-----BEGIN PRIVACY-ENHANCED MESSAGE-----
Proc-Type: 2001,MIC-CLEAR
Originator-Name: webmaster@www.sec.gov
Originator-Key-Asymmetric:
MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen
TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB
MIC-Info: RSA-MD5,RSA,
Tnr2sT7hzNjqPDduYKyBLILqC6jC7a1+BLLUTToynqj6LwqsvHvU0fRrc8ryEleM
G+xrW645mCQYrfv1gF+3gw==
<SEC-DOCUMENT>0000950117-01-000640.txt : 20010402
<SEC-HEADER>0000950117-01-000640.hdr.sgml : 20010402
ACCESSION NUMBER: 0000950117-01-000640
CONFORMED SUBMISSION TYPE: 10-K
PUBLIC DOCUMENT COUNT: 15
CONFORMED PERIOD OF REPORT: 20001231
FILED AS OF DATE: 20010330
FILER:
COMPANY DATA:
COMPANY CONFORMED NAME: HONEYWELL INTERNATIONAL INC
CENTRAL INDEX KEY: 0000773840
STANDARD INDUSTRIAL CLASSIFICATION: MOTOR VEHICLE PARTS & ACCESSORIES [3714]
IRS NUMBER: 222640650
STATE OF INCORPORATION: DE
FISCAL YEAR END: 1231
FILING VALUES:
FORM TYPE: 10-K
SEC ACT:
SEC FILE NUMBER: 001-08974
FILM NUMBER: 1586682
BUSINESS ADDRESS:
STREET 1: 101 COLUMBIA RD
STREET 2: PO BOX 4000
CITY: MORRISTOWN
STATE: NJ
ZIP: 07962
BUSINESS PHONE: 9734552000
MAIL ADDRESS:
STREET 1: 101 COLUMBIA RD P O BOX 4000
STREET 2: 101 COLUMBIA RD P O BOX 4000
CITY: MORRISTOWN
STATE: NJ
ZIP: 07962
FORMER COMPANY:
FORMER CONFORMED NAME: ALLIEDSIGNAL INC
DATE OF NAME CHANGE: 19940929
</SEC-HEADER>
<DOCUMENT>
<TYPE>10-K
<SEQUENCE>1
<FILENAME>0001.txt
<DESCRIPTION>HONEYWELL INTERNATIONAL INC. 10-K
<TEXT>
<PAGE>
________________________________________________________________________________
________________________________________________________________________________
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-K
[x] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended December 31, 2000
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from to
Commission file number 1-8974
HONEYWELL INTERNATIONAL INC.
(Exact name of registrant as specified in its charter)
<TABLE>
<S> <C>
DELAWARE 22-2640650
- --------------------------------------- ------------------------------------
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
101 Columbia Road
P.O. Box 4000
Morristown, New Jersey 07962-2497
- ----------------------------------------- ------------------------------------
(Address of principal executive offices) (Zip Code)
</TABLE>
Registrant's telephone number, including area code (973)455-2000
Securities registered pursuant to Section 12(b) of the Act:
<TABLE>
<S> <C>
Name of Each Exchange
Title of Each Class on Which Registered
- --------------------------------------- ------------------------------------
Common Stock, par value $1 per share* New York Stock Exchange
Chicago Stock Exchange
Pacific Exchange
9 7/8% Debentures due June 1, 2002 New York Stock Exchange
9.20% Debentures due February 15, 2003 New York Stock Exchange
Zero Coupon Serial Bonds due 2009 New York Stock Exchange
9 1/2% Debentures due June 1, 2016 New York Stock Exchange
</TABLE>
- ---------
* The common stock is also listed for trading on the London stock exchange.
Securities registered pursuant to Section 12(g) of the Act: None
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 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 [ ]
The aggregate market value of the voting stock held by nonaffiliates of the
Registrant was approximately $38.2 billion at December 31, 2000.
There were 807,291,445 shares of Common Stock outstanding at December 31, 2000.
________________________________________________________________________________
________________________________________________________________________________
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
ITEM PAGE
---- ----
<S> <C> <C>
Part I. 1 Business.................................................................................... 1
2 Properties.................................................................................. 10
3 Legal Proceedings........................................................................... 10
4 Submission of Matters to a Vote of Security Holders......................................... 10
Part II. 5 Market for Registrant's Common Equity and Related Stockholder Matters....................... 11
6 Selected Financial Data..................................................................... 11
7 Management's Discussion and Analysis of Financial Condition and Results of Operations....... 12
7A Quantitative and Qualitative Disclosure About Market Risk.................................. 22
8 Financial Statements and Supplementary Data................................................. 22
9 Changes in and Disagreements with Accountants on Accounting and Financial Disclosure........ 55
Part III. 10 Directors and Executive Officers of the Registrant......................................... 55
11 Executive Compensation..................................................................... 58
12 Security Ownership of Certain Beneficial Owners and Management............................. 61
13 Certain Relationships and Related Transactions............................................. 62
Part IV. 14 Exhibits, Financial Statement Schedules, and Reports on Form 8-K........................... 63
Signatures............................................................................................... 64
</TABLE>
- ---------
This report contains certain statements that may be deemed 'forward-looking
statements' within the meaning of Section 21E of the Securities Exchange Act of
1934. All statements, other than statements of historical fact, that address
activities, events or developments that we or our management intends, expects,
projects, believes or anticipates will or may occur in the future are
forward-looking statements. Such statements are based upon certain assumptions
and assessments made by our management in light of their experience and their
perception of historical trends, current conditions, expected future
developments and other factors they believe to be appropriate. The
forward-looking statements included in this report are also subject to a number
of material risks and uncertainties, including but not limited to economic,
competitive, governmental and technological factors affecting our operations,
markets, products, services and prices. Such forward-looking statements are not
guarantees of future performance and actual results, developments and business
decisions may differ from those envisaged by such forward-looking statements.
i
<PAGE>
PART I.
ITEM 1. BUSINESS
On October 22, 2000, Honeywell entered into a merger agreement with General
Electric Company (GE). Under the terms of the merger agreement, each share of
Honeywell common stock will be exchangeable for 1.055 shares of GE common stock
at the effective time of the merger, with fractional shares paid in cash, and
Honeywell will become a wholly owned subsidiary of GE. The transaction was
approved by Honeywell's shareowners on January 10, 2001, and it remains subject
to regulatory reviews. GE and Honeywell are working with regulatory agencies to
complete the required reviews so that the transaction can close as early as
possible in 2001.
MAJOR BUSINESSES
Honeywell is a diversified technology and manufacturing company, serving
customers worldwide with aerospace products and services, control technologies
for buildings, homes and industry, automotive products, power generation
systems, specialty chemicals, fibers, plastics and electronic and advanced
materials. Our operations are conducted by strategic business units, which have
been aggregated under four reportable segments: Aerospace Solutions, Automation
& Control, Performance Materials and Power & Transportation Products. Financial
information related to our reportable segments is included in 'Item 8. Financial
Statements and Supplementary Data' in Note 24 of Notes to Financial Statements.
Following is a description of our strategic business units:
<TABLE>
<CAPTION>
STRATEGIC
BUSINESS UNITS PRODUCT CLASSES MAJOR PRODUCTS/SERVICES MAJOR CUSTOMERS/USES KEY COMPETITORS
- -------------- --------------- ----------------------- -------------------- ---------------
<S> <C> <C> <C> <C>
AEROSPACE SOLUTIONS
Engines & Turbine propulsion TFE731 turbofan Business, regional Pratt & Whitney
Systems engines TPE331 turboprop and military trainer aircraft Canada
TFE1042 turbofan Commercial and military Rolls Royce/
F124 turbofan helicopters Allison
LF502 turbofan Military vehicles Turbomeca
LF507 turbofan Commercial and military Williams
CFE738 turbofan marine craft
AS907 turbofan
T53, T55 turboshaft
LT101 turboshaft
T800 turboshaft
TF40 turboshaft
TF50 turboshaft
AGT1500 turboshaft
Retrofits
Repair, overhaul and
spare parts
----------------------------------------------------------------------------------------------------------
Auxiliary power units Airborne auxiliary Commercial, regional, Pratt & Whitney
(APUs) power units business and Canada
Jet fuel starters military aircraft Sundstrand Power
Secondary power Ground power Systems
systems
Ground power units
Repair, overhaul and
spare parts
----------------------------------------------------------------------------------------------------------
Industrial power ASE 8 turboshaft Ground based European Gas
ASE 40/50 utilities, industrial Turbines
turboshaft or mechanical Rolls Royce/
drives Allison
Solar
----------------------------------------------------------------------------------------------------------
</TABLE>
1
<PAGE>
<TABLE>
<CAPTION>
STRATEGIC
BUSINESS UNITS PRODUCT CLASSES MAJOR PRODUCTS/SERVICES MAJOR CUSTOMERS/USES KEY COMPETITORS
- -------------- --------------- ----------------------- -------------------- ---------------
<S> <C> <C> <C> <C>
Environmental control Air management systems: Commercial, regional Auxilec
systems Air conditioning and general Barber Colman
Bleed air systems aviation aircraft Dukes
Cabin pressure control Military aircraft Eaton-Vickers
systems Ground vehicles Hamilton Sundstrand
Air purification and Spacecraft Liebherr
treatment Litton Breathing
De-icing systems Systems
Electrical power systems: Lucas
Power distribution and Pacific Scientific
control Parker Hannifin
Emergency power Smiths
generation TAT
Fuel cells
Repair, overhaul and
spare parts
----------------------------------------------------------------------------------------------------------
Engine systems and Electronic and Commercial air transport, BAE Controls
accessories hydromechanical regional and general aviation Goodrich
fuel controls Military aircraft (Chandler-Evans)
Engine start systems Parker Hannifin
Electronic engine TRW (Lucas
controls Aerospace)
Sensors UTC (Hamilton
Electric and pneumatic Sundstrand)
power generation systems
Thrust reverser
actuation, pneumatic and
electric
- -------------------------------------------------------------------------------------------------------------------------------
Aerospace Avionics systems Flight safety systems: Commercial, business Century
Electronic Enhanced Ground and general aviation aircraft Garmin
Systems Proximity Warning Government aviation Goodrich
Systems (EGPWS) Kaiser
Traffic Alert and Litton
Collision Avoidance Lockheed Martin
Systems (TCAS) Narco
Windshear detection Rockwell Collins
systems Smiths
Flight data and cockpit S-tec
voice recorders Thales Sextant
Communication, navigation Trimble/Terra
and surveillance Universal
systems:
Air-to-ground telephones
Global positioning
systems
Automatic flight control
systems
Surveillance systems
Integrated systems
Flight management systems
Cockpit display systems
Data management and
aircraft performance
monitoring systems
Vehicle management
systems
Inertial sensor systems
for guidance,
stabilization,
navigation
and control
----------------------------------------------------------------------------------------------------------
Automatic test systems Computer-controlled U.S. Government and GDE Systems
automatic test systems international logistics Litton
Functional testers and centers Lockheed Martin
ancillaries Military aviation Northrop Grumman
Portable test and
diagnostic systems
Advanced battery
analyzer/charger
----------------------------------------------------------------------------------------------------------
Inertial sensor Gyroscopes, Military and Astronautics-
accelerometers, inertial commercial vehicles Kearfott
measurement units and Commercial spacecraft Ball
thermal switches and launch vehicles BEI
Energy utility boring GEC
Transportation Litton
Missiles Rockwell Collins
Munitions
----------------------------------------------------------------------------------------------------------
</TABLE>
2
<PAGE>
<TABLE>
<CAPTION>
STRATEGIC
BUSINESS UNITS PRODUCT CLASSES MAJOR PRODUCTS/SERVICES MAJOR CUSTOMERS/USES KEY COMPETITORS
- -------------- --------------- ----------------------- -------------------- ---------------
<S> <C> <C> <C> <C>
Radar systems Aircraft precision Global and U.S. airspace Hughes
landing agencies Motorola
Ground surveillance Military aviation Raytheon
Target detection devices Military missiles Rockwell Collins
Thales
- -------------------------------------------------------------------------------------------------------------------------------
Aerospace Management and technical Maintenance/operation U.S. and foreign government Boeing
Services services and provision of space space communications, Computer Sciences
systems, services logistics and information Dyncorp
and facilities services ITT
Systems engineering Commercial space ground Lockheed Martin
and integration segment systems and services SAIC
Information technology United Space
services Alliance
Logistics and sustainment
----------------------------------------------------------------------------------------------------------
Aircraft hardware Consumable hardware, Commercial and military Arrow Pemco
distribution including fasteners, aviation and space programs Avnet
bearings, bolts and Dixie
o-rings Fairchild Direct
Adhesives, sealants, Jamaica Bearings
lubricants, cleaners M&M Aerospace
and paints Pentacon
Electrical connectors, Wesco Aircraft
switches, relays and
circuit breakers
Value-added services,
repair and overhaul
kitting and point-of-use
replenishment
- -------------------------------------------------------------------------------------------------------------------------------
Aircraft Landing Landing systems Wheels and brakes Commercial and Aircraft Braking
Systems Friction products military aircraft Systems
Brake control systems Dunlop
Wheel and brake Goodrich
overhaul services Messier-Bugatti
Aircraft landing Messier-Dowty
systems integration
- -------------------------------------------------------------------------------------------------------------------------------
Federal Management services Maintenance/ U.S. government Bechtel
Manufacturing & operation of facilities Lockheed Martin
Technologies The Washington
Group
- -------------------------------------------------------------------------------------------------------------------------------
AUTOMATION & CONTROL
Home and Building Products Heating, ventilating and Original equipment Danfoss
Control air conditioning manufacturers (OEMs) DSC
controls and components Distributors Emerson
for homes and buildings Contractors EST
Indoor air quality Retailers Holmes
products including System integrators Interlogix
zoning, air cleaners, Commercial customers Invensys
humidification, heat and and homeowners served Johnson Controls
energy recovery by the distributor, Siemens
ventilators wholesaler, contractor,
Controls plus integrated retail and utility channels
electronic systems for
burners, boilers and
furnaces
Security products and
systems
Consumer household
products including
heaters, fans,
humidifiers, air
cleaners and thermostats
Water controls
Fire products & systems
----------------------------------------------------------------------------------------------------------
</TABLE>
3
<PAGE>
<TABLE>
<CAPTION>
STRATEGIC
BUSINESS UNITS PRODUCT CLASSES MAJOR PRODUCTS/SERVICES MAJOR CUSTOMERS/USES KEY COMPETITORS
- -------------- --------------- ----------------------- -------------------- ---------------
<S> <C> <C> <C> <C>
Solutions and services HVAC and building control Building managers and owners Carrier
solutions and services Contractors, architects and GroupMac
Energy management developers Invensys
solutions and services Consulting engineers Johnson Controls
Security and asset Security directors Local contractors
management solutions and Plant managers and utilities
services Utilities Simplex
Enterprise building Large, global corporations Trane
integration solutions Public school systems
Building information Universities
services Local governments
Critical environment
control solutions and
services
- -------------------------------------------------------------------------------------------------------------------------------
Industrial Control Industrial automation Advanced control software Refining and petrochemical Allen-Bradley
solutions and industrial companies Asea Brown Boveri
automation systems for Chemical manufacturers Aspentech
control and monitoring Oil and gas producers Banner
of continuous, batch and Food and beverage processors Fisher-Rosemount
hybrid operations Pharmaceutical companies Invensys
Process control Utilities Siemens
instrumentation Film and coated producers Yokogawa
Field instrumentation Pulp and paper industry
Production management Continuous web producers in
software the paper, plastics, metals,
Communications systems rubber, non- wovens and
for Industrial Control printing industries
equipment and systems
Consulting, networking
engineering and
installation
----------------------------------------------------------------------------------------------------------
Sensors, electromechanical Sensors, measurement, Package and materials handling Cherry
switches, control control and industrial operations Eaton
components components Appliance manufacturers Omron
Analytical Automotive companies Optek
instrumentation Aviation companies Phillips
Recorders Food and beverage processors Telemecanique
Controllers Medical equipment Turck
Datacom components Heat treat processors Yokogawa
Flame safeguard equipment Flame safeguard equipment
Computer and business
equipment manufacturers
Data acquisition companies
- -------------------------------------------------------------------------------------------------------------------------------
PERFORMANCE MATERIALS
Performance Nylon products and Nylon filament and Commercial, residential and BASF
Polymers & services staple yarns specialty carpet markets DSM
Chemicals Bulk continuous Nylon for fibers, DuPont
filament engineered resins and film Enichem
Nylon polymer Fertilizer ingredients Rhodia
Caprolactam Specialty chemicals Solutia
Ammonium sulfate Vitamins UBE
Hydroxylamine
Cyclohexanol
Cyclohexanone
----------------------------------------------------------------------------------------------------------
Performance fibers Industrial nylon and Passenger car and truck tires Acordis
polyester yarns Passenger car and light truck Akra
Extended-chain seatbelts and airbags DSM
polyethylene composites Broad woven fabrics DuPont
Ropes and mechanical Hyosung
rubber goods Kolon
Luggage Kosa
Sports gear Solutia
Bullet resistant vests,
helmets and heavy armor
Cut-resistant industrial
upholstery and workwear
Sailcloth
----------------------------------------------------------------------------------------------------------
</TABLE>
4
<PAGE>
<TABLE>
<CAPTION>
STRATEGIC
BUSINESS UNITS PRODUCT CLASSES MAJOR PRODUCTS/SERVICES MAJOR CUSTOMERS/USES KEY COMPETITORS
- -------------- --------------- ----------------------- -------------------- ---------------
<S> <C> <C> <C> <C>
Engineered applications Thermoplastic nylon Food and pharmaceutical BASF
and solutions Thermoplastic alloys packaging Bayer
and blends Housings (e.g., electric hand DuPont
Post-consumer tools, chain saws) Hoechst
recycled PET resins Industrial applications Kolon
Recycled nylon resins Automotive components Monsanto
Cast nylon Office furniture Rexam Custom
Biaxially oriented nylon Electrical and electronics Toyobo
film
Fluoropolymer film
----------------------------------------------------------------------------------------------------------
Fluorocarbons Genetron'r' refrigerants, Refrigeration Atochem
aerosol and Air conditioning DuPont
insulation foam blowing Polyurethane foam ICI
agents Precision cleaning
Genesolv'r' solvents Optical
Oxyfume sterilant gases Metalworking
Hospitals
Medical equipment
manufacturers
----------------------------------------------------------------------------------------------------------
Hydrofluoric acid (HF) Anhydrous and aqueous Fluorocarbons Ashland
hydrofluoric acid Steel Atochem
Oil refining DuPont
Chemical intermediates Hashimoto
Merck
Norfluor
Quimica Fluor
----------------------------------------------------------------------------------------------------------
Fluorine specialties Sulfur hexafluoride (SF[u]6) Electric utilities Air Products
Iodine pentafluoride Magnesium Asahi Glass
(IF[u]5) Gear manufacturers Atochem
Antimony pentafluoride Ausimont
(SbF[u]5) Kanto Denko Kogyo
Solvay Fluor
----------------------------------------------------------------------------------------------------------
Nuclear services UF[u]6 conversion services Nuclear fuel British Nuclear
Electric utilities Fuels
Cameco
Cogema
Tennex
----------------------------------------------------------------------------------------------------------
Pharmaceutical and Active pharmaceutical Agrichemicals Cambrex
agricultural chemicals ingredients Pharmaceuticals DSM
Oxime-based fine Lonza
chemicals Zeneca
Fluoroaromatics
Bromoaromatics
----------------------------------------------------------------------------------------------------------
High purity chemicals Ultra high purity HF Semiconductors LaPorte
Solvents Merck
Inorganic acids Olin
High purity solvents
----------------------------------------------------------------------------------------------------------
Industrial specialties HF derivatives Diverse by product type Varies by product
Imaging Fluoroaromatics line
Luminescence and Photodyes
plastic additives Phosphors
Chemical processing Catalysts
Materials and Oxime silanes
surface treatment
Sealants
----------------------------------------------------------------------------------------------------------
Specialty waxes Polyethylene waxes Coatings BASF
Petroleum waxes and Inks Clariant
blends Candles Eastman
Tire/Rubber Exxon
Personal care IGI
Packaging Leuna
Schumann-Sasol
----------------------------------------------------------------------------------------------------------
Specialty additives Polyethylene waxes PVC Eastman
Petroleum waxes and Plastics Geon
blends Henkel
PVC lubricant systems
Plastic additives
----------------------------------------------------------------------------------------------------------
</TABLE>
5
<PAGE>
<TABLE>
<CAPTION>
STRATEGIC
BUSINESS UNITS PRODUCT CLASSES MAJOR PRODUCTS/SERVICES MAJOR CUSTOMERS/USES KEY COMPETITORS
- -------------- --------------- ----------------------- -------------------- ---------------
<S> <C> <C> <C> <C>
UOP (joint venture) Processes Petroleum, ABB Lummus
Catalysts petrochemical, gas Criterion
Molecular sieves processing and IFP
Adsorbents chemical industries Mobil
Design of process Procatalyse
plants and equipment Stone & Webster
Customer catalyst Zeochem
manufacturing
- -------------------------------------------------------------------------------------------------------------------------------
Electronic Wafer Interconnect- Semiconductors Applied Materials
Materials fabrication dielectrics Microelectronics Dow Chemical
materials and Interconnect-metals Telecommunications Dow Corning
services Semiconductor packaging Japan Energy
materials JSR
Advanced polymers Material Research
Global services Tokyo-Ohka
Tosoh SMD
VMC/Ulvac
----------------------------------------------------------------------------------------------------------
Specialty Amorphous metal ribbons Electrical distribution ARMCO/Allegheny
electronic and components transformers CF Lux
materials High frequency Gould
electronics Morgan/VAC
Metal joining
Theft deterrent
systems
Printed circuit
boards
----------------------------------------------------------------------------------------------------------
Advanced Printed circuit boards Computers JVC
circuits (PCBs); high density Telecommunications Merix
interconnect solutions, Handsets & infrastructure Sanmina
complex rigid PCBs, Networking equipment TTM
high-layer Unicap
count/multilayer PCBs ViaSystems
- -------------------------------------------------------------------------------------------------------------------------------
POWER & TRANSPORTATION PRODUCTS
Transportation and Charge-air systems Turbochargers Passenger car, truck Aisin Seiki
Power Systems Superchargers and off-highway Borg-Warner
Remanufactured components OEMs Hitachi
Engine manufacturers Holset
Aftermarket distributors IHI
and dealers KKK
MHI
Schwitzer
----------------------------------------------------------------------------------------------------------
Thermal systems Charge-air coolers Passenger car, truck Behr/McCord
Aluminum radiators and off-highway OEMs Modine
Aluminum cooling Engine manufacturers Valeo
modules Aftermarket distributors
and dealers
----------------------------------------------------------------------------------------------------------
Power generation Microturbine generators Users of electricity Bowman
Capstone
Elliot
GenSet OEMs
Ebarra
Electric Utilities
Mitsubishi
Toyota
Turbec
----------------------------------------------------------------------------------------------------------
Air brake systems Anti-lock brake On-highway medium and Arvin Meritor
(joint venture) systems (ABS) heavy truck, Eaton
Air disc brakes bus and trailer OEMs Midland-Haldex
Air compressors Off-highway equipment WABCO
Air valves OEMs
Air dryers Aftermarket distributors
Actuators and dealers/original
Truck electronics equipment service (OES)
Competitive
remanufactured
products
- -------------------------------------------------------------------------------------------------------------------------------
</TABLE>
6
<PAGE>
<TABLE>
<CAPTION>
STRATEGIC
BUSINESS UNITS PRODUCT CLASSES MAJOR PRODUCTS/SERVICES MAJOR CUSTOMERS/USES KEY COMPETITORS
- -------------- --------------- ----------------------- -------------------- ---------------
<S> <C> <C> <C> <C>
Consumer Products Aftermarket Oil, air, fuel, Automotive and heavy AC Delco
Group filters, spark plugs, transmission and coolant vehicle aftermarket channels, Bosch
electronic components and filters OEMs and OES Champion
car care products PCV valves Auto supply retailers Champ Labs
Spark plugs Specialty installers Havoline/Texaco
Wire and cable Mass merchandisers Mann & Hummel
Antifreeze/coolant NGK
Ice-fighter products Peak/Old World
Windshield washer fluids Industries
Waxes, washes and Pennzoil-Quaker
specialty cleaners State
Purolator/Arvin Ind
STP/ArmorAll/
Clorox
Turtle Wax
Various Private
Label
Wix/Dana
Zerex/Valvoline
- -------------------------------------------------------------------------------------------------------------------------------
Friction Materials Friction materials Disc brake pads Automotive and heavy vehicle Akebono
Aftermarket brake hard Drum brake linings OEMs, OES, brake Dana
parts Brake blocks manufacturers and aftermarket Delphi
Disc and drum brake channels Federal-Mogul
components Mass merchandisers ITT Automotive
Brake hydraulic Installers Italy S.r.l.
components Railway and commercial/ JBI
Brake fluid military aircraft OEMs Nisshinbo
Aircraft brake linings and brake manufacturers Pagid
Railway linings Sumitomo
TMD
- -------------------------------------------------------------------------------------------------------------------------------
</TABLE>
AEROSPACE SALES
Our sales to aerospace customers were 40, 42 and 42 percent of our total
sales in 2000, 1999 and 1998, respectively. Our sales to aerospace original
equipment manufacturers were 14, 15 and 16 percent of our total sales in 2000,
1999 and 1998, respectively. If there were a large decline in sales of aircraft
that use our components, operating results could be negatively impacted. In
addition, our sales to aftermarket customers of aerospace products and services
were 19, 19 and 18 percent of our total sales in 2000, 1999 and 1998,
respectively. If there were a large decline in the number of flight hours for
aircraft that use our components or services, operating results could be
negatively impacted.
U.S. GOVERNMENT SALES
Sales to the U.S. Government (principally by our Aerospace Solutions
segment), acting through its various departments and agencies and through prime
contractors, amounted to $2,219, $2,383 and $2,693 million in 2000, 1999 and
1998, respectively, which includes sales to the U.S. Department of Defense of
$1,548, $1,415 and $1,658 million in 2000, 1999 and 1998, respectively. We are
affected by U.S. Government budget constraints for defense and space programs.
U.S. defense spending increased slightly in 2000 and is also expected to
increase slightly in 2001.
In addition to normal business risks, companies engaged in supplying
military and other equipment to the U.S. Government are subject to unusual
risks, including dependence on Congressional appropriations and administrative
allotment of funds, changes in governmental procurement legislation and
regulations and other policies that may reflect military and political
developments, significant changes in contract scheduling, complexity of designs
and the rapidity with which they become obsolete, necessity for constant design
improvements, intense competition for U.S. Government business necessitating
increases in time and investment for design and development, difficulty of
forecasting costs and schedules when bidding on developmental and highly
sophisticated technical work and other factors characteristic of the industry.
Changes are customary over the life of U.S. Government contracts, particularly
development contracts, and generally result in adjustments of contract prices.
We, like other government contractors, are subject to government
investigations of business practices and compliance with government procurement
regulations. Although such regulations provide that a contractor may be
suspended or barred from government contracts under certain circumstances, and
the outcome of pending government investigations cannot be predicted with
certainty, we are not
7
<PAGE>
currently aware of any such investigations that we expect, individually or in
the aggregate, will have a material adverse effect on us. In addition, we have a
proactive business compliance program designed to ensure compliance and sound
business practices.
BACKLOG
Our total backlog at year-end 2000 and 1999 was $8,094 and $8,736 million,
respectively. We anticipate that approximately $5,090 million of the 2000
backlog will be filled in 2001. We believe that backlog is not necessarily a
reliable indicator of our future sales because a substantial portion of the
orders constituting this backlog may be canceled at the customer's option.
COMPETITION
We are subject to active competition in substantially all product and
service areas. Such competition is expected to continue in all geographic
regions. Competitive conditions vary widely among the thousands of products and
services provided by us, and vary country by country. Depending on the
particular customer or market involved, our businesses compete on a variety of
factors, such as price, quality, reliability, delivery, customer service,
performance, applied technology, product innovation and product recognition.
Brand identity, service to customers and quality are generally important
competitive factors for our products and services, and there is considerable
price competition. Other competitive factors for certain products include
breadth of product line, research and development efforts and technical and
managerial capability. While our competitive position varies among our products
and services, we believe we are a significant factor in each of our major
product and service classes. However, certain of our products and services are
sold in competition with those of a large number of other companies, some of
which have substantial financial resources and significant technological
capabilities. In addition, some of our products compete with the captive
component divisions of original equipment manufacturers.
INTERNATIONAL OPERATIONS
We are engaged in manufacturing, sales and/or research and development
mainly in the U.S., Europe, Canada, Asia and Latin America. U.S. exports and
foreign manufactured products are significant to our operations.
Our international operations, including U.S. exports, are potentially
subject to a number of unique risks and limitations, including: fluctuations in
currency value; exchange control regulations; wage and price controls;
employment regulations; foreign investment laws; import and trade restrictions,
including embargoes; and governmental instability. However, we have limited
exposure in high risk countries and have taken action to mitigate such risks.
Financial information related to geographic areas is included in 'Item 8.
Financial Statements and Supplementary Data' in Note 25 of Notes to Financial
Statements.
RAW MATERIALS
The principal raw materials used in our operations are generally readily
available. We experienced no significant or unusual problems in the purchase of
key raw materials and commodities in 2000. We are not dependent on any one
supplier for a material amount of our raw materials. However, we are highly
dependent on our suppliers and subcontractors in order to meet commitments to
our customers. In addition, many major components and product equipment items
are procured or subcontracted on a sole-source basis with a number of domestic
and foreign companies. We maintain a qualification and performance surveillance
process to control risk associated with such reliance on third parties. While we
believe that sources of supply for raw materials and components are generally
adequate, it is difficult to predict what effects shortages or price increases
may have in the future. However, at present, we have no reason to believe a
shortage of raw materials will cause any material adverse impact during 2001.
PATENTS, TRADEMARKS, LICENSES AND DISTRIBUTION RIGHTS
Our business as a whole, and that of our strategic business units, are not
dependent upon any single patent or related group of patents, or any licenses or
distribution rights. We own, or are licensed under, a large number of patents,
patent applications and trademarks acquired over a period of many
8
<PAGE>
years, which relate to many of our products or improvements thereon and are of
importance to our business. From time to time, new patents and trademarks are
obtained, and patent and trademark licenses and rights are acquired from others.
We also have distribution rights of varying terms for 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 us. We believe that,
in the aggregate, the rights under such patents, trademarks and licenses are
generally important to our operations, but we do not consider that any patent,
trademark or related group of patents, or any licensing or distribution rights
related to a specific process or product are of material importance in relation
to our total business. See Item 3 at page 10 of this Form 10-K for information
concerning litigation relating to patents in which we are involved.
We have registered trademarks for a number of our products, including such
consumer brands as Honeywell, Prestone, FRAM, Anso and Autolite.
RESEARCH AND DEVELOPMENT
Our research activities are directed toward the discovery and development of
new products and processes, improvements in existing products and processes, and
the development of new uses of existing products.
Research and development expense totaled $818, $909 and $876 million in
2000, 1999 and 1998, respectively. Customer-sponsored (principally the U.S.
Government) research and development activities amounted to an additional $560,
$682 and $718 million in 2000, 1999 and 1998, respectively.
ENVIRONMENT
We are subject to various federal, state and local requirements regulating
the discharge of materials into the environment or otherwise relating to the
protection of the environment. It is our policy to comply with these
requirements and we believe that, as a general matter, our policies, practices
and procedures are properly designed to prevent unreasonable risk of
environmental damage, and of resulting financial liability, in connection with
our business. Some risk of environmental damage is, however, inherent in certain
of our operations and products, as it is with other companies engaged in similar
businesses.
We are and have been engaged in the handling, manufacture, use or disposal
of many substances classified as hazardous or toxic by one or more regulatory
agencies. We believe that, as a general matter, our handling, manufacture, use
and disposal of such substances are in accord with environmental laws and
regulations. It is possible, however, that future knowledge or other
developments, such as improved capability to detect substances in the
environment or increasingly strict environmental laws and standards and
enforcement policies thereunder, could bring into question our handling,
manufacture, use or disposal of such substances.
Among other environmental requirements, we are subject to the federal
superfund law, and similar state laws, under which we have been designated as a
potentially responsible party that may be liable for cleanup costs associated
with various hazardous waste sites, some of which are on the U.S. Environmental
Protection Agency's superfund priority list. Although, under some court
interpretations of these laws, there is a possibility that a responsible party
might have to bear more than its proportional share of the cleanup costs if it
is unable to obtain appropriate contribution from other responsible parties, we
have not had to bear significantly more than our proportional share in multi-
party situations taken as a whole.
Further information regarding environmental matters is included in 'Item 7.
Management's Discussion and Analysis of Financial Condition and Results of
Operations.'
EMPLOYEES
We have approximately 125,000 employees at December 31, 2000. Approximately
86,000 were located in the United States, and, of these employees, about 17%
were unionized employees represented by various local or national unions.
9
<PAGE>
ITEM 2. PROPERTIES
We have over 1,000 locations consisting of plants, research laboratories,
sales offices and other facilities. The plants are generally located to serve
large marketing areas and to provide accessibility to raw materials and labor
pools. The properties are generally maintained in good operating condition.
Utilization of these plants may vary with sales to customers and other
business conditions; however, no major operating facility is significantly
idle. The facilities, together with planned expansions, are expected to meet
our needs for the foreseeable future. We own or lease warehouses, railroad
cars, barges, automobiles, trucks, airplanes and materials handling and data
processing equipment. We also lease space for administrative and sales staffs.
Our headquarters and administrative complex is located at Morristown, New
Jersey.
Our principal plants, which are owned in fee unless otherwise indicated, are
as follows:
<TABLE>
<S> <C> <C>
AEROSPACE SOLUTIONS
-------------------
Glendale, AZ (partially leased) South Bend, IN Rocky Mount, NC
Phoenix, AZ Olathe, KS (leased) Redmond, WA
Tempe, AZ Coon Rapids, MN (leased) Yeovil, Somerset
Tucson, AZ Minneapolis, MN United Kingdom
Torrance, CA Teterboro, NJ
(partially leased) Albuquerque, NM
Clearwater, FL
AUTOMATION & CONTROL
--------------------
Phoenix, AZ Freeport, IL Syosset, NY
San Diego, CA Golden Valley, MN El Paso, TX (leased)
Northford, CT Plymouth, MN Offenbach, Germany
PERFORMANCE MATERIALS
---------------------
Baton Rouge, LA Pottsville, PA Hopewell, VA
Geismar, LA Columbia, SC Seelze, Germany
Roseville, MN Orange, TX
Moncure, NC Chesterfield, VA
POWER & TRANSPORTATION PRODUCTS
-------------------------------
Torrance, CA Thaon-Les-Vosges, France Atessa, Italy
Huntington, IN Glinde, Germany Skelmersdale, United
Kingdom
</TABLE>
ITEM 3. LEGAL PROCEEDINGS
Details of Legal Proceedings are included in 'Item 8. Financial Statements
and Supplementary Data' under the headings 'Litton Litigation', 'Shareowner
Litigation' and 'Other Matters' in Note 22 of Notes to Financial Statements.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
At the Special Meeting of Shareowners of Honeywell held on January 10, 2001,
the proposed merger to be implemented pursuant to the Agreement and Plan of
Merger, dated as of October 22, 2000, between General Electric Company and
Honeywell International Inc. as set forth in Honeywell's proxy statement dated
December 4, 2000, which was filed with the Securities and Exchange Commission
pursuant to Regulation 14A under the Securities Exchange Act of 1934, was
approved with 592,168,926 votes cast FOR, 8,187,890 votes cast AGAINST,
6,826,897 abstentions and no broker non-votes.
10
<PAGE>
PART II.
ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS
Market and dividend information for Honeywell's common stock is included in
'Item 8. Financial Statements and Supplementary Data' in Note 26 of Notes to
Financial Statements.
The number of record holders of our common stock at December 31, 2000 was
92,313.
ITEM 6. SELECTED FINANCIAL DATA
HONEYWELL INTERNATIONAL INC.
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
---------------------------------------------------------
2000 1999 1998 1997 1996 1995
---- ---- ---- ---- ---- ----
(DOLLARS AND SHARES IN MILLIONS EXCEPT PER SHARE AMOUNTS)
<S> <C> <C> <C> <C> <C> <C>
RESULTS OF OPERATIONS
Net sales.......................... $25,023 $23,735 $23,555 $22,499 $21,283 $21,077
Net income(1)...................... 1,659 1,541 1,903 1,641 1,423 1,209
EARNINGS PER COMMON SHARE
Net earnings:
Basic............................ 2.07 1.95 2.38 2.04 1.77 1.50
Assuming dilution................ 2.05 1.90 2.34 2.00 1.73 1.48
Dividends.......................... 0.75 0.68 0.60 0.52 0.45 0.39
FINANCIAL POSITION AT YEAR-END
Property, plant and
equipment - net.................. 5,230 5,630 5,600 5,380 5,353 5,841
Total assets....................... 25,175 23,527 22,738 20,118 18,322 17,525
Short-term debt.................... 1,682 2,609 2,190 1,238 867 956
Long-term debt..................... 3,941 2,457 2,776 2,394 2,034 1,848
Total debt......................... 5,623 5,066 4,966 3,632 2,901 2,804
Shareowners' equity................ 9,707 8,599 8,083 6,775 6,385 5,632
</TABLE>
- ---------
(1) In 2000, includes a net provision for asset impairments, repositioning,
environmental and other charges and a gain on the sale of the TCAS product
line of Honeywell Inc. resulting in a net after-tax charge of $634 million,
or $0.78 per share. In 1999, includes merger, repositioning and other
charges and gains on the sales of our Laminate Systems business and our
investment in AMP common stock resulting in a net after-tax charge of $624
million, or $0.78 per share. In 1998, includes repositioning charges, a gain
on settlement of litigation claims and a tax benefit resulting from the
favorable resolution of certain prior-year research and development tax
claims resulting in a net after-tax charge of $4 million, with no impact on
the per share amount. In 1997, includes repositioning and other charges,
gains on the sales of our automotive Safety Restraints and certain
Industrial Control businesses and a charge related to the 1996 sale of our
automotive Braking Systems business resulting in a net after-tax charge of
$5 million, with no impact on the per share amount. In 1996, includes
repositioning and other charges and a gain on the sale of our automotive
Braking Systems business resulting in a net after-tax gain of $9 million, or
$0.01 per share.
11
<PAGE>
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
RESULTS OF OPERATIONS
<TABLE>
<CAPTION>
2000 1999 1998
---- ---- ----
(DOLLARS IN MILLIONS)
<S> <C> <C> <C>
NET SALES
Aerospace Solutions............................ $ 9,988 $ 9,908 $ 9,890
Automation & Control........................... 7,384 6,115 5,957
Performance Materials.......................... 4,055 4,007 4,169
Power & Transportation Products................ 3,527 3,581 3,387
Corporate...................................... 69 124 152
------- ------- -------
$25,023 $23,735 $23,555
------- ------- -------
------- ------- -------
SEGMENT PROFIT
Aerospace Solutions............................ $ 2,195 $ 1,918 $ 1,587
Automation & Control........................... 986 767 705
Performance Materials.......................... 334 439 634
Power & Transportation Products................ 274 322 234
Corporate...................................... (160) (175) (248)
------- ------- -------
$ 3,629 $ 3,271 $ 2,912
------- ------- -------
------- ------- -------
</TABLE>
See 'Item 8. Financial Statements and Supplementary Data' in Note 24 of Notes to
Financial Statements for further information on our reportable segments.
Net sales in 2000 were $25,023 million, an increase of $1,288 million, or
5 percent compared with 1999. Net sales in 1999 were $23,735 million, an
increase of $180 million, or 1 percent compared with 1998. The increase in sales
in both 2000 and 1999 is attributable to the following:
<TABLE>
<CAPTION>
2000 1999
VERSUS VERSUS
1999 1998
---- ----
<S> <C> <C>
Acquisitions/Divestitures................................... 6% 1%
Foreign Exchange............................................ (2) (1)
Volume/Price................................................ 1 1
-- --
5% 1%
-- --
-- --
</TABLE>
Total segment profit in 2000 was $3,629 million, an increase of $358
million, or 11 percent compared with 1999. Segment profit margin for 2000 was
14.5 percent compared with 13.8 percent in 1999. The increase in segment profit
in 2000 was led by a significant improvement by the Aerospace Solutions and
Automation & Control segments and lower Corporate expenses. The increase was
partially offset by lower segment profit by the Performance Materials and Power
& Transportation Products segments. Total segment profit in 1999 was
$3,271 million, an increase of $359 million, or 12 percent compared with 1998.
Segment profit margin for 1999 was 13.8 percent compared with 12.4 percent in
1998. The increase in segment profit in 1999 was led by a substantial
improvement by the Aerospace Solutions segment with the Power & Transportation
Products and Automation & Control segments also contributing solid gains. Lower
Corporate expenses also contributed to the increase. The increase was partially
offset by a substantial decrease in segment profit by the Performance Materials
segment.
