SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the Securities Exchange Act of 1934
(Amendment No. __)
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|_| Preliminary Proxy Statement
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|X| Definitive Proxy Statement
|_| Definitive Additional Materials
|_| Soliciting Material Pursuant to ss.240.14a-11(c) or ss.240.14a-12
HONEYWELL, INC.
(Name of Registrant as Specified In Its Charter)
(Name of Person(s) Filing Proxy Statement if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
|X| No fee required.
|_| Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and 0-11.
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|_| Check box if any part of the fee is offset as provided by Exchange Act Rule
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previously. Identify the previous filing by registration statement number, or
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1) Amount Previously Paid:
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Honeywell
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March 9, 1998
To our Shareowners:
You are cordially invited to attend the Annual Meeting of Shareowners,
which will be held at 2:00 p.m., Tuesday, April 21, 1998, at the Minneapolis
Convention Center, 1301 Second Avenue South, Minneapolis, Minnesota.
o You will find a Notice of Meeting on Page 1 that identifies three proposals
for your action.
o At the meeting we will present a brief report on Honeywell's 1997 business
results and outlook for the future.
o If you plan to attend the meeting, please detach the admission ticket on
your proxy card to present at the meeting registration tables.
o Refreshments will be served beginning at 1:00 p.m.
YOUR VOTE IS IMPORTANT. We encourage you to read this Proxy Statement and
vote your shares as soon as possible. A return envelope for your proxy card is
enclosed for convenience. Shareowners of record also have the option of voting
by telephone. A toll-free number and instructions are included on the proxy
card.
Sincerely,
/s/ Michael R. Bonsignore
-------------------------
Michael R. Bonsignore
Chairman of the Board and
Chief Executive Officer
PROXY STATEMENT
TABLE OF CONTENTS
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PAGE
----
NOTICE OF MEETING ......................................................... 1
VOTING PROCEDURES ......................................................... 2
HONEYWELL BOARD PRACTICES ................................................. 3
DIRECTOR COMPENSATION ..................................................... 6
BOARD MEETINGS--COMMITTEES OF THE BOARD ................................... 6
ITEM 1--ELECTION OF DIRECTORS ............................................. 8
Nominees ....................................................... 8
ITEM 2--RATIFICATION OF INDEPENDENT AUDITORS .............................. 12
ITEM 3--APPROVAL OF PROPOSED HONEYWELL EMPLOYEE STOCK PURCHASE PLAN ....... 12
STOCK OWNERSHIP INFORMATION ............................................... 13
Compliance with Section 16(a) Reporting ........................ 13
Stock Ownership Guidelines ..................................... 13
Five Percent Owner of Honeywell Stock .......................... 14
Stock Ownership of Director Nominees and Executive Officers .... 14
EXECUTIVE COMPENSATION .................................................... 15
Summary Compensation Table ..................................... 15
1997 Option Grants Table ....................................... 16
1997 Option Exercises and Year-End Values Table ................ 16
Long-Term Incentive Plan--Awards Table ......................... 17
Report on Executive Compensation ............................... 17
Insider Participation and Director Interlocks .................. 20
Performance Graph .............................................. 21
Change in Control and Termination Arrangements ................. 22
Pension Plan Table ............................................. 23
OTHER INFORMATION ......................................................... 23
Director Nominations and Shareowner Proposals .................. 23
Expenses of Solicitation ....................................... 24
EXHIBIT A: Proposed Honeywell Employee Stock Purchase Plan ................ A-1
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YOUR VOTE IS IMPORTANT
Please complete, date and sign your proxy card and return it as soon as
possible in the enclosed envelope. If you are a shareowner of record, you can
help Honeywell reduce expenses by voting your shares by telephone using the
toll-free number on your proxy card.
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Honeywell
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HONEYWELL INC., HONEYWELL PLAZA, MINNEAPOLIS, MINNESOTA 55408
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
DATE: Tuesday, April 21, 1998
TIME: 2:00 p.m., Central Time
PLACE: Minneapolis Convention Center
1301 Second Avenue South
Minneapolis, Minnesota
RECORD DATE: February 20, 1998
MEETING AGENDA
1) Election of directors;
2) Ratification of appointment of auditors;
3) Approval of proposed Honeywell Employee Stock Purchase Plan; and any
other matter properly brought before the meeting.
SHAREOWNER LIST
A list of shareowners entitled to vote at the meeting will be available during
business hours for ten days prior to the meeting at the Company's offices,
Honeywell Plaza, Minneapolis, Minnesota, for examination by any shareowner for
any legally valid purpose.
ADMISSION TO THE MEETING
Admission to the meeting will be limited to Honeywell shareowners or their
authorized representative by proxy. If your shares are held through an
intermediary, such as a bank or broker, you should request a ticket from the
intermediary, or present proof of your ownership of Honeywell shares at the
meeting. Proof of ownership could include a proxy from the intermediary or a
copy of your account statement.
By Order of the Board of Directors,
/s/ Kathleen Gibson
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Kathleen M. Gibson
Vice President and Corporate Secretary
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PROXY STATEMENT--VOTING PROCEDURES
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YOUR VOTE IS VERY IMPORTANT.
Whether or not you plan to attend our Annual Meeting of Shareowners, please
take the time to vote your shares as soon as possible. Your prompt voting by
telephone or mail may save Honeywell the expense of a second mailing.
METHODS OF VOTING
All shareowners may vote by mail. SHAREOWNERS OF RECORD CAN ALSO VOTE BY
TELEPHONE. Shareowners who hold their shares through a bank or broker, can vote
by telephone if that option is offered by the bank or broker.
o VOTING BY MAIL. Shareowners may sign, date and mail their proxies in the
postage-paid envelope provided. If you sign, date and mail your proxy card
without indicating how you want to vote, your proxy will be voted as
recommended by the Board of Directors.
o VOTING BY TELEPHONE. Shareowners of record may vote by using the toll-free
number listed on the proxy card. Telephone voting is also available to
shareowners who hold their shares in the Honeywell Savings and Stock
Ownership Plan and the Dividend Reinvestment Plan. The telephone voting
procedure is designed to verify shareowners through use of a Control Number
that is provided on each proxy card. The procedure allows you to vote your
shares and to confirm that your instructions have been properly recorded.
Please see your proxy card for specific instructions.
REVOKING YOUR PROXY
Whether you vote by mail or telephone, you may later revoke your proxy by:
o sending a written statement to that effect to the Vice President and Corporate
Secretary of the Company;
o submitting a properly signed proxy with a later date;
o voting by telephone at a later time; or
o voting in person at the annual meeting (except for shares held in the savings
plan described below).
VOTING BY SAVINGS PLAN PARTICIPANTS
If you own Honeywell shares as a participant in the Honeywell Savings and
Stock Ownership Plan, you will receive a single proxy card that covers both
shares credited to your plan account and shares you own of record that are
registered in the same exact name. If your plan account is not registered in the
same name as your shares of record, you will receive separate proxy cards for
your record and plan holdings. Proxies executed by plan participants or properly
voted by telephone will serve as voting instructions to T. Rowe Price Trust
Company, the trustee for the plan.
Under the terms of the plan, voting instructions must be received by T.
Rowe Price by April 16. Please refer to your proxy card for a more detailed
explanation of the timing requirement for voting plan shares by mail or
telephone.
VOTE REQUIRED AND METHOD OF COUNTING VOTES
At the close of business on the record date, February 20, 1998, there were
126,307,784 shares of Honeywell common stock outstanding and entitled to vote at
the annual meeting.
The following is an explanation of the vote required and method of counting
votes for each of the three items to be voted on at the annual meeting.
ITEM 1 - ELECTION OF DIRECTORS
The eleven nominees receiving the highest number of votes will be elected.
Shareowners who do not wish their shares to be voted for a particular nominee
may so indicate in the space provided on the proxy card or withhold authority as
prompted during telephone voting.
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ITEM 2 - RATIFICATION OF AUDITORS, AND
ITEM 3 - APPROVAL OF HONEYWELL EMPLOYEE STOCK PURCHASE PLAN
The affirmative vote of a majority of shares present in person or by proxy
is required for approval of Items 2 and 3. Shares represented by proxy which are
marked "abstain" will have the effect of a vote against Items 2 and 3. A "broker
non-vote" (i.e., when a broker does not have authority to vote on a specific
issue) will have no effect on the vote.
OTHER BUSINESS
The Board knows of no other matters to be presented for shareowner action
at the meeting. If other matters are properly brought before the meeting, the
persons named in the accompanying proxy card intend to vote the shares
represented by them in accordance with their best judgment.
CONFIDENTIAL VOTING POLICY
Honeywell maintains a policy of keeping shareowner votes confidential.
HONEYWELL BOARD PRACTICES
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In order to help our shareowners understand Honeywell's Board practices, we
are including below a description of current practices. The Nominating and
Governance Committee reviews these practices each year. As part of its review,
the Committee also evaluates board practices at other well-managed companies and
practices that are the focus of commentators on corporate governance. Following
its review, the Committee recommends any changes it feels are appropriate to the
Board. In January 1998, the Board approved the following practices and
recommended that these practices be communicated to shareowners in this proxy
statement.
The Board is proud of its long-standing commitment to sound governance
practices, and was honored to be named one of the five best Boards by Chief
Executive magazine in 1997.
CEO PERFORMANCE EVALUATION
At the beginning of each year, the CEO presents his performance objectives
to the non-employee directors for their approval. At the end of each year, the
non-employee directors evaluate the CEO's performance against these performance
objectives. Each non-employee director provides an anonymous, written evaluation
of the CEO's performance to the Chairman of the Nominating and Governance
Committee, who prepares an appraisal report that covers the views expressed by
the non-employee directors. The non-employee directors then meet privately to
discuss the CEO's performance and to agree on the content of the appraisal,
which the Chairman of the Nominating and Governance Committee later reviews with
the CEO. The Personnel Committee uses this performance evaluation in the course
of its deliberations when considering the compensation of the CEO.
BOARD PERFORMANCE EVALUATION
With the goal of increasing the effectiveness of the Board and its
relationship to management, the Nominating and Governance Committee evaluates
the Board's performance as a whole. The evaluation process, which occurs every
two years, includes a survey of the individual views of all non-employee
directors, which are then shared with the full Board and with management.
CEO SUCCESSION
The Board views CEO selection as one of its most important
responsibilities. The CEO reports annually to the Nominating and Governance
Committee on planning for CEO succession either in the event of a sudden
emergency or, longer range, when it is time for the CEO's retirement. When a
succession of the CEO occurs, this Committee manages the process of identifying
and
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selecting the new CEO with the full participation of each of the non-employee
directors and the current CEO.
BOARD SIZE AND COMPOSITION
The Board believes that approximately 10 to 15 members is an appropriate
size for the Honeywell Board. The Board also believes that the Honeywell Board
should be made up of a substantial majority of independent, non-employee
directors. The Nominating and Governance Committee reviews annually the
appropriate skills and characteristics required of Board members in light of the
current make-up of the Board. This assessment includes issues of diversity, age,
and skills such as understanding of manufacturing, finance, marketing,
technology, regulation and public policy, international background, etc. The
principal qualification for a director is the ability to act on behalf of all of
the shareowners. The Board currently has 11 members, two of whom are employees
of the Company.
SELECTION OF DIRECTORS
The Board is responsible for selecting its own members. The Board delegates
the screening process to the Nominating and Governance Committee with direct
input from the chairman and chief executive officer and from the other
directors. This Committee annually reviews employment and other relationships of
directors, and the Board believes there is no current relationship between any
non-employee director and Honeywell that would be construed in any way as
compromising the independence of any director.
DIRECTOR RETIREMENT
Non-employee directors must retire at the annual meeting following the
first to occur of (1) age 70, or (2) 15 years of service as a director.
Directors who change the occupation they held when initially elected are
expected to offer to resign from the Board. At that time, the Nominating and
Governance Committee reviews the continued appropriateness of Board membership
under these new circumstances. The Board has adopted a policy calling for
employee directors, including the CEO, to retire from the Board at the time of a
change in their status as an officer of Honeywell, although in special
circumstances the Committee may request a former CEO to continue as a director
for a maximum of one year.
DIRECTOR COMPENSATION AND STOCK OWNERSHIP
Each year Honeywell staff presents a report to the Nominating and
Governance Committee that compares Honeywell Board compensation to director
compensation at peer companies, which are benchmarks for the Company's financial
performance. It is the Board's policy that a significant portion of director
compensation be in the form of Honeywell stock or stock equivalent units. Under
the Board's stock ownership guidelines for Directors, each Director is expected
to own Honeywell stock having a value at least equal to six times the amount of
the Board's annual retainer.
