Honeywell 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 Honeywell, any subsidiary of Honeywell, any "person" (as hereinabove defined) acting on behalf of Honeywell as underwriter pursuant to an offering who is temporarily holding securities in connection with such offering, any trustees or other fiduciary holding securities under an employee benefit plan of Honeywell or any corporation owned, directly or indirectly, by the stockholders of Honeywell in substantially the same proportions as their ownership of stock of Honeywell), 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 8 more of the combined voting power of the Company's then outstanding securities; (b) during any period of not more than two consecutive years (not including any period prior to the Effective Date), individuals who at the beginning of such period constitute the Board of Directors of Honeywell (the "Board"), and any new director (other than a director designated by a "person" who has entered into an agreement with Honeywell to effect a transaction described in clause (a), (c) or (d) of this Section) whose election by the Board of nomination for election by Honeywell'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 Honeywell approve a merger or consolidation of Honeywell with any other corporation, other than (i) a merger or consolidation which would result in the voting securities of Honeywell 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 Honeywell or such surviving entity outstanding immediately after such merger or consolidation or (ii) a merger or consolidation effected to implement a recapitalization of Honeywell (or similar transaction) in which no "person" (as hereinabove defined) acquires more than 30 percent of the combined voting power of Honeywell's then outstanding securities; or (d) the stockholders of Honeywell approve a plan of complete liquidation of Honeywell or an agreement for the sale or disposition by Honeywell of all or substantially all of the Company's assets (or any transaction having a similar effect). 9 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 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. 10 (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 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 11 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. 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 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 "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 12 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 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. 13 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. 3.8 VESTED PARTICIPANT'S BENEFIT. Upon the receipt of benefits by a Participant under his or her Base Plan who is not eligible for Early Retirement but for whom a specified accrued benefit has been determined under this Plan in accordance with Section 8.3 of this Plan, he or she shall be eligible for life for an annual benefit determined by calculating the Participant's "Vested Terminated Participant 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 this 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 this 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 this 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 of Honeywell, 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 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 15 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 this 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 this 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 within 3 years 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 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 16 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 (hereinafter referred to as "IRS") 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 IRS; 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 Code, published IRS 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. The Company shall undertake at its sole expense to defend any tax claims described herein which are asserted by the IRS 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 IRS, by any state revenue authority or by a lower court. The Company also agrees to reimburse 17 any Participant for any interest or penalties in respect of Federal or state tax claims hereunder upon receipt of documentation of same. Any distributions from this 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 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 of Honeywell, 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 which is equal to 10 percent of the present value of any 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. 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 except in the event of a Change in Control as defined in Section 3.3, 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 a Change in Control as defined in Section 3.3, the Board of Directors may not amend or terminate the Plan in any manner that shall adversely affect a benefit payable on the Normal or Early Retirement, death or Permanent and Total Disability of, or any available optional form of payment to, a Participant for a period of 3 years from such date of the Change in Control. 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 3.3(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 this 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 beneficiary. 