<PAGE>
SUBJECT TO AMENDMENT, AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON
NOVEMBER 9, 2000
REGISTRATION NO. 333-
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
------------------------
FORM S-4
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
------------------------------
GENERAL ELECTRIC COMPANY
(Exact name of registrant as specified in its charter)
<TABLE>
<S> <C> <C>
NEW YORK 3724 14-0689340
(State or other jurisdiction (Primary Standard Industrial (I.R.S. Employer Identification Number)
of Classification Code Number)
incorporation or organization)
</TABLE>
------------------------------
3135 EASTON TURNPIKE
FAIRFIELD, CT 06431-0001
(203) 373-2211
(Address, including zip code, and telephone number, including area code,
of registrant's principal executive offices)
------------------------------
ROBERT E. HEALING, ESQ.
GENERAL ELECTRIC COMPANY
3135 EASTON TURNPIKE
FAIRFIELD, CT 06431-0001
(203) 373-2211
(Name, address, including zip code, and telephone number,
including area code, of agent for service)
------------------------------
COPIES TO:
<TABLE>
<S> <C> <C>
John A. Marzulli Jr., Esq. Peter M. Kreindler, Esq. Peter Allan Atkins, Esq.
Mark Roppel, Esq. Honeywell International Inc. David J. Friedman, Esq.
Shearman & Sterling 101 Columbia Road Skadden, Arps, Slate, Meagher & Flom LLP
599 Lexington Ave. Morris Township, NJ 07962-2497 Four Times Square
New York, NY 10022 (973) 455-2000 New York, NY 10036-6522
(212) 848-4000 (212) 735-3000
</TABLE>
------------------------------
APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC: As soon as
practicable after this registration statement becomes effective.
------------------------------
If the securities being registered on this Form are being offered in
connection with the formation of a holding company and there is compliance with
General Instruction G, check the following box. / /
If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act of 1933, please check the
following box and list the Securities Act of 1933 registration statement number
of the earlier effective registration statement for the same offering. / /
If this Form is a post-effective amendment filed pursuant to Rule 462(d)
under the Securities Act of 1933, check the following box and list the
Securities Act of 1933 registration statement number of the earlier effective
registration statement for the same offering. / /
------------------------------
CALCULATION OF REGISTRATION FEE
<TABLE>
<CAPTION>
PROPOSED MAXIMUM PROPOSED MAXIMUM
TITLE OF EACH CLASS OF AMOUNT TO OFFERING PRICE AGGREGATE AMOUNT OF
SECURITIES TO BE REGISTERED BE REGISTERED PER SHARE OFFERING PRICE REGISTRATION FEE
<S> <C> <C> <C> <C>
Common Stock, par value $.06 per share 903,031,087(1) Not Applicable $44,536,337,675.16(2) $11,757,593.15
</TABLE>
(1) Based on the maximum number of shares of GE common stock, par value $.06 per
share, that GE may be required to issue in the merger, calculated as the
product of (i) 855,953,637, which is the sum of (a) the aggregate number of
outstanding shares of common stock, par value $1.00 per share, of Honeywell
on September 30, 2000, (b) the aggregate number of shares of Honeywell
common stock issuable pursuant to all outstanding employee and director
stock options and (c) the number of shares of Honeywell common stock
otherwise expected to be issued prior to the date the merger is consummated
and (ii) an exchange ratio of 1.055 shares of GE common stock for each share
of Honeywell common stock.
(2) Estimated solely for the purpose of calculating the registration fee
required by Section 6(b) of the Securities Act of 1933, as amended, and
computed pursuant to Rule 457(f)(1) and Rule 457(c) thereunder on the basis
of the market value of the Honeywell common stock to be exchanged in the
merger, as the product of (i) $52.03125 (the average of the high and low
sales prices per share of Honeywell common stock as reported on the New York
Stock Exchange on November 3, 2000) and (ii) 855,953,637, which is the sum
of (a) the number of shares of Honeywell common stock outstanding on
September 30, 2000, (b) the aggregate number of shares of Honeywell common
stock issuable pursuant to all outstanding employee and director stock
options and (c) the number of shares of Honeywell common stock otherwise
expected to be issued prior to the date the merger is consummated.
------------------------------
THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT SHALL
FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION
STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(A) OF
THE SECURITIES ACT OF 1933, OR UNTIL THE REGISTRATION STATEMENT SHALL BECOME
EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID SECTION 8(A),
MAY DETERMINE.
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
<PAGE>
The information in this proxy statement/prospectus is not complete and may be
changed. We may not sell these securities until the registration statement filed
with the Securities and Exchange Commission is effective. This proxy
statement/prospectus is not an offer to sell these securities and it is not
soliciting an offer to buy these securities in any state where the offer or sale
is not permitted.
<PAGE>
[HONEYWELL LOGO]
[Month, day], 2000
To our Shareowners:
The board of directors of Honeywell International Inc. has approved the
merger of a wholly owned subsidiary of General Electric Company into Honeywell.
As a result of the merger, Honeywell will become a wholly owned subsidiary of
GE. This transaction presents us with a unique opportunity to enhance shareowner
value, while at the same time allowing shareowners to participate in a larger
and more diversified company.
In the merger, Honeywell shareowners will receive 1.055 shares of GE common
stock for each share of Honeywell common stock that they own at the effective
time of the merger. Following the merger, former Honeywell shareowners will hold
approximately 8% of GE's outstanding common stock.
The merger cannot be completed unless the shareowners of Honeywell holding a
majority of the outstanding shares of Honeywell common stock vote in favor of
the proposed transaction. This proxy statement/prospectus contains detailed
information about the proposed merger, and we urge you to read it carefully. IN
PARTICULAR, YOU SHOULD READ THE "RISK FACTORS" SECTION BEGINNING ON PAGE 14 FOR
A DESCRIPTION OF VARIOUS RISKS YOU SHOULD CONSIDER IN EVALUATING THE PROPOSED
TRANSACTION. In addition, you may obtain additional information about Honeywell
and GE from documents that each has filed with the Securities and Exchange
Commission.
The board of directors of Honeywell, with one director excused because she
is also a director of GE, unanimously determined that the merger is advisable
and fair to, and in the best interests of, Honeywell and its shareowners and
recommends that the Honeywell shareowners vote "for" approval and adoption of
the merger agreement and the merger. We have scheduled a special meeting for our
shareowners to vote on the merger agreement and the merger, and you are
cordially invited to attend the meeting at our headquarters located at 101
Columbia Road, Morris Township, New Jersey, on [day], [month, day], 2001, at
[time] local time.
YOUR VOTE IS IMPORTANT. Please vote your shares as soon as possible so that
your shares are represented at the special meeting. A return envelope for your
proxy card is enclosed for your convenience. Shareowners of record and
participants in Honeywell stock plans also have the option of voting via the
internet or by telephone. Specific instructions on how to vote via the internet
or by telephone are included on the proxy card.
Sincerely,
Michael R. Bonsignore
CHAIRMAN AND CHIEF EXECUTIVE OFFICER
NEITHER THE SECURITIES AND EXCHANGE COMMISSION NOR ANY STATE SECURITIES
REGULATOR HAS APPROVED THE SHARES OF GE COMMON STOCK TO BE ISSUED IN THE MERGER
DESCRIBED IN THIS PROXY STATEMENT/ PROSPECTUS, NOR HAVE THEY DETERMINED IF THIS
PROXY STATEMENT/PROSPECTUS IS ACCURATE OR ADEQUATE. ANY REPRESENTATION TO THE
CONTRARY IS A CRIMINAL OFFENSE.
This proxy statement/prospectus is dated [month, day], 2000, and is first
being mailed to shareowners on or about [month, day], 2000.
<PAGE>
[HONEYWELL LOGO]
NOTICE OF A SPECIAL MEETING OF SHAREOWNERS
To the Shareowners of Honeywell International Inc.:
A special meeting of shareowners of Honeywell International Inc. will be
held on [day], [month, day], 2001 at [time], local time, at our headquarters
located at 101 Columbia Road, Morris Township, New Jersey to consider and vote
on the following matters described in the accompanying proxy
statement/prospectus:
The approval and adoption of the Agreement and Plan of Merger, dated as
of October 22, 2000, as it may be amended, between General Electric
Company and Honeywell International Inc. and the merger provided for
therein; and
to transact any other business that may properly come before the special
meeting.
The board of directors of Honeywell has determined that owners of record of
Honeywell's common stock at the close of business on [day], [month, day], 2000
are entitled to notice of and to vote at the Honeywell special meeting and any
adjournment or postponement of the meeting. A list of shareowners entitled to
vote at the meeting will be open to the examination of any shareowner for a
period of 10 days prior to the Honeywell special meeting at Honeywell's
principal executive offices, during ordinary business hours and at the special
meeting.
By Order of the Board of Directors,
Kathleen M. Gibson
VICE PRESIDENT AND SECRETARY
Honeywell International Inc.
101 Columbia Road
Morris Township, New Jersey 07962-2497
[Month, day], 2000
YOUR VOTE IS IMPORTANT
We encourage you to read the proxy statement/prospectus and vote your shares
as soon as possible. A return envelope for your proxy card is enclosed for
convenience. Shareowners of record and participants in Honeywell stock plans
also have the option of voting via the internet or by telephone. Specific
instructions on how to vote via the internet or by telephone are included in the
proxy card.
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
QUESTIONS & ANSWERS ABOUT THE
MERGER................................ 1
SUMMARY OF THE PROXY
STATEMENT/PROSPECTUS.................. 3
The Companies....................... 3
Special Meeting of Honeywell
Shareowners....................... 4
The Merger.......................... 4
Shareowner Vote Required............ 5
Honeywell Board of Directors'
Recommendation.................... 5
Opinion of Honeywell's Financial
Advisor........................... 5
Share Ownership of Management....... 5
Stock Options....................... 5
No Appraisal or Dissenters'
Rights............................ 5
What is Needed to Complete the
Merger............................ 6
Regulatory Approvals................ 6
Material United States Federal
Income Tax Consequences of the
Merger............................ 6
Accounting Treatment................ 7
Interests of the Honeywell Directors
and Officers in the Merger........ 7
Termination of the Merger
Agreement......................... 7
Termination Fee..................... 7
Stock Option Agreement.............. 8
Exchange of Stock Certificates...... 8
SELECTED CONSOLIDATED FINANCIAL DATA
OF GENERAL ELECTRIC................... 9
SELECTED CONSOLIDATED FINANCIAL DATA
OF HONEYWELL.......................... 10
COMPARATIVE PER SHARE DATA............ 11
COMPARATIVE STOCK PRICES AND
DIVIDENDS............................. 12
RISK FACTORS.......................... 14
FORWARD-LOOKING STATEMENTS............ 15
THE HONEYWELL SPECIAL MEETING......... 16
Date, Time and Place................ 16
Matters to be Considered at the
Honeywell Special Meeting......... 16
Record Date; Stock Entitled to Vote;
Quorum............................ 16
Votes Required...................... 16
Share Ownership of Management....... 17
Voting of Proxies................... 17
</TABLE>
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Confidential Voting Policy.......... 18
THE MERGER............................ 19
Background of the Merger............ 19
Recommendations of the Honeywell
Board of Directors; Reasons for
the Merger........................ 20
Opinion of the Honeywell Financial
Advisor........................... 22
GE's Reasons For The Merger......... 30
Interests of Honeywell Management in
the Merger........................ 30
Accounting Treatment................ 32
Regulatory Matters.................. 32
Material United States Federal
Income Tax Consequences of the
Merger............................ 33
Federal Securities Laws
Consequences...................... 34
Appraisal and Dissenters' Rights.... 34
Stock Exchange Listing.............. 34
MERGER AGREEMENT...................... 35
The Merger.......................... 35
Treatment of Honeywell Stock Option
Plans............................. 36
Board of Directors.................. 36
Covenants........................... 37
Representations and Warranties...... 41
Additional Covenants................ 42
Conditions to the Completion of the
Merger............................ 42
Termination of the Merger
Agreement......................... 44
Amendments and Waiver............... 44
STOCK OPTION AGREEMENT................ 45
Exercise............................ 45
Cash Exercise Notice................ 45
Repurchase Election................. 45
Maximum Amount Realizable by GE..... 46
Listing and Registration Rights..... 46
Effect of the Stock Option
Agreement......................... 47
COMPARISON OF SHAREOWNER RIGHTS....... 48
DESCRIPTION OF GE CAPITAL STOCK....... 52
LEGAL MATTERS......................... 52
EXPERTS............................... 52
OTHER MATTERS......................... 53
FUTURE SHAREOWNER PROPOSALS........... 53
WHERE YOU CAN FIND MORE INFORMATION... 53
</TABLE>
i
<PAGE>
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
ANNEXES
Annex A -- Agreement and Plan of Merger..................... A-1
Annex B -- Stock Option Agreement........................... B-1
Annex C -- Opinion of Bear, Stearns & Co. Inc............... C-1
</TABLE>
THIS DOCUMENT INCORPORATES IMPORTANT BUSINESS AND FINANCIAL INFORMATION
ABOUT GE AND HONEYWELL FROM DOCUMENTS THAT EACH COMPANY HAS FILED WITH THE
SECURITIES AND EXCHANGE COMMISSION AND THAT HAVE NOT BEEN INCLUDED IN OR
DELIVERED WITH THIS DOCUMENT.
HONEYWELL WILL PROVIDE YOU WITH COPIES OF THIS INFORMATION RELATING TO
HONEYWELL, WITHOUT CHARGE, UPON WRITTEN OR ORAL REQUEST TO:
HONEYWELL INTERNATIONAL INC.
101 COLUMBIA ROAD
P.O. BOX 2245
MORRIS TOWNSHIP, NEW JERSEY 07962-2245
ATTENTION: CORPORATE PUBLICATIONS
TELEPHONE NUMBER: (973) 455-5402
GE WILL PROVIDE YOU WITH COPIES OF THIS INFORMATION RELATING TO GE, WITHOUT
CHARGE, UPON WRITTEN OR ORAL REQUEST TO:
GENERAL ELECTRIC COMPANY
3135 EASTON TURNPIKE
FAIRFIELD, CONNECTICUT 06431-0001
ATTENTION: INVESTOR RELATIONS
TELEPHONE NUMBER: (203) 373-2211
IN ORDER TO RECEIVE TIMELY DELIVERY OF THE DOCUMENTS IN ADVANCE OF THE
HONEYWELL SPECIAL MEETING, YOU SHOULD MAKE YOUR REQUEST NO LATER THAN [MONTH,
DAY], [ - ].
ii
<PAGE>
QUESTIONS & ANSWERS ABOUT THE MERGER
Q: WHAT AM I BEING ASKED TO VOTE ON?
A: You are being asked to vote to approve and adopt the merger agreement
entered into between GE and Honeywell and the merger contemplated by the merger
agreement. In the merger, General Electric 2000 Merger Sub, Inc., a newly
formed, wholly owned subsidiary of GE, will be merged with and into Honeywell.
After the merger is completed, Honeywell, which will be the company surviving
the merger, will be a wholly owned subsidiary of GE.
Q: WHAT WILL I RECEIVE IN THE MERGER?
A: If the merger is completed, Honeywell shareowners will receive 1.055
shares of GE common stock for each share of Honeywell common stock owned by
them. GE will not issue fractional shares. Instead, Honeywell shareowners will
receive a cash payment for any fractional shares.
Q: DOES HONEYWELL'S BOARD SUPPORT THE MERGER?
A: Yes. Honeywell's board of directors, with one director excused because she
is also a director of GE, has unanimously determined that the merger is
advisable and fair to, and in the best interests of, Honeywell and its
shareowners and recommended that Honeywell shareowners vote for approval and
adoption of the merger agreement and the merger.
Q: WHEN AND WHERE IS THE SPECIAL MEETING OF SHAREOWNERS?
A: The special meeting will take place on [day], [month, day], 2001 at
[time], local time, at Honeywell's headquarters located at 101 Columbia Road,
Morris Township, New Jersey.
Q: WHO CAN VOTE AT THE HONEYWELL SPECIAL MEETING OF SHAREOWNERS?
A: You can vote at the special meeting if you owned shares of Honeywell
common stock at the close of business on [day], [month, day], 2000. As of the
close of business on that day, [ - ] shares of Honeywell common stock were
outstanding.
Q: WHAT VOTE IS REQUIRED TO APPROVE AND ADOPT THE MERGER AGREEMENT AND THE
MERGER?
A: Approval and adoption of the merger agreement and the merger requires the
affirmative vote of the holders of a majority of the shares of Honeywell common
stock outstanding on the record date. Shareowners will have one vote for each
share of Honeywell common stock owned by them.
Q: WHAT HAPPENS IF I DO NOT VOTE?
A: Since the affirmative vote of the holders of a majority of the outstanding
shares is required to approve the merger agreement and the merger, a failure to
vote will have the same effect as a vote "against" the merger.
Q: DOES THE CONSUMMATION OF THE MERGER REQUIRE THE APPROVAL OF GE'S
SHAREOWNERS?
A: No. GE shareowners are not required to approve the merger.
Q: WHAT DO I NEED TO DO NOW?
A: After you have carefully read this document, just indicate on your proxy
card how you want to vote. Complete, sign, date and mail the proxy card in the
enclosed return envelope as soon as possible. If you are a shareowner of record
or are a participant in a Honeywell stock plan, you may also vote your shares
via the internet or by telephone by following the instructions accompanying your
proxy card.
Q: WILL HONEYWELL'S SHARES CONTINUE TO BE TRADED ON THE NEW YORK STOCK
EXCHANGE AFTER THE MERGER IS COMPLETED?
A: No. If the merger is consummated, Honeywell's shares will no longer be
listed for trading on the New York Stock Exchange.
1
<PAGE>
Q: IF MY SHARES ARE HELD IN THE NAME OF A BANK, BROKER OR OTHER FIDUCIARY,
WILL THE BANK, BROKER OR OTHER FIDUCIARY VOTE MY SHARES FOR ME?
A: If your shares are held in the name of a bank, broker or other fiduciary,
you should provide such person(s) with instructions on how to vote your shares
or you should request a proxy from such person(s) to vote at the Honeywell
special meeting. If you do not provide your bank, broker or other fiduciary with
instructions on how to vote your shares, your bank, broker or other fiduciary
will not be permitted to vote your shares on the proposal presented at the
Honeywell special meeting. Please check the voting form received by you from
such person(s) to see if you may vote via the internet or by telephone.
Q: WHAT DO I DO IF I WANT TO CHANGE MY VOTE?
A: If you are a shareowner of record or if you hold shares of Honeywell
common stock as a participant in a Honeywell stock plan, you may change your
vote in any of the following ways:
- by sending a written notice to the secretary of Honeywell prior to the
special meeting stating that you would like to revoke your proxy,
- by completing, signing and dating another proxy card and returning it by
mail prior to the special meeting,
- by telephone or via the internet by following the instructions provided on
your proxy card, or
- by attending the special meeting and voting in person, except for shares
held in the Honeywell stock plans as described on the proxy card.
If your shares are held in the name of a bank, broker or other fiduciary and
you have directed such person(s) to vote your shares, you should instruct such
person(s) to change your vote.
Q: CAN I DISSENT AND REQUIRE APPRAISAL OF MY SHARES?
A: No. Shareowners are not entitled to dissenters' rights or appraisal rights
in connection with the merger.
Q: SHOULD I SEND IN MY STOCK CERTIFICATES AT THIS TIME?
A: No. After we complete the merger, the exchange agent to be appointed in
connection with the merger will send you written instructions for exchanging
your stock certificates.
Q: WHERE CAN I FIND OUT MORE INFORMATION ABOUT GE AND HONEYWELL?
A: You can find out more information about GE and Honeywell from various
sources described under "Where You Can Find More Information" on page 53 of this
proxy statement/ prospectus.
Q: WHOM SHOULD I CALL WITH QUESTIONS ABOUT THE MERGER?
A: You should contact Georgeson Shareholder Communications Inc. at
1-800-223-2064.
2
<PAGE>
SUMMARY OF THE PROXY STATEMENT/PROSPECTUS
THIS DOCUMENT IS A PROSPECTUS OF GENERAL ELECTRIC COMPANY AND A PROXY
STATEMENT OF HONEYWELL INTERNATIONAL INC. THIS SUMMARY HIGHLIGHTS SELECTED
INFORMATION FROM THIS PROXY STATEMENT/PROSPECTUS. IT DOES NOT CONTAIN ALL OF THE
INFORMATION THAT MAY BE IMPORTANT TO YOU. YOU SHOULD CAREFULLY READ THE ENTIRE
PROXY STATEMENT/ PROSPECTUS AND THE OTHER DOCUMENTS TO WHICH THIS DOCUMENT
REFERS YOU. WE HAVE INCLUDED PAGE REFERENCES PARENTHETICALLY TO DIRECT YOU TO A
MORE COMPLETE DESCRIPTION OF THE TOPICS PRESENTED IN THIS SUMMARY. SEE ALSO
"WHERE YOU CAN FIND MORE INFORMATION" ON PAGE 53.
THE COMPANIES
GENERAL ELECTRIC COMPANY
3135 Easton Turnpike
Fairfield, Connecticut 06431-0001
(203) 373-2211
GE, a New York corporation, is one of the world's largest and most
diversified industrial corporations. GE has engaged in developing, manufacturing
and marketing a wide variety of products for the generation, transmission,
distribution, control and utilization of electricity since its incorporation in
1892. Over the years, GE has developed or acquired new technologies or services
that have broadened considerably the scope of its activities.
GE's products include major appliances; lighting products; industrial
automation products; medical diagnostic imaging equipment; motors; electrical
distribution and control equipment; locomotives; power generation and delivery
products; nuclear power support services and fuel assemblies; commercial and
military aircraft jet engines; and engineered materials, such as plastics,
silicones and superabrasive industrial diamonds.
GE's services include product services; electrical product supply
distribution; electrical apparatus installation, engineering, repair and
rebuilding services; and computer-related information services. Through its
affiliate, the National Broadcasting Company, Inc., GE delivers network
television services, operates television stations, and provides cable
programming and distribution services. Through another affiliate, GE Capital
Services, Inc., GE offers a broad array of financial, insurance and other
services, including consumer financing, commercial and industrial financing,
real estate financing, asset management and leasing, mortgage services, consumer
savings and insurance services, specialty insurance and reinsurance, and
satellite communications.
HONEYWELL INTERNATIONAL INC.