BOARD AGENDAS AND MEETINGS
The chairman and chief executive officer establishes the agendas for Board
meetings. Each director is free to suggest items for the agenda, and each
director is free to raise at any Board meeting subjects that are not on the
agenda for that meeting. The Board reviews and approves Honeywell's yearly
operating plan and specific financial goals at the start of each year, and the
Board monitors performance throughout the year. The Board also reviews
long-range strategic issues at regular Board meetings as well as at periodic,
multi-day off-site meetings devoted solely to strategic issues.
EXECUTIVE SESSIONS OF OUTSIDE DIRECTORS
The non-employee directors meet privately in executive sessions to review
the performance of the CEO and to review recommendations of the Personnel
Committee concerning compensation for the employee directors. The non-employee
directors may also meet in executive session
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at other times during the year to consider issues they deem important to
consider without management present. The chairperson of the Nominating and
Governance Committee has been designated as the individual whom other directors
may ask to call a private meeting of non-employee directors when they believe
there is a need to discuss a matter that could materially affect the performance
of Honeywell. When non-employee directors meet without the chairman and chief
executive officer present, the chairperson of the Board committee most relevant
to the subject under discussion will act as the chairperson of the meeting.
COMMITTEES OF THE BOARD
The Board currently has the following committees: Audit; Finance;
Nominating and Governance; Personnel; and Executive. Only non-employee directors
serve on the Audit, Finance, Nominating and Governance, and Personnel
Committees. Chairpersons and members of these four committees are rotated
periodically, as appropriate. At each meeting of the Audit Committee, Committee
members meet privately with representatives of Deloitte & Touche LLP, the
Company's independent auditors, and with the Company vice president responsible
for carrying out the internal audit function. The members of the Personnel
Committee meet privately several times during the year to discuss the
compensation of the employee directors and other issues that the Committee
wishes to review.
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DIRECTOR COMPENSATION
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The Board of Directors believes that a significant amount of director
compensation should be paid in stock. Compensation for non-employee directors is
payable under the Non-Employee Directors Fee and Stock Unit Plan, which was
approved by shareowners in 1996. Directors who are employees of Honeywell
receive no compensation for service on the Board.
The principal components of director compensation are as follows:
1) an annual retainer fee of $40,000;
2) a fee of $1,200 for each board or Committee meeting attended ($1,800 for
a Committee chairperson); and
3) an award of stock units having a value equal to one-half of the annual
retainer and meeting fees paid to the director during the previous year.
A director may choose to receive his or her annual retainer and meeting
fees in the form of: cash; stock units; or a combination of cash and stock
units. In order to encourage increased stock ownership, a director who chooses
to receive payment of his or her retainer or meeting fees in stock units, will
receive stock units having a value equal to 110% of these fees. While stock
units do not confer on a director the right to vote, each stock unit is credited
on each dividend payment date with stock units equal to the applicable dividend
payable on Honeywell common stock. Stock units are payable in Honeywell stock at
the time a director leaves the Board. The plan also provides a director with the
option of deferring fees that would be payable in cash.
BOARD MEETINGS--COMMITTEES OF THE BOARD
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The Board of Directors held eight regular and one special meeting during
1997. The Executive Committee of the Board does not have scheduled meetings and
did not meet during the year. The Board maintains four other committees: Audit,
Finance, Nominating and Governance, and Personnel. Membership on these four
committees is limited to non-employee directors. Committee membership as of the
record date is listed below.
AUDIT COMMITTEE
The members of the Audit Committee are:
o R. Donald Fullerton (Chairperson)
o Albert J. Baciocco, Jr.
o William H. Donaldson
o Bruce E. Karatz
The Audit Committee met three times in 1997. The primary functions of the Audit
Committee are to:
o Establish and review the activities of the independent auditors and the
internal auditors;
o Review and approve the format of the financial statements to be included in
the annual report to the shareowners;
o Review recommendations of the independent auditors and responses of
management;
o Review and discuss Honeywell financial reporting, loss exposures and asset
control with the auditors and management;
o Monitor the Honeywell program for compliance with law and policies on business
ethics; and
o Direct and supervise any special investigations the Committee deems necessary.
FINANCE COMMITTEE
The members of the Finance Committee are:
o Elizabeth E. Bailey (Chairperson)
o R. Donald Fullerton
o A. Barry Rand
o Steven G. Rothmeier
o Michael W. Wright
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The Finance Committee met four times in 1997. The primary responsibilities
of the Finance Committee are to review the financial structure, policies and
future plans of the Company as developed and presented by management and to make
recommendations concerning them to the Board. In carrying out these functions
the Committee periodically reviews:
o The financial constraints within which the
Company will operate, such as debt-equity ratio, coverage of fixed charges, and
other financial ratios;
o Proposed acquisitions, divestitures and other investments that exceed a
certain financial threshold;
o Company debt and credit arrangements;
o Proposals
for obtaining additional capital funds or other changes in the capitalization of
the Company;
o Dividend and tax policy;
o Foreign exchange exposure and risks;
o The Company's various retirement and pension plans; and
o Investment banker relationships and investor relations.
NOMINATING AND GOVERNANCE COMMITTEE
The members of the Nominating and Governance Committee are:
o James J. Howard (Chairperson)
o Elizabeth E. Bailey
o William H. Donaldson
o Steven G. Rothmeier
The Nominating and Governance Committee met four times in 1997. The primary
functions of the Nominating and Governance Committee are to:
o Determine and recommend to the Board criteria regarding personal
qualifications currently needed for Board membership;
o Determine and recommend to the Board appropriate compensation for directors;
o Evaluate the performance of the Board as a whole and provide feedback to the
chief executive officer on how the directors and the Board are functioning;
o Establish the process for the Board to evaluate the chief executive officer
and other inside directors; o Evaluate and recommend to the Board successors to
the chief executive officer and inside director positions when required;
o Annually evaluate Board practices at Honeywell and other well-managed
companies and recommend appropriate changes to the Board; and
o Consider governance issues raised by shareowners or other stakeholders in the
Company and recommend appropriate responses to the Board.
PERSONNEL COMMITTEE
The members of the Personnel Committee are:
o A. Barry Rand (Chairperson)
o Albert J. Baciocco, Jr.
o James J. Howard
o Bruce E. Karatz
o Michael W. Wright
The Personnel Committee met five times in 1997. The primary functions of the
Personnel Committee are to:
o Review and report to the Board on the Company's programs for attracting,
retaining and promoting executives, and for developing future senior
management;
o Review and make recommendations to the Board regarding compensation for the
chief executive officer and other inside directors;
o Review and approve performance targets, participation and level of awards for
incentive award plans; and
o Review, approve and report to the Board concerning administration of
compensation plans and compensation for executives at specified salary grade
levels.
The average attendance at meetings of the Board and Board Committees during
1997 was 98 percent.
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ITEM 1--ELECTION OF DIRECTORS
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NOMINEES
Eleven directors of the Company are to be elected to serve until the 1999
Annual Meeting of Shareowners or until their successors are elected and
qualified. All of the nominees are currently directors of the Company and were
elected directors at the 1997 Annual Meeting of Shareowners, except Katherine M.
Hudson. Mr. William H. Donaldson, currently a director, is retiring after 15
years of service in accordance with the retirement policy of the Board of
Directors.
Your shares will be voted, unless authority to vote is withheld, `FOR' the
election of the eleven nominees named below. If any of the nominees should
become unavailable, your shares will be voted for a Board-approved substitute,
or the Board may reduce the number of directors.
[PHOTO]
STANDING FROM LEFT. Michael W. Wright, James J. Howard, Bruce Karatz, Albert J.
Baciocco, William H. Donaldson (retiring) and Katherine M. Hudson (nominee).
STANDING FROM LEFT: Steven G. Rothmeier, Elizabeth E. Bailey, Michael R.
Bonsignore (Chairman), A. Barry Rand, Giannantonio Ferrari, and R. Donald
Fullerton.
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ALBERT J. BACIOCCO, JR. Director since 1988. Vice Admiral, U.S. Navy (Retired),
President, The Baciocco Group, Inc. since 1987.
After a distinguished 34-year career in the U.S. Navy, primarily within the
nuclear submarine force and directing the Department of the Navy research and
technology development enterprise, Admiral Baciocco has been engaged in a
variety of business and pro bono activities with industry, government and
academe, principally related to technology planning, investment, management and
implementation.
Admiral Baciocco is a director of Shell Exploration and Production Company
and American Superconductor Corporation. He serves on several boards and
committees of government, industry and academe. He is a member of the Army
Science Board of the Department of the Army, and the Naval Studies Board of the
National Research Council. He serves on the Board of Trustees of the South
Carolina Research Authority; and on the boards of directors of the University of
South Carolina Research Institute, the Foundation for Research Development at
the Medical University of South Carolina, and the Waste Policy Institute, an
affiliate of Virginia Polytechnic Institute and State University. In addition,
he is a member of the National Advisory Council of the Navy League of the United
States. Board Committees: Audit and Personnel. Age 67.
ELIZABETH E. BAILEY. Director since 1985. John C. Hower Professor of Public
Policy and Management, The Wharton School, University of Pennsylvania, since
1991.
Dr. Bailey joined Bell Laboratories in 1960, where she held various
supervisory positions until 1977. From 1973 until 1977, she was also adjunct
professor of economics at New York University. In 1977, she was appointed a
commissioner of the Civil Aeronautics Board and was vice chairman of the Civil
Aeronautics Board from 1981 to 1983. From 1983 to 1990, she served as dean of
the Graduate School of Industrial Administration of Carnegie Mellon University.
From 1990 to 1991, she was a visiting scholar at Yale University, on leave from
Carnegie Mellon.
Dr. Bailey is also a director of Philip Morris Companies Inc., CSX
Corporation and the College Retirement Equities Fund. She serves on the board of
the Brookings Institution, Bancroft, Inc. and the National Bureau of Economics
Research. Board Committees: Finance (Chairperson) and Nominating and Governance.
Age 59.
MICHAEL R. BONSIGNORE. Director since 1990. Chairman of the Board and Chief
Executive Officer of Honeywell since April 1993.
Mr. Bonsignore began his business career at Honeywell in 1969. He held
various marketing and operations management positions and became Vice President
of Marine Systems in 1981. In 1983, Mr. Bonsignore was appointed President of
Honeywell Europe, based in Brussels, Belgium. In 1987, Mr. Bonsignore returned
to Minneapolis as Executive Vice President, International, and was elected
President of this business in May 1987. In 1990, Mr. Bonsignore was elected
Executive Vice President and Chief Operating Officer for the International and
Home and Building Control businesses, and was also elected to the Company's
Board of Directors.
Mr. Bonsignore is also a director of Cargill, Inc. and The St. Paul
Companies, Inc. He serves as a member on various advisory boards and committees
including: the U.S. - China Business Council, Investment and Services Policy
Advisory Committee, U.S. - Russia Trade and Economic Council and the Alliance to
Save Energy Board. He is a member of the Executive Committee of the Honeywell
Board. Age 56.
GIANNANTONIO FERRARI. Director since April 1997. President and Chief Operating
Officer of Honeywell since April 1997.
9
Mr. Ferrari joined Honeywell Italia in 1965. He held various managerial
positions in Italy, and in 1976 was appointed Director of Finance and Human
Resources for the Middle East region. In 1981, he was appointed Controller for
Honeywell Europe and, in 1984, he was elected Vice President of Finance and
Director of Distribution for Honeywell Europe. In 1988, Mr. Ferrari returned to
Italy and served as Vice President, Western and Southern Europe, Middle East and
Africa. In January 1992, he was elected President of Honeywell Europe.
Mr. Ferrari is also a director of Northern States Power Company, the
National Association of Manufacturers, and the European American Industrial
Council located in Belgium. He is a member of the Board of Governors of the
National Electrical Manufacturers Association. He is a member of the Executive
Committee of the Honeywell Board. Age 58.
R. DONALD FULLERTON. Director since 1992. Chairman -- Executive Committee CIBC,
a Canadian financial services institution, since 1992.