Postretirement benefit plans contributed cost reductions of $282 and $61
million in 2000 and 1999, respectively, principally due to workforce reductions
and the funding status of our pension plans (described in 'Item 8. Financial
Statements and Supplementary Data' in Note 23 of Notes to Financial Statements).
Future effects on operating results depend on economic conditions and investment
performance.
12
<PAGE>
A discussion of net sales and segment profit by reportable segment can be
found in the Review of Business Segments section below.
(Gain) on sale of non-strategic businesses of $112 million in 2000
represents the pretax gain on the government-mandated divestiture of the TCAS
product line of Honeywell Inc. (the former Honeywell) following the merger of
AlliedSignal Inc. and Honeywell Inc. in December 1999. (Gain) on sale of
non-strategic businesses of $106 million in 1999 represents the pretax gain on
the sale of our Laminate Systems business. Refer to 'Item 8. Financial
Statements and Supplementary Data' in Note 6 of Notes to Financial Statements
for further information.
Equity in (income) loss of affiliated companies was a loss of $89 million in
2000 compared with income of $76 million in 1999. The decrease of $165 million
in equity income reflects that the current year includes a charge of
$136 million for costs associated with closing an affiliate's chemical
manufacturing operations and for an equity investee's customer claims. The prior
year also included a charge of $40 million related to the writedown of an equity
investment and an equity investee's severance actions. Refer to 'Item 8.
Financial Statements and Supplementary Data' in Note 5 of Notes to Financial
Statements for further discussion of the charges in both 2000 and 1999.
Excluding these charges in both periods, equity in (income) loss of affiliated
companies was income of $47 million in 2000, a decrease of $69 million compared
with 1999. This decrease was due mainly to lower earnings from our UOP process
technology (UOP) joint venture partially offset by the gain on the sale of our
interest in an automotive aftermarket joint venture. Equity in (income) loss of
affiliated companies was income of $76 million in 1999 compared with income of
$162 million in 1998. The decrease of $86 million resulted from the charge of
$40 million relating to the writedown of an equity investment and an equity
investee's severance actions as well as lower earnings from UOP.
Other (income) expense, $57 million of income in 2000, decreased by
$250 million compared with 1999. The decrease principally reflects the 1999 net
gain of $268 million on our disposition of our investment in AMP Incorporated
(AMP) common stock. Refer to 'Item 8. Financial Statements and Supplementary
Data' in Note 7 of Notes to Financial Statements for further information.
Excluding this net gain, other (income) expense was $57 million of income in
2000, compared with $39 million of income in 1999. This increase in other income
of $18 million in 2000 was due principally to lower minority interest expense
and increased benefits from foreign exchange hedging. Other (income) expense,
$307 million of income in 1999, increased by $280 million compared with 1998.
The increase principally reflects the net gain of $268 million on our
disposition of our investment in AMP common stock.
Interest and other financial charges of $481 million in 2000 increased by
$216 million, or 82 percent compared with 1999. The increase results from higher
average levels of debt during the current year due principally to the Pittway
acquisition and our share repurchase program, higher average interest rates and
the impact of tax interest expense. Interest and other financial charges of
$265 million in 1999 decreased by $10 million, or 4 percent compared with 1998.
The decrease resulted from lower interest rates and tax interest expense
somewhat offset by the effects of higher average debt outstanding during 1999.
The effective tax rate was 30.8, 31.5 and 31.3 percent in
2000, 1999 and 1998, respectively. Refer to 'Item 8. Financial Statements and
Supplementary Data' in Note 9 of Notes to Financial Statements for further
information.
Net income in 2000 of $1,659 million, or $2.05 per share, was 8 percent
higher than 1999 net income of $1,541 million, or $1.90 per share. Net income in
2000 included the gain on the disposition of the TCAS product line of the former
Honeywell and asset impairments, repositioning, environmental and other charges.
Adjusted for these items, net income in 2000 was $634 million, or $0.78 per
share, higher than reported. Net income in 1999 included the gains on our
dispositions of our Laminate Systems business and our investment in AMP and
merger, repositioning and other charges. Adjusted for these items, net income in
1999 was $624 million, or $0.78 per share, higher than reported. Net income in
2000 increased by 6 percent compared with 1999 if both years are adjusted for
these items. Net income in 1999 of $1,541 million, or $1.90 per share, was
19 percent lower than 1998 net income of $1,903 million, or $2.34 per share. Net
income in 1998 included repositioning charges, litigation
13
<PAGE>
settlements and a tax settlement. Net income in 1999 increased by 14 percent
compared with 1998 if both years are adjusted for these items.
REVIEW OF BUSINESS SEGMENTS
Aerospace Solutions sales in 2000 were $9,988 million, an increase of $80
million, or 1 percent compared with 1999. Higher sales to the aftermarket,
particularly repair and overhaul and the military, and increased original
equipment sales to business, regional and general aviation customers were
partially offset by lower original equipment sales to air transport
manufacturers and a decline in engineering services revenues. Sales also
decreased due to the effects of government-mandated divestitures in connection
with the merger of AlliedSignal and the former Honeywell. Aerospace Solutions
sales in 1999 were $9,908 million or basically flat compared with 1998. Sales of
avionics products were higher due principally to continued strong demand for
flight safety products. Sales to the aftermarket, particularly repair and
overhaul and the military, were also higher. The acquisition in 1998 of a
controlling interest in the Normalair-Garrett Ltd. environmental controls joint
venture also increased sales. This increase was offset by lower sales to air
transport and military original equipment manufacturers, and the effects of
divestitures and a restructuring of a government technical services contract.
Aerospace Solutions segment profit in 2000 was $2,195 million, an increase
of $277 million, or 14 percent compared with 1999 due principally to cost
structure improvements, primarily from workforce and benefit cost reductions,
and merger-related savings. Increased sales of higher-margin aftermarket
products and services also contributed to the improvement in segment profit.
Aerospace Solutions segment profit in 1999 was $1,918 million, an increase of
$331 million, or 21 percent compared with 1998 due principally to increased
sales of higher-margin aftermarket and avionics products and cost structure
improvements primarily from workforce and benefit cost reductions.
Automation & Control sales in 2000 were $7,384 million, an increase of
$1,269 million, or 21 percent compared with 1999. Sales for our Home and
Building Control business were substantially higher as increased sales in our
security products business, due to the acquisition of Pittway, were partially
offset by lower sales in our solutions and services business. Sales for our
Industrial Control business declined moderately as growth in our sensing and
control business was more than offset by lower sales in our industrial
automation and control business. Our industrial automation and control business
continues to be adversely affected by weakness in the hydrocarbon processing
industry. Sales for the segment were also adversely impacted by foreign currency
fluctuations due to the strong dollar. Automation & Control sales in 1999 were
$6,115 million, an increase of $158 million, or 3 percent compared with 1998.
Sales increased for our Home and Building Control business driven by growth in
our control products and building services, and security businesses.
Acquisitions also contributed to the increase partially offset by lower sales
from our energy retrofit and installed systems businesses. Sales for our
Industrial Control business were basically flat compared with 1998. Higher sales
due to acquisitions and growth in our sensing and control business were offset
by the effects of continued weakness in our industrial automation and control
business.
Automation & Control segment profit in 2000 was $986 million, an increase of
$219 million, or 29 percent compared with 1999. Segment profit for both our Home
and Building Control and Industrial Control businesses improved primarily as a
result of lower costs due to workforce and benefit cost reductions and
merger-related savings. The acquisition of Pittway and other portfolio changes
also contributed to the improvement in segment profit. Automation & Control
segment profit in 1999 was $767 million, an increase of $62 million, or 9
percent compared with 1998. Segment profit for our Home and Building Control
business increased significantly due to improvement in our control products
business and the contraction of our lower-margin energy retrofit and installed
systems businesses. Cost savings from workforce reductions also contributed to
the improvement. This increase was offset somewhat by lower segment profit for
our Industrial Control business as growth in our higher-margin sensing and
control business and cost structure improvements were more than offset by the
effects of continued weakness in certain key end markets in our industrial
automation and control business.
Performance Materials sales in 2000 were $4,055 million, an increase of $48
million, or 1 percent compared with 1999. Higher sales of advanced circuitry and
wafer-fabrication products by our
14
<PAGE>
Electronic Materials business were largely offset by the effect of divestitures,
principally our Laminate Systems business. Performance Materials sales in 1999
were $4,007 million, a decrease of $162 million, or 4 percent compared with 1998
due principally to divestitures including our environmental catalyst, Laminate
Systems and phenol businesses. Lower sales for our carpet fibers business also
contributed to the decrease. This decrease was partially offset by higher sales
for our specialty films, engineering plastics and waxes businesses and increased
sales from the acquisitions of Johnson Matthey Electronics and Pharmaceutical
Fine Chemicals.
Performance Materials segment profit in 2000 was $334 million, a decrease of
$105 million, or 24 percent compared with 1999. The decrease principally
reflects higher raw material costs in certain Performance Polymers and Chemicals
businesses and higher operating losses in our chip packaging and pharmaceutical
chemicals businesses. The decrease was partially offset by cost structure
improvements and price increases in certain Performance Polymers and Chemicals
businesses. Performance Materials segment profit in 1999 was $439 million, a
decrease of $195 million, or 31 percent compared with 1998. The decrease
principally reflects the effects of pricing pressures in our Performance
Polymers and Electronic Materials businesses and higher raw material costs in
certain Performance Polymers businesses. The impact of 1998 divestitures also
contributed to the decrease. The effect of improved sales volume for our
specialty films, engineering plastics and waxes businesses was a partial offset.
Power & Transportation Products sales in 2000 were $3,527 million, a
decrease of $54 million, or 2 percent compared with 1999 due mainly to lower
sales for our Commercial Vehicle Systems and Friction Materials businesses.
Sales for our Commercial Vehicles Systems business were negatively impacted by
decreased heavy-duty truck builds. Sales for our Friction Materials business
were lower mainly due to foreign currency fluctuations. This decrease was
partially offset by higher sales for our Turbocharging Systems business as
continued strong world-wide demand more than offset the adverse impact of
foreign currency fluctuations. Power & Transportation Products sales in 1999
were $3,581 million, an increase of $194 million, or 6 percent compared with
1998. Sales for our Turbocharging Systems business increased significantly due
primarily to continued strong sales in Europe reflecting the turbodiesel's
increased penetration of the passenger car market. Sales for our Commercial
Vehicle Systems business also increased due principally to increased North
American truck builds. Sales for our Consumer Products Group business also
increased, led by higher sales of Prestone'r' products and FRAM'r' filters.
Lower sales for our Friction Materials business due to pricing pressures,
weakness in the European market and foreign currency fluctuations were a partial
offset.
Power & Transportation Products segment profit in 2000 was $274 million, a
decrease of $48 million, or 15 percent compared with 1999. The decrease
primarily reflects costs associated with a product recall and lower sales in our
Commercial Vehicle Systems business, costs related to the ramp-up of our
Turbogenerator product line and costs associated with a supplier issue in our
Turbocharging Systems business. The decrease was partially offset by the effects
of cost structure improvements in our Friction Materials and Consumer Products
Group businesses and higher sales in our Turbocharging Systems business. Power &
Transportation Products segment profit in 1999 was $322 million, an increase of
$88 million, or 38 percent compared with 1998. The increase reflects higher
sales for our Turbocharging Systems, Commercial Vehicle Systems and Consumer
Products Group businesses. Cost structure improvements in these businesses,
materials procurement savings and workforce reductions also contributed to the
increase.
FINANCIAL CONDITION, LIQUIDITY AND CAPITAL RESOURCES
Total assets at December 31, 2000 were $25,175 million, an increase of
$1,648 million, or 7 percent from December 31, 1999. The increase relates
principally to our acquisition of Pittway. Total assets at December 31, 1999
were $23,527 million, an increase of $789 million, or 3 percent from
December 31, 1998.
Cash provided by operating activities of $1,989 million during 2000
decreased by $385 million compared with 1999 due principally to spending related
to merger and repositioning actions, a decrease in working capital and higher
non-cash pension income. This decrease was partially offset by higher net
income, excluding one-time items as previously described, and lower taxes paid
on sales of
15
<PAGE>
businesses and investments. Cash provided by operating activities of
$2,374 million during 1999 increased by $400 million compared with 1998 due
principally to higher net income, excluding one-time items as previously
described.
Cash used for investing activities of $2,714 million during 2000 increased
by $2,423 million compared with 1999. The acquisition of Pittway, the fact that
the prior year included the net proceeds from our disposition of our investment
in AMP and lower proceeds from sales of businesses were principally responsible
for the increase. This increase was partially offset by lower capital spending.
Cash used for investing activities of $291 million during 1999 decreased by
$1,302 million compared with 1998. The decrease relates principally to the
proceeds from our disposition of our investment in AMP and an increase in
proceeds from sales of businesses, primarily Laminate Systems. This decrease was
partially offset by higher spending for acquisitions, mainly Johnson Matthey
Electronics, and the liquidation in 1998 of short-term investments.
We continuously assess the relative strength of each business in our
portfolio as to strategic fit, market position and profit contribution in order
to upgrade our combined portfolio and identify operating units that will most
benefit from increased investment. We identify acquisition candidates that will
further our strategic plan and strengthen our existing core businesses. We also
identify operating units that do not fit into our long-term strategic plan based
on their market position, relative profitability or growth potential. These
operating units are considered for potential divestiture, restructuring or other
repositioning action subject to regulatory constraints.
Capital expenditures were $853, $986 and $1,037 million in 2000, 1999 and
1998, respectively. Spending by the reportable segments and Corporate since 1998
is shown in 'Item 8. Financial Statements and Supplementary Data' in Note 24 of
Notes to Financial Statements. Our total capital expenditures in 2001 are
currently projected at approximately $1 billion. These expenditures are expected
to be financed principally by internally generated funds and are primarily
planned for expansion and cost reduction.
Cash used for financing activities of $70 million during 2000 decreased by
$1,040 million compared with 1999 led principally by a decrease in stock
repurchases and higher net issuances of debt. During 2000, we repurchased 4.3
million shares of our common stock for $166 million in connection with our share
repurchase program. As a result of the pending merger with General Electric (see
Item 8. 'Financial Statements and Supplementary Data' in Note 4 of Notes to
Financial Statements), Honeywell rescinded its share repurchase program
effective October 21, 2000. Total debt of $5,623 million at December 31, 2000
was $557 million, or 11 percent higher than at December 31, 1999 due to the
acquisition of Pittway. Cash used for financing activities of $1,110 million
during 1999 increased by $1,002 million compared with 1998. The increase relates
principally to lower net issuances of debt partially offset by lower net stock
repurchases. Total debt of $5,066 million at year-end 1999 was $100 million, or
2 percent higher than at December 31, 1998.
We maintain a $2 billion bank revolving credit facility which is comprised
of (a) a $1 billion Five-Year Credit Agreement; and, (b) a $1 billion 364-Day
Credit Agreement. The credit agreements were established for general corporate
purposes including support for the issuance of commercial paper. There was
$1,192 and $2,023 million of commercial paper outstanding at year-end 2000 and
1999, respectively. See 'Item 8. Financial Statements and Supplementary Data' in
Note 16 of Notes to Financial Statements for details of long-term debt and a
discussion of the Credit Agreements.
We believe that our available cash, committed credit lines, and access to
the public debt markets using debt securities and commercial paper, provide
adequate short-term and long-term liquidity.
MERGER AND REPOSITIONING CHARGES
In 2000, we recognized a charge of $239 million related to announced global
workforce reductions in each of our reportable segments, costs to close a chip
package manufacturing plant and related workforce reductions in our Electronic
Materials business, and other asset impairments principally associated with the
completion of previously announced plant shut-downs in our Performance Polymers
and Chemicals business. The components of the charge included severance costs of
$151 million and asset impairments of $88 million. The workforce reductions
consisted of approximately 2,800 manufacturing and administrative positions and
are expected to be substantially completed by
16
<PAGE>
the end of the second quarter of 2001. Asset impairments were principally
related to manufacturing plant and equipment held for sale and capable of being
taken out of service and actively marketed in the period of impairment. Also,
$46 million of accruals established in 1999, principally for severance, were
returned to income in 2000 due to higher than expected voluntary employee
attrition (approximately 650 positions) resulting in reduced severance
liabilities principally in our Automation & Control and Aerospace Solutions
reportable segments. We also recognized a charge of $99 million in equity in
(income) loss of affiliated companies for costs to close an affiliate's chemical
manufacturing operations. The components of the charge included severance costs
of $6 million, asset impairments of $53 million, and other environmental exit
costs and period expenses of $40 million.
In 1999, upon completion of the merger between AlliedSignal and the former
Honeywell, we recognized a charge of $642 million for the cost of actions
designed to improve our combined competitiveness, productivity and future
profitability. The merger-related actions included the elimination of redundant
corporate offices and functional administrative overhead; elimination of
redundant and excess facilities and workforce in our combined aerospace
businesses; adoption of six sigma productivity initiatives at the former
Honeywell businesses; and, the transition to a global shared services model. The
components of the charge included severance costs of $342 million, asset
impairments of $108 million, other exit costs of $57 million and merger-related
transaction and period expenses of $135 million. Planned global workforce
reductions consisted of approximately 6,500 administrative and manufacturing
positions and are substantially complete. Asset impairments were principally
related to the elimination of redundant or excess corporate and aerospace
facilities and equipment. Other exit costs were related to lease terminations
and contract cancellation losses negotiated or subject to reasonable estimation
at year-end. Merger-related transaction and period expenses consisted of
investment banking and legal fees, former Honeywell deferred compensation vested
upon change in control and other direct merger-related expenses incurred in the
period the merger was completed. All merger-related actions are substantially
complete.
In 1999, we also recognized a pretax charge of $321 million for the costs of
actions designed to reposition principally the AlliedSignal businesses for
improved productivity and future profitability. These repositioning actions
included the organizational realignment of our aerospace businesses to
strengthen market focus and simplify business structure; elimination of an
unprofitable product line, closing of a wax refinery and carbon materials plant
and rationalization of manufacturing capacity and infrastructure in our
Performance Polymers and Chemicals business; a reduction in the infrastructure
in our Turbocharging Systems business; elimination of two manufacturing
facilities in our Electronic Materials business; a plant closure and outsourcing
activity in our automotive Consumer Products Group business; and related and
general workforce reductions in all AlliedSignal businesses and our Industrial
Control business. The components of the charge included severance costs of
$140 million, asset impairments of $149 million, and other exit costs of
$32 million. Global workforce reductions consisted of approximately 5,100
manufacturing, administrative, and sales positions and are substantially
complete. Asset impairments were principally related to manufacturing plant and
equipment held for sale and capable of being taken out of service and actively
marketed in the period of impairment. Other exit costs principally consisted of
environmental exit costs associated with chemical plant shutdowns. All
repositioning actions, excluding environmental remediation, are substantially
complete.
The merger and repositioning actions committed to in 2000 and 1999 generated
pretax savings of over $270 million in 2000 principally from planned workforce
reductions and facility consolidations. We expect these actions to generate
pretax savings of over $600 million in 2001 and $780 million in 2002. Cash
expenditures for severance, other exit costs, and future period expenses
necessary to execute these actions will exceed $500 million and were
principally incurred in 2000. Such expenditures have been funded through
operating cash flows, proceeds from government required divestitures resulting
from the merger of AlliedSignal and the former Honeywell and sale of merger-
related, excess or duplicate facilities and equipment.
We are currently formulating a detailed plan to effect further actions
designed to improve our competitiveness, productivity and future profitability.
The cost of these actions will result in a charge against earnings in the first
quarter of 2001.
17
<PAGE>
In 1998, we recognized a charge of $54 million related to productivity
initiatives which included workforce reductions of 1,200 employees and facility
consolidations principally in our Home and Building Control and Industrial
Control businesses. These actions were completed by December 31, 1999, with
substantially all reserve spending occurring in 1999.
ENVIRONMENTAL MATTERS
We are subject to various federal, state and local government requirements
relating to the protection of the environment. We believe that, as a general
matter, our policies, practices and procedures are properly designed to prevent
unreasonable risk of environmental damage and that our handling, manufacture,
use and disposal of hazardous or toxic substances are in accord with
environmental laws and regulations. However, mainly because of past operations
and operations of predecessor companies, we, like other companies engaged in
similar businesses, are a party to lawsuits and claims and have incurred
remedial response and voluntary cleanup costs associated with environmental
matters. Additional lawsuits, claims and costs involving environmental matters
are likely to continue to arise in the future. We continually conduct studies,
individually at our owned sites, and jointly as a member of industry groups at
non-owned sites, to determine the feasibility of various remedial techniques to
address environmental matters. It is our policy to record appropriate
liabilities for such matters when environmental assessments are made or remedial
efforts are probable and the costs can be reasonably estimated. The timing of
these accruals is generally no later than the completion of feasibility studies.
Remedial response and voluntary cleanup expenditures were $75, $78 and $77
million in 2000, 1999 and 1998, respectively, and are currently estimated to be
approximately $69 million in 2001. We expect that we will be able to fund such
expenditures from operating cash flow. The timing of expenditures depends on a
number of factors, including regulatory approval of cleanup projects, remedial
techniques to be utilized and agreements with other parties.
In 2000 we charged $110 million against pretax income for remedial response
and voluntary cleanup costs. At December 31, 2000 and 1999, the recorded
liability for environmental matters was $386 and $349 million, respectively.
In addition, in 2000 and 1999 we incurred operating costs for ongoing
businesses of approximately $80 and $89 million, respectively, relating
to compliance with environmental regulations.
Although we do not currently possess sufficient information to reasonably
estimate the amounts of liabilities to be recorded upon future completion of
studies or settlements, and neither the timing nor the amount of the ultimate
costs associated with environmental matters can be determined, they may be
significant to our consolidated results of operations. We do not expect that
environmental matters will have a material adverse effect on our consolidated
financial position.
See 'Item 8. Financial Statements and Supplementary Data' in Note 22 of
Notes to Financial Statements for a discussion of our commitments and
contingencies, including those related to environmental matters.
FINANCIAL INSTRUMENTS
As a result of our global operating and financing activities, we are exposed
to market risks from changes in interest and foreign currency exchange rates,
which may adversely affect our operating results and financial position. We
minimize our risks from interest and foreign currency exchange rate fluctuations
through our normal operating and financing activities and, when deemed
appropriate, through the use of derivative financial instruments. We do not use
derivative financial instruments for trading or other speculative purposes and
do not use leveraged derivative financial instruments. A summary of our
accounting policies for derivative financial instruments is included in 'Item 8.
Financial Statements and Supplementary Data' in Note 1 of Notes to Financial
Statements.
Our exposure to market risk from changes in interest rates relates primarily
to our debt obligations. As described in 'Item 8. Financial Statements and
Supplementary Data' in Notes 16 and 18 of Notes
18
<PAGE>
to Financial Statements, we issue both fixed and variable rate debt and use
interest rate swaps to manage our exposure to interest rate movements and reduce
borrowing costs.
Our exposure to market risk for changes in foreign currency exchange rates
arises from international financing activities between subsidiaries and foreign
currency denominated receivables, payables, and firm commitments arising from
international transactions. We attempt to have such transaction exposures hedged
with internal natural offsets to the fullest extent possible and, once these
opportunities have been exhausted, through foreign currency forward and option
agreements with third parties. We also use derivative financial instruments to
hedge the impact of exchange rate movements on the translated U.S. dollar value
of the net income for a number of foreign subsidiaries. Foreign currency forward
and option agreements used to hedge net income are marked-to-market, with gains
or losses recognized immediately in income. Our principal foreign currency
exposures relate to the Belgian franc, the French franc, the German mark
(collectively the Euro countries), the British pound, the Canadian dollar, and
the U.S. dollar. At December 31, 2000, we held or had written foreign currency
forward and option agreements maturing through 2001.
Derivative financial instruments expose us to counterparty credit risk for
nonperformance and to market risk related to changes in interest or currency
exchange rates. We manage exposure to counterparty credit risk through specific
minimum credit standards, diversification of counterparties, and procedures to
monitor concentrations of credit risk. Our counterparties are substantial
investment and commercial banks with significant experience using such
derivative instruments. We monitor the impact of market risk on the fair value
and cash flows of our derivative and other financial instruments considering
reasonably possible changes in interest and currency exchange rates and restrict
the use of derivative financial instruments to hedging activities.
The following table illustrates the potential change in fair value for
interest rate sensitive instruments based on a hypothetical immediate
one-percentage-point increase in interest rates across all maturities and the
potential change in fair value for foreign exchange rate sensitive instruments
based on a 10 percent increase in U.S. dollar per local currency exchange rates
across all maturities at December 31, 2000 and 1999.
<TABLE>
<CAPTION>
ESTIMATED
FACE OR INCREASE
NOTIONAL CARRYING FAIR (DECREASE)
AMOUNT VALUE(1) VALUE(1) IN FAIR VALUE
------ -------- -------- -------------
(DOLLARS IN MILLIONS)
<S> <C> <C> <C> <C>
DECEMBER 31, 2000
INTEREST RATE SENSITIVE INSTRUMENTS
Long-term debt (including current maturities)(2).... $(4,295) $(4,291) $(4,517) $(183)
Interest rate swaps................................. 1,600 16 68 (67)
FOREIGN EXCHANGE RATE SENSITIVE INSTRUMENTS
Foreign currency exchange contracts(3).............. 1,542 -- 3 (3)
DECEMBER 31, 1999
INTEREST RATE SENSITIVE INSTRUMENTS
Long-term debt (including current maturities)(2).... (2,712) (2,705) (2,702) (120)
Interest rate swaps................................. 1,100 (4) (36) (22)
FOREIGN EXCHANGE RATE SENSITIVE INSTRUMENTS
Foreign currency exchange contracts(3).............. 1,445 4 6 25
</TABLE>
(1) Asset or (liability).
(2) Excludes capitalized leases.
(3) Increases in the fair value of foreign currency exchange contracts are
substantially offset by changes in the fair value of net underlying hedged
foreign currency transactions.
The above discussion of our procedures to monitor market risk and the estimated
changes in fair value resulting from our sensitivity analyses are
forward-looking statements of market risk assuming certain adverse market
conditions occur. Actual results in the future may differ materially from these
estimated results due to actual developments in the global financial markets.
The methods used by us to assess and mitigate risk discussed above should not be
considered projections of future events.
19
<PAGE>
OTHER MATTERS
LITIGATION
Litton Litigation -- On March 13, 1990, Litton Systems, Inc. filed a legal
action against the former Honeywell in U.S. District Court, Central District of
California, Los Angeles, with claims that were subsequently split into two
separate cases. One alleges patent infringement under federal law for using an
ion-beam process to coat mirrors incorporated in the former Honeywell's ring
laser gyroscopes, and tortious interference under state law for interfering with
Litton's prospective advantage with customers and contractual relationships with
an inventor and his company, Ojai Research, Inc. The other case alleges
monopolization and attempted monopolization under federal antitrust laws by the
former Honeywell in the sale of inertial reference systems containing ring laser
gyroscopes into the commercial aircraft market. The former Honeywell generally
denied Litton's allegations in both cases. In the patent/tort case, the former
Honeywell also contested the validity as well as the infringement of the patent,
alleging, among other things, that the patent had been obtained by Litton's
inequitable conduct before the United States Patent and Trademark Office.
In 1993 and 1995, trials were held in each case and juries initially awarded
Litton significant monetary damages. However, those verdicts were set aside by
the trial court judge who ordered, at a minimum, new trials on the issue of
damages in each case.
Following cross-appeals by the parties of various issues to the Federal
Circuit and the U.S. Supreme Court in the patent/tort case, it was remanded to
the trial court for further legal and perhaps factual review with respect to
both liability and damages. On September 23, 1999, the trial court issued
dispositive rulings in the case, granting the former Honeywell's Motion for
Judgment as a Matter of Law and Summary Judgment on the Patent claims on various
grounds; granting the former Honeywell's Motion for Judgment as a Matter of Law
on the state law claims on the grounds of insufficient evidence; and denying
Litton's Motion for Partial Summary Judgment. The trial court entered a final
judgment in Honeywell's favor on January 31, 2000, and Litton appealed that
judgment to the U.S. Court of Appeals for the Federal Circuit. On February 5,
2001, a three judge panel of the Federal Circuit court affirmed the trial
court's rulings granting the former Honeywell's Motion for Judgment as a Matter
of Law and Summary Judgment on the patent claims, agreeing that the former
Honeywell did not infringe. On the state law claims, the panel vacated the
jury's verdict in favor of Litton, reversed the trial court's grant of judgment
as a matter of law for the former Honeywell, and remanded the case to the trial
court for further proceedings under state law to resolve certain factual issues
that it held should have been submitted to the jury. Litton may now seek review
of this decision by the U.S. Supreme Court.
A retrial of damages in the antitrust case commenced October 29, 1998, and
on December 9, 1998, a jury returned a verdict against Honeywell for actual
damages in the amount of $250 million. Following post trial motions, on
September 24, 1999, the trial court issued rulings denying the former
Honeywell's Motion for Judgment as a Matter of Law and Motion for New Trial and
Remittitur as they related to Litton Systems, Inc., but granting the former
Honeywell's Motion for Judgment as a Matter of Law as it relates to Litton
Systems, Canada, Limited. The net effect of these rulings was to reduce the
existing judgment against the former Honeywell of $750 million to $660 million,
plus attorney fees and costs of approximately $35 million. We believe that there
is no factual or legal basis for the magnitude of the jury's award and believe
that it should be overturned. We also believe we have very strong arguments that
the liability portion of the jury verdict in the first antitrust trial was
erroneous. Both parties have appealed this judgment, as to both liability and
damages, to the U.S. Court of Appeals for the Ninth Circuit. Execution of the
trial court's judgment is stayed pending resolution of the former Honeywell's
post-judgment motions and disposition of any appeals filed by the parties.
Although it is not possible at this time to predict the result of any
further appeals in this case, potential does remain for an adverse outcome which
could be material to our financial position or results of operations. As a
result of the uncertainty regarding the outcome of this matter, no provision has
been made in the financial statements with respect to this contingent liability.
For a detailed discussion of this litigation, see 'Item 8. Financial
Statements and Supplementary Data' in Note 22 of Notes to the Financial
Statements.
Shareowner Litigation -- Honeywell and seven of its officers were named as
defendants in several purported class action lawsuits filed in the United States
District Court for the District of New Jersey
20
<PAGE>
(the Securities Law Complaints). The Securities Law Complaints principally
allege that the defendants violated federal securities laws by purportedly
making false and misleading statements and by failing to disclose material
information concerning Honeywell's financial performance, thereby allegedly
causing the value of Honeywell's stock to be artificially inflated. The
purported class period for which damages are sought is December 20, 1999 to
June 19, 2000.
In addition, Honeywell, seven of its officers and its Board of Directors
have been named as defendants in a purported shareowner derivative action which
was filed on November 27, 2000 in the United States District Court for the
District of New Jersey (the Derivative Complaint). The Derivative Compliant
alleges a single claim for breach of fiduciary duty based on nearly identical
allegations to those set forth in the Securities Law Complaints.
We believe that there is no factual or legal basis for the allegations in
the Securities Law Complaints and the Derivative Complaint. Although it is not
possible at this time to predict the result of these cases, we expect to
prevail. However, an adverse outcome could be material to our financial position
or results of operations. No provision has been made in our financial statements
with respect to this contingent liability.
EURO CONVERSION
On January 1, 1999, certain member countries of the European Union
established fixed conversion rates between their existing currencies and the
European Union's common currency (Euro). The transition period for the
introduction of the Euro is between January 1, 1999 and January 1, 2002. We have
identified and are ensuring that all Euro conversion compliance issues are
addressed and do not expect any adverse consequences.
SALES TO THE U.S. GOVERNMENT
Sales to the U.S. Government, acting through its various departments and
agencies and through prime contractors, amounted to $2,219, $2,383 and
$2,693 million in 2000, 1999 and 1998, respectively. This included sales to the
Department of Defense (DoD), as a prime contractor and subcontractor, of $1,548,
$1,415 and $1,658 million in 2000, 1999 and 1998, respectively. Sales to the DoD
accounted for 6.2, 6.0 and 7.0 percent of our total sales in 2000, 1999 and
1998, respectively. We are affected by U.S. Government budget constraints for
defense and space programs. U.S. defense spending increased slightly in 2000 and
is also expected to increase slightly in 2001.
BACKLOG
Our total backlog at year-end 2000 and 1999 was $8,094 and $8,736 million,
respectively. We anticipate that approximately $5,090 million of the 2000
backlog will be filled in 2001. We believe that backlog is not necessarily a
reliable indicator of our future sales because a substantial portion of the
orders constituting this backlog may be canceled at the customer's option.
INFLATION
Highly competitive market conditions have minimized inflation's impact on
the selling prices of our products and the cost of our purchased materials. Cost
increases for materials and labor have generally been low, and productivity
enhancement programs, including Six Sigma initiatives, have largely offset any
impact.
NEW ACCOUNTING PRONOUNCEMENT
Statement of Financial Accounting Standards No. 133, 'Accounting for
Derivative Instruments and Hedging Activities', as amended (SFAS No. 133), is
effective for Honeywell as of January 1, 2001. SFAS No. 133 requires all
derivatives to be recorded on the balance sheet as assets or liabilities,
measured at fair value. The accounting for gains or losses resulting from
changes in values of such derivatives depends on the use of the derivative and
whether it qualifies for hedge accounting. We estimate that, at January 1, 2001,
the effect on our consolidated financial statements of adopting SFAS No. 133
will not be material.
21
<PAGE>
ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURE ABOUT MARKET RISK
Information relating to market risk is included in 'Item 7. Management's
Discussion and Analysis of Financial Condition and Results of Operations' under
the caption 'Financial Instruments.'
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
HONEYWELL INTERNATIONAL INC.
CONSOLIDATED STATEMENT OF INCOME
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
---------------------------
2000 1999 1998
---- ---- ----
(DOLLARS IN MILLIONS,
EXCEPT PER SHARE AMOUNTS)
<S> <C> <C> <C>
Net sales................................................... $25,023 $23,735 $23,555
------- ------- -------
Costs, expenses and other
Cost of goods sold...................................... 19,090 18,495 17,689
Selling, general and administrative expenses............ 3,134 3,216 3,008
(Gain) on sale of non-strategic businesses.............. (112) (106) --
Equity in (income) loss of affiliated companies......... 89 (76) (162)
Other (income) expense.................................. (57) (307) (27)
Interest and other financial charges.................... 481 265 275
------- ------- -------
22,625 21,487 20,783
------- ------- -------
Income before taxes on income............................... 2,398 2,248 2,772
Taxes on income............................................. 739 707 869
------- ------- -------
Net income.................................................. $ 1,659 $ 1,541 $ 1,903
------- ------- -------
------- ------- -------
Earnings per share of common stock -- basic................. $ 2.07 $ 1.95 $ 2.38
------- ------- -------
------- ------- -------
Earnings per share of common stock -- assuming dilution..... $ 2.05 $ 1.90 $ 2.34
------- ------- -------
------- ------- -------
</TABLE>
The Notes to Financial Statements are an integral part of this statement.
22
<PAGE>
HONEYWELL INTERNATIONAL INC.
CONSOLIDATED BALANCE SHEET
<TABLE>
<CAPTION>
DECEMBER 31,
------------------------
2000 1999
---------- -----------
(DOLLARS IN MILLIONS)
<S> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents............................... $ 1,196 $ 1,991
Accounts and notes receivable........................... 4,623 3,896
Inventories............................................. 3,734 3,436
Other current assets.................................... 1,108 1,099
------- -------
Total current assets............................ 10,661 10,422
Investments and long-term receivables....................... 748 782
Property, plant and equipment -- net........................ 5,230 5,630
Goodwill and other intangible assets -- net................. 5,898 4,660
Other assets................................................ 2,638 2,033
------- -------
Total assets.................................... $25,175 $23,527
------- -------
------- -------
LIABILITIES
Current liabilities:
Accounts payable........................................ $ 2,364 $ 2,129
Short-term borrowings................................... 110 302
Commercial paper........................................ 1,192 2,023
Current maturities of long-term debt.................... 380 284
Accrued liabilities..................................... 3,168 3,534
------- -------
Total current liabilities....................... 7,214 8,272
Long-term debt.............................................. 3,941 2,457
Deferred income taxes....................................... 1,173 864
Postretirement benefit obligations other than pensions...... 1,887 1,968
Other liabilities........................................... 1,253 1,367
CONTINGENCIES
SHAREOWNERS' EQUITY
Capital -- common stock -- Authorized 2,000,000,000 shares
(par value $1 per share):
-- issued 957,599,900 shares....................... 958 958
-- additional paid-in capital...................... 2,782 2,318
Common stock held in treasury, at cost:
2000 -- 150,308,455 shares; 1999 -- 162,466,000
shares................................................ (4,296) (4,254)
Accumulated other nonowner changes.......................... (729) (355)
Retained earnings........................................... 10,992 9,932
------- -------
Total shareowners' equity....................... 9,707 8,599
------- -------
Total liabilities and shareowners' equity....... $25,175 $23,527
------- -------
------- -------
</TABLE>
The Notes to Financial Statements are an integral part of this statement.
23
<PAGE>
HONEYWELL INTERNATIONAL INC.
CONSOLIDATED STATEMENT OF CASH FLOWS
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
---------------------------
2000 1999 1998
---- ---- ----
(DOLLARS IN MILLIONS)
<S> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net income.............................................. $ 1,659 $ 1,541 $ 1,903
Adjustments to reconcile net income to net cash provided
by operating activities:
(Gain) on sale of non-strategic businesses.......... (112) (106) --
(Gain) on disposition of investment in AMP
Incorporated...................................... -- (268) --
Merger, repositioning and other charges............. 966 1,287 54
Depreciation and amortization....................... 995 881 897
Undistributed earnings of equity affiliates......... (4) (39) (24)
Deferred income taxes............................... 414 (11) 221
Net taxes paid on sales of businesses and
investments....................................... (97) (246) (300)
Retirement benefit plans............................ (509) (313) (239)
Other............................................... (199) 148 63
Changes in assets and liabilities, net of the
effects of acquisitions and divestitures:
Accounts and notes receivable................... (560) (54) (154)
Inventories..................................... (45) 90 (96)
Other current assets............................ (73) (39) 3
Accounts payable................................ 186 121 35
Accrued liabilities............................. (632) (618) (389)
------- ------- -------
Net cash provided by operating activities..... 1,989 2,374 1,974
------- ------- -------
CASH FLOWS FROM INVESTING ACTIVITIES
Expenditures for property, plant and equipment.......... (853) (986) (1,037)
Proceeds from disposals of property, plant and
equipment............................................. 127 67 150
Decrease in investments................................. 88 -- --
(Increase) in investments............................... (3) (20) (1)
Disposition (purchase) of investment in AMP
Incorporated.......................................... -- 1,164 (890)
Cash paid for acquisitions.............................. (2,523) (1,311) (581)
Proceeds from sales of businesses....................... 467 784 335
(Increase) decrease in short-term investments........... (17) 11 431
------- ------- -------
Net cash (used for) investing activities...... (2,714) (291) (1,593)
------- ------- -------
CASH FLOWS FROM FINANCING ACTIVITIES
Net (decrease) increase in commercial paper............. (831) 250 909
Net (decrease) increase in short-term borrowings........ (191) 156 16
Proceeds from issuance of common stock.................. 296 419 216
Proceeds from issuance of long-term debt................ 1,810 25 687
Payments of long-term debt.............................. (389) (375) (366)
Repurchases of common stock............................. (166) (1,058) (1,089)
Cash dividends on common stock.......................... (599) (527) (481)
------- ------- -------
Net cash (used for) financing activities...... (70) (1,110) (108)
------- ------- -------
Net (decrease) increase in cash and cash equivalents........ (795) 973 273
Cash and cash equivalents at beginning of year.............. 1,991 1,018 745
------- ------- -------
Cash and cash equivalents at end of year.................... $ 1,196 $ 1,991 $ 1,018
------- ------- -------
------- ------- -------
</TABLE>
The Notes to Financial Statements are an integral part of this statement.
24
<PAGE>
HONEYWELL INTERNATIONAL INC.