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 vested accrued benefit is determined with respect to any other Participant in this 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. Attached hereto 22 as Table II is a list of the Participants described in subparts (ii) and (iii) above and the amount of their accrued benefits under this Plan which became vested in 1993, if any. 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 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 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 this 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 that material or information is necessary; and 24 (d) An explanation of this 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 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 25 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 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), 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 27 TABLE II VESTED ACCRUED BENEFITS UNDER THE TRA SERP THROUGH DECEMBER 31, 1993 The following Participant(s), who were determined in accordance with the provisions of Section 8.3(ii) or Section 8.3(iii) of this Plan, have a vested accrued benefit under this Plan payable at his or her "Social Security Retirement Age", as defined in the Base Plan, in the indicated monthly amounts as calculated on a life annuity basis: NAME MONTHLY LIFE ANNUITY PAYABLE AT SOCIAL SECURITY RETIREMENT AGE ---------------------------------------------------------- No Participants were determined to have a vested accrued benefit under this Plan through December 31, 1993. 28 EX-10.III(M) 14 EXHIBIT 10III(M) Exhibit (10)(iii)(m) ________________, 1994 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 (this "Agreement") will better serve the above-stated objective than the letter agreement entered into between you and the Corporation dated ________________ (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, 1995; provided, however, that commencing on January 1, 1996 and each January 1 thereafter, the term ________________, 1994 Page 2 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 of the Corporation 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 subsidiary of the Corporation, any "person" (as hereinabove defined) acting on behalf of the Corporation as underwriter pursuant to an offering who is temporarily holding securities in connection with such offering, 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 thirty percent (30%) or more of the combined voting power of the Corporation's then outstanding securities; (ii) during any period of not more than 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 of Directors of the Corporation (the "Board"), and any new director (other than a director designated by a "person" (as hereinabove defined) 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, 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 (1) 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) more than fifty percent (50%) of the combined voting power of the voting securities of the Corporation or such surviving entity outstanding immediately after such merger or consolidation or (2) a merger or consolidation effected to implement a recapitalization of the Corporation (or similar transaction) in which no "person" (as hereinabove defined) acquires more _________________, 1994 Page 3 than thirty percent (30%) of the combined voting power of the Corporation's then outstanding securities; 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 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. _________________, 1994 Page 4 (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 Subsection 3(vi)) specified in the Notice of Termination (as defined in Subsection 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 of the Corporation; (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 business travel obligations immediately prior to such change in control of the Corporation; (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: (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, 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; _________________, 1994 Page 5 (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 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 Cause shall not be less than thirty (30) days from the date such Notice of Termination is given) and 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) if your employment is terminated by you for any other reason (other than for Good Reason or for Disability) the date specified in the Notice of Termination shall not be less than thirty (30) days from the date such Notice of Termination is _________________, 1994 Page 6 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 Subsection 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 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 Subsection 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 Plans 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 or Disability, 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 _________________, 1994 Page 7 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, or in effect on the date immediately preceding the date of the change in control of the Corporation, whichever is higher, no later than the fifth day following the Date of Termination, plus all other amounts to which you are entitled under any Compensation Plan, 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 times the sum of your (1) annual salary as in effect as of your Date of Termination or in effect on the date immediately preceding the date of the change in control of the Corporation, whichever is higher, and (2) "on-plan" bonus under the Corporate Executive Compensation