101 Columbia Road
P.O. Box 4000
Morris Township, New Jersey 07962-2497
(973) 455-2000
Honeywell, a Delaware corporation, is a diversified technology and
manufacturing leader, serving customers worldwide with aerospace products and
services; control technologies for buildings, homes and industry; automotive
products; power generation systems; specialty chemicals; fibers; plastics; and
electronic and advanced materials. Honeywell employs approximately 120,000
people in 95 countries. Honeywell results from the combination on December 1,
1999 of AlliedSignal Inc. and Honeywell Inc. Honeywell aggregates its strategic
business units into four reportable segments.
Honeywell's Aerospace Solutions segment is a customer-driven global provider
of avionics, engines, systems and service solutions for aircraft manufacturers,
airlines, business and general aviation, the military and airport operations.
Honeywell's aerospace products can be found on virtually every type of aircraft
in use, in nearly every region of the world. Major product categories for
Aerospace Solutions include avionics systems and equipment for communication,
navigation and safety; aircraft systems and components including auxiliary power
units, environmental controls, aircraft lighting and integrated landing systems;
propulsion systems including turboprop and turbofan engines for business and
regional aircraft and helicopters; launch and satellite vehicle systems
including inertial and global positioning systems, guidance systems, satellite
positioning and stabilization systems and launch
3
<PAGE>
vehicle controls; and airport systems including satellite landing systems,
airport lighting, ground vehicle management and maintenance systems. In addition
to aerospace products, Honeywell offers value-added services, including
comprehensive maintenance and support for all Honeywell products; spare parts
and consumable hardware; inventory management; logistics and process support;
technical publications; ground support equipment; and training.
Honeywell's Automation & Control segment is comprised of two strategic
business units: Home and Building Control and Industrial Control. Home and
Building Control provides products and services to create efficient, safe and
comfortable environments. This unit offers controls for heating, ventilating,
humidification and air-conditioning equipment; security and fire alarm systems;
home comfort products and integration systems; energy-efficient lighting
controls; and building management systems and services. Industrial Control is
the world's leading supplier of industrial control systems and related advanced
software solutions and products. The mission of the Industrial Control unit is
to improve its customers' competitiveness through the application of sensing and
control technologies.
Honeywell's Performance Materials segment is comprised of two strategic
business units: Electronic Materials and Performance Polymers and Chemicals.
Electronic Materials is a leading provider of materials and solutions used in
wafer fabrication; specialty electronic materials such as amorphous alloy
products, copper foils, and advanced polymers; advanced packaging substrates for
silicon chips; printed circuit boards; and electronic manufacturing services.
Performance Polymers and Chemicals is a world leader in the production of nylon,
polyester, polyethylene, fluoropolymer and other chemicals used in engineered
plastics, specialty films, performance fibers and carpet fibers. It is also a
leading global manufacturer of specialty and fine chemicals for a broad range of
markets. Performance Polymers and Chemicals provides tailored customer solutions
worldwide through the Chemical Specialties, Fluorine Products, Pharmaceutical
Fine Chemicals, Specialty Wax and Additives businesses.
Honeywell's Power & Transportation Products segment is comprised of three
strategic business units: Transportation and Power Systems, Consumer Products
Group and Friction Materials. This segment's key areas of business include
automotive and truck products, engine boosting systems and on-site power
generation. Its products include Garrett-Registered Trademark- turbochargers and
charge air coolers; Bendix-Registered Trademark- air brakes, compressors, air
dryers, disk brake pads and drum brake linings; JURID-TM- and
RoadTuff-Registered Trademark- friction material; FRAM-Registered Trademark-
filters; Autolite-Registered Trademark- spark plugs;
Prestone-Registered Trademark- and Holts-Registered Trademark- car care
products; Parallon-TM- 75 TurboGenerator; and Simoniz-Registered Trademark-
appearance products (outside North America).
SPECIAL MEETING OF HONEYWELL SHAREOWNERS (PAGE 16)
The special meeting of Honeywell shareowners will be held on [day], [month,
day], 2001 at [time], local time, at Honeywell's headquarters located at 101
Columbia Road, Morris Township, New Jersey. At the special meeting, you will be
asked to vote to approve and adopt the merger agreement and the merger
contemplated by the merger agreement.
You can vote, or submit a proxy to vote, at the special meeting if you were
a record holder of Honeywell common stock at the close of business on [month,
date], 2000. You can vote your shares by attending the meeting and voting in
person. You can also vote your shares by marking the enclosed proxy card with
your vote, signing it and mailing it in the enclosed return envelope. You may
also vote your shares by proxy via the internet or by telephone by following the
instructions accompanying your proxy card. If your shares are held in the name
of a bank, broker or other fiduciary, you must instruct the bank, broker or
other fiduciary to vote on your behalf or obtain a proxy from the record holder
to vote at the Honeywell special meeting. You may revoke your proxy at any time
before it is exercised. A failure to vote will have the same effect as a vote
"against" the merger.
THE MERGER (PAGE 19)
The merger agreement contemplates the merger of General Electric 2000 Merger
4
<PAGE>
Sub, Inc., a Delaware company and a wholly owned subsidiary of GE--which we
refer to as Merger Sub--with and into Honeywell. Following consummation of the
merger, Honeywell will be a wholly owned subsidiary of GE. In the merger, each
outstanding share of Honeywell common stock will be converted into the right to
receive 1.055 shares of GE common stock.
GE and Honeywell plan to complete the merger promptly after the Honeywell
special meeting, provided that the required antitrust, merger control and other
regulatory approvals have been obtained at such time. If the required antitrust,
merger control and other regulatory approvals have not been obtained at such
time, the merger will be completed promptly after they are obtained.
The merger agreement is included as Annex A to this proxy
statement/prospectus. It is the legal document that governs the merger.
SHAREOWNER VOTE REQUIRED (PAGE 16)
The holders of a majority of the shares of Honeywell common stock
outstanding on the record date must vote for the approval and adoption of the
merger agreement and the merger.
HONEYWELL BOARD OF DIRECTORS' RECOMMENDATION (PAGE 20)
The Honeywell board of directors, with one director excused because she is
also a director of GE, unanimously determined that the merger is advisable and
fair to, and in the best interests of, Honeywell and its shareowners and
recommends that you vote "for" the approval and adoption of the merger agreement
and the merger.
OPINION OF HONEYWELL'S FINANCIAL ADVISOR (PAGE 22)
Bear, Stearns & Co. Inc., Honeywell's financial advisor, delivered an
opinion to the Honeywell board of directors that, as of the date of the opinion,
the exchange ratio to be received in the merger was fair, from a financial point
of view, to the shareowners of Honeywell. We have attached this opinion as
Annex C to this proxy statement/prospectus.
SHARE OWNERSHIP OF MANAGEMENT (PAGE 17)
At the close of business on the record date, directors and executive
officers of Honeywell and their affiliates beneficially owned and were entitled
to vote approximately [ - ] shares of Honeywell common stock, collectively
representing approximately [ - ]% of the shares of Honeywell common stock
outstanding on that date. Each director and executive officer has indicated his
or her present intention to vote, or cause to be voted, the shares of Honeywell
common stock owned by him or her "for" the approval and adoption of the merger
agreement and the merger.
STOCK OPTIONS (PAGE 36)
At the effective time of the merger, the right to receive shares of
Honeywell common stock pursuant to each outstanding option to purchase shares of
Honeywell common stock granted under the Honeywell stock option plans will
become the right to purchase a number of shares of GE common stock equal to the
number of shares of Honeywell common stock that were subject to the option
multiplied by 1.055, at an exercise price equal to the current exercise price
divided by 1.055. Each such option, other than options under plans that are
applicable only to non-employee members of the Honeywell board of directors, in
accordance with the terms of the Honeywell stock option plans, will vest and
become exercisable immediately upon the effective time of the merger. These
options will otherwise be subject to the same terms and conditions as were in
effect immediately prior to the merger.
NO APPRAISAL OR DISSENTERS' RIGHTS (PAGE 34)
Under the Delaware General Corporation Law, Honeywell shareowners are not
entitled to appraisal rights or dissenters' rights in connection with the
merger.
5
<PAGE>
WHAT IS NEEDED TO COMPLETE THE MERGER (PAGE 42)
Several conditions must be satisfied before the merger will be completed.
These include:
- approval and adoption of the merger agreement and the merger by Honeywell
shareowners;
- receipt by each of GE and Honeywell of an opinion from their respective
special tax counsel to the effect that the merger will be treated for
federal income tax purposes as a reorganization under the Internal Revenue
Code, and those opinions having not been withdrawn prior to the effective
time of the merger;
- expiration or termination of any applicable waiting period under the
Hart-Scott-Rodino Antitrust Improvements Act of 1976 and the Competition
Act of Canada and the approval of the merger by the European Commission;
- receipt of all other required regulatory and third-party approvals and
consents, other than those, the failure of which to obtain would not
result in civil or criminal sanctions being imposed on GE or would not
have a material adverse effect on Honeywell;
- receipt of a letter at closing from KPMG LLP stating that they concur with
the opinion of GE's management that pooling of interests accounting
treatment for the merger is appropriate if the merger is consummated in
accordance with the terms of the merger agreement and a letter at closing
from PricewaterhouseCoopers LLP stating that they concur with the opinion
of Honeywell's management that Honeywell is eligible to participate in a
transaction to be accounted for as a pooling of interests; and
- other customary contractual conditions set forth in the merger agreement.
If the law permits, GE or Honeywell may each waive conditions for the
benefit of their company and shareowners and complete the merger even though one
or more of these conditions have not been met. We cannot assure you that all of
the conditions will be satisfied or waived or that the merger will occur.
REGULATORY APPROVALS (PAGE 32)
Under the Hart-Scott-Rodino Act, GE and Honeywell cannot complete the merger
until they have given certain information and materials to the Federal Trade
Commission and the Antitrust Division of the United States Department of Justice
and a required waiting period has expired or been terminated. Honeywell and GE
intend to submit pre-merger notification and report forms to the Federal Trade
Commission and the Antitrust Division of the United States Department of
Justice. The waiting period expires 30 days after such filing unless it is
terminated prior to such date by the Federal Trade Commission or the Antitrust
Division of the Department of Justice or extended by a request for additional
information from either agency.
The merger is also subject to the approval of the European Commission under
the competition laws of the European Union. GE and Honeywell intend to make the
necessary filings with the European Commission. In addition, the merger is
subject to the expiration or earlier termination of the applicable waiting
periods under the Competition Act of Canada. GE and Honeywell intend to file
formal notifications of the merger with the Canadian Competition Bureau as
promptly as practicable.
The merger may also be subject to regulatory review by other U.S. federal
and state governmental authorities and by regulatory authorities in other
jurisdictions.
MATERIAL UNITED STATES FEDERAL INCOME TAX CONSEQUENCES OF THE MERGER (PAGE 33)
Honeywell shareowners generally will not recognize any gain or loss on the
exchange of their Honeywell common stock for GE common stock, except for any
gain or loss recognized in connection with cash received for a fractional share
of GE common stock.
6
<PAGE>
ACCOUNTING TREATMENT (PAGE 32)
We expect that the merger will be accounted for as a pooling of interests.
This means that, for accounting and financial reporting purposes, we will treat
our companies as if they had always been combined.
INTERESTS OF THE HONEYWELL DIRECTORS AND OFFICERS IN THE MERGER (PAGE 30)
Some of your directors and officers have interests in the merger that are
different from, or in addition to, their interests as shareowners of Honeywell.
These interests exist in part because of rights they may have under Honeywell
severance agreements and compensation and benefit plans and in part because of
agreements entered into with GE.
The merger agreement requires GE, after the completion of the merger, to
cause the company surviving the merger to indemnify the directors and officers
of Honeywell for events occurring before the merger, including events that are
related to the merger.
Upon the consummation of the merger, the board of directors of GE will be
expanded to add to the GE board of directors three persons mutually acceptable
to Honeywell and GE. These persons will be nominated for election to the board
of directors of GE at the two annual meetings of shareowners of GE following the
consummation of the merger. It is presently contemplated that three of
Honeywell's current board members, including Michael R. Bonsignore, chairman of
the board of directors and chief executive officer of Honeywell, will be
appointed to the GE board of directors at the effective time of the merger.
At the time of the merger, options granted to officers under Honeywell stock
option plans will become fully vested and immediately exercisable.
Mr. Bonsignore is expected to enter into a consulting agreement pursuant to
which he will act as a consultant to GE after the consummation of the merger.
TERMINATION OF THE MERGER AGREEMENT (PAGE 44)
GE and Honeywell may mutually agree at any time prior to the effective time
to abandon the merger, even if the Honeywell shareowners have approved the
merger. Also, either company may decide, without the consent of the other, to
abandon the merger agreement if:
- the other party materially breaches its representations and warranties or
covenants contained in the merger agreement, which material breaches
cannot be cured or are not cured within 30 days after notice to the
breaching party;
- any court or governmental entity issues a final order or judgment, or a
law is adopted, in each case which prohibits or materially restricts the
completion of the merger;
- Honeywell shareowners do not approve the merger; or
- the merger has not been completed by June 30, 2001, unless it is not
completed due to the failure of certain antitrust, merger control and
other conditions to be satisfied, in which instance the merger agreement
may not be terminated until November 30, 2001.
In addition, GE may terminate the merger agreement if the Honeywell board of
directors shall have failed to recommend or withdrawn or modified or changed, in
a manner adverse to GE, its approval or recommendation of the merger or shall
have failed to call the Honeywell special meeting or shall have recommended a
superior proposal.
TERMINATION FEE (PAGE 44)
Honeywell has agreed to pay GE a $1.35 billion termination fee if the merger
agreement is terminated by GE because the Honeywell board of directors has
withdrawn, or changed, in a manner adverse to GE, its recommendation of the
merger. In addition, Honeywell has also agreed to pay that fee to GE if the
Honeywell shareowners do not approve the merger at a time when another proposal
to
7
<PAGE>
acquire Honeywell has been publicly announced and not withdrawn.
STOCK OPTION AGREEMENT (PAGE 45)
In connection with the merger, GE and Honeywell entered into a stock option
agreement pursuant to which Honeywell granted to GE an option to purchase up to
19.9% of Honeywell's outstanding shares of common stock. The option is
exercisable in the same circumstances under which Honeywell is required to pay
to GE the $1.35 billion termination fee. The stock option agreement limits the
amount of profit GE is permitted to receive as a result of the termination fee
and the exercise of the stock option to $1.35 billion in total. We have attached
the form of the stock option agreement as Annex B to this proxy
statement/prospectus.
EXCHANGE OF STOCK CERTIFICATES (PAGE 35)
After the merger occurs, the exchange agent appointed in connection with the
merger will send a letter of transmittal to Honeywell shareowners that will
provide instructions on the procedure for exchanging Honeywell stock
certificates for GE stock certificates.
PLEASE DO NOT SEND ANY STOCK CERTIFICATES AT THIS TIME.
8
<PAGE>
SELECTED CONSOLIDATED FINANCIAL DATA OF GENERAL ELECTRIC
The following selected financial data for each of the five years in the
period ended December 31, 1999 have been derived from GE's consolidated
financial statements, which have been audited by KPMG LLP, independent public
accountants. The financial data as of September 30, 2000 and 1999, and for each
of the nine-month periods then ended, have been derived from GE's unaudited
condensed consolidated financial statements which include, in management's
opinion, all adjustments, consisting of normal recurring adjustments, necessary
to present fairly the results of operations and financial position of GE for the
periods and dates presented. This data should be read in conjunction with the
respective audited and unaudited consolidated financial statements of GE,
including the notes to the financial statements, incorporated by reference into
this document.
<TABLE>
<CAPTION>
FOR THE NINE MONTHS
ENDED
SEPTEMBER 30, FOR THE YEAR ENDED DECEMBER 31,
-------------------------- -------------------------------------------------------------
2000 1999 1999 1998 1997 1996 1995
----------- ----------- --------- --------- --------- --------- ---------
(UNAUDITED) (UNAUDITED)
(IN MILLIONS, EXCEPT PER SHARE AMOUNTS)
<S> <C> <C> <C> <C> <C> <C> <C>
RESULTS OF OPERATIONS:
Revenues...................... $ 94,872 $ 78,775 $111,630 $100,469 $ 90,840 $ 79,179 $ 70,028
Net earnings.................. 9,150 7,628 10,717 9,296 8,203 7,280 6,573
Dividends declared............ 4,059 3,440 4,786 4,081 3,535 3,138 2,838
Return earned on average
shareholder's equity........ 20.3% 19.4% 26.8% 25.7% 25.0% 24.0% 23.5%
EARNINGS PER SHARE OF COMMON
STOCK:(1)
--Assuming dilution......... $ 0.91 $ 0.76 $ 1.07 $ 0.93 $ 0.82 $ 0.72 $ 0.64
--Basic..................... 0.93 0.78 1.09 0.95 0.83 0.73 0.65
Dividends(1).................. 0.41 0.35 0.48 2/3 0.41 2/3 0.36 0.31 2/3 0.28 1/6
BALANCE SHEET DATA: (AS OF THE
END OF THE PERIOD)
Total assets.................. $431,141 $380,224 $405,200 $355,935 $304,012 $272,402 $228,035
Long-term debt................ 75,813 66,338 71,427 59,663 46,603 49,246 51,027
Common shares outstanding --
average(1).................. 9,888 9,828 9,833 9,807 9,824 9,922 10,103
</TABLE>
------------------------------
(1) Reflects the 3-for-1 stock split effective April 27, 2000.
9
<PAGE>
SELECTED CONSOLIDATED FINANCIAL DATA OF HONEYWELL
The following selected financial data for each of the three years in the
period ended December 31, 1999 have been derived from Honeywell's audited
consolidated financial statements. The financial data as of September 30, 2000
and 1999, and for each of the nine-month periods then ended, and as of
December 31, 1996 and 1995, and for each of the years then ended, have been
derived from Honeywell's unaudited condensed consolidated financial statements
which include, in management's opinion, all adjustments, consisting of normal
recurring adjustments, necessary to present fairly the results of operations and
financial position of Honeywell for the periods and dates presented. This data
should be read in conjunction with the respective audited and unaudited
consolidated financial statements of Honeywell, including the notes to the
financial statements, incorporated by reference into this document.
<TABLE>
<CAPTION>
FOR THE NINE MONTHS
ENDED
SEPTEMBER 30, FOR THE YEAR ENDED DECEMBER 31,
---------------------- -------------------------------------------------
2000 1999 1999 1998 1997 1996 1995
---------- ---------- ------- ------- ------- ---------- ----------
(IN MILLIONS, EXCEPT PER SHARE AMOUNTS)
<S> <C> <C> <C> <C> <C> <C> <C>
RESULTS OF OPERATIONS:
Net sales............................... $18,569 $17,576 $23,735 $23,555 $22,499 $21,283 $21,077
Net income(1)........................... 1,405 1,534 1,541 1,903 1,641 1,423 1,209
EARNINGS PER SHARE OF COMMON STOCK: (2)
--Assuming dilution................... $ 1.74 $ 1.90 $ 1.90 $ 2.34 $ 2.00 $ 1.73 $ 1.48
--Basic............................... 1.76 1.94 1.95 2.38 2.04 1.77 1.50
Dividends (2)........................... 0.5625 0.51 0.68 0.60 0.52 0.45 0.39
BALANCE SHEET DATA: (AS OF THE END OF
THE PERIOD)
Total assets............................ $25,917 $22,212 $23,527 $22,738 $20,118 $18,322 $17,525
Long-term debt.......................... 4,155 2,480 2,457 2,776 2,394 2,034 1,848
Common shares outstanding at
period end (2)........................ 797.5 792.9 795.1 795.3 794.9 802.7 803.4
</TABLE>
------------------------------
(1) For the nine months ended September 30, 2000, includes repositioning and
other charges, an impairment charge relating to Honeywell's Friction
Materials business and a gain on the sale of the former Honeywell Inc. TCAS
product line, resulting in a net after-tax charge of $319 million, or $0.40
per share. For the nine months ended September 30, 1999, includes
repositioning and other charges, and gains on the sales of Honeywell's
Laminate Systems business and its investment in AMP common stock, resulting
in a net after-tax charge of $1 million, with no impact on the per share
amount. For the year ended December 31, 1999, includes
AlliedSignal/Honeywell Inc. merger, repositioning and other charges and
gains on the sales of Honeywell's Laminate Systems business and Honeywell's
investment in AMP common stock, resulting in a net after-tax charge of
$624 million, or $0.78 per share. For the year ended December 31, 1998,
includes repositioning charges, a gain on settlement of litigation claims
and a tax benefit resulting from the favorable resolution of certain
prior-year research and development tax claims, resulting in a net after-tax
charge of $4 million, with no impact on the per share amount. For the year
ended December 31, 1997, includes repositioning and other charges, gains on
the sales of Honeywell's automotive Safety Restraints and certain Industrial
Control businesses and a charge related to the 1996 sale of its automotive
Braking Systems business, resulting in a net after-tax charge of
$5 million, with no impact on the per share amount. For the year ended
December 31, 1996, includes repositioning and other charges and a gain on
the sale of Honeywell's automotive Braking Systems business, resulting in a
net after-tax gain of $9 million, or $0.01 per share.
(2) Reflects the 2-for-1 stock split effective September 15, 1997.
10
<PAGE>
COMPARATIVE PER SHARE DATA
The following table sets forth selected historical and pro forma per share
data for GE and historical and pro forma equivalent per share data for
Honeywell. The data presented below should be read in conjunction with the
historical financial statements of Honeywell and GE that have been incorporated
by reference into this document. The Honeywell pro forma equivalent per share
data was calculated by multiplying the GE pro forma per share data by the
exchange ratio of 1.055. The pro forma combined per share data may not be
indicative of the operating results or financial position that would have
occurred if the merger had been consummated at the beginning of the periods
indicated, and may not be indicative of future operating results or financial
position.