CONSOLIDATED STATEMENT OF SHAREOWNERS' EQUITY
<TABLE>
<CAPTION>
COMMON COMMON STOCK ACCUMULATED
STOCK ISSUED ADDITIONAL HELD IN TREASURY OTHER NON- TOTAL
--------------- PAID-IN ---------------- OWNER RETAINED SHAREOWNERS'
SHARES AMOUNT CAPITAL SHARES AMOUNT CHANGES EARNINGS EQUITY
------ ------ ------- ------ ------ ------- -------- ------
(IN MILLIONS EXCEPT PER SHARE AMOUNTS)
<S> <C> <C> <C> <C> <C> <C> <C> <C>
BALANCE AT DECEMBER 31, 1997......... 953.1 $953 $1,199 (158.1) $(2,665) $(208) $ 7,496 $ 6,775
Net income........................... 1,903 1,903
Foreign exchange translation
adjustments......................... 34 34
Minimum pension liability
adjustment.......................... (10) (10)
Unrealized holding gain on marketable
securities.......................... 90 90
-------
Nonowner changes in shareowners'
equity.............................. 2,017
Common stock issued for
acquisitions........................ 322 11.1 98 420
Common stock issued for employee
benefit plans (including related tax
benefits of $91).................... 3.8 4 348 11.0 96 448
Repurchases of common stock.......... (3.9) (4) (156) (22.0) (942) (1,102)
Cash dividends on common stock ($.60
per share).......................... (481) (481)
Other................................ 0.3 6 6
----- ---- ------ ------ ------- ----- ------- -------
BALANCE AT DECEMBER 31, 1998......... 953.3 953 1,719 (158.0) (3,413) (94) 8,918 8,083
Net income........................... 1,541 1,541
Foreign exchange translation
adjustments......................... (126) (126)
Minimum pension liability
adjustment.......................... (43) (43)
Unrealized holding loss on marketable
securities.......................... (92) (92)
-------
Nonowner changes in shareowners'
equity.............................. 1,280
Common stock issued for employee
benefit plans (including related tax
benefits of $237)................... 4.7 5 602 14.5 125 732
Repurchases of common stock.......... (18.9) (966) (966)
Cash dividends on common stock ($.68
per share).......................... (527) (527)
Other................................ (0.4) (3) (3)
----- ---- ------ ------ ------- ----- ------- -------
BALANCE AT DECEMBER 31, 1999......... 957.6 958 2,318 (162.4) (4,254) (355) 9,932 8,599
Net income........................... 1,659 1,659
Foreign exchange translation
adjustments......................... (377) (377)
Unrealized holding gain on marketable
securities.......................... 3 3
-------
Nonowner changes in shareowners'
equity.............................. 1,285
Common stock issued for employee
benefit plans (including related tax
benefits of $139)................... 464 16.0 120 584
Repurchases of common stock.......... (4.3) (166) (166)
Cash dividends on common stock ($.75
per share).......................... (599) (599)
Other................................ 0.4 4 4
----- ---- ------ ------ ------- ----- ------- -------
BALANCE AT DECEMBER 31, 2000......... 957.6 $958 $2,782 (150.3) $(4,296) $(729) $10,992 $ 9,707
----- ---- ------ ------ ------- ----- ------- -------
----- ---- ------ ------ ------- ----- ------- -------
</TABLE>
The Notes to Financial Statements are an integral part of this statement.
25
<PAGE>
HONEYWELL INTERNATIONAL INC.
NOTES TO FINANCIAL STATEMENTS
(DOLLARS IN MILLIONS EXCEPT PER SHARE AMOUNTS)
NOTE 1 -- SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
HONEYWELL INTERNATIONAL INC. is a diversified technology and manufacturing
company, serving customers worldwide with aerospace products and services,
control technologies for buildings, homes and industry, automotive products,
power generation systems, specialty chemicals, fibers, plastics and electronic
and advanced materials. As described in Note 2, Honeywell International Inc. was
formed upon the merger of AlliedSignal Inc. and Honeywell Inc. The following is
a description of the significant accounting policies of Honeywell International
Inc.
PRINCIPLES OF CONSOLIDATION -- The consolidated financial statements include
the accounts of Honeywell International Inc. and all of its subsidiaries in
which a controlling interest is maintained. All intercompany transactions and
balances are eliminated in consolidation.
INVENTORIES -- Inventories are valued at the lower of cost or market using
the first-in, first-out or the average cost method and the last-in, first-out
(LIFO) method for certain qualifying domestic inventories.
INVESTMENTS -- Investments in affiliates over which we have a significant
influence, but not a controlling interest, are accounted for using the equity
method of accounting. Other investments are carried at market value, if readily
determinable, or cost.
PROPERTY, PLANT AND EQUIPMENT -- Property, plant and equipment are recorded
at cost less accumulated depreciation. For financial reporting, the
straight-line method of depreciation is used over the estimated useful lives of
10 to 40 years for buildings and improvements and 3 to 15 years for machinery
and equipment.
GOODWILL AND OTHER INTANGIBLE ASSETS -- Goodwill represents the excess of
acquisition costs over the fair value of net assets of businesses acquired and
is amortized on a straight-line basis over appropriate periods up to 40 years.
Goodwill, net, was $5,600 and $4,282 million at December 31, 2000 and 1999,
respectively. Accumulated amortization was $974 and $804 million at
December 31, 2000 and 1999, respectively.
Other intangible assets includes patents, trademarks, customer lists and
other items amortized on a straight-line basis over appropriate periods up to
24 years. Other intangible assets, net, were $298 and $378 million at
December 31, 2000 and 1999, respectively. Accumulated amortization was $437 and
$398 million at December 31, 2000 and 1999, respectively.
LONG-LIVED ASSETS -- We periodically evaluate the recoverability of the
carrying amount of long-lived assets (including property, plant, and equipment,
goodwill and other intangible assets) whenever events or changes in
circumstances indicate that the carrying amount of an asset may not be fully
recoverable. An impairment is assessed when the undiscounted expected future
cash flows derived from an asset are less than its carrying amount. Impairment
losses are measured as the amount by which the carrying value of an asset
exceeds its fair value and are recognized in operating results. We also
continually evaluate the estimated useful lives of all long-lived assets and
periodically revise such estimates based on current events.
SALES RECOGNITION -- Product and service sales are recognized when an
agreement of sale exists, product delivery has occurred or services have been
rendered, pricing is fixed or determinable, and collection is reasonably
assured. Sales under long-term contracts in the Aerospace Solutions and
Automation & Control segments are recorded on a 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 such losses
become evident.
ENVIRONMENTAL EXPENDITURES -- Environmental expenditures that relate to
current operations are expensed or capitalized as appropriate. Expenditures that
relate to an existing condition caused by past operations, and that do not
provide future benefits, are expensed as incurred. Liabilities are recorded when
environmental assessments are made or remedial efforts are probable and the
costs
26
<PAGE>
HONEYWELL INTERNATIONAL INC.
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
(DOLLARS IN MILLIONS EXCEPT PER SHARE AMOUNTS)
can be reasonably estimated. The timing of these accruals is generally no later
than the completion of feasibility studies.
FOREIGN CURRENCY TRANSLATION -- Assets and liabilities of subsidiaries
operating outside the United States with a functional currency other than U.S.
dollars are translated into U.S. dollars using year-end exchange rates. Sales,
costs and expenses are translated at the average exchange rates effective during
the year. Foreign currency translation gains and losses are included as a
component of Accumulated Other Nonowner Changes in shareowners' equity. For
subsidiaries operating in highly inflationary environments, inventories and
property, plant and equipment, including related expenses, are remeasured at the
exchange rate in effect on the date the assets were acquired, while monetary
assets and liabilities are remeasured at year-end exchange rates. Remeasurement
adjustments for these operations are included in net income.
FINANCIAL INSTRUMENTS -- Interest rate swap, foreign currency forward and
option agreements are accounted for as a hedge of the related asset, liability,
firm commitment or anticipated transaction when designated and effective as a
hedge of such items. Agreements qualifying for hedge accounting are accounted
for as follows:
Changes in the amount to be received or paid under interest rate swap
agreements are recognized in Interest and Other Financial Charges.
Gains and losses on foreign currency exchange contracts used to hedge
assets, liabilities and net income are recognized in Other (Income)
Expense.
Gains and losses on foreign currency exchange contracts to hedge net
investments in foreign subsidiaries are recognized in the Cumulative
Foreign Exchange Translation Adjustment.
Gains and losses on foreign currency exchange contracts used to hedge firm
foreign currency commitments, and purchased foreign currency options used
to hedge anticipated foreign currency transactions, are recognized in the
measurement of the hedged transaction when the transaction occurs.
Changes in the fair value of agreements not qualifying for hedge accounting
are recognized in Other (Income) Expense. Gains and losses on terminated
interest rate swap agreements are amortized over the shorter of the remaining
term of the agreement or the hedged liability.
The carrying value of each agreement is reported in Accounts and Notes
Receivable, Other Current Assets, Accounts Payable or Accrued Liabilities, as
appropriate.
INCOME TAXES -- Deferred tax liabilities or assets reflect temporary
differences between amounts of assets and liabilities for financial and tax
reporting. Such amounts are adjusted, as appropriate, to reflect changes in tax
rates expected to be in effect when the temporary differences reverse. A
valuation allowance is established for any deferred tax asset for which
realization is not likely.
RESEARCH AND DEVELOPMENT -- Research and development costs for
company-sponsored research and development projects are expensed as incurred.
Such costs are classified as part of Cost of Goods Sold and were $818, $909 and
$876 million in 2000, 1999 and 1998, respectively.
EARNINGS PER SHARE -- Basic earnings per share is based on the weighted
average number of common shares outstanding. Diluted earnings per share is based
on the weighted average number of common shares outstanding and all dilutive
potential common shares outstanding. All earnings per share data in this report
reflect earnings per share -- assuming dilution, unless otherwise indicated.
CASH AND CASH EQUIVALENTS -- Cash and cash equivalents includes cash on hand
and on deposit and highly liquid, temporary cash investments with an original
maturity of three months or less.
USE OF ESTIMATES -- The preparation of consolidated financial statements in
conformity with generally accepted accounting principles requires management to
make estimates and assumptions
27
<PAGE>
HONEYWELL INTERNATIONAL INC.
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
(DOLLARS IN MILLIONS EXCEPT PER SHARE AMOUNTS)
that affect the reported amounts in the financial statements and related
disclosures in the accompanying notes. Actual results could differ from those
estimates.
NEW ACCOUNTING PRONOUNCEMENT -- Statement of Financial Accounting Standards
No. 133, 'Accounting for Derivative Instruments and Hedging Activities', as
amended (SFAS No. 133), is effective for Honeywell as of January 1, 2001. SFAS
No. 133 requires all derivatives to be recorded on the balance sheet as assets
or liabilities, measured at fair value. The accounting for gains or losses
resulting from changes in values of such derivatives depends on the use of the
derivative and whether it qualifies for hedge accounting. We estimate that, at
January 1, 2001, the effect on our consolidated financial statements of adopting
SFAS No. 133 will not be material.
NOTE 2 -- ALLIEDSIGNAL - HONEYWELL MERGER
On December 1, 1999, AlliedSignal Inc. (AlliedSignal) and Honeywell Inc.
(former Honeywell) completed a merger under an Agreement and Plan of Merger
(Merger Agreement) dated as of June 4, 1999. Under the Merger Agreement, a
wholly-owned subsidiary of AlliedSignal merged with and into the former
Honeywell. As a result of the merger, the former Honeywell has become a
wholly-owned subsidiary of AlliedSignal. At the effective time of the merger
AlliedSignal was renamed Honeywell International Inc. (Honeywell).
The former Honeywell shareowners received 1.875 shares of Honeywell common
stock for each share of the former Honeywell common stock with cash paid in lieu
of any fractional shares. As a result, former Honeywell shareowners received
approximately 241 million shares of Honeywell common stock valued at
approximately $15 billion at the merger date. In addition, outstanding former
Honeywell employee stock options were converted at the same exchange factor into
options to purchase approximately 10 million shares of Honeywell common stock.
The merger qualified as a tax-free reorganization and was accounted for
under the pooling-of-interests accounting method. Accordingly, Honeywell's
consolidated financial statements have been restated for all periods prior to
the merger to include the results of operations, financial position and cash
flows of the former Honeywell as though it had always been a part of Honeywell.
There were no material transactions between AlliedSignal and the former
Honeywell prior to the merger and there were no material adjustments to conform
the accounting policies of the combining companies.
The net sales and net income previously reported by the separate companies
and the combined amounts presented in the accompanying Consolidated Statement of
Income are as follows:
<TABLE>
<CAPTION>
NINE MONTHS
ENDED YEAR ENDED
SEPTEMBER 30, DECEMBER 31,
1999 1998
------------- ------------
(UNAUDITED)
<S> <C> <C>
Net sales
AlliedSignal......................................... $11,252 $15,128
Former Honeywell..................................... 6,324 8,427
------- -------
Combined................................................. $17,576 $23,555
------- -------
------- -------
Net income
AlliedSignal......................................... $ 1,121 $ 1,331
Former Honeywell..................................... 413 572
------- -------
Combined................................................. $ 1,534 $ 1,903
------- -------
------- -------
</TABLE>
As described in Note 5, fees and expenses related to the merger and costs to
integrate the combined companies were expensed in the fourth quarter of 1999.
28
<PAGE>
HONEYWELL INTERNATIONAL INC.
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
(DOLLARS IN MILLIONS EXCEPT PER SHARE AMOUNTS)
NOTE 3 -- ACQUISITIONS
In addition to the pooling-of-interests transaction discussed in Note 2, we
acquired businesses for an aggregate cost of $2,646, $1,314 and $1,191 million
in 2000, 1999 and 1998, respectively. The following table presents information
about the more significant acquisitions:
<TABLE>
<CAPTION>
ACQUISITION AGGREGATE ANNUAL
DATE COST GOODWILL NET SALES
---- ---- -------- ---------
<S> <C> <C> <C> <C>
2000
Pittway Corporation(1)..................... 2/00 $2,200 $1,500 $1,600
1999
Johnson Matthey Electronics(2)............. 8/99 655 331 670
TriStar Aerospace Co.(3)................... 12/99 300 147 200
1998
Banner Aerospace(4)........................ 1/98 350 175 250
Pharmaceutical Fine Chemicals(5)........... 6/98 390 297 110
</TABLE>
- ---------
(1) Pittway Corporation designs, manufactures and distributes security and fire
systems for homes and buildings.
(2) Johnson Matthey Electronics supplies wafer fabrication materials and
interconnect products to the electronics and telecommunications industries.
(3) TriStar Aerospace Co. distributes fasteners, fastening systems and related
hardware and provides customized inventory management services to original
equipment manufacturers of aircraft and aircraft components, commercial
airlines and aircraft maintenance, repair and overhaul facilities.
(4) Banner Aerospace distributes FAA-certified aircraft hardware principally to
the commercial air transport and general aviation markets.
(5) Pharmaceutical Fine Chemicals manufactures and distributes active and
intermediate pharmaceutical chemicals.
All the acquisitions were accounted for under the purchase method of
accounting, and accordingly, the assets and liabilities of the acquired
businesses were 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, of $1,678, $678 and $883 million in 2000, 1999 and 1998,
respectively, was recorded as goodwill and is amortized over estimated useful
lives. In connection with these acquisitions the amounts recorded for
transaction costs and the costs of integrating the acquired businesses into
Honeywell were not material. The results of operations of the acquired
businesses have been included in the consolidated results of Honeywell from
their respective acquisition dates. The pro forma results for 2000, 1999 and
1998, assuming these acquisitions had been made at the beginning of the year,
would not be materially different from reported results.
NOTE 4 -- HONEYWELL-GENERAL ELECTRIC MERGER
On October 22, 2000, Honeywell and General Electric Company (GE) entered
into an Agreement and Plan of Merger (Merger Agreement) providing for a business
combination between Honeywell and GE. When the merger is effective, a
wholly-owned subsidiary of GE will be merged with and into Honeywell, and
Honeywell will become a wholly-owned subsidiary of GE and each issued and
outstanding share of common stock of Honeywell will be converted into the right
to receive 1.055 shares of common stock of GE, with fractional shares paid in
cash. The merger, which was approved by Honeywell shareowners on January 10,
2001, is subject to certain remaining conditions, which include review or
approval of the transaction by various governmental authorities. GE and
Honeywell are working with regulatory agencies to complete the required reviews
or obtain required approvals so that the transaction can close as early as
possible in 2001. The Merger Agreement provides for payment of a $1.35 billion
termination fee by Honeywell under certain circumstances. In connection with the
execution of the Merger Agreement, Honeywell and GE entered into a stock option
agreement
29
<PAGE>
HONEYWELL INTERNATIONAL INC.
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
(DOLLARS IN MILLIONS EXCEPT PER SHARE AMOUNTS)
pursuant to which Honeywell granted to GE an option to purchase up to 19.9
percent of Honeywell's outstanding shares of common stock. The option is
exercisable in the same circumstances under which Honeywell is required to pay
to GE the $1.35 billion termination fee.
NOTE 5 -- MERGER, REPOSITIONING AND OTHER CHARGES
In 2000, we recognized a charge of $239 million related to announced global
workforce reductions in each of our reportable segments, costs to close a chip
package manufacturing plant and related workforce reductions in our Electronic
Materials business, and other asset impairments principally associated with the
completion of previously announced plant shut-downs in our Performance Polymers
and Chemicals business. The components of the charge included severance costs of
$151 million and asset impairments of $88 million. The workforce reductions
consisted of approximately 2,800 manufacturing and administrative positions and
are expected to be substantially completed by the end of the second quarter of
2001. Asset impairments were principally related to manufacturing plant and
equipment held for sale and capable of being taken out of service and actively
marketed in the period of impairment. Also, $46 million of accruals established
in 1999, principally for severance, were returned to income in 2000 due to
higher than expected voluntary employee attrition (approximately 650 positions)
resulting in reduced severance liabilities principally in our Automation &
Control and Aerospace Solutions reportable segments. We also recognized a charge
of $99 million in equity in (income) loss of affiliated companies for costs to
close an affiliate's chemical manufacturing operations. The components of the
charge included severance costs of $6 million, asset impairments of $53 million,
and other environmental exit costs and period expenses of $40 million.
In 1999, upon completion of the merger between AlliedSignal and the former
Honeywell, we recognized a charge of $642 million for the cost of actions
designed to improve our combined competitiveness, productivity and future
profitability. The merger-related actions included the elimination of redundant
corporate offices and functional administrative overhead; elimination of
redundant and excess facilities and workforce in our combined aerospace
businesses; adoption of six sigma productivity initiatives at the former
Honeywell businesses; and, the transition to a global shared services model. The
components of the charge included severance costs of $342 million, asset
impairments of $108 million, other exit costs of $57 million and merger-related
transaction and period expenses of $135 million. Planned global workforce
reductions consisted of approximately 6,500 administrative and manufacturing
positions and are substantially complete. Asset impairments were principally
related to the elimination of redundant or excess corporate and aerospace
facilities and equipment. Other exit costs were related to lease terminations
and contract cancellation losses negotiated or subject to reasonable estimation
at year-end. Merger-related transaction and period expenses consisted of
investment banking and legal fees, former Honeywell deferred compensation vested
upon change in control and other direct merger-related expenses incurred in the
period the merger was completed. All merger-related actions are substantially
complete.
In 1999, we also recognized a charge of $321 million for the cost of actions
designed to reposition principally the AlliedSignal businesses for improved
productivity and future profitability. These repositioning actions included the
organizational realignment of our aerospace businesses to strengthen market
focus and simplify business structure; elimination of an unprofitable product
line, closing of a wax refinery and carbon materials plant and rationalization
of manufacturing capacity and infrastructure in our Performance Polymers and
Chemicals business; a reduction in the infrastructure in our Turbocharging
Systems business; elimination of two manufacturing facilities in our Electronic
Materials business; a plant closure and outsourcing activity in our automotive
Consumer Products Group business; and related and general workforce reductions
in all AlliedSignal businesses and our Industrial Control business. The
components of the charge included severance costs of $140 million, asset
impairments of $149 million, and other exit costs of $32 million. Global
workforce reductions consisted of approximately 5,100 manufacturing,
administrative, and sales positions and are substantially complete. Asset
impairments were principally related to manufacturing plant and
30
<PAGE>
HONEYWELL INTERNATIONAL INC.
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
(DOLLARS IN MILLIONS EXCEPT PER SHARE AMOUNTS)
equipment held for sale and capable of being taken out of service and actively
marketed in the period of impairment. Other exit costs principally consisted of
environmental exit costs associated with chemical plant shutdowns. All
repositioning actions, excluding environmental remediation, are substantially
complete.
The following table summarizes the status of our total merger and
repositioning costs.
<TABLE>
<CAPTION>
SEVERANCE ASSET EXIT MERGER FEES
COSTS IMPAIRMENTS COSTS AND EXPENSES TOTAL
----- ----------- ----- ------------ -----
<S> <C> <C> <C> <C> <C>
1999 charges...................... $ 482 $ 257 $ 89 $135 $ 963
1999 usage........................ (58) (257) (4) (77) (396)
----- ----- ---- ---- -----
Balance at December 31, 1999...... 424 -- 85 58 567
----- ----- ---- ---- -----
2000 charges...................... 157 141 40 -- 338
2000 usage........................ (303) (141) (41) (58) (543)
Adjustments....................... (42) -- (4) -- (46)
----- ----- ---- ---- -----
Balance at December 31, 2000...... $ 236 $ -- $ 80 $ -- $ 316
----- ----- ---- ---- -----
----- ----- ---- ---- -----
</TABLE>
In 2000, we identified certain business units and manufacturing facilities
as non-core to our business strategy. As a result of this assessment, we
implemented cost reduction initiatives and conducted discussions with potential
acquirers of these businesses and assets. As part of this process, we evaluated
the businesses and assets for possible impairment. As a result of our analysis,
we recognized impairment charges of $245 and $165 million principally related to
the write-down of property, plant and equipment, goodwill and other identifiable
intangible assets of our Friction Materials business and a chemical
manufacturing facility, respectively. We recognized other charges consisting of
probable and reasonably estimable environmental liabilities of $87 million, and
contract claims, merger related period expenses, other contingencies, and
write-offs of tangible assets removed from service, including inventory,
totaling $140 million. In addition, we recognized a charge of $37 million in
equity in (income) loss of affiliated companies for costs principally related to
an equity investee's customer claims.
In 1999, we recognized other charges consisting of losses on aerospace
engine maintenance contracts and a contract cancellation penalty totaling $45
million, customer and employee claims of $69 million, contract settlements and
contingent liabilities of $18 million, and other write-offs principally related
to tangible and intangible assets removed from service, including inventory, of
$152 million. We also recognized a $36 million charge resulting from an other
than temporary decline in value of an equity investment due to a significant
deterioration in market conditions and a $4 million charge related to an equity
investee's severance action involving approximately 220 employees. The
investee's severance action was completed by December 31, 1999.
In 1998, we recognized a charge of $54 million related to productivity
initiatives which included workforce reductions and facility consolidations
principally in our Home and Building Control and Industrial Control businesses.
The components of the charge included severance costs of $46 million and other
exit costs of $8 million. Global workforce reductions included approximately
1,200 sales, marketing, manufacturing and other administrative positions. Other
exit costs consisted of lease termination penalties to consolidate field office
locations and other period costs incurred to rationalize product lines. These
actions were completed by December 31, 1999, with substantially all reserve
spending occurring in 1999.
31
<PAGE>
HONEYWELL INTERNATIONAL INC.
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
(DOLLARS IN MILLIONS EXCEPT PER SHARE AMOUNTS)
The following table summarizes the pretax impact of total merger,
repositioning and other charges by reportable business segment.
<TABLE>
<CAPTION>
2000 1999 1998
---- ---- ----
<S> <C> <C> <C>
Aerospace Solutions......................................... $ 91 $ 315 $ 1
Automation & Control........................................ 108 215 52
Performance Materials....................................... 399 251 --
Power & Transportation Products............................. 263 129 --
Corporate................................................... 105 377 1
---- ------ ---
$966 $1,287 $54
---- ------ ---
---- ------ ---
</TABLE>
The following table summarizes the pretax distribution of total merger,
repositioning and other charges by income statement classification.
<TABLE>
<CAPTION>
2000 1999 1998
---- ---- ----
<S> <C> <C> <C>
Cost of goods sold.......................................... $830 $ 947 $54
Selling, general and administrative expenses................ -- 300 --
Equity in (income) loss of affiliated companies............. 136 40 --
---- ------ ---
$966 $1,287 $54
---- ------ ---
---- ------ ---
</TABLE>
NOTE 6 -- GAIN ON SALE OF NON-STRATEGIC BUSINESSES
In 2000, as a result of a government mandate in connection with the merger
of AlliedSignal and the former Honeywell, we sold the TCAS product line of the
former Honeywell. We received approximately $215 million in cash resulting in a
pretax gain of $112 million. The TCAS product line had annual sales of
approximately $100 million.
In 1999, we sold our Laminate Systems business for approximately $425
million in cash resulting in a pretax gain of $106 million. The Laminate Systems
business had annual sales of about $400 million.
NOTE 7 -- OTHER (INCOME) EXPENSE
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
------------------------------
2000 1999 1998
---- ---- ----
<S> <C> <C> <C>
Interest income and other............................... $(79) $ (76) $(57)
Minority interests...................................... 34 46 37
Foreign exchange (gain) loss............................ (12) (9) 17
Gain on disposition of investment in AMP Incorporated... -- (268) --
Litigation settlements.................................. -- -- (24)
---- ----- ----
$(57) $(307) $(27)
---- ----- ----
---- ----- ----
</TABLE>
In April 1999, we reached an agreement with Tyco International Ltd. (Tyco)
and AMP Incorporated (AMP), settling AMP's claim to the gain we would realize on
the disposition of our investment in AMP common stock. We made a payment to AMP
of $50 million, and the parties released all claims that they had against each
other relating to AMP. Subsequently, we converted our investment in AMP common
stock into Tyco common stock and sold the Tyco common stock for net cash
proceeds of $1.2 billion resulting in a pretax gain of $268 million, net of the
settlement payment.
32
<PAGE>
HONEYWELL INTERNATIONAL INC.
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
(DOLLARS IN MILLIONS EXCEPT PER SHARE AMOUNTS)
NOTE 8 -- INTEREST AND OTHER FINANCIAL CHARGES
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
------------------------------
2000 1999 1998
---- ---- ----
<S> <C> <C> <C>
Total interest and other financial charges.............. $497 $287 $300
Less -- Capitalized interest............................ (16) (22) (25)
---- ---- ----
$481 $265 $275
---- ---- ----
---- ---- ----
</TABLE>
Cash payments of interest during the years 2000, 1999 and 1998 were $573,
$328 and $426 million, respectively.
The weighted average interest rate on short-term borrowings and commercial
paper outstanding at December 31, 2000 and 1999 was 6.60 and 5.97 percent,
respectively.
NOTE 9 -- TAXES ON INCOME
INCOME BEFORE TAXES ON INCOME
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
------------------------
2000 1999 1998
---- ---- ----
<S> <C> <C> <C>
United States............................................. $1,842 $1,742 $2,085
Foreign................................................... 556 506 687
------ ------ ------
$2,398 $2,248 $2,772
------ ------ ------
------ ------ ------
</TABLE>
TAXES ON INCOME
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
------------------------
2000 1999 1998
---- ---- ----
<S> <C> <C> <C>
United States............................................. $ 508 $ 531 $ 616
Foreign................................................... 231 176 253
------ ------ ------
$ 739 $ 707 $ 869
------ ------ ------
------ ------ ------
</TABLE>
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
------------------------
2000 1999 1998
---- ---- ----
<S> <C> <C> <C>
Taxes on income consist of:
Current:
United States......................................... $ 126 $ 416 $ 424
State................................................. 2 113 49
Foreign............................................... 197 189 175
------ ------ ------
325 718 648
------ ------ ------
Deferred:
United States......................................... 325 37 81
State................................................. 55 (35) 62
Foreign............................................... 34 (13) 78
------ ------ ------
414 (11) 221
------ ------ ------
$ 739 $ 707 $ 869
------ ------ ------
------ ------ ------
</TABLE>
33
<PAGE>
HONEYWELL INTERNATIONAL INC.
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
(DOLLARS IN MILLIONS EXCEPT PER SHARE AMOUNTS)
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
------------------------
2000 1999 1998
---- ---- ----
<S> <C> <C> <C>
The U.S. statutory federal income tax rate is reconciled
to our effective income tax rate as follows:
Statutory U.S. federal income tax rate................ 35.0% 35.0% 35.0%
Taxes on foreign earnings over (under) U.S. tax
rate................................................ (.7) (1.2) 1.0
Asset basis differences............................... 2.5 (1.6) (1.5)
Nondeductible amortization............................ 2.8 3.3 1.3
State income taxes.................................... 1.3 2.2 2.5
Tax benefits of Foreign Sales Corporation............. (5.0) (4.4) (2.2)
ESOP dividend tax benefit............................. (.7) (.7) (.6)
Tax credits........................................... (3.5) (1.2) (1.1)
All other items -- net................................ (.9) .1 (3.1)
------ ------ ------
30.8% 31.5% 31.3%
------ ------ ------
------ ------ ------
</TABLE>
DEFERRED INCOME TAXES
<TABLE>
<CAPTION>
DECEMBER 31,
---------------
2000 1999
---- ----
<S> <C> <C>
Included in the following balance sheet accounts:
Other current assets.................................... $ 734 $ 789
Other assets............................................ 151 143
Accrued liabilities..................................... (5) (13)
Deferred income taxes................................... (1,173) (864)
------- -----
$ (293) $ 55
------- -----
------- -----
</TABLE>
DEFERRED TAX ASSETS (LIABILITIES)
<TABLE>
<CAPTION>
DECEMBER 31,
-------------
2000 1999
---- ----
<S> <C> <C>
The principal components of deferred tax assets and
(liabilities) are as follows:
Property, plant and equipment basis differences......... $(934) $(648)
Postretirement benefits other than pensions and
postemployment benefits............................... 847 869
Investment and other asset basis differences............ (375) (328)
Other accrued items..................................... 377 552
Net operating losses.................................... 207 184
Deferred foreign gain................................... (17) (27)
Undistributed earnings of subsidiaries.................. (35) (33)
All other items -- net.................................. (319) (491)
----- -----
(249) 78
Valuation allowance..................................... (44) (23)
----- -----
$(293) $ 55
----- -----
----- -----
</TABLE>
The amount of federal tax net operating loss carryforwards available at
December 31, 2000 was $111 million. The majority of these loss carryforwards
were generated by certain subsidiaries prior to their acquisition in 1997 and
have expiration dates through the year 2011. The use of pre-acquisition
operating losses is subject to limitations imposed by the Internal Revenue Code.
We do not anticipate that these limitations will affect utilization of the
carryforwards prior to their expiration. We also have foreign net operating
losses of $595 million which are available to reduce future income tax payments
in several countries, subject to varying expiration rules.
34
<PAGE>
HONEYWELL INTERNATIONAL INC.
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
(DOLLARS IN MILLIONS EXCEPT PER SHARE AMOUNTS)
Deferred income taxes have not been provided on approximately $2.1 billion
of undistributed earnings of foreign affiliated companies, which are considered
to be permanently reinvested. It is not practicable to estimate the amount of
tax that might be payable on the eventual remittance of such earnings.
Cash payments of income taxes during the years 2000, 1999 and 1998 were
$442, $625 and $729 million, respectively.
NOTE 10 -- EARNINGS PER SHARE
The following table sets forth the computations of basic and diluted
earnings per share:
<TABLE>
<CAPTION>
AVERAGE PER SHARE
INCOME SHARES AMOUNT
------ ------ ------
<S> <C> <C> <C>
2000
Earnings per share of common stock -- basic..... $1,659 800,317,543 $2.07
Dilutive securities issuable in connection with
stock plans................................... 9,149,959
-----------
Earnings per share of common stock -- assuming
dilution...................................... $1,659 809,467,502 $2.05
------ ----------- -----
------ ----------- -----
1999
Earnings per share of common stock -- basic..... $1,541 792,010,145 $1.95
Dilutive securities issuable in connection with
stock plans................................... 16,979,863
-----------
Earnings per share of common stock -- assuming
dilution...................................... $1,541 808,990,008 $1.90
------ ----------- -----
------ ----------- -----
1998
Earnings per share of common stock -- basic..... $1,903 798,390,836 $2.38
Dilutive securities issuable in connection with
stock plans................................... 15,608,334
-----------
Earnings per share of common stock -- assuming
dilution...................................... $1,903 813,999,170 $2.34
------ ----------- -----
------ ----------- -----
</TABLE>
The diluted earnings per share calculation excludes the effect of stock
options when the options' exercise prices exceed the average market price of the
common shares during the period. In 2000, 1999 and 1998, the number of stock
options not included in the computations was 14,563,673, 868,631 and 3,688,074,
respectively. These stock options were outstanding at the end of each of the
respective years.
NOTE 11 -- ACCOUNTS AND NOTES RECEIVABLE
<TABLE>
<CAPTION>
DECEMBER 31,
---------------
2000 1999
---- ----
<S> <C> <C>
Trade....................................................... $3,967 $3,545
Other....................................................... 755 435
------ ------
4,722 3,980
Less -- Allowance for doubtful accounts and refunds......... (99) (84)
------ ------
$4,623 $3,896
------ ------
------ ------
</TABLE>
Unbilled receivables related to long-term contracts were $423 and $359
million at December 31, 2000 and 1999, respectively, and are generally billable
and collectible within one year.
We are a party to agreements under which we can sell undivided interests in
designated pools of trade accounts receivable. At both December 31, 2000 and
1999, trade accounts receivable on the
35
<PAGE>
HONEYWELL INTERNATIONAL INC.
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
(DOLLARS IN MILLIONS EXCEPT PER SHARE AMOUNTS)
Consolidated Balance Sheet have been reduced by approximately $500 million
reflecting such sales. We act as an agent for the purchasers in the collection
and administration of the receivables.
NOTE 12 -- INVENTORIES
<TABLE>
<CAPTION>
DECEMBER 31,
---------------
2000 1999
---- ----
<S> <C> <C>
Raw materials............................................... $1,262 $1,027
Work in process............................................. 809 973
Finished products........................................... 1,797 1,589
------ ------
3,868 3,589
Less --
Progress payments........................................... (5) (44)
Reduction to LIFO cost basis................................ (129) (109)
------ ------
$3,734 $3,436
------ ------
------ ------
</TABLE>
Inventories valued at LIFO amounted to $167 million at both December 31,
2000 and 1999. Had such LIFO inventories been valued at current costs, their
carrying values would have been approximately $129 and $109 million higher at
December 31, 2000 and 1999, respectively.
Inventories related to long-term contracts, net of progress payments and
customer advances, were $220 and $271 million at December 31, 2000 and 1999,
respectively.
NOTE 13 -- INVESTMENTS AND LONG-TERM RECEIVABLES
<TABLE>
<CAPTION>
DECEMBER 31,
-------------
2000 1999
---- ----
<S> <C> <C>
Investments................................................. $548 $664
Long-term receivables....................................... 200 118
---- ----
$748 $782
---- ----
---- ----
</TABLE>
NOTE 14 -- PROPERTY, PLANT AND EQUIPMENT
<TABLE>
<CAPTION>
DECEMBER 31,
----------------
2000 1999
---- ----
<S> <C> <C>
Land and improvements....................................... $ 337 $ 371
Machinery and equipment..................................... 9,484 9,574
Buildings and improvements.................................. 2,134 2,192
Construction in progress.................................... 505 566
------- ------
12,460 12,703
Less -- Accumulated depreciation and amortization........... (7,230) (7,073)
------- ------
$ 5,230 $5,630
------- ------
------- ------
</TABLE>
NOTE 15 -- ACCRUED LIABILITIES
<TABLE>
<CAPTION>
DECEMBER 31,
---------------
2000 1999
---- ----
<S> <C> <C>
Compensation and benefit costs.............................. $ 728 $ 828
Customer advances........................................... 453 511
Income taxes................................................ 92 186
Environmental costs......................................... 171 104
Other....................................................... 1,724 1,905
------ ------
$3,168 $3,534
------ ------
------ ------
</TABLE>
36
<PAGE>
HONEYWELL INTERNATIONAL INC.
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
(DOLLARS IN MILLIONS EXCEPT PER SHARE AMOUNTS)
NOTE 16 -- LONG-TERM DEBT AND CREDIT AGREEMENTS
<TABLE>
<CAPTION>
DECEMBER 31,
---------------
2000 1999
---- ----
<S> <C> <C>
6.60% notes due 2001........................................ $ -- $ 100
5 3/4% dealer remarketable securities due 2001.............. -- 200
6.75% notes due 2002........................................ 200 200
9 7/8% debentures due 2002.................................. 171 171
6.875% notes due 2005....................................... 750 --
8 5/8% debentures due 2006.................................. 100 100
7.0% notes due 2007......................................... 350 350
7 1/8% notes due 2008....................................... 200 200
6.20% notes due 2008........................................ 200 200
Zero coupon bonds and money multiplier notes,
13.0% - 14.26%, due 2009.................................. 100 100
7.50% notes due 2010........................................ 1,000 --
Industrial development bond obligations, 4.40% - 6.75%,
maturing at various dates through 2027.................... 92 107
6 5/8% debentures due 2028.................................. 216 216
9.065% debentures due 2033.................................. 51 51
Other (including capitalized leases),
1.54% - 12.50%, maturing at various dates through 2033.... 511 462
------ ------
$3,941 $2,457
------ ------
------ ------
</TABLE>
The schedule of principal payments on long-term debt is as follows:
<TABLE>
<CAPTION>
AT DECEMBER 31,
2000
---------------
<S> <C>
2001........................................................ $ 380
2002........................................................ 465
2003........................................................ 77
2004........................................................ 63
2005........................................................ 921
Thereafter.................................................. 2,415
------
4,321
Less -- Current portion..................................... (380)
------
$3,941
------
------
</TABLE>
We maintain $2 billion of bank revolving credit facilities with a group of
banks which are comprised of: (a) a $1 billion Five-Year Credit Agreement and
(b) a $1 billion 364-Day Credit Agreement. The credit agreements are maintained
for general corporate purposes including support for the issuance of commercial
paper. We had no balance outstanding under either agreement at December 31,
2000.
Neither of the credit agreements restrict our ability to pay dividends and
neither contain financial covenants. The failure to comply with customary
conditions or the occurrence of customary events of default contained in the
credit agreements would prevent any further borrowings and would generally
require the repayment of any outstanding borrowings under such credit
agreements. Such events of default include (a) non-payment of credit agreement
debt and interest thereon, (b) non-compliance with the terms of the credit
agreement covenants, (c) cross-default with other debt in certain circumstances,
(d) bankruptcy and (e) defaults upon obligations under the Employee Retirement
Income Security Act. Additionally, each of the banks has the right to terminate
its commitment to lend under the credit agreements if any person or group
acquires beneficial ownership of 30 percent or more of our voting stock or,
during any 12-month period, individuals who were directors of Honeywell at the
beginning of the period cease to constitute a majority of the Board of Directors
(the Board).
37
<PAGE>
HONEYWELL INTERNATIONAL INC.
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
(DOLLARS IN MILLIONS EXCEPT PER SHARE AMOUNTS)
Loans under the Five-Year Credit Agreement are required to be repaid no
later than December 2, 2004. We have agreed to pay a facility fee of 0.065
percent per annum on the aggregate commitment for the Five-Year Credit
Agreement, subject to increase or decrease in the event of changes in our
long-term debt ratings.
Interest on borrowings under the Five-Year Credit Agreement would be
determined, at our option, by (a) an auction bidding procedure; (b) the highest
of the floating base rate of the agent bank, 0.5 percent above the average CD
rate, or 0.5 percent above the Federal funds rate or (c) the average
Eurocurrency rate of three reference banks plus 0.135 percent (applicable
margin). The applicable margin over the Eurocurrency rate on the Five-Year
Credit Agreement is subject to increase or decrease if our long-term debt
ratings change.
The commitments under the 364-Day Credit Agreement terminate on November 29,
2001. Annually, prior to the Agreement's anniversary date, we may request that
the termination date of the 364-Day Credit Agreement be extended by 364 days. We
have agreed to pay a facility fee of 0.055 percent per annum on the aggregate
commitment for the 364-Day Credit Agreement.
Interest on borrowings under the 364-Day Credit Agreement would be
determined, at our option, by (a) an auction bidding procedure; (b) the highest
of the floating base rate of the agent bank, 0.5 percent above the average CD
rate, or 0.5 percent above the Federal funds rate or (c) the average
Eurocurrency rate of three reference banks plus 0.145 percent (applicable
margin).
NOTE 17 -- LEASE COMMITMENTS
Future minimum lease payments under operating leases having initial or
remaining noncancellable lease terms in excess of one year are as follows:
<TABLE>
<CAPTION>
AT DECEMBER 31,
2000
---------------
<S> <C>
2001........................................................ $ 233
2002........................................................ 191
2003........................................................ 147
2004........................................................ 108
2005........................................................ 92
Thereafter.................................................. 313
------
$1,084
------
------
</TABLE>
Rent expense was $306, $291 and $262 million in 2000, 1999 and 1998,
respectively.
NOTE 18 -- FINANCIAL INSTRUMENTS
As a result of our global operating and financing activities, we are exposed
to market risks from changes in interest and foreign currency exchange rates,
which may adversely affect our operating results and financial position. We
minimize our risks from interest and foreign currency exchange rate fluctuations
through our normal operating and financing activities and, when deemed
appropriate, through the use of derivative financial instruments. We do not use
derivative financial instruments for trading or other speculative purposes and
do not use leveraged derivative financial instruments.