Plan or the average of the annual bonuses paid to you (without regard to any prorata adjustment thereof for any portion of a year) during the three year period immediately preceding the date of the change in control of the Corporation, whichever is higher; (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 _________________, 1994 Page 8 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. You hereby agree to report to the Corporation any such comparable benefits actually received by you. (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 or on the date immediately preceding the date of the change in control of the Corporation, whichever is higher, 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, at the time such payments are due; (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 or on the date immediately preceding the date of the change in control of the Corporation, whichever is higher, and (2) "on-plan" bonus under the Corporate Executive Compensation Plan or the average of the annual bonuses paid to you (without regard to any prorata adjustment thereof for any portion of a year) during the three year period immediately preceding the date of the change in control of the Corporation, whichever is higher; (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 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 __________________, 1994 Page 9 benefits under the provisions of the Honeywell Retirement Benefit Plan in effect immediately prior to the change in control of the Corporation during such layoff period, and retention of your employment status for the greater of (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 credited service for benefits under such Plan up to a maximum 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 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. You hereby agree to report to the Corporation any such comparable benefits actually received by you. (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 _________________, 1994 Page 10 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 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 from the date the Gross-Up Payment was initially made to the date of 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 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 from the date that the estimated payments were made to the date the remainder of such payments is made 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 _________________, 1994 Page 11 to you, payable on the fifth day after demand by the Corporation (together with interest from the date that the estimated payments were made to the date of repayment 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 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 you 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 , addressed to your address set forth on the first page of this Agreement, provided that all notices to the Corporation shall be directed to the __________________, 1994 Page 12 attention of the Board of Directors, Honeywell Inc., Honeywell Plaza, Minneapolis, Minnesota, 55408, 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. All such notices shall be sent (i) by certified or registered mail and shall be deemed received three (3) business days after the date of mailing; (ii) by Federal Express or similar overnight courier and shall be deemed received one (1) business day after delivery to Federal Express or similar overnight courier; or (iii) by personal service and shall be deemed received on the same day as service. 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 of the Corporation 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 this Agreement 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 of the Corporation, 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 Subsection 3(vi) during the pendency of any dispute or controversy arising under or in connection with this Agreement. Judgment may be entered on the arbitrator's award in any court having jurisdiction. _________________, 1994 Page 13 11. PRIOR AGREEMENT. This Agreement supersedes the Prior Agreement, which is hereby terminated and canceled. Any other prior agreements, arrangements or understandings between you and the Corporation (other than the Prior Agreement) remain binding and in full force and effect consistent with the terms and conditions thereof and shall not be affected by this Agreement. 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 ____ day of __________, 1994 _____________________________ ________________, 1994 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 (this "Agreement") will better serve the above-stated objective than the letter agreement entered into between you and the Corporation dated ________________ (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, 1995; provided, however, that commencing on January 1, 1996 and each January 1 thereafter, the term ________________, 1994 Page 2 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 of the Corporation 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 subsidiary of the Corporation, any "person" (as hereinabove defined) acting on behalf of the Corporation as underwriter pursuant to an offering who is temporarily holding securities in connection with such offering, 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 thirty percent (30%) or more of the combined voting power of the Corporation's then outstanding securities; (ii) during any period of not more than 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 of Directors of the Corporation (the "Board"), and any new director (other than a director designated by a "person" (as hereinabove defined) 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, 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 (1) 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) more than fifty percent (50%) of the combined voting power of the voting securities of the Corporation or such surviving entity outstanding immediately after such merger or consolidation or (2) a merger or consolidation effected to implement a recapitalization of the Corporation (or similar transaction) in which no "person" (as hereinabove defined) acquires more ________________, 1994 Page 3 than thirty percent (30%) of the combined voting power of the Corporation's then outstanding securities; 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 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. ________________, 1994 Page 4 (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 Subsection 3(vi)) specified in the Notice of Termination (as defined in Subsection 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 of the Corporation; (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 business travel obligations immediately prior to such change in control of the Corporation; (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: (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, 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; ________________, 1994 Page 5 (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 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 Cause shall not be less than thirty (30) days from the date such Notice of Termination is given) and 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) if your employment is terminated by you for any other reason (other than for Good Reason or for Disability) the date specified in the Notice of Termination shall not be less than thirty (30) days from the date such Notice of Termination is ________________, 1994 Page 6 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 Subsection 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 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 Subsection 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 Plans 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 or Disability, 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 ________________, 1994 Page 7 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, or in effect on the date immediately preceding the date of the change in control of the Corporation, whichever is higher, no later than the fifth day following the Date of Termination, plus all other amounts to which you are entitled under any Compensation Plan, 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 two times the sum of your (1) annual salary as in effect as of your Date of Termination or in effect on the date immediately preceding the date of the change in control of the Corporation, whichever is higher, and (2) "on-plan" bonus under the Corporate Executive Compensation Plan or the average of the annual bonuses paid to you (without regard to any prorata adjustment thereof for any portion of a year) during the three year period immediately preceding the date of the change in control of the Corporation, whichever is higher; (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 two 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 ________________, 1994 Page 8 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 two year period following your termination. You hereby agree to report to the Corporation any such comparable benefits actually received by you. (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 or on the date immediately preceding the date of the change in control of the Corporation, whichever is higher, 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, at the time such payments are due; (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 two times the sum of your (1) annual salary as in effect at the time Notice of Termination is given or on the date immediately preceding the date of the change in control of the Corporation, whichever is higher, and (2) "on-plan" bonus under the Corporate Executive Compensation Plan or the average of the annual bonuses paid to you (without regard to any prorata adjustment thereof for any portion of a year) during the three year period immediately preceding the date of the change in control of the Corporation, whichever is higher; (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 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 ________________, 1994 Page 9 benefits under the provisions of the Honeywell Retirement Benefit Plan in effect immediately prior to the change in control of the Corporation during such layoff period, and retention of your employment status for the greater of (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 credited service for benefits under such Plan up to a maximum of five years; and (f) for a two 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 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 two year period following your cessation of active service. You hereby agree to report to the Corporation any such comparable benefits actually received by you. (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 ________________, 1994 Page 10 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 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 from the date the Gross-Up Payment was initially made to the date of 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 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 