<TABLE>
<CAPTION>
NINE MONTHS FOR THE YEAR ENDED
ENDED DECEMBER 31,
------------- ------------------------------
SEPTEMBER 30,
2000 1999 1998 1997
------------- -------- -------- --------
(UNAUDITED)
<S> <C> <C> <C> <C>
GE HISTORICAL (1)
Net income per share:
Diluted................................................... $ 0.91 $ 1.07 $0.93 $0.82
Basic..................................................... 0.93 1.09 0.95 0.83
Cash dividends declared per share........................... 0.41 0.48 2/3 0.41 2/3 0.36
Book value per share........................................ 4.82 4.32 N/A N/A
HONEYWELL HISTORICAL
Net income per share:
Diluted................................................... $ 1.74 $ 1.90 $2.34 $2.00
Basic..................................................... 1.76 1.95 2.38 2.04
Cash dividends declared per share........................... 0.5625 0.68 0.60 0.52
Book value per share........................................ 11.71 10.82 N/A N/A
GE PRO FORMA(2)
Pro Forma combined net income per share:
Diluted................................................... $ 0.97 $ 1.13 $1.03 $0.90
Basic..................................................... 0.98 1.15 1.05 0.92
Pro Forma combined dividends declared per share............. 0.42 0.50 0.43 0.37
Pro Forma combined book value per share..................... 5.31 4.78 N/A N/A
HONEYWELL PRO FORMA EQUIVALENT (2)
Net income per share:
Diluted................................................... $ 1.02 $ 1.19 $1.09 $0.95
Basic..................................................... 1.03 1.21 1.11 0.97
Cash dividends per share.................................... 0.44 0.53 0.45 0.39
Book value per share........................................ 5.60 5.04 N/A N/A
</TABLE>
------------------------------
(1) Reflects the 3-for-1 stock split effective April 27, 2000.
(2) These amounts are unaudited and do not reflect adjustments to eliminate
transactions between GE and Honeywell.
11
<PAGE>
COMPARATIVE STOCK PRICES AND DIVIDENDS
GE common stock is listed and traded primarily on the New York Stock
Exchange, or NYSE, under the symbol "GE". Honeywell common stock is listed and
traded primarily on the NYSE under the symbol "HON". Honeywell common stock was
listed and traded primarily on the NYSE under the symbol "ALD" until
December 1, 1999, at which time Honeywell changed its name from
AlliedSignal Inc. following its merger with Honeywell Inc.
The following table sets forth, for the periods indicated, the high and low
sales prices per share of GE common stock and Honeywell common stock as reported
on the NYSE, based on published financial services, and the quarterly cash
dividends per share declared:
<TABLE>
<CAPTION>
GE COMMON STOCK (1) HONEYWELL COMMON STOCK
------------------------------------- -------------------------------------
HIGH LOW DIVIDENDS HIGH LOW DIVIDENDS
-------- -------- --------- -------- -------- ---------
<S> <C> <C> <C> <C> <C> <C>
1998
First Quarter................................ $29 13/64 $23 27/64 $0.10 $43 13/16 $34 5/8 $0.15
Second Quarter............................... 30 43/64 26 57/64 0.10 47 9/16 39 5/8 0.15
Third Quarter................................ 32 19/64 24 13/64 0.10 46 11/16 32 5/8 0.15
Fourth Quarter............................... 34 41/64 23 0.11 2/3 45 1/8 33 1/16 0.15
1999
First Quarter................................ $38 1/16 $31 27/64 $0.11 2/3 $50 15/16 $37 13/16 $0.17
Second Quarter............................... 39 9/64 33 17/64 0.11 2/3 68 5/8 49 1/4 0.17
Third Quarter................................ 40 53/64 34 3/16 0.11 2/3 67 9/16 57 1/2 0.17
Fourth Quarter............................... 53 11/64 38 13/64 0.13 2/3 63 3/4 52 3/8 0.17
2000
First Quarter................................ $54 61/64 $41 43/64 $0.13 2/3 $60 1/2 $40 5/16 $0.18 3/4
Second Quarter............................... 55 63/64 47 11/16 0.13 2/3 59 1/8 32 1/8 0.18 3/4
Third Quarter................................ 60 1/2 49 1/2 0.13 2/3 41 3/4 33 1/4 0.18 3/4
Fourth Quarter (through November 8, 2000).... 59 15/16 49 [-] 54 1/2 33 3/8 [-]
</TABLE>
------------------------------
(1) Reflects the 3-for-1 stock split effective April 27, 2000.
12
<PAGE>
The following table sets forth the closing prices per share of GE common
stock and Honeywell common stock on the NYSE on:
- October 19, 2000, the trading day on which news reports first appeared
that Honeywell was in discussions with United Technologies Corporation
regarding a possible business combination;
- October 20, 2000, the last full trading day prior to the announcement of
the execution of the merger agreement; and
- November 8, 2000, the last full trading day prior to the date of the
filing of this preliminary proxy statement/prospectus.
This table also sets forth the equivalent price per share of Honeywell
common stock on those dates. The equivalent price per share for Honeywell common
stock is equal to the closing price of a share of GE common stock on that date
multiplied by 1.055, the number of shares of GE common stock to be issued in
exchange for each share of Honeywell common stock.
<TABLE>
<CAPTION>
HONEYWELL
GE COMMON HONEYWELL EQUIVALENT PER
STOCK COMMON STOCK SHARE PRICE
----------- ------------ --------------
<S> <C> <C> <C>
October 19, 2000.................................... $55.62 $35.88 $58.68
October 20, 2000.................................... 52.25 46.00 55.12
November 8, 2000.................................... 54.56 53.50 57.56
</TABLE>
Honeywell shareowners should obtain current market quotations for GE common
stock. The market price of GE common stock could vary at any time before or
after the merger.
GE DIVIDEND POLICY
The holders of GE common stock receive dividends if and when declared by the
GE board of directors out of funds legally available for dividends. GE expects
to continue paying quarterly cash dividends on GE common stock. The declaration
and payment of dividends after the merger will depend upon business conditions,
operating results and the GE board of directors' consideration of other relevant
factors.
GE declared dividends of $4.786 billion in 1999, or approximately 44.7% of
GE's 1999 consolidated earnings. GE declared dividends of $.48 2/3 per share in
1999, which represented an increase of 17% from 1998 and GE's 24th consecutive
annual increase.
GE STOCK REPURCHASE PROGRAM
At year-end 1999, GE had purchased and placed into treasury a total of
304 million GE shares having an aggregate cost of $15.440 billion under a share
repurchase program begun in December 1994. In December 1999, GE's board of
directors increased the authorization to repurchase GE common stock to
$22 billion and authorized the program to continue through 2002. Such shares are
from time to time reissued upon the exercise of employee stock options,
conversion of convertible securities and for other corporate purposes. Due to
the requirements of applicable regulations promulgated by the Securities and
Exchange Commission, GE will suspend repurchases of GE common stock from the
date of the mailing of this proxy statement/prospectus through the date of the
special meeting of Honeywell shareowners.
In addition, in connection with the merger, GE may limit the number of
shares of GE common stock to be repurchased in the future by GE or terminate the
program.
13
<PAGE>
RISK FACTORS
IN ADDITION TO THE OTHER INFORMATION THAT WE HAVE INCLUDED AND INCORPORATED
BY REFERENCE IN THIS PROXY STATEMENT/PROSPECTUS, YOU SHOULD CAREFULLY READ AND
CONSIDER THE FOLLOWING FACTORS IN EVALUATING THE PROPOSALS TO BE VOTED ON AT THE
SPECIAL MEETING OF SHAREOWNERS.
THE VALUE OF THE MERGER CONSIDERATION THAT HONEYWELL SHAREOWNERS WILL
RECEIVE WILL DEPEND ON THE MARKET VALUE OF GE COMMON SHARES AT THE EFFECTIVE
TIME OF THE MERGER.
In the merger, Honeywell shareowners will receive 1.055 shares of GE common
stock in exchange for each of their shares of Honeywell common stock. The market
value of GE common shares is likely to vary between the date of this proxy
statement/prospectus and the effective time of the merger because of global
economic, business, competitive, market and regulatory conditions, or changes in
the operations or prospects of GE or Honeywell. After the merger, the market
value of GE common shares may also change over time due to changes in global
economic, business, competitive, market and regulatory factors. Detailed
information about these factors is contained in GE's and Honeywell's filings
with the SEC. Because the value of the merger consideration depends on the
market value of a GE common share at the time of the merger, the value of the
merger consideration that Honeywell shareowners will receive in the merger
cannot now be determined. This market value may be less than or greater than
$[ - ] per share of Honeywell common stock, which is the value of the merger
consideration based upon the closing GE common share price on the NYSE of
$[ - ] on [ - ], 2000, the last full trading day prior to the date of this
proxy statement/prospectus. If the market value of GE common stock declines
prior to the effective time of the merger, then the value of the merger
consideration to be received by the holders of Honeywell common shares in the
merger will correspondingly decline.
THE NEED FOR GOVERNMENTAL APPROVALS MAY AFFECT THE DATE OF CONSUMMATION OF
THE MERGER OR COULD DIMINISH THE BENEFITS OF THE MERGER.
The merger is conditioned upon, among other things, the expiration or
termination of the applicable waiting period under the Hart-Scott-Rodino Act,
the approval by the European Commission of the transactions contemplated by the
merger agreement pursuant to European Union Council Regulation No. 4064/89, and
the expiration of the applicable waiting periods under the Competition Act of
Canada. In addition, other filings with, notifications to and authorizations and
approvals of, various governmental agencies in numerous other countries with
respect to the merger relating primarily to antitrust issues must be made and
received prior to the consummation of the merger. Satisfying these regulatory
requirements may affect the date of consummation of the merger. In addition, you
should be aware that, as in any large transaction, it is possible that, among
other things, restrictions on the combined operations of GE and Honeywell,
including divestitures, may be sought by governmental agencies as a condition to
obtaining the required regulatory approvals. Such restrictions on operations and
divestitures could diminish the benefits of the merger to GE.
GE MAY NOT REALIZE ALL OF THE ANTICIPATED BENEFITS OF THE MERGER.
The success of the merger will depend, in part, on the ability of GE to
realize the anticipated synergies, cost savings and growth opportunities from
integrating the businesses of Honeywell with those of its own. GE's success in
realizing these synergies, cost savings and growth opportunities, and the timing
of this realization, depends on the successful integration of Honeywell's
operations into GE. Even if GE is able to integrate the business operations of
Honeywell successfully, GE cannot assure you that this integration will result
in the realization of the full benefits of the synergies, cost savings and
growth opportunities that GE currently expects to result from this integration
or that these benefits will be achieved within the anticipated time frame. For
example, the elimination of duplicative costs may not be possible or may take
longer than anticipated, the benefits from the merger may be offset by costs
incurred in integrating the companies, and regulatory authorities may impose
adverse conditions on the combined businesses, such as divestiture of product
lines, in connection with granting approval of the merger.
14
<PAGE>
FORWARD-LOOKING STATEMENTS
Some of the statements included or incorporated by reference in this proxy
statement/prospectus that are not statements of historical fact are
"forward-looking statements" within the meaning of the Private Securities
Litigation Reform Act of 1995. Forward-looking statements include those preceded
by, followed by or that include the words "expects", "intends", "plans",
"projects", "believes", "estimates", "anticipates" and variations of these and
similar expressions. With respect to all forward-looking statements, Honeywell
and GE claim the protection of the safe harbor for forward-looking statements
contained in the Private Securities Litigation Reform Act.
You should understand that the following important factors, in addition to
those discussed in "Risk Factors" previously and elsewhere in this document and
in the documents which are incorporated by reference, could affect the future
results of GE, Honeywell and the combined company following the completion of
the merger, and could cause those results or other outcomes to differ materially
from those expressed or implied in the forward-looking statements:
- materially adverse changes in economic and industry conditions and
customer demand generally or in the markets served by Honeywell and GE
- supply and demand for and pricing of supplies and components
- changes in demographics and consumer preferences or demands for GE's and
Honeywell's goods and services
- fluctuations of foreign currencies
- the competitiveness of product substitutes
- the actions of competitors
- new technologies
- industry consolidation
- deregulation
- supply disruptions
- changes in operating conditions and costs
- risks relating to performance of contracts, including dependence on
performance of third-parties
- availability of intellectual property rights for newly developed products
- changes in regulatory environment
- the challenges inherent in diverting management's focus and resources from
other strategic opportunities and from operational matters during the
integration process
- the impact of the loss of employees
15
<PAGE>
THE HONEYWELL SPECIAL MEETING
DATE, TIME AND PLACE
The Honeywell special meeting will be held on [month, day], 2001 at [time],
local time, at Honeywell's headquarters located at 101 Columbia Road, Morris
Township, New Jersey.
MATTERS TO BE CONSIDERED AT THE HONEYWELL SPECIAL MEETING
At the Honeywell special meeting, shareowners will be asked to consider and
vote upon a proposal to approve the merger agreement and the merger, and such
other matters as may properly come before the Honeywell special meeting. It is
currently contemplated that no other matters will be considered at the special
meeting.
RECORD DATE; STOCK ENTITLED TO VOTE; QUORUM
Shareowners of record of shares of Honeywell common stock at the close of
business on [month, day], 2000, the record date for the Honeywell special
meeting, are entitled to receive notice of, and have the right to vote at, the
Honeywell special meeting. On the record date, approximately [ - ] shares of
Honeywell common stock were issued and outstanding. Shareowners of record of
shares of Honeywell common stock on the record date are each entitled to one
vote per share on the approval and adoption of the merger agreement and the
merger.
A quorum of shareowners is necessary to have a valid meeting of shareowners.
A majority of the shares of Honeywell common stock issued and outstanding and
entitled to vote on the record date must be present in person or by proxy at the
Honeywell special meeting in order for a quorum to be established.
Abstentions and broker "non-votes" count as present for establishing a
quorum. Shares held by Honeywell in its treasury or by any majority-owned
subsidiary of Honeywell do not count toward a quorum.
A broker "non-vote" occurs on an item when a broker is not permitted to vote
on that item without instructions from the beneficial owner of the shares and no
instructions are given. We expect, in the event that a quorum is not present at
the Honeywell special meeting, that the meeting will be adjourned or postponed
to solicit additional proxies.
If you own Honeywell shares as a participant in a Honeywell employee savings
plan, you will receive a card to instruct the plan trustee on voting shares held
by the plan on your behalf. Please refer to the card for a more detailed
explanation of the timing requirement for voting plan shares by telephone,
internet or mail.
VOTES REQUIRED
Approval and adoption of the merger agreement and the merger will require
the affirmative vote of the holders of a majority of the shares of the Honeywell
common stock outstanding on the record date. Under applicable Delaware law, in
determining whether the proposal to approve and adopt the merger agreement and
the merger has received the requisite number of affirmative votes, abstentions
will be counted and have the same effect as a vote "against" the proposal. In
addition, failing to vote will have the same effect as a vote "against" the
proposal. Under the applicable rules of the NYSE, a bank, broker or other
fiduciary who holds shares for customers who are the beneficial owners of those
shares are prohibited from giving a proxy to vote those customers' shares with
respect to the proposal to be voted on at the Honeywell special meeting in the
absence of specific instructions from the customer. Shares held by a broker,
bank or other fiduciary which are not voted because the customer
16
<PAGE>
has not provided instructions to the broker, bank or other fiduciary will have
the same effect as a vote "against" the proposal.
SHARE OWNERSHIP OF MANAGEMENT
At the close of business on the record date, directors and executive
officers of Honeywell and their affiliates beneficially owned and were entitled
to vote approximately [ - ] shares of Honeywell common stock, collectively
representing approximately [ - ]% of the shares of Honeywell common stock
outstanding on that date. Each director and executive officer has indicated his
or her present intention to vote, or cause to be voted, the shares of Honeywell
common stock owned by him or her "for" the approval and adoption of the merger
agreement and the merger.
VOTING OF PROXIES
SUBMITTING PROXIES. Shareowners of record may vote their shares by
attending the Honeywell special meeting and voting their shares in person at the
meeting, or by completing the enclosed proxy card, signing and dating it and
mailing it in the enclosed postage pre-paid envelope. If a proxy card is signed
by a shareowner of record and returned without specific voting instructions, the
shares represented by the proxy will be voted "for" the proposal presented at
the Honeywell special meeting.
Because Delaware, the state in which Honeywell is incorporated, permits
electronic submission of proxies, shareowners who are shareowners of record or
who hold shares in a Honeywell stock plan have the option to submit their
proxies via the internet or by telephone. The internet and telephone voting
procedures are designed to authenticate votes cast by use of a personal
identification number. These procedures allow shareowners to appoint a proxy to
vote their shares and to confirm that their instructions have been properly
recorded. Instructions for voting via the internet and by telephone are printed
on the proxy card for shareowners of record and shareowners who hold shares in
Honeywell stock plans.
Shareowners whose shares are held in the name of a bank, broker or other
fiduciary must either direct the record holder of their shares as to how to vote
their shares or obtain a proxy from the record holder to vote at the Honeywell
special meeting. Please check the voting form used by your bank, broker or other
fiduciary to see if you may vote via the internet or by telephone.
REVOKING PROXIES. Shareowners of record and shareowners who hold shares in
a Honeywell stock plan may revoke their proxies at any time prior to the time
their proxies are voted at the Honeywell special meeting. Proxies may be revoked
by written notice, including by telegram or telecopy, to the secretary of
Honeywell, by a later-dated proxy signed and returned by mail, or by attending
the Honeywell special meeting and voting in person except for shares held in a
Honeywell stock plan. Shareowners of record and shareowners who hold shares in a
Honeywell stock plan may also revoke proxies by a later-dated proxy using the
internet and telephone voting procedures. Any written notice of a revocation of
a proxy must be sent so as to be delivered before the taking of the vote at the
meeting to the following address:
Honeywell International Inc.
101 Columbia Road
P.O. Box 4000
Morris Township, New Jersey 07962-2497
Telecopy: (973) 455-2000
Attention: Secretary
Shareowners who require assistance in changing or revoking a proxy should
call Georgeson Shareholder Communications Inc. at 1-800-223-2064.
17
<PAGE>
OTHER BUSINESS; ADJOURNMENTS. Honeywell is not aware of any other business
to be acted upon at the Honeywell special meeting. If, however, other matters
are properly brought before the Honeywell special meeting, or any adjourned
meeting, your proxies will have discretion to act on those matters or to adjourn
the meeting, according to their best judgment.
Adjournments of the Honeywell special meeting may be made for the purpose
of, among other things, soliciting additional proxies. Any adjournment may be
made at any time by shareowners representing a majority of the votes present in
person or by proxy at the Honeywell special meeting, whether or not a quorum
exists, without further notice other than by an announcement made at the
meeting. Honeywell does not currently intend to seek an adjournment of its
special meeting.
PROXY SOLICITATION. The cost of solicitation of proxies from shareowners
will be paid by Honeywell. In addition to solicitation by mail, the directors,
officers and employees of Honeywell may also solicit proxies from shareowners by
telephone, telecopy, telegram or in person. Honeywell will also make
arrangements with brokerage houses and other custodians, nominees and
fiduciaries to send the proxy materials to beneficial owners. Upon request, we
will reimburse those brokerage houses and custodians for their reasonable
expenses in so doing.
Honeywell has retained Georgeson Shareholder Communications Inc. to aid in
the solicitation of proxies and to verify certain records related to the
solicitations. Georgeson Shareholder Communications Inc. will receive customary
fees as compensation for its services and reimbursement for its related
out-of-pocket expenses. Honeywell has agreed to indemnify Georgeson Shareholder
Communications Inc. against certain liabilities arising out of or in connection
with its engagement.
DO NOT SEND IN ANY STOCK CERTIFICATES WITH YOUR PROXY CARDS. THE EXCHANGE
AGENT WILL SEND TRANSMITTAL FORMS WITH INSTRUCTIONS FOR THE SURRENDER OF
CERTIFICATES REPRESENTING SHARES OF HONEYWELL COMMON STOCK TO FORMER HONEYWELL
SHAREOWNERS SHORTLY AFTER THE MERGER IS COMPLETED.
CONFIDENTIAL VOTING POLICY
It is Honeywell's policy that any proxy, ballot or other voting material
that identifies the particular vote of a shareowner and contains the
shareowner's request for confidential treatment will be kept confidential,
except in the event of a contested proxy solicitation or as may be required by
law. Honeywell may be informed whether or not a particular shareowner has voted
and will have access to any comment written on a proxy, ballot or other material
and to the identity of the commenting shareowner. Under the policy, the
inspectors of election at any shareowners meeting will be independent parties
unaffiliated with Honeywell.
18
<PAGE>
THE MERGER
BACKGROUND OF THE MERGER
On an ongoing basis, Honeywell management identifies candidates for
acquisitions, combinations or strategic alliances to further its strategic plan
and strengthen its existing core businesses. At the end of May 2000,
Mr. Michael R. Bonsignore, chairman and chief executive officer of Honeywell,
contacted Mr. George David, chairman and chief executive officer of United
Technologies Corporation, to determine his interest in a possible strategic
combination of the two companies or their respective lines of business.
On June 8, 2000, Mr. Bonsignore met with Mr. David in New York City. At that
meeting, the representatives of Honeywell and United Technologies discussed the
possible merits of a transaction and suggested that, subject to the completion
of a regulatory analysis, it would be in the best interests of both companies to
continue efforts to explore a possible combination. At the conclusion of the
meeting, it was agreed that regulatory counsel for the two companies would
review their respective businesses and make a joint recommendation as to the
feasability of a transaction. This effort proceeded and a joint recommendation
of feasibility was made.
On September 29, 2000, Messrs. David and Bonsignore and their respective
legal counsel met. After a review of regulatory matters, the parties agreed to
proceed to explore potential terms for a transaction.
Over the next several weeks, representatives of Honeywell and United
Technologies conducted due diligence and negotiated the terms for a possible
transaction. The parties scheduled board of directors meetings for October 20,
2000, at which time the respective boards of directors would evaluate the terms
for the transaction.
On the afternoon of October 19, 2000, there were reports in the media that a
potential transaction between Honeywell and United Technologies was pending and
that, in such transaction, each share of Honeywell common stock would be
exchanged for 0.74 of a share of United Technologies common stock. In light of
such rumors, Honeywell issued a press release confirming that it was in
discussions with United Technologies about a possible business combination. On
the evening of October 19, John F. Welch, Jr., chairman and chief executive
officer of GE, discussed individually with various board members of GE the
possibility of making a proposal to acquire Honeywell. On October 20, Mr. Welch
continued these board discussions, received approval to proceed with the
proposal and consulted with members of GE's senior management as well as GE's
outside advisors.
On October 20, 2000, the Honeywell board of directors met to consider a
possible combination with United Technologies. During the course of the meeting,
Mr. Welch contacted Mr. Bonsignore, indicating that GE had an interest in
pursuing a business combination at an exchange ratio of one share of GE common
stock for each outstanding share of Honeywell common stock. In response to a
request from Mr. Bonsignore, Mr. Welch confirmed this proposal to the Honeywell
board of directors in writing. After considering the matter, including, among
other things, the fact that the value of one share of GE common stock
represented significantly greater value than the then market value of the
fraction of a share being offered by United Technologies, the Honeywell board of
directors determined that Honeywell management should explore the proposal made
by Mr. Welch and report back to the board of directors at 5:00 P.M. on
October 21, 2000, at which time the board of directors would be reconvened.