Interest rate swap agreements are used to manage interest rate risk by
adjusting our ratio of fixed to floating interest rates payable on our
outstanding debt. At December 31, 2000 and 1999, interest rate swap agreements
effectively changed $1,600 and $850 million, respectively, of fixed rate debt at
an average rate of 7.1 and 6.6 percent, respectively, to LIBOR and commercial
paper based floating rate debt. Other interest rate swaps at December 31, 1999
effectively changed $250 million of LIBOR and commercial paper based floating
rate swaps and debt to fixed rate swaps and debt with an average fixed rate of
6.3 percent. Our interest rate swaps mature through the year 2007.
38
<PAGE>
HONEYWELL INTERNATIONAL INC.
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
(DOLLARS IN MILLIONS EXCEPT PER SHARE AMOUNTS)
Our exposure to market risk for changes in foreign currency exchange rates
arises from international financing activities between subsidiaries, and foreign
currency denominated receivables, payables, and firm commitments arising from
international transactions. We attempt to have such transaction exposure hedged
with internal natural offsets to the fullest extent possible and, once these
opportunities have been exhausted, through foreign currency forward and option
agreements with third parties. We also use derivative financial instruments to
hedge the impact of exchange rate movements on the translated U.S. dollar value
of the net income for a number of foreign subsidiaries. Foreign currency forward
and option agreements used to hedge net income are marked-to-market, with gains
or losses recognized immediately in income. Our principal foreign currency
exposures relate to the Belgian franc, the French franc, the German mark
(collectively the Euro countries), the British pound, the Canadian dollar, and
the U.S. dollar. At December 31, 2000, we held or had written foreign currency
forward and option agreements maturing through 2001.
Derivative financial instruments expose us to counterparty credit risk for
nonperformance and to market risk related to changes in interest or currency
exchange rates. We manage our exposure to counterparty credit risk through
specific minimum credit standards, diversification of counterparties, and
procedures to monitor concentrations of credit risk. Our counterparties are
substantial investment and commercial banks with significant experience using
such derivative instruments. We monitor the impact of market risk on the fair
value and cash flows of our derivative and other financial instruments
considering reasonably possible changes in interest and currency exchange rates
and restrict the use of derivative financial instruments to hedging activities.
The values of our outstanding derivative financial instruments at
December 31, 2000 and 1999 follows:
<TABLE>
<CAPTION>
NOTIONAL
PRINCIPAL CARRYING FAIR
AMOUNT VALUE VALUE(1)
------ ----- --------
<S> <C> <C> <C>
DECEMBER 31, 2000
Interest rate swap agreements............................ $1,600 $ 16 $ 68
Foreign currency exchange contracts...................... 1,542 -- 3
DECEMBER 31, 1999
Interest rate swap agreements............................ $1,100 $ (4) $ (36)
Foreign currency exchange contracts...................... 1,445 4 6
</TABLE>
- ---------
(1) The fair value of financial instruments is based on quoted market prices or
other valuation techniques, as appropriate.
Other financial instruments that are not carried on the Consolidated Balance
Sheet at amounts, which approximate fair values, are certain debt instruments.
The carrying value of long-term debt and related current maturities (excluding
capitalized leases of $30 and $36 million at December 31, 2000 and 1999,
respectively) were $4,291 and $2,705 million and the fair values were $4,517 and
$2,702 million at December 31, 2000 and 1999, respectively. The fair values are
estimated based on the quoted market price for the issues (if traded) or based
on current rates offered to us for debt of the same remaining maturity and
characteristics.
NOTE 19 -- CAPITAL STOCK
We are authorized to issue up to 2,000,000,000 shares of common stock, with
a par value of one dollar. Common shareowners are entitled to receive such
dividends as may be declared by the Board, are entitled to one vote per share,
and are entitled, in the event of liquidation, to share ratably in all the
assets of Honeywell which are available for distribution to the common
shareowners. Common shareowners do not have preemptive or conversion rights.
Shares of common stock issued and
39
<PAGE>
HONEYWELL INTERNATIONAL INC.
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
(DOLLARS IN MILLIONS EXCEPT PER SHARE AMOUNTS)
outstanding or held in the treasury are not liable to further calls or
assessments. There are no restrictions on us relative to dividends or the
repurchase or redemption of common stock.
On July 21, 2000, our Board authorized a share repurchase program to
purchase up to 40 million shares of our common stock in the open market or in
privately negotiated transactions, depending on market conditions and other
factors. During 2000, we repurchased 4.3 million shares of our common stock for
$166 million in connection with our share repurchase program. As a result of the
pending merger with General Electric Company (See Note 4), Honeywell rescinded
its share repurchase program effective October 21, 2000.
We are authorized to issue up to 40,000,000 shares of preferred stock,
without par value, and can determine the number of shares of each series, and
the rights, preferences and limitations of each series. As of December 31, 2000,
there was no preferred stock outstanding.
NOTE 20 -- OTHER NONOWNER CHANGES IN SHAREOWNERS' EQUITY
Total nonowner changes in shareowners' equity are included in the
Consolidated Statement of Shareowners' Equity. The components of Accumulated
Other Nonowner Changes are as follows:
<TABLE>
<CAPTION>
AFTER-
PRETAX TAX TAX
------ --- ---
<S> <C> <C> <C>
YEAR ENDED DECEMBER 31, 2000
Unrealized gains on securities available for sale........... $ 4 $ (1) $ 3
Reclassification adjustment for gains on securities
available for sale included in net income................. -- -- --
----- ----- -----
Net unrealized gains arising during the year................ 4 (1) 3
Foreign exchange translation adjustments.................... (377) -- (377)
----- ----- -----
$(373) $ (1) $(374)
----- ----- -----
----- ----- -----
YEAR ENDED DECEMBER 31, 1999
Unrealized gains on securities available for sale........... $ -- $ -- $ --
Reclassification adjustment for gains on securities
available for sale included in net income................. (152) 60 (92)
----- ----- -----
Net unrealized losses arising during the year............... (152) 60 (92)
Foreign exchange translation adjustments.................... (126) -- (126)
Minimum pension liability adjustment........................ (70) 27 (43)
----- ----- -----
$(348) $ 87 $(261)
----- ----- -----
----- ----- -----
YEAR ENDED DECEMBER 31, 1998
Unrealized gains on securities available for sale........... $ 149 $ (59) $ 90
Reclassification adjustment for gains on securities
available for sale included in net income................. -- -- --
----- ----- -----
Net unrealized gains arising during the year................ 149 (59) 90
Foreign exchange translation adjustments.................... 34 -- 34
Minimum pension liability adjustment........................ (16) 6 (10)
----- ----- -----
$ 167 $ (53) $ 114
----- ----- -----
----- ----- -----
</TABLE>
40
<PAGE>
HONEYWELL INTERNATIONAL INC.
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
(DOLLARS IN MILLIONS EXCEPT PER SHARE AMOUNTS)
The components of Accumulated Other Nonowner Changes are as follows:
<TABLE>
<CAPTION>
DECEMBER 31,
---------------------
2000 1999 1998
---- ---- ----
<S> <C> <C> <C>
Cumulative foreign exchange translation adjustment.......... $(672) $(295) $(169)
Unrealized holding gains on securities available for sale... 3 -- 92
Minimum pension liability................................... (60) (60) (17)
----- ----- -----
$(729) $(355) $ (94)
----- ----- -----
----- ----- -----
</TABLE>
NOTE 21 -- STOCK-BASED COMPENSATION PLANS
We have stock plans available to grant incentive stock options,
non-qualified stock options and stock appreciation rights to officers and
employees.
FIXED STOCK OPTIONS -- The exercise price, term and other conditions
applicable to each option granted under the stock plans are generally determined
by the Management Development and Compensation Committee of the Board. The
options are granted at a price equal to the stock's fair market value on the
date of grant. The options generally become exercisable over a three-year period
and expire after ten years.
The following table summarizes information about stock option activity for
the three years ended December 31, 2000:
<TABLE>
<CAPTION>
WEIGHTED
AVERAGE
NUMBER OF EXERCISE
OPTIONS PRICE
------- -----
<S> <C> <C>
Outstanding at December 31, 1997............................ 59,962,780 $22.47
Granted................................................. 9,819,362 34.33
Exercised............................................... (10,708,194) 20.28
Lapsed or canceled...................................... (4,352,142) 26.33
-----------
Outstanding at December 31, 1998............................ 54,721,806 25.66
Granted................................................. 20,580,611 54.93
Exercised............................................... (16,956,945) 23.04
Lapsed or canceled...................................... (2,304,969) 35.38
-----------
Outstanding at December 31, 1999............................ 56,040,503 36.81
Granted................................................. 4,506,804 45.68
Exercised............................................... (12,115,659) 23.22
Lapsed or canceled...................................... (2,431,324) 52.87
-----------
Outstanding at December 31, 2000............................ 46,000,324 40.36
-----------
-----------
</TABLE>
The following table summarizes information about stock options outstanding
at December 31, 2000:
<TABLE>
<CAPTION>
OPTIONS OUTSTANDING OPTIONS EXERCISABLE
--------------------------------- ----------------------
WEIGHTED WEIGHTED
WEIGHTED AVERAGE AVERAGE
NUMBER AVERAGE EXERCISE NUMBER EXERCISE
RANGE OF EXERCISE PRICES OUTSTANDING LIFE(1) PRICE EXERCISABLE PRICE
- ------------------------ ----------- ------- ----- ----------- -----
<S> <C> <C> <C> <C> <C>
$ 7.18 - $29.98............... 12,808,606 3.5 $19.64 11,513,126 $19.52
$30.41 - $39.93............... 9,591,295 7.1 36.64 7,970,175 36.71
$40.02 - $49.97............... 11,659,185 8.0 43.39 5,801,237 41.84
$50.13 - $66.73............... 11,941,238 8.9 62.63 1,713,808 61.62
---------- ----------
46,000,324 6.8 40.36 26,998,346 32.06
---------- ----------
---------- ----------
</TABLE>
- ---------
(1) Average remaining contractual life in years.
41
<PAGE>
HONEYWELL INTERNATIONAL INC.
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
(DOLLARS IN MILLIONS EXCEPT PER SHARE AMOUNTS)
There were 30,927,704 and 33,530,799 options exercisable at weighted average
exercise prices of $27.21 and $20.38 at December 31, 1999 and 1998,
respectively. There were 3,627,101 shares available for future grants under the
terms of our stock option plans at December 31, 2000.
Statement of Financial Accounting Standards No. 123, 'Accounting for
Stock-Based Compensation,' (SFAS No. 123) requires that the cost of stock-based
compensation be measured using a fair value based method. As permitted by SFAS
No. 123, we elected to continue to account for stock-based compensation using
the intrinsic value based method under Accounting Principles Board Opinion
No. 25, 'Accounting for Stock Issued to Employees.' Accordingly, no compensation
cost has been recognized for our fixed stock option plans. The following table
sets forth pro forma information, including related assumptions, as if
compensation cost had been determined consistent with the requirements of SFAS
No. 123.
<TABLE>
<CAPTION>
2000 1999 1998
---- ---- ----
<S> <C> <C> <C>
Weighted average fair value per share of options granted
during the year(1)....................................... $18.21 $12.70 $9.24
Reduction of:
Net income............................................. $ 75 $ 65 $ 48
Earnings per share of common stock -- basic............ $ .09 $ .08 $ .06
Earnings per share of common stock -- assuming
dilution............................................. $ .09 $ .08 $ .06
Assumptions:
Historical dividend yield.............................. 1.4% 1.3% 1.6%
Historical volatility.................................. 27.8% 24.6% 20.7%
Risk-free rate of return............................... 6.4% 5.2% 5.3%
Expected life (years).................................. 5.0 5.0 5.0
</TABLE>
- ---------
(1) Estimated on date of grant using Black-Scholes option-pricing model.
RESTRICTED STOCK UNITS -- Restricted stock unit (RSU) awards entitle the
holder to receive one share of common stock for each unit when the units vest.
RSU's are issued to certain key employees as compensation and as incentives tied
directly to the achievement of certain performance objectives.
RSU's issued were 1,374,640, 1,175,127 and 942,143 in 2000, 1999 and 1998,
respectively. There were 2,449,749, 2,657,561 and 3,117,736 RSU's outstanding,
with a weighted average grant date fair value per share of $47.33, $37.81 and
$28.84 at December 31, 2000, 1999 and 1998, respectively.
NON-EMPLOYEE DIRECTORS' PLAN -- We also have a Stock Plan for Non-Employee
Directors (Directors' Plan) under which restricted shares and options are
granted. Each new director receives a one-time grant of 3,000 shares of common
stock, subject to certain restrictions. In addition, each director will be
granted an option to purchase 2,000 shares of common stock each year on the date
of the annual meeting of shareowners. We have set aside 450,000 shares for
issuance under the Directors' Plan. Options generally become exercisable over a
three-year period and expire after ten years.
EMPLOYEE STOCK MATCH PLANS -- We sponsor employee savings plans under which
we match, in the form of our common stock, certain eligible U.S. employee
savings plan contributions. Shares issued under the stock match plans were 3.9,
2.6 and 3.4 million in 2000, 1999 and 1998, respectively, at a cost of $161,
$142 and $139 million, respectively.
NOTE 22 -- COMMITMENTS AND CONTINGENCIES
LITTON LITIGATION -- On March 13, 1990, Litton Systems, Inc. (Litton) filed
a legal action against the former Honeywell in U.S. District Court, Central
District of California, Los Angeles (the trial court) with claims that were
subsequently split into two separate cases. One alleges patent infringement
under
42
<PAGE>
HONEYWELL INTERNATIONAL INC.
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
(DOLLARS IN MILLIONS EXCEPT PER SHARE AMOUNTS)
federal law for using an ion-beam process to coat mirrors incorporated in the
former Honeywell's ring laser gyroscopes, and tortious interference under state
law for interfering with Litton's prospective advantage with customers and
contractual relationships with an inventor and his company, Ojai Research, Inc.
The other case alleges monopolization and attempted monopolization under federal
antitrust laws by the former Honeywell in the sale of inertial reference systems
containing ring laser gyroscopes into the commercial aircraft market. The former
Honeywell generally denied Litton's allegations in both cases. In the
patent/tort case, the former Honeywell also contested the validity as well as
the infringement of the patent, alleging, among other things, that the patent
had been obtained by Litton's inequitable conduct before the United States
Patent and Trademark Office.
Patent/Tort Case -- U.S. District Court Judge Mariana Pfaelzer presided over
a three-month patent infringement and tortious interference trial in 1993. On
August 31, 1993, a jury returned a verdict in favor of Litton, awarding damages
against the former Honeywell in the amount of $1.2 billion on three claims. The
former Honeywell filed post-trial motions contesting the verdict and damage
award. On January 9, 1995, the trial court set them all aside, ruling, among
other things, that the Litton patent was invalid due to obviousness,
unenforceable because of Litton's inequitable conduct before the Patent and
Trademark Office, and in any case, not infringed by the former Honeywell's
current process. It further ruled that Litton's state tort claims were not
supported by sufficient evidence. The trial court also held that if its rulings
concerning liability were vacated or reversed on appeal, the former Honeywell
should at least be granted a new trial on the issue of damages because the
jury's award was inconsistent with the clear weight of the evidence and based
upon a speculative damage study.
The trial court's rulings were appealed to the U.S. Court of Appeals for the
Federal Circuit, and on July 3, 1996, in a two to one split decision, a three
judge panel of that court reversed the trial court's rulings of patent
invalidity, unenforceability and non-infringement, and also found the former
Honeywell to have violated California law by intentionally interfering with
Litton's consultant contracts and customer prospects. However, the panel upheld
two trial court rulings favorable to the former Honeywell, namely that the
former Honeywell was entitled to a new trial for damages on all claims, and also
to a grant of intervening patent rights which are to be defined and quantified
by the trial court. After unsuccessfully requesting a rehearing of the panel's
decision by the full Federal Circuit appellate court, the former Honeywell filed
a petition with the U.S. Supreme Court on November 26, 1996, seeking review of
the panel's decision. In the interim, Litton filed a motion and briefs with the
trial court seeking injunctive relief against the former Honeywell's commercial
ring laser gyroscope sales. After the former Honeywell and certain aircraft
manufacturers filed briefs and made oral arguments opposing the injunction, the
trial court denied Litton's motion on public interest grounds on December 23,
1996, and then scheduled the patent/tort damages retrial for May 6, 1997.
On March 17, 1997, the U.S. Supreme Court granted the former Honeywell's
petition for review and vacated the July 3, 1996 Federal Circuit panel decision.
The case was remanded to the Federal Circuit panel for reconsideration in light
of a recent decision by the U.S. Supreme Court in the Warner-Jenkinson vs.
Hilton Davis case, which refined the law concerning patent infringement under
the doctrine of equivalents. On March 21, 1997, Litton filed a notice of appeal
to the Federal Circuit of the trial court's December 23, 1996 decision to deny
injunctive relief, but the Federal Circuit stayed any briefing or consideration
of that matter until such time as it completed its reconsideration of liability
issues ordered by the U.S. Supreme Court.
The liability issues were argued before the same three judge Federal Circuit
panel on September 30, 1997. On April 7, 1998, the panel issued its decision:
(i) affirming the trial court's ruling that the former Honeywell's hollow
cathode and RF ion-beam processes do not literally infringe the
asserted claims of Litton's '849 reissue patent (Litton's patent);
(ii) vacating the trial court's ruling that the former Honeywell's RF
ion-beam process does not infringe the asserted claims of Litton's
patent under the doctrine of equivalents, but also
43
<PAGE>
HONEYWELL INTERNATIONAL INC.
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
(DOLLARS IN MILLIONS EXCEPT PER SHARE AMOUNTS)
vacating the jury's verdict on that issue and remanding that issue to
the trial court for further proceedings in accordance with the
Warner-Jenkinson decision;
(iii) vacating the jury's verdict that the former Honeywell's hollow
cathode process infringes the asserted claims of Litton's patent
under the doctrine of equivalents and remanding that issue to the
trial court for further proceedings;
(iv) reversing the trial court's ruling with respect to the torts of
intentional interference with contractual relations and intentional
interference with prospective economic advantage, but also vacating the
jury's verdict on that issue, and remanding the issue to the trial
court for further proceedings in accordance with California state law;
(v) affirming the trial court's grant of a new trial to the former
Honeywell on damages for all claims, if necessary;
(vi) affirming the trial court's order granting intervening rights to the
former Honeywell in the patent claim;
(vii) reversing the trial court's ruling that the asserted claims of
Litton's patent were invalid due to obviousness and reinstating the
jury's verdict on that issue; and
(viii) reversing the trial court's determination that Litton had obtained
Litton's patent through inequitable conduct.
Litton's request for a rehearing of the panel's decision by the full Federal
Circuit court was denied and its appeal of the denial of an injunction was
dismissed. The case was remanded to the trial court for further legal and
perhaps factual review. The parties filed motions with the trial court to
dispose of the remanded issues as matters of law, which were argued before the
trial court on July 26, 1999. On September 23, 1999, the trial court issued
dispositive rulings in the case, granting the former Honeywell's Motion for
Judgment as a Matter of Law and Summary Judgment on the patent claims on various
grounds; granting the former Honeywell's Motion for Judgment as a Matter of Law
on the state law claims on the grounds of insufficient evidence; and denying
Litton's Motion for Partial Summary Judgment. The trial court entered a final
judgment in Honeywell's favor on January 31, 2000, and Litton appealed that
judgment to the U.S. Court of Appeals for the Federal Circuit.
On February 5, 2001, a three judge panel of the Federal Circuit court
affirmed the trial court's rulings granting the former Honeywell's Motion for
Judgment as a Matter of Law and Summary Judgment on the patent claims, agreeing
that the former Honeywell did not infringe. On the state law claims, the panel
vacated the jury's verdict in favor of Litton, reversed the trial court's grant
of judgment as a matter of law for the former Honeywell, and remanded the case
to the trial court for further proceedings under state law to resolve certain
factual issues that it held should have been submitted to the jury. Litton may
now attempt to seek review of this decision by the U.S. Supreme Court.
When preparing for the patent/tort damages retrial that was scheduled for
May 1997, Litton had submitted a revised damage study to the trial court,
seeking damages as high as $1.9 billion. We do not expect that if Litton files
an appeal to the U.S. Supreme Court it will ultimately succeed. We do not expect
that in the absence of any patent infringement Litton will be able to prove any
tortious conduct by the former Honeywell under state law that interfered with
Litton's contracts or business prospects. We believe that it is reasonably
possible that no damages will ultimately be awarded to Litton.
Although it is not possible at this time to predict whether Litton will seek
review by the U.S. Supreme Court and whether such an appeal would succeed,
potential does remain for an adverse outcome which could be material to our
financial position or results of operations. We believe however, that any
potential award of damages for an adverse judgment of infringement or
interference should be based upon a reasonable royalty reflecting the value of
the ion-beam coating process, and further that such an award would not be
material to our financial position or results of operations. As a result of the
uncertainty regarding the outcome of this matter, no provision has been made in
the financial statements with respect to this contingent liability.
44
<PAGE>
HONEYWELL INTERNATIONAL INC.
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
(DOLLARS IN MILLIONS EXCEPT PER SHARE AMOUNTS)
Antitrust Case -- Preparations for, and conduct of, the trial in the
antitrust case have generally followed the completion of comparable proceedings
in the patent/tort case. The antitrust trial did not begin until November 20,
1995. Judge Pfaelzer also presided over the trial, but it was held before a
different jury. At the close of evidence and before jury deliberations began,
the trial court dismissed, for failure of proof, Litton's contentions that the
former Honeywell had illegally monopolized and attempted to monopolize by:
(i) engaging in below-cost predatory pricing;
(ii) tying and bundling product offerings under packaged pricing;
(iii) misrepresenting its products and disparaging Litton products; and
(iv) acquiring the Sperry Avionics business in 1986.
On February 2, 1996, the case was submitted to the jury on the remaining
allegations that the former Honeywell had illegally monopolized and attempted to
monopolize by:
(i) entering into certain long-term exclusive dealing and penalty
arrangements with aircraft manufacturers and airlines to exclude Litton
from the commercial aircraft market, and
(ii) failing to provide Litton with access to proprietary software used in
the cockpits of certain business jets.
On February 29, 1996, the jury returned a $234 million single damages
verdict against the former Honeywell for illegal monopolization, which verdict
would have been automatically trebled. On March 1, 1996, the jury indicated that
it was unable to reach a verdict on damages for the attempt to monopolize claim,
and a mistrial was declared as to that claim.
The former Honeywell subsequently filed a motion for judgment as a matter of
law and a motion for a new trial, contending, among other things, that the
jury's partial verdict should be overturned because the former Honeywell was
prejudiced at trial, and Litton failed to prove essential elements of liability
or submit competent evidence to support its speculative, all-or-nothing
$298.5 million damage claim. Litton filed motions for entry of judgment and
injunctive relief. On July 24, 1996, the trial court denied the former
Honeywell's alternative motions for judgment as a matter of law or a complete
new trial, but concluded that Litton's damage study was seriously flawed and
granted the former Honeywell a retrial on damages only. The court also denied
Litton's two motions. At that time, Judge Pfaelzer was expected to conduct the
retrial of antitrust damages sometime following the retrial of patent/tort
damages. However, after the U.S. Supreme Court remanded the patent/tort case to
the Federal Circuit in March 1997, Litton moved to have the trial court
expeditiously schedule the antitrust damages retrial. In September 1997, the
trial court rejected that motion, indicating that it wished to know the outcome
of the current patent/tort appeal before scheduling retrials of any type.
Following the April 7, 1998 Federal Circuit panel decision in the
patent/tort case, Litton again petitioned the trial court to schedule the
retrial of antitrust damages. The trial court tentatively scheduled the trial to
commence in the fourth quarter of 1998, and reopened limited discovery and other
pretrial preparations. Litton then filed another antitrust damage claim of
nearly $300 million.
The damages only retrial began October 29, 1998 before Judge Pfaelzer and a
new jury. On December 9, 1998, the jury returned verdicts against the former
Honeywell totaling $250 million, $220 million of which is in favor of Litton and
$30 million of which is in favor of its sister corporation, Litton Systems,
Canada, Limited.
On January 27, 1999, the court vacated its prior mistrial ruling with
respect to the attempt to monopolize claim and entered a treble damages judgment
in the total amount of $750 million for actual and attempted monopolization. The
former Honeywell filed appropriate post-judgment motions with the trial court
and Litton filed motions seeking to add substantial attorney's fees and costs to
the judgment. A hearing on the post-judgment motions was held before the trial
court on May 20, 1999. On September 24, 1999, the trial court issued rulings
denying the former Honeywell's Motion for Judgment as a Matter of Law and Motion
for New Trial and Remittitur as they related to Litton Systems Inc., but
45
<PAGE>
HONEYWELL INTERNATIONAL INC.
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
(DOLLARS IN MILLIONS EXCEPT PER SHARE AMOUNTS)
granting the former Honeywell's Motion for Judgment as a Matter of Law as it
relates to Litton Systems, Canada, Limited. The net effect of these rulings was
to reduce the existing judgment against the former Honeywell of $750 million to
$660 million, plus attorney fees and costs of approximately $35 million. Both
parties have appealed the judgment, as to both liability and damages, to the
U.S. Court of Appeals for the Ninth Circuit. Execution of the trial court's
judgment is stayed pending resolution of the former Honeywell's post-judgment
motions and the disposition of any appeals filed by the parties.
We expect to obtain substantial relief from the current adverse judgment in
the antitrust case by an appeal to the Ninth Circuit, based upon sound
substantive and procedural legal grounds. We believe that there was no factual
or legal basis for the magnitude of the jury's award in the damages retrial and
that, as was the case in the first trial, the jury's award should be overturned.
We also believe there are serious questions concerning the identity and nature
of the business arrangements and conduct which were found by the first antitrust
jury in 1996 to be anti-competitive and damaging to Litton, and the verdict of
liability should be overturned as a matter of law.
Although it is not possible at this time to predict the result of the
appeals, potential remains for an adverse outcome which could be material to our
financial position or results of operations. As a result of the uncertainty
regarding the outcome of this matter, no provision has been made in the
financial statements with respect to this contingent liability. We also believe
that it would be inappropriate for Litton to obtain recovery of the same
damages, e.g. losses it suffered due to the former Honeywell's sales of ring
laser gyroscope-based inertial systems to OEMs and airline customers, under
multiple legal theories, claims, and cases, and that eventually any duplicative
recovery would be eliminated from the antitrust and patent/tort cases.
SHAREOWNER LITIGATION -- Honeywell and seven of its officers were named as
defendants in several purported class action lawsuits filed in the United States
District Court for the District of New Jersey (the Securities Law Complaints).
The Securities Law Complaints principally allege that the defendants violated
federal securities laws by purportedly making false and misleading statements
and by failing to disclose material information concerning Honeywell's financial
performance, thereby allegedly causing the value of Honeywell's stock to be
artifically inflated. The purported class period for which damages are sought is
December 20, 1999 to June 19, 2000.
In addition, Honeywell, seven of its officers and its Board have been named
as defendants in a purported shareowner derivative action which was filed on
November 27, 2000 in the United States District Court for the District of New
Jersey (the Derivative Complaint). The Derivative Complaint alleges a single
claim for breach of fiduciary duty based on nearly identical allegations to
those set forth in the Securities Law Complaints.
We believe that there is no factual or legal basis for the allegations in
the Securities Law Complaints and the Derivative Complaint. Although it is not
possible at this time to predict the result of these cases, we expect to
prevail. However, an adverse outcome could be material to our financial position
or results of operations. No provision has been made in our financial statements
with respect to this contingent liability.
ENVIRONMENTAL MATTERS -- In accordance with our accounting policy (see
Note 1), liabilities are recorded for environmental matters generally no later
than the completion of feasibility studies. Although we do not currently possess
sufficient information to reasonably estimate the amounts of the liabilities to
be recorded upon future completion of studies, they may be significant to the
consolidated results of operations, but we do not expect that they will have a
material adverse effect on our consolidated financial position. The liabilities
for environmental costs recorded in Accrued Liabilities and Other Liabilities at
December 31, 2000 were $171 and $215 million, respectively, and at December 31,
1999 were $104 and $245 million, respectively.
OTHER MATTERS -- We are subject to a number of other lawsuits,
investigations and claims (some of which involve substantial amounts) arising
out of the conduct of our business. With respect to all these other matters,
including those relating to commercial transactions, government contracts,
product
46
<PAGE>
HONEYWELL INTERNATIONAL INC.
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
(DOLLARS IN MILLIONS EXCEPT PER SHARE AMOUNTS)
liability and non-environmental health and safety matters, while the ultimate
results of these lawsuits, investigations and claims cannot be determined, we do
not expect that these matters will have a material adverse effect on our
consolidated results of operations or financial position.
We have issued or are a party to various direct and indirect guarantees,
bank letters of credit and customer guarantees. We do not expect that these
guarantees will have a material adverse effect on our consolidated results of
operations or financial position.
NOTE 23 -- PENSION AND OTHER POSTRETIREMENT BENEFITS
We maintain pension plans covering the majority of our employees and
retirees, and postretirement benefit plans for retirees that include health care
benefits and life insurance coverage. Pension benefits for substantially all
U.S. employees are provided through non-contributory, defined benefit pension
plans. 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. Our retiree medical plans
cover U.S. and Canadian employees who retire with pension eligibility for
hospital, professional and other medical services. Most of the U.S. retiree
medical plans require deductibles and copayments and virtually all are
integrated with Medicare. Retiree contributions are generally required based on
coverage type, plan and Medicare eligibility. The retiree medical and life
insurance plans are not funded. Claims and expenses are paid from our general
assets.
Net periodic pension and other postretirement benefit costs (income) include
the following components:
<TABLE>
<CAPTION>
OTHER POSTRETIREMENT
PENSION BENEFITS BENEFITS
------------------------- ---------------------
2000 1999 1998 2000 1999 1998
---- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C>
Service cost....................... $ 193 $ 229 $ 233 $ 23 $ 32 $ 30
Interest cost...................... 702 710 721 131 125 121
Assumed return on plan assets...... (1,151) (1,062) (951) -- -- --
Amortization of transition asset... (13) (13) (14) -- -- --
Amortization of prior service
cost (credit).................... 53 50 45 (18) (18) (18)
Recognition of actuarial (gains)
losses........................... (114) 10 3 (4) (4) (8)
Settlements and curtailments....... (50) (45) (29) (34) (75) (44)
------ ------- ------ ------ ----- ----
Benefit cost (income).............. $ (380) $ (121) $ 8 $ 98 $ 60 $ 81
------ ------- ------ ------ ----- ----
------ ------- ------ ------ ----- ----
</TABLE>
47
<PAGE>
HONEYWELL INTERNATIONAL INC.
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
(DOLLARS IN MILLIONS EXCEPT PER SHARE AMOUNTS)
The following table summarizes the balance sheet impact, including the
benefit obligations, assets, funded status and actuarial assumptions associated
with our significant pension and other postretirement benefit plans.
<TABLE>
<CAPTION>
OTHER POSTRETIREMENT
PENSION BENEFITS BENEFITS
----------------- ---------------------
2000 1999 2000 1999
---- ---- ---- ----
<S> <C> <C> <C> <C>
Change in benefit obligation:
Benefit obligation at beginning of
year................................... $ 9,938 $11,101 $ 1,708 $ 1,867
Service cost............................. 193 229 23 32
Interest cost............................ 702 710 131 125
Plan amendments.......................... 41 29 (69) (16)
Actuarial (gains) losses................. 409 (1,223) 333 (114)
Acquisitions............................. 72 95 -- --
Benefits paid............................ (786) (794) (165) (144)
Settlements and curtailments............. (77) (128) (9) (42)
Other.................................... (360) (81) -- --
------- ------- ------- -------
Benefit obligation at end of year........ 10,132 9,938 1,952 1,708
------- ------- ------- -------
Change in plan assets:
Fair value of plan assets at beginning of
year................................... 13,022 11,560 -- --
Actual return on plan assets............. 233 2,232 -- --
Company contributions.................... 62 108 -- --
Acquisitions............................. 102 57 -- --
Settlements.............................. -- (80) -- --
Benefits paid............................ (786) (794) -- --
Other.................................... (369) (61) -- --
------- ------- ------- -------
Fair value of plan assets at end of
year................................... 12,264 13,022 -- --
------- ------- ------- -------
Funded status of plans....................... 2,132 3,084 (1,952) (1,708)
Unrecognized transition (asset).............. (21) (27) -- --
Unrecognized net (gain) loss................. (1,276) (2,742) 89 (257)
Unrecognized prior service cost (credit)..... 258 305 (170) (145)
------- ------- ------- -------
Prepaid (accrued) benefit cost............... $ 1,093 $ 620 $(2,033) $(2,110)
------- ------- ------- -------
------- ------- ------- -------
Actuarial assumptions at December 31:
Discount rate............................ 7.75% 8.00% 7.75% 8.00%
Assumed rate of return on plan assets.... 10.00% 10.00% -- --
Assumed annual rate of compensation
increase............................... 4.00% 4.00% -- --
</TABLE>
The projected benefit obligation, accumulated benefit obligation and fair
value of plan assets for our pension plans with accumulated benefit obligations
in excess of plan assets were $350, $310 and $44 million, respectively, as of
December 31, 2000 and $608, $534 and $210 million, respectively, as of December
31, 1999.
For measurement purposes, we assumed an annual health-care cost trend rate
of 6 percent for 2001 and beyond. Assumed health-care cost trend rates have a
significant effect on the amounts reported for our retiree health-care plan. A
one-percentage-point change in assumed health care cost trend rates would have
the following effects:
<TABLE>
<CAPTION>
ONE- ONE-
PERCENTAGE- PERCENTAGE-
POINT INCREASE POINT DECREASE
-------------- --------------
<S> <C> <C>
Effect on total of service and interest cost
components.......................................... $ 11 $ (10)
Effect on postretirement benefit obligation........... $ 130 $ (119)
</TABLE>
48
<PAGE>
HONEYWELL INTERNATIONAL INC.
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
(DOLLARS IN MILLIONS EXCEPT PER SHARE AMOUNTS)
NOTE 24 -- SEGMENT FINANCIAL DATA
Statement of Financial Accounting Standards No. 131, 'Disclosures about
Segments of an Enterprise and Related Information' (SFAS No. 131), establishes
standards for reporting information about operating segments. The following
information is provided in accordance with the requirements of SFAS No. 131 and
is consistent with how business results are reported internally to management.
We globally manage our business operations through strategic business units
(SBUs) offering products and services to the aerospace, automation and control,
chemicals, and automotive industries. Based on similar economic and operational
characteristics, our SBUs are aggregated into the following four reportable
segments:
Aerospace Solutions includes Engines & Systems (auxiliary power units;
propulsion engines; environmental control systems; engine controls; and
power generation systems); Aerospace Electronic Systems (flight safety
communications, navigation, radar and surveillance systems; aircraft and
airfield lighting; and advanced systems and instruments); Aerospace
Services (repair and overhaul services; hardware; logistics; and management
and technical services); and Aircraft Landing Systems (aircraft wheels and
brakes).
Automation & Control includes Home and Building Control (controls for
heating, ventilating, humidification and air-conditioning equipment;
energy-efficient lighting controls; home consumer products; security and
fire alarm systems; home automation systems; and building management
systems and services); and Industrial Control (systems for the automation
and control of process operations; solid-state sensors for position,
pressure, air flow, temperature and current; precision electromechanical
switches; control products; advanced vision-based sensors; and fiber-optic
components).
Performance Materials includes Performance Polymers and Chemicals (fibers;
plastic resins; specialty films; intermediate chemicals; fluorine-based
products; pharmaceutical and agricultural chemicals; specialty waxes,
adhesives and sealants; and process technology); and Electronic Materials
(wafer fabrication materials and services; advanced circuits; and amorphous
metals).
Power & Transportation Products includes Transportation and Power Systems
(turbochargers; charge-air coolers; portable power systems; air brake and
anti-lock braking systems); the Consumer Products Group (car care products
including anti-freeze, filters, spark plugs, cleaners, waxes and
additives); and Friction Materials (friction material and related brake
system components).
The accounting policies of the segments are the same as those described in
Note 1. We evaluate segment performance based on segment profit, which excludes
general corporate unallocated expenses, gains on sales of non-strategic
businesses, equity income, other (income) expense, interest and other financial
charges, merger, repositioning and other charges and other. We do not
disaggregate assets on a products and services basis for internal management
reporting and, therefore, such information is not presented. Intersegment sales
approximate market and are not significant. Reportable segment data were as
follows:
49
<PAGE>
HONEYWELL INTERNATIONAL INC.
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
(DOLLARS IN MILLIONS EXCEPT PER SHARE AMOUNTS)
<TABLE>
<CAPTION>
2000 1999 1998
---- ---- ----
<S> <C> <C> <C>
Net sales
Aerospace Solutions................................ $ 9,988 $ 9,908 $ 9,890
Automation & Control............................... 7,384 6,115 5,957
Performance Materials.............................. 4,055 4,007 4,169
Power & Transportation Products.................... 3,527 3,581 3,387
Corporate.......................................... 69 124 152
------- ------- -------
$25,023 $23,735 $23,555
------- ------- -------
------- ------- -------
Depreciation and amortization
Aerospace Solutions................................ $ 328 $ 291 $ 304
Automation & Control............................... 264 192 194
Performance Materials.............................. 244 214 212
Power & Transportation Products.................... 107 106 111
Corporate.......................................... 52 78 76
------- ------- -------
$ 995 $ 881 $ 897
------- ------- -------
------- ------- -------
Segment profit
Aerospace Solutions................................ $ 2,195 $ 1,918 $ 1,587
Automation & Control............................... 986 767 705
Performance Materials.............................. 334 439 634
Power & Transportation Products.................... 274 322 234
Corporate.......................................... (160) (175) (248)
------- ------- -------
$ 3,629 $ 3,271 $ 2,912
------- ------- -------
------- ------- -------
Capital expenditures
Aerospace Solutions................................ $ 225 $ 270 $ 287
Automation & Control............................... 193 212 212
Performance Materials.............................. 261 282 308
Power & Transportation Products.................... 145 143 149
Corporate.......................................... 29 79 81
------- ------- -------
$ 853 $ 986 $ 1,037
------- ------- -------
------- ------- -------
</TABLE>
A reconciliation of segment profit to consolidated income before taxes on
income is as follows:
<TABLE>
<CAPTION>
2000 1999 1998
---- ---- ----
<S> <C> <C> <C>
Segment profit......................................... $ 3,629 $ 3,271 $ 2,912
Gain on sale of non-strategic businesses............... 112 106 --
Equity in income of affiliated companies............... 47 116 162
Other income........................................... 57 39 3
Interest and other financial charges................... (481) (265) (275)
Merger, repositioning and other charges................ (966) (1,287) (54)
Other(1)............................................... -- 268 24
------- ------- -------
Income before taxes on income.......................... $ 2,398 $ 2,248 $ 2,772
------- ------- -------
------- ------- -------
</TABLE>
- ---------
(1) Other represents the gain on our disposition of our investment in AMP common
stock in 1999 and litigation settlements in 1998.
50
<PAGE>
HONEYWELL INTERNATIONAL INC.
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
(DOLLARS IN MILLIONS EXCEPT PER SHARE AMOUNTS)
NOTE 25 -- GEOGRAPHIC AREAS -- FINANCIAL DATA
<TABLE>
<CAPTION>
UNITED OTHER
STATES EUROPE INTERNATIONAL TOTAL
------ ------ ------------- -----
<S> <C> <C> <C> <C> <C>
Net sales(1)......................... 2000 $18,007 $4,313 $2,703 $25,023
1999 16,913 4,608 2,214 23,735
1998 17,082 4,510 1,963 23,555
Long-lived assets(2)................. 2000 8,994 1,617 517 11,128
1999 7,837 1,840 613 10,290
1998 7,346 1,944 675 9,965
</TABLE>
- ---------
(1) Sales between geographic areas approximate market and are not significant.
Net sales are classified according to their country of origin. Included in
United States net sales are export sales of $3,194, $3,715 and $3,824
million in 2000, 1999 and 1998, respectively. Our sales are not materially
dependent on a single customer or a small group of customers.
(2) Long-lived assets are comprised of property, plant and equipment, goodwill
and other intangible assets.
NOTE 26 -- UNAUDITED QUARTERLY FINANCIAL INFORMATION
<TABLE>
<CAPTION>
2000 1999
--------------------------------------------------------- --------------------------------
MAR. 31 JUNE 30 SEPT. 30 DEC. 31 YEAR MAR. 31 JUNE 30 SEPT. 30
------- ------- -------- ------- ---- ------- ------- --------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Net sales......... $6,044 $6,309 $6,216 $6,454 $25,023 $5,582 $5,958 $6,036
Gross profit...... 1,594 1,638(1) 1,371(3)(4) 1,330(5) 5,933 1,390 1,333(6) 1,462(8)
Net income........ 506 617(1)(2) 282(3)(4) 254(5) 1,659 440 540(6)(7) 554(8)(9)
Earnings per
share -- basic... .64 .77 .35 .32 2.07 .55 .68 .70
Earnings per
share -- assuming
dilution......... .63 .76(1)(2) .35(3)(4) .31(5) 2.05 .55 .67(6)(7) .68(8)(9)
Dividends
paid(12)......... .1875 .1875 .1875 .1875 .75 .17 .17 .17
Market price(13)..