Mr. Fullerton joined the Canadian Bank of Commerce (now CIBC) in 1953. From
1968 to 1974, he held various senior managerial positions with CIBC. He was
elected to CIBC's Board of Directors in 1974 and elected president and chief
operating officer in 1976. In 1984, he was elected chief executive officer, and
in 1985, he was named chairman. In June 1992, Mr. Fullerton retired as the
company's chairman and chief executive officer.
Mr. Fullerton is also a director of CIBC, Orange plc, Burcon Properties
Limited, Ontario Hydro, Westcoast Energy Inc., George Weston Ltd., Hollinger
Inc., Asia Satellite Telecommunications Company Limited, and a member of the
advisory board, IBM Canada Ltd., and other cultural and medical entities. Board
Committees: Audit (Chairperson) and Finance. Age 66.
JAMES J. HOWARD. Director since 1990. Chairman of the Board, President and Chief
Executive Officer of Northern States Power Company, a Minnesota-based energy
company. Chairman and Chief Executive Officer since 1988, and President since
1994. Prior to 1987, Mr. Howard was president and chief operating officer of
Ameritech Corporation.
Mr. Howard is also a director of Walgreen Company, Ecolab Inc., ReliaStar
Financial and the Federal Reserve Bank of Minneapolis. He also serves on the
Board of Trustees for the University of St. Thomas, in St. Paul, Minnesota, and
the Board of Visitors for the University of Pittsburgh, Joseph M. Katz School of
Business. He is also past chairman and board member of the Edison Electric
Institute and current chairman of the Nuclear Energy Institute, both located in
Washington, DC and a member of the International Energy Coal Industry Advisory
Board in Paris, France.
Mr. Howard serves the community as a board member of the Minnesota Business
Partnership; the Capitol City Partnership; the Jerimiah Program; the
Metropolitan Economic Development Association; the Minneapolis Center for
Corporate Responsibility; the United Way of Minneapolis; and the Danny Thompson
Memorial Leukemia Foundation. He is also a member of the KARE Eleven Who Care
Board of Governors and a Senior Member of the Conference Board, Inc., in New
York City. Board Committees: Nominating and Governance (Chairperson), Executive
and Personnel. Age 62.
KATHERINE M. HUDSON. Nominee for Director. President and Chief Executive
Officer, W.H. Brady Co., an international manufacturer of industrial
identification, safety, graphics and precision tape products based in Milwaukee,
Wisconsin.
Prior to joining W.H. Brady in 1994, Ms. Hudson served from 1970 until 1994
in various managerial and financial positions with Eastman Kodak Company, and
was most recently the Corporate Vice President and General Manager for the
Professional Printing and Publishing Imaging Division.
10
Ms. Hudson is also a director of W.H. Brady Co. and Case Corporation. She
serves on the Alverno College Board of Trustees and the Medical College of
Wisconsin Board of Trustees, the Advisory Council for the Indiana University
School of Business, the Advisory Board of the University of Wisconsin School of
Business, and the Governor's Commission on the Glass Ceiling. Age 51.
BRUCE KARATZ. Director since 1992. Chairman of the Board, President and Chief
Executive Officer, Kaufman and Broad Home Corporation, an international
residential and commercial builder based in California, since 1993. President
and Chief Executive Officer of the company since 1986.
Mr. Karatz is also a director of Fred Meyer, Inc. and National Golf
Properties, Inc. Among his civic and cultural activities, Mr. Karatz is a
trustee of the RAND Corporation, co-chairman of the Mayor's Alliance for a Safer
L.A., member of the Board of the National Park Foundation, University of
Southern California Law Center Board of Councilors, member of the Board of
Governors for the Music Center of Los Angeles County, and a member of the
Council on Foreign Relations. In 1992, he was inducted into the California
Building Industry Hall of Fame. Board Committees: Audit and Personnel. Age 52.
A. BARRY RAND. Director since 1990. Executive Vice President, Customer
Operations, Xerox Corporation, a document processing office equipment company,
since 1992. Mr. Rand joined Xerox in 1968. In May 1985, he was elected a
corporate officer and in 1987 he was elected president of Xerox's United States
Marketing Group.
Mr. Rand is also a director of Abbott Laboratories and Ameritech
Corporation. He serves on the board of overseers of the Rochester Philharmonic
Orchestra and is a member of the Stanford University Graduate School of Business
advisory council. In 1993, Mr. Rand was inducted into the National Sales Hall of
Fame. Board Committees: Personnel (Chairperson) and Finance. Age 53.
STEVEN G. ROTHMEIER. Director since 1985. Chairman of the Board and Chief
Executive Officer, Great Northern Capital, a private asset management firm that
he formed in March 1993.
Prior to March 1993, Mr. Rothmeier served as president at IAI Capital
Group, a venture capital and merchant banking firm. From 1973 to November 1989,
he held various senior positions at Northwest Airlines, Inc., and from 1986 to
1989, he served as chairman of the board and chief executive officer of NWA Inc.
and Northwest Airlines, Inc.
Mr. Rothmeier is also a director of Waste Management, Inc., Precision
Castparts Corp., Department 56, Inc., E.W. Blanch Holdings, Inc., and the
Argonne National Laboratory/University of Chicago Development Corporation
(ARCH). He also serves as chairman of the St. Agnes Foundation in St. Paul,
Minnesota and of Catholic Views Broadcast, Inc. in Minnesota.
Mr. Rothmeier is a member of the Council on the Graduate School of
Business, University of Chicago, a trustee of the University of Chicago, a
director of the American Council on Germany, a director of the Center of the
American Experiment, a director of the German Marshall Fund and an advisor to
the Metropolitan Economic Development Association. Board Committees: Executive,
Finance, and Nominating and Governance. Age 51.
MICHAEL W. WRIGHT. Director since 1987. Chairman of the Board, President and
Chief Executive Officer, SUPERVALU INC., a major food distributor and retailer,
since 1982. He was elected president and chief operating officer in 1978, chief
executive officer in 1981, and chairman of the board in 1982. He joined the
company as senior vice president of administration and as a member of the board
of directors in 1977. Prior to
11
1977, he was a partner in the law firm of Dorsey & Whitney.
Mr. Wright is also a director of Cargill, Inc., Musicland Stores
Corporation, and Norwest Corporation. He is chairman of the board of the Food
Marketing Institute, and a director of Food Distributors International,
International Grocers Association and CIES, The Food Business Forum.
Mr. Wright serves the community as trustee emeritus of the University of
Minnesota Foundation, trustee of St. Thomas Academy and is a member of the board
of overseers for the Carlson School of Management, University of Minnesota.
Board Committees: Executive, Personnel and Finance. Age 59.
ITEM 2--RATIFICATION OF INDEPENDENT AUDITORS
- --------------------------------------------------------------------------------
The shares represented by your proxy will be voted (unless you indicate to
the contrary) to ratify the selection of Deloitte & Touche LLP, independent
public accountants, to examine the financial statements to be included in the
1998 Annual Report to Shareowners.
A partner of Deloitte & Touche LLP will be present at the meeting, will be
given the opportunity to make a statement, and will also respond to appropriate
questions.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR ITEM 2.
ITEM 3--APPROVAL OF PROPOSED HONEYWELL EMPLOYEE STOCK PURCHASE PLAN
- --------------------------------------------------------------------------------
The Board of Directors adopted the Plan in December 1997, subject to
shareowner approval. The following is a summary of the Plan. Please refer to
Exhibit A attached to this Proxy Statement for the full text of the Plan.
PURPOSE: The purpose of the Plan is to increase employee stock ownership by
providing eligible employees with a convenient method of purchasing Honeywell
stock at a discount from the market price through payroll deduction.
ELIGIBLE PARTICIPANTS AND TAX TREATMENT: The Plan will be offered to full
and part-time employees of the Company and certain of its subsidiaries, and is
designed to qualify under Section 423 of the Internal Revenue Code. As a result,
federal income taxes on the purchase discount and any appreciation on the stock
will be deferred until the employee sells the stock.
MAXIMUM NUMBER OF SHARES: The maximum number of shares to be issued under
the Plan is one million, subject to adjustment for any changes affecting the
capital structure of the Company.
TERM: The Plan will commence on July 1, 1998, and terminate when all shares
approved for issuance have been purchased, unless the Board of Directors, at its
discretion, terminates the Plan sooner.
PAYROLL DEDUCTION: Employees may elect to deduct between one and ten
percent of their base pay on an after-tax basis to purchase shares under the
Plan, subject to a limit of $25,000 in any calendar year and three hundred
shares during any purchase period.
PURCHASE PERIODS: Shares will be purchased in the calendar quarters
commencing January 1, April 1, July 1 and October 1.
SHARE OPTION GRANT: An employee will be automatically granted an option to
purchase the maximum number of shares that can be purchased with the amount of
payroll deductions accumulated in his or her account during a purchase period.
SHARE OPTION EXERCISE AND EXPIRATION DATES: The option will be
automatically exercised at the end of the purchase period unless the employee
instructs otherwise, as
12
provided under the Plan. Each option granted at the beginning of the purchase
period expires on the last day of the period.
SHARE PURCHASE PRICE: An employee may elect to purchase shares at a price
which will be the lower of 85% of the fair market value on the first day of the
applicable purchase period or 85% of the fair market value on the last day of
the applicable purchase period.
DIVIDENDS: All dividends payable on shares allocated to an employee's
account will be used to purchase additional shares during the applicable
purchase period pursuant to a custodian or recordkeeper-sponsored dividend
reinvestment program.
SHARE ISSUANCE AND SALES: An employee will pay all costs associated with
the issuance of a stock certificate or any sale of shares, including brokerage
commissions.
TERMINATION OR SUSPENSION: An employee may terminate from the Plan or
suspend payroll deductions at any time. However, any termination from the Plan
will require new enrollment by the employee.
CHANGE IN CONTROL: In the event of a change in control of the Company, the
exercise date of a share option granted under the Plan will be accelerated to
occur before the date of a change in control, which may result in the purchase
of shares for an employee's account before the end of a purchase period.
AMENDMENTS: The Plan may be amended at any time by the Board of Directors,
except that no amendment will be permitted that would jeopardize the
tax-qualified status of the Plan. Shareowner approval is required in order to
increase the maximum number of shares that may be issued under the Plan or to
change any eligibility requirements.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR ITEM 3.
STOCK OWNERSHIP INFORMATION
- --------------------------------------------------------------------------------
COMPLIANCE WITH SECTION 16(A) REPORTING
- --------------------------------------------------------------------------------
The rules of the Securities and Exchange Commission require that Honeywell
disclose late filings of reports of stock ownership (and changes in stock
ownership) by its directors and executive officers. To the best of the Company's
knowledge, all of the filings for the Company's executive officers and directors
were made on a timely basis in 1997, except that the Company filed one report on
behalf of William Hjerpe, an executive officer, ten days late. The report
contained information on the sale of shares in January of 1997.
STOCK OWNERSHIP GUIDELINES
- --------------------------------------------------------------------------------
EXECUTIVES
o The Board of Directors adopted stock ownership guidelines for Honeywell
executives in 1990. The guidelines were raised in 1996. The current
guidelines are as follows: The chief executive officer and chief operating
officer are expected to own Honeywell stock having a value of at least five
times the mid-point of the executive's salary grade range. The ownership
level for presidents of Honeywell business units and the chief financial
officer is four times the midpoint of the executive's salary grade range. The
guideline for other executive officers is three times the midpoint of salary
grade range.
13
BOARD OF DIRECTORS
o The Board of Directors adopted a guideline that each director have an
ownership interest in Honeywell stock equal to at least six times the annual
retainer fee. As the annual retainer is currently $40,000, the guidelines
would encourage each director to have an equity interest in Honeywell of at
least $240,000. Rather than setting a time frame for reaching the recommended
ownership guideline, the Board decided that Directors should use their
judgment in setting their own timetable for reaching the guideline.
FIVE PERCENT OWNER OF HONEYWELL STOCK
- --------------------------------------------------------------------------------
Barrow, Hanley, Mewhinney & Strauss, Inc., One McKinney Plaza, 3232
McKinney Avenue, 15th Floor, Dallas, Texas 75204-2429, notified Honeywell that
it beneficially owned 9,245,480 shares of Honeywell common stock on December 31,
1997. This represented 7.3% of Honeywell's outstanding shares on that date.
Barrow Hanley also advised Honeywell that it is a registered investment adviser
and that these shares are held on behalf of various clients.