Mr. Bonsignore then communicated to Mr. David of United Technologies that
Honeywell had received another proposal, that the board of directors had
directed management to explore the other proposal and that the board of
directors would not be in a position to proceed with any transaction prior to
exploring such other proposal. Mr. Bonsignore then called Mr. Welch and set a
time to meet with Mr. Welch in New York City that afternoon.
19
<PAGE>
Mr. David and legal counsel for United Technologies subsequently contacted
Mr. Bonsignore and legal counsel for Honeywell, respectively, to indicate that,
unless Honeywell was willing to sign an agreement with United Technologies
within the hour, United Technologies would be issuing a press release indicating
that discussions between the two companies had terminated. Mr. Bonsignore noted
in response that the Honeywell board of directors had already recessed until
5:00 P.M., October 21, 2000, that the board of directors had directed management
to explore the interest from GE and, accordingly, Honeywell was not in a
position to sign an agreement and United Technologies should do what it felt was
appropriate.
Later on the afternoon of October 20, 2000, United Technologies issued a
press release stating that discussions with Honeywell had terminated. Honeywell,
in a press release, confirmed that such discussions had terminated and that
Honeywell was exploring alternative proposals. Representatives of Bear Stearns,
Honeywell's financial advisor, had also received a call on October 20, 2000 from
another company expressing possible interest in a business combination
transaction. However, after receiving media reports on that afternoon that GE
had expressed an interest in a transaction with Honeywell, the other party
withdrew its expression of interest in exploring a potential transaction.
Later on October 20, 2000, discussions between representatives of GE and
Honeywell began. Such discussions focused on the consideration to be paid and
the protection of the Honeywell franchise, as well as the terms for the
transaction. During the evening, a draft merger agreement was provided to
counsel for GE.
On October 21, 2000, the terms of the transaction, as well as the merger
agreement, were negotiated, subject to approval by the Honeywell and GE boards
of directors. As part of those negotiations, GE agreed to increase the exchange
ratio to 1.055 shares of GE common stock for each share of Honeywell common
stock.
At a meeting held late in the afternoon of October 21, 2000, the Honeywell
board of directors considered in detail the terms of the proposed transaction
with GE. Management reported on the negotiations with GE, as well as Honeywell's
role in the combined organization. Mr. Bonsignore also conveyed to the directors
Mr. Welch's agreement to postpone his retirement until the end of 2001 so as to
oversee the integration of the two companies. Mr. Welch then spoke briefly to
the Honeywell board of directors. In addition, the board of directors also heard
a presentation from legal counsel as to the terms of the proposed agreement and
a financial presentation from Bear Stearns. Following discussion, the board of
directors approved the proposed agreement as being in the best interest of
Honeywell and its shareowners.
The board of directors of GE met on October 22, 2000 and approved the
transaction. Following such approval, Honeywell and GE executed the merger
agreement and related documents. A press release announcing the transaction was
issued that evening.
RECOMMENDATIONS OF THE HONEYWELL BOARD OF DIRECTORS; REASONS FOR THE MERGER
At a meeting held on October 21, 2000, with one director, Ann M. Fudge,
excused because she is also a director of GE, the board of directors of
Honeywell unanimously:
- determined that the merger is advisable and fair to, and in the best
interests of, Honeywell and its shareowners;
- directed that the proposed transaction be submitted for consideration by
the Honeywell shareowners; and
- recommended that the Honeywell shareowners vote "for" approval and
adoption of the merger agreement and the merger.
20
<PAGE>
In reaching its decision, the Honeywell board of directors consulted with
Honeywell's management, as well as its legal counsel and its financial advisor,
and considered the following material factors:
(1) the merger will present, based on the then-current market price for GE
common stock, the opportunity for the holders of Honeywell common stock
to receive a significant premium over the trading value of Honeywell
common stock on October 18, 2000, the last day of trading before rumors
of a possible business combination transaction appeared in the
marketplace, while at the same time allowing those shareowners to
participate in a more diversified company with greater resources and, as
shareowners of GE, benefit from any future growth of that company;
(2) the board of directors' knowledge of Honeywell and the industries in
which the Honeywell businesses compete and its belief that the greater
resources which Honeywell will realize as a result of the merger are
important to the long-term future of Honeywell;
(3) the potential strategic and other benefits of the merger, including the
complementary nature and related expansion of various Honeywell and GE
businesses and the opportunity for significant cost savings;
(4) the oral presentations by, and discussions with, Bear Stearns and the
oral opinion of Bear Stearns, which was subsequently confirmed in
writing, to the effect that, as of the date of the opinion, and subject
to the qualifications and limitations set forth in the written opinion,
the exchange ratio was fair to the shareowners of Honeywell from a
financial point of view. A copy of Bear Stearns' written opinion is
attached as Annex C to this proxy statement/ prospectus;
(5) the fact that the merger provides for a fixed exchange ratio and, as a
result, the value of GE common stock to be received by Honeywell
shareowners at the effective time of the merger may be higher or lower
than the value of such stock at the time the merger agreement was
signed;
(6) the decision of John F. Welch, Jr. to continue as chief executive
officer and chairman of the GE board of directors until the end of 2001
and the fact that it is presently contemplated that three of Honeywell's
current board members, including Mr. Bonsignore, will be appointed to
the GE board at the effective time of the merger;
(7) the intended accounting of the merger as a pooling of interests;
(8) the ability to complete the merger as a reorganization for United States
federal income tax purposes in which Honeywell shareowners generally
will not recognize any gain or loss, except for any gain or loss
recognized in connection with cash received for a fractional share of
GE's common stock;
(9) the board of directors' belief, after considering the advice of counsel,
that the parties should be able to satisfy all conditions to the
completion of the merger, including the receipt of the necessary
regulatory approvals in accordance with the terms of the merger
agreement, while recognizing the possibility that regulators might
impose conditions on the grant of their approval;
(10) GE's agreement to (a) use the Honeywell name in areas in which Honeywell
has been historically strong, (b) use the Honeywell name in conjunction
with the GE name for the Honeywell Home and Building Control business
and the Honeywell avionics business and (c) consider using the Honeywell
name in conjunction with the GE name for the Honeywell industrial
controls business;
21
<PAGE>
(11) the terms of the merger agreement regarding third party proposals,
including (a) that the Honeywell board of directors may, under certain
circumstances, furnish information to a party making, and enter into
discussions regarding, a proposal that the board of directors concludes
in good faith could result in a superior proposal, (b) that the
Honeywell board of directors may, under certain circumstances, withdraw
or change its recommendation of the merger after receiving a superior
proposal, (c) the potential payment to GE of a termination fee, (d) the
grant to GE of an option to purchase shares of Honeywell common stock
and (e) that Honeywell cannot terminate the merger agreement in order to
enter into a transaction with a third party before the Honeywell
shareowners have had an opportunity to vote on the proposed merger, and
the potential effect of such provisions on possible efforts by other
parties to acquire or otherwise combine with Honeywell;
(12) the fact that rumors concerning a possible business combination
involving Honeywell had surfaced, providing an opportunity to other
parties with an interest in pursuing a business combination with
Honeywell to contact Honeywell or its advisors;
(13) the fact that Honeywell shareowners will have an opportunity to vote on
the proposed merger; and
(14) the interests that certain executive officers and directors of Honeywell
may have with respect to the merger in addition to their interests as
shareowners of Honeywell generally. See "Interests of Honeywell
Management in the Merger" on page 30.
The Honeywell board of directors did not find it necessary to, and did not
quantify or otherwise assign relative weights to, the foregoing factors or
determine that any factor was of particular importance. Rather, the Honeywell
board of directors views its recommendation as being based on the totality of
the information presented to, and considered by, it. The Honeywell board of
directors considered all these factors and determined that these factors, as a
whole, supported the conclusions and recommendations described above. In
reaching this determination, the factors described above generally figured
positively, as advantages or opportunities, with the exception of the factor
described in clause (11) above, which figured both positively and negatively,
and the factors described in clauses (5) and (14) above, which the Honeywell
board of directors considered to be neutral.
In considering the recommendation of the Honeywell board of directors to
approve and adopt the merger agreement and the merger, Honeywell shareowners
should be aware that certain officers and directors of Honeywell have certain
interests in the proposed merger that are different from and in addition to the
interests of Honeywell shareowners generally. The Honeywell board of directors
was aware of these interests and considered them in approving the merger
agreement and the merger. See "Interests of Honeywell Management in the Merger"
on page 30.
OPINION OF THE HONEYWELL FINANCIAL ADVISOR
Honeywell engaged Bear Stearns as its financial advisor based on Bear
Stearns' experience and expertise. Bear Stearns is an internationally recognized
investment banking firm that has substantial experience in transactions similar
to the merger. Bear Stearns, as part of its investment banking business, is
continuously engaged in the valuation of businesses and securities in connection
with mergers and acquisitions, negotiated underwritings, secondary distributions
of listed and unlisted securities, private placements and valuations for
corporate and other purposes.
At the October 21, 2000 meeting of the Honeywell board of directors, Bear
Stearns delivered its oral opinion, which was subsequently confirmed in writing,
to the effect that, as of the date of the opinion, and subject to the
assumptions, qualifications and limitations set forth in the written opinion,
the exchange of one share of Honeywell common stock for 1.055 shares of GE
common stock--which
22
<PAGE>
we refer to as the exchange ratio--was fair, from a financial point of view, to
the shareowners of Honeywell.
We have attached as Annex C to this document the full text of Bear Stearns'
written opinion and urge you to read the opinion in its entirety. This opinion
sets forth the assumptions made, matters considered and qualifications and
limitations on the review undertaken by Bear Stearns and is incorporated herein
by reference. THE SUMMARY OF THE BEAR STEARNS OPINION SET FORTH BELOW IS
QUALIFIED IN ITS ENTIRETY BY REFERENCE TO THE FULL TEXT OF THE OPINION WHICH IS
ATTACHED AS ANNEX C TO THIS PROXY STATEMENT/PROSPECTUS. In reading the
discussion of the fairness opinion set forth below, Honeywell shareowners should
be aware that Bear Stearns' opinion:
- was provided to the Honeywell board of directors for its use and benefit;
- did not address Honeywell's underlying business decision to effect the
merger;
- did not constitute a recommendation to the Honeywell board of directors in
connection with the merger;
- does not constitute a recommendation to any Honeywell shareowner as to how
to vote in connection with the merger proposal; and
- was not intended to be relied upon or confer any rights or remedies upon
any creditor or shareowner of Honeywell, or any other third party.
Although Bear Stearns evaluated the fairness, from a financial point of
view, of the exchange ratio to the shareowners of Honeywell, the exchange ratio
itself was determined by GE and Honeywell through arm's-length negotiations.
Bear Stearns provided advice to Honeywell during the course of such
negotiations. Except as discussed below, Honeywell did not provide specific
instructions to, or place any limitations on, Bear Stearns with respect to the
procedures to be followed or factors to be considered by it in performing its
analyses or providing its opinion.
In arriving at its opinion, Bear Stearns, among other things:
- reviewed the merger agreement;
- reviewed Honeywell's Annual Report to Shareowners and Annual Report on
Form 10-K for the year ended December 31, 1999, its quarterly reports on
Form 10-Q for the periods ended March 31 and June 30, 2000, its Reports on
Form 8-K since December 31, 1999 and Honeywell's press release announcing
third quarter earnings;
- reviewed certain operating and financial information, including
projections for the three years ended December 31, 2003, provided to Bear
Stearns by Honeywell's management relating to Honeywell's business and
prospects;
- reviewed certain estimates of cost savings and other combination benefits
expected to result from the merger prepared and provided to Bear Stearns
by Honeywell's management;
- met with certain members of Honeywell's senior management to discuss
Honeywell's business, operations, historical and projected financial
results and future prospects;
- reviewed GE's Annual Report to Shareholders and Annual Report on
Form 10-K for the year ended December 31, 1999, and its quarterly reports
on Form 10-Q for the periods ended March 31 and June 30, 2000, its Reports
on Form 8-K since December 31, 1999 and GE's press release announcing
third quarter earnings;
- met with certain members of GE's senior management to discuss GE's
business, operations, historical and projected financial results and
future prospects;
23
<PAGE>
- reviewed the historical prices, trading multiples and trading volumes of
Honeywell common stock and GE common stock;
- reviewed publicly available financial data, stock market performance data
and trading multiples of companies which Bear Stearns deemed generally
comparable to Honeywell and GE;
- reviewed the terms of recent acquisitions of companies which Bear Stearns
deemed generally comparable to the merger;
- reviewed the pro forma financial results, financial condition and
capitalization of GE giving effect to the merger; and
- conducted such other studies, analyses, inquiries and investigations as
Bear Stearns deemed appropriate.
In preparing its opinion, Bear Stearns relied upon and assumed, without
independent verification, the accuracy and completeness of the financial and
other information, including, without limitation, the projections and synergy
estimates provided to Bear Stearns by Honeywell. With respect to Honeywell's
projected financial results and the potential synergies that could be achieved
upon consummation of the merger, Bear Stearns assumed that they have been
reasonably prepared on bases reflecting the best currently available estimates
and judgments of the senior management of Honeywell as to the expected future
performance of Honeywell. With Honeywell's consent, Bear Stearns also relied
upon certain estimates prepared by Wall Street analysts with regard to GE's
projected financial results. Bear Stearns did not assume any responsibility for
the independent verification of any such information or of the projections and
the synergy estimates provided to Bear Stearns, and relied upon the assurances
of the senior management of Honeywell that it was unaware of any facts that
would make such information, or projections or synergy estimates incomplete or
misleading.
Bear Stearns also assumed with the consent of Honeywell that the merger will
(1) qualify as a tax free reorganization for United States federal income tax
purposes, (2) be accounted for under the pooling of interests method of
accounting and (3) otherwise be consummated in a timely manner in accordance
with the terms described in the merger agreement, without any regulatory
limitations, restrictions, conditions, amendments or modifications that
collectively would have a material effect on Honeywell or GE. In arriving at its
opinion, Bear Stearns did not perform or obtain any independent appraisal of the
assets or liabilities (contingent or otherwise) of Honeywell and GE, nor was it
furnished with any such appraisals. In rendering its opinion, Bear Stearns did
not solicit, and was not authorized to solicit, third party acquisition interest
in Honeywell. In rendering its opinion, Bear Stearns did, however, consider the
terms of certain proposals received by Honeywell.
In addition, Bear Stearns did not express any opinion as to the price or
range of prices at which Honeywell common stock or GE common stock may trade
subsequent to the announcement or consummation of the merger. Bear Stearns'
opinion was necessarily based on economic, market and other conditions, and the
information made available to Bear Stearns, as of the date of its opinion. Bear
Stearns assumed no responsibility for updating or revising its opinion based on
circumstances or events occurring after that date.
The following is a summary of the material valuation and financial and
comparative analyses considered by Bear Stearns in connection with the rendering
of the Bear Stearns opinion. This summary does not purport to be a complete
description of the analyses underlying the Bear Stearns opinion and is qualified
in its entirety by reference to the full text of the Bear Stearns opinion.
In performing its analysis, Bear Stearns made numerous assumptions with
respect to industry performance, general business, economic, market and
financial conditions and other matters, many of which are beyond the control of
Bear Stearns, GE and Honeywell. Any estimates contained in the analysis
performed by Bear Stearns are not necessarily indicative of actual values or
future results,
24
<PAGE>
which may be significantly more or less favorable than suggested by this
analysis. Additionally, estimates of the value of businesses or securities do
not purport to be appraisals or to reflect the prices at which such businesses
or securities may actually be sold. Accordingly, these analyses and estimates
are inherently subject to substantial uncertainty. In addition, Bear Stearns'
opinion was among several factors considered by the Honeywell board of directors
in making its determination to approve the merger agreement and the merger.
HISTORICAL RATIO ANALYSIS. Bear Stearns reviewed the relationship between
the daily closing prices of Honeywell common stock and GE common stock during
the period from October 20, 1999 through October 20, 2000, by analyzing the
implied historical ratios determined by dividing the price per share of
Honeywell common stock by the price per share of GE common stock over such
period. Bear Stearns noted that the ratio as of October 19, 2000, prior to the
announcement by Honeywell and United Technologies of discussions regarding a
potential transaction between Honeywell and United Technologies, was 0.645, and
for the last three months prior to October 19, 2000, the average implied
historical ratio was 0.640, as compared to the exchange ratio in the merger of
1.055.
COMPARABLE COMPANY ANALYSIS. Bear Stearns compared certain financial,
trading and valuation information for Honeywell and GE to certain publicly
available financial, trading and valuation information for six selected
companies, which, in Bear Stearns' judgment, were comparable to Honeywell and GE
for purposes of this analysis. These companies were:
<TABLE>
<S> <C>
- Emerson Electric Co. - Textron Inc.
- Rockwell International Corporation - Tyco International Ltd.
- Siemens AG - United Technologies Corporation
</TABLE>
Bear Stearns' analysis was based on closing stock prices as of October 19,
2000, prior to the announcement by Honeywell and United Technologies of
discussions regarding a potential transaction between Honeywell and United
Technologies. A summary of the multiples of equity value to projected net income
for calendar years 2000 and 2001 is set forth below:
<TABLE>
<CAPTION>
EQUITY VALUE/PROJECTED NET INCOME
-----------------------------------
CALENDAR YEAR CALENDAR YEAR
2000 ESTIMATE(3) 2001 ESTIMATE(3)
---------------- ----------------
<S> <C> <C>
Honeywell................................................... 12.0x 10.7x
GE.......................................................... 43.8x 38.1x
Merger(1)................................................... 18.5x 16.5x
Range of Multiples for Comparable Companies................. 9.2x-24.0x 8.1x-19.2x
Harmonic Mean for Comparable Companies(2)................... 16.3x 14.5x
Median for Comparable Companies............................. 20.3x 17.0x
</TABLE>
------------------------------
(1) Based on the closing price of GE common stock as of October 20, 2000, at the
exchange ratio of 1.055x.
(2) The harmonic mean of the comparable company multiples is the reciprocal of
the arithmetic mean of the reciprocals of the comparable company multiples.
(3) Projected net income of Honeywell is based upon projections of Honeywell
management. Projected net income of GE is based upon Wall Street analyst
estimates. Except as noted, stock prices are the closing stock prices on
October 19, 2000.
25
<PAGE>
Bear Stearns noted that for calendar years 2000 and 2001, multiples of the
equity value to projected net income of Honeywell were below the harmonic mean
and the median for comparable companies, while the multiples of the equity value
to projected net income of GE were above the harmonic mean and the median for
comparable companies. Bear Stearns also noted that the merger multiples were
above the harmonic mean for comparable companies. Bear Stearns further noted
that none of the comparable companies is identical to GE or Honeywell and that,
accordingly, any analysis of comparable companies necessarily involved complex
consideration and judgments concerning differences in financial and operating
characteristics and other factors that would necessarily affect the relative
trading value of GE and Honeywell versus the companies to which GE and Honeywell
were compared.
PREMIUM ANALYSIS. Bear Stearns conducted (i) an analysis of the implied
premium paid to Honeywell shareowners and (ii) a comparison of the implied
premium to the implied premiums paid in selected stock-for-stock, "non-mergers
of equals" transactions--that is, transactions involving the merger of two
companies unequal in size. Bear Stearns noted that based upon the closing sales
prices for Honeywell common stock as of October 19, 2000, prior to the
announcement by Honeywell and United Technologies of discussions regarding a
potential transaction between Honeywell and United Technologies, and for GE
common stock as of October 20, 2000, the exchange ratio of 1.055 resulted in an
implied one-day premium to Honeywell shareowners of 53.6%. Based on the average
closing price of GE common stock for the ten days ending October 20, 2000, the
implied premium to Honeywell shareowners was 65.1%. Bear Stearns also noted the
various premiums set forth below:
<TABLE>
<CAPTION>
BASED ON GE TEN DAY
BASED ON GE SPOT STOCK AVERAGE STOCK PRICE OF
PRICE OF $52.25(1) $56.14(2)
---------------------- ----------------------
<S> <C> <C>
Value of Merger Consideration @1.055x............ $55.12 $59.23
HONEYWELL COMMON STOCK PRICES:
Spot--$46.00(1).................................. 19.8 % 28.8 %
October 19 "Pre-announcement"--$35.88............ 53.6 % 65.1 %
Spot Price Four Weeks Prior--$36.31(3)........... 51.8 % 63.1 %
52 Week High--$63.75(1).......................... (13.5)% (7.1)%
52 Week Low--$33.00(1)........................... 67.0 % 79.5 %
</TABLE>
------------------------------
(1) Based on closing price as of October 20, 2000.
(2) Based on the average closing prices over the ten day period ended on
October 20, 2000.
(3) Based on closing price as of September 22, 2000.
Bear Stearns also compared the one-day and four-week pre-announcement
premiums paid to Honeywell shareowners to the premiums/discounts observed over
comparable periods for selected stock-for-stock, "non-mergers of equals"
transactions valued between $25 billion and $75 billion (excluding debt) and
announced since January 1997. The transactions included in this analysis are set
forth below:
- Chevron Corporation's acquisition of Texaco, Inc.
- Chase Manhattan Corporation's acquisition of JP Morgan & Co. Incorporated
- Citigroup, Inc.'s acquisition of Associates First Capital Corporation
- Credit Suisse First Boston Corporation's acquisition of Donaldson
Lufkin & Jenrette, Inc.
- Viacom, Inc.'s acquisition of Infinity Broadcasting Corporation
- FirstEnergy Corp.'s acquisition of GPU, Inc.
- FPL Group, Inc.'s acquisition of Entergy Corporation
26
<PAGE>
- Georgia-Pacific Corporation's acquisition of Fort James Corporation
- UBS AG's acquisition of Paine Webber Group Inc.
- JDS Uniphase Corporation's acquisition of SDL Inc.
- Terra Networks S.A.'s acquisition of Lycos, Inc.
- Veritas Software Corporation's acquisition of Seagate Technology Inc.
- VeriSign, Inc.'s acquisition of Network Solutions, Inc.
- El Paso Energy Corporation's acquisition of The Coastal Corporation
- JDS Uniphase Corporation's acquisition of E-Tek Dynamics, Inc.
- Clear Channel Communications, Inc.'s acquisition of AMFM, Inc.