High........... 60.50 59.13 41.75 55.69 60.50 50.94 68.63 67.56
Low............ 40.31 32.13 33.25 33.38 32.13 37.81 49.25 57.50
<CAPTION>
1999
------------------------
DEC. 31 YEAR
------- ----
<S> <C> <C>
Net sales......... $6,159 $23,735
Gross profit...... 1,055(10) 5,240
Net income........ 7(10)(11) 1,541
Earnings per
share -- basic... .01 1.95
Earnings per
share -- assuming
dilution......... .01(10)(11) 1.90
Dividends
paid(12)......... .17 .68
Market price(13)..
High........... 63.75 68.63
Low............ 52.38 37.81
</TABLE>
- ---------
(1) Includes $96 million, after-tax $59 million, or $0.08 per share for
repositioning charges. See Note 5 of Notes to Financial Statements for
further information.
(2) Includes an after-tax gain of $71 million, or $0.09 per share on the sale
of the TCAS product line of the former Honeywell. See Note 6 of Notes to
Financial Statements for further information.
(3) Gross profit includes a $116 million charge for repositioning and other
charges. Gross profit does not include an equity charge of $99 million for
closing an affiliate's operations. The total charge is $215 million,
after-tax $133 million, or $0.16 per share. See Note 5 of Notes to
Financial Statements for further information.
(4) Includes an impairment charge of $245 million, after-tax $198 million,
$0.25 per share related to long-lived assets of our Friction Materials
business. See Note 5 of Notes to Financial Statements for further
information.
(5) Gross profit includes a $373 million charge for asset impairment,
environmental and other charges. Gross profit does not include an equity
charge of $37 million related to an equity investee's customer claims. The
total charge is $410 million, after-tax $315 million, or $0.39 per share.
See Note 5 of Notes to Financial Statements for further information.
(footnotes continued on next page)
51
<PAGE>
HONEYWELL INTERNATIONAL INC.
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
(DOLLARS IN MILLIONS EXCEPT PER SHARE AMOUNTS)
(footnotes continued from previous page)
(6) Gross profit includes a $222 million charge for repositioning and other
charges. Gross profit does not include an equity charge of $36 million
related to the writedown of an equity investment. The total charge is $258
million, after-tax $156 million, or $0.19 per share. See Note 5 of Notes to
Financial Statements for further information.
(7) Includes an after-tax gain of $161 million, or $0.20 per share on the
disposition of our investment in AMP common stock. See Note 7 of Notes to
Financial Statements for further information.
(8) Gross profit includes a $103 million charge for repositioning and other
charges. Gross profit does not include an equity charge of $4 million
related to an equity investee's severance actions. The total charge is
$107 million, after-tax $65 million, or $0.08 per share. See Note 5 of
Notes to Financial Statements for further information.
(9) Includes an after-tax gain of $59 million, or $0.07 per share on the sale
of our Laminate Systems business. See Note 6 of Notes to Financial
Statements for further information.
(10) Includes $622 million, after-tax $395 million, or $0.49 per share for
repositioning and other charges. See Note 5 of Notes to Financial
Statements for further information.
(11) Includes $300 million, after-tax $228 million, or $0.28 per share for
repositioning and other charges. See Note 5 of Notes to Financial
Statements for further information.
(12) Represents the historical dividends of AlliedSignal up to December 1, 1999
and of Honeywell subsequent to that date.
(13) Represents the historical market price of AlliedSignal up to December 1,
1999, and of Honeywell subsequent to that date. From composite tape-stock
is primarily traded on the New York Stock Exchange.
52
<PAGE>
REPORT OF INDEPENDENT ACCOUNTANTS
TO THE BOARD OF DIRECTORS AND SHAREOWNERS OF
HONEYWELL INTERNATIONAL INC.
In our opinion, based on our audits and the report of other auditors, the
consolidated financial statements listed in the index appearing under
Item 14(a)(1) on page 63 present fairly, in all material respects, the financial
position of Honeywell International Inc. and its subsidiaries at December 31,
2000 and 1999, and the results of their operations and their cash flows for each
of the three years in the period ended December 31, 2000 in conformity with
accounting principles generally accepted in the United States of America. These
financial statements are the responsibility of the Company's management; our
responsibility is to express an opinion on these financial statements based on
our audits. We did not audit the financial statements of Honeywell Inc., a
wholly-owned subsidiary, which statements reflect total sales of $8,426.7
million for the year ended December 31, 1998. Those statements were audited by
other auditors whose report thereon has been furnished to us, and our opinion
expressed herein, insofar as it related to the amounts included for Honeywell
Inc., is based solely on the report of the other auditors. We conducted our
audits of these statements in accordance with auditing standards generally
accepted in the United States of America, which 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,
assessing the accounting principles used and significant estimates made by
management, and evaluating the overall financial statement presentation. We
believe that our audits and the report of other auditors provide a reasonable
basis for our opinion.
/s/ PRICEWATERHOUSECOOPERS LLP
PricewaterhouseCoopers LLP
Florham Park, New Jersey
February 9, 2001
53
<PAGE>
INDEPENDENT AUDITORS' REPORT
To the Shareowners of Honeywell Inc.:
We have audited the statements of financial position of Honeywell Inc. and
subsidiaries as of December 31, 1998, and the related statements of income,
shareowners' equity, and cash flows for the year then ended (not separately
included herein). These financial statements are the responsibility of the
Company's management. Our responsibility is to express an opinion on these
financial statements based on our audit.
We conducted our audit in accordance with auditing standards generally
accepted in the United States of America. 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 audit provides 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, 1998 and the results of their operations and their cash flows for the year
then ended in conformity with accounting principles generally accepted in the
United States of America.
/s/ Deloitte & Touche LLP
Minneapolis, Minnesota
February 10, 1999
54
<PAGE>
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
Not Applicable
PART III.
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
Information with respect to the directors and executive officers of
Honeywell International Inc. is set forth below:
<TABLE>
<CAPTION>
NAME, AGE,
DATE FIRST
ELECTED A DIRECTOR/OFFICER BUSINESS EXPERIENCE
-------------------------- ------------------------------------------------------------
<S> <C>
DIRECTORS:
Michael R. Bonsignore (a), 59 Chairman of the Board and Chief Executive Officer since
1999 April 2000. Chief Executive Officer from December 1999
through March 2000. Chairman of the Board and Chief
Executive Officer of Honeywell Inc. from April 1993
through November 1999. Mr. Bonsignore is also a director
of Medtronic, Inc. He was a director of Honeywell Inc.
from November 1990 to December 1999.
Hans W. Becherer, 65 Formerly Chairman and Chief Executive Officer of Deere &
1991 Company (manufacturer of mobile power machinery and
supplier of financial services) from 1990 to 2000.
Mr. Becherer is also a director of J.P. Morgan Chase & Co.
and Schering-Plough Corporation.
Gordon M. Bethune, 59 Chairman of the Board and Chief Executive Officer of
1999 Continental Airlines, Inc. (international commercial
airline company) since 1996. President and Chief Executive
Officer of Continental Airlines, Inc. from November 1994
to 1996. He was a director of Honeywell Inc. from
April 1999 to December 1999.
Marshall N. Carter, 60 Senior Fellow at the Center for Business and Government,
1999 John F. Kennedy School of Government, Harvard University,
since January 2001. Chairman and Chief Executive Officer
of State Street Corporation (provider of services to
institutional investors worldwide) from 1993 to 2000.
Jaime Chico Pardo, 51 Vice Chairman and Chief Executive Officer of Telefonos
1999 de Mexico, S.A. de C.V. (TELMEX) (a telecommunications
company based in Mexico City) since 1995. Mr. Chico Pardo
is also Vice-Chairman of Carso Global Telecom and a
director of America Movil, Grupo Carso, Grupo Financiero
Inbursa and Prodigy Communications Corp. He was a director
of Honeywell Inc. from September 1998 to December 1999.
Ann M. Fudge, 49 President, Kraft's Beverages, Desserts & Post Divisions and
1993 Group Vice President, Kraft Foods, Inc. (packaged foods)
from 2000 to February 2001. President of Kraft General
Foods' Maxwell House Coffee Company from 1994 to 2000.
Ms. Fudge is a director of General Electric Company and
the Federal Reserve Bank of New York.
- --------------
(a) Also an officer.
</TABLE>
55
<PAGE>
<TABLE>
<CAPTION>
NAME, AGE,
DATE FIRST
ELECTED A DIRECTOR/OFFICER BUSINESS EXPERIENCE
-------------------------- ------------------------------------------------------------
<S> <C>
James J. Howard, 65 Chairman of the Board of Xcel Energy Inc. (formerly known as
1999 Northern States Power Company, an energy company) since
August 2000. Chairman of the Board, President and Chief
Executive Officer of Northern States Power Company from
1994 to 2000. Mr. Howard is also a director of Ecolab,
Inc., the Federal Reserve Bank of Minneapolis and Walgreen
Company. He was a director of Honeywell Inc. from
July 1990 to December 1999.
Bruce Karatz, 55 Chairman of the Board, President and Chief Executive Officer
1999 of KB Home (an international residential and commercial
builder) since 1993. Mr. Karatz is also a director of the
Kroger Co. and National Golf Properties, Inc. He was a
director of Honeywell Inc. from July 1992 to
December 1999.
Robert P. Luciano, 67 Chairman Emeritus of Schering-Plough Corporation (a
1989 manufacturer and marketer of pharmaceuticals and consumer
products) since October 1999. Chairman of the Board of
Schering-Plough Corporation from 1984 to October 1998.
Mr. Luciano is a director of C.R. Bard, Inc., Merrill
Lynch & Co. and Schering-Plough Corporation.
Russell E. Palmer, 66 Chairman and Chief Executive Officer of the Palmer Group (a
1987 private investment firm) since 1990. Mr. Palmer is a
director of Federal Home Loan Mortgage Corporation, The
May Department Stores Company, Safeguard Scientifics, Inc.
and Verizon Communications.
Ivan G. Seidenberg, 54 President and Co-Chief Executive Officer of Verizon
1995 Communications (telecommunications and information
services provider) since June 2000 when Bell Atlantic
Corporation and GTE Corporation merged and Verizon
Communications was created. Chairman and Chief Executive
Officer of Bell Atlantic Corporation from 1999 to June
2000. Vice Chairman, President and Chief Executive Officer
since June 1998, and Vice Chairman, President and Chief
Operating Officer following the merger of NYNEX
Corporation and Bell Atlantic in 1997. Chairman and Chief
Executive Officer of NYNEX Corporation from 1995 to 1997.
Mr. Seidenberg is also a director of American Home
Products Corporation, Boston Properties, Inc., CVS
Corporation and Viacom Inc.
John R. Stafford, 63 Chairman, President and Chief Executive Officer of American
1993 Home Products Corporation (a manufacturer of
pharmaceutical, health care, animal health and
agricultural products) since 1986. Mr. Stafford is also a
director of Deere & Company, J.P. Morgan Chase & Co. and
Verizon Communications.
Michael W. Wright, 62 Chairman of the Board, President and Chief Executive
1999 Officer, SUPERVALUE Inc. (a major food distributor and
retailer) since 1982. Mr. Wright is also a director of
Cargill, Inc. and Wells Fargo and Company. He was a
director of Honeywell Inc. from April 1987 to
December 1999.
</TABLE>
56
<PAGE>
<TABLE>
<CAPTION>
NAME, AGE,
DATE FIRST
ELECTED A DIRECTOR/OFFICER BUSINESS EXPERIENCE
-------------------------- ------------------------------------------------------------
<S> <C>
EXECUTIVE OFFICERS:
Giannantonio Ferrari, 61 Chief Operating Officer and Executive Vice President,
1999 Performance Products and Solutions, since December 1999.
President and Chief Operating Officer of Honeywell Inc.
from April 1997 to November 1999. President, Honeywell
Europe S.A. from January 1992 to March 1997. Mr. Ferrari
is a citizen of Italy.
Robert D. Johnson, 53 Chief Operating Officer and Executive Vice President,
1998 Aerospace Businesses, since December 1999. President and
Chief Executive Officer of AlliedSignal Aerospace from
April 1999 to November 1999. President -- Aerospace
Marketing, Sales and Service from January 1999 to March
1999. President -- Electronic & Avionics Systems from
October 1997 to December 1998. Vice President and General
Manager, Aerospace Services from 1994 to 1997.
Barry C. Johnson, 57 Senior Vice President, Chief Technology Officer since
2000 July 2000. Corporate Vice President of Motorola Inc. and
Chief Technology Officer of Motorola's Semiconductor
Product Sector from September 1998 to June 2000. Vice
President and Director, Global New Product and Technology
Operations of Motorola Inc. from May 1997 to August 1998.
Vice President and Director, Manufacturing Technology
Development of Motorola Inc. from July 1994 to
April 1997.
Peter M. Kreindler, 55 Senior Vice President and General Counsel since March 1992.
1992 Secretary from December 1994 through November 1999.
James T. Porter, 49 Senior Vice President and Chief Administrative Officer since
1999 October 2000. Senior Vice President -- Information and
Business Services from December 1999 to September 2000.
Vice President and Chief Administrative Officer of
Honeywell Inc. from January 1998 through November 1999.
Corporate Vice President, Human Resources of Honeywell
Inc. from May 1993 to December 1997.
Richard F. Wallman, 49 Senior Vice President and Chief Financial Officer since
1995 March 1995. Vice President and Controller of International
Business Machines Corp. from April 1994 to February 1995.
</TABLE>
The executive officers of Honeywell, listed above, are elected annually.
There are no family relationships among them.
SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
The rules of the Securities and Exchange Commission require that we disclose
late filings of reports of stock ownership (and changes in stock ownership) by
our directors and executive officers. To the best of Honeywell's knowledge, all
of the filings for our executive officers and directors were made on a timely
basis in 2000 except that the sale of 33,422 shares by Donald Redlinger, a
former executive officer, was reported two weeks after the filing deadline.
57
<PAGE>
ITEM 11. EXECUTIVE COMPENSATION
SUMMARY COMPENSATION TABLE
The following table provides a summary of cash and non-cash compensation
with respect to Honeywell's Chief Executive Officer and the other four most
highly compensated officers of Honeywell.
<TABLE>
<CAPTION>
ANNUAL COMPENSATION LONG-TERM COMPENSATION
------------------- ----------------------
AWARDS PAYOUTS
------ -------
NAME AND PRINCIPAL RESTRICTED OPTIONS LTIP ALL OTHER
POSITION YEAR SALARY($) BONUS($) STOCK UNITS($)(1) (SHARES) PAYOUTS($) COMPENSATION(2)
-------- ---- --------- -------- ----------------- -------- ---------- ---------------
<S> <C> <C> <C> <C> <C> <C> <C>
Michael R. Bonsignore(3) 2000 $1,500,000 $ 975,000 -- -- -- $ 356,551
Chairman of the Board 1999 1,087,817 2,000,000 $22,781,250 1,781,249 $2,565,000 1,039,122
and Chief Executive Officer
Giannantonio Ferrari(4) 2000 628,387 325,000 -- -- -- 338,669
Chief Operating Officer and 1999 536,896 775,000 2,039,375 612,251 1,282,500 272,915
Executive Vice President
Robert D. Johnson 2000 550,000 400,000 -- -- 1,187,840(5) 58,913
Chief Operating Officer and 1999 370,833 625,000 1,882,500 400,000 -- 36,469
Executive Vice President 1998 267,917 300,000 -- 190,000 -- 31,505
Peter M. Kreindler 2000 480,000 275,000 -- 250,000 -- 209,625
Sr. Vice President and 1999 462,500 640,000 1,098,125 333,000 -- 386,986
General Counsel 1998 445,000 550,000 -- -- -- 105,705
Richard F. Wallman 2000 480,000 235,000 -- 437,500 -- 211,042
Sr. Vice President and 1999 455,833 590,000 1,098,125 333,000 -- 352,478
Chief Financial Officer 1998 410,000 500,000 -- -- -- 79,136
</TABLE>
- ---------
(1) The total number of units held and their value as of December 31, 2000 were
as follows: Mr. Bonsignore, 375,000 ($17,742,188); Mr. Ferrari, 32,500
($1,537,656); Mr. Johnson, 30,000 ($1,419,375); Mr. Kreindler, 17,500
($827,969); Mr. Wallman, 17,500 ($827,969). Common stock dividend
equivalents are payable on each unit. Restricted units will vest in
increments of one-third each on April 1, 2001, 2002 and 2003 if Honeywell
achieves specified operating margin targets.
(2) Amounts shown for 2000 consists of matching contributions made by Honeywell
under the Savings Plan and Supplemental Savings Plan: for Mr. Bonsignore,
$171,705; Mr. Johnson, $30,475; Mr. Kreindler, $38,269; and Mr. Wallman,
$19,195; the value of life insurance premiums: for Mr. Bonsignore, $98,447;
Mr. Johnson, $28,200; Mr. Kreindler, $21,300; above-market interest earned
on deferred compensation: for Mr. Bonsignore, $22,589; Mr. Johnson, $238;
Mr. Kreindler, $150,056; and Mr. Wallman, $191,847; the value of perquisites
for Mr. Bonsignore, $63,810 which includes a $38,000 cash flexible
perquisite payment and $22,730 for the value of personal use of company
provided aircraft; and relocation allowances in connection with foreign
assignments for Mr. Ferrari, $338,669.
(3) Mr. Bonsignore became an executive officer on December 1, 1999.
(4) Mr. Ferrari became an executive officer on December 1, 1999.
(5) Payment made in 2000 from the Long Term Performance Plan for Key
Executives for the 1998 and 1999 performance period. The plan was
discontinued at the time of the merger of AlliedSignal and the
former Honeywell.
58
<PAGE>
OPTION GRANTS IN LAST FISCAL YEAR
The stock options included in the following table were all granted with an
exercise price equal to 100 percent of the fair market value of the common stock
on the date of grant.
<TABLE>
<CAPTION>
NUMBER OF % OF TOTAL
SECURITIES OPTIONS
UNDERLYING GRANTED TO EXERCISE GRANT DATE
OPTIONS EMPLOYEES IN PRICE EXPIRATION PRESENT
NAME GRANTED(#) FISCAL YEAR ($/SH) DATE VALUE(1)
---- ---------- ----------- ------ ---- --------
<S> <C> <C> <C> <C> <C>
M. R. Bonsignore..................... -- -- -- -- --
G. Ferrari........................... -- -- -- -- --
R. D. Johnson........................ -- -- -- -- --
P. M. Kreindler...................... 250,000(2) 6% $47.8500 03/23/10 $4,510,335
R. F. Wallman........................ 437,500(2) 10% 47.8500 03/23/10 7,893,086
</TABLE>
- ---------
(1) Options are valued using a Black-Scholes option pricing model which assumes
a historic five-year average volatility of 32.25 percent, the average
dividend yield for the three years ended December 31, 2000 (1.43 percent), a
6.5 percent risk-free rate of return (based on the average zero coupon
five-year U.S. Treasury note yield for the month of grant), and an expected
option life of 5.0 years based on past experience. No adjustments are made
for non-transferability or risk of forfeiture. Options will have no actual
value unless, and then only to the extent that, the common stock price
appreciates from the grant date to the exercise date. If the grant date
present values are realized, total shareowner value will have appreciated by
approximately $14.6 billion, and the value of the granted options reflected
in the table will be less than 0.09 percent of the total shareowner
appreciation.
(2) Vests 40 percent on January 1, 2001 and 30 percent on each of January 1,
2002 and 2003.
AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR
AND FISCAL YEAR-END OPTION VALUES
<TABLE>
<CAPTION>
NUMBER OF SECURITIES VALUE OF UNEXERCISED
UNDERLYING UNEXERCISED IN-THE-MONEY OPTIONS
SHARES OPTIONS AT YEAR-END(#) AT YEAR-END($)
ACQUIRED ON VALUE --------------------------- ---------------------------
NAME EXERCISE(#) REALIZED($) EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
---- ----------- ----------- ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
M. R. Bonsignore......... 286,326 $10,445,920 1,490,986 1,100,000 $11,075,709 --
G. Ferrari............... 253,834 3,836,353 38,626 433,000 -- --
R. D. Johnson............ 100,000 1,722,335 -- 502,000 -- $ 973,635
P. M. Kreindler.......... 540,000 15,244,247 40,000 723,000 236,100 4,312,800
R. F. Wallman............ 550,000 15,657,340 89,000 895,500 1,313,733 3,982,913
</TABLE>
EMPLOYMENT AND TERMINATION ARRANGEMENTS
Mr. Bonsignore's employment agreement provides for his employment as
Chairman and Chief Executive Officer through December 31, 2004. During the term
of the agreement, Mr. Bonsignore will have an annual salary of at least
$1,500,000 and will have an annual target bonus equal to 100 percent of base
salary. If his employment is terminated without good cause, he will be entitled
to a severance payment of three times his annual salary and bonus.
When Mr. Ferrari became President of Honeywell Europe in 1992, he entered
into an employment agreement with Honeywell Europe that provided for certain
salary and benefits in accordance with Belgian law. Mr. Ferrari's current
position is considered to be an international assignment under his Belgian
employment contract; therefore, the contract remains in effect until his
retirement from Honeywell. As an executive of Honeywell Inc., Mr. Ferrari was
also a party to a change of control agreement, which remains in effect until
September 2002. Under this agreement, he is entitled to a lump sum payment of
three times his salary and target incentive bonus if either his employment is
terminated (other than for cause) or his duties are diminished.
Under the Severance Plan for Senior Executives, the current executive
officers named in the Summary Compensation Table (other than Messrs. Bonsignore
and Ferrari) would be entitled to
59
<PAGE>
payments equivalent to base salary and annual incentive bonus (and continuation
of certain benefits, such as group life and medical insurance coverage) for a
period of 36 months if their employment is terminated other than for 'gross
cause' (which includes fraud and criminal conduct). The payments would be made
in a lump sum following a change in control. The Severance Plan provides for an
additional payment sufficient to eliminate the effect of any applicable excise
tax on severance payments in excess of an amount determined under Section 280G
of the Internal Revenue Code. Payments subject to the excise tax would not be
deductible by Honeywell.
RETIREMENT BENEFITS
The following table illustrates the estimated annual pension benefits which
would be provided on retirement at age 65 under Honeywell's retirement program
and an unfunded supplemental retirement plan, after applicable deductions for
Social Security benefits, to salaried employees having specified average annual
remuneration and years of service.
<TABLE>
<CAPTION>
PENSION TABLE
-------------
AVERAGE YEARS OF CREDITED SERVICE
ANNUAL ------------------------------------------------------------------------------------
REMUNERATION 5 10 15 20 25 - 30 35 40
- ------------ - -- -- -- ------- -- --
<S> <C> <C> <C> <C> <C> <C> <C>
$ 600,000 $ 48,995 $108,995 $ 168,995 $ 228,995 $ 288,995 $ 310,372 $ 354,710
800,000 68,995 148,995 228,995 308,995 388,995 415,372 474,710
1,000,000 88,995 188,995 288,995 388,995 488,995 520,372 594,710
1,200,000 108,995 228,995 348,995 468,995 588,995 625,372 714,710
2,000,000 188,995 388,995 588,995 788,995 988,995 1,045,372 1,194,710
3,000,000 288,995 588,995 888,995 1,188,995 1,488,995 1,570,372 1,794,710
4,000,000 388,995 788,995 1,188,995 1,588,995 1,988,995 2,095,372 2,394,710
</TABLE>
The benefit amounts shown in the Pension Table are computed on a straight
life annuity basis. At January 1, 2001, the following individuals had the
indicated number of years of credited service for pension purposes: Mr.
Bonsignore, 31; Mr. Johnson, 6; Mr. Kreindler, 9; and Mr. Wallman, 5. Mr.
Ferrari has 40 years of service, but is covered under a separate Belgian pension
arrangement described below.
The amounts in the Salary and Bonus columns of the Summary Compensation
Table would be included in computing remuneration for pension purposes as well
as any payroll based reward and recognition awards. Average annual remuneration
under the Pension Plan is calculated based on the highest paid 60 consecutive
months of an employee's last 120 months of employment.
Under his employment agreement, Mr. Bonsignore is entitled to receive during
his lifetime, commencing on retirement, Honeywell facilities and services
comparable to those provided prior to his retirement, and a retirement benefit
equivalent to 60 percent of final average compensation (based on his highest
three years of salary and bonus) payable annually for life. Benefits under his
agreement will be reduced by any retirement benefits payable under Honeywell's
retirement and supplemental retirement plans.
Mr. Ferrari is covered by the Belgian pension arrangement, which provides a
benefit of 55 percent of final average compensation after 30 years of service,
through a combination of the plan and equivalent pension plans in other
countries. This arrangement also provides for an additional benefit of 15
percent of final average compensation which is funded by contributions from Mr.
Ferrari.
DIRECTOR COMPENSATION
Directors who are employees of Honeywell receive no compensation for service
on the Board. Each non-employee director receives an annual Board retainer of
$65,000, of which $20,000 is automatically credited to the director's account in
the Deferred Compensation Plan for Non-Employee Directors in the form of common
stock equivalents (which are only payable after termination of Board service).
They also receive a fee of $2,000 for Board meetings attended on any day (ten
during 2000), an annual retainer of $7,000 for each Board Committee served, and
an additional Committee Chair retainer of $5,000 for the Audit and Management
Development and Compensation Committees and $3,000 for all other Board
Committees. While no fees are generally paid for attending Committee meetings, a
$1,000 fee is paid for attendance at a Committee meeting, or other extraordinary
meeting related to Board business which occurs apart from a Board meeting.
Non-employee directors are also
60
<PAGE>
provided with $350,000 in business travel accident insurance and are eligible to
elect $100,000 in term life insurance and medical and dental coverage for
themselves and their eligible dependents.
Directors may elect to defer, until a specified calendar year or retirement
from the Board, all or any portion of their annual retainers and fees that are
not automatically deferred and to have such compensation credited to their
account in the Deferred Compensation Plan. Amounts credited either accrue
interest (11 percent for 2001) or are valued as if invested in common stock
equivalents or one of the other funds available to participants in our savings
plan. Amounts deferred in a common stock account earn amounts equivalent to
dividends. Upon a change of control, a director will be entitled to a lump-sum
payment of all deferred amounts.
Under the Stock Plan for Non-Employee Directors, each new director receives
a one-time grant of 3,000 shares of common stock, which are subject to transfer
restrictions until the director's service terminates with the consent of a
majority of the Board, provided termination occurs at or after 65. During the
restricted period, the director is entitled to one-fifth of the shares granted
for each year of service (up to five). However, the shares will be forfeited if
the director's service terminates (other than for death or disability) prior to
the end of the restricted period. The Plan also provides for an annual grant to
each director of options to purchase 2,000 shares of common stock at 100 percent
of the fair market value on the date of grant. Option grants vest in cumulative
installments of 40 percent on April 1 of the year following the grant date and
an additional 30 percent on April 1 of each of the next two years.
MANAGEMENT DEVELOPMENT AND COMPENSATION COMMITTEE
The primary functions of the Management Development and Compensation
Committee of the Board of Directors are to review and recommend the compensation
arrangements for officers; approve compensation arrangements for other senior
level employees; consider matters related to management development and
succession and recommend individuals for election as officers; and review or
take such other action as may be required in connection with the bonus, stock
and other benefit plans of Honeywell and its subsidiaries. The members of the
Committee are: Robert P. Luciano (Chair), Hans W. Becherer, Gordon M. Bethune,
Bruce Karatz, Ivan G. Seidenberg and John R. Stafford.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
STOCK OWNERSHIP OF CERTAIN BENEFICIAL OWNERS
As of December 31, 2000, State Street Bank and Trust Company, 225 Franklin
Street, Boston, Massachusetts, 02101 held 69,227,941 shares or approximately 8.6
percent of the outstanding common stock as trustee of certain of Honeywell's
savings plans. Under the terms of the plans, State Street is required to vote
shares attributable to any participant in accordance with instructions received
from the participant and to vote all shares for which it does not receive
instructions in the same ratio as the shares for which instructions were
received. State Street disclaims beneficial ownership of the shares referred to
above. State Street also held 15,430,034 shares, or approximately 1.9 percent of
the outstanding common stock in various other fiduciary capacities.
As of December 31, 2000, AXA or its affiliates, including the Mutuelles AXA,
AXA Financial, Inc., Alliance Capital Management L.P. and The Equitable Life
Assurance Society of the United States beneficially owned 42,369,312 shares of
common stock (including 379,000 shares of common stock issuable upon exercise of
options), representing approximately 5.2 percent of the outstanding common
stock. The address of AXA is 25, Avenue Matignon, 75008 Paris, France, and the
address of AXA Financial, Inc. is 1290 Avenue of the Americas, New York, New
York 10104.
STOCK OWNERSHIP OF DIRECTORS AND EXECUTIVE OFFICERS
In general, 'beneficial ownership' includes those shares a director or
executive officer has the power to vote or transfer, and stock options that are
exercisable currently or within 60 days. On December 31, 2000, the directors and
executive officers of Honeywell beneficially owned, in the aggregate, 2,968,499
shares of common stock which are included in the table below. Directors and
executive officers also have interests in stock-based units under Honeywell's
plans. While these units
61
<PAGE>
may not be voted or transferred, we have included them in the table below as
they represent the total economic interest of the directors and executive
officers in Honeywell stock.
<TABLE>
<CAPTION>
NUMBER OF
NAME SHARES(1)(2)(3)
---- ---------------
<S> <C>
Hans W. Becherer...................................... 30,276
Gordon M. Bethune..................................... 3,436
Michael R. Bonsignore................................. 1,696,942
Marshall N. Carter.................................... 22,247
Jaime Chico Pardo..................................... 5,279
Giannantonio Ferrari.................................. 234,379
Ann M. Fudge.......................................... 18,021
James J. Howard....................................... 9,174
Robert D. Johnson..................................... 131,199
Bruce Karatz.......................................... 11,680
Peter M. Kreindler.................................... 263,569
Robert M. Luciano..................................... 23,161
Russell E. Palmer..................................... 17,904
Ivan G. Seidenberg.................................... 19,486
John R. Stafford...................................... 25,894
Richard F. Wallman.................................... 437,892
Michael W. Wright..................................... 7,696
</TABLE>
- ---------
(1) The total beneficial ownership for any individual is less than 0.5 percent,
and the total for the group is less than 0.9 percent, of the shares of
common stock outstanding.
(2) Includes the following number of shares or share-equivalents in deferred
accounts, as to which no voting or investment power exists: Mr. Becherer,
14,076; Mr. Bethune, 436; Mr. Bonsignore, 2,476; Mr. Carter, 3,447;
Mr. Chico Pardo, 2,279; Ms. Fudge, 1,821; Mr. Howard, 1,338; Mr. Johnson,
515; Mr. Karatz, 2,289; Mr. Kreindler, 21,449; Mr. Luciano, 4,961;
Mr. Palmer, 4,704; Mr. Seidenberg, 8,286; Mr. Stafford, 9,694; Mr. Wallman,
71,445; Mr. Wright, 2,446; and all directors and executive officers as a
group, 152,175.
(3) Includes shares which the following have the right to acquire within 60 days
through the exercise of vested stock options: Mr. Becherer, 10,200;
Mr. Bonsignore, 1,490,986; Mr. Carter, 800; Mr. Ferrari, 168,626;
Ms. Fudge, 10,200; Mr. Johnson, 120,000; Mr. Kreindler, 240,000;
Mr. Luciano, 10,200; Mr. Palmer, 6,200; Mr. Seidenberg, 8,200;
Mr. Stafford, 10,200; Mr. Wallman, 364,000; and all directors and executive
officers as a group, 2,599,612.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
In connection with certain tax planning, we secured supplemental retirement
payments for three executives by funding them through an escrow arrangement.
The amounts funded through an escrow arrangement in 2000 were $4,000,000 for
Mr. Bonsignore, $2,100,000 for Mr. Wallman, and $1,400,000 for Dr. Barry C.
Johnson. By securing the payments, the executive's tax liability was
accelerated. We loaned each executive an amount equal to the related
withholding tax obligation. We will also loan each executive additional amounts
as necessary to cover the balance of taxes related to securing the payments.
The loans bear interest at 5.53 percent compounded semiannually and are due
December 31, 2004. On December 31, 2000, the amount of loans outstanding totaled
$2,977,590, of which $1,635,200 was loaned to Mr. Bonsignore, $765,450 to
Mr. Wallman and $576,940 to Dr. Johnson.
62
<PAGE>
PART IV.
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K
<TABLE>
<S> <C>
(a)(1.) All Financial Statements:
The following items are included in 'Item 8.
Financial Statements and Supplementary Data' in
Part II of this report:
Consolidated Statement of Income for the years
ended December 31, 2000, 1999 and 1998
Consolidated Balance Sheet at December 31, 2000
and 1999
Consolidated Statement of Cash Flows for the
years ended December 31, 2000, 1999 and 1998
Consolidated Statement of Shareowners' Equity
for the years ended December 31, 2000, 1999
and 1998
Notes to Financial Statements
Report of Independent Accountants
</TABLE>
(a)(2.) Consolidated Financial Statement Schedules
The two financial statement schedules applicable to us have been omitted
because of the absence of the conditions under which they are required.
(a)(3.) Exhibits
See the Exhibit Index to this Form 10-K Annual Report. The following
exhibits listed on the Exhibit Index are filed with this Form 10-K Annual
Report:
<TABLE>
<CAPTION>
EXHIBIT NO. DESCRIPTION
- ----------- -----------
<C> <S>
10.6 Supplemental Non-Qualified Savings Plan for Highly
Compensated Employees of Honeywell International Inc. and
its Subsidiaries, as amended and restated
10.7 AlliedSignal Inc. Severance Plan for Senior Executives, as
amended and restated
10.8 Salary Deferral Plan for Selected Employees of Honeywell
International Inc. and its Affiliates, as amended and
restated
10.10 Amended and Restated 364-Day Credit Agreement dated as of
November 30, 2000 among Honeywell, the initial lenders
named therein, Citibank, N.A., as administrative agent,
The Chase Manhattan Bank, Deutsche Bank AG and Bank of
America, N.A., as syndication agents, and Salomon Smith
Barney Inc., as lead arranger and book manager, which
amends the agreement set forth in Exhibit 10.11 which was
previously filed
10.13 Honeywell International Inc. Supplemental Pension Plan, as
amended and restated
10.16 Honeywell International Inc. Supplemental Executive
Retirement Plan for Executives in Career Band 6 and Above
10.17 Honeywell Supplemental Defined Benefit Retirement Plan, as
amended and restated
10.18 Form of Escrow Agreement used to secure certain supplemental
retirement benefits for certain executive officers of
Honeywell
10.19 Form of Promissory Note representing loans to certain
executive officers of Honeywell of required withholding
taxes relating to the securing of certain supplemental
retirement benefits
10.20 Honeywell International Inc. Severance Plan for Corporate
Staff Employees (Involuntary Termination Following a
Change in Control), as amended and restated
21 Subsidiaries of the Registrant
23.1 Consent of PricewaterhouseCoopers LLP
23.2 Consent of Deloitte & Touche LLP
24 Powers of Attorney
</TABLE>
(b) Reports on Form 8-K
During the three months ended December 31, 2000, Current Report on Form 8-K
was filed on October 25 reporting that Honeywell and General Electric Company
entered into an Agreement and Plan of Merger.
63
<PAGE>
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the Registrant has duly caused this annual report to be
signed on its behalf by the undersigned, thereunto duly authorized.
HONEYWELL INTERNATIONAL INC.
March 30, 2001 By: /s/ PHILIP M. PALAZZARI
-------------------------------------
Philip M. Palazzari
Vice President and Controller
Pursuant to the requirements of the Securities Exchange Act of 1934, this
annual report has been signed below by the following persons on behalf of the
Registrant and in the capacities and on the date indicated:
<TABLE>
<CAPTION>
NAME NAME
---- ----
<S> <C>
* *
- ---------------------------------------------------- -------------------------------------------
Michael R. Bonsignore Bruce Karatz
Chairman of the Board, Director
Chief Executive Officer and Director
*
* -------------------------------------------
------------------------------------------- Robert P. Luciano
Hans W. Becherer Director
Director
*
* -------------------------------------------
------------------------------------------- Russell E. Palmer
Gordon M. Bethune Director
Director
*
* -------------------------------------------
------------------------------------------- Ivan G. Seidenberg
Marshall N. Carter Director
Director
*
* -------------------------------------------
------------------------------------------- John R. Stafford
Jaime Chico Pardo Director
Director
*
* -------------------------------------------
------------------------------------------- Michael W. Wright
Ann M. Fudge Director
Director
/s/ PHILIP M. PALAZZARI
* -------------------------------------------
------------------------------------------- Philip M. Palazzari
James J. Howard Vice President and Controller
Director (Principal Accounting Officer)
/s/ RICHARD F. WALLMAN
-------------------------------------------
Richard F. Wallman
Senior Vice President and
Chief Financial Officer
(Principal Financial Officer)
*By: /s/ RICHARD F. WALLMAN
------------------------------------------
(Richard F. Wallman
Attorney-in-fact)
</TABLE>
March 30, 2001
64
<PAGE>
EXHIBIT INDEX
<TABLE>
<CAPTION>
EXHIBIT NO. DESCRIPTION
- ----------- -----------
<C> <S>
2.1 Agreement and Plan of Merger, dated as of October 22, 2000,
between Honeywell and General Electric Company
(incorporated by reference to Annex A to Honeywell's Proxy
Statement, dated December 4, 2000, filed pursuant to Rule
14a-6 of the Securities Exchange Act of 1934)
2.2 Stock Option Agreement, dated as of October 22, 2000,
between General Electric Company and Honeywell
(incorporated by reference to Annex B to Honeywell's
Proxy Statement, dated December 4, 2000, filed pursuant to
Rule 14a-6 of the Securities Exchange Act of 1934)
3(i) Restated Certificate of Incorporation of Honeywell
(incorporated by reference to Exhibit 3(i) to Honeywell's
Form 8-K filed December 3, 1999)
3(ii) By-laws of Honeywell, as amended (incorporated by reference
to Exhibit 3(ii) to Honeywell's Form 10-Q for the quarter
ended June 30, 2000)
4 Honeywell is a party to several long-term debt instruments
under which, in each case, the total amount of securities
authorized does not exceed 10% of the total assets of
Honeywell and its subsidiaries on a consolidated basis.
Pursuant to paragraph 4(iii)(A) of Item 601(b) of
Regulation S-K, Honeywell agrees to furnish a copy of such
instruments to the Securities and Exchange Commission upon
request.