STOCK OWNERSHIP OF DIRECTOR NOMINEES 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 February 27, 1998, the nominees for
directors and the executive officers of Honeywell beneficially owned, in the
aggregate, 1,508,741 shares of Honeywell common stock (approximately 1.2% of the
shares outstanding). Honeywell directors and executive officers also have
interests in stock-based units under Company plans. While these units may not be
voted or transferred, we have listed them in the table below as they represent
the total economic interest of the directors and executive officers in Honeywell
stock.
Shares Options
Name of Beneficially Exercisable Stock
Beneficial Owner Owned Within 60 Days Units Total
- ----------------------------------------------------------------------------------------------------------
A.J. Baciocco, Jr.................. 2,281 0 12,321 14,602
E.E. Bailey........................ 2,082 0 16,418 18,500
M.R. Bonsignore.................... 123,048 416,565 36,000 575,613
G.Ferrari.......................... 47,733 61,499 18,000 127,232
R.D. Fullerton..................... 7,853 0 1,735 9,588
E.D. Grayson....................... 12,065 88,853 7,500 108,418
W.M. Hjerpe........................ 38,140 92,885 10,000 141,025
J.J. Howard........................ 2,508 0 11,359 13,867
K.M. Hudson........................ 500 0 0 500
B.Karatz........................... 3,409 0 6,459 9,868
D.L. Moore......................... 50,200 85,742 0 135,942
A.B. Rand.......................... 1,002 0 4,925 5,927
S.G. Rothmeier..................... 1,128 0 8,271 9,399
M.I. Tambakeras.................... 37,933 63,540 10,000 111,473
M.W. Wright........................ 1,200 0 15,202 16,402
Directors and Executive
Officers as a group............... 477,103 1,031,638 188,791 1,697,532
- ----------------------------------------------------------------------------------------------------------
14
EXECUTIVE COMPENSATION
- --------------------------------------------------------------------------------
For 1997, the following table shows compensation for services to Honeywell
of the following persons: 1) the chief executive officer; 2) the four most
highly compensated executive officers (other than the CEO) who were employed by
Honeywell during all of 1997; and 3) a former executive officer who retired from
Honeywell in June 1997.
- --------------------------------------------------------------------------------
SUMMARY COMPENSATION TABLE
- --------------------------------------------------------------------------------
Long-Term Compensation
---------------------------------------
Annual Compensation Awards Payouts
--------------------------------- ------------------------ -----------
Other
Annual Restricted All Other
Name and Compen- Stock Options LTIP Compen-
Principal Position Year Salary($) Bonus($) sation($) Awards($)(5) (Shares) Payouts($)(1) sation($)(2)
- ------------------------------------------------------------------------------------------------------------------------------
M.R. Bonsignore 1997 882,308 1,115,410 21,906 -0- 85,000 1,764,692 43,655
Chairman of the Board 1996 747,310 820,000 3,815 -0- -0- -0- 44,276
and Chief 1995 682,917 541,616 31,714 -0- 113,131 -0- 17,682
Executive Officer
- ------------------------------------------------------------------------------------------------------------------------------
G. Ferrari 1997 536,854 542,278 127,572(6) 350,000 49,379 712,342 -0-
President and Chief
Operating Officer (3)
- ------------------------------------------------------------------------------------------------------------------------------
E.D. Grayson 1997 322,513 270,519 3,451 -0- 11,500 376,082 23,918
Vice President 1996 311,760 200,000 2,834 -0- -0- -0- 23,714
and General Counsel 1995 300,420 189,781 5,693 108,750 29,091 -0- 14,308
- ------------------------------------------------------------------------------------------------------------------------------
W.M. Hjerpe 1997 361,531 320,000 171,282(6) -0- 21,500 545,912 20,484
President, Honeywell 1996 296,107 237,522 5,867 -0- 10,213 -0- 19,975
Europe 1995 273,739 200,999 4,420 595,563 15,275 -0- 6,546
- ------------------------------------------------------------------------------------------------------------------------------
M. I. Tambakeras 1997 347,690 285,221 2,923 -0- 21,500 471,750 19,763
President, Industrial 1996 285,462 208,448 68,283 -0- -0- -0- 19,260
Control 1995 246,360 159,651 22,749 908,770 72,040 -0- 7,116
- ------------------------------------------------------------------------------------------------------------------------------
D.L. Moore, Former 1997 386,611 413,565 65,504 -0- 18,500 683,899 367,498
President and Chief 1996 631,360 606,748 9,382 -0- 67,242 -0- 37,804
Operating Officer (4) 1995 595,104 471,973 19,253 -0- 56,566 -0- 15,401
- ------------------------------------------------------------------------------------------------------------------------------
(1) Represents the payout in January 1998 of stock awards for the 1996-1997
performance period of the Performance Share Program described in the Report
on Executive Compensation on page 18. The amounts include a combination of
performance shares and performance units that were converted to shares upon
payout.
(2) Compensation reported represents (a) the value of Company contributions of
Honeywell stock to the Company 401(k) Plan, (b) the value of premiums paid
by the Company on split-dollar life insurance, and (c) retirement
compensation. For 1997, the dollar value of each benefit is: M.R.
Bonsignore; (a) $5,460, (b) $38,195; E.D. Grayson (a) $5,460, (b)$18,458;
W.M. Hjerpe; (a) $5,460, (b) $15,024; M.I. Tambakeras; (a) $5,460, (b)
$14,303; and D.L. Moore; (a) $5,460, (b) $31,167, and (c) $330,871.
(3) G. Ferrari became an executive officer on April 15, 1997.
(4) D.L. Moore retired as President and Chief Operating Officer on June 30,
1997.
(5) As of December 31, 1997, the number and value of total shares of restricted
stock held by the above officers is: M.R. Bonsignore (47,343 shares;
$3,242,995);G. Ferrari (24,358 shares; $1,668,523); E.D. Grayson (6,893
shares; $472,170); W.M.Hjerpe (22,389 shares; $1,533,646); M.I. Tambakeras
(23,654 shares; $1,620,299); and D.L. Moore (12,355 shares; $846,317).
Dividends are paid on all restricted common stock at the same rate as paid
on Honeywell's common stock.
(6) Amounts principally represent relocation allowances in connection with
foreign assignments.
15
OPTION GRANTS IN LAST FISCAL YEAR
- --------------------------------------------------------------------------------
Potential Realizable Value at Assumed Annual
Rates of Stock Price Appreciation for Option
Individual Grants (1) Term (2)
--------------------------------------------------- ------------------------------------
Number of % of Total
Securities Options
Underlying Granted to
Options Employees Exercise or
Granted in Fiscal Base Price Expiration
Name (#) Year ($/Sh) Date 0% ($) 5% ($) 10% ($)
- ----- --------- -------- ---------- ---------- ------- ----------- ------------
M.R. Bonsignore......... 85,000 3.9 75.19 2/17/07 0 4,019,360 10,185,847
G. Ferrari.............. 31,500 1.4 75.19 2/17/07 0 1,489,527 3,774,755
7,324 .33 70.81 7/17/05 0 241,238 574,571
5,555 .25 71.68 7/17/05 0 185,231 441,177
5,000 .22 75.06 7/17/05 0 174,574 415,795
E.D. Grayson............ 11,500 .5 75.19 2/17/07 0 543,796 1,378,085
W.M. Hjerpe............. 21,500 1.0 75.19 2/17/07 0 1,016,662 2,576,420
M.I. Tambakeras......... 21,500 1.0 75.19 2/17/07 0 1,016,662 2,576,420
D. L. Moore............. 18,500 .8 75.19 7/31/02 0 874,802 2,216,920
All Shareowners (3)..... N/A N/A N/A N/A 0 5,989,709,791 15,179,100,617
All Optionees........... 1,529,461 100.0 74.76 0 69,430,854 175,195,396
All Optionees Gain as %
of All Shareowners'
Gain.................. N/A N/A N/A N/A N/A 1.16% 1.16%
- ------------------------------------------------------------------------------------------------------------------------------------
(1) In general, stock options become exercisable one year after the grant date,
and the option exercise price may be paid in cash, shares or a combination.
Stock options are subject to a reload feature: when an option is exercised
with the payment of the exercise price by delivery of previously-owned
shares of the Company's common stock, a reload option is granted for the
number of shares used to pay the exercise price, with a new exercise price
equal to the market value of the Company's common stock on the date of
exercise and a term expiring on the expiration date of the original option.
The options shown above for G. Ferrari include grants of reload stock
options.
(2) The dollar amounts under these columns are the result of calculations at 0%
and at the 5% and 10% rates set by the Securities and Exchange Commission
and are not intended to forecast possible future appreciation, if any, in
the Company's stock price.
(3) For "All Shareowners" the gain is calculated from $75.19, the fair market
value of the Company's common stock on February 18, 1997, when stock options
were granted to executive officers, and is measured over the ten-year period
ending February 17, 2007, when those stock options expire.
AGGREGATED OPTION EXERCISES IN LAST FISCAL
YEAR AND FY-END OPTION VALUES
- --------------------------------------------------------------------------------
Number of Securities
Underlying Value of Unexercised
Unexercised Options In-the-Money Options
at at
FY-End (#) FY-End ($)
Shares Acquired Value ------------------------ -----------------------
Name on Exercise(#) Realized($) Exercisable Unexercisable Exercisable Unexercisable
- ----- ------------ ---------- --------- ----------- --------- -----------
M.R. Bonsignore............ 3,282 142,531 331,565 140,000 11,351,353 1,978,284
G. Ferrari................. 40,404 1,202,221 29,999 31,500 145,062 0
E.D. Grayson............... 0 0 77,353 11,500 2,376,875 0
W.M. Hjerpe................ 0 0 71,385 46,500 1,771,047 578,907
M.I. Tambakeras............ 0 0 54,040 46,500 1,455,120 578,907
D.L. Moore................. 37,000 1,545,971 67,242 18,500 1,151,002 0
16
LONG-TERM INCENTIVE PLAN--AWARDS IN LAST FISCAL YEAR
- --------------------------------------------------------------------------------
The table identifies performance units awarded under the Performance Share
Program, which is described in the Report on Executive Compensation on page 18.
Estimated future payouts under
Number of Performance or non-stock price-based plans
shares, units other period ------------------------------------
or other until maturation Threshold Target/Maximum
Name rights (#)(1) or payout (#) (#)
- --------------------------------------------------------------------------------------------------
G. Ferrari............... 3,187 1 year 1,593 3,187
- --------------------------------------------------------------------------------------------------
(1) Additional units that were awarded for the 1996-1997 performance period due
to Mr. Ferrari's promotion to President and Chief Operating Officer in April
1997.
REPORT ON EXECUTIVE COMPENSATION
- --------------------------------------------------------------------------------
COMPENSATION PHILOSOPHY
The Personnel Committee of the Board of Directors adopted a management
compensation program based on the following compensation principles:
o Honeywell provides the level of total compensation necessary to attract and
retain the best executives in its industries.
o Compensation is linked to performance and to the interests of shareowners.
o Incentive compensation programs recognize both individual and team
performance.
o Compensation balances rewards for short- term vs. long-term results.
o Compensation programs include features that encourage executives to make a
long-term career commitment to Honeywell and its shareowners.
o Plans include measurements based on continuous growth and performance
relative to peer companies.
COMPENSATION METHODOLOGY
Each year the Personnel Committee reviews market data and assesses
Honeywell's competitive position in each component of executive compensation,
including base salary, annual incentive and long-term incentive compensation.
The primary market comparison for cash compensation (base salary and annual
incentive) is comprised of two broad-based surveys, each including several
hundred participating companies. The Committee believes that a broad mix of
companies is representative of the market in which Honeywell competes to recruit
executives. Target compensation is based on the median of actual compensation,
adjusted to reflect differences in revenue among these companies. Several
additional surveys are used to verify the results of the primary survey and to
allow for a broader analysis of trends in executive compensation.
The primary market comparison for long-term compensation is a bi-annual
survey of 40 high-tech manufacturing companies. This survey was selected because
of the technical competence of the survey firm and because the companies operate
in businesses similar to Honeywell's and compete for executives with experience
and skills similar to those Honeywell requires. Several additional broad-based
surveys were also consulted, for purposes of verifying the findings of the
primary survey and determining stock option grant practices and trends.
The descriptions below of the components of compensation contain additional
detail regarding compensation methodology. Compensation decisions regarding
individual executives may also be based on factors such as individual
performance, level of responsibility or unique skills of the executive.