- Motorola, Inc.'s acquisition of General Instrument Corporation
- Viacom, Inc.'s acquisition of CBS Corporation
- The Dow Chemical Company's acquisition of Union Carbide Corporation
- Firstar Corporation's acquisition of Mercantile Bancorporation, Inc.
- AT&T Corp.'s acquisition of MediaOne Group, Inc.
- BP Amoco Corporation's acquisition of Atlantic Richfield Company
- Global Crossing Ltd.'s acquisition of Frontier Corporation
- Lucent Technologies Inc.'s acquisition of Ascend Communications, Inc.
- Scottish Power plc's acquisition of PACIFICORP
- Tyco International Ltd.'s acquisition of AMP Incorporated
- The Kroger Co.'s acquisition of Fred Meyer, Inc.
- American International Group, Inc.'s acquisition of SunAmerica, Inc.
- Albertson's, Inc.'s acquisition of American Stores Company
- Berkshire Hathaway Inc.'s acquisition of General Re Corporation
- Daimler-Benz AG's acquisition of Chrysler Corporation
- Washington Mutual, Inc.'s acquisition of HF Ahmanson & Company
- AT&T Corp.'s acquisition of Teleport Communications Group, Inc.
- First Union Corporation's acquisition of CoreStates Financial Corp.
- Starwood Hotels & Resorts Worldwide, Inc.'s acquisition of ITT Corporation
- WorldCom, Inc.'s acquisition of MCI Communications Corporation
- NationsBank Corporation's acquisition of Barnett Banks, Inc.
27
<PAGE>
The implied premium analysis for selected stock-for-stock, "non-mergers of
equals" transactions is set forth below:
<TABLE>
<CAPTION>
IMPLIED PREMIUM (DISCOUNT)
--------------------------------------
ONE-DAY PRIOR TO FOUR WEEKS PRIOR TO
ANNOUNCEMENT ANNOUNCEMENT
---------------- -------------------
<S> <C> <C>
Range of Implied Premiums for Selected Transactions......... (2)%-103% 2%-153%
Median Implied Premium...................................... 25% 37%
Mean Implied Premium........................................ 31% 48%
Merger...................................................... 54%(1) 52%(2)
</TABLE>
------------------------------
(1) Based on closing price for GE common stock on October 20, 2000 and the
"pre-announcement" closing price for Honeywell common stock on October 19,
2000.
(2) Based on the closing price for Honeywell common stock on September 22, 2000
and the closing price for GE common stock on October 20, 2000.
COMPARABLE ACQUISITION ANALYSIS. Bear Stearns reviewed and analyzed certain
of the publicly available financial terms of eight selected merger and
acquisition transactions which, in Bear Stearns' judgment, were in the relevant
industry segments and reasonably comparable to the merger, and compared the
financial terms of these transactions to those of the merger. The eight
transactions were:
- United Technologies Corporation's acquisition of Sundstrand Corporation
- Siebe plc's acquisition of BTR plc
- Honeywell's acquisition of Measurex Corporation
- The B.F. Goodrich Company's acquisition of Coltec Industries Inc.
- Tyco International Ltd.'s acquisition of AMP Incorporated
- SPX Corporation's acquisition of General Signal Corporation
- Rockwell International Corporation's acquisition of Reliance Electric
Company
- Emerson Electric Co.'s acquisition of Fisher Controls International, Inc.
Bear Stearns reviewed the prices paid in these transactions and analyzed
various financial information and imputed valuation multiples. Bear Stearns'
analysis of the comparable acquisitions indicated that the range of equity value
multiples and enterprise value multiples for the latest 12 months as of the
transaction date for the comparable transactions and fiscal year 2000 for the
merger was as indicated below:
<TABLE>
<CAPTION>
ENTERPRISE VALUE
EQUITY -------------------------------------
VALUE/LTM LTM
NET INCOME REVENUES LTM EBITDA LTM EBIT
------------- ----------- ---------- ----------
<S> <C> <C> <C> <C>
Range of Multiples for Comparable
Acquisitions............................ 10.4x-38.6x 1.31x-2.30x 6.0x-12.6x 8.4x-21.7x
Harmonic Mean for Comparable
Acquisitions............................ 18.4x 1.57x 9.4x 13.1x
Median for Comparable Acquisitions........ 19.3x 1.41x 10.0x 13.6x
Merger(1)................................. 18.5x 1.96x 10.0x 12.5x
</TABLE>
------------------------------
(1) Merger multiple based on projected fiscal year 2000 Honeywell financial
results.
Bear Stearns noted that the merger multiples were generally consistent with
both the harmonic mean and median of the comparable transaction multiples. Bear
Stearns also noted that none of the comparable acquisitions was identical to the
merger and that, accordingly, any analysis of the
28
<PAGE>
comparable acquisitions necessarily involved complex consideration and judgments
concerning the differences in financial and operating characteristics and other
factors that would necessarily affect the acquisition value of Honeywell versus
the acquisition values of the companies in the comparable acquisitions.
PRO FORMA EARNINGS PER SHARE ACCRETION AND DIVIDEND ANALYSIS. Bear Stearns
analyzed the impact of the merger on the projected earnings per share of GE for
the projected fiscal years 2001 and 2002 assuming the realization of various
levels of potential synergies and excluding any one-time charges.
<TABLE>
<CAPTION>
2001 $/% ACCRETION(1) 2002 $/% ACCRETION(1)
--------------------- ---------------------
<S> <C> <C>
$0 in potential synergies....................... $0.13/8.9% $0.15/8.3%
$250 million in potential synergies............. $0.15/9.9% $0.16/9.2%
$500 million in potential synergies............. $0.16/11.0% $0.18/10.1%
</TABLE>
------------------------------
(1) Projected net income of Honeywell based upon projections of Honeywell
management. Projected net income of GE based upon Wall Street analyst
estimates.
Bear Stearns also conducted an analysis of Honeywell's dividends per share,
comparing estimated dividends on a stand-alone basis to estimates of dividends
to be paid by GE after the merger to former Honeywell shareowners, adjusted by
the exchange ratio and assuming that the dividend paid by GE after the merger
would remain the same as GE's current dividend. Pro forma for the merger, the
implied effect on the indicated dividends per share to Honeywell shareowners
after giving effect to the exchange ratio is a reduction of $0.17 to $0.58
compared to a stand-alone indicated dividend per share of $0.75.
The preparation of a fairness opinion is a complex process and involves
various judgments and determinations as to the most appropriate and relevant
assumptions and financial analyses and the application of these methods to the
particular circumstances involved. The opinions are therefore not readily
susceptible to partial analysis or summary description, and taking portions of
the analyses set out above, without considering the analysis as a whole, would,
in the view of Bear Stearns, create an incomplete and misleading picture of the
processes underlying the analyses considered in rendering its opinion. Bear
Stearns did not form a judgment as to whether any individual analysis or factor
(positive or negative), considered in isolation, supported or failed to support
its opinion. In arriving at its opinion, Bear Stearns considered the results of
its separate analyses and did not attribute particular weight to any one
analysis or factor. The analyses performed by Bear Stearns, particularly those
based on estimates and projections, are not necessarily indicative of actual
values or actual future results, which may be significantly more or less
favorable than suggested by these analyses. These analyses were prepared solely
as part of the Bear Stearns analysis of the fairness, from a financial point of
view, of the exchange ratio to the shareowners of Honeywell.
Pursuant to the terms of its engagement letter with Bear Stearns, Honeywell
has agreed to pay Bear Stearns a total fee of $30 million, $10 million of which
became payable to Bear Stearns upon the delivery of its opinion to the Honeywell
board of directors and $20 million of which will become payable upon
consummation of the merger. Honeywell has also agreed to indemnify Bear Stearns
against certain liabilities in connection with its engagement, including certain
liabilities under the federal securities laws.
Bear Stearns has previously rendered certain investment banking and
financial advisory services to both Honeywell and GE for which Bear Stearns
received customary compensation. Bear Stearns may provide financial advisory and
financing services to the company surviving the merger and/or its affiliates and
may receive fees for the rendering of these services. In the ordinary course of
its business, Bear Stearns may actively trade the securities of Honeywell and/or
GE for its own account and for the accounts of its customers and, accordingly,
Bear Stearns may at any time hold a long or short position in these securities.
29
<PAGE>
GE'S REASONS FOR THE MERGER
The GE board of directors approved the merger agreement on October 22, 2000
after GE's senior management discussed with the board the businesses, assets,
liabilities, results of operations and financial performance of Honeywell and
GE, the complementary nature of certain of GE's and Honeywell's businesses, the
expectation that Honeywell's businesses could be readily integrated with GE's
existing operations, and the potential benefits that could be realized as a
result of such integration. The GE board of directors also carefully considered
the terms of the merger agreement and the stock option agreement and determined
that the transaction is in the best interests of GE and its shareowners.
INTERESTS OF HONEYWELL MANAGEMENT IN THE MERGER
In considering the recommendation of the Honeywell board of directors with
respect to the merger agreement and the merger, Honeywell shareowners should be
aware that certain members of the management of Honeywell and the Honeywell
board of directors have interests in the merger that may be different from, or
in addition to, the interests of the other shareowners of Honeywell generally.
These interests are summarized below.
EXISTING TERMINATION AGREEMENTS WITH HONEYWELL EXECUTIVE OFFICERS. Under
the Honeywell Severance Plan for Senior Executives, if the employment of an
executive officer is terminated other than for cause or death, or is terminated
by the executive officer for good reason within the 24-month period following
the completion of the merger, such executive officer will be entitled to a lump
sum payment equivalent to one and one-half, two or three times his or her base
salary and annual incentive bonus, a pension enhancement, a continuation of
certain other benefits, such as group life and medical insurance coverage, for a
period of one and one-half, two or three years and an additional payment of an
amount sufficient to make the executive officer whole in the event that he or
she is subject to any excess parachute excise tax in connection with the merger
and a subsequent termination of employment.
Pursuant to the Honeywell Severance Plan for Senior Executives, Honeywell is
also obligated to make a cash payment to certain employees if their employment
is terminated following the merger. These employees are Michael R. Bonsignore,
Giannantonio Ferrari, Robert D. Johnson, Peter M. Kreindler, Richard
F. Wallman, James T. Porter and Barry C. Johnson. If Honeywell is required to
make these cash severance payments to all of these employees, it will be
required to pay, in the aggregate, approximately $26.4 million.
BONSIGNORE EMPLOYMENT AGREEMENT. Upon the consummation of the merger, it is
anticipated that the employment of Mr. Bonsignore, chairman of the board of
directors and chief executive officer of Honeywell, with Honeywell will be
terminated by Mr. Bonsignore for good reason and that Mr. Bonsignore will be
entitled to receive severance benefits under the Honeywell Severance Plan for
Senior Executives, including a severance payment equal to three years' salary
and bonus. Mr. Bonsignore is also entitled to receive an additional payment of
an amount sufficient to make him whole in the event that he is subject to any
excess parachute excise tax in connection with the merger and his termination of
employment. In addition, as is the case for all other executive officers of
Honeywell, all of Mr. Bonsignore's unvested equity-based awards will become
vested and exercisable as of the consummation of the merger. See below,
"Incentive Compensation and Stock Ownership Plans" on page 30.
INCENTIVE COMPENSATION AND STOCK OWNERSHIP PLANS. Pursuant to the terms of
Honeywell's equity-based compensation plans--other than those plans that are
applicable only to non-employee members of the Honeywell board of directors--all
unvested options to purchase Honeywell shares will become vested and exercisable
as of the consummation of the merger, and restrictions with respect to shares of
restricted stock issued under those plans will lapse on that date. As of the
record date, Honeywell's executive officers held unvested options to acquire an
aggregate of [ - ] shares of Honeywell
30
<PAGE>
common stock with a weighted average exercise price of $[ - ] per share which
will become exercisable as of the consummation of the merger. Upon the
consummation of the merger, these options will be converted into options to
acquire an aggregate of [ - ] shares of GE common stock with a weighted
average exercise price of $[ - ] per share and shares of restricted stock will
be converted into shares of GE common stock. In addition, as of the consummation
of the merger, restrictions with respect to an aggregate of [ - ] restricted
shares of Honeywell common stock held by Honeywell's executive officers will
lapse.
Prior to the consummation of the merger, and subject to the other provisions
of the merger agreement, Honeywell may pay performance bonuses to no more than
20 of its senior executives in an amount not to exceed $19 million in the
aggregate. The payment of these bonuses is not contingent upon the consummation
of the merger.
NEW CONSULTING AGREEMENT. Mr. Bonsignore is expected to enter into a
consulting agreement with GE that will take effect upon consummation of the
merger. The consulting agreement will have a term of two years from the
consummation of the merger, during which term Mr. Bonsignore will serve as
chairman of the board of directors and chief executive officer, emeritus, of
Honeywell and devote as much as 50% of normal business time to his duties under
the consulting agreement. These duties will include assisting with the
integration of Honeywell and GE, advising the chief executive officer of GE on
matters pertaining to the Honeywell businesses, serving as an "ambassador at
large" for the Honeywell businesses, supporting the interests of the businesses
with customers, suppliers and employees, and performing such other specific
assignments as Mr. Bonsignore and the chief executive officer of GE agree to
during the term of the consulting agreement.
Under the consulting agreement, Mr. Bonsignore will receive an annual
consulting fee of $3 million and reimbursement for business expenses and have
access to GE aircraft for business and personal use. If the consulting agreement
is terminated by GE or by reason of Mr. Bonsignore's death or disability, GE
will pay to Mr. Bonsignore, or his estate or beneficiary, as applicable, a cash
lump sum payment equal to the consulting fees otherwise payable over the
remainder of the term of the agreement and Mr. Bonsignore will continue to have
access to GE aircraft for two years following the consummation of the merger.
Mr. Bonsignore's employment with Honeywell will be terminated for good reason at
the time the merger is completed. As a result, he will be entitled to receive
the benefits payable under his existing employment agreement and Honeywell's
benefit plans. See above, "Bonsignore Employment Agreement" on page 30.
INDEMNIFICATION; DIRECTORS' AND OFFICERS' INSURANCE. GE has agreed to cause
the company surviving the merger to indemnify, to the fullest extent allowed
under law, each individual who is or was an officer or director of Honeywell or
its subsidiaries for all actions taken by them in their capacities as such or
for actions taken at the request of Honeywell or a Honeywell subsidiary prior to
the consummation of the merger. GE has also agreed to cause the company
surviving the merger to honor all indemnification obligations of Honeywell to
those persons, whether pursuant to Honeywell's restated certificate of
incorporation, by-laws or an indemnification agreement. For three years after
completing the merger, GE will also procure officers' and directors' liability
insurance in respect of acts or omissions prior to the completion of the merger.
GE will not be required to pay, in total, an annual premium for the insurance
described in this paragraph in excess of 200% of the current annual premium paid
by Honeywell for its existing coverage prior to the merger. However, if the
annual premiums of that insurance coverage exceed that amount, GE will be
obligated to provide, or cause its subsidiaries to provide, coverage available
for a cost equal to 200% of the current annual premium. In addition, GE has
agreed that the company surviving the merger will not settle certain shareowner
class action suits without a full release of the officers and directors of
Honeywell named in such actions.
APPOINTMENT OF DIRECTORS. Upon consummation of the merger, the GE board of
directors will be expanded to add three persons mutually acceptable to GE and
Honeywell. These three persons will also be nominated for election to the GE
board of directors at the two annual meetings of GE
31
<PAGE>
shareowners following consummation of the merger. It is presently contemplated
that three of Honeywell's current board members, including Mr. Bonsignore, will
be appointed to the GE board of directors at the effective time of the merger.
ACCOUNTING TREATMENT
We expect the merger to qualify as a pooling of interests for accounting and
financial reporting purposes. Under this method of accounting, the recorded
assets and liabilities of GE and Honeywell will be carried forward to the books
of GE at their historical recorded amounts, subject to any adjustments required
to conform the accounting policies of GE and Honeywell. In addition, the net
income of GE will include income of GE and Honeywell for the entire fiscal year
in which the merger occurs. The historical reported net income of GE and
Honeywell for prior periods will be combined and restated as net income of GE
after addressing any accounting conformity issues.
It is a condition to closing the merger that GE and Honeywell receive a
letter at the closing from KPMG LLP stating that they concur with the opinion of
GE's management that pooling of interests accounting treatment for the merger is
appropriate if the merger is consummated in accordance with the terms of the
merger agreement and a letter from PricewaterhouseCoopers LLP at the closing
stating that they concur with the opinion of Honeywell's management that
Honeywell is eligible to participate in a transaction to be accounted for as a
pooling of interests.
REGULATORY MATTERS
U.S. ANTITRUST. Under the Hart-Scott-Rodino Act, GE and Honeywell cannot
complete the merger until they have given the following notice and information
to the Federal Trade Commission and the Antitrust Division of the United States
Department of Justice and one or more specified waiting periods expire or are
earlier terminated:
- notification that GE and Honeywell desire to merge; and
- certain information relating to the nature of the businesses and
industries in which GE and Honeywell operate.
GE and Honeywell intend to submit pre-merger notification and report forms
under the Hart-Scott-Rodino Act with the Federal Trade Commission and the
Antitrust Division of the United States Department of Justice. The merger cannot
be consummated until a required waiting period of 30 days from the date of such
filing has expired or been terminated earlier by the Federal Trade Commission or
the Antitrust Division of the United States Department of Justice. The Federal
Trade Commission or the Antitrust Division of the United States Department of
Justice can also request additional information and materials from GE and
Honeywell in connection with its review of the proposed merger. Should there be
such an additional request, GE and Honeywell cannot complete the merger until
20 days after they have substantially complied with the request for additional
information, unless the 20-day waiting period is terminated early. The Federal
Trade Commission and the Antitrust Division of the United States Department of
Justice have the authority to challenge the merger on antitrust grounds by
seeking a federal court order enjoining the transaction pending an
administrative hearing. Expiration or termination of all applicable waiting
periods under the Hart-Scott-Rodino Act is a condition to completing the merger.
EUROPEAN UNION. Both GE and Honeywell conduct business in member states of
the European Union. European Union Council Regulation No. 4064/89 and
accompanying regulations require notification of and approval by the European
Commission of specific mergers or acquisitions involving parties with aggregate
worldwide sales and individual European Union sales exceeding specified
thresholds before these mergers and acquisitions can be implemented. GE and
Honeywell intend to file formal notifications with the European Commission.
Completing a review and gaining approval under the European Commission merger
regulation is a condition to completing the merger.
CANADA. Both GE and Honeywell conduct business in Canada. The Competition
Act of Canada and accompanying regulations require notification of and approval
by Canada's Competition Bureau of
32
<PAGE>
specific mergers or acquisitions involving parties whose aggregate Canadian
assets or whose revenues from sales to and from Canada exceed a predetermined
threshold, or if the size of the Canadian assets being acquired exceeds a
specific dollar value. This notification to the Competition Bureau and
expiration of the applicable waiting period are required before the merger can
be completed. GE and Honeywell intend to file formal notifications with the
Competition Bureau as promptly as practicable.
OTHER LAWS. In addition to the regulatory approvals described above, the
consent of the Federal Aviation Administration, the Federal Communications
Commission and certain other governmental agencies may be required to be
obtained prior to the effective time of the merger. GE and Honeywell are
currently in the process of reviewing whether other filings or approvals may be
required or desirable in these other jurisdictions.
MATERIAL UNITED STATES FEDERAL INCOME TAX CONSEQUENCES OF THE MERGER
The following general discussion is a summary of the anticipated material
United States federal income tax consequences of the merger to you, a shareowner
of Honeywell, if you are a United States holder and you hold shares of Honeywell
stock as a capital asset. You are a United States holder if you are (1) a United
States citizen or resident alien individual, (2) a corporation, partnership or
other entity created or organized under the laws of the United States or any
state or the District of Columbia, (3) an estate the income of which is subject
to United States federal income tax without regard to the source or (4) a trust
if a court within the United States is able to exercise primary supervision over
its administration and one or more United States persons have authority to
control all substantial decisions relating to the trust.
This summary is intended only as general information and does not address
all of the United States federal income tax consequences of the merger that may
be relevant to you based upon your particular circumstances. Moreover, you may
be subject to special tax rules based on your particular circumstances -- for
example, if you are a non-United States holder, financial institution,
tax-exempt organization, insurance company, dealer in securities, hold your
shares of Honeywell stock as a hedge, or as part of a constructive sale or
conversion transaction or acquired your shares of Honeywell stock pursuant to
the exercise of employee stock options or otherwise as compensation -- which are
not addressed in this summary. This summary also does not cover any aspect of
United States federal tax law other than income taxation, and does not discuss
the tax consequences of the merger under the laws of any state, locality or
non-United States jurisdiction.
YOU ARE STRONGLY URGED TO CONSULT YOUR OWN TAX ADVISORS AS TO THE SPECIFIC
TAX CONSEQUENCES OF THE MERGER TO YOU UNDER UNITED STATES FEDERAL, AS WELL AS
UNDER APPLICABLE STATE, LOCAL AND NON-UNITED STATES TAX LAW.
TAX OPINIONS. Shearman & Sterling, counsel to GE, and Skadden, Arps, Slate,
Meagher & Flom LLP, counsel to Honeywell, have rendered opinions to the effect
that, under current U.S. federal income tax law, (1) the merger will qualify as
a reorganization within the meaning of Section 368(a) of the Internal Revenue
Code of 1986, as amended, and (2) each of Honeywell, GE and Merger Sub will be a
party to such reorganization within the meaning of Section 368(b) of the
Internal Revenue Code. Neither GE nor Honeywell will request a ruling from the
Internal Revenue Service with regard to any of the United States federal income
tax consequences of the merger. The tax opinions are based on and subject to
certain assumptions and limitations as well as factual representations received
from GE and Honeywell, as discussed below. Opinions of counsel represent such
counsel's best legal judgment and have no binding effect or official status of
any kind. No assurances can be given that contrary positions may not be taken by
the Internal Revenue Service or a court considering the issues.
The tax opinions and this discussion are based on currently existing
provisions of the Internal Revenue Code, existing and proposed Treasury
regulations, and current administrative rulings and court decisions. There can
be no assurance that future legislative, judicial, or administrative changes or
interpretations will not adversely affect the accuracy of the tax opinions or of
the statements and conclusions set forth in this discussion. Any such changes or
interpretations could be applied retroactively and could affect the tax
consequences of the merger.