9 Omitted (Inapplicable)
10.1 Master Support Agreement, dated February 26, 1986, as
amended and restated January 27, 1987, as further amended
July 1, 1987 and as again amended and restated
December 7, 1988, by and among Honeywell, Wheelabrator
Technologies Inc., certain subsidiaries of Wheelabrator
Technologies Inc., The Henley Group, Inc. and Henley Newco
Inc. (incorporated by reference to Exhibit 10.1 to
Honeywell's Form 10-K for the year ended December 31,
1988)
10.2* Deferred Compensation Plan for Non-Employee Directors of
AlliedSignal Inc., as amended (incorporated by reference
to Exhibit 10.2 to Honeywell's Form 10-K for the year
ended December 31, 1996)
10.3* Stock Plan for Non-Employee Directors of AlliedSignal Inc.,
as amended (incorporated by reference to Exhibit C to
Honeywell's Proxy Statement, dated March 10, 1994, filed
pursuant to Rule 14a-6 of the Securities Exchange Act of
1934)
10.4* 1985 Stock Plan for Employees of Allied-Signal Inc. and its
Subsidiaries, as amended (incorporated by reference to
Exhibit 19.3 to Honeywell's Form 10-Q for the quarter
ended September 30, 1991)
10.5* AlliedSignal Inc. Incentive Compensation Plan for Executive
Employees, as amended (incorporated by reference to
Exhibit B to Honeywell's Proxy Statement, dated March 10,
1994, filed pursuant to Rule 14a-6 of the Securities
Exchange Act of 1934, and to Exhibit 10.5 to Honeywell's
Form 10-Q for the quarter ended June 30, 1999)
10.6* Supplemental Non-Qualified Savings Plan for Highly
Compensated Employees of Honeywell International Inc. and
its Subsidiaries, as amended and restated (filed herewith)
10.7* AlliedSignal Inc. Severance Plan for Senior Executives, as
amended and restated (filed herewith)
10.8* Salary Deferral Plan for Selected Employees of Honeywell
International Inc. and its Affiliates, as amended and
restated (filed herewith)
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
EXHIBIT NO. DESCRIPTION
- ----------- -----------
<C> <S>
10.9* 1993 Stock Plan for Employees of Honeywell International
Inc. and its Affiliates (incorporated by reference to
Exhibit A to Honeywell's Proxy Statement, dated March 10,
1994, filed pursuant to Rule 14a-6 of the Securities
Exchange Act of 1934)
10.10 Amended and Restated 364-Day Credit Agreement dated as of
November 30, 2000 among Honeywell, the initial lenders
named therein, Citibank, N.A., as administrative agent,
The Chase Manhattan Bank, Deutsche Bank AG and Bank of
America, N.A., as syndication agents, and Salomon Smith
Barney Inc., as lead arranger and book manager, which
amends the agreement set forth in Exhibit 10.11 hereto
(filed herewith)
10.11 364-Day Credit Agreement dated as of December 2, 1999 among
Honeywell, the initial lenders named therein, Citibank,
N.A., as administrative agent, Morgan Guaranty Trust
Company of New York, as syndication agent, and Salomon
Smith Barney Inc. and J.P. Morgan Securities Inc., as
arrangers (incorporated by reference to Exhibit 10.11 to
Honeywell's Form 10-K for the year ended December 31,
1999)
10.12 Five-Year Credit Agreement dated as of December 2, 1999
among Honeywell, the initial lenders named therein,
Citibank, N.A., as administrative agent, The Chase
Manhattan Bank, Deutsche Bank AG and Bank of America,
N.A., as syndication agents, and Salomon Smith Barney
Inc., as lead arranger and book manager (incorporated by
reference to Exhibit 10.12 to Honeywell's Form 10-K for
the year ended December 31, 1999)
10.13* Honeywell International Inc. Supplemental Pension Plan, as
amended and restated (filed herewith)
10.14* Employment Agreement dated as of December 1, 1999 between
Honeywell and Michael R. Bonsignore (incorporated by
reference to Exhibit 10.14 to Honeywell's Form 8-K filed
December 3, 1999)
10.15* Long Term Performance Plan for Key Executives of Honeywell
International Inc. (incorporated by reference to Exhibit
10.16 to Honeywell's Form 10-Q for the quarter ended
March 31, 2000)
10.16* Honeywell International Inc. Supplemental Executive
Retirement Plan for Executives in Career Band 6 and Above
(filed herewith)
10.17* Honeywell Supplemental Defined Benefit Retirement Plan, as
amended and restated (filed herewith)
10.18* Form of Escrow Agreement used to secure certain supplemental
retirement benefits for certain executive officers of
Honeywell (filed herewith)
10.19* Form of Promissory Note representing loans to certain
executive officers of Honeywell of required withholding
taxes relating to the securing of certain supplemental
retirement benefits (filed herewith)
10.20* Honeywell International Inc. Severance Plan for Corporate
Staff Employees (Involuntary Termination Following a
Change in Control), as amended and restated (filed
herewith)
11 Omitted (Inapplicable)
12 Omitted (Inapplicable)
16 Omitted (Inapplicable)
18 Omitted (Inapplicable)
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
EXHIBIT NO. DESCRIPTION
- ----------- -----------
<C> <S>
21 Subsidiaries of the Registrant (filed herewith)
22 Omitted (Inapplicable)
23.1 Consent of PricewaterhouseCoopers LLP (filed herewith)
23.2 Consent of Deloitte & Touche LLP (filed herewith)
24 Powers of Attorney (filed herewith)
28 Omitted (Inapplicable)
99 Omitted (Inapplicable)
</TABLE>
- ---------
The Exhibits identified above with an asterisk(*) are management contracts
or compensatory plans or arrangements.
STATEMENT OF DIFFERENCES
------------------------
The registered trademark symbol shall be expressed as ................ 'r'
Characters normally expressed as subscript shall be preceded by ...... [u]
</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>EX-10
<SEQUENCE>2
<FILENAME>0002.txt
<DESCRIPTION>EXHIBIT 10.6
<TEXT>
<PAGE>
EXHIBIT 10.6
SUPPLEMENTAL NON-QUALIFIED SAVINGS PLAN FOR HIGHLY COMPENSATED
EMPLOYEES OF HONEYWELL INTERNATIONAL INC. AND ITS SUBSIDIARIES
(Career Band 6 and above)
(As Amended and Restated as of December 1, 2000)
1. Eligibility
Those highly compensated employees ("HCEs") of Honeywell International
Inc. (the "Corporation") and its subsidiaries within the meaning of Section
414(q) of the Internal Revenue Code of 1986 (the "Code") in Career Band 6 and
above who are eligible to participate in any of the qualified (as determined
under Code Section 401(a)) savings plans maintained by the Corporation or its
subsidiaries, other than any such plan maintained by Honeywell Inc. prior to
April 1, 2000, (the "Qualified Savings Plans") are eligible to participate in
the Supplemental Non-Qualified Savings Plan for Highly Compensated Employees of
Honeywell International Inc. and its Subsidiaries (Career Band 6 and above) (the
"Plan").
2. Definitions
Capitalized terms not otherwise defined in the Plan have the respective
meanings set forth in the applicable Qualified Savings Plans.
3. Participation
(a) Time and Form of Election. Any eligible employee may become a
participant in the Plan (a "Participant") as of the beginning of the next
available pay period, by executing a written or electronic notice of election to
participate and filing such notice with the Plan Administrator (as defined in
Section 10(a)) prior to the beginning of such pay period. Such notice may direct
that a portion (determined in accordance with paragraph 4(a)) of the base annual
salary exclusive of shift differentials, overtime or other premium pay, bonus,
incentive or other extra compensation, but inclusive of severance pay (unless
otherwise specifically excluded by the severance pay plan) or salary deferred
under this Plan or otherwise ("Base Annual Salary"), which would have been
payable to such Participant during such pay period and succeeding pay periods,
in lieu of such payment, be credited to a deferred compensation account
maintained under the Plan as an unfunded book entry stated as a cash balance
(the "Participant's Account"). Amounts so credited to the Participant's Account
shall constitute "Participant Deferred Contributions." A Participant's election
to direct that a portion of his or her Base Annual Salary be credited to the
Participant's Account shall continue in effect until the Participant terminates
such election, the Participant is no longer an HCE or the Participant is no
longer eligible to contribute to the Qualified Savings Plans. Any such
termination shall be effective only with respect to the Participant's Base
Annual Salary payable after the end of the pay period in which one of the events
in the preceding sentence occurs. Amounts credited to the Participant's Account
prior to the effective date of the termination of the election shall not be
affected and shall be distributed only in accordance with the terms of the Plan
and Participant's distribution election thereunder.
<PAGE>
(b) Change or Resumption of Amount Deferred. A Participant may elect at
any time to modify the amount of Base Annual Salary to be credited to the
Participant's Account under the Plan, which modification shall be effective for
the next available pay period following his or her election. Amounts credited to
the Participant's Account prior to the effective date of such change shall not
be affected by such change and shall be distributed only in accordance with the
terms of the Plan.
4. Contributions to Participants' Accounts
(a) Participant Deferred Contributions. Unless the Plan Administrator
shall have established a lesser amount, a Participant may elect to defer an
aggregate amount equal to the difference between (i) a full percentage of such
Participant's Base Annual Salary from 1% to the maximum percentage permitted
under the Qualified Savings Plans and Code Section 415(c)(1)(B) for Before-Tax
Contributions by an individual who is not an HCE and who is eligible to
participate in the Qualified Savings Plans, without regard to any other
limitations which may apply under the Code and without regard to any After-Tax
Contributions which might be made under the Qualified Savings Plans, and (ii)
the full amount of Before-Tax Contributions made by such Participant under the
Qualified Savings Plans; provided, however, that a Participant who elects to
defer any amount hereunder shall be required to make the maximum Before-Tax
Contributions permissible under the Qualified Savings Plans for the applicable
Plan Year (after giving effect to deferrals under the Plan or otherwise).
(b) Plan Employer Contributions. There shall be credited to the
Participant's Account employer contributions under the Plan ("Plan Employer
Contributions") in an aggregate amount equal to (i) minus (ii), where (i) is
50% (for participants entitled to a 50% Employer Contribution in the Qualified
Savings Plans) or 100% (for participants entitled to a 100% Employer
Contribution in the Qualified Savings Plans) of the lesser of (x) 8% of the
Participant's Base Annual Salary, or (y) the sum of the Participant's
Participant Contributions under the Qualified Savings Plans and Participant
Deferred Contributions under the Plan, expressed as a percentage of Base
Annual Salary, and (ii) is the total amount of Employer Contributions made
with respect to the Participant under the Qualified Savings Plans; provided,
however, that in no event shall the combined Plan Employer Contributions and
Employer Contributions made with respect to the Participant exceed 8% of
the Participant's Base Annual Salary, and provided, further, that Plan Employer
Contributions shall not be made with respect to a Participant during any
period of suspension of Employer Contributions with respect to such Participant
under the terms of the Qualified Savings Plans, whether or not such
Participant continues to make Participant Contributions under the Qualified
Savings Plans during the period of such suspension. Notwithstanding the
preceding sentence, there shall be credited to the Participant's Account an
amount equal to the product of (i) the number of whole shares of common stock
of Honeywell International Inc. ("Common Stock") credited to such Participant's
Account under Section 5(b) on December 29, 2000, and (ii) $0.08 (such product
rounded to the nearest full dollar). The amount determined under the preceding
sentence shall be credited to the Participant's Account as Plan Employer
Contributions in accordance with Section 5(a) and shall be credited to such
Account no later than December 31, 2000.
(c) Vesting. Participant Deferred Contributions, Plan Employer
Contributions (collectively "Total Contribution Amounts") and all amounts
accrued with respect to Total Contribution Amounts in accordance with Section 5,
shall be vested at the time such amounts are credited to the Participant's
Account.
-2-
<PAGE>
(d) All Contributions Prorated. Total Contribution Amounts shall be
credited to a Participant's Account each pay period.
5. The Participant's Account
(a) Crediting of Participant's Accounts. Participant Deferred
Contributions shall be credited to the Participant's Account under the Plan as
unfunded book entries stated as cash balances. Participant Deferred
Contributions credited to the Participant's Account prior to January 1, 1994 or
after the Participant has terminated employment shall accrue amounts (to be
posted each Valuation Date) equivalent to interest, compounded daily, at a rate
based upon the cost to the Corporation of borrowing at a fixed rate for a
15-year term. Such rate shall be determined annually by the Chief Financial
Officer of the Corporation in consultation with the Treasurer of the
Corporation. Participant Deferred Contributions credited to the Participant's
Account on or after January 1, 1994, but before a Participant terminates
employment, shall accrue amounts (to be posted each Valuation Date) equivalent
to interest, compounded daily, at a rate determined annually by the Management
Development and Compensation Committee (the "Committee") of the Board of
Directors (the "Board") of the Corporation. The rate established in the
preceding sentence shall not exceed the greater of (i) 10%, or (ii) 200% of the
10-year U.S. Treasury Bond rate at the time of determination and, once
established for a calendar year, shall remain in effect with respect to all
Participant Deferred Contributions credited to the Participant's Account during
such calendar year until such amounts are distributed. Plan Employer
Contributions shall be credited to the Participant's Account under the Plan as
unfunded book entries stated as shares of Common Stock (including fractional
shares). The number of shares of Common Stock credited to a Participant's
Account shall be determined by dividing the equivalent cash amount (as
determined under Section 4(b)) by the closing price of Common Stock on the day
that such Plan Employer Contributions are credited to the Participant's Account.
Amounts equivalent to the dividends that would have been payable in respect of
the Common Stock shall be credited to the Participant's Account as if reinvested
in Common Stock, with the number of shares credited determined by dividing the
equivalent cash dividend amount by the closing price of Common Stock on the date
the dividends would have been payable. Amounts credited to the Participant's
Account shall accrue amounts equivalent to interest and dividends, as the case
may be, until distributed in accordance with the Plan.
(b) Transition Rule for Plan Employer Contributions. The balance of
each Participant's Account attributable to Plan Employer Contributions,
determined as of the close of business on the day prior to the effective date of
the amendment and restatement of the Plan and adjusted to reflect all gains,
losses and dividends that have been credited to such Participant's Account
through the day prior to such effective date, shall be converted into the
equivalent number of shares of Common Stock by dividing such balance by the
closing price of Common Stock on the trading date next preceding such effective
date. Such amount shall be an unfunded book entry only and shall (i) thereafter
be credited with equivalent dividend amounts in accordance with Section 5(a),
and (ii) be distributed in accordance with Section 6(a)(ii).
6. Distribution from Accounts
(a) Form of Election.
(i) Participant Deferred Contributions. At the time a Participant makes
an election pursuant to Section 3(a), the Participant shall also make an
election with respect to the
-3-
<PAGE>
distribution of the aggregate amount of the Participant Deferred Contributions,
plus earnings credited thereon pursuant to Section 5 (collectively the
"Participant Deferred Contribution Amounts"), credited to the Participant's
Account pursuant to such election. A Participant may elect to receive such
amount in one lump-sum payment or in a number of annual installments (up to
fifteen installments). The lump-sum payment or the first installment shall be
paid in cash as soon as practicable during the month of January of such future
calendar year as the Participant may designate or, if the Participant so elects,
as soon as practicable during the month of January of the calendar year
immediately following the later of the year in which the Participant last
contributed to the Plan or the year in which the Participant terminates
employment with the Corporation or any of its subsidiaries (whether by reason of
Retirement or otherwise). Except as otherwise provided in Section 8, subsequent
installments shall be paid in cash as soon as practicable during the month of
January of each succeeding calendar year until the entire amount of the
Participant Deferred Contribution Amounts shall have been paid. The amount of
each installment shall be determined by multiplying the balance of the
Participant Deferred Contribution Amounts each year by a fraction, the numerator
of which is one and the denominator of which is (A) the number of installments
elected, reduced by (B) one for each annual installment previously received.
(ii) Plan Employer Contributions. The distribution election made
pursuant to subsection (i) above shall also apply to the timing of the
distribution of the aggregate number of shares of Common Stock representing the
Plan Employer Contributions plus reinvested dividends pursuant to Section 5
(collectively the "Plan Employer Contribution Amounts") credited to the
Participant's Account pursuant to Section 5. Except to the extent otherwise
provided with respect to fractional shares, all distributions of Plan Employer
Contribution Amounts shall be made in Common Stock. A Participant may elect to
receive such Plan Employer Contribution Amounts in one lump-sum payment or in a
number of annual installments (up to fifteen installments). The lump-sum payment
or the first installment shall be paid as soon as practicable during the month
of January of such future calendar year as the Participant may designate, or, if
the Participant so elects, as soon as practicable during the month of January of
the calendar year immediately following the later of the year in which the
Participant last contributed to the Plan or the year in which the Participant
terminates employment with the Corporation or any of its subsidiaries (whether
by reason of Retirement or otherwise). Except as otherwise provided in Section
8, subsequent installments shall be paid as soon as practicable during the month
of January of each succeeding calendar year until the entire amount of the Plan
Employer Contribution Amounts shall have been paid. The amount of each
installment shall be determined by (A) multiplying the balance of the Plan
Employer Contribution Amounts on the last Valuation Date of each year by a
fraction, the numerator of which is one and the denominator of which is (x) the
number of installments elected, reduced by (y) one for each annual installment
previously received, and (B) rounding the result down to the next whole share of
Common Stock; provided, however, the amount of the last installment shall be
determined without regard to the rounding requirement of the preceding portion
of this sentence. Any fractional shares of Common Stock shall be paid in an
equivalent cash amount, as determined using the closing price of Common Stock on
the trading date next preceding the distribution date.
(b) Adjustment of Method of Distribution. Prior to the beginning of any
calendar year, a Participant may elect to change the timing and method of
distribution of the Participant Deferred Contribution Amounts and Plan Employer
Contribution Amounts credited to the Participant's Account commencing with such
calendar year. Participant Deferred Contribution Amounts and Plan Employer
Contribution Amounts credited to the Participant's Account prior to the
effective date of such change (the "Prior Balance"), and all amounts thereafter
accrued with
-4-
<PAGE>
respect to the Prior Balance, shall not be affected by such change and, except
as otherwise determined by the Plan Administrator pursuant to Section 8, shall
be distributed only in accordance with the election in effect at the time such
Prior Balance was credited to the Participant's Account.
(c)(i) Distribution Default for Participant Deferred Contribution
Amounts. Any Participant Deferred Contribution Amounts credited to a
Participant's Account which are not covered by a timely distribution election
under subsections (a) and (b) above shall be distributed to the Participant in
one lump-sum cash payment as soon as practicable during the month of January of
the calendar year immediately following the later of the year in which the
Participant last contributed to the Plan or the year in which the Participant
terminates his employment with the Corporation or any of its subsidiaries
(whether by reason of Retirement or otherwise); provided, however, if the
Participant has made an election pursuant to Sections 9(a)(i) or 9(a)(ii), the
lump sum payment shall be made within the 90-day period following a Change in
Control, as defined in Section 9(c).
(c)(ii) Distribution Default for Plan Employer Contribution Amounts.
Any Plan Employer Contribution Amounts credited to a Participant's Account which
are not covered by a timely distribution election under subsections (a) and (b)
above shall be distributed to the Participant in Common Stock as soon as
practicable during the month of January of the calendar year immediately
following the later of the year in which the Participant last contributed to the
Plan or the year in which the Participant terminates his employment with the
Corporation or any of it subsidiaries (whether by reason of Retirement or
otherwise); provided, however, if the Participant has made an election pursuant
to Sections 9(a)(i) or (ii), the distribution shall be made within the 90-day
period following a Change in Control, as defined in Section 9(c). Any fractional
shares of Common Stock shall be paid in an equivalent cash amount, as determined
using the closing price of Common Stock on the trading date next preceding the
distribution date.
(d) One-Time Election. Notwithstanding any provision of this Plan to
the contrary, a Participant shall be given a one-time opportunity prior to
January 1, 2001 to make a new election with respect to the distribution of his
Participant Deferred Contribution Amounts, including a new election with respect
to the Participant's Prior Balance attributable to such Participant Deferred
Contribution Amounts (other than the portion of such Prior Balance payable, or
part of a series of payments payable, in January 2001), provided, however, that
any such election shall only be authorized by the Committee if it results in a
further deferral of the distribution of the Participant Deferred Contribution
Amounts or Prior Balance attributable to such Participant Deferred Contribution
Amounts from that previously elected. Such election shall be effective upon a
"Merger" of the Corporation and General Electric Company (as defined in the
Agreement and Plan of Merger between Honeywell International Inc. and General
Electric Company dated October 22, 2000) and acceptance of the election by the
Corporation. Any such election shall be subject to such restrictions and
limitations as the Corporation shall determine in its sole discretion.
-5-
<PAGE>
7. Distribution on Death
(a) Participant Deferred Contribution Amounts. If a Participant should
die before all Participant Deferred Contribution Amounts credited to the
Participant's Account have been paid in accordance with the election referred to
in Sections 6(a) or 6(b), the balance of the Participant Deferred Contribution
Amounts in such Participant's Account shall be paid in cash as soon as
practicable following the Participant's death to the beneficiary designated in
writing by the Participant and filed with the Plan Administrator; provided,
however, if the Participant has made an election pursuant to Sections 9(a)(i) or
9(a)(ii), such amount shall be paid within the 90-day period following a Change
in Control, as defined in Section 9(c). If (i) no beneficiary designation has
been made, or (ii) the designated beneficiary shall have predeceased the
Participant and no further designation has been made, then such balance shall be
paid to the estate of the Participant. A Participant may change the designated
beneficiary at any time during the Participant's lifetime by filing a subsequent
designation in writing with the Plan Administrator.
(b) Plan Employer Contribution Amounts. If a Participant should die
before all Plan Employer Contribution Amounts credited to the Participant's
Account have been paid in accordance with the election referred to in Sections
6(a) or 6(b), the balance of the Plan Employer Contribution Amounts in such
Participant's Account shall be paid in Common Stock as soon as practicable
following the Participant's death to the beneficiary designated in writing by
the Participant and filed with the Plan Administrator; provided, however, if the
Participant has made an election pursuant to Sections 9(a)(i) or 9(a)(ii), such
amount shall be paid within the 90-day period following a Change in Control, as
defined in Section 9(c). If (i) no such beneficiary designation has been made,
or (ii) the designated beneficiary shall have predeceased the Participant and no
further designation has been made, then such balance shall be paid to the estate
of the Participant. A Participant may change the designated beneficiary at any
time during the Participant's lifetime by filing a subsequent designation in
writing with the Plan Administrator. Any fractional shares of Common Stock shall
be paid in an equivalent cash amount, as determined using the closing price of
Common Stock on the trading date next preceding the distribution date.
8. Payment in the Event of Hardship
Upon receipt of a request from a Participant, delivered in writing to
the Plan Administrator along with a Certificate of Unavailability of Resources
form, the Plan Administrator, or his designee, may cause the Corporation to
accelerate (or require the subsidiary of the Corporation which employs or
employed the Participant to accelerate) payment of all or any part of the amount
credited to the Participant's Account, including accrued amounts, if it finds in
its sole discretion that payment of such amounts in accordance with the
Participant's prior election under Sections 6(a) or 6(b) would result in severe
financial hardship to the Participant, and such hardship is the result of an
unforeseeable emergency caused by circumstances beyond the control of the
Participant. Acceleration of payment may not be made under this Section 8 to the
extent that such hardship is or may be relieved (a) through reimbursement or
compensation by insurance or otherwise, (b) by liquidation of the Participant's
assets, to the extent the liquidation of assets would not itself cause severe
financial hardship, or (c) by cessation of deferrals under this Plan or any
tax-qualified savings plan of the Corporation or its subsidiaries. Any
distribution of Participant Deferred Contribution Amounts pursuant to this
Section 8 shall be made in cash, while any distribution of Plan Employer
Contribution Amounts pursuant to this Section 8 shall be made in Common Stock.
Any fractional shares of
-6-
<PAGE>
Common Stock shall be paid in an equivalent cash amount, as determined using the
closing price of Common Stock on the trading date next preceding the
distribution date.
9. Change in Control
(a)(i) Initial Lump-Sum Payment Election. Notwithstanding any election
made pursuant to Section 6, any person who becomes eligible to participate in
the Plan may file a written election with the Plan Administrator at the time the
individual makes an election to participate pursuant to Section 3(a) to have the
aggregate amount credited to the Participant's Account (commencing with the date
on which such written election is filed) paid in one-lump sum payment as soon as
practicable following a Change in Control, but in no event later than 90 days
after such Change in Control. Any distribution of Participant Deferred
Contribution Amounts pursuant to this Section 9 shall be made in cash, while any
distribution of Plan Employer Contribution Amounts pursuant to this Section 9
shall be made in Common Stock (or the common stock of any successor corporation
issued in exchange for, or with respect to, Common Stock incident to the Change
in Control). Any fractional shares of Common Stock (or the common stock of any
successor corporation issued in exchange for, or with respect to, Common Stock
incident to the Change in Control) shall be paid in an equivalent cash amount.
(a)(ii) Subsequent Lump-Sum Payment Election. A Participant who did not
make an election pursuant to Section 9(a)(i) or who has revoked, pursuant to
Section 9(a)(iii), an election previously made under Section 9(a)(i) or this
Section 9(a)(ii) may, prior to the earlier of a Change in Control or the
beginning of the calendar year in which the election is to take effect, elect to
have the aggregate amount credited to the Participant's Account for all calendar
years commencing with the first calendar year beginning after the date the
election is made, paid in one lump-sum payment as soon as practicable following
a Change in Control, but in no event later than 90 days after such Change in
Control. Amounts credited to the Participant's Account prior to the effective
date of the election made pursuant to this Section 9(a)(ii) shall not be
affected by such election and shall be distributed following a Change in Control
in accordance with any prior election in effect under Sections 9(a)(i) or
9(a)(ii).
(a)(iii) Revocation of Lump-Sum Payment Elections. A Participant may,
prior to the earlier of a Change in Control or the beginning of any calendar
year, file an election revoking any election made pursuant to Sections 9(a)(i)
or 9(a)(ii), with respect to amounts credited to the Participant's Account
commencing with the first calendar year beginning after the election is made.
Amounts credited to the Participant's Account prior to the effective date of the
election made pursuant to this Section 9(a)(iii) shall not be affected by such
election and shall be distributed following a Change in Control in accordance
with any prior election in effect under Sections 9(a)(i) or 9(a)(ii).
Notwithstanding the preceding provisions of this paragraph 9, a Participant
shall be given a one-time opportunity prior to January 1, 2001 to revoke any
election made pursuant to paragraph 9(a)(i) or 9(a)(ii) to receive a lump sum
payment of Participant Deferred Contribution Amounts as soon as practicable
following a Change in Control. Any such revocation shall be applicable to the
Participant Deferred Contribution Amounts, including the Participant's Prior
Balance attributable to Participant Deferred Contribution Amounts. Any
revocation election shall be effective upon a "Merger" of the Corporation and
General Electric Company (as defined in the Agreement and Plan of Merger between
Honeywell International Inc. and General Electric Company dated October 22,
2000) and acceptance by the Corporation. Any such election shall be subject to
such restrictions and limitations as the Corporation shall determine in its sole
discretion.
-7-
<PAGE>
(b) Interest Equivalents. Notwithstanding anything to the contrary in
the Plan, after a Change in Control, the Plan may not provide, or be amended to
provide, interest accruals with respect to Participant Deferred Contributions at
rates lower than the rates in effect under Section 5 immediately prior to the
Change in Control.
(c) Definition of Change in Control. For purposes of the Plan, a Change
in Control is deemed to occur at the time (i) when any entity, person or group
(other than the Corporation, any subsidiary or any savings, pension or other
benefit plan for the benefit of employees of the Corporation or its
subsidiaries) which therefore beneficially owned less than 30% of the common
stock then outstanding acquires shares of Common Stock in a transaction or
series of transactions that results in such entity, person or group directly or
indirectly owning beneficially 30% or more of the outstanding Common Stock, (ii)
of the purchase of shares of Common Stock pursuant to a tender offer or exchange
offer (other than an offer by the Corporation) for all, or any part of, the
Common Stock, (iii) of a merger in which the Corporation will not survive as an
independent, publicly owned corporation, a consolidation, or a sale, exchange or
other disposition of all or substantially all of the Corporation's assets, (iv)
of a substantial change in the composition of the Board during any period of two
consecutive years such that individuals who at the beginning of such period were
members of the Board cease for any reason to constitute at least a majority
thereof, unless the election, or the nomination for election by the stockholders
of the Corporation, of each new director was approved by a vote of at least
two-thirds of the directors then still in office who were directors at the
beginning of the period, or (v) of any transaction or other event which the
Corporate Governance Committee of the Board, in its discretion, determines to be
a Change in Control for purposes of the Plan.
10. Administration
(a) Plan Administrator. The Plan Administrator and "named fiduciary"
for purposes of ERISA shall be the Senior Vice President-Human Resources and
Communications of the Corporation (or the person acting in such capacity in the
event such position is abolished, restructured or renamed). The Plan
Administrator shall have the authority to appoint one or more other named
fiduciaries of the Plan and to designate persons, other than named fiduciaries,
to carry out fiduciary responsibilities under the Plan, pursuant to Section
405(c)(1)(B) of ERISA. Any person acting on behalf of the Plan Administrator
shall serve without additional compensation. The Plan Administrator shall keep
or cause to be kept such records and shall prepare or cause to be prepared such
returns or reports as may be required by law or necessary for the proper
administration of the Plan.
(b) Powers and Duties of Plan Administrator. The Plan Administrator
shall have the full discretionary power and authority to construe and interpret
the Plan (including, without limitation, supplying omissions from, correcting
deficiencies in, or resolving inconsistencies or ambiguities in, the language of
the Plan); to determine all questions of fact arising under the Plan, including
questions as to eligibility for and the amount of benefits; to establish such
rules and regulations (consistent with the terms of the Plan) as it deems
necessary or appropriate for administration of the Plan; to delegate
responsibilities to others to assist it in administering the Plan; to retain
attorneys, consultants, accountants or other persons (who may be employees of
the Corporation and its subsidiaries) to render advice and assistance as it
shall determine to be necessary to effect the proper discharge of any duty for
which it is responsible; and to perform all other acts it believes reasonable
and proper in connection with the administration of the Plan. The Plan
Administrator shall be entitled to rely on the records of the Corporation and
its subsidiaries in determining any Participant's entitlement to and the amount
of benefits payable
-8-
<PAGE>
under the Plan. Any determination of the Plan Administrator, including
interpretations of the Plan and determinations of questions of fact, shall be
final and binding on all parties.
(c) Indemnification. To the extent permitted by law, the Corporation
shall indemnify the Plan Administrator from all claims for liability, loss, or
damage (including payment of expenses in connection with defense against such
claims) arising from any act or failure to act in connection with the Plan.
11. Claims Procedures and Appeals
(a) Any request or claim for Plan benefits must be made in writing and
shall be deemed to be filed by a Participant when a written request is made by
the claimant or the claimant's authorized representative which is reasonably
calculated to bring the claim to the attention of the Plan Administrator.
(b) The Plan Administrator shall provide notice in writing to any
Participant when a claim for benefits under the Plan has been denied in whole or
in part. Such notice shall be provided within 90 days of the receipt by the Plan
Administrator of the Participant's claim or, if special circumstances require,
and the Participant is so notified in writing, within 180 days of the receipt by
the Plan Administrator of the Participant's claim. The notice shall be written
in a manner calculated to be understood by the claimant and shall:
(i) set forth the specific reasons for the denial of benefits;
(ii) contain specific references to Plan provisions relative to the
denial;
(iii) describe any material and information, if any, necessary for
the claim for benefits to be allowed, that had been requested, but not received
by the Plan Administrator; and
(iv) advise the Participant that any appeal of the Plan
Administrator's adverse determination must be made in writing to the Plan
Administrator within 60 days after receipt of the initial denial notification,
and must set forth the facts upon which the appeal is based.
(c) If notice of the denial of a claim is not furnished within the time
periods set forth above, the claim shall be deemed denied and the claimant shall
be permitted to proceed to the review procedures set forth below. If the
Participant fails to appeal the Plan Administrator's denial of benefits in
writing and within 60 days after receipt by the claimant of written notification
of denial of the claim (or within 60 days after a deemed denial of the claim),
the Plan Administrator's determination shall become final and conclusive.
(d) If the Participant appeals the Plan Administrator's denial of
benefits in a timely fashion, the Plan Administrator shall re-examine all issues
relevant to the original denial of benefits. Any such claimant, or his or her
duly authorized representative, may review any pertinent documents, as
determined by the Plan Administrator, and submit in writing any issues or
comments to be addressed on appeal.
(e) The Plan Administrator shall advise the Participant and such
individual's representative of its decision, which shall be written in a manner
calculated to be understood by the claimant, and include specific references to
the pertinent Plan provisions on which the decision is based. Such response
shall be made within 60 days of receipt of the written appeal,
-9-
<PAGE>
unless special circumstances require an extension of such 60-day period for not
more than an additional 60 days. Where such extension is necessary, the claimant
shall be given written notice of the delay. If the decision on review is not
furnished within the time set forth above, the claim shall be deemed denied on
review.
(f) Any dispute, controversy, or claim arising out of or relating to
any Plan benefit, including, without limitation, any dispute, controversy or
claim as to whether the decision of the Plan Administrator respecting the
benefits under this Plan or interpretation of this Plan is arbitrary and
capricious, that is not settled in accordance with the procedures outlined in
this Section 11, shall be settled by final and binding arbitration in accordance
with the American Arbitration Association Employment Dispute Resolution or other
applicable Rules. Before resorting to arbitration, an aggrieved Participant must
first follow the review procedure outlined in this Section of the Plan. If there
is still a dispute after the procedures in this Section have been exhausted, the
Participant must request arbitration in writing within six (6) months after the
Plan Administrator issues, or is deemed to have issued, its determination under
subparagraph (e) above.
The arbitrator shall be selected by mutual agreement of the
parties, if possible. If the parties fail to reach agreement upon appointment of
an arbitrator within 30 days following receipt by one party of the other party's
notice of desire to arbitrate, the arbitrator shall be selected from a panel or
panels of persons submitted by the American Arbitration Association (the "AAA").
The selection process shall be that which is set forth in the AAA Employment
Dispute Resolution Rules, except that, if the parties fail to select an
arbitrator from one or more panels, AAA shall not have the power to make an
appointment but shall continue to submit additional panels until an arbitrator
has been selected.
All fees and expenses of the arbitration, including a
transcript if requested, will be borne by the Corporation. The arbitrator shall
have no power to amend, add to or subtract from this Plan. The award shall be
admissible in any court or agency action seeking to enforce or render
unenforceable this Plan or any portion thereof. Any action to enforce or vacate
the arbitrator's award shall be governed by the Federal Arbitration Act if
applicable.
12. Miscellaneous
(a) Anti-Alienation. The right of a Participant to receive any amount
credited to the Participant's Account shall not be transferable or assignable by
the Participant, except by will or by the laws of descent and distribution. To
the extent that any person acquires a right to receive any amount credited to a
Participant's Account hereunder, such right shall be no greater than that of an
unsecured general creditor of the Corporation. Except as expressly provided
herein, any person having an interest in any amount credited to a Participant's
Account under the Plan shall not be entitled to payment until the date the
amount is due and payable. No person shall be entitled to anticipate any payment
by assignment, pledge or transfer in any form or manner prior to actual or
constructive receipt thereof.
(b) Unsecured General Creditor. Neither the Corporation nor any of its
subsidiaries shall be required to reserve or otherwise set aside funds, Common
Stock or other assets for the payment of its obligations hereunder. However, the
Corporation or any subsidiary may, in its sole discretion, establish funds for
payment of its obligations hereunder. Any such funds shall remain assets of the
Corporation or such subsidiary, as the case may be, and subject to the claims of
its general creditors. Such funds, if any, shall not be deemed to be assets of
the Plan.
-10-
<PAGE>
The Plan is intended to be unfunded for tax purposes and for purposes of Title I
of the Employee Retirement Income Security Act of 1974, as amended.
(c) Withholding. The Corporation shall withhold from any distribution
made from Participant Deferred Contribution Amounts the amount necessary to
satisfy applicable federal, state and local tax withholding requirements. With
respect to distributions of Plan Employer Contribution Amounts, the delivery of
the shares of Common Stock shall be delayed until the Participant makes
arrangements, pursuant to procedures to be adopted by the Plan Administrator, to
satisfy the applicable federal, state and local tax withholding requirements.
(d) Termination and Amendment. The Corporation may at any time amend or
terminate the Plan. No amendment or termination shall impair the rights of a
Participant with respect to amounts then credited to the Participant's Account.
(e) Benefit Statements. Each Participant will receive periodic
statements (not less frequently than annually) regarding the Participant's
Account. Each such statement shall indicate the amount of the balances credited
to the Participant's Account as of the end of the period covered by such
statement.
(f) Legal Interpretation. This Plan and its provisions shall be
construed in accordance with the laws of the State of Delaware to the extent
such Delaware law is not inconsistent with the provisions of ERISA. The text of
this Plan shall, to the extent permitted by law, govern the determination of the
rights and obligations created or referred to herein. Headings to the Sections,
paragraphs and subparagraphs are for reference purposes only and do not limit or
extend the meaning of any of the Plan's provisions.
(g) Employment. The adoption and maintenance of this Plan shall not be
deemed to constitute a contract between the Corporation or its subsidiaries and
any employee or to be a consideration for or condition of employment of any
person. No provision of the Plan shall be deemed to give any employee the right
to continue in the employ of the Corporation or its subsidiaries or to interfere
with the right of the Corporation or its subsidiaries to discharge any employee
at any time without regard to the effect which such discharge might have upon
the employee's participation in the Plan or benefits under it.
(h) Fiduciary Capacities. Any person or group of persons may serve in
more than one fiduciary capacity with respect to the Plan. For purposes of this
Section 12(h), the term "fiduciary" shall have the same meaning as in ERISA.
(i) Participants Subject to Section 16. Notwithstanding anything herein
to the contrary, if any request, election or other action under the Plan
affecting a Participant subject to Section 16 of the Securities Exchange Act of
1934 should require the approval of the Committee to exempt such request,
election or other action from potential liability under Section 16, then the
approval of the Committee shall be obtained in lieu of the approval of the Plan
Administrator.
-11-
</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>EX-10
<SEQUENCE>3
<FILENAME>0003.txt
<DESCRIPTION>EXHIBIT 10.7
<TEXT>
<PAGE>
EXHIBIT 10.7
ALLIEDSIGNAL INC. SEVERANCE PLAN
FOR SENIOR EXECUTIVES
Amended and Restated
Effective as of
May 1, 1999
<PAGE>
PART I
GENERAL PROVISIONS
1. Purpose.
The purpose of the AlliedSignal Inc. Severance Plan for Senior
Executives (the "Plan") is to provide severance related benefits to
selected eligible employees of an AlliedSignal Employer (as defined in
Part II) who are employed in a position in Career Band 6 or above and
whose employment relationship is involuntarily terminated at the
initiative of the Employer for reasons other than Gross Cause (as
defined below). This Plan is intended to be an unfunded plan for a
select group of management or highly compensated employees for purposes
of ERISA (as defined below).
This Plan is comprised of Part I--general provisions relating to the
operation of the Plan, and Part II--special provisions that become
effective only upon a Change in Control (as defined below). As set
forth herein, this Plan constitutes the amendment and restatement, as
of May 1, 1999, of the Severance Plan for Senior Executives established
by Allied Corporation on March 31, 1983 and amended and restated by
AlliedSignal Inc. as of April 25, 1988, January 1, 1990, April 29,
1991, and January 1, 1994.
As used throughout the Plan unless otherwise clearly or necessarily
indicated by context:
(a) "Annual Base Salary" means an amount equal to the product of Base
Salary and twelve.
(b) "Annual Incentive Compensation" means, except as provided in
Section 18(b), the product of (i) times (ii) where (i) is the
target percentage that would be utilized in determining the
Incentive Award for the Participant in the calendar year in which
Participant's Covered Termination occurs and (ii) is Annual Base
Salary.
(c) "Base Salary" means the monthly base salary payable to a
Participant at the highest rate in effect during any of the
thirty-six months preceding a Covered Termination.
(d) "Board" means the Board of Directors of the Company.
(e) "Career Band" means the salary and position classification system
adopted by the Company for use after January 1, 1994.
(f) "Change in Control" is deemed to occur at the time (i) when any
entity, person or group (other than the Company, any subsidiary
or any savings, pension or other benefit plan for the benefit of
employees of the Company or its subsidiaries) which theretofore
beneficially owned less than 30% of the Common Stock then
outstanding acquires shares of Common Stock in a transaction or
series of transactions that results in such entity, person or
group directly or indirectly
-1-
<PAGE>
owning beneficially 30% or more of the outstanding Common Stock,
(ii) of the purchase of shares of Common Stock pursuant to a
tender offer or exchange offer (other than an offer by the
Company) for all, or any part of, the Common Stock, (iii) of a
merger in which the Company will not survive as an independent,
publicly owned corporation, (iv) of a consolidation, or a sale,
exchange or other disposition of all or substantially all of the
Company's assets, (v) of a substantial change in the composition
of the Board during any period of two consecutive years such that
individuals who at the beginning of such period were members of
the Board cease for any reason to constitute at least a majority
thereof, unless the election, or the nomination for election by
the shareowners of the Company, of each new director was approved
by a vote of at least two-thirds of the directors then still in
office who were directors at the beginning of the period, or (vi)
of any transaction or other event which the Management
Development and Compensation Committee of the Board, in its
discretion, determines to be a change in control for purposes of
this Plan.
(g) "Code" means the Internal Revenue Code of 1986, as amended from
time to time.
(h) "Common Stock" means the common stock of the Company or such
other stock into which the common stock may be changed as a
result of split-ups, recapitalizations, reclassifications and any
similar transaction.
(i) "Company" means AlliedSignal Inc., a Delaware corporation.
(j) "Covered Termination" means, except as provided in Section 18(c),
a Participant's Discharge. Notwithstanding the preceding
sentence, in the event of a sale or transfer of a facility or
line of business that causes a severance of the employment
relationship with the Employer, a Covered Termination shall be
deemed to have occurred only if the Participant is not offered
substantially comparable employment with the new employer, as
determined by the Plan Administrator, in its sole discretion.
(k) "Discharge" means an involuntary termination of a Participant's
employment relationship by the Employer for reasons other than
death or Gross Cause.
(l) "Determination Year" means a calendar year within which
performance is measured for purposes of determining the amount of
Incentive Awards payable for that year.
(m) "Effective Date" means March 31, 1983.
(n) "Employer" means the Company and its participating divisions,
subsidiaries, strategic business units and their respective
successors.
(o) "ERISA" means the Employee Retirement Income Security Act of
1974, as amended from time to time, together with applicable
final regulations thereunder.
-2-
<PAGE>
(p) "Gross Cause" means, except as provided in Section 18(f), conduct
by a Participant which is a fraud, misappropriation of Employer
property or intentional misconduct damaging to such property or
business of an Employer, or the commission of a crime. Gross
Cause shall be determined by the Plan Administrator in its sole
and absolute discretion.