17
COMPONENTS OF COMPENSATION
O BASE SALARY
The Corporate Executive Compensation Plan provides for annual cash
compensation consisting of base salary and annual incentive. The relationship
between base salary and annual incentive is based on salary grade. Executives at
higher grade levels have a larger percentage of their total cash compensation
contingent on the accomplishment of business objectives.
Annual base salary is designed to compensate executives for their sustained
performance. Salary is based on: (1) executive grade level; (2) individual
performance; and (3) spending guidelines approved by the Committee. The
Committee approves all salary increases for executive officers. Salaries for
executive officers for 1997 were projected to be at the median of the
compensation peer group.
O ANNUAL INCENTIVE
The Corporate Executive Compensation Plan establishes a fixed percentage of
annual salary as an executive's target "on-plan" annual incentive opportunity.
The Committee establishes the percentage based on comparative survey data. For
executive officers, the percentage ranged from 40% of salary to 70% of salary,
in the case of the CEO. Annual incentive for 1997 was targeted at the median of
the compensation peer group.
Annual incentive payments for 1997 were based 50% on net income and 50% on
economic value added. Under the Plan, payouts may range from 0% to 200% of the
target incentive. Overall, the Company exceeded the net income and economic
value added objectives for 1997. However, since targets vary by business units,
payouts under the Plan ranged from 0% to approximately 199% of the individual's
"on-plan" target incentive. The Bonus column of the Summary Compensation table
on page 15 contains the annual incentive payment for 1997 performance for each
of the most highly compensated executive officers.
O LONG TERM INCENTIVE COMPENSATION
The principal components of long-term compensation are stock options,
performance shares, and restricted stock.
Stock Options
Based on market surveys of long-term incentive compensation, the Committee
approves a target number of option shares for each executive grade level.
Management makes recommendations to the Committee as to the number of options,
if any, to be granted to each executive based on the following criteria:
o the executive's ability to impact financial performance in terms of
profitability and revenue;
o the executive's past performance;
o expectations of the executive's future potential.
The Committee reviews and approves stock option grants to executive
officers. Options granted have an exercise price equal to the fair market value
of Honeywell common stock on the date of grant and are typically exercisable one
year from the date of grant.
Performance Share Program
The Performance Share Program provides grants of performance share units
which executives may earn if certain objectives are met over a specified
performance period. The target number of performance share units varies by grade
level. The Committee selects the eligible participants for the program, approves
the performance objectives, and approves final awards paid to executives at the
end of the performance period.
For the 1996-97 performance period:
o One-third of the total grant was based on cumulative pre-tax profit;
18
o One-third of the total grant was based on Honeywell's shareholder return
(stock appreciation plus dividends) compared to a group of selected peer
companies; (For purposes of measuring the total shareowner return objective,
Honeywell constructed a group of 19 peer companies which are included in the
performance graph on page 21.) and
o One-third of the total grant was based on cumulative revenue.
Overall, the Company exceeded both its profit and revenue objectives,
resulting in a 100% payout for these objectives. Total shareowner return ranked
in the second quartile for the period compared to the peer group, resulting in
a 50% payout for this objective. Since the revenue and profit objectives varied
by business unit, payouts under the program ranged from approximately 16% to
83% of the targeted number of shares. See the Long-Term Incentive Plan Payout
column in the Summary Compensation table on page 15 for the dollar value of
awards paid out to the most highly compensated executive officers for the
1996-1997 performance period.
Restricted Stock
The Committee occasionally grants shares of restricted stock with fixed
restriction periods to ensure the retention of key executives or as part of the
compensation to a new executive hired from outside the Company.
COMPENSATION OF THE CHIEF EXECUTIVE OFFICER
Michael R. Bonsignore became Chairman of the Board and Chief Executive
Officer at the 1993 Annual Meeting of Shareowners. The non-employee directors
meet annually, in private, to review Mr. Bonsignore's performance. The Personnel
Committee uses this performance evaluation in determining Mr. Bonsignore's
compensation.
Mr. Bonsignore's total annual compensation for 1997, including salary and
annual incentive target, was approximately at the median for his position, in
both of the primary and secondary surveys used to determine cash compensation.
In 1997, the Committee approved a 14.6% salary increase for Mr. Bonsignore.
In addition to his performance, the increase was based on an external study that
indicated that his compensation was below the median compensation of other CEOs
with similar responsibilities.
In 1995, shareowners approved the Honeywell Senior Management Performance
Incentive Plan, which was designed to preserve the Company's tax deduction for
incentive compensation paid to certain executives. Incentive compensation in any
given year under that plan for Mr. Bonsignore may be either (1) 35% of an
incentive compensation pool consisting of 1% of income from continuing
operations before income taxes, or (2) a lesser amount based on criteria used to
determine payouts under the Corporate Executive Compensation Plan and
Performance Share Program.
For 1997, the Committee decided that Mr. Bonsignore's annual incentive
payment be based on the objectives established under the Corporate Executive
Compensation Plan described on page 18. Based on the Company's performance for
1997, Mr. Bonsignore received a payment of $1,115,410, representing 181% of his
target incentive.
For 1996-97 performance, the Committee also decided that Mr. Bonsignore
receive a payout based on the criteria used under the Performance Share Program,
resulting in a payout of 25,437 shares. See the Long-Term Incentive Plan Payout
column in the Summary Compensation table on page 15 for the dollar amount of
this award.
Mr. Bonsignore received a grant of 85,000 stock options in 1997.
19
IMPACT OF APPLICABLE TAX CODE PROVISION
The Committee has reviewed the potential consequences for the Company of
Section 162(m) of the Internal Revenue Code, which imposes a limit on tax
deductions for annual compensation in excess of one million dollars paid to any
of the five most highly compensated executive officers. Honeywell has designed
most of its executive compensation programs to preserve its ability to deduct
compensation paid to executives under these programs. As a result, this
provision had no impact on the Company in 1997. However, the provision is
expected to have some impact on the Company in 1998 due to the scheduled vesting
of shares of restricted stock, which were granted prior to the effective date of
Section 162(m) and do not qualify under that provision.
EMPLOYMENT AGREEMENTS
When Mr. Moore became President and Chief Operating Officer in 1993, he
entered into an employment agreement with the Company, which was amended in
1995. Under the terms of the agreement Mr. Moore is entitled to receive 60
monthly payments of $34,000, which commenced upon his retirement from the
Company on June 30, 1997.
When Mr. Ferrari became President of Honeywell Europe in 1992, he entered
into an employment agreement with Honeywell Europe which provided for certain
salary and benefits in accordance with Belgian law. When Mr. Ferrari was
promoted to President and Chief Operating Officer of Honeywell in 1997, his
compensation was increased to reflect his promotion and his benefits were
adjusted to accommodate his relocation to the United States. 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 the Company. Please see the Summary Compensation table on page
15 for details regarding Mr. Ferrari's compensation for 1997.
SUBMITTED BY THE PERSONNEL COMMITTEE OF THE BOARD OF DIRECTORS:
A.B. Rand (Chairperson)
A.J. Baciocco, Jr.
J.J. Howard
B.Karatz
M.W. Wright
INSIDER PARTICIPATION AND DIRECTOR INTERLOCKS
James J. Howard, Chairman and Chief Executive Officer and President of
Northern States Power Company, is a member of the Honeywell Board of Directors.
Giannantonio Ferrari, President and Chief Operating Officer of Honeywell, became
a member of the Board of Directors of Northern States Power Company in 1997. Mr.
Howard has been a member of the Honeywell Personnel Committee since he joined
the Honeywell Board in 1990. However, since the time that Mr. Ferrari joined the
Northern States Power Board, Mr. Howard has abstained from voting on all matters
considered by the Personnel Committee or the full Board dealing with Mr.
Ferrari's compensation. Mr. Ferrari is not a member of the compensation
committee of Northern States Power Company.
20
PERFORMANCE GRAPH
- --------------------------------------------------------------------------------
This graph compares the cumulative total shareowner return on Honeywell's
common stock for the last five fiscal years with the cumulative total return of:
o The S&P 500 Index,
o A composite of the S&P Electrical Equipment Index and the S&P Aerospace and
Defense Index, and
o A custom peer group of 19 companies which Honeywell uses to determine various
aspects of incentive compensation.
Because of the custom peer group's linkage to Honeywell's incentive
compensation, we are replacing the composite S&P Electrical Equipment and
Aerospace and Defense Index that we used in prior proxy statements with the
custom peer group. SEC rules require that we use both comparisons in the year in
which we implement a change.
The graph assumes the investment of $100 in Honeywell's common stock, the
S&P 500 Index, the Composite Index, and the Custom Peer Group identified below
at the market close on December 31, 1992, and the reinvestment of all dividends.
CUMULATIVE TOTAL SHAREHOLDER RETURN
[The following table represents the plot points of a line chart.]
Composite Custom
Honeywell S&P 500 Index Peer Group
Dec-92 100 100 100 100
Dec-93 106 110 123 124
Dec-94 100 112 127 124
Dec-95 159 153 185 174
Dec-96 218 189 250 232
Dec-97 231 252 330 317
*Custom peer group consists of AlliedSignal Inc., AMP Inc., Cooper Industries,
Dover Corp., Eaton Corp., Emerson Electric Co., General Electric Company,
General Signal Corp., Johnson Controls Inc., Litton Industries, Parker-Hannifin
Corp., Raytheon Co., Rockwell International, Siebe Plc ADR, TRW Inc., Tyco
International, United Technologies, CBS Corp. (previously Westinghouse Electric)
and York International.
21
CHANGE IN CONTROL AND TERMINATION ARRANGEMENTS
- --------------------------------------------------------------------------------
COMPENSATION AND RETIREMENT PLANS
Several of the Company's compensation and retirement plans provide for
enhanced employee benefits upon "a change in control" of the Company. A change
of control will generally be deemed to have occurred upon (1) a third party's
acquisition of 30% or more of the Company's stock, (2) a change in the majority
of the members of the Company's Board of Directors, (3) a merger, consolidation
or liquidation of the Company, or (4) a sale of all or substantially all of the
assets of the Company.
In general, upon a change in control, (1) all options become immediately
exercisable, (2) restricted shares become immediately vested, and (3)
performance-based awards are paid out.
The Company's qualified retirement plan contains provisions, which specify
how assets in excess of those needed to satisfy the plan's obligations are to be
directed. In general, those assets will be applied towards post-retiree medical
benefits to participants under age 65 and to payment of increased retirement
benefits on a proportional basis to both active and retired participants.
The Company's supplementary retirement plans generally provide for the
payment of retirement benefits in excess of those provided by the Company's
qualified retirement plans. Upon a change in control, participants' accrued
benefits under any of the plans become fully vested and are paid out in a lump
sum following termination of employment after the change in control.
TERMINATION AGREEMENTS
The Company has entered into executive termination agreements with 20 of
its executives. These agreements will be automatically extended each January 1
unless the Company notifies an executive by October 1 of the preceding year that
it does not wish to extend the term of the executive's agreement. If a change in
control occurs at any time during the term of an agreement, the term is
automatically extended for a period of thirty-six months, but not beyond the end
of the month in which the executive would reach age 65.
In general, these agreements entitle the executive to a lump sum payment of
three times (in some cases, two times) the executive's salary and on-plan
incentive bonus if either the executive's employment is terminated (other than
for cause) or his or her duties are diminished following a change in control.
The executive will also be entitled to medical, life insurance and disability
coverage for up to three years (in some cases, two years). In addition, the
Company will compensate the executive for any excise tax liability he or she may
incur as a result of payments made under the agreement.