33
<PAGE>
TAX CONSEQUENCES OF THE MERGER. Subject to the limitations and
qualifications set forth in this summary, the material United States federal
income tax consequences of the merger to you are as follows:
- You will not recognize gain or loss on the exchange of Honeywell common
stock for GE common stock in the merger, except to the extent of cash you
receive in lieu of fractional shares
- If you receive cash in lieu of a fractional share of GE common stock, you
generally will recognize capital gain or loss measured by the difference
between the amount of cash received and the part of your tax basis that is
apportioned to the fractional share of GE common stock as described below
- Your aggregate tax basis in GE common stock received in the merger will be
the same as the aggregate tax basis of Honeywell common stock surrendered
in the merger, reduced by any amount of tax basis allocable to a
fractional share interest in GE common stock for which you received cash
- Your holding period for the GE common stock received in the
merger--including fractional shares redeemed for cash--will include the
holding period of the Honeywell common stock surrendered in the merger
BACKUP WITHHOLDING. Under the United States backup withholding rules, you
may be subject to backup withholding at the rate of 31% on any cash received in
lieu of fractional shares of GE common stock, unless you (1) are a corporation
or qualify under other exempt categories and, when required, demonstrate this
fact or (2) provide a correct taxpayer identification number, certify that you
are not subject to backup withholding and otherwise comply with applicable
requirements of the backup withholding rules. Any amount withheld under these
rules will be credited against your federal income tax liability, provided you
timely furnish the required information to the Internal Revenue Service. If you
do not comply with the backup withholding rules, you may be subject to penalties
imposed by the Internal Revenue Service.
FEDERAL SECURITIES LAWS CONSEQUENCES
The merger agreement requires Honeywell to use reasonable best efforts to
cause each of its affiliates to execute a written agreement, in the form
attached as an exhibit to the merger agreement, to the effect that such person
will not offer, sell or otherwise dispose of any of the shares of common stock
of GE issued to that affiliate in the merger or otherwise owned or acquired by
that affiliate:
- for a period beginning 30 days prior to the merger and continuing until
results covering at least 30 days of post-merger combined operations of GE
and Honeywell have been published by GE, which restriction is necessary to
ensure that the merger is accounted for as a pooling of interests; or
- in violation of the Securities Act.
All shares of common stock of GE received by Honeywell shareowners in the
merger will be freely transferable, except that shares of common stock of GE
received by persons who are deemed to be "affiliates" of Honeywell under the
Securities Act at the time of Honeywell's special meeting may resell those
shares only in transactions permitted by Rule 145 under the Securities Act or as
otherwise permitted under the Securities Act. Persons who may be affiliates of
Honeywell for those purposes generally include individuals or entities that
control, are controlled by, or are under common control with, Honeywell, but
would not include shareowners who are not officers, directors or principal
shareowners of Honeywell.
APPRAISAL AND DISSENTERS' RIGHTS
In accordance with the Delaware General Corporation Law, there will be no
appraisal rights or dissenters' rights available to holders of Honeywell common
stock in connection with the merger.
STOCK EXCHANGE LISTING
GE is obligated under the merger agreement to use its reasonable best
efforts to cause the shares of GE common stock to be issued upon the
consummation of the merger to be approved for listing on the NYSE. In addition,
it is a condition to Honeywell's obligation to consummate the merger that these
shares be approved for listing on the NYSE, subject to official notice of
issuance to the NYSE. The Honeywell common stock will be delisted from the NYSE
following consummation of the merger.
34
<PAGE>
MERGER AGREEMENT
The following is a summary of the material terms of the merger agreement.
This summary is qualified in its entirety by reference to the merger agreement,
a copy of which is attached as Annex A to this proxy statement/prospectus and is
incorporated by reference into this proxy statement/ prospectus. All shareowners
are urged to read the merger agreement in its entirety for a more complete
description of the terms and conditions of the merger.
THE MERGER
STRUCTURE OF THE MERGER. At the effective time of the merger, General
Electric 2000 Merger Sub, Inc., a newly formed, wholly owned subsidiary of GE,
will merge with and into Honeywell. Honeywell will remain as the surviving
corporation and become a wholly owned subsidiary of GE immediately after the
merger.
EFFECTIVE TIME OF THE MERGER. The closing of the merger will occur within
three business days after the fulfillment or waiver of the conditions described
below under "The Merger Agreement--Conditions to the Completion of the Merger",
unless GE and Honeywell agree in writing upon another time or date.
The merger will become effective upon the filing of a certificate of merger
with the Delaware Secretary of State. The filing of the certificate of merger
will take place at the time of the closing of the merger.
MERGER CONSIDERATION. The merger agreement provides that each share of
Honeywell common stock that is outstanding prior to the effective time will, at
the effective time, be converted into the right to receive 1.055 shares of GE
common stock.
CANCELATION OF SHARES. Each share of Honeywell common stock held by
Honeywell as treasury stock or owned by GE immediately prior to the effective
time will be automatically canceled, and GE will not exchange those shares for
any securities of GE or any other consideration.
PROCEDURE FOR SURRENDER OF CERTIFICATES; FRACTIONAL SHARES. Prior to the
merger, an exchange agent will be appointed to handle the exchange of Honeywell
stock certificates for GE stock certificates and the payment of cash for
fractional shares. Soon after the closing of the merger, the exchange agent will
send a letter of transmittal, which is to be used to exchange Honeywell stock
certificates for GE stock certificates, to each former Honeywell shareowner. The
letter of transmittal will contain instructions explaining the procedure for
surrendering Honeywell stock certificates. YOU SHOULD NOT RETURN STOCK
CERTIFICATES WITH THE ENCLOSED PROXY CARD.
Honeywell shareowners who surrender their stock certificates together with a
properly completed letter of transmittal will receive stock certificates
representing the shares of GE common stock into which their shares of Honeywell
common stock have been converted in the merger.
After the merger, each certificate that previously represented shares of
Honeywell common stock will represent only the right to receive the shares of
GE's common stock into which those shares of Honeywell common stock have been
converted.
GE will not pay dividends to holders of Honeywell stock certificates in
respect of the shares of GE common stock into which the Honeywell shares
represented by those certificates have been converted until the Honeywell stock
certificates are surrendered to the exchange agent.
After the merger becomes effective, Honeywell will not register any further
transfers of Honeywell shares. Any certificates for Honeywell shares that you
present for registration after the effective time will be exchanged for GE
shares.
35
<PAGE>
GE will not issue fractional shares in the merger. Instead, the exchange
agent will determine the excess of the number of full shares of GE common stock
delivered as part of the merger over the number of full shares of GE common
stock distributed to holders of Honeywell common stock. As soon as practicable
after the effective time of the merger, the exchange agent will sell these
excess shares on the NYSE. The exchange agent will determine the portion of the
net proceeds from the sale of the excess shares that each holder of Honeywell
common stock is entitled, if any, by multiplying the net proceeds by a fraction,
the numerator of which is the amount of the fractional share interest to which a
holder of Honeywell common stock is entitled and the denominator of which is the
aggregate amount of fractional share interests to which all holders of Honeywell
common stock are entitled. Alternatively, GE may elect at its option to pay the
exchange agent an amount in cash sufficient for the exchange agent to pay to
each of those shareowners otherwise entitled to a fractional share of GE common
stock an amount in cash determined by multiplying the fractional share interest
to which the shareowner would otherwise be entitled by the closing price for a
share of GE common stock on the NYSE on the first business day immediately
following the effective time. After determining the amount of cash to be paid to
shareowners otherwise entitled to a fractional share of GE common stock, the
exchange agent will pay those amounts to such holders of Honeywell common stock.
TREATMENT OF HONEYWELL STOCK OPTION PLANS
At the effective time of the merger, the right to receive shares of
Honeywell common stock pursuant to each outstanding option to purchase shares of
Honeywell common stock granted under the Honeywell stock option plans will
become the right to purchase a number of shares of GE common stock equal to the
number of shares of Honeywell common stock that were subject to the option
multiplied by 1.055, at an exercise price equal to the current exercise price
divided by 1.055. Each option granted to employees, in accordance with the terms
of the Honeywell stock option plans, will vest and become exercisable
immediately upon the effective time of the merger. Each such option, subject to
the foregoing, will then be subject to the same terms and conditions as were in
effect immediately prior to the merger.
GE will take all action necessary to reserve for issuance a sufficient
number of shares of GE common stock that will become subject to options to
purchase shares of GE common stock and will file with the SEC a registration
statement with respect to such GE common stock.
Prior to the signing of the merger agreement, Honeywell took action to cause
the holders of restricted shares, restricted stock units and any other
stock-based awards of Honeywell outstanding under Honeywell stock plans which
would otherwise be settled in cash, to receive settlements in shares of GE
common stock. Within 90 days of the consummation of the merger, holders of
restricted stock units which will be settled in shares of GE common stock will
receive that number of shares of GE common stock equal to the cash value of the
restricted stock units divided by the closing price of GE common stock on the
date of the consummation of the merger.
BOARD OF DIRECTORS
GE has agreed to take all action necessary so that, upon the consummation of
the merger, the board of directors of GE will have been expanded to add three
persons mutually acceptable to Honeywell and GE. The three persons will be
elected to the board of directors of GE effective as of the effective time of
the merger, and the same three persons will be nominated for election to the
board of directors of GE at the two annual meetings of shareowners of GE
following the consummation of the merger. It is presently contemplated that
three of Honeywell's current board members, including Mr. Bonsignore, will be
appointed to the GE board of directors at the effective time of the merger.
36
<PAGE>
COVENANTS
GE and Honeywell have each undertaken certain covenants in the merger
agreement. The following summarizes the more significant of these covenants:
NO SOLICITATION. Honeywell has agreed not to, and will cause its
subsidiaries not to, and will use reasonable best efforts to cause its officers,
directors, employees, investment bankers, consultants, attorneys, accountants,
agents and other representatives not to, directly or indirectly:
- take any action to solicit, initiate, encourage, or facilitate the making
of any "acquisition proposal" or any inquiry with respect to any
acquisition proposal of the type described below; or
- engage in substantive discussions or negotiations with any person
regarding any acquisition proposal or disclose any nonpublic information
relating to it or its subsidiaries or afford access to the properties,
books or records of it or its subsidiaries to any person that has made, or
that Honeywell knows is considering making, any acquisition proposal.
However, in the event that Honeywell receives an acquisition proposal that,
prior to the approval and adoption of the merger agreement and the merger by the
shareowners of Honeywell, was not solicited by it and that the board of
directors of Honeywell concludes in good faith could result in a "superior
proposal" of the type described below, and the Honeywell board of directors
determines in its good faith judgment, after receiving the advice of outside
counsel, that, in light of the acquisition proposal, there is a reasonable
probability that the board of directors would be in violation of its fiduciary
duties under applicable law if Honeywell failed to do so, Honeywell may, after
giving written notice of its intention to do so to GE:
- furnish information with respect to Honeywell and its subsidiaries to the
person making the acquisition proposal, subject to a customary
confidentiality agreement; and
- participate in discussions or negotiations regarding such acquisition
proposal.
An "acquisition proposal" is any offer or proposal for, or indication of
interest in, any:
- direct or indirect acquisition or purchase of a business or asset of
Honeywell or any of its subsidiaries that constitutes 20% or more of the
net revenue, net income or assets of Honeywell and its subsidiaries, taken
as a whole;
- direct or indirect acquisition or purchase of 20% or more of any class of
equity securities of Honeywell or of any of its subsidiaries whose
business constitutes 20% or more of the net revenue, net income or assets
of Honeywell and its subsidiaries, taken as a whole;
- tender offer or exchange offer that, if completed, would result in any
person owning 20% or more of any class of equity securities of Honeywell,
or any of its subsidiaries whose business constitutes 20% or more of the
net revenue, net income or assets of Honeywell and its subsidiaries, taken
as a whole; or
- merger, consolidation, business combination, recapitalization,
liquidation, dissolution or similar transaction involving Honeywell or any
of its subsidiaries whose business constitutes 20% or more of the net
revenue, net income or assets of Honeywell and its subsidiaries, taken as
a whole.
A "superior proposal" is any bona fide written acquisition proposal,
obtained by Honeywell and not solicited by it, for all the outstanding shares of
Honeywell common stock on terms which the board of directors of Honeywell
determines in its good faith judgment -- after consultation with a financial
advisor of nationally recognized reputation and taking into account all the
terms and conditions of the acquisition proposal and the merger agreement that
the board of directors considers to be relevant, including break-up fees,
expense reimbursement requirements, conditions to and expected timing and risks
of consummation, and the ability of the party making the acquisition proposal to
obtain financing for such acquisition proposal, and taking into account all
other legal, financial, regulatory and all other
37
<PAGE>
aspects of such proposal--to be more favorable, other than in immaterial
respects, from a financial point of view to Honeywell's shareowners than the
merger and which has a reasonable likelihood of being completed.
Honeywell will notify GE promptly upon, but in no event later than 24 hours
after, receipt of an acquisition proposal or any amendment or change in any
previously received acquisition proposal or any request for nonpublic
information relating to Honeywell or its subsidiaries or for access to the
properties, book or records of Honeywell or its subsidiaries by any person that
has made, or to Honeywell's knowledge, may be considering making, an acquisition
proposal. Honeywell will promptly provide GE with copies of any proposals,
indications of interest, draft agreements and correspondence relating to any
acquisition proposal. Honeywell will, and will cause its subsidiaries to
immediately cease and cause to be terminated, and use reasonable best efforts to
cause its officers, directors, employees, investment bankers, consultants,
attorneys, accountants, agents and other representatives to immediately cease
and cause to be terminated, all discussions and negotiations that have taken
place prior to the date of the merger agreement with any persons with respect to
any acquisition proposal, and will request the return or destruction of all
confidential information provided to any other person.
BOARD OF DIRECTORS' COVENANT TO RECOMMEND AND CALL SHAREOWNER
MEETING. Honeywell's board of directors has agreed to call a meeting of its
shareowners, to recommend the approval and adoption of the merger agreement and
the merger to its shareowners and to use its best efforts to obtain such
approval and adoption. The board of directors is permitted not to make this
recommendation or to withdraw or to modify this recommendation in a manner
adverse to GE only if, after receiving a superior proposal, the board of
directors determines in its good faith judgment, after receiving the advice of
outside legal counsel, that in light of this superior proposal, there is a
reasonable probability that the board of directors would be in violation of its
fiduciary duties under applicable law if it failed to withdraw or modify its
recommendation, such determination to be in the sole discretion of Honeywell's
board of directors.
OPERATIONS OF HONEYWELL PENDING CLOSING. Honeywell has undertaken that it
and its subsidiaries, until the earlier of the effective time of the merger or
termination of the merger agreement, will conduct their businesses in the
ordinary course consistent with past practices and use their reasonable best
efforts to preserve intact their business organizations and relationships with
third parties. Honeywell has agreed that it and its subsidiaries will not,
without the prior written consent of GE, such consent not to be unreasonably
withheld:
- amend any organizational documents;
- adopt a plan or agreement of merger, liquidation, dissolution,
reorganization or other similar transaction;
- issue, encumber or dispose of any stock, options or other securities
convertible into or exchangeable for stock, except pursuant to stock
options outstanding as of October 22, 2000 and pursuant to the dividend
reinvestment plan in effect on October 22, 2000;
- split, combine, subdivide or reclassify its stock;
- declare, set aside or pay dividends, except for regular quarterly cash
dividends consistent with past practice;
- redeem or repurchase any of its stock, except as required in connection
with the terms of any Honeywell stock plan or in accordance with any
dividend reinvestment plan in effect on October 22, 2000 consistent with
past practice;
- amend the terms of any employee or director stock options or other awards
the value of which is tied to the value of Honeywell's stock;
- increase employee compensation or benefits except for increases in the
ordinary course consistent with past practice;
38
<PAGE>
- acquire a material amount of assets except in the ordinary course of
business consistent with past practices or incur any additional
incremental indebtedness in excess of $1.5 billion, in the aggregate;
- dispose of a material amount of assets, except pursuant to existing
contracts or commitments and in the ordinary course of business consistent
with past practices, except as described below in "Reasonable Best Efforts
Covenant";
- change any accounting policies except as required by changes in generally
accepted accounting principles;
- enter into any material joint venture, partnership or other similar
arrangement;
- take any action that would make any representation or warranty of
Honeywell in the merger agreement inaccurate in any material respect;
- settle or compromise any material legal action for an amount in excess of
$100 million, or enter into any consent decree, injunction or similar
restraint or form of equitable relief in settlement of any legal action,
except for those which would not individually or in the aggregate
adversely affect the businesses or operations of Honeywell, GE or the
combined company at or after the effective time of the merger;
- take any action to exempt any person, entity or action, other than GE,
from the provisions of Section 203 of the Delaware General Corporation Law
or any other potentially applicable anti-takeover provision;
- make any election with respect to taxes that would have a material adverse
effect on Honeywell; or
- agree or commit to do any of the foregoing.
A material adverse effect, with respect to any person or entity, means a
material adverse effect on the financial condition, business, liabilities,
properties, assets or results of operations of such person or entity and its
subsidiaries, taken as a whole, except to the extent resulting from:
- any changes in general United States or global economic conditions,
- any changes in general economic conditions in industries in which the
person or entity operates, which changes do not affect Honeywell or GE, as
the case may be, disproportionately relative to other entities operating
in such industries, or
- any decline in the market price of the common stock of such person or
entity.
GE and Honeywell have agreed that, for purposes of the covenants described
above, acquisitions of property, assets or any business involving consideration
in excess of $500 million in the aggregate, and dispositions of assets or
property having a fair market value in excess of $500 million in the aggregate,
shall be deemed to be material.
REASONABLE BEST EFFORTS COVENANT. GE and Honeywell have agreed to cooperate
with each other and use, and cause their subsidiaries to use, their respective
reasonable best efforts to promptly take all necessary actions to complete the
merger and the other transactions contemplated by the merger agreement as soon
as practicable, including, without limitation, preparing and filing all
documentation to effect all necessary filings, notices and other required
documents, and obtaining all necessary approvals, consents and other
confirmations required to be obtained from third parties. GE and Honeywell will
use their reasonable best efforts to avoid the entry of, or to have vacated or
terminated, any decree, order or judgment that would restrain, prevent or delay
the completion of the merger, including defending through litigation on the
merits any claim asserted in any court by any person, and to avoid or eliminate
any impediment under any antitrust, competition or trade regulation law that may
be asserted by any governmental authority in order to cause the closing of the
merger to occur as soon as reasonably possible. GE will not be required to take
any such action if such action with respect to a
39
<PAGE>
comparable amount of assets, businesses or product lines of Honeywell would be
reasonably likely, in the aggregate, to have a material adverse effect on
Honeywell and its subsidiaries, taken as a whole. In addition, neither GE nor
Honeywell is required to sell or divest any businesses, product lines or assets
of Honeywell if the sales and divestitures would be reasonably likely, in the
aggregate, to have a material adverse effect on Honeywell and its subsidiaries.
Honeywell will take such actions described in this paragraph as GE may request,
provided that any such action is conditioned upon the consummation of the
merger. GE and Honeywell will keep each other reasonably apprised of the status
of matters relating to the completion of the transactions and work cooperatively
in connection with obtaining all required approvals or consents of any
governmental authority.
EMPLOYEE MATTERS. GE and Honeywell agreed to the following in the merger
agreement:
- GE will cause the company surviving the merger to honor in accordance with
their terms all benefits and obligations under Honeywell employee plans in
effect on October 22, 2000; no provision of the merger agreement will
prevent GE from amending or terminating any Honeywell employee plan to the
extent permitted by the terms of the respective plan and applicable law,
and the merger agreement does not create a right in any employee or
beneficiary that the employee or beneficiary would not have otherwise had
under the terms of any applicable Honeywell employee plan;
- for a period of at least one year following the effective time of the
merger, for as long as each Honeywell employee remains employed by GE or
its subsidiaries, GE will provide to employees of Honeywell employee
benefits which in the aggregate are at least as favorable as the benefits
provided pursuant to Honeywell's employee benefit plans immediately prior
to the effective time of the merger;
- GE will, or will cause the company surviving the merger to, provide to
employees of Honeywell at the effective time of the merger full credit for
their service with Honeywell for purposes of eligibility, vesting and
determination of benefits under severance benefit, vacation and other
employee benefit plans, other than for benefit accrual purposes under
defined benefit pension plans maintained by GE or where such crediting of
service would result in a duplication of benefits;
- GE will, or will cause the company surviving the merger to, waive all
limitations as to preexisting conditions, exclusions and waiting periods,
with respect to participation and coverage requirements applicable to
Honeywell employees at the effective time of the merger under any welfare
benefit plans of GE that such employees may be eligible to participate in
after the effective time of the merger, other than limitations, exclusions
and waiting periods that would have been in effect with respect to the
same employees under any welfare plan maintained by Honeywell before the
effective time of the merger; and
- GE and Honeywell will take all necessary action to ensure that no "rabbi"
or similar trust maintained by Honeywell is required to be funded as a
result of the transactions contemplated by the merger agreement.
CONSULTING AGREEMENT. At the effective time of the merger, GE will enter
into a consulting agreement with Michael R. Bonsignore substantially on the
terms set out in the disclosure schedule to the merger agreement.
See "Interests of Certain Persons in the Merger," beginning on page 30, for
additional information on the consulting agreement and employee benefits matters
covered in the merger agreement.
PAYMENT OF DIVIDENDS PENDING THE MERGER. GE and Honeywell have agreed to
coordinate declaring dividends and the related record dates and payment dates so
that Honeywell shareowners do not receive two dividends, or fail to receive one
dividend, for any single calendar quarter.
40
<PAGE>
REPRESENTATIONS AND WARRANTIES
The merger agreement contains certain generally reciprocal representations
and warranties made by each party to the other. These generally reciprocal
representations and warranties relate to:
- corporate existence, qualification to conduct business and corporate
standing and power;
- corporate authorization to enter into and carry out obligations under the
merger agreement and the stock option agreement, the enforceability of the
merger agreement and the stock option agreement and actions by the GE and
Honeywell board of directors with respect to the merger agreement and the
stock option agreement;
- governmental consents, approvals, orders and authorizations required in
connection with the merger;
- absence of a breach of the certificate of incorporation, by-laws, law or
material agreements as a result of the merger;
- capitalization;
- filings with the SEC;
- financial statements;
- information provided for inclusion in this proxy statement/prospectus;
- litigation;
- absence of undisclosed liabilities;
- treatment of the merger as a pooling of interests for accounting purposes
and as a reorganization under the Internal Revenue Code in which Honeywell
shareowners generally will not recognize any gain or loss, except for any
gain or loss recognized in connection with cash received for a fractional
share of GE common stock; and
- payment of fees to finders and financial advisors in connection with the
merger agreement.