from the date that the estimated payments were made to the date the remainder of such payments is made 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 ________________, 1994 Page 11 to you, payable on the fifth day after demand by the Corporation (together with interest from the date that the estimated payments were made to the date of repayment 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 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 two 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 you 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 , addressed to your address set forth on the first page of this Agreement, provided that all notices to the Corporation shall be directed to the ________________, 1994 Page 12 attention of the Board of Directors, Honeywell Inc., Honeywell Plaza, Minneapolis, Minnesota, 55408, 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. All such notices shall be sent (i) by certified or registered mail and shall be deemed received three (3) business days after the date of mailing; (ii) by Federal Express or similar overnight courier and shall be deemed received one (1) business day after delivery to Federal Express or similar overnight courier; or (iii) by personal service and shall be deemed received on the same day as service. 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 of the Corporation 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 this Agreement 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 of the Corporation, 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 Subsection 3(vi) during the pendency of any dispute or controversy arising under or in connection with this Agreement. Judgment may be entered on the arbitrator's award in any court having jurisdiction. ----------------, 1994 Page 13 11. PRIOR AGREEMENT. This Agreement supersedes the Prior Agreement, which is hereby terminated and canceled. Any other prior agreements, arrangements or understandings between you and the Corporation (other than the Prior Agreement) remain binding and in full force and effect consistent with the terms and conditions thereof and shall not be affected by this Agreement. 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 ____ day of __________, 1994 _____________________________ EX-10.III(N) 15 EXHIBIT 10III(N) Exhibit (10)(iii)(n) 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 Honeywell Inc. common stock having a par value of $1.50 per share ("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 July 19, 1994. 5. FEES ANNUAL 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 elects 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 value of shares of Common Stock payable in lieu of the Annual Retainer, or the elected percentage thereof, shall equal 110% of the amount of the Annual Retainer, and the number thereof shall be determined based on the Fair Market Value (as defined in Section 9 hereunder) on the date of the Company's Annual Meeting of Shareholders. (b) If selected, the value of shares of Common Stock payable in lieu of the Meeting Fees occurring within a calendar quarter shall equal 110% of the amount of such Meetings Fees and the number thereof shall be determined by taking 110% of the total cash amount of Meeting Fees for the quarterly period and dividing the amount by the Fair Market Value determined as of the last trading day for such quarter. (c) All shares of Common Stock issued to a Participant in lieu of cash payments for the Annual Retainer or Meeting Fees shall be subject to the restriction that they may not be sold or transferred until the earliest to occur of the following: (i) five years shall lapse from the date the applicable shares are credited to the Participant's account (the "Restriction Period"); (ii) the Participant's death or disability; (iii) the Participant, after being nominated to the Board, is not elected by the shareholders in an election for the Board; (iv) the Board determines that the Participant will not be nominated for election to the Board; -2- (v) the Participant's service on the Board terminates because of his or her resignation at the request of the Nominating Committee of the Board or his or her removal by action of the Company's stockholders; (vi) the Participant's service on the Board terminates because the Participant has taken a position with a governmental agency in public service that does not permit membership on the board of directors of a publicly-held corporation; or (vii) the occurrence of a Change in Control, as set forth in Section 14. All shares of Common Stock subject to the foregoing restrictions are herein referred to as "Restricted Shares". (d) In the event restrictions lapse, as provided in sections 7(c)(i)-(vii) above, a certificate for the applicable shares, free and clear of restrictions, will be delivered to the Director as soon as practicable thereafter. If the Participant's service on the Board terminates prior to the end of the Restriction Period for any reason other than those identified in sections 7(c)(ii)-(vii) above, the Director shall immediately forfeit the shares to the Company. 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, -3- 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, as set forth in Section 14. (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 shares of 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 the Company during the Restriction Period as set forth in Section 7(c)(i). Any dividends or distributions, payable in cash or in kind, with respect to the Common Stock, shall be paid to the Participant. All Common Stock issued hereunder shall be fully paid and non-assessable and the Participant shall have all voting rights with respect thereto. 