22
PENSION PLAN TABLE
- --------------------------------------------------------------------------------
AVERAGE COMPENSATION
(Average of Salaries Plus Incentive Payments YEARS OF SERVICE
During Highest 60 Consecutive Months of ---------------------------------------------------------------
120 Months Prior to Retirement) 15 20 25 30 35
- ---------------------------------------------------------------------------------------------------------------
$ 200,000 $ 45,516 $ 60,688 $ 75,860 $ 91,032 $ 96,032
- ---------------------------------------------------------------------------------------------------------------
400,000 93,516 124,688 155,860 187,032 197,032
- ---------------------------------------------------------------------------------------------------------------
600,000 141,516 188,688 235,860 283,032 298,032
- ---------------------------------------------------------------------------------------------------------------
800,000 189,516 252,688 315,860 379,032 399,032
- ---------------------------------------------------------------------------------------------------------------
1,000,000 237,516 316,688 395,860 475,032 500,032
- ---------------------------------------------------------------------------------------------------------------
1,200,000 285,516 380,688 475,860 571,032 601,032
- ---------------------------------------------------------------------------------------------------------------
1,400,000 333,516 444,688 555,860 667,032 702,032
- ---------------------------------------------------------------------------------------------------------------
1,600,000 381,516 508,688 635,860 763,032 803,032
- ---------------------------------------------------------------------------------------------------------------
1,800,000 429,516 572,688 715,860 859,032 904,032
- ---------------------------------------------------------------------------------------------------------------
2,000,000 477,516 636,688 795,860 955,032 1,005,032
- ---------------------------------------------------------------------------------------------------------------
2,200,000 525,516 700,688 875,860 1,051,032 1,106,032
- ---------------------------------------------------------------------------------------------------------------
2,400,000 573,516 764,688 955,860 1,147,032 1,207,032
- ---------------------------------------------------------------------------------------------------------------
Honeywell and its subsidiaries maintain a variety of pension and retirement
plans for their employees. The table illustrates the annual benefits payable by
the Company in specified remuneration and years-of-service classifications at
normal retirement under the Honeywell Retirement Benefit Plan, which is a
defined benefit plan that does not require employee contributions. Compensation
used for pension formula purposes includes salary and annual bonus reported as
set forth in the table on page 15. Contributions by Honeywell, when required by
the Plan, are determined on an actuarial basis and are not made primarily for
the benefit of any individual. The credited years of service for the current
executive officers in the table on page 15 are: M.R. Bonsignore -- 27 years; G.
Ferrari -- 37 years; E.D. Grayson -- 5 years; W.M. Hjerpe -- 23 years; and M. I.
Tambakeras -- 18 years. Mr. Moore retired in June 1997 after 35 years of
service. A portion of the benefits shown in the table may be paid from the
Company's supplementary retirement plans, rather than from plan trusts, due to
limitations imposed by the Internal Revenue Code, which restricts the amount of
benefits payable under tax-qualified plans.
OTHER INFORMATION
- --------------------------------------------------------------------------------
SUBMISSION OF DIRECTOR NOMINATIONS AND SHAREOWNER PROPOSALS
The Nominating and Governance Committee of the Board of Directors will
consider qualified nominees for director recommended by shareowners.
o In order for a shareowner proposal to be considered for inclusion in
Honeywell's proxy statement for the 1999 Annual Meeting, the proposal must be
received at the Company's offices no later than November 3, 1998. Securities
and Exchange Commission rules contain standards as to what shareowner
proposals are required to be included in a proxy statement.
o In addition, the Company's By-laws provide that any shareowner wishing to
make a nomination for director, or wishing to introduce a proposal at the
Company's Annual Meeting of Shareowners must notify the Company not more than
75 days and not less than 50 days prior to the meeting, and that notice must
meet other requirements contained in the By-laws.
Any shareowner who wishes to submit a shareowner proposal or a nomination
for
23
director, or who would like to receive a copy of the relevant section of the
By-laws, should contact the Vice President and Corporate Secretary, Honeywell
Plaza, Minneapolis, Minnesota, 55408.
EXPENSES OF SOLICITATION
Honeywell pays the cost of preparing, assembling and mailing this
proxy-soliciting material. In addition to the use of the mail, proxies may be
solicited personally, by telephone or telegraph, or by Honeywell officers and
employees without additional compensation. Honeywell pays all costs of
solicitation, including certain expenses of brokers and nominees who mail proxy
material to their customers or principals. In addition, Georgeson & Company Inc.
has been retained to assist in the solicitation of proxies for the 1998 Annual
Meeting of Shareowners at a fee of approximately $18,000 plus associated costs
and expenses.
By Order of the Board of Directors,
/s/ Kathleen Gibson
- -------------------
Kathleen M. Gibson
Vice President and Corporate Secretary
SEE ENCLOSED PROXY CARD -- PLEASE VOTE BY TELEPHONE OR SIGN CARD AND MAIL
PROMPTLY.
24
EXHIBIT A
HONEYWELL EMPLOYEE STOCK PURCHASE PLAN
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1. PURPOSE. The purpose of the Honeywell Employee Stock Purchase Plan (the
"Plan") is to offer employees of Honeywell Inc., a Delaware corporation (the
"Company"), and its Subsidiaries (as defined below) an added incentive to invest
in the Company's common stock, par value $1.50 per share (each a "Share") by
permitting eligible employees to purchase Shares at below-market prices, and
increase employee ownership of the Company's Shares. The Plan is intended to
qualify as an "employee stock purchase plan" within the meaning of Section 423
of the Internal Revenue Code of 1986, as amended (the "Code").
2. DEFINITIONS. Capitalized terms used in this Plan shall have the following
meanings unless defined elsewhere herein.
(a) "BOARD OF DIRECTORS" means the Board of Directors of Honeywell Inc.
(b) "COMMITTEE" means the group of individuals administering the Plan, which
shall be the Savings Plan Committee of the Company or any other committee
designated or established by the Board of Directors for the purpose of
administering the Plan.
(c) "COMPENSATION" means all gross earnings and commissions, including payments
for overtime, shift premium, incentive compensation, incentive payments,
bonuses and other compensation. Compensation shall not include expense
reimbursements, allowances and payments attributable to foreign
assignments, long-term disability and workers' compensation payments,
lump-sum payments due to death, termination of employment or layoff,
non-taxable fringe benefits, amounts received by selling vacation, and
payments or discounts under any stock purchase or option plan.
(d) "EXERCISE DATE" means the last Trading Day of each Purchase Period.
(e) "FAIR MARKET VALUE" means the value of a Share on a given date, determined
based on the arithmetic mean between the high and low sale prices of a
Share on such date, as reported in a summary of composite transactions for
stock listed on the New York Stock Exchange or, if the New York Stock
Exchange is not open for trading on such date, the fair market value of a
Share shall be the arithmetic mean between the high and low sale prices of
a Share, as so reported, on the nearest date on which the New York Stock
Exchange is open for trading.
(f) "PARTICIPANT" means any individual who is eligible to participate in the
Plan and enrolls in the Plan in the manner set forth in Section 4 hereof.
(g) "PURCHASE PERIOD" means the approximate three-month period during which an
option to purchase Shares is granted and may be exercised, beginning on the
first Trading Day of each calendar quarter commencing on January 1, April
1, July 1 and October 1, and ending on the Exercise Date of each such
calendar quarter.
(h) "PURCHASE PRICE" means an amount equal to 85% of the lower of the Fair
Market Value of a Share on the first Trading Day of a Purchase Period or on
the Exercise Date.
(i) "SUBSIDIARY" means a corporation, of which not less than 50% of the voting
shares are held by the Company or a Subsidiary, within the meaning of
Sections 424(e) and 424(f) of the Code, whether or not such corporation now
exists or is hereafter organized or acquired by the Company or a
Subsidiary, which from time to time, may adopt the Plan.
A-1
(j) "TRADING DAY" means any day on which the New York Stock Exchange is open for
trading.
3. PURCHASE PERIODS. The Plan shall be implemented by consecutive Purchase
Periods, with the first Purchase Period commencing on the first Trading Day on
or after July 1, 1998 and each subsequent Purchase Period commencing on the
first Trading Day of each calendar quarter thereafter, continuing until the Plan
is terminated in accordance with Sections 19 or 22 hereof.
4. ELIGIBILITY; PARTICIPATION.
(a) ELIGIBLE EMPLOYEES. Any individual who, as of the beginning of a Purchase
Period, is an employee of the Company or any Subsidiary for tax purposes
and whose customary employment with the Company or such Subsidiary is at
least twenty (20) hours per week and more than five (5) months in any
calendar year shall be eligible to participate in the Plan. For purposes of
the Plan, the employment relationship shall be treated as continuing intact
while the individual is on medical leave, maternity leave or any other
leave of absence approved by the Company or any Subsidiary. Where the
period of leave exceeds 90 days and the individual's right to reemployment
is not guaranteed either by statute or by contract, the employment
relationship shall be deemed to have terminated on the 91st day of such
leave.
(b) ENROLLMENT. Any individual who is eligible to participate in the Plan may
do so by enrolling in the Plan and authorizing payroll deductions in the
manner prescribed by the Committee.
(c) LIMITATIONS ON PARTICIPATION. Notwithstanding any provisions of the Plan,
no Participant shall be granted an option under the Plan if immediately
after the grant, (i) such Participant (or any other person whose stock
would be attributed to such Participant pursuant to Section 424(d) of the
Code) would own capital stock of the Company and/or hold outstanding
options to purchase any class of capital stock possessing five percent (5%)
or more of the total combined voting power or value of all classes of the
capital stock of the Company or any subsidiary thereof, or (ii) the
Participant's rights to purchase capital stock under all employee stock
purchase plans of the Company and its subsidiaries would accrue at a rate
which exceeds Twenty-Five Thousand Dollars ($25,000) worth of capital stock
(determined at the Fair Market Value of the Shares at the time such option
is granted) for each calendar year in which such option is outstanding at
any time.
5. PAYROLL DEDUCTIONS.
(a) AMOUNT. At the time a Participant enrolls in the Plan, the Participant
shall elect to have payroll deductions made on each pay day during each
Purchase Period in an amount not to exceed ten percent (10%) of the
Compensation which the Participant receives on each such pay day. All
payroll deductions shall be credited to an account maintained for
Participants under the Plan and shall be withheld in whole percentages
only. A Participant may not make any additional payments into such account.
(b) COMMENCEMENT. Payroll deductions shall commence in the first practicable
payroll period of the Purchase Period following the Participant's
enrollment in the Plan and shall end in the last practicable payroll period
of the Purchase Period during which the Participant is enrolled in the
Plan, unless suspended by the Participant pursuant to Subsection (c)
hereinbelow or the Participant ceases to participate in the Plan for any of
the reasons stated in Sections 11 or 12 hereof.
A-2
(c) ADJUSTMENTS. A Participant may increase or decrease the rate of payroll
deductions during a Purchase Period by notifying the Company thereof in the
manner prescribed by the Committee, and such change will be effective with
the next practicable payroll period. In the event a Participant suspends
all payroll deductions, the Participant shall not be entitled to renew same
until a subsequent Purchase Period. The Committee may, in its discretion,
limit the number of payroll deduction rate changes and prescribe the
effective dates thereof during any Purchase Period.
Notwithstanding the foregoing, to the extent necessary to comply with
Section 423(b)(8) of the Code and Section 4(c) hereof, the Company may
decrease a Participant's payroll deductions or suspend same at any time
during a Purchase Period.
6. GRANT OF OPTION. On the first Trading Day of each Purchase Period, each
Participant shall be granted an option to purchase, exercisable on each Exercise
Date, that number of Shares determined by dividing the aggregate amount of
payroll deductions accumulated during the Purchase Period and retained for the
Participant as of such Exercise Date, by the Purchase Price; provided however,
that in no event shall an Employee be permitted to purchase during each Purchase
Period more than 300 Shares (subject to any adjustment pursuant to Section 18
hereof), and provided further that such purchase shall be subject to the
limitations set forth in Sections 4(c) and 15 hereof. The option shall expire on
the last Trading Day of the Purchase Period.
7. EXERCISE OF OPTION. On each Exercise Date, each Participant's option to
purchase Shares under the Plan shall be exercised automatically, and the maximum
number of Shares subject to such option shall be purchased for the Participant
at the Purchase Price, with the aggregate amount of payroll deductions
accumulated for the Participant, unless the Participant otherwise requests as
provided for in Sections 11 or 12 hereof.
8. PARTICIPANT ACCOUNTS.
(a) STATEMENT. Individual accounts shall be maintained for each Participant.
Shares purchased for the account of each Participant shall be credited
thereto as of the close of business on the Exercise Date. As soon as
practicable following each Purchase Period, a statement of account shall be
sent to each Participant, setting forth the amount of payroll deductions,
the Purchase Price, the number of Shares purchased and the remaining cash
balance, if any, in the Participant's account.
(b) CUSTODY OF SHARES. Shares purchased for the account of each Participant
shall be held in a book-entry account maintained for the benefit of
Participants by the recordkeeper/custodian selected by the Company. A
Participant may request that a certificate for all or a portion of the
Shares credited to the Participant's account be issued, provided the
Participant pays any fees associated with the issuance of such Share
certificate.
(c) VOTING RIGHTS; DIVIDENDS. A Participant shall have all ownership rights with
respect to the Shares credited to the Participant's account, including the
right to vote such Shares. Any dividends or distributions which may be
declared thereon by the Board of Directors will be reinvested by the
recordkeeper/custodian in additional Shares for the Participant.