In addition, Honeywell also makes representations and warranties to GE
regarding:
- ownership of subsidiaries;
- tax matters;
- employee benefit matters;
- compliance with laws;
- environmental matters;
- opinion of financial advisor;
- absence of certain material changes or events since June 30, 2000;
- intellectual property matters; and
- takeover statutes.
The representations and warranties contained in the merger agreement do not
survive the effective time of the merger.
41
<PAGE>
ADDITIONAL COVENANTS
INSURANCE AND INDEMNIFICATION. GE is obligated, for three years after the
merger, to procure directors' and officers' liability insurance covering acts or
omissions occurring prior to the effective time of the merger for persons
currently covered by Honeywell's officers' and directors' liability insurance
policies. GE will not be required to pay, in total, an annual premium for the
insurance described in this paragraph in excess of 200% of the current annual
premium paid by Honeywell for its existing coverage prior to the merger.
However, if the annual premiums of that insurance coverage exceed that amount,
GE will be obligated to provide, or cause its subsidiaries to provide, coverage
available for a cost equal to 200% of the current annual premium.
GE is obligated to cause the company surviving the merger to indemnify and
hold harmless each person who is, or has been an officer, director or employee
of Honeywell or any of its subsidiaries with respect to acts or omissions by
them in their capacities as officers, directors or employees or taken at the
request of Honeywell or any of its subsidiaries at any time on or prior to the
effective time of the merger to the fullest extent permitted under applicable
laws.
EXPENSES. GE and Honeywell have agreed to each pay their own costs and
expenses incurred in connection with the merger agreement and the merger. GE and
Honeywell will, however, share equally
- the filing fees for filings under the Hart-Scott-Rodino Act, antitrust
filings with the European Commission and all similar filings;
- the filing fees in connection with the filing with the SEC of this proxy
statement/prospectus and the related registration statement;
- all printing, mailing and related expenses; and
- all other expenses not directly attributable to either Honeywell or GE.
NYSE LISTING. GE is obligated to use its reasonable best efforts to cause
the shares of its common stock to be issued in the merger to be approved for
listing on the NYSE, subject to official notice of issuance.
TAX AND ACCOUNTING TREATMENT. GE and Honeywell have each agreed not to take
any action or fail to take any action which would prevent the merger from
qualifying for pooling of interests accounting treatment or as a reorganization
under the Internal Revenue Code. In addition, Honeywell has agreed not to take
any action which would prevent the merger between Honeywell Inc. and
AlliedSignal Inc. that was completed on December 1, 1999 from qualifying for
pooling of interests accounting treatment.
HONEYWELL NAME. GE has agreed to use the Honeywell name in areas in which
Honeywell has been historically strong. In addition, GE has agreed to use the
Honeywell name in conjunction with the GE name for the Honeywell Home and
Building Control business and the Honeywell avionics business. Finally, GE will
consider the use of the Honeywell name in conjunction with the GE name for the
Honeywell industrial controls business.
CONDITIONS TO THE COMPLETION OF THE MERGER
The respective obligations of GE and Honeywell to complete the merger are
subject to the satisfaction or, to the extent legally permissible, the waiver of
various conditions which include, in addition to other customary closing
conditions, the following:
- approval and adoption of the merger agreement and the merger by the
shareowners of Honeywell in accordance with Delaware law;
- expiration or termination of the relevant waiting period under the
Hart-Scott-Rodino Act;
42
<PAGE>
- approval of the merger by the European Commission pursuant to European
Community merger regulations;
- expiration or termination of the relevant waiting period under the
Competition Act of Canada;
- the absence of any law, regulation or court order prohibiting, materially
restricting, making illegal or enjoining the completion of the merger;
- the SEC having declared effective the registration statement relating to
the issuance of the shares of GE common stock to be issued in the merger,
of which this proxy statement/prospectus forms a part;
- the shares of GE common stock to be issued in the merger having been
approved for listing on the NYSE, subject to official notice of issuance;
and
- receipt of a letter at closing from KPMG LLP stating that they concur with
the opinion of GE's management that pooling of interests accounting
treatment for the merger is appropriate if the merger is consummated in
accordance with the terms of the merger agreement and a letter at closing
from PricewaterhouseCoopers LLP stating that they concur with the opinion
of Honeywell's management that Honeywell is eligible to participate in a
transaction to be accounted for as a pooling of interests.
In addition, individually, the respective obligations of GE and Honeywell to
effect the merger are subject to the satisfaction or, to the extent legally
permissible, the waiver of the following additional conditions:
- the representations and warranties of the other company contained in the
merger agreement being true and correct on the closing date of the merger,
as if they were made on that date, unless they were by their express
provisions made as of a specific date, in which case they need be true and
correct only as of that specific date, unless their failure to be true and
correct would not have a material adverse effect on such other company;
- the other company having performed in all material respects all required
obligations to be performed by it prior to the closing of the merger;
- each company having received a certificate signed by an executive officer
of the other company on its behalf to the effect of the previous two
paragraphs; and
- GE and Honeywell having received an opinion from their respective counsel
to the effect that the merger will be treated for federal income tax
purposes as a reorganization under the Internal Revenue Code, and those
opinions having not been withdrawn prior to the effective time of the
merger.
The obligations of GE to consummate the merger are subject to the following
further conditions:
- there is no statute, rule, regulation, injunction, order or decree
applicable to the merger and the other transactions contemplated by the
merger agreement by any court, governmental authority or agency or
legislative body, foreign or domestic, that would, or would reasonably be
expected to, have a material adverse effect on Honeywell at the effective
time of the merger; and
- all required approvals or consents of any governmental authority or third
party will have been obtained except, in the case of consents the absence
of which would not result in civil or criminal sanctions being imposed on
GE, the company surviving the merger or their respective affiliates, where
the failure to obtain any such consents and approvals would not reasonably
be expected to have a material adverse effect on Honeywell, and all such
approvals and consents which have been obtained shall be on terms that
would not reasonably be expected to have a material adverse effect on
Honeywell.
43
<PAGE>
TERMINATION OF THE MERGER AGREEMENT
RIGHT TO TERMINATE. The merger agreement may be terminated at any time
prior to the closing in any of the following ways:
- by the mutual written consent of GE and Honeywell;
- by either GE or Honeywell:
- if the merger is not completed as of June 30, 2001; however, that date
is extended to November 30, 2001 if the merger is not completed on or
before June 30, 2001 solely because of the failure to satisfy certain
antitrust, merger control or other closing conditions, except that GE
or Honeywell may not terminate the merger agreement on the dates above
if the cause of the merger not being completed is its failure to
fulfill its obligations;
- if the Honeywell shareowners do not approve the merger agreement and
the merger at the Honeywell special meeting;
- if a law or court order permanently prohibits the completion of the
merger; or
- if there has been a material breach by the other company of any of the
other company's representations, warranties, covenants or agreements
contained in the merger agreement, and the breach would result in the
failure to satisfy one or more of the conditions to the merger and the
breach is incapable of being cured or, if capable of being cured, has
not been cured within 30 days after written notice was received by the
company in breach;
- by GE, if the Honeywell board of directors fails to recommend the merger
agreement and the merger to its shareowners, withdraws or modifies or
changes its approval or recommendation of the merger agreement and the
merger in any manner adverse to GE, fails to call a meeting of the
Honeywell shareowners or recommends a superior proposal.
TERMINATION FEES PAYABLE BY HONEYWELL. Honeywell has agreed to pay GE a
termination fee of $1.35 billion in the event that:
- either GE or Honeywell terminates the merger agreement after the Honeywell
shareowners do not approve and adopt the merger agreement and the merger
at the Honeywell special meeting and, either at or prior to the time of
the failure of Honeywell's shareowners to approve and adopt the merger
agreement and the merger, an acquisition proposal has been made public and
not withdrawn; or
- GE terminates the merger agreement if the Honeywell board of directors
fails to recommend the merger agreement and the merger to its shareowners,
withdraws or modifies its approval or recommendation of the merger
agreement and the merger in any manner adverse to GE, fails to call a
meeting of the Honeywell shareowners, or recommends a superior proposal.
In the event of a termination by Honeywell, the termination fee will be paid
prior to or simultaneously with such termination. In the event of a termination
by GE, Honeywell must pay the termination fee promptly, but in no event later
than two business days after such termination.
AMENDMENTS AND WAIVER
Any provision of the merger agreement may be amended or waived at any time
prior to the effective time of the merger. However, if a provision of the merger
agreement is amended or waived after the Honeywell shareowners approve the
merger agreement, such amendment or waiver will be subject to any necessary
shareowner approval. Any amendment must be signed by GE, Honeywell and Merger
Sub. Any waiver must be signed by the party against whom the waiver is to be
effective.
44
<PAGE>
STOCK OPTION AGREEMENT
The following description of the stock option agreement describes the
material terms of the agreement but does not purport to describe all the terms
of the agreement. The complete text of the stock option agreement is attached as
Annex B to this proxy statement/prospectus and is incorporated by reference into
this proxy statement/prospectus. All shareowners are urged to read the stock
option agreement in its entirety.
Concurrently with the execution of the merger agreement, GE and Honeywell
entered into a stock option agreement pursuant to which Honeywell granted to GE
an option to purchase up to 19.9% of the Honeywell common stock issued and
outstanding at the time of first exercise. The option has an exercise price of
$55.12 per share, payable in cash.
EXERCISE
The option becomes exercisable only under circumstances in which a
termination fee is payable to GE. These circumstances are described above in
"Termination Fees Payable by Honeywell". GE may only exercise the option if
there are no governmental restraints prohibiting the exercise of the option and
any prior notification or approval of any governmental entity has been made or
obtained.
GE may no longer exercise its option after the earliest to occur of:
- the effective time of the merger;
- 120 days after the full payment of the termination fee;
- the date of termination of the merger agreement in circumstances which do
not require the payment of the termination fee; or
- the first anniversary of the termination of the merger agreement.
CASH EXERCISE NOTICE
If GE's option becomes exercisable, GE may, as to all or part of the option
shares subject to the option, elect to receive a cash payment. To the extent GE
elects to receive a cash payment in lieu of option shares, GE's right to
purchase such option shares will terminate. The cash to be paid to GE would be
equal to the spread multiplied by such number of option shares as GE specifies
in its election.
The spread is the excess over the exercise price of the greater of:
- the highest price per share of Honeywell common stock paid or proposed to
be paid by any person or entity in connection with an acquisition
proposal; or
- the average of the closing prices of Honeywell common stock for the five
days preceding the notice of the election to receive cash.
REPURCHASE ELECTION
If GE's option becomes exercisable as a result of an acquisition proposal
consisting in whole or in part of shares of capital stock of a third party, from
the time its options become exercisable until the tenth business day after the
first mailing to Honeywell's shareowners of a proxy statement, tender offer
statement or other disclosure or offering document relating to such acquisition
proposal, GE may require Honeywell, or a successor of Honeywell, to repurchase
from GE all of the shares of common stock acquired by GE as a result of its
option, and with respect to which GE then has beneficial ownership, at a price
equal to the repurchase fee.
45
<PAGE>
The repurchase fee equals the sum of:
- the aggregate price paid by GE for any shares of Honeywell common stock
acquired by GE as a result of its option and with respect to which GE then
has beneficial ownership; and
- subject to the maximum amount described below in "Maximum Amount
Realizable by GE", the spread multiplied by the number of shares of
Honeywell common stock acquired by GE as a result of its option and with
respect to which GE then has beneficial ownership.
If GE elects to require Honeywell, or a successor of Honeywell, to
repurchase its option shares, Honeywell or its successor will pay GE an amount
equal to the repurchase fee and GE will surrender the certificates representing
the Honeywell common stock acquired by exercise of the option.
MAXIMUM AMOUNT REALIZABLE BY GE
Notwithstanding any other provision of the stock option agreement or the
merger agreement, the total profit, as defined below, that GE is permitted to
receive will not exceed $1.35 billion. If the total profit of GE would otherwise
exceed this amount, GE may, at its sole election:
- pay cash to Honeywell;
- deliver to Honeywell for cancelation option shares previously acquired;
- waive payment of any portion of the termination fee payable pursuant to
the merger agreement; or
- any combination of the above,
so that GE's actually realized total profit does not exceed $1.35 billion after
taking into account the foregoing actions.
Total profit means the aggregate, before taxes, of the following:
- the cash amount actually received by GE in payment of the termination fee
under the merger agreement, LESS any repayment as described in the
preceding paragraph;
- the amounts received by GE from the sale of option shares, LESS the
purchase price for those option shares; and
- the aggregate amount received by GE as a result of a cash exercise
election or repurchase election.
The stock option agreement also provides that GE may not exercise the option
for a number of option shares that would, as of the date of notice to Honeywell,
result in a notional total profit, as defined below, that exceeds
$1.35 billion. For purposes of the stock option agreement, the notional total
profit with respect to the option shares for which GE may propose to exercise
the option granted to it means the total profit received by it determined as of
the date GE notifies Honeywell of its intent to exercise the option and assuming
that the option shares, together with all other option shares previously
acquired upon exercise of the option and held by GE or its affiliates as of such
date, were sold for cash at the closing price on the NYSE on the preceding
trading day, less customary brokerage commissions.
LISTING AND REGISTRATION RIGHTS
If GE's option becomes exercisable, Honeywell will apply to list the option
shares subject to the option on the NYSE and will use reasonable best efforts to
have those shares listed as soon as practicable. If GE exercises the option, it
will have certain registration rights, subject to certain restrictions set forth
in the stock option agreement, with respect to the option shares for a period of
46
<PAGE>
two years. The registration rights allow GE to require that Honeywell use its
reasonable best efforts to register the shares GE receives by exercising its
option.
EFFECT OF THE STOCK OPTION AGREEMENT
The stock option agreement is intended to increase the likelihood that the
merger will be completed in accordance with the terms of the merger agreement.
The stock option agreement may have the effect of making an acquisition or other
business combination involving Honeywell by or with a third party more costly
because of the need in any transaction to acquire the shares of Honeywell common
stock held pursuant to the stock option agreement. In addition, should the
option granted to GE become exercisable, it could preclude any other party from
using the pooling of interests method in any merger or business combination
transaction with Honeywell during the two-year period following the exercise of
the option.
47
<PAGE>
COMPARISON OF SHAREOWNER RIGHTS
GE is incorporated under the laws of the State of New York, whereas
Honeywell is incorporated under the laws of the State of Delaware. After the
completion of the merger, Honeywell shareowners, whose rights are currently
governed by Delaware law, the certificate of incorporation of Honeywell and the
by-laws of Honeywell, will become shareowners of GE, and their rights as such
will be governed by New York law, the GE certificate of incorporation and the
by-laws of GE. The material differences between the rights of holders of
Honeywell common stock and the rights of holders of GE common stock, resulting
from the differences in their governing documents, are summarized below.
The following summary does not purport to be a complete statement of the
rights of holders of GE common stock under the applicable provisions of New York
law, the GE certificate of incorporation and the GE by-laws or the rights of the
holders of Honeywell common stock under the applicable provisions of Delaware
law, the Honeywell certificate of incorporation and the Honeywell by-laws, or a
complete description of the specific provisions referred to in this summary.
This summary contains a list of the material differences, but is not meant to be
relied upon as an exhaustive list or a detailed description of the provisions
discussed and is qualified in its entirety by reference to New York law and
Delaware law and the governing corporate instruments of GE and Honeywell, to
which the holders of Honeywell common stock are referred. Copies of such
governing corporate instruments of GE and Honeywell are available, without
charge, to any person, including any beneficial owner to whom this prospectus is
delivered, by following the instructions listed under "Where You Can Find More
Information".
SUMMARY OF MATERIAL DIFFERENCES BETWEEN THE RIGHTS OF HONEYWELL SHAREOWNERS
AND THE RIGHTS OF GE SHAREOWNERS
<TABLE>
<CAPTION>
HONEYWELL SHAREOWNER RIGHTS GE SHAREOWNER RIGHTS
------------------------------------ ------------------------------------
<S> <C> <C>
AUTHORIZED CAPITAL The authorized capital stock of The authorized capital stock of GE
STOCK: Honeywell currently consists of currently consists of 13,250,000,000
2,040,000,000 shares of capital shares of capital stock, consisting
stock, consisting of (i) of (i) 13,200,000,000 shares of GE
2,000,000,000 shares of Honeywell common stock, par value $0.06 per
common stock, par value $1.00 per share, and (ii) 50,000,000 shares of
share, and (ii) 40,000,000 shares of preferred stock, par value $1.00 per
preferred stock, without par value. share.
NUMBER OF DIRECTORS; The Honeywell board of directors The GE board of directors currently
CLASSIFIED BOARD: currently consists of 13 directors, consists of 17 directors, with each
divided into three classes of director elected to a one-year term.
relatively equal number, with each
director elected to a term expiring
at the third succeeding annual
meeting of shareowners.
REMOVAL OF Honeywell directors may be removed GE directors may be removed only
DIRECTORS: only with cause by the affirmative with cause by the affirmative vote
votes of the holders of at least 80% of the holders of a majority of the
of the voting power of the votes cast by the holders of shares
outstanding capital stock of the entitled to vote thereon at a
company. meeting of shareowners.
</TABLE>
48
<PAGE>
<TABLE>
<CAPTION>
HONEYWELL SHAREOWNER RIGHTS GE SHAREOWNER RIGHTS
------------------------------------ ------------------------------------
<S> <C> <C>
CALLING A SPECIAL Special meetings of the Honeywell Special meetings of the GE
MEETING OF shareowners may be called by the shareowners may be called by the
SHAREOWNERS: chief executive officer or the board board of directors. In addition,
of directors. special meetings of the GE
shareowners may be called upon the
written request of shareowners
holding forty percent of the then
issued stock of the company.
SHAREOWNER ACTION BY Shareowners may not take any action Any action which may be taken at a
WRITTEN CONSENT: by written consent in lieu of a meeting of shareowners of GE may
meeting. also be taken by the unanimous
written consent of all shareowners.
AMENDMENT OF Generally, Honeywell's charter may The affirmative vote of at least a
CHARTER: be amended by the affirmative vote majority of outstanding shares of GE
of the holders of a majority of the common stock is required to amend
outstanding stock entitled to vote. the GE charter.
In addition, Honeywell's charter
provides that the affirmative vote
of the holders of at least 80% of
the voting power of the outstanding
capital stock of the company is
required to amend provisions in
Honeywell's charter related to:
- the composition of the board of
directors and removal of
directors,
- amendments to the by-laws,
- allowing only the chief executive
officer or the board of directors
of the company to call special
meetings of the shareowners, and
- allowing shareowner action to be
taken only at a meeting of
shareowners.
AMENDMENT OF Honeywell's by-laws may be amended, GE's by-laws may be amended or
BY-LAWS: supplemented or repealed by the repealed by the shareowners of the
board of directors of the company. company or the board of directors of
Honeywell shareowners may also the company, except that the GE
amend, supplement or repeal by-laws board of directors does not have the
of the company, except that the authority to amend or repeal any
affirmative vote of the holders of by-law which is adopted by the GE
at least 80% of the voting power of shareowners after April 20, 1948,
the outstanding capital stock of the unless such authority is granted to
company is required to amend, the GE board of directors by the
supplement or repeal provisions in specific provisions of a by-law
Honeywell's by-laws relating to: adopted by the GE shareowners.
- special meetings of shareowners,
</TABLE>
49
<PAGE>
<TABLE>
<CAPTION>
HONEYWELL SHAREOWNER RIGHTS GE SHAREOWNER RIGHTS
------------------------------------ ------------------------------------
<S> <C> <C>
- the number, election and terms of
directors, and
- removal of directors.
APPRAISAL RIGHTS: Under Delaware law, the right of Upon strict compliance with the
dissenting shareowners to obtain the applicable statutory requirements
fair value for their shares is and procedures, a dissenting
available in connection with some shareowner has the right to receive
mergers or consolidations. Unless payment of the fair value of such
otherwise provided in the corporate shareowner's shares if such
charter, appraisal rights are not shareowner objects to:
available to shareowners when the
corporation will be the surviving - mergers,
corporation in a merger and no vote - consolidations,
of its shareowners is required to - dispositions of assets requiring
approve the merger. In addition, no shareowner approval,
appraisal rights are available to - specified share exchanges, or
holders of shares of any class of - amendments to the certificate of
stock which is either: incorporation which adversely
affect the rights of such
- listed on a national securities shareowner.
exchange or designated as a
national market system security on
an interdealer quotation system by
the NASD, or
- held of record by more than 2,000
shareowners,
unless those shareowners are
required by the terms of the merger
to accept anything other than
- shares of stock of the surviving
corporation,
- shares of stock of another
corporation which, on the
effective date of the merger or
consolidation, are of the kind
described above,
- cash instead of fractional shares
of such stock, or
- any combination of the
consideration set forth above.
</TABLE>
50
<PAGE>
<TABLE>
<CAPTION>
HONEYWELL SHAREOWNER RIGHTS GE SHAREOWNER RIGHTS
------------------------------------ ------------------------------------
<S> <C> <C>
INTERESTED Under Delaware law, an interested An interested shareowner, defined
SHAREOWNERS: shareowner, defined generally as a generally as a person owning 20% or
person owning 15% or more of a more of a corporation's outstanding
corporation's outstanding voting voting stock, is prevented from
stock, is prevented from engaging in engaging in a business combination
a business combination with the with the corporation for five years
corporation for three years after becoming an interested
following the time that person shareowner, unless:
became an interested shareowner,
unless: - the board approved the transaction
in which the interested shareowner
- the board, before the time the became an interested shareowner;
person became an interested or
shareowner, approved either the
business combination or the - the board approves the business
transaction that resulted in the combination before the shareowner
person becoming an interested becomes an interested shareowner.
shareowner;
If the board did not approve the
- the person became an interested transaction in which the interested
shareowner and 85% owner of the shareowner became an interested
voting stock in the transaction, shareowner, such interested
excluding shares owned by shareowner is prevented from
directors and officers and shares engaging in a business combination
owned by some employee stock after the five-year period unless:
plans; or
- a majority of the shares not owned
- the combination transaction is by the interested shareowner
approved by the board and approve the business combination;
authorized by the affirmative vote or
of at least two-thirds of the
outstanding voting stock not owned - the consideration to be provided
by the interested shareowner. in connection with the business
combination meets certain fair
A Delaware corporation can elect in price criteria.
its charter or by-laws not to be
governed by this provision of
Delaware law. Honeywell has not made
such an election.