(q) "Incentive Award" means an incentive compensation award or any
other annual incentive award determined under the Incentive
Compensation Plan for Executive Employees of AlliedSignal and its
Affiliates, and any predecessor or successor plan, but shall not
include any performance improvement award or any other long-term
incentive award under any such plan.
(r) "Named Fiduciary" means the Plan Administrator and/or such other
committee, entity or person as the Company or the Plan
Administrator may designate to administer the terms and
conditions of the Plan, as the case may be.
(s) "Participant" means an Existing Participant, an Officer
Participant or a New Participant.
(i) "Existing Participant" means, except as further defined in
Part II an individual who, on July 1, 1993, was an
employee of an Employer in Salary Grade 20 or above or in
a position comparable to a position of Salary Grade 20 or
above.
(ii) "Officer Participant" means, except as further defined in
Part II, an individual (other than an Existing
Participant) who is an officer of an Employer as
determined by the Plan Administrator in his or her sole
discretion.
(iii) "New Participant" means, except as further defined in Part
II, an individual (other than an Existing Participant and
an Officer Participant) who is employed by an Employer in
a position evaluated in Career Band 6 or above or in a
position comparable to a position in Career Band 6 or
above, all as determined by the Plan Administrator in his
or her sole discretion.
(t) "Pay Continuation" means the component of the severance benefit
described in Section 3(a)(i):
(u) "Plan Administrator" means the person defined in Section 7 and
Section 21(a).
(v) "Pro Rata Factor" means (I) for the Determination Year in which a
Covered Termination occurs, a fraction the numerator of which is
equal to the number of
-3-
<PAGE>
calendar months which have elapsed from the first day of the
calendar month following the Covered Termination through December
31st of the Determination Year, and the denominator of which is
twelve, and (ii) for any subsequent Determination Year shall mean
a fraction, the numerator of which is equal to the Severance Pay
Factor, reduced by the number of calendar months which have
elapsed from the first day of the calendar month following the
Covered Termination through December 31st of the year preceding
the Determination Year, and the denominator of which is twelve;
provided, however, that the Pro Rata Factor shall never be
greater than 1.0.
(w) "Prorated Annual Incentive Compensation" means the component of
the severance benefit described in Section 3(a)(ii).
(x) "Salary Grade" means the salary and position classification used
by the Company prior to January 1, 1994, or any comparable salary
and position classification used by any other Employer.
(y) "Severance Pay Factor" means, with respect to any Participant,
the relevant factor specified in Section 3(a)(i)(A).
(z) "Severance Period" means the period, commencing on the first day
of the first month following a Covered Termination, which is
comprised of the number of consecutive months equal to the lesser
of (i) the Severance Pay Factor, or (ii) the number of months
occurring before the first day of the month following the
Participant's attainment of age 65 or, if later, eligibility to
receive an unreduced retirement benefit under a qualified defined
benefit pension plan maintained by an Employer.
2. Participation.
(a) An employee of an Employer who is at any time a Participant shall
continue to be a Participant in the Plan until the earlier of (i)
the date the employment relationship with the Employer is severed
for reasons other than a Covered Termination, or (ii) the date
the employee ceases to be employed in a position equivalent to
Career Band 6 or above; provided, however, any employee who
ceases to be employed in a position equivalent to Career Band 6
or above on or after a Change in Control shall nevertheless
continue to be a Participant in the Plan.
(b) A Participant in the Plan who is at any time the subject of a
Covered Termination shall continue to be a Participant until all
of the benefits for which he or she is entitled under Section 3,
if any, have been paid.
3. Severance Benefits.
-4-
<PAGE>
(a) Eligibility for Benefits. Subject to subparagraph (b) below, a
Participant who is the subject of a Covered Termination shall
receive the benefits described in this Section 3.
(i) Pay Continuation.
(A) An Existing Participant shall receive a benefit in
an amount equal to his or her Base Salary multiplied
by the relevant Severance Pay Factor determined as
follows (a detailed schedule of each Existing
Participant's Severance Pay Factor is attached
hereto as Exhibit A):
<TABLE>
<CAPTION>
Salary Grade as of July 1, 1993 Severance Pay Factor
------------------------------- --------------------
<S> <C>
20 and 21 18
22 and 23 24
24 and above 36
</TABLE>
Provided, however, that the Severance Pay Factor of
an Existing Participant, whose Salary Grade is
reduced after a Change in Control, shall not be
reduced.
(B) An Officer Participant shall receive a benefit in an
amount equal to his or her Base Salary multiplied by
a Severance Pay Factor of 18.
(C) A New Participant shall receive a benefit in an
amount equal to his or her Base Salary multiplied by
a Severance Pay Factor of 12.
(ii) Annual Incentive Compensation. An Existing Participant
or an Officer Participant shall receive a benefit in an
amount equal to his or her Annual Incentive Compensation
multiplied by the applicable Pro Rata Factor. The Pro
Rata Factor shall be determined for the calendar year in
which a Covered Termination occurs and each calendar
year thereafter through the end of the calendar year in
which the Severance Period ends.
(iii) Benefit Continuation. For the duration of the Severance
Period, the Employer will continue the Participant's
employee benefits including, without limitation,
continuation of the Participant's savings plan
participation (to the extent permissible under Section
401(a) of the Code) and basic and contributory life and
medical insurance (including qualified dependents), at
the active employee coverage level and prevailing
employee contribution rate, if any; provided, however,
(A) that such level of continued benefits shall not
exceed the level of benefits in effect on the date of
the Participant's Covered Termination, (B) that such
continuation of benefits will cease on the date similar
benefits are provided the Participant by a subsequent
employer, (C) executive perquisites, such as
-5-
<PAGE>
automobiles or memberships, will be governed by the
terms of the particular programs, and (D) that no
employee benefit shall be continued for a longer period
of time than that provided by the terms of the
controlling employee benefit plan applicable to the
Participant on the date of such Participant's Covered
Termination.
(iv) Pension Service Continuation. Except as otherwise
provided by an applicable pension plan and, subject to
the requirements for qualification of Section 401(a) of
the Code, only the first twelve (12) months of the
Severance Period, Pay Continuation and Prorated Annual
Incentive Compensation will be recognized for purposes
of the vesting and pension calculation provisions of the
AlliedSignal Inc. Retirement Program or any other
pension plan sponsored by an Employer in which the
Participant participates. The normal policy for
qualifying leaves remains applicable thereafter.
(b) Benefits Conditioned on Release. Notwithstanding anything in
this Section 3 to the contrary, all benefits under this Plan
except benefits provided pursuant to Part II, shall be
provided in consideration for, and conditioned upon, execution
of the release by the Participant of all current or future
claims, known or unknown, arising on or before the date of the
release against the Employer, its affiliates or their
respective officers substantially in the form attached hereto
as Exhibit B. Additionally, no severance benefits shall be
payable under this Section 3 unless the Participant has
returned to the Employer all property of the Employer and any
information of a proprietary nature in his or her possession.
(c) Benefit Limitations.
(i) Except as provided in subparagraph (ii) below, any
benefit determined to be payable to a Participant under
any other severance plan sponsored or funded by an
Employer shall be reduced by the amount of any similar
benefit payable to the Participant under this Plan
(excluding any benefit payable under Section 19(a))
regardless of whether the benefit determined under the
Plan is payable at an earlier or a later date than
payments under such other severance plan.
(ii) Any benefit determined to be payable under this Plan
(excluding any benefit payable under Section 19(a)) to a
Participant who was not eligible to participate in this
Plan prior to April 25, 1988 will be reduced to the
extent of any duplication of benefits between the Plan
and any benefits that may be payable to the Participant
under arrangements existing prior to April 25, 1988.
4. Form and Timing of Payment.
-6-
<PAGE>
Except as provided in Sections 20(a) and 20(b), any Pay Continuation
shall be paid in equal monthly installments during the Severance
Period, and any Prorated Annual Incentive Compensation shall be paid
annually as soon after the end of the Determination Year as is
practicable. No Prorated Annual Incentive Compensation shall be payable
for any Determination Year with respect to which the Pro Rata Factor is
less than or equal to zero.
5. Forfeiture of Benefits.
Notwithstanding anything to the contrary in the Plan and except as
provided in Section 20(c), a Participant receiving benefits or
otherwise entitled to receive benefits under this Plan shall cease to
receive such benefits under the Plan and the right to receive any
benefits in the future under the Plan shall be forfeited, in the event
the Participant, either before or after termination of employment, as
determined by the Named Fiduciary, in its sole discretion (a) is
convicted of a felony, (b) commits any fraud or misappropriates
property, proprietary information, intellectual property or trade
secrets of the Employer for personal gain or for the benefit of another
party, (c) actively recruits and offers employment to any management
employee of the Employer, or (d) engages in intentional misconduct
substantially damaging to the property or business of any Employer, or
(e) makes false or misleading statements about the Employer or its
products, officers or employees to competitors or customers or
potential customers of the Employer, or to current of former employees
of the Employer.
6. Payment of Benefits Upon Incompetence or Death.
In the event the Named Fiduciary is presented with evidence
satisfactory to it that a Participant receiving benefits or entitled to
receive benefits is adjudged to be legally incompetent, the remainder
of such Participant's unpaid benefits shall be paid to the
Participant's conservator, legal representative or any other person
deemed by the Named Fiduciary to have assumed responsibility for the
maintenance of such person receiving or entitled to receive benefits.
In the event a Participant receiving benefits or entitled to receive
benefits dies, the remainder of such Participant's unpaid benefits
shall be paid to the Participant's designated beneficiary. A
Participant may designate a beneficiary in the form and manner
prescribed by the Named Fiduciary. Any designation of a beneficiary may
be revoked by filing a later designation or revocation. In the absence
of an effective designation of a beneficiary by a Participant or upon
the death of all beneficiaries on or before a Participant's death, the
remainder of the Participant's unpaid benefits shall be paid to the
Participant's spouse or, if none, to the Participant's estate. Any
payment made pursuant to this Section 6 shall be a discharge of any
liability under the Plan therefor.
7. Administration.
(a) Plan Administration. Except as provided in Section 21(a), the
Plan shall be administered by the Plan Administrator, who may
act through one or more Named Fiduciaries under this Plan who
shall have the powers and authorities as described in this
Section 7. The Plan Administrator shall be the Senior Vice
President,
-7-
<PAGE>
Human Resources and Communications, or such other person as
the Board may appoint. The Plan Administrator shall have the
authority to appoint and remove any other Named Fiduciary at
his or her discretion.
Any person acting on behalf of the Named Fiduciary shall serve
without additional compensation. The Named Fiduciary shall
keep or cause to be kept such records and shall prepare or
cause to be prepared such returns or reports as may be
required by law or necessary for the proper administration of
the Plan.
(b) Powers and Duties of Named Fiduciary. The Named Fiduciary
shall have the full discretionary power and authority to
construe and interpret the Plan (including, without
limitation, supplying omissions from, correcting deficiencies
in, or resolving inconsistencies or ambiguities in, the
language of the Plan); to determine all questions of fact
arising under the Plan, including questions as to eligibility
for and the amount of benefits; to establish such rules and
regulations (consistent with the terms of the Plan) as it
deems necessary or appropriate for administration of the Plan;
to delegate responsibilities to others to assist it in
administering the Plan; and to perform all other acts it
believes reasonable and proper in connection with the
administration of the Plan. The Named Fiduciary shall be
entitled to rely on the records of the Employer in determining
any Participant's entitlement to and the amount of benefits
payable under the Plan. Any determination of the Named
Fiduciary, including interpretations of the Plan and
determinations of questions of fact, shall be final and
binding on all parties.
The Named Fiduciary may retain attorneys, consultants,
accountants or other persons (who may be employees of the
Employer) to render advice and assistance and may delegate any
of the authorities conferred on him under this Plan to such
persons as he shall determine to be necessary to effect the
discharge of his duties hereunder. The Plan Administrator, or
other Named Fiduciary, the Employer, the Company and its
officers and directors shall be entitled to rely upon the
advice, opinions and determinations of any such persons. Any
exercise of the authorities set forth in this Section 7,
whether by the Plan Administrator, or other Named Fiduciary or
his delegee, shall be final and binding upon the Employer and
all Participants.
(c) Plan Year. The plan year shall be the calendar year.
(d) Indemnification. To the extent permitted by law, the Employer
shall indemnify any Named Fiduciary from all claims for
liability, loss, or damage (including payment of expenses in
connection with defense against such claims) arising from any
act or failure to act in connection with the Plan.
8. Claims and Appeals Procedures.
Except as provided in Sections 21(c)-(f), the Plan's benefit claims and
appeals procedures shall be as follows:
-8-
<PAGE>
(a) Any request or claim for Plan benefits must be made in writing
and shall be deemed to be filed by a Participant when a
written request is made by the claimant or the claimant's
authorized representative which is reasonably calculated to
bring the claim to the attention of the Named Fiduciary.
(b) The Named Fiduciary shall provide notice in writing to any
Participant when a claim for benefits under the Plan has been
denied in whole or in part. Such notice shall be provided
within 60 days of the receipt by the Named Fiduciary of the
Participant's claim or, if special circumstances require, and
the Participant is so notified in writing, within 120 days of
the receipt by the Named Fiduciary of the Participant's claim.
The notice shall be written in a manner calculated to be
understood by the claimant and shall:
(i) set forth the specific reasons for the denial of
benefits;
(ii) contain specific references to Plan provisions relative
to the denial;
(iii) describe any material and information, if any,
necessary for the claim for benefits to be allowed,
that had been requested, but not received by the Named
Fiduciary; and
(iv) advise the Participant that any appeal of the Named
Fiduciary's adverse determination must be made in
writing to the Named Fiduciary within 60 days after
receipt of the initial denial notification, and must
set forth the facts upon which the appeal is based.
(c) If notice of the denial of a claim is not furnished within the
time periods set forth above, the claim shall be deemed denied
and the claimant shall be permitted to proceed to the review
procedures set forth below. If the Participant fails to appeal
the Named Fiduciary's denial of benefits in writing and within
60 days after receipt by the claimant of written notification
of denial of the claim (or within 60 days after a deemed
denial of the claim), the Named Fiduciary's determination
shall become final and conclusive.
(d) If the Participant appeals the Named Fiduciary's denial of
benefits in a timely fashion, the Plan Administrator shall
re-examine all issues relevant to the original denial of
benefits. Any such claimant, or his or her duly authorized
representative may review any pertinent documents, as
determined by the Plan Administrator, and submit in writing
any issues or comments to be addressed on appeal.
(e) The Plan Administrator shall advise the Participant and such
individual's representative of its decision which shall be
written in a manner calculated to be understood by the
claimant, and include specific references to the pertinent
Plan provisions on which the decision is based. Such response
shall be made within 60 days of receipt of the written appeal,
unless special circumstances require an
-9-
<PAGE>
extension of such 60-day period for not more than an
additional 60 days. Where such extension is necessary, the
claimant shall be given written notice of the delay. Any
decision of the Plan Administrator shall be binding on all
persons affected thereby.
(f) Any dispute, controversy, or claim arising out of or relating
to any Plan benefit, including, without limitation, any
dispute, controversy or claim as to whether the decision of
the Named Fiduciary respecting the benefits under this Plan or
interpretation of this Plan is arbitrary and capricious, that
is not settled in accordance with the procedures outlined in
Section 8, shall be settled by final and binding arbitration
in accordance with the American Arbitration Association
Employment Dispute Resolution or other applicable rules.
Before resorting to arbitration, an aggrieved Participant must
first follow the review procedure outlined in this Section of
the Plan. If there is still a dispute after the procedures in
this Section have been exhausted, the Participant must request
arbitration in writing within six (6) months after the issues,
or is deemed to have issued, its determination under
subparagraph (e) above.
The arbitrator shall be selected by mutual agreement of the
parties, if possible. If the parties fail to reach agreement
upon appointment of an arbitrator within 30 days following
receipt by one party of the other party's notice of desire to
arbitrate, the arbitrator shall be selected from a panel or
panels of persons submitted by the American Arbitration
Association (the "AAA"). The selection process shall be that
which is set forth in the AAA Employment Dispute Resolution
Rules, except that, if the parties fail to select an
arbitrator from one or more panels, AAA shall not have the
power to make an appointment but shall continue to submit
additional panels until an arbitrator has been selected.
All fees and expenses of the arbitration, including a
transcript if requested, will be borne by the Company. The
arbitrator shall have no power to amend, add to or subtract
from this Plan. The award shall be admissible in any court or
agency seeking to enforce or render unenforceable this Plan or
any portion thereof. Any action to enforce or vacate the
arbitrator's award shall be governed by the Federal
Arbitration Act if applicable.
9. Unfunded Obligation.
All benefits payable under this Plan shall constitute an unfunded
obligation of the Employer. Payments shall be made, as due, from the
general funds of the Employer. This Plan shall constitute solely an
unsecured promise by the Employer to pay severance benefits to
employees to the extent provided herein.
10. Inalienability of Benefits.
No Participant shall have the power to transfer, assign, anticipate,
mortgage or otherwise encumber any rights or any amounts payable under
this Plan; nor shall any such rights or
-10-
<PAGE>
amounts payable under this Plan be subject to seizure, attachment,
execution, garnishment or other legal or equitable process, or for the
payment of any debts, judgments, alimony, or separate maintenance, or
be transferable by operation of law in the event of bankruptcy,
insolvency, or otherwise. In the event a person who is receiving or is
entitled to receive benefits under the Plan attempts to assign,
transfer or dispose of such right, or if an attempt is made to subject
such right to such process, such assignment, transfer or disposition
shall be null and void.
11. Withholding.
The Employer shall have the right to withhold any taxes required to be
withheld with respect to any payments due under this Plan.
12. Amendment or Termination.
Except to the extent otherwise provided in Section 21(i), the Company
reserves the right to amend or terminate the Plan at any time without
prior notice to or the consent of any employee. No amendment or
termination shall adversely affect the rights of any Participant whose
employment terminated prior to such amendment or termination. However,
except as provided in Section 21(i), any Participant whose employment
continues after amendment of the Plan shall be governed by the terms of
the Plan as so amended. Any Participant whose employment continues
after termination of the Plan shall have no right to a benefit under
the Plan.
13. Plan Not a Contract of Employment; Employer's Policies Control.
Nothing contained in this Plan shall give an employee the right to be
retained in the employment of an Employer. This Plan is not a contract
of employment between the Employer and any employee.
Any dispute involving issues of employment other than claims for
benefits under this Plan shall be governed by the appropriate
employment dispute resolution policies and procedures of the Employer.
14. Action by an Employer.
Unless expressly indicated to the contrary herein, any action required
to be taken by the Company may be taken by action of its Board or by
any appropriate officer or officers traditionally responsible for such
determination or actions, or such other individual or individuals as
may be designated by the Board or any such officer.
15. Governing Law.
The Plan is an employee welfare benefit plan within the meaning of
Section 3(1) of ERISA, and will be construed in accordance with the
provisions of ERISA.
-11-
<PAGE>
16. Severability.
If any provision of this Plan shall be held illegal or invalid for any
reason, said illegality or invalidity shall not affect the remaining
parts of this Plan, but this Plan shall be construed and enforced as if
said illegal or invalid provision had never been included herein.
-12-
<PAGE>
PART II
SPECIAL PROVISIONS THAT BECOME EFFECTIVE
ONLY UPON CHANGE IN CONTROL
17. Change in Control.
(a) The provisions of this Part II become effective upon a Change
in Control and, in addition to the provisions of Part I that
are not superseded by provisions of this Part II, shall
control (i) the determination of eligibility for, the amount
of, and the time of payment of benefits under the Plan to any
Existing Participant or Officer Participant who is the subject
of a Covered Termination which occurs within the two-year
period following the Change in Control, (ii) the terms of
payment for any Existing Participant or Officer Participant
whose Severance Period extends beyond the Change in Control,
and (iii) the determination of eligibility for, the amount of,
and the time of payment of benefits under Section 20 of the
Plan to any Existing Participant or Officer Participant.
(b) Without derogation to the effect the provisions of this Part
II may have on the determination of any Participant's
eligibility for benefits under the Plan or the amount of such
benefits, it is intended that this Part II will assure that
the purposes of this Plan, as they may affect Existing
Participants or Officer Participants, will not be adversely
affected by the unique circumstances which may exist following
a Change in Control. The provisions of this Part II will have
no effect whatsoever prior to a Change in Control.
18. Definitions.
(a) "Allied & Signal Employer" means the Employer and any other
person, organization or entity that agrees in writing to be
bound by the terms of the Plan for a period of time that
extends at least through the two-year period following a
Change in Control.
(b) "Annual Incentive Compensation" means, notwithstanding the
provisions of Section 1(b); the product of Annual Base Salary
and the greater of (i) the target percentage utilized in
determining Incentive Awards as in effect for the most recent
Determination Year ended prior to the Change in Control, or
(ii) the average of the target percentages applied in
determining the Participant's Incentive Award in the last
three Determination Years prior to the date of Covered
Termination (or such lesser period as the Participant may have
been employed).
(c) "Covered Termination" means, notwithstanding the provisions of
Section 1(j), severance of the employment relationship (i) at
the initiative of the Participant for Good Reason, or (ii) at
an AlliedSignal Employer's initiative for reasons other
-13-
<PAGE>
than death or Gross Cause. Notwithstanding the preceding
sentence, in the event of a sale or transfer of a facility or
line of business that causes a severance of the employment
relationship, a Covered Termination shall be deemed to have
occurred only if the new employer has not agreed in writing to
be an AlliedSignal Employer with respect to the Participant or
the Participant is not employed by the new employer.
(d) "Existing Participant" for purposes of this Part II means (i)
an individual who, on July 1, 1993, was an employee of an
Employer in Salary Grade 20 or above or in a position
comparable to Salary Grade 20 or above, or (ii) an individual
who, as of April 1, 1999, is determined by the Senior Vice
President, Human Resources and Communications to be in a
position comparable to Salary Grade 20, and is or reports
directly to a functional Senior Vice President of the Company.
(e) "Good Reason" means any one or more of the following:
(i) A material change in the Participant's position, duties
and/or responsibilities as they existed in the period
immediately preceding the Change in Control.
(ii) Any significant reduction in Base Salary or Annual
Incentive Compensation.
(iii) Any significant reduction in benefit coverages
available to the Participant under the Company's
medical benefit plans for active employees or
comparable medical benefit plans of any other
AlliedSignal Employer or any significant increase in
premiums to be paid by the Participant for such
benefits.
(iv) Any reduction in the economic value of awards granted
under the Company's long-term incentive plan or
comparable long-term incentive plan of any other
AlliedSignal Employer in which the Participant
participates.
(v) Any significant reduction in the rate of the Company's
contribution to its savings plan or of any other
AlliedSignal Employer's contribution to a savings plan
comparable to the Company's savings plans or any
significant reduction in the rate of benefit accrual
under the AlliedSignal Inc. Retirement Program or any
other comparable pension plan sponsored by an
AlliedSignal Employer in which the Participant
participates.
(vi) Any significant reduction in the benefit coverages
available to the Participant under the long-term
disability plan of the Company or any comparable
long-term disability plan of any other AlliedSignal
Employer
-14-
<PAGE>
or any significant increase in premiums to be paid by
the Participant for such benefits.
(vii) Any significant reduction in the life insurance
benefits available to the Participant, including any
change affecting the Company's Executive Life Insurance
Program or comparable program of any other AlliedSignal
Employer, or any significant increase in premiums to be
paid by the Participant for such benefits.
(viii) Any geographic relocation of the Participant's position
to a new location which is more than seventy-five (75)
miles from the location of the Participant's position
immediately prior to a Change in Control.
(ix) Any action by an AlliedSignal Employer that under
applicable law constitutes constructive discharge.
(x) Any failure to pay the benefit determined under Section
19(b) within the time required under Sections 20(a) or
20(b).
(xi) The failure of any AlliedSignal Employer that is a
successor to the Company or any of its affiliates
(whether direct or indirect, by purchase, merger,
consolidation or otherwise) to expressly assume and
agree to honor this Plan, if such assumption is legally
required to make this Plan enforceable against the
successor.
For purposes of this Section 18, the term "significant
reduction" shall mean a reduction or series of reductions with
respect to the same form of benefit or remuneration which are
greater than 10% or which do not affect all persons covered by
the plan or program in question. For purposes of this Section
18, the term "significant increase" shall mean an increase or
a series of increases in the Participant's percentage of total
premiums for a benefit which are greater than 10% or which do
not affect all persons covered by the plan or program in
question.
(f) "Gross Cause" means, notwithstanding the provisions of Section
1(p), any act or acts constituting a felony committed against
an AlliedSignal Employer, its property or business.
(g) "New Plan Administrator" shall mean such person or persons
appointed pursuant to Section 21 to administer the Plan upon
the occurrence of a Change in Control.
-15-
<PAGE>
19. Enhancement Benefit.
(a) If, following a Change in Control, any payment to a
Participant from an AlliedSignal Employer or from any benefit
or compensation plan or program sponsored or funded by an
AlliedSignal Employer is determined to be an "excess parachute
payment" within the meaning of Section 280G or any successor
or substitute provision of the Code, with the effect that
either the Participant is liable for the payment of the tax
described in Section 4999 or any successor or substitute
provision of the Code (hereafter the "Section 4999 tax") or
the AlliedSignal Employer has withheld the amount of the
Section 4999 tax, an additional benefit (hereafter the
"Enhancement Benefit") shall be paid from this Plan to such
affected Participant.
(b) The Enhancement Benefit payable shall be an amount, which when
added to all payments constituting "parachute payments" for
purposes of Section 280G or any successor or substitute
provision of the Code, is sufficient to cause the remainder of
(i) the sum of the "parachute payments", including any
Enhancement Benefit, less (ii) the amount of all state, local
and federal income taxes and the Section 4999 tax attributable
to such payments and penalties and interest on any amount of
Section 4999 tax, other than penalties and interest on any
amount of Section 4999 tax with respect to which an
Enhancement Benefit was paid to the Participant on or before
the due date of the Participant's federal income tax return on
which such Section 4999 tax should have been paid, to be equal
to the remainder of (iii) sum of the "parachute payments",
excluding any Enhancement Benefit, less (iv) the amount of all
state, local and federal income taxes attributable to such
payments determined as though the Section 4999 tax and
penalties and interest on any amount of Section 4999 tax,
other than penalties and interest on any amount of Section
4999 tax with respect to which an Enhancement Benefit was paid
to the Participant on or before the due date of the
Participant's federal income tax return on which such Section
4999 tax should have been paid, did not apply.
20. Benefit Payments and Forfeitures.
(a) Benefit Payments. Notwithstanding the provisions of Section 4,
benefits that are determined to be payable to a Participant
under Sections 3(a)(i) and 3(a)(ii) on or after a Change in
Control shall be paid within thirty days following the later
of the Change in Control or the Covered Termination, in a
single payment equal to the sum of (i) the total amount of the
benefit remaining payable under Section 3(a)(i), and (ii) the
amount of the benefit remaining payable under Section 3(a)(ii)
for all Determination Years which are coextensive, in whole or
part, with the Severance Period. The requirements of Section
3(b) shall have no application to benefits payable after a
Change in Control. Benefits which are determined to be payable
to a Participant under Section 19(a) shall be paid within
thirty days following the later of a Change in Control or the
date the "parachute payments" referred to in Section 19 are
made, in a single payment equal to the amount of the benefit
-16-
<PAGE>
determined under Section 19(b). If any benefit is paid later
than the time provided in this Section 20(a), such late
payment shall be credited with interest for the period from
the date payment should have been made to the date actually
made at a rate equal to the average quoted rate for
three-month U.S. Treasury Bills for the week preceding the
date of payment, as determined by the New Plan Administrator,
plus six percentage points.
(b) Subsequent Benefit Payments. Notwithstanding the provisions of
Section 4, in the event the Internal Revenue Service assesses
a Section 4999 tax due which is in excess of the amount
determined by the AlliedSignal Employer under Section 19(b), a
Participant shall be paid within thirty days following the
date the Participant gives notice to the New Plan
Administrator of proof of payment of the Section 4999 tax in a
single payment equal to the amount of the additional benefit
determined under Section 19(b), based upon the amount of the
Section 4999 tax paid in excess of any Section 4999 tax with
respect to which any Enhancement Benefit was previously paid.
If any benefit is paid later than the time provided in this
Section 20(b), such late payment shall be credited with
interest for the period from the date payment should have been
made to the date actually made at a rate equal to the average
quoted rate for three-month U.S. Treasury Bills for the week
preceding the date of payment, as determined by the New Plan
Administrator, plus six percentage points.
(c) Forfeiture of Benefits. Notwithstanding the provisions of
Section 5, a Participant receiving benefits or entitled to
receive benefits under the Plan shall cease to receive such
benefits under the Plan and the right to receive any benefits
in the future under the Plan shall be forfeited, in the event
the Participant, as determined by the New Plan Administrator,
(i) is convicted of a felony committed against an AlliedSignal
Employer, its property or business, (ii) commits any fraud or
misappropriates property, proprietary information,
intellectual property or trade secrets of an AlliedSignal
Employer for personal gain or for the benefit of another
party, or (iii) actively recruits and offers employment to any
management employee of an AlliedSignal Employer.
-17-
<PAGE>
21. Administration.
(a) New Plan Administrator. On or before a Change in Control, the
Company, its successors, or persons operating under its
control or on its behalf (hereafter the "Corporation") shall
appoint a person independent of the Corporation to be the New
Plan Administrator upon the occurrence of a Change in Control
and the Plan Administrator shall immediately provide to the
New Plan Administrator such information with respect to each
Participant in the Plan as shall be necessary to enable the
New Plan Administrator to determine the amount of any benefit
which is then or may thereafter become payable to such
Participants.
(b) Authority. Upon the occurrence of a Change in Control, the New
Plan Administrator shall have exclusive authority to make
initial determinations of eligibility for the benefits under
the Plan, subject to the requirements of Section 21(f). The
New Plan Administrator may, in reviewing any recommendation
for benefit eligibility pursuant to this Section 21, rely on
representations made by the Corporation or an AlliedSignal
Employer pursuant to Section 21(c). However, in the event that
none of the recommendations are agreed to by the Participant,
the New Plan Administrator shall refer the disputed claim for
benefits under this Plan for resolution as provided in Section
21(f). Any recommendation by the New Plan Administrator under
this Section 21, any determination by the New Plan
Administrator as to the eligibility for or the amount of
benefits which are not in dispute and any judicial
determination pursuant to Section 21(f) shall be final and
binding on the Corporation and the AlliedSignal Employer. The
Corporation and the responsible AlliedSignal Employer shall
make payments to Participants as directed by the New Plan
Administrator or pursuant to judicial determination pursuant
to Section 21(f).
(c) Corporation or AlliedSignal Employer Recommendations. Upon the
occurrence of a Change in Control, the Corporation and any
AlliedSignal Employer may make recommendations to the New Plan
Administrator with respect to benefit determinations for
affected Participants under the Plan and the New Plan
Administrator shall immediately forward any such
recommendation to the affected Participant. If the
recommendation is agreed to in writing by the Participant, the
New Plan Administrator shall advise the Corporation and any
responsible AlliedSignal Employer, and the Corporation or
AlliedSignal Employer, whichever is responsible, shall
immediately make payment.
(d) Independent Recommendations. In the case of a recommendation
which is not agreed to by the affected Participant, the New
Plan Administrator shall immediately review the recommendation
of the Corporation or responsible AlliedSignal Employer and
within 15 days of notice of the dispute from the Participant,
determine whether it is in accordance with the terms of the
Plan and notify the Corporation or responsible AlliedSignal
Employer and the Participant of its findings. If the New Plan
Administrator determines that the recommendation is not in
accordance with the terms of the Plan and that an
-18-
<PAGE>
adjustment is necessary and the Participant agrees in writing
to such adjustment, the New Plan Administrator shall advise
the Corporation or responsible AlliedSignal Employer, and the
Corporation or responsible AlliedSignal Employer shall
immediately make payment. Any such adjustment determined by
the New Plan Administrator, whether agreed to by the
Participant or not, shall be final and binding upon the
Corporation or responsible AlliedSignal Employer and may not
be challenged by either of them.
(e) Direct Application. Upon notice to the New Plan Administrator
by an affected Participant, as to whom the Corporation or
responsible AlliedSignal Employer has made no recommendation,
that a Covered Termination has occurred, the Corporation or
responsible AlliedSignal Employer shall be notified by the New
Plan Administrator and given 15 days from the date the
Participant gave notice to the new Plan Administrator within
which to make a recommendation as to benefit determination.
The New Plan Administrator shall also make its own independent
determination as to the benefit payable under the terms of the
Plan. Within 21 days of receipt of the notice from the
affected Participant, the New Plan Administrator shall
transmit to the Participant its own recommendation and that of
the Corporation or responsible AlliedSignal Employer if such
is available. If either recommendation is accepted in writing
by the affected Participant, the New Plan Administrator shall
advise the Corporation or responsible AlliedSignal Employer,
and the Corporation or responsible AlliedSignal Employer shall
immediately make payment. Any recommendation by the New Plan
Administrator shall be final and binding upon the Corporation
or responsible AlliedSignal Employer and may not be challenged
by either of them.
(f) Disputed Recommendation. If an affected Participant does not
agree in writing within 30 days of transmittal to accept any
of the recommendations made pursuant to Sections 21(c), 21(d)
or 21(e), the New Plan Administrator shall consider the amount
in excess of the highest recommendation to be a claim for
benefits which is in dispute and shall, with respect to such
amount, initiate an action in interpleader pursuant to Rule 22
of the Federal Rules of Civil Procedure or analogous rules,
before a court of competent jurisdiction. The New Plan
Administrator shall not assert any claim or take any position
in this proceeding based on its interpretation of the terms of
the Plan, other than the provisions of this Section 21.
(g) Attorneys Fees and Costs. If a Participant is paid or is
determined to be entitled to receive benefits (i) in excess of
any recommendation made by the Corporation or responsible
AlliedSignal Employer pursuant to Sections 21(c) or 21(e), or
(ii) in a case where the Corporation or responsible
AlliedSignal Employer have made no recommendation pursuant to
Sections 21(c) or 21(e), the New Plan Administrator shall
advise the Corporation or responsible AlliedSignal Employer,
and the Corporation or responsible AlliedSignal Employer shall
immediately pay or reimburse the affected Participant for the
full amount of any attorneys' fees and other expenses the
affected Participant incurred in pursuing his or her claim for
-19-
<PAGE>
benefits. The payment or reimbursement shall include the
standard hourly rates charged by each such attorney, any and
all other expenses related to the action incurred by or on
behalf of the affected Participant, the costs and expenses of
any experts utilized to prepare the claim, and any court costs
assessed against the affected Participant.
(h) Undisputed Benefits. Prior to the resolution of amounts in
dispute under Section 21(f), the Participant shall be paid
immediately by the Corporation or responsible AlliedSignal
Employer in accordance with the terms of the Plan, the higher
of (i) the amount recommended, if any, by the Corporation or
the responsible AlliedSignal Employer, or (ii) the amount
recommended by the New Plan Administrator.
(i) Amendment or Termination. This Plan may not be amended or
terminated after a Change in Control; provided, however, the
Plan may be amended if the purpose of the amendment is to
increase benefits hereunder.
-20-
</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>EX-10
<SEQUENCE>4
<FILENAME>0004.txt
<DESCRIPTION>EXHIBIT 10.8
<TEXT>
<PAGE>
EXHIBIT 10.8
Salary Deferral Plan
for
Selected Employees of Honeywell International Inc. and its Affiliates
(Career Band 6 and Above or Employees Who Occupy Positions Equivalent Thereto)
Amended and Restated
as of January 1, 2000
<PAGE>
-2-
1. Eligibility
Those employees of Honeywell International Inc. (the "Corporation") and
its affiliates whose positions are evaluated in Career Band 6 and above or who
occupy positions equivalent thereto and who are designated by the Management
Development and Compensation Committee (the "Committee") shall be eligible to
participate in this supplemental non-qualified Salary Deferral Plan for Selected
Employees of Honeywell International Inc. and its Affiliates (Career Band 6 and
Above or Employees Who Occupy Positions Equivalent Thereto) (the "Plan").
2. Participation
An eligible employee may become a participant in the Plan (a
"Participant") by filing a timely written deferral election with the
Corporation. Such notice shall direct that a portion of the compensation
elements described in paragraph 3(a) and paragraph 3(b) be credited to an
unfunded deferred compensation account maintained for the Participant under the
Plan (the "Participant Account" or "Account"). A Participant's direction shall
become effective for the pay period or payment date in the next succeeding
calendar year (or for a newly eligible Participant, for the next succeeding pay
period or payment date after the receipt of the direction by the Corporation),
and shall continue in effect until the Participant terminates such direction,
effective as of the end of the calendar year, or is no longer eligible to be a
Participant. Any modification of Participant's direction shall be effective only
with respect to compensation payable with respect to pay periods in the calendar
year next following the date such direction is received by the Corporation.
3. Contributions to Participant Accounts
(a) Base Annual Salary. A Participant may, prior to the beginning of
any calendar year (and with respect to a newly eligible Participant, within
thirty days after first becoming so eligible) elect to defer an aggregate amount
of base annual salary otherwise payable in such subsequent calendar year (or
with respect to a newly eligible Participant, in the remainder of the calendar
year), exclusive of any bonus or any other compensation or allowance paid or
payable by the Corporation or its affiliates (the "Base Annual Salary"). The
amount deferred under this paragraph 3(a) shall not be greater than fifty
percent (50%) of the Participant's Base Annual Salary for such pay period.
(b) Incentive Awards. A Participant may, to the extent that the
AlliedSignal Inc. Incentive Compensation Plan For Executive Employees (the
"Incentive Plan") (or any successor plan) permits deferrals of an incentive
award (the "Incentive Award") payable thereunder, elect to defer an amount not
greater than one hundred percent of such Incentive Award. Any amount so deferred
shall be deemed to be deferred under this Plan but shall, to the extent the
provisions of the Incentive Plan are not inconsistent with this Plan, otherwise
be subject to the terms of the Incentive Plan. Any deferral of an Incentive
Award shall be made by filing an appropriate deferral election with the
Corporation not later than the date established by the Corporation from time to
time.
(c) Deferral Amounts. All amounts determined under this paragraph 3
which are the subject of a written deferral election (the "Deferral Amounts")
shall, in
<PAGE>
-3-
accordance with the relevant Participant direction, be credited to a Participant
Account maintained under the Plan on the same day the Base Annual Salary or
Incentive Award would otherwise have been payable.
4. Deferral Requirements
Amounts may be deferred under this Plan for a minimum period of three
years or such shorter period as may be approved by the Committee. Except as
otherwise provided in paragraphs 9 or 10 or as approved by Committee, no amount
shall be withdrawn from a Participant Account prior to the earlier of: three
years following the last day of the calendar year in which the amount is
credited to the Participant Account; the date the Participant reaches normal
retirement age and is eligible to receive a benefit under a pension plan of the
Corporation or one of its affiliates; the date of Participant's death; or the
date the Participant ceases to be employed by the Corporation or any of its
affiliates.
5. Interest Equivalents
Deferral Amounts shall accrue additional amounts equivalent to interest
("Interest Equivalents"), compounded daily, from the date the Deferral Amount is
credited to the Account to the date of distribution. A single rate for
calculating Interest Equivalents shall be established by the Committee, in its
sole discretion, for all Deferral Amounts credited to Participant Accounts in
each calendar year. The rate established by the Committee shall not exceed the
greater of (i) 10% or (ii) 200% of the 10-year U.S. Treasury Bond rate at the
time of determination. Such Interest Equivalents, once established for a
calendar year, shall remain in effect with respect to Deferral Amounts credited
to Participant Accounts during the calendar year until the Deferral Amounts are
distributed.
The rate of notional interest established by the Committee shall be set
forth on Schedule A attached hereto and made a part hereof. Any portion of such
rate designated as "Vested Rate" on such Schedule A shall be nonforfeitable at
all times. Any portion of such rate designated as "Contingent Rate" shall become
nonforfeitable only if the Employee is still employed by the Company at the end
of the third full calendar year following the calendar year in which the Award
relates, provided, however, in the event a Participant terminates employment
with the Corporation or an affiliate prior to such date for reasons other than
gross cause, the Committee shall treat such portion as nonforfeitable in the
event the Participant's employment with the Company is involuntarily terminated
(including a termination for "good reason" under any applicable severance plan
of the Company) or is terminated for such reasons as the Committee may determine
from time to time in its sole discretion. The rate established by the Committee
and set forth on Schedule A shall remain in effect until superceded by action of
the Committee and amendment of such Schedule A.
<PAGE>
-4-
6. Participant Accounts
All amounts credited to a Participant's Account pursuant to paragraphs
3 and 4 shall be unfunded general obligations of the Corporation, and no
Participant shall have any claim to or security interest in any asset of the
Corporation on account thereof.