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 -4- 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 Honeywell 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. CHANGE IN CONTROL. A "Change in Control" shall be deemed to have occurred if any one or more of the following events has occurred: (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 not more than two consecutive years (not including any period prior to the effective date of this 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 paragraph's (a), (b) or (c) of this Section 14) 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 approve a merger or consolidation of the Company with any other person, other than (i) a merger or consolidation which would result in the -5- 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 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). 15. 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. No income will be recognized by a Participant at the time of issuance of Restricted Shares, unless an election under Internal Revenue Code Section 83(b) is made by the Participant. 16. 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. 17. 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. 18. 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. -6- EX-11 16 EXHIBIT 11 EXHIBIT (11) HONEYWELL INC. AND SUBSIDIARIES COMPUTATION OF EARNINGS PER SHARE FOR THE FIVE YEARS ENDED DECEMBER 31, 1994 (DOLLARS IN MILLIONS EXCEPT PER SHARE AMOUNTS)
1994 1993 1992 1991 1990 ----------- ----------- ----------- ----------- ----------- Primary: Income: Income from continuing operations........................... $ 278.9 $ 322.2 $ 399.9 $ 331.1 $ 371.8 Income from discontinued operations......................... 10.1 ----------- ----------- ----------- ----------- ----------- Income before extraordinary item and cumulative effect of accounting changes......................................... 278.9 322.2 399.9 331.1 381.9 Extraordinary item -- loss on early redemption of debt...... (8.6) Cumulative effect of accounting changes (Note).............. (144.5) ----------- ----------- ----------- ----------- ----------- Net income................................................ $ 278.9 $ 322.2 $ 246.8 $ 331.1 $ 381.9 ----------- ----------- ----------- ----------- ----------- ----------- ----------- ----------- ----------- ----------- Shares: Weighted average of shares outstanding during the year...... 129,440,052 134,242,394 138,525,414 140,868,222 151,759,942 ----------- ----------- ----------- ----------- ----------- ----------- ----------- ----------- ----------- ----------- Earnings per share: Continuing operations....................................... $ 2.15 $ 2.40 $ 2.88 $ 2.35 $ 2.45 Discontinued operations..................................... 0.07 ----------- ----------- ----------- ----------- ----------- Income before extraordinary item and cumulative effect of accounting changes........................................ 2.15 2.40 2.88 2.35 2.52 Extraordinary item -- loss on early redemption of debt...... (0.06) Cumulative effect of accounting changes (Note).............. (1.04) ----------- ----------- ----------- ----------- ----------- Net income................................................ $ 2.15 $ 2.40 $ 1.78 $ 2.35 $ 2.52 ----------- ----------- ----------- ----------- ----------- ----------- ----------- ----------- ----------- ----------- Assuming full dilution: Income: Income from continuing operations........................... $ 278.9 $ 322.2 $ 399.9 $ 331.1 $ 371.8 Income from discontinued operations......................... 10.1 ----------- ----------- ----------- ----------- ----------- Income before extraordinary item and cumulative effect of accounting changes........................................ 278.9 322.2 399.9 331.1 381.9 Extraordinary item -- loss on early redemption of debt...... (8.6) Cumulative effect of accounting changes (Note).............. (144.5) ----------- ----------- ----------- ----------- ----------- Net income................................................ $ 278.9 $ 322.2 $ 246.8 $ 331.1 $ 381.9 ----------- ----------- ----------- ----------- ----------- ----------- ----------- ----------- ----------- ----------- Shares: Weighted average of shares outstanding during the year...... 129,440,052 134,242,394 138,525,414 140,868,222 151,759,942 Shares issuable in connection with stock plans less shares purchaseable from proceeds................................ 541,811 1,069,901 1,599,395 2,120,234 1,410,826 ----------- ----------- ----------- ----------- ----------- Total shares.............................................. 129,981,863 135,312,295 140,124,809 142,988,456 153,170,768 ----------- ----------- ----------- ----------- ----------- ----------- ----------- ----------- ----------- ----------- Earnings per share: Continuing operations....................................... $ 2.15 $ 2.38 $ 2.85 $ 2.32 $ 2.43 Discontinued operations..................................... 0.06 ----------- ----------- ----------- ----------- ----------- Income before extraordinary item and cumulative effect of accounting changes........................................ 2.15 2.38 2.85 2.32 2.49 Extraordinary item -- loss on early redemption of debt...... (0.06) Cumulative effect of accounting changes..................... (1.03) ----------- ----------- ----------- ----------- ----------- Net income................................................ $ 2.15 $ 2.38 $ 1.76 $ 2.32 $ 2.49 ----------- ----------- ----------- ----------- ----------- ----------- ----------- ----------- ----------- ----------- ------------------------------ 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).