9. TAXES. At the time an option is exercised, in whole or in part, or at the
time all or a portion of the Shares purchased under the Plan are disposed of,
the Participant must make adequate provision for the Company's federal, state,
or other tax withholding obligations, if any,
A-3
which arise upon the exercise of the option or the disposition of the Shares. At
any time, the Company may, but shall not be obligated to, withhold from the
Participant's compensation the amount necessary for the Company to meet
applicable withholding obligations, including any withholding required to make
available to the Company any tax deductions or benefits attributable to any sale
or early disposition of Shares by the Participant.
10. PURCHASE FOR INVESTMENT PURPOSE. The Plan is intended to provide Shares for
investment and not for resale. The Company does not, however, intend to restrict
or influence any Participant in the conduct of such Participant's own affairs. A
Participant may therefore sell Shares purchased under the Plan at any time the
Participant chooses, subject to compliance with any applicable federal or state
securities laws. Because of certain federal tax requirements, each Participant
agrees, by enrolling in the Plan, to notify the Company of any sale or other
disposition of Shares held by the Participant less than two (2) years from the
beginning of the Purchase Period during which they were purchased or one (1)
year from the Exercise Date, whichever is longer, indicating the number of such
Shares disposed of. The Company shall be entitled to presume that a Participant
has disposed of any Shares for which the Participant has requested a
certificate. All certificates for Shares delivered under the Plan shall be
subject to such stock transfer orders and other restrictions as the Company may
deem advisable under all applicable laws, rules, and regulations, and the
Company may cause a legend or legends to be put on any such certificates to make
appropriate references to such restrictions.
11. WITHDRAWALS; TERMINATION OF PLAN PARTICIPATION.
(a) WITHDRAWALS. At any time during a Purchase Period, a Participant may
request a withdrawal of all or a portion of the Shares, dividends or other
distributions credited to the Participant's account, or the entire amount
of any payroll deductions which have not yet been used to purchase Shares,
by notifying the Company thereof in the manner prescribed by the Committee.
The Participant shall specify in such notice whether or not the amount of
any withdrawal attributable to Shares is to be distributed in cash or
Shares. If cash is elected, the number of full Shares credited to the
Participant's account which is approximately equal to the amount of the
withdrawal requested, based on the Fair Market Value of such Shares as of
the effective date of the notice, shall be sold, and the proceeds thereof,
less any brokerage fees or commissions charged pursuant to such sale, shall
be distributed together with any requested payroll deductions, dividends or
other distributions, as soon as practicable. If the Participant requests a
distribution in Shares, a certificate therefore shall be prepared at the
Participant's expense and issued as soon as practical thereafter.
(b) TERMINATION OF PARTICIPATION. A Participant may terminate participation in
the Plan by notifying the Company thereof in the manner prescribed by the
Committee. Following the effective date of such notice, the Participant's
payroll deductions shall cease with the next practicable payroll period.
The Participant shall specify in such notice whether or not the Shares
credited to the Participant's account are to be distributed in cash or
Shares. If cash is elected, the Shares shall be sold as of the effective
date of such notice and the proceeds thereof, less any brokerage fees or
commissions charged pursuant to such sale, shall be distributed as soon as
practicable. If the Participant requests a distribution in Shares, a
certificate therefore shall be prepared at the Participant's expense and
issued as soon as practicable thereafter.
A-4
Unless the Participant otherwise requests, all payroll deductions,
dividends and other distributions, if any, credited for the Participant but
not yet used to purchase Shares, shall be applied to such purchase on the
next Exercise date. At the Participant's election, certificates
representing such additional Shares shall be prepared at the Participant's
expense and issued as soon as practicable thereafter, or such Shares shall
be sold and the proceeds of such sale, less any brokerage fees or
commissions, distributed to the Participant as soon as practicable
thereafter. If the Participant requests that such payroll deductions,
dividends and other distributions not be used to purchase additional
Shares, such amounts will be refunded to the Participant as soon as
practicable following the end of the Purchase Period.
(c) RENEWAL OF PARTICIPATION. If a Participant terminates participation in the
Plan, the Participant must re-enroll in the Plan to renew participation.
Termination of participation in the Plan shall not have any effect upon the
Participant's eligibility to participate in any similar plan which may
hereafter be adopted by the Company.
12. TERMINATION OF ELIGIBILITY. If a Participant ceases to be eligible to
participate in the Plan for any reason, the Participant's payroll deductions
shall cease as of the effective date of such termination of eligibility. The
Participant may then allow Shares credited to the Participant's account to
remain therein, or at any time, request withdrawal of all or a portion of such
account in the manner specified in Section 11(a) hereof.
Unless the Participant otherwise requests, all payroll deductions,
dividends and other distributions, if any, credited for the Participant but not
yet used to purchase Shares shall be applied to such purchase on the next
Exercise Date. If the Participant requests that such payroll deductions,
dividends and other distributions not be used to purchase additional Shares,
such amounts will be refunded to the Participant as soon as practicable
following the end of the Purchase Period.
Notwithstanding the foregoing, a Participant who receives payment in lieu
of notice of termination of employment shall be treated as continuing to be
eligible to participate in the Plan for the Participant's customary number of
hours per week of employment during the period in which the Participant is
subject to such payment in lieu of notice.
13. TRANSFER. A Participant may not assign, transfer, pledge or otherwise
dispose of (other than by will, the laws of descent and distribution or as
provided in Section 14 hereof) any payroll deductions credited for the
Participant or any right to exercise an option or receive Shares under the Plan.
Any such assignment, transfer, pledge or other disposition shall be without
effect, except that the Company may treat such act as an election by the
Participant to terminate participation in the Plan in accordance with Section 11
hereof.
14. PARTICIPANT BENEFICIARIES.
(a) DESIGNATION. A Participant may file with the Company, a written designation
of a beneficiary who is entitled to receive any Shares, accumulated payroll
deductions, dividends or other distributions, if any, held for the
Participant under the Plan, in the event of the Participant's death. If a
Participant is married and the designated beneficiary is not the spouse,
spousal consent shall be required for such designation to be effective. A
Participant may change the designation of a beneficiary at any time by
written notice, unless the current designated beneficiary is a spouse, in
which case, spousal consent shall be required.
A-5
(b) FAILURE OF DESIGNATION. If a Participant dies and there is no beneficiary
validly designated under the Plan who is living at the time of the
Participant's death, the first class of the following classes of automatic
beneficiaries with a member surviving the Participant and (except in the
case of the Participant's issue) in equal shares if there is more than one
member in such class surviving the Participant: (i) Participant's surviving
spouse, (ii) Participant's surviving issue per stirpes and not per capita,
(iii) Participant's surviving parents, (iv) Participant's surviving
brothers and sisters, or (v) the representative of the Participant's
estate, shall be entitled to receive any Shares, accumulated payroll
deductions, dividends and other distributions, if any, held for the
Participant.
15. SHARES. The maximum number of Shares which may be purchased under the Plan
is One Million (1,000,000), subject to adjustment upon changes in the
capitalization of the Company as set forth in Section 18 hereof. Shares
purchased for Participants' accounts may be purchased in the open market (on an
exchange or in negotiated transactions), may be previously acquired treasury
Shares, authorized and unissued Shares, or any combination of Shares purchased
in the open market, previously acquired treasury Shares or authorized and
unissued Shares. If, on a given Exercise Date, the number of Shares with respect
to which options are to be exercised exceeds the number of Shares then available
under the Plan, the Committee shall make a pro rata allocation of the Shares
remaining available for purchase in as uniform a manner as shall be practicable
and as it shall determine to be equitable.
16. ADMINISTRATION. The Plan shall be administered by the Committee, which shall
have full and exclusive discretionary authority to construe, interpret and apply
the terms of the Plan, to determine eligibility and to adjudicate all disputed
claims filed under the Plan. The Committee may change the frequency of payroll
deductions, limit the frequency or number of changes in the amount of payroll
deductions to be made during a Purchase Period, establish the exchange ratio
applicable to amounts withheld in a currency other than U.S. dollars, permit
payroll withholding in excess of the amount designated by a Participant in order
to adjust for delays or mistakes in the Company's processing of properly
completed withholding elections, establish reasonable waiting and adjustment
periods and/or accounting and crediting procedures to ensure that amounts
applied toward the purchase of Shares for each Participant properly correspond
with amounts withheld from the Participant's Compensation, and establish such
other limitations or procedures as the Committee determines in its sole
discretion are advisable and consistent with the Plan.
The Plan is intended to qualify as an "employee stock purchase plan" within
the meaning of Section 423 of the Code. Accordingly, the provisions of the Plan
shall be construed so as to extend and limit participation in a manner
consistent with the requirements of that section of the Code. Every finding,
decision and determination made by the Committee shall, to the fullest extent
permitted by law, be final and binding upon all parties.
17. USE OF FUNDS. No interest shall accrue on the payroll deductions of a
Participant in the Plan, and all payroll deductions which are received or held
by the Company under the Plan may be used by the Company for any corporate
purpose. The Company shall not be obligated to segregate payroll deductions.
18. ADJUSTMENTS UPON CHANGES IN CAPITALIZATION, DISSOLUTION, LIQUIDATION, CHANGE
IN CONTROL.
(a) CHANGES IN CAPITALIZATION. Subject to any required action by the
shareholders of the Company, the number of Shares covered by each option
under the Plan which has not
A-6
yet been exercised and the number of Shares which have been authorized for
issuance under the Plan but not yet placed under option, the maximum number
of Shares each Participant may purchase per Purchase Period (pursuant to
Section 6), as well as the Purchase Price, shall be proportionately
adjusted for any increase or decrease in the number of issued Shares
resulting from a stock split, reverse stock split, stock dividend,
combination or reclassification of the Shares, or any other increase or
decrease in the number of Shares effected without receipt of consideration
by the Company, provided, however, that conversion of any convertible
securities of the Company shall not be deemed to have been "effected
without receipt of consideration". Such adjustment shall be made by the
Committee, whose determination in that respect shall be final, binding and
conclusive. Except as expressly provided herein, no issuance by the Company
of shares of stock of any class, or securities convertible into shares of
stock of any class, shall affect, and no adjustment by reason thereof shall
be made with respect to, the number or price of Shares subject to, an
option.
(b) DISSOLUTION OR LIQUIDATION. In the event of the proposed dissolution or
liquidation of the Company, any Purchase Period then in progress shall be
shortened by setting a new Exercise Date (the "New Exercise Date"), and any
Purchase Period then in progress shall end on the New Exercise Date. The
New Exercise Date shall be established by the Committee, and shall be
before the date of the Company's proposed dissolution or liquidation. The
Committee shall notify each Participant in writing, at least ten (10)
business days prior to the New Exercise Date, that the Exercise Date for
the Participant's option has been changed to the New Exercise Date and that
the Participant's option shall be exercised automatically on the New
Exercise Date, unless prior to such date the Participant has withdrawn from
the Purchase Period, as provided for in Sections 11 or 12 hereof.
(c) CHANGE IN CONTROL. In the event of a Change in Control of the Company, any
Purchase Period then in progress shall be shortened by setting a new
Exercise Date (the "Change of Control Exercise Date") and any Purchase
Period then in progress shall end on the Change of Control Exercise Date.
The Change of Control Exercise Date shall be before the date of the
Company's proposed sale or merger. The Committee shall notify each
Participant in writing, at least ten (10) business days prior to the Change
of Control Exercise Date, that the Exercise Date for the Participant's
option has been changed to the Change of Control Exercise Date and that the
Participant's option shall be exercised automatically on the Change of
Control Exercise Date, unless prior to such date the Participant has
withdrawn from the Purchase Period, as provided for in Sections 11 or 12
hereof.