7. Distribution from Accounts
At the time a Participant makes an election pursuant to paragraph 3,
the Participant shall also make an election with respect to the distribution of
the Deferral Amounts and Interest Equivalents accrued thereon which are credited
to the Participant's Account pursuant to such election. A Participant may elect
to receive such distribution in one lump-sum payment or in a number of
approximately equal annual payments (provided the payment period may not include
more than fifteen such installments). The lump-sum or the first installment
shall be paid as soon as practicable during the month of January of the calendar
year designated by the Participant. Except as otherwise provided in paragraphs
8, 9 and 10, all installment payments following the initial installment payment
shall be paid in cash as soon as practicable during the month of January of each
succeeding calendar year until the entire amount in the Account shall have been
paid. Notwithstanding the foregoing, in the event an Employee's employment with
the Company is terminated either voluntarily (other than on account of
retirement as defined in the qualified pension plan in which the Participant
participates or for "good reason" under any applicable severance plan of the
Company) or for "gross cause" (as defined in the AlliedSignal Inc. Severance
Plan for Senior Executives), the nonforfeitable portion of such Employee's
Deferred Awards for performance years beginning after 1997 (including the vested
portion of any applicable notional interest credited thereto) shall be
distributed in a lump sum as soon as practicable in January of the calendar year
following such termination of employment.
Notwithstanding any provision of this Plan to the contrary, a
Participant shall be given a one-time opportunity prior to January 1, 2001 to
make a new election with respect to the distribution of all Deferral Amounts and
Interest Equivalents accrued thereon which are credited to such Participant
under the Plan (other than any such amounts otherwise payable, or part of a
series of payments payable, in January 2001), including a new election with
respect to any payments to be made in connection with a Change in Control as
described in paragraph 10, provided, however, that any such election shall only
be authorized by the Corporation if it results in a further deferral of the
distribution of the Participant's Deferral Amounts and Interest Equivalents from
that previously elected. Such election shall be effective upon a "Merger" of the
Corporation and General Electric Company (as defined in the Agreement and Plan
of Merger between Honeywell International Inc. and General Electric Company
dated October 22, 2000) and acceptance of such election by the Corporation. Any
such election shall be subject to such restrictions and limitations as the
Corporation shall determine in its sole discretion.
<PAGE>
-5-
8. Distribution on Death
If a Participant should die before all amounts credited to the
Participant's Account have been distributed, the balance in the Account shall be
paid as soon as practical thereafter to the beneficiary designated in writing by
the Participant. Payments to a beneficiary pursuant to a designation by a
Participant shall be in such form as the Participant shall elect, including
periodic payments as described in paragraph 7, but in the absence of any such
election, the payment shall be made in one lump sum to the designated
beneficiary as soon as practicable following the death of the Participant. Such
beneficiary designations shall be effective when received by the Corporation,
and shall remain in effect until rescinded or modified by the Participant by an
appropriate written direction. If no beneficiary is properly designed by the
Participant or if the designated beneficiary shall have predeceased the
Participant, such balance in the Account shall be paid to the estate of the
Participant.
9. Payment in the Event of Hardship
Upon receipt of a request from a Participant or a Participant's
designated beneficiary, delivered in writing to the Corporation along with a
Certificate of Unavailability of Other Resources form, the Committee, the Senior
Vice President - Human Resources and Communications, or his designee, may cause
the Corporation to accelerate (or require the subsidiary of the Corporation
which employs or employed the Participant to accelerate) payment of all or any
part of the Deferral Amount and Interest Equivalents credited to the
Participant's Account, if it finds in its sole discretion that payment of such
amounts in accordance with the Participant's prior election under paragraph 3
would result in severe financial hardship to the Participant or beneficiary and
such hardship is the result of an unforeseeable emergency caused by
circumstances beyond the control of the Participant or the Participant's
beneficiary. Acceleration of payment may not be made under this paragraph 9 to
the extent that such hardship is or may be relieved (i) through reimbursement or
compensation by insurance or otherwise, (ii) by liquidation of the Participant's
assets, to the extent the liquidation of assets would not itself cause severe
financial hardship or (iii) by cessation of deferrals under this Plan or any
tax-qualified savings plan of the Corporation.
10. Change in Control
(a) Initial Lump Sum Election. Notwithstanding any election made
pursuant to paragraph 7, a Participant may file a written election with the
Corporation to have the Deferral Amounts and Interest Equivalents accrued
thereon which are credited thereafter to the Participant's Account paid in one
lump-sum payment as soon as practicable following a Change in Control, but in no
event later than 90 days after such Change in Control. The Interest Equivalents
on any Deferred Amount payable pursuant to this paragraph 10(a) shall include
the "Contingent Rate" credited to such Deferred Amount without regard to whether
such amount has become nonforfeitable as provided in paragraph 5 at the time
payment is made under this paragraph 10(a).
(b) Revocation of Lump-Sum Election. A Participant may revoke an
election made pursuant to paragraph 10(a) by filing an appropriate written
notice with the Corporation. A revocation notice filed pursuant to this
paragraph 10(b) shall be subject
<PAGE>
-6-
to such terms and conditions as the Corporation shall establish and shall be
effective with respect to any or all of the Participant's Deferral Amounts and
Interest Equivalents accrued thereon which are credited to such Participant
under the Plan. Any revocation notice made before January 1, 2001 shall be
effective upon a "Merger" of the Corporation and General Electric Company (as
defined in the Agreement and Plan of Merger between Honeywell International Inc.
and General Electric Company dated October 22, 2000) and acceptance of such
election by the Corporation. Any such election shall be subject to such
restrictions and limitations as the Corporation shall determine in its sole
discretion.
(c) Limitation on Elections. Any election made pursuant to paragraph
10(a) or 10(b) shall not be effective unless filed with the Corporation at least
90 days prior to a Change in Control.
(d) Definition of Change in Control. For purposes of the Plan, a Change
in Control is deemed to occur at the time (i) when an entity, person or group
(other than the Corporation, any subsidiary or savings, pension or other benefit
plan for the benefit of employees of the Corporation or its subsidiaries) which
theretofore beneficially owned less than 30% of the Corporation's common stock
(the "Common Stock") then outstanding, acquires shares of Common Stock in a
transaction or a series of transactions that results in such entity, person or
group directly or indirectly owning beneficially 30% or more of the outstanding
Common Stock, (ii) of the purchase of Common Stock pursuant to a tender offer or
exchange offer (other than an offer by the Corporation) for all, or any part of,
the Common Stock (iii) of a merger in which the Corporation will not survive as
an independent, publicly owned corporation, a consolidation, a sale, exchange or
other disposition of all or substantially all of the Corporation's assets, (iv)
of a substantial change in the composition of the Board during any period of two
consecutive years such that individuals who at the beginning of such period were
members of the Board cease for any reason to constitute at least a majority
thereof, unless the election, or the nomination for election by the shareowners
of the Corporation, of each new director was approved by a vote of at least
two-thirds of the directors then still in office who were directors at the
beginning of the period, or (v) of any transaction or other event which the
Committee, in its sole discretion, determines to be a Change in Control for
purposes of the Plan.
11. Miscellaneous
(a) No Alienation of Benefits. Except insofar as may otherwise be
required by law, no amount payable at any time under the Plan shall be subject
in any manner to alienation by anticipation, sale, transfer, assignment,
bankruptcy, pledge, attachment, charge, or encumbrance of any kind nor in any
manner be subject to the debts or liabilities of any person and any attempt to
so alienate or subject any such amount, whether presently or thereafter payable,
shall be void. If any person shall attempt to, or shall alienate, sell,
transfer, assign, pledge, attach, charge, or otherwise encumber any amount
payable under the Plan, or any part thereof, or if by reason of such person's
bankruptcy or other event happening at any such time such amount would be made
subject to the person's debts or liabilities or would otherwise not be enjoyed
by that person, then the Corporation, if it so elects, may direct that such
amount be withheld and that same or any part thereof be paid or applied to or
for the benefit of such person,
<PAGE>
-7-
the person's spouse, children or other dependents, or any of them, in such
manner and proportion as the Corporation may deem proper.
(b) No Right or Interest in Corporation's Assets. Neither the
Corporation nor any of its Affiliates shall be required to reserve or otherwise
set aside funds for the payment of obligations arising under this Plan. The
Corporation may, in its sole discretion, establish funds, segregate assets or
take such other action as it shall determine necessary or appropriate to secure
the payment of its obligations arising under this Plan. This Plan is intended to
be unfunded for tax purposes and for purposes of Title I of the Employee
Retirement Income Security Act of 1974, as amended. Nothing contained herein,
and no action taken pursuant to the provisions of this Plan shall create or be
construed to create a trust of any kind, or a fiduciary relationship between the
Corporation and any Participant or any other person. To the extent that any
person acquires a right to receive payments under this Plan, such right shall be
no greater than the right of an unsecured creditor of the Corporation.
(c) Administration. The Corporation shall have sole discretion and
authority to administer the Plan, including the authority to interpret its
terms, promulgate regulations thereunder, determine eligibility to participate
in the Plan and make any finding of fact which may be necessary to determine the
obligation of the Plan with respect to the payment of benefits.
(d) Amendment. The Corporation may amend, modify or terminate the Plan
at any time, or from time to time; provided, however, that no change to the Plan
shall impair the right of any Participant with respect to amounts then credited
to an Account.
(e) Accounting. Each Participant shall receive periodic statements (not
less frequently than annually) setting forth the cumulative Deferral Amounts and
Interest Equivalents credited to, and any distributions from, the Participant's
Account.
(f) Facility of Payments. If the Corporation shall find that any person
to whom any amount is payable under the plan is unable to care for his or her
affairs because of illness or accident, or is a minor, or has died, then any
payment due the person or the person's estate (unless a prior claim therefore
has been made by a duly appointed legal representative), may, if the Corporation
so elects in its sole discretion, be paid to the person's spouse, a child, a
relative, an institution having custody of such person, or any other person
deemed by the Corporation to be a proper recipient on behalf of such person
otherwise entitled to payment. Any such payment shall be a complete discharge of
the liability of the Corporation and the Plan therefore.
(g) Governing Law. The Plan is intended to constitute an unfunded
deferred compensation arrangement for a select group of management or highly
compensated personnel and all rights thereunder shall be governed by and
construed in accordance with the laws of New York.
<PAGE>
-8-
SCHEDULE A
Notional Interest Rate
<TABLE>
<CAPTION>
Award Year Vested Rate Contingent Rate Total Rate
- ---------- ----------- --------------- ----------
<S> <C> <C> <C>
1975-1992 Treasury bills + N/A Treasury bills +
3%* 3%*
1993-1997 10% N/A 10%
1998+ 8% 3% 11%
</TABLE>
*/Three-month Treasury bill average rate for the immediately preceding calendar
quarter as reported by the Federal Reserve Bank; rate changes each calendar
quarter.
</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>EX-10
<SEQUENCE>5
<FILENAME>0005.txt
<DESCRIPTION>EXHIBIT 10.10
<TEXT>
<PAGE>
EXHIBIT 10.10
U.S. $1,000,000,000
AMENDED AND RESTATED 364-DAY CREDIT AGREEMENT
Dated as of November 30, 2000
Among
HONEYWELL INTERNATIONAL INC.,
as Borrower,
and
THE INITIAL LENDERS NAMED HEREIN,
as Initial Lenders,
and
CITIBANK, N.A.,
as Administrative Agent
and
THE CHASE MANHATTAN BANK
DEUTSCHE BANK AG, NEW YORK BRANCH
BANK OF AMERICA, N.A.
as Syndication Agents
and
SALOMON SMITH BARNEY INC.
as Lead Arranger and Book Manager
<PAGE>
AMENDED AND RESTATED 364-DAY CREDIT AGREEMENT
Dated as of November 30, 2000
HONEYWELL INTERNATIONAL INC., a Delaware corporation (the
"Borrower"), the banks, financial institutions and other institutional lenders
(collectively, the "Initial Lenders") party hereto, CITIBANK, N.A., as
administrative agent (together with any successor thereto appointed pursuant to
Article VII of the Existing Credit Agreement referred to below, the "Agent") for
the Lenders (as defined in the Existing Credit Agreement referred to below) THE
CHASE MANHATTAN BANK, DEUTSCHE BANK AG, NEW YORK BRANCH and BANK OF AMERICA,
N.A., as syndication agents, and SALOMON SMITH BARNEY INC., as lead arranger
book manager, hereby agree as follows:
PRELIMINARY STATEMENTS
(1) The Borrower is party to a 364-Day Credit Agreement dated
as of December 2, 1999 (the "Existing Credit Agreement") with the banks,
financial institutions and other institutional lenders party thereto and
Citibank, N.A., as Agent for the Lenders and such other lenders. Capitalized
terms not otherwise defined in this Amendment and Restatement shall have the
same meanings as specified in the Existing Credit Agreement.
(2) The parties to this Amendment and Restatement desire to
amend the Existing Credit Agreement as set forth herein and to restate the
Existing Credit Agreement in its entirety to read as set forth in the Existing
Credit Agreement with the following amendments.
(3) The Borrower has requested that the Lenders agree to
extend credit to it from time to time in an aggregate principal amount of up to
$1,000,000,000 for general corporate purposes of the Borrower and its
Subsidiaries not otherwise prohibited under the terms of this Agreement. The
Lenders have indicated their willingness to agree to extend credit to the
Borrower from time to time in such amount on the terms and conditions of this
Amendment and Restatement.
SECTION 1. Amendments to the Existing Credit Agreement. (a)
Section 1.01 of the Existing Credit Agreement is, effective as of the date of
this Amendment and Restatement and subject to the satisfaction of the conditions
precedent set forth in Section 2, hereby amended by deleting the definitions of
"Commitment", "Lenders" and "Termination Date" set forth therein and replacing
them, respectively, with the following new definitions thereof:
"Commitment" means as to any Lender, (i) the Dollar amount set
forth opposite its name on Schedule I hereto, (ii) if such Lender has
become a Lender hereunder pursuant to an Assumption Agreement, the
Dollar amount set forth as its Commitment in such Assumption Agreement
or (iii) if such Lender has entered into any Assignment and Acceptance,
the Dollar amount set forth for such Lender in the Register maintained
by the Agent pursuant to Section 9.07(d), in each case as the same may
be terminated or reduced, as the case may be, pursuant to Section 2.05.
"Lenders" means, collectively, each Initial Lender and each
other Person that shall become a party hereto pursuant to Sections
9.07(a), (b) and (c).
"Termination Date" means the earliest of (i) November 29,
2001, (ii) the date that is 90 days after the consummation of a merger
of the Borrower with General Electric Co. or any subsidiary of General
Electric Co. and (iii) the date of termination in whole of the
Commitments pursuant to Section 2.05 or 6.01.
<PAGE>
2
(b) Schedule I to the Existing Credit Agreement is, effective
as of the date of this Amendment and Restatement and subject to the satisfaction
of the conditions precedent set forth in Section 2, deleted in its entirety and
replaced with Schedule I to this Amendment and Restatement.
(c) Schedule 3.01(b) to the Existing Credit Agreement is,
effective as of the date of this Amendment and Restatement and subject to the
satisfaction of the conditions precedent set forth in Section 2, deleted in its
entirety and replaced with Schedule 3.01(b) to this Amendment and Restatement
SECTION 2. Conditions of Effectiveness of this Amendment and
Restatement. This Amendment and Restatement shall become effective as of the
date first above written (the "Restatement Effective Date") when and only if:
(a) The Administrative Agent shall have received counterparts
of this Amendment and Restatement executed by the Borrower and all of
the Initial Lenders or, as to any of the Initial Lenders, advice
satisfactory to the Administrative Agent that such Initial Lender has
executed this Amendment and Restatement.
(b) The Administrative Agent shall have received on or before
the Restatement Effective Date the following, each dated such date and
(unless otherwise specified below) in form and substance satisfactory
to the Administrative Agent and in sufficient copies for each Initial
Lender:
(i) The Revolving Credit Notes payable to the order
of the Lenders, to the extent requested by any Lender pursuant
to Section 2.17.
(ii) A certificate of the Secretary or an Assistant
Secretary of the Borrower certifying (A) that there are no
amendments to the resolutions of the Borrower since the date
of the certificate delivered pursuant to Section 3.01(e)(ii)
of the Existing Credit Agreement and (B) the names and true
signatures of the officers of the Borrower authorized to sign
this Amendment and Restatement and the Notes, if any, and the
other documents to be delivered hereunder by the Borrower.
(iii) A favorable opinion of the General Counsel,
Deputy General Counsel or Assistant General Counsel of the
Borrower, in substantially the form of Exhibit G to the
Existing Credit Agreement but with such modifications as are
required to address the Existing Credit Agreement, as amended
by this Amendment and Restatement.
(iv) A favorable opinion of Shearman & Sterling,
counsel for the Agent, in form and substance reasonably
satisfactory to the Agent.
(c) The representations and warranties contained in Section
4.01 of the Existing Credit Agreement shall be correct on and as of the
Restatement Effective Date, before and after giving effect to the
Restatement Effective Date, as though made on and as of such date.
(d) No event shall have occurred and be continuing, or shall
occur as a result of the occurrence of the Restatement Effective Date,
that constitutes a Default.
SECTION 3. Reference to and Effect on the Existing Credit
Agreement and the Notes. (a) On and after the effectiveness of this Amendment
and Restatement, each reference in the Existing Credit Agreement to "this
Agreement", "hereunder", "hereof" or words of like import referring to the
Existing Credit Agreement, and each reference in the Notes to "the Credit
Agreement", "thereunder", "thereof" or words of like import referring to the
Existing Credit Agreement, shall mean and be a reference to the Existing Credit
Agreement, as amended by this Amendment and Restatement.
<PAGE>
3
(b) The Existing Credit Agreement and the Notes, as
specifically amended by this Amendment and Restatement, are and shall continue
to be in full force and effect and are hereby in all respects ratified and
confirmed.
(c) Without limiting any of the other provisions of the
Existing Credit Agreement, as amended by this Amendment and Restatement, any
references in the Existing Credit Agreement to the phrases "on the date hereof",
"on the date of this Agreement" or words of similar import shall mean and be a
reference to the date of the Existing Credit Agreement (which is December 2,
1999).
SECTION 4. Costs and Expenses. The Borrower agrees to pay on
demand all reasonable out-of-pocket costs and expenses of the Agent in
connection with the preparation, execution, delivery and administration,
modification and amendment of this Amendment and Restatement, the Notes and the
other documents to be delivered hereunder (including, without limitation, the
reasonable and documented fees and expenses of counsel for the Agent with
respect hereto and thereto) in accordance with the terms of Section 9.04 of the
Existing Credit Agreement.
SECTION 5. Execution in Counterparts. This Amendment and
Restatement may be executed in any number of counterparts and by different
parties hereto in separate counterparts, each of which when so executed shall be
deemed to be an original and all of which taken together shall constitute one
and the same agreement. Delivery of an executed counterpart of a signature page
to this Amendment and Restatement by telecopier shall be effective as delivery
of a manually executed counterpart of this Amendment and Restatement.
SECTION 6. Governing Law. This Amendment and Restatement shall
be governed by, and construed in accordance with, the laws of the State of New
York.
<PAGE>
4
IN WITNESS WHEREOF, the parties hereto have caused this
Amendment and Restatement to be executed by their respective officers thereunto
duly authorized, as of the date first above written.
THE BORROWER
HONEYWELL INTERNATIONAL INC.
By /s/ James V. Gelly
-------------------------------------
Name: James V. Gelly
Title: Vice President and Treasurer
THE AGENT
CITIBANK, N.A.,
as Agent
By /s/ Carolyn A. Kee
------------------------------------
Name: Carolyn A. Kee
Title: Vice President
THE INITIAL LENDERS
ADMINISTRATIVE AGENT
CITIBANK, N.A.
By: /s/ Carolyn A. Kee
-------------------------------------
Name: Carolyn A. Kee
Title: Vice President
CO-SYNDICATION AGENTS
BANK OF AMERICA, N.A.
By: /s/ John Pocalyko
-------------------------------------
Name: John Pocalyko
Title: Managing Director
THE CHASE MANHATTAN BANK
By: /s/ Tina Ruyter
--------------------------------------
Name: Tina Ruyter
Title: Vice President
<PAGE>
5
DEUTSCHE BANK AG, NEW YORK AND/OR
CAYMAN ISLANDS BRANCH
By: /s/ Jean Hannigan
--------------------------------------
Name: Jean Hannigan
Title: Director
By: /s/ Stephanie Strohe
--------------------------------------
Name: Stephanie Strohe
Title: Associate
AGENT
BARCLAYS BANK PLC
By: /s/ Douglas Bernegger
--------------------------------------
Name: Douglas Bernegger
Title: Director
SENIOR MANAGING AGENTS
BANCA NAZIONALE DE LAVORO S.p.A.-NEW
YORK BRANCH
By: /s/ Giulio Giovine /s/ Leonardo Valentini
-------------------------------------------
Name: Giulio Giovine Leonardo Valentini
Title: Vice President First Vice President
THE BANK OF NEW YORK
By: /s/ Ernest Fung
-------------------------------------------
Name: Ernest Fung
Title: Vice President
BANK OF TOKYO-MITSUBISHI TRUST COMPANY
By: /s/ Jeffrey K. Stanton
--------------------------------------------
Name: Jeffrey K. Stanton
Title: Vice President
BANK ONE, NA (Main Office Chicago)
By: /s/ Tatiana Ross
--------------------------------------------
Name: Tatiana Ross
Title: Commercial Banking Officer
HSBC BANK USA
<PAGE>
6
By: /s/ Monisha Khadse
--------------------------------------------
Name: Monisha Khadse
Title: Vice President
MELLON BANK, N.A.
By: /s/ Kristen M. Denning
--------------------------------------------
Name: Kristen M. Denning
Title: Assistant Vice President
MORGAN GUARANTY TRUST COMPANY OF
NEW YORK
By: /s/ Dennis Wilczek
--------------------------------------------
Name: Dennis Wilczek
Title: Associate
CO-AGENTS
ABN AMRO BANK N.V.
By: /s/ Andre Kel
--------------------------------------------
Name: Andre Kel
Title: Senior Vice President
By: /s/ Juliette Mound
--------------------------------------------
Name: Juliette Mound
Title: Assistant Vice President
BANCA DI ROMA
By: /s/ Steven Paley
--------------------------------------------
Name: Steven Paley
Title: First V.P.
By: /s/ William J.Fontana
--------------------------------------------
Name: William J. Fontana
Title: V.P.
<PAGE>
7
BNP PARIBAS
By: /s/ Christopher Criswell
--------------------------------------------
Name: Christopher Criswell
Title: Director
By:/s/ William Van Nostrand
--------------------------------------------
Name: William Van Nostrand
Title: Director
NORTHERN TRUST COMPANY
By: /s/ Ashish S. Bhagwat
--------------------------------------------
Name: Ashish S. Bhagwat
Title: Second Vice President
THE SUMITOMO BANK, LIMITED
By: /s/ Edward D. Henderson, Jr.
--------------------------------------------
Name: Edward D. Henderson, Jr.
Title: Senior Vice President
WELLS FARGO BANK, NATIONAL ASSOCIATION
By: /s/ Bradley A. Hardy /s/ Peter M. Angelico
--------------------------------------------
Name: Bradley A. Hardy Peter M. Angelico
Title: Vice President Vice President
LENDERS
BANCO BILBAO VIZCAYA
By: /s/ Manuel Sanchez John Martini
--------------------------------------------
Name: Manuel Sanchez John Martini
Title: Global Re. Manager Vice President
Corporate Banking Corporate Banking
THE FUJI BANK, LIMITED
By: /s/ Raymond Ventura
--------------------------------------------
Name: Raymond Ventura
Title: Vice President & Manager
<PAGE>
8
ROYAL BANK OF CANADA
By: /s/ Lori A. Ross
--------------------------------------------
Name: Lori Ross
Title: Manager
STANDARD CHARTERED BANK
By: /s/ Shafiq Ur Rahman /s/ Peter G.R. Dodds
------------------------------------------------------
Name: Shafiq Ur. Rahman Peter G.R. Dodds
Title: Senior Vice President Senior Credit Officer
Standard Chartered Bank Coin 98/62
UNICREDITO ITALIANO SPA
By: /s/ Christopher J. Eldin /s/ Saiyed A. Abbas
-------------------------------------------------------
Name:Christopher J. Eldin Saiyed A. Abbas
Title: FVP & Deputy Manager Vice President
<PAGE>
SCHEDULE I
COMMITMENTS AND APPLICABLE LENDING OFFICES
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------------------------------------------
NAME OF INITIAL LENDER COMMITMENT DOMESTIC LENDING OFFICE EURODOLLAR LENDING OFFICE
- ---------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Citibank, N.A. $112,000,001 399 Park Avenue 399 Park Avenue
New York, NY 10043 New York, NY 10043
Attn: Carolyn Sheridan Attn: Carolyn Sheridan
Phone: (212) Phone: (212) 559-3245
Fax: (212) 826-2371 Phone: (212)
Fax: (212) 826-2371
- ---------------------------------------------------------------------------------------------------------------------------
Bank of America, N.A. $85,333,333 101 N. Tryon Street 101 N. Tryon Street
Charlotte, NC 28255 Charlotte, NC 28255
Attn: Carrie Cunder Attn: Carrie Cunder
Phone: (704) 386-8382 Phone: (704) 386-8382
Fax: (704) 409-0064 Fax: (704) 409-0064
- ---------------------------------------------------------------------------------------------------------------------------
The Chase Manhattan Bank $85,333,333 One Chase Manhattan Plaza One Chase Manhattan Plaza
New York, NY 10081 New York, NY 10081
Attn: Lenora Kiernan Attn: Lenora Kiernan
Phone: (212) 552-7309 Phone: (212) 552-7309
Fax: (212) 552-5650 Fax: (212) 552-5650
- ---------------------------------------------------------------------------------------------------------------------------
Deutsche Bank AG, New York and/or $85,333,333 31 West 52nd Street 31 West 52nd Street
Cayman Islands Branch New York, NY 10019 New York, NY 10019
Attn: Colin T. Taylor Attn: Colin T. Taylor
Phone: (212) 474-7904 Phone: (212) 474-7904
Fax: (212) 474-8212 Fax: (212) 474-8212
- ---------------------------------------------------------------------------------------------------------------------------
Barclays Bank PLC $85,333,333 222 Broadway 222 Broadway
New York, NY 10038 New York, NY 10038
Attn: Paul Kavanagh Attn: Paul Kavanagh
Phone: (212) 412-1547 Phone: (212) 412-1547
Fax: (212) 412-7585 Fax: (212) 412-7585
- ---------------------------------------------------------------------------------------------------------------------------
Banca Nazionale De Lavoro $50,000,000 25 West 51st Street 25 West 51st Street
New York, NY 10019 New York, NY 10019
Attn: Giulio Giovine Attn: Giulio Giovine
Phone: (212) 314-0239 Phone: (212) 314-0239
Fax: (212) 765-2978 Fax: (212) 765-2978
- ---------------------------------------------------------------------------------------------------------------------------
The Bank of New York $50,000,000 One Wall Street One Wall Street
New York, NY 10286 New York, NY 10286
Attn: Ernest Fung Attn: Ernest Fung
Phone: (212) 635-6805 Phone: (212) 635-6805
Fax: (212) 635-7978 Fax: (212) 635-7978
- ---------------------------------------------------------------------------------------------------------------------------
The Bank of Tokyo-Mitsubishi $50,000,000 1251 Avenue of the Americas 1251 Avenue of the Americas
12th Floor 12th Floor
New York, NY 10020 New York, NY 10020
Attn: William Derasmo Attn: William Derasmo
Phone: (212) 782-4359 Phone: (212) 782-4359
Fax: (212) 782-6445 Fax: (212) 782-6445
- ---------------------------------------------------------------------------------------------------------------------------
Bank One, NA $50,000,000 One Bank One Plaza One Bank One Plaza
Chicago, IL 60670 Chicago, IL 60670
Attn: Claudia Kech Attn: Claudia Kech
Phone: (312) 732-1031 Phone: (312) 732-1031
Fax: (312) 732-4840 Fax: (312) 732-4840
- ---------------------------------------------------------------------------------------------------------------------------
</TABLE>
<PAGE>
2
<TABLE>
<S> <C> <C> <C>
- ---------------------------------------------------------------------------------------------------------------------------
HSBC Bank USA $50,000,000 140 Broadway, 4th Floor 140 Broadway, 4th Floor
New York, NY 10005 New York, NY 10005
Attn: Monisha Khadse Attn: Monisha Khadse
Phone: (212) 658-5572 Phone: (212) 658-5572
Fax: (212) 658-5109 Fax: (212) 658-5109
- ---------------------------------------------------------------------------------------------------------------------------
Mellon Bank $50,000,000 3 Mellon Bank Center, 12th Floor 3 Mellon Bank Center, 12th Floor
Pittsburgh, PA 15259 Pittsburgh, PA 15259
Attn: Sannford Richards Attn: Sannford Richards
Phone: (412) 234-8285 Phone: (412) 234-8285
Fax: (412) 209-6118 Fax: (412) 209-6118
- ---------------------------------------------------------------------------------------------------------------------------
Morgan Guaranty Trust Company $50,000,000 Morgan Guaranty Trust Company of Morgan Guaranty Trust Company -
New York Nassau Bahamas Branch
60 Wall Street c/o JP Morgan Services Inc.
New York, NY 10260-0060 500 Stanton Christiana Road
Attn: Andrew Lipsett Newark, DE 19713
Phone: (302) 634-1872 Attn: Andrew Lipsett
Fax: (302) 634-8177 Phone: (302) 634-1872
Fax: (302) 634-8177
- ---------------------------------------------------------------------------------------------------------------------------
ABN AMRO Bank N.V. $21,666,667 208 South LaSalle Street 208 South LaSalle Street
Suite 1500 Suite 1500
Chicago, IL 60604 Chicago, IL 60604
Attn: Credit Administration Attn: Credit Administration
Phone: (312) 992-5110 Phone: (312) 992-5110
Fax: (312) 992-5111 Fax: (312) 992-5111
- ---------------------------------------------------------------------------------------------------------------------------
Banca di Roma $21,666,667 34 East 51st Street 34 East 51st Street
New York, NY 10022 New York, NY 10022
Attn: Lino Caldera Attn: Lino Caldera
Phone: (212) 407-1613 Phone: (212) 407-1613
Fax: (212) 407-1684 Fax: (212) 407-1684
- ---------------------------------------------------------------------------------------------------------------------------
BNP Paribas $21,666,667 499 Park Avenue 499 Park Avenue
New York, NY 10022 New York, NY 10022
Attn: Andree Mitton/Robin Attn: Andree Mitton/Robin
Jackson-Bogner Jackson-Bogner
Phone: (212) 415-9617/9616 Phone: (212) 415-9617/9616
Fax: (212) 415-9606 Fax: (212) 415-9606
- ---------------------------------------------------------------------------------------------------------------------------
Northern Trust Company $21,666,667 50 S. LaSalle Street 50 S. LaSalle Street
Chicago, IL 60675 Chicago, IL 60675
Attn: Linda Honda Attn: Linda Honda
Phone: (312) 444-3532 Phone: (312) 444-3532
Fax: (312) 630-1566 Fax: (312) 630-1566
- ---------------------------------------------------------------------------------------------------------------------------
The Sumitomo Bank, Limited $21,666,667 277 Park Avenue 277 Park Avenue
New York, NY 10172 New York, NY 10172
Attn: Edward McColly Attn: Edward McColly
Phone: (212) 224-4139 Phone: (212) 224-4139
Fax: (212) 224-4384 Fax: (212) 224-4384
- ---------------------------------------------------------------------------------------------------------------------------
Wells Fargo (Norwest) $21,666,667 Sixth & Marquette Sixth & Marquette
3rd Floor 3rd Floor
Minneapolis, MN 55479 Minneapolis, MN 55479
Attn: Molly S. Van Metre Attn: Molly S. Van Metre
Phone: (612) 667-9147 Phone: (612) 667-9147
Fax: (612) 667-2276 Fax: (612) 667-2276
- ---------------------------------------------------------------------------------------------------------------------------
</TABLE>
<PAGE>
3
<TABLE>
<S> <C> <C> <C>
- ---------------------------------------------------------------------------------------------------------------------------
Banco Bilbao Vizcaya $13,333,333 1345 Avenue of the Americas 1345 Avenue of the Americas
45th Floor 45th Floor
New York, NY 10105 New York, NY 10105
Attn: Anne-Maureen Sarfati Attn: Anne-Maureen Sarfati
Phone: (212) 728-1654 Phone: (212) 728-1654
Fax: (212) 333-2904 Fax: (212) 333-2904
- ---------------------------------------------------------------------------------------------------------------------------
Fuji Bank $13,333,333 Two World Trade Center Two World Trade Center
New York, NY 10048 New York, NY 10048
Attn: Tina Catapano Attn: Tina Catapano
Phone: (212) 898-2099 Phone: (212) 898-2099
Fax: (212) 488-8216 Fax: (212) 488-8216
- ---------------------------------------------------------------------------------------------------------------------------
Royal Bank of Canada $13,333,333 One Liberty Plaza, 4th Floor One Liberty Plaza, 4th Floor
New York, NY 10006 New York, NY 10006
Attn: Aurora Lanteigne Attn: Aurora Lanteigne
Phone: (212) 428-6338 Phone: (212) 428-6338
Fax: (212) 428-2372 Fax: (212) 428-2372
- ---------------------------------------------------------------------------------------------------------------------------
Standard Chartered $13,333,333 7 World Trade Center 7 World Trade Center
New York, NY 10048 New York, NY 10048
Attn: Kevin Fax Attn: Kevin Fax
Phone: (212) 667-0341 Phone: (212) 667-0341
Fax: (212) 667-0568 Fax: (212) 667-0568
- ---------------------------------------------------------------------------------------------------------------------------
Unicredito Italiano $13,333,333 375 Park Avenue Grand Cayman Branch
New York, NY 10152 c/o Unicredito Italiano, NY Branch
Attn: Christopher Eldin 375 Park Avenue
Phone: (212) 546-9611 New York, NY 10152
Fax: (212) 546-9665 Attn: Christopher Eldin
Phone: (212) 546-9611
Fax: (212) 546-9665
- ---------------------------------------------------------------------------------------------------------------------------
</TABLE>
</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>EX-10
<SEQUENCE>6
<FILENAME>0006.txt
<DESCRIPTION>EXHIBIT 10.13
<TEXT>
<PAGE>
EXHIBIT 10.13
Honeywell International Inc.
Supplemental Pension Plan
Amended and Restated
as of January 1, 2000
<PAGE>
-2-
Article I - Purpose
Effective November 20, 1975, Allied Corporation adopted the
Allied Corporation Supplemental Retirement Plan for Executives and Key
Employees. Such plan is amended and restated effective January 1, 2000 as the
Honeywell International Inc. Supplemental Pension Plan (the "Plan").
The purpose of the Plan is to provide retired participants and
their joint annuitants and beneficiaries under the Pension Plan with the amount
of retirement income that is not provided under the Pension Plan because the
participant deferred compensation under one or more nonqualified deferred
compensation plans of Honeywell International Inc., including the Incentive
Plan, the Supplemental Savings Plans and the Salary Deferral Plan or, by reason
of the limits imposed by Section 415 and 401(a)(17) of the Code. The Plan is
also intended to cover any contractual obligation Allied has to pay pension
benefits which cannot be provided under the provisions of the Pension Plan.
Except to the extent otherwise indicated, and to the extent
otherwise inappropriate, the Pension Plan and the provisions thereof are hereby
incorporated by reference.
Article II - Definitions
2.1 Accrued Pension Benefit - means the amount of retirement income
payable under the Pension Plan to or with respect to a participant
at or after termination of employment, or such earlier date
requiring payment under this Plan.
2.2 Board of Directors - means the Board of Directors of Honeywell.
2.3 Code - means the Internal Revenue Code of 1986, as amended from
time to time.
2.4 Committee - means the Management Development and Compensation
Committee of Honeywell.
2.5 Incentive Plan - means the AlliedSignal Inc. Incentive Compensation
Plan for Executive Employees, and all predecessor and successor
plans.
2.6 Honeywell - means Honeywell International Inc., a Delaware
corporation and its subsidiaries.
2.7 Pension Plan - means the AlliedSignal Inc. Retirement Program (or
any successor defined benefit pension plan) and any other defined
benefit pension plan covering salaried employees of Honeywell
International Inc. other than (i) this Plan, (ii) the portion of
any defined benefit pension plan providing benefits to employees
under the Honeywell Retirement Benefit Plan formula and provisions
of such pension plan, and (iii) the AlliedSignal Pension Plan for
Contractual Obligations. Notwithstanding the foregoing, any Plan
participant who is a participant in a plan described in subclause
(ii) above and who has waived his or her right to the
<PAGE>
-3-
change in control benefit to which he or she was previously
entitled under the terms of a severance agreement or plan
maintained by Honeywell Inc. and is a Participant in the Honeywell
International Inc. Supplemental Executive Retirement Plan for
Executives in Career Band 6 and Above shall have this definition
apply without regard to subclause (ii) above.
2.8 Plan - means the Honeywell International Inc. Supplemental Pension
Plan.
2.9 Salary Deferral Plan - means the Salary Deferral Plan for Selected
Employees of Honeywell International Inc. and its Affiliates
(Career Band 6 and above or employees who occupy positions
equivalent thereto), as the same may be amended from time to time.
2.10 Supplemental Benefit - means the excess, if any, of (i) the
retirement income payable to or with respect to a participant under
the Pension Plan which would have been accrued by the participant
(1) had the amount of deferred compensation awards under the
Incentive Plan been compensation included for calculating benefits
under the Pension Plan in the year the award would otherwise have
been earned or payable as recognized by the Pension Plan, (2) had
Participant Deferred Contributions, as that term is defined in the
Supplemental Savings Plans, been compensation included for
calculating benefits under the Pension Plan in the year the
compensation would otherwise have been earned or payable as
recognized by the Pension Plan, (3) had the portion of Base Annual
Salary and Incentive Awards deferred by a participant under the
terms of the Salary Deferral Plan, been compensation included for
calculating benefits under the Pension Plan in the year the
compensation would otherwise have been earned or payable as
recognized by the Pension Plan, (4) had the limits of Code Section
415 and 401(a)(17) not been incorporated in the Pension Plan, and
(5) had the participant met all the requirements for a benefit from
the Pension Plan with respect to all other pension benefits which
Honeywell has become contractually obligated to pay to the
participant, over (ii) the participant's Accrued Pension Benefit.
2.11 Supplemental Savings Plans - means the Supplemental Non-Qualified
Savings Plans for Highly Compensated Employees of Honeywell
International Inc. and its Subsidiaries, as the same may be amended
from time to time.
<PAGE>
-4-
Article III - Participation
Participation in the Plan shall be limited to:
(a) those participants in the Pension Plan (and their joint
annuitants and beneficiaries) who as a result of having
deferred an award under the Incentive Plan or having
deferred compensation under the Supplemental Savings Plans
or the Salary Deferral Plan, receive or shall receive a
lesser amount under the Pension Plan than would otherwise
be paid or payable in the absence of such deferral;
(b) those participants in the Pension Plan (and their joint
annuitants and beneficiaries) who as a result of the
limitations contained in Code Sections 415 or 401(a)(17)
receive or will receive a lesser amount under the Pension
Plan than would otherwise be paid or payable in the
absence of such limitations, and
(c) any employee who has entered into a contractual agreement
with Honeywell under which Honeywell shall, after the
termination of employment of the employee, provide a
benefit in the form of a life annuity for the employee
(and the employee's joint annuitant or beneficiary) as
provided under the terms of the contractual agreement.
Article IV - Supplemental Benefit
4.01 Payment of Supplemental Benefit
(a) Supplemental Benefits shall be payable directly to such
participant, or such participant's joint annuitant or
beneficiary, as applicable, from the general assets of
Honeywell and Honeywell shall not be under any obligation
to set aside any funds or other assets for the payment of
the Supplemental Benefits under this Plan. Honeywell may,
in its sole discretion, establish funds for payment of
these Supplemental Benefits. However, any and all such
funds shall remain assets of Honeywell and subject to the
claims of creditors of such corporation. Such funds, if
any, shall not be deemed to be assets of this Plan.
Notwithstanding the preceding paragraph, the Committee is
authorized (but not required) to cause AlliedSignal (or
any successor thereto) to fund all or a part of the
Supplemental Benefits for such participant or participants
as it may select in its sole discretion from time to time.
The amount of such funded Supplemental Benefits shall not
be assets of Honeywell and shall not be subject to the
claims of creditors of Honeywell. Such participants, if
any, and the amount of any funded Supplemental Benefits
shall be designated in Appendix A and the
<PAGE>
-5-
Supplemental Benefits of any participant not designated in
Appendix A or the portion of any Supplemental Benefit not
funded as designated in Appendix A shall not be so funded
and shall remain subject to the provisions of the
preceding paragraph of this Section 4.01(a). A participant
designated on Appendix A who is married on the date any
funded Supplemental Benefits commence under Section
4.01(b) must obtain the written consent of the
participant's spouse in the form and manner prescribed by
the Committee to the election of any form of payment of
such funded Supplemental Benefits other than a 50% joint
and survivor annuity with the participant's spouse
designated as the joint annuitant. The Committee is