48 EX-12 17 EXHIBIT 12 EXHIBIT (12) HONEYWELL INC. AND SUBSIDIARIES COMBINED WITH PROPORTIONAL SHARES OF 50% OWNED COMPANIES COMPUTATION OF RATIOS OF EARNINGS TO FIXED CHARGES FOR THE FIVE YEARS ENDED DECEMBER 31, 1994 (DOLLARS IN MILLIONS)
1994 1993 1992 1991 1990 --------- --------- --------- --------- --------- Income from continuing operations before income taxes................. $ 369.70 $ 478.50 $ 634.70 $ 509.40 $ 516.40 Deduct: Equity income....................................................... 10.50 17.80 15.80 14.60 11.50 --------- --------- --------- --------- --------- Subtotal............................................................ 359.20 460.70 618.90 494.80 504.90 Add (Deduct): Dividends from less than 50% owned companies........................ 2.37 2.10 1.54 1.44 1.42 Proportional share of income (loss) before income taxes of 50% owned companies.......................................................... (2.83) .30 .79 .31 .25 --------- --------- --------- --------- --------- Adjusted income....................................................... 358.74 463.10 621.23 496.55 506.57 --------- --------- --------- --------- --------- Fixed charges Interest on indebtedness: Honeywell Inc. and subsidiaries..................................... 72.89 65.46 87.54 87.23 103.76 50% owned companies................................................. .02 --------- --------- --------- --------- --------- Subtotal............................................................ 72.89 65.46 87.54 87.23 103.78 Amortization of debt expense.......................................... 2.61 2.54 2.36 2.17 2.24 Interest portion of rent expense...................................... 45.64 44.75 42.68 39.87 38.94 --------- --------- --------- --------- --------- Total fixed charges................................................... 121.14 112.75 132.58 129.27 144.96 --------- --------- --------- --------- --------- Total available income................................................ $ 479.88 $ 575.85 $ 753.81 $ 625.82 $ 651.53 --------- --------- --------- --------- --------- --------- --------- --------- --------- --------- Ratio of earnings to fixed charges.................................... 3.96 5.11 5.69 4.84 4.49 --------- --------- --------- --------- --------- --------- --------- --------- --------- ---------
49 EX-21 18 EXHIBIT 21 HONEYWELL INC. AFFILIATES -- JANUARY 1, 1995
A % I COUNTRY OWNED COMPANY * - --------------------- ----- ----------------------------------------------------------------------------------- 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:DEL. 100 HONEYWELL OVERSEAS FINANCE COMPANY (HOFC) A UNITED STATES:DEL. 100 HONEYWELL REALTY, INC. A UNITED STATES:DEL. 100 HONEYWELL TCAS INC. A UNITED STATES:IL. 49 FOSTER / HONEYWELL JOINT VENTURE (Partnership) A UNITED STATES:DEL. 50 GE / MICROSWITCH CONTROL INC. I UNITED STATES:DEL. 100 MINNEAPOLIS-HONEYWELL REGULATOR COMPANY INC. A UNITED STATES:CALIF. 100 HONEYWELL PROFIMATICS, INC. A GERMANY 100 PROFIMATICS EUROPE G.m.b.H. A CANADA 49 COMCEPT CANADA, INC. I UNITED STATES: CALIF. 100 TETRA TECH SYSTEMS, INC. I 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 A ENGLAND 100 HONEYWELL INFORMATION SYSTEMS LIMITED I ENGLAND 100 HONEYWELL LEASING LIMITED A ENGLAND 100 HONEYWELL PROFIMATICS 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 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. I CANADA 100 2526-9648 QUEBEC INC. A CHILE 100 HONEYWELL CHILE S.A. A CHINA 55 SINOPEC HONEYWELL (TIANJIN) LIMITED A CHINA 100 HONEYWELL (TIANJIN) LIMITED HONEYWELL INC. AFFILIATES -- JANUARY 1, 1995 A % I COUNTRY OWNED COMPANY * - --------------------- ----- ----------------------------------------------------------------------------------- A DENMARK 100 HONEYWELL A/S A DENMARK 100 HONEYWELL EJENDOMSVIRKE A/S I DOMINICAN REPUBLIC 100 HONEYWELL DOMINICANA C. POR A. A FINLAND 100 HONEYWELL OY A FINLAND 100 KIINTEISTOHUOLTO MERATEK OY I FINLAND 100 VM-KIINTEISTOHUOLTO OY A FINLAND 80.1 HONEYWELL-AHLSTROM ADVANCED CONTROLS OY A FINLAND 100 TULLINTORIN KIINTEISTPALVELU OY A FRANCE 99.9 HONEYWELL S.A. A FRANCE 99.9 DAVILOR TECHNOLOGIE S.A. A FRANCE 99.9 HONEYWELL AEROSPACE S.A. A FRANCE 99.9 AURIS S.A. A FRANCE 99.9 APPLICATEL S.A. A FRANCE 99.9 ALARME ET PROTECTION - SOCOMEX S.A. A FRANCE 99.9 ALARME ET PROTECTION S.A. A FRANCE 99.9 HONEYWELL GERDS S.A. A GERMANY 100 HONEYWELL HOLDING AG A GERMANY 100 INGENIEURBETRIEB 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 GERMANY 100 HONEYWELL SAFETY MANAGEMENT SYSTEMS G.m.b.H. A GERMANY 100 METALLWERKE NEHEIM GOEKE & CO. A FRANCE 100 MNG FRANCE E.U.R.L. A BULGARIA 100 HONEYWELL EOOD A CZECH REPUBLIC 100 HONEYWELL SERVICE AND ENGINEERING CSFR spol.sr.o. A HUNGARY 100 HONEYWELL SZABALYOZASTECHNIKAI 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 CENTRA-BUERKLE G.m.b.H. A SWITZERLAND 100 HONEYWELL CENTRABUERKLE AG A GERMANY 100 B&S KAELTE-WAERME KLIMA G.m.b.H.- GARCHING A GERMANY 100 B&S KAELTE-WAERME KLIMA G.m.b.H.- STUTTGART A GERMANY 100 B&S KAELTE-WAERME KLIMA G.m.b.H.- MEERBUSCH A GERMANY 100 ERG BETRIEBSGESELLSCHAFT m.b.H. 