For purposes of this Plan, a "Change in Control" of the Company shall be
deemed to have occurred if the conditions set forth in any one or more of the
following paragraphs shall have been satisfied:
(i) Any "person", as such term is used in Sections 13(d) and 14(d) of the
Exchange Act (other than the Company, any subsidiary of the Company, any
"person" (as hereinabove defined) acting on behalf of the Company as
underwriter pursuant to an offering who is temporarily holding securities
in connection with such offering, any trustee or other fiduciary holding
securities under an employee benefit plan of the Company or any corporation
owned, directly or indirectly, by the shareholders of the Company in
substantially the same proportions as their ownership of stock of the
Company), is or becomes the "beneficial owner" (as defined in Rule 13d-3
under the Exchange Act), directly or
A-7
indirectly, of securities of the Company representing thirty percent (30%)
or more of the combined voting power of the Company's then outstanding
securities; or
(ii) During any period of not more than two consecutive years (not including any
period prior to the effective date of the Plan), individuals who at the
beginning of such period constitute the Board of Directors, and any new
director (other than a director designated by a person who has entered into
an agreement with the Company to effect a transaction described in
paragraphs (i), (iii) or (iv) of this Section 18(c)) whose election by the
Board of Directors or nomination for election by the Company's shareholders
was approved by a vote of at least two-thirds (2/3) of the directors then
still in office who either were directors at the beginning of the period or
whose election or nomination for election was previously so approved, cease
for any reason to constitute at least a majority thereof;
(iii)The shareholders of the Company approve a merger or consolidation of the
Company with any other person, other than (a) a merger or consolidation
which would result in the voting securities of the Company outstanding
immediately prior thereto continuing to represent (either by remaining
outstanding or by being converted into voting securities of the surviving
entity) more than fifty percent (50%) of the combined voting power of the
voting securities of the Company or such surviving entity outstanding
immediately after such merger or consolidation, or (b) a merger or
consolidation effected to implement a recapitalization of the Company (or
similar transaction) in which no "person" (as hereinabove defined) acquires
more than thirty percent (30%) of the combined voting power of the
Company's then outstanding securities; or
(iv) The shareholders of the Company approve a plan of complete liquidation of
the Company or an agreement for the sale or disposition by the Company of
all or substantially all of the Company's assets (or any transaction having
a similar effect).
19. AMENDMENT OR TERMINATION. The Board of Directors may at any time and for any
reason terminate or amend the Plan, and/or delegate authority for any amendments
to the Committee. Except as provided in Section 18 hereof, no such termination
or amendment shall affect options previously granted or adversely affect the
rights of any Participant with respect thereto. Without shareholder consent and
without regard to whether any Participant rights may have been considered to
have been "adversely affected," the Plan may be amended to change the Purchase
Periods, increase the Purchase Price or change the percentage of payroll
deductions. To the extent necessary to comply with Section 423 of the Code (or
any successor rule or provision or any other applicable law, regulation or stock
exchange rule), the Company shall obtain shareholder approval of any amendment
to the Plan in such a manner and to such a degree as required.
20. NOTICES. All notices or other communications by a Participant to the Company
under or in connection with the Plan shall be deemed to have been duly given
when received in the form specified by the Committee at the location, or by the
person, designated by the Committee for the receipt thereof.
21. CONDITIONS UPON ISSUANCE OF SHARES. Shares shall not be issued with respect
to an option unless the exercise of such option and the issuance and delivery of
Shares pursuant thereto shall comply with all applicable provisions of law,
domestic or foreign, including, without limitation, the Securities Act of 1933,
as amended, the Securities Exchange Act of 1934, as amended, the rules and
regulations promulgated thereunder, and the requirements of any stock exchange
upon which the Shares may then be listed.
A-8
As a condition to the exercise of an option, the Company may require a
Participant to represent and warrant at the time of any such exercise that the
Shares are being purchased only for investment and without any present intention
to sell or distribute such Shares if, in the opinion of counsel for the Company,
such a representation is required by any of the aforementioned applicable
provisions of law.
22. TERM. The Plan shall become effective upon its adoption by the Board of
Directors subject to the approval by the shareholders of the Company. It shall
continue in effect indefinitely thereafter until the maximum number of Shares
available for sale under the Plan (as provided in Section 15 hereof) has been
purchased, unless sooner terminated pursuant to Section 19 hereof.
A-9
================================================================================
HELP ELIMINATE DUPLICATE MAILINGS
SECURITIES AND EXCHANGE COMMISSION RULES PERMIT US TO SEND A SINGLE
COPY OF THE ANNUAL REPORT TO HONEYWELL SHAREOWNERS RESIDING IN THE SAME
HOUSEHOLD WITH SHAREOWNER CONSENT. IF THE ANNUAL REPORT ACCOMPANYING THIS
PROXY STATEMENT IS A DUPLICATE COPY FOR YOUR HOUSEHOLD, YOU MAY
DISCONTINUE RECEIVING THIS DUPLICATE COPY BY MARKING THE APPROPRIATE BOX
ON YOUR PROXY CARD OR SO INDICATING WHEN PROMPTED DURING TELEPHONE VOTING.
IF YOU CHOOSE TO DO SO, WE WILL NOT SEND FUTURE ANNUAL REPORTS TO THE
ACCOUNT ADDRESS LISTED ON THAT PROXY CARD, UNLESS YOU REQUEST THAT WE
RESUME SUCH MAILINGS.
================================================================================
Honeywell
- --------------------------------------------------------------------------------
Honeywell Inc.
Honeywell Plaza
Minneapolis, Minnesota 55408
RECYCLED PAPER WITH A MINIMUM
OF 10% POST CONSUMER WASTE
[RECYCLE LOGO]
PRINTED IN U.S.A.
Please mark
your vote as
indicated in [X]
this example
BOARD OF DIRECTORS RECOMMENDS A VOTE FOR
FOR AGAINST ABSTAIN
1. ELECTION OF DIRECTORS TO WITHHOLD 2. RATIFICATION OF [ ] [ ] [ ]
FOR all Nominees AUTHORITY (For all DELOITTE & TOUCHE LLP
(Except as marked Nominees listed) AS AUDITORS
to the contrary*) 3. APPROVAL OF HONEYWELL FOR AGAINST ABSTAIN
[ ] [ ] EMPLOYEE STOCK PURCHASE [ ] [ ] [ ]
PLAN.
NOMINEES: (01) A.J.Baciocco, Jr., (02) E.E.Bailey, (03) M.R.Bonsignore,
(04) G.Ferrari, (05) R.D.Fullerton, (06) J.J.Howard, (07) K.M.Hudson,
(08) B.Karatz, (09) A.B.Rand, (10) S.G.Rothmeier, (11) M.W.Wright
THIS PROXY WILL BE VOTED FOR ITEMS 1-3
IF NO CHOICE IS SPECIFIED.
*INSTRUCTION:
TO WITHHOLD AUTHORITY TO VOTE FOR ANY INDIVIDUAL
NOMINEE STRIKE A LINE THROUGH THE NOMINEE'S NAME ABOVE.
Will attend meeting [ ] I have noted comments [ ]
on reverse side
Discontinue Duplicate [ ] Change of Address [ ]
Annual Report
__________________________________________________________
__________________________________________________________
________________________________________________________
IF VOTING BY TELEPHONE, PLEASE FOLLOW INSTRUCTIONS BELOW
________________________________________________________
Signature(s)___________________________________________ Date________________
NOTE: Please sign as name appears hereon. Joint owners should each sign. When
signing as attorney, executor,
- --------------------------------------------------------------------------------
FOLD AND DETACH HERE
HELP THE COMPANY REDUCE EXPENSES BY VOTING BY TELEPHONE.
TO VOTE BY TELEPHONE, PLEASE FOLLOW THE INSTRUCTIONS BELOW.
o If you have a touch-tone telephone, call 1-800-840-1208. This is a TOLL-FREE
number. You may call 24 hours a day through April 19, 1998.
o You will be asked to enter a Control Number, which is located in the box at
the lower right hand corner of this instruction form.
o Following voting on either option below, you will also be asked if you plan
to attend the meeting in Minneapolis, and whether you wish to discontinue
receiving a duplicate Annual Report.
o Your vote on all proposals will be repeated and you will have an opportunity
to confirm it.
OPTION #1: To vote as the Board of Directors recommends on all proposals, press
1 now. If you wish to vote on each proposal separately, press 0 now. (When you
press 1 here, your vote will be confirmed and cast as you directed).
END OF CALL.
OPTION #2: If you choose to vote on each proposal separately, press 0 now, and
you will hear these instructions:
Proposal 1: To vote FOR ALL nominees, press 1; to WITHHOLD FOR ALL
nominees, press 9; to WITHHOLD FOR AN INDIVIDUAL NOMINEE, press
0. If you press 0, enter the two digit number that appears above,
next to the name of the nominee for whom you DO NOT WISH TO VOTE
FOR. If you have completed voting for all Directors, press 0.
Proposal 2: To vote FOR the auditors, press 1; to vote AGAINST, press 9;
and to ABSTAIN, press 0.
Proposal 3: To vote FOR the Plan, press 1; to vote AGAINST, press 9; and
to ABSTAIN, press 0. END OF CALL.
____________________________________________________
IF YOU VOTE BY TELEPHONE, THERE IS NO NEED TO RETURN
YOUR PROXY CARD BY MAIL. THANK YOU FOR VOTING.
____________________________________________________
HONEYWELL INC.
PROXY
Proxy Solicited on Behalf of The Board of Directors for Annual Meeting of
Shareowners on April 21, 1998
(I)(We) hereby appoint(s) M.R. Bonsignore, E.D. Grayson and K.M. Gibson, and
each of them, proxies (each with power of substitution) to attend the above
annual meeting of shareowners of Honeywell Inc. and any adjournment, to vote all
shares of Honeywell stock that (I)(we) hold, including any shares held under the
Dividend Reinvestment Plan administered by ChaseMellon Shareholder Services,
L.L.C., for all matters described on the reverse side of this card, and on any
other matter that may properly come before the meeting.
The Honeywell Savings and Stock Ownership Plan requires that the Trustee receive
voting instructions for shares held under the plan by April 16, 1998. To meet
this requirement, either complete this card and mail it to be received no later
than April 16, or vote by telephone by April 16. After April 16, your voting
instructions for Plan shares cannot be revoked. Also, you may not vote Plan
shares in person at the meeting. The Trustee is authorized to vote the Plan
shares for which instructions have been given on any other business that may
come before the meeting. ChaseMellon Shareholder Services, L.L.C. will tally the
vote on behalf of the Trustee.
THIS PROXY IS CONTINUED ON THE REVERSE SIDE.
PLEASE SIGN ON THE REVERSE SIDE AND MAIL PROMPTLY OR VOTE BY TELEPHONE.
________________________________________________________________
Comments:
____________
See Reverse
Side
_________________________________________________________________ ___________
- --------------------------------------------------------------------------------
FOLD AND DETACH HERE
IF VOTING BY MAIL, RETURN PROXY CARD IN THE ENCLOSED ENVELOPE. PLEASE BE SURE TO
SIGN AND DATE THE CARD.
ADMISSION TICKET
________________
HONEYWELL INC.
1998 ANNUAL MEETING OF SHAREOWNERS
TUESDAY, APRIL 21, 1998, 2:00 P.M.
MINNEAPOLIS CONVENTION CENTER
1301 SECOND AVENUE SOUTH
MINNEAPOLIS, MINNESOTA 55403
(612) 335-6000
The Meeting will be held in Room 101, which is next to the Ballroom.
Public entrances are located on Second Avenue S. and Grant St., which are
labeled as follows: Ballroom Entrance, Hall 1, Hall 2 & Hall 3. Handicap access
is adjacent to the Hall 3 entrance on Third Avenue and 12th Street (closest to
Wesley Church).
Parking is generally available underground in the Plaza Ramp, entering either on
Second Avenue S. or on 12th Street S. Elevators and a skyway connect the Ramp to
the Convention Center. Additional parking is available as indicated on the
adjacent map.
[MAP OF MINNEAPOLIS CONVENTION CENTER]
Annual Shareowners
Meeting Scheduled
for April 21
Honeywell's annual meeting of shareowners will be held April 21 at the
Minneapolis Convention Center in Minneapolis, Minnesota, at 2 p.m. Eleven
directors will be elected to the Honeywell board of directors at the meeting,
including, Michael Bonsignore and Giannantonio Ferrari. Shareowners will vote on
the election of directors, the ratification of the selection of Deloitte and
Touche as the company's auditors, and approval of the Honeywell Employee Stock
Purchase Plan.
Notice of the annual meeting and proxy statements were mailed to shareowners
beginning March 9. Employee shareowners are encouraged to vote by telephone or
mail your proxy cards promptly to Honeywell's transfer agent, ChaseMellon
Shareholder Services. If you are a shareowner and a participant in the Honeywell
Savings and Stock Ownership Plan, you will receive a single proxy card, covering
shares in the plans and shares of record, registered in the same name.
To receive a proxy statement, send your name and mail station to: Proxy Request.
c/o Kathy Curran at MN12-5292.