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 70 STERCH CONTROLS A UKRAINE 100 HONEYWELL LIMITED A HONG KONG 100 HONEYWELL LIMITED A INDIA 100 HONEYWELL INDIA SOFTWARE OPERATION PTE. LIMITED A INDIA 39.5 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 100 TECHNOREG 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. HONEYWELL INC. AFFILIATES -- JANUARY 1, 1995 A % I COUNTRY OWNED COMPANY * - --------------------- ----- ----------------------------------------------------------------------------------- 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 CHINA 100 DALIAN YAMATAKE CONTROL INSTRUMENTS CO., LTD. A CHINA 60 YAMATAKE-SIC BUILDING AUTOMATION CO., LTD. A CHINA 52.9 YAMATAKE-SIC CONTROL 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. 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 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 100 HONEYWELL SAFETY MANAGEMENT SYSTEMS B.V. A SINGAPORE 100 HONEYWELL SAFETY MANAGEMENT SYSTEMS PTE. LTD. 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 NORWAY 100 HONEYWELL MILJOPARTNER A/S A NORWAY 100 HONEYWELL KOLBERG SERVICE 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 INUCONTROL AB A SWITZERLAND 100 HONEYWELL AG A TAIWAN 100 HONEYWELL TAIWAN LIMITED A THAILAND 100 HONEYWELL SYSTEMS (THAILAND) LIMITED A VENEZUELA 100 HONEYWELL C.A. I 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-23 19 EXHIBIT 23 EXHIBIT (23) CONSENT OF INDEPENDENT AUDITORS 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 Nos. 33-62300 and 33-57135 on Form S-3, of our report dated February 13, 1995, appearing in this Annual Report on Form 10-K of Honeywell Inc. for the year ended December 31, 1994. Deloitte & Touche LLP Minneapolis, Minnesota March 28, 1995 50 EX-24 20 EXHIBIT 24 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 M. HJERPE, 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, 1994, 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, 1994, 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 21st day of February, 1995. /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 M. HJERPE, 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, 1994, 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, 1994, 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 21st day of February, 1995. /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, 1994, 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, 1994, 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 21st day of February, 1995. /s/ W. M. Hjerpe ---------------------------------------- W. M. Hjerpe 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, 1994, 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, 1994, 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 21st day of February, 1995. /s/ P. M. Palazzari ---------------------------------------- P. M. Palazzari 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 M. HJERPE, 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, 1994, 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, 1994, 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 21st day of February, 1995. /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 M. HJERPE, 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, 1994, 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, 1994, 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 21st day of February, 1995. /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 M. HJERPE, 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, 1994, 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, 1994, 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 21st day of February, 1995. /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 M. HJERPE, 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, 1994, 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, 1994, 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 21st day of February, 1995. /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 M. HJERPE, 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, 1994, 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, 1994, 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 21st day of February, 1995. /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 M. HJERPE, 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, 1994, 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, 1994, 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 21st day of February, 1995. /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 M. HJERPE, 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, 1994, 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, 1994, 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 21st day of February, 1995. /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 M. HJERPE, 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, 1994, 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, 1994, 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 21st day of February, 1995. /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 M. HJERPE, 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, 1994, 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, 1994, 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 21st day of February, 1995. /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 M. HJERPE, 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, 1994, 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, 1994, 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 21st day of February, 1995. /s/ M. W. Wright ---------------------------------------- M. W. Wright Director EX-27 21 EXHIBIT 27
5 1,000,000 12-MOS DEC-31-1994 JAN-01-1994 DEC-31-1994 267 7 1,438 31 760 2,649 2,717 1,617 4,886 2,072 502 282 0 0 1,572 4,886 6,057 6,057 4,082 4,082 319 13 76 370 91 279 0 0 0 279 2.15 2.15