</TABLE>
51
<PAGE>
DESCRIPTION OF GE CAPITAL STOCK
Set forth below is a description of the GE capital stock. The following
statements are brief summaries of, and are subject to the provisions of, the
certificate of incorporation and by-laws of GE and the relevant provisions of
the law of New York.
GE currently is authorized to issue up to 13,200,000,000 shares of common
stock, par value $.06 per share. GE is also authorized to issue up to 50,000,000
shares of preferred stock, par value $1.00 per share, in series. GE has not
issued any of this preferred stock. If preferred stock is issued, GE's board of
directors may fix the designation, relative rights, preferences and limitations
of the shares of each series.
Dividends may be paid on the GE common stock out of funds legally available
for dividends, when and if declared by GE's board of directors.
Holders of the GE common stock are entitled to share ratably in any
dividends and in any assets available for distribution on liquidation,
dissolution or winding-up, subject, if preferred stock of GE is then
outstanding, to any preferential rights of such preferred stock. Each share of
GE common stock entitles the holder to one vote at all meetings of shareowners,
and the votes are noncumulative. The GE common stock is not redeemable, has no
subscription or conversion rights and does not entitle the holder to any
preemptive rights.
The Bank of New York is the transfer agent and registrar for the GE common
stock.
LEGAL MATTERS
The legality of the GE common stock offered hereby will be passed upon for
GE by Robert E. Healing, corporate counsel of GE. Mr. Healing beneficially owns
or has rights to acquire an aggregate of less than 0.01% of GE's common stock.
Shearman & Sterling, counsel to GE, and Skadden, Arps, Slate, Meagher & Flom
LLP, counsel to Honeywell, each will deliver opinions concerning the federal
income tax consequences of the merger.
EXPERTS
KPMG LLP, independent certified public accountants, audited GE's
consolidated financial statements as of December 31, 1999 and 1998, and for each
of the years in the three-year period ended December 31, 1999. GE's annual
report on Form 10-K includes these financial statements and the auditor's
report. This prospectus incorporates the financial statements and report by
reference, relying on KPMG LLP's authority as experts in accounting and
auditing.
The audited financial statements incorporated in this proxy
statement/prospectus by reference to the annual report on Form 10-K of Honeywell
for the year ended December 31, 1999, except as they relate to Honeywell Inc., a
wholly owned subsidiary of Honeywell International Inc., as of and for the two
years ended December 31, 1998, have been audited by PricewaterhouseCoopers LLP,
independent accountants, and, insofar as they relate to Honeywell Inc. as of and
for the two years ended December 31, 1998, by Deloitte & Touche LLP, independent
accountants. Such financial statements have been so incorporated in reliance on
the reports of such independent accountants, given on the authority of such
firms as experts in auditing and accounting.
With respect to the unaudited consolidated financial information of
Honeywell for the three-month periods ended March 31, 2000 and 1999, the
three-month and six-month periods ended June 30, 2000 and 1999 incorporated by
reference in this proxy statement/prospectus, PricewaterhouseCoopers LLP
reported that they have applied limited procedures in accordance with
professional standards for a review of such information. However, their separate
reports dated May 5, 2000 and July 28, 2000 incorporated by reference in this
proxy statement/prospectus, state that they did not audit and did not
52
<PAGE>
express an opinion on that unaudited consolidated financial information.
Accordingly, the degree of reliance on their report on such information should
be restricted in light of the limited nature of the review procedures applied.
PricewaterhouseCoopers LLP is not subject to the liability provisions of
Section 11 of the Securities Act for their report on the unaudited consolidated
financial information because that report is not a "report" or a "part" of the
registration statement prepared or certified by PricewaterhouseCoopers LLP
within the meaning of Sections 7 and 11 of the Securities Act.
OTHER MATTERS
As of the date of this proxy statement/prospectus, the Honeywell board of
directors is not aware of any matters that will be presented for consideration
at the special meeting other than as described in this proxy
statement/prospectus. If any other matters come before the special meeting or
any adjournments or postponements of the special meeting and are voted upon, the
enclosed proxy will confer discretionary authority on the individuals named as a
proxy to vote the shares represented by the proxy as to any other matters. The
individuals named as proxies intend to vote or not to vote in accordance with
the recommendation of the management of Honeywell.
FUTURE SHAREOWNER PROPOSALS
If the merger is not consummated, Honeywell will hold a 2001 Annual Meeting
of Shareowners. If such meeting is held, for a shareowner proposal to be
considered for inclusion in Honeywell's proxy statement for the 2001 Annual
Meeting, the proposal must have been received at Honeywell's offices no later
than November 13, 2000. SEC Rule 14a-8 contains standards as to what shareowner
proposals are to be included in a proxy statement.
In the event the merger is not consummated and the Honeywell 2001 Annual
Meeting is held, if a shareowner intends to present a proposal for consideration
at the 2001 Annual Meeting outside the processes of SEC Rule 14a-8, Honeywell
must receive the notice of such proposal on or before January 27, 2001.
WHERE YOU CAN FIND MORE INFORMATION
GE and Honeywell file annual, quarterly and special reports, proxy
statements and other information with the SEC under the Exchange Act. You may
read and copy this information at the following locations of the SEC:
<TABLE>
<S> <C> <C>
Public Reference Room North East Regional Midwest Regional Office
450 Fifth Street, N.W. Office 500 West Madison Street
Room 1024 7 World Trade Center Suite 1400
Washington, D.C. 20549 Suite 1300 Chicago, Illinois 60661-2511
New York, New York 10048
</TABLE>
The public may obtain information on the operations of the Public Reference
Room by calling the SEC at 1-800-SEC-0300. You may also obtain copies of this
information by mail from the Public Reference Section of the SEC, 450 Fifth
Street, N.W., Room 1024, Washington, D.C. 20549, at prescribed rates.
The SEC also maintains a web site that contains reports, proxy statements
and other information about issuers, like GE and Honeywell, who file
electronically with the SEC. The address of that site is www.sec.gov.
You may also obtain information about GE, including printer-friendly
versions of GE's SEC reports, at http://www.ge.com.
You can also inspect reports, proxy statements and other information about
GE and Honeywell at the offices of the NYSE, 20 Broad Street, New York, New York
10005.
53
<PAGE>
GE has filed a registration statement on Form S-4 under the Securities Act
to register with the SEC the GE common stock to be issued pursuant to the merger
agreement. This proxy statement/ prospectus is a part of that registration
statement. As allowed by SEC rules, this proxy statement/ prospectus does not
contain all the information you can find in the registration statement or the
exhibits to the registration statement. You may obtain copies of the Form S-4
(and any amendments to those documents) in the manner described above.
The SEC allows us to "incorporate by reference" information into this proxy
statement/prospectus, which means that we can disclose important information to
you by referring you to another document filed separately with the SEC. The
information incorporated by reference is deemed to be part of this proxy
statement/prospectus, except for any information superseded by information
contained directly in this proxy statement/prospectus or in any document filed
after the date of this proxy statement/ prospectus by GE or Honeywell with the
SEC under Section 13(a), 13(c), 14 or 15(d) of the Exchange Act until the
meeting of Honeywell's shareowners. This proxy statement/prospectus incorporates
by reference the documents set forth below that GE and Honeywell have previously
filed with the SEC. These documents contain important information about GE and
Honeywell and their financial condition.
<TABLE>
<CAPTION>
GE COMMISSION FILINGS PERIOD
--------------------- ------
<S> <C>
Current Report on Form 8-K.................................. Dated October 22, 2000
Quarterly Report on Form 10-Q............................... Quarter ended September 30, 2000
Quarterly Report on Form 10-Q and Amended Quarterly Report
on Form 10-Q/A............................................ Quarter ended June 30, 2000
Current Report on Form 8-K.................................. Dated April 27, 2000
Quarterly Report on Form 10-Q............................... Quarter ended March 31, 2000
Proxy Statement of General Electric Company................. Filed March 13, 2000
Annual Report on Form 10-K.................................. Year ended December 31, 1999
</TABLE>
<TABLE>
<CAPTION>
HONEYWELL COMMISSION FILINGS PERIOD
---------------------------- ------
<S> <C>
Current Report on Form 8-K.................................. Dated October 22, 2000
Current Report on Form 8-K.................................. Dated August 17, 2000
Quarterly Report on Form 10-Q............................... Quarter ended June 30, 2000
Quarterly Report on Form 10-Q............................... Quarter ended March 31, 2000
Proxy Statement of Honeywell................................ Filed March 13, 2000
Current Report on Form 8-K.................................. Dated February 24, 2000
Current Report on Form 8-K.................................. Filed February 14, 2000
Current Report on Form 8-K.................................. Dated January 19, 2000
Annual Report on Form 10-K and Amended Annual Report on
Form 10-K/A............................................... Year ended December 31, 1999
</TABLE>
GE and Honeywell each incorporate by reference the documents listed above,
and any additional documents filed by either of them with the SEC under
Section 13(a), 13(c), 14 or 15(d) of the Exchange Act until Honeywell's meeting
of shareowners.
YOU SHOULD RELY ONLY ON THE INFORMATION CONTAINED OR INCORPORATED BY
REFERENCE IN THIS DOCUMENT TO VOTE ON THE MERGER AGREEMENT AND THE MERGER.
NEITHER GE NOR HONEYWELL HAS AUTHORIZED ANYONE TO PROVIDE YOU WITH INFORMATION
THAT IS DIFFERENT FROM WHAT IS CONTAINED IN THIS DOCUMENT. THIS DOCUMENT IS
DATED AS OF THE DATE SET FORTH ON THE COVER PAGE. YOU SHOULD NOT ASSUME THAT THE
INFORMATION CONTAINED IN THIS DOCUMENT IS ACCURATE AS OF ANY DATE OTHER THAN
THIS DATE, AND NEITHER THE MAILING OF THIS DOCUMENT TO SHAREOWNERS NOR THE
DELIVERY OF GE COMMON SHARES PURSUANT TO THE MERGER SHALL CREATE ANY IMPLICATION
TO THE CONTRARY.
54
<PAGE>
ANNEX A
AGREEMENT AND PLAN OF MERGER
DATED AS OF
OCTOBER 22, 2000
BETWEEN
HONEYWELL INTERNATIONAL INC.
AND
GENERAL ELECTRIC COMPANY
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
--------
<S> <C> <C>
ARTICLE I THE MERGER........................................................ A-1
Section 1.1 The Merger.................................................. A-1
Section 1.2 Conversion of Shares........................................ A-2
Section 1.3 Surrender and Payment....................................... A-2
Section 1.4 Stock Options and Equity Awards............................. A-3
Section 1.5 Adjustments................................................. A-4
Section 1.6 Fractional Shares........................................... A-4
Section 1.7 Withholding Rights.......................................... A-5
Section 1.8 Lost Certificates........................................... A-5
Section 1.9 Shares Held by Honeywell Affiliates......................... A-5
Section 1.10 Appraisal Rights............................................ A-6
ARTICLE II CERTAIN GOVERNANCE MATTERS....................................... A-6
Section 2.1 Board of Directors.......................................... A-6
Section 2.2 Certificate of Incorporation of the Surviving Corporation... A-6
Section 2.3 By-laws of the Surviving Corporation........................ A-6
Section 2.4 Directors and Officers of the Surviving Corporation......... A-6
ARTICLE III REPRESENTATIONS AND WARRANTIES OF HONEYWELL..................... A-6
Section 3.1 Corporate Existence and Power............................... A-6
Section 3.2 Corporate Authorization..................................... A-7
Section 3.3 Governmental Authorization.................................. A-7
Section 3.4 Non-Contravention........................................... A-8
Section 3.5 Capitalization.............................................. A-8
Section 3.6 Subsidiaries................................................ A-9
Section 3.7 Commission Filings.......................................... A-10
Section 3.8 Financial Statements........................................ A-10
Section 3.9 Disclosure Documents........................................ A-10
Section 3.10 Absence of Certain Changes.................................. A-11
Section 3.11 No Undisclosed Material Liabilities......................... A-11
Section 3.12 Litigation.................................................. A-12
Section 3.13 Taxes....................................................... A-12
Section 3.14 Employee Benefit Plans...................................... A-12
Section 3.15 Compliance with Laws........................................ A-14
Section 3.16 Finders' or Advisors' Fees.................................. A-14
Section 3.17 Environmental Matters....................................... A-15
Section 3.18 Opinion of Financial Advisor................................ A-15
Section 3.19 Pooling; Tax Treatment...................................... A-15
Section 3.20 Takeover Statutes........................................... A-15
Section 3.21 Intellectual Property Matters............................... A-15
ARTICLE IV REPRESENTATIONS AND WARRANTIES OF PARENT......................... A-16
Section 4.1 Corporate Existence and Power............................... A-16
Section 4.2 Corporate Authorization..................................... A-17
Section 4.3 Governmental Authorization.................................. A-17
Section 4.4 Non-Contravention........................................... A-17
Section 4.5 Capitalization.............................................. A-18
Section 4.6 Commission Filings.......................................... A-18
Section 4.7 Financial Statements........................................ A-18
Section 4.8 Disclosure Documents........................................ A-19
Section 4.9 Absence of Certain Changes.................................. A-19
Section 4.10 No Undisclosed Material Liabilities......................... A-19
Section 4.11 Litigation.................................................. A-19
Section 4.12 Finders' or Advisors' Fees.................................. A-19
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
PAGE
--------
<S> <C> <C>
Section 4.13 Pooling; Tax Treatment...................................... A-19
ARTICLE V COVENANTS OF HONEYWELL............................................ A-20
Section 5.1 Conduct of Honeywell........................................ A-20
Section 5.2 Honeywell Stockholder Meeting............................... A-21
ARTICLE VI COVENANTS OF PARENT.............................................. A-22
Section 6.1 Obligations of Merger Subsidiary............................ A-22
Section 6.2 Director and Officer Liability.............................. A-22
Section 6.3 Stock Exchange Listing...................................... A-23
Section 6.4 Employee Benefits........................................... A-23
Section 6.6 Consultant Agreement........................................ A-24
ARTICLE VII COVENANTS OF PARENT AND HONEYWELL............................... A-24
Section 7.1 Reasonable Best Efforts..................................... A-24
Section 7.2 Proxy Materials; Certain Filings............................ A-26
Section 7.3 Access to Information....................................... A-26
Section 7.4 Tax and Accounting Treatment................................ A-26
Section 7.5 Public Announcements........................................ A-27
Section 7.6 Further Assurances.......................................... A-27
Section 7.7 Notices of Certain Events................................... A-27
Section 7.8 Affiliates.................................................. A-27
Section 7.9 Payment of Dividends........................................ A-28
Section 7.10 No Solicitation............................................. A-28
Section 7.11 Letters from Accountants.................................... A-30
Section 7.12 Takeover Statutes........................................... A-30
Section 7.13 Honeywell Name and Integrity of Franchise................... A-30
Section 7.14 Transfer Statutes........................................... A-30
Section 7.15 Section 16(b)............................................... A-30
ARTICLE VIII CONDITIONS TO THE MERGER....................................... A-31
Section 8.1 Conditions to the Obligations of Each Party................. A-31
Conditions to the Obligations of Parent and Merger
Section 8.2 Subsidiary................................................ A-31
Section 8.3 Conditions to the Obligations of Honeywell.................. A-32
ARTICLE IX TERMINATION...................................................... A-32
Section 9.1 Termination................................................. A-32
Section 9.2 Effect of Termination....................................... A-33
Section 9.3 Fee and Expenses............................................ A-33
ARTICLE X MISCELLANEOUS..................................................... A-34
Section 10.1 Notices..................................................... A-34
Section 10.2 Non-Survival of Representations and Warranties.............. A-35
Section 10.3 Amendments; No Waivers...................................... A-35
Section 10.4 Expenses.................................................... A-35
Section 10.5 Successors and Assigns...................................... A-35
Section 10.6 Governing Law............................................... A-35
Section 10.7 Jurisdiction................................................ A-35
Section 10.8 Waiver of Jury Trial........................................ A-36
Section 10.9 Counterparts; Effectiveness................................. A-36
Section 10.10 Entire Agreement; No Third Party Beneficiaries.............. A-36
Section 10.11 Captions.................................................... A-36
Section 10.12 Severability................................................ A-36
</TABLE>
<TABLE>
<S> <C> <C>
EXHIBIT
Exhibit A -- Form of Honeywell Affiliate Letter
</TABLE>
A-ii
<PAGE>
DEFINITIONS
<TABLE>
<CAPTION>
SECTION
-------
<S> <C>
Acquisition Proposal........................................ Section 7.10(c)
Action...................................................... Section 3.12
Affected Employees.......................................... Section 6.5(b)
Agreement................................................... Preamble
Certificate................................................. Section 1.2(c)
Closing..................................................... Section 1.1(d)
Closing Date................................................ Section 1.1(d)
Code........................................................ Recitals
Commission.................................................. Recitals
Confidentiality Agreement................................... Section 7.3
Delaware Law................................................ Section 1.1(b)
EC Merger Regulation........................................ Section 3.3
Effective Time.............................................. Section 1.1(a)
End Date.................................................... Section 9.1(b)(i)
Environmental Laws.......................................... Section 3.17(b)
ERISA....................................................... Section 3.14(a)
Exchange Act................................................ Section 3.3
Exchange Agent.............................................. Section 1.3(a)
Exchange Ratio.............................................. Section 1.2(a)(iii)
Form S-4.................................................... Section 7.2
GAAP........................................................ Recitals
Honeywell................................................... Preamble
Honeywell 10-Q.............................................. Section 3.7
Honeywell Balance Sheet..................................... Section 3.8
Honeywell Balance Sheet Date................................ Section 3.8
Honeywell Commission Documents.............................. Section 3.7(a)
Honeywell Common Stock...................................... Recitals
Honeywell Convertible Security.............................. Section 3.5
Honeywell Disclosure Schedules.............................. Article III
Honeywell Employee Plans.................................... Section 3.14(a)
Honeywell Stock Option...................................... Section 1.4(a)
Honeywell Stock Plans....................................... Section 1.4(a)
Honeywell Stockholder Approval.............................. Section 3.2(a)
Honeywell Stockholder Meeting............................... Section 5.2(a)
Honeywell Subsidiary Convertible Security................... Section 3.6(b)
Hazardous Material.......................................... Section 3.17(b)
HSR Act..................................................... Section 3.3
Indemnitees................................................. Section 6.2(a)
Intellectual Property....................................... Section 3.21(b)
Proxy Statement/Prospectus.................................. Section 7.2
Lien........................................................ Section 3.4
Material Adverse Effect..................................... Section 3.1
Merger...................................................... Recitals
Merger Consideration........................................ Section 1.2(b)
Merger Subsidiary........................................... Preamble
NYSE........................................................ Section 1.6
Parent...................................................... Preamble
Parent 10Q.................................................. Section 4.6(a)
</TABLE>
A-iii
<PAGE>
<TABLE>
<CAPTION>
SECTION
-------
<S> <C>
Parent Balance Sheet........................................ Section 4.7
Parent Balance Sheet Date................................... Section 4.7
Parent Commission Documents................................. Section 4.6(a)
Parent Common Stock......................................... Section 1.2(a)(iii)
Parent Convertible Security................................. Section 4.5
Parent Disclosure Schedules................................. Article IV
Person...................................................... Section 1.3(c)
Securities Act.............................................. Section 1.4(c)
Subsidiary.................................................. Section 3.6(a)
Superior Proposal........................................... Section 7.10(c)
Surviving Corporation....................................... Section 1.1(b)
Tax Returns................................................. Section 3.13
Taxes....................................................... Section 3.13
</TABLE>
A-iv
<PAGE>
AGREEMENT AND PLAN OF MERGER
THIS AGREEMENT AND PLAN OF MERGER (this "AGREEMENT") dated as of
October 22, 2000 by and between HONEYWELL INTERNATIONAL INC., a Delaware
corporation ("HONEYWELL"), and GENERAL ELECTRIC COMPANY, a New York corporation
("PARENT").
W I T N E S S E T H:
WHEREAS, the respective Boards of Directors of Parent and Honeywell have
approved this Agreement, and deem it advisable and in the best interests of
their respective stockholders to consummate the merger of a Subsidiary of Parent
to be formed as soon as practicable after the date hereof ("MERGER SUBSIDIARY")
with and into Honeywell on the terms and conditions set forth in this Agreement
(the "MERGER");
WHEREAS, for United States federal income tax purposes, it is intended that
the Merger qualify as a "reorganization" within the meaning of Section 368 of
the Internal Revenue Code of 1986, as amended, and the rules and regulations
promulgated thereunder (the "CODE"); and
WHEREAS, for accounting purposes, it is intended that the Merger be
accounted for as a "pooling of interests" under United States generally accepted
accounting principles ("GAAP") and the rules and regulations of the Securities
and Exchange Commission (the "COMMISSION").
WHEREAS, in order to induce Parent to execute and deliver this Agreement,
Parent and Honeywell are entering into a stock option agreement (the "OPTION
AGREEMENT") pursuant to which Honeywell is granting Parent the option to
purchase shares of common stock, par value $1.00 per share, of Honeywell (the
"HONEYWELL COMMON STOCK"), constituting 19.9% of the issued and outstanding
Honeywell Common Stock, upon the terms and subject to the conditions set forth
therein.
NOW, THEREFORE, in consideration of the promises and the respective
representations, warranties, covenants, and agreements set forth herein, the
parties agree as follows:
ARTICLE I
THE MERGER
Section 1.1 THE MERGER.
(a) As soon as practicable after satisfaction or, to the extent permitted
hereunder, waiver of all conditions to the Merger, Honeywell and Merger
Subsidiary will file a certificate of merger with the Secretary of State of the
State of Delaware and make all other filings or recordings required by Delaware
Law to be made in connection with the Merger. The Merger shall become effective
at such time as the certificate of merger is duly filed with the Secretary of
State of the State of Delaware or, if agreed to by Honeywell and Parent, at such
later time as is specified in the certificate of merger (the "EFFECTIVE TIME").
(b) At the Effective Time, Merger Subsidiary shall be merged with and into
Honeywell in accordance with the requirements of the General Corporation Law of
the State of Delaware (the "DELAWARE LAW"), whereupon the separate existence of
Merger Subsidiary shall cease, and Honeywell shall be the surviving corporation
in the Merger (the "SURVIVING CORPORATION").
(c) From and after the Effective Time, the Surviving Corporation shall
possess all the rights, privileges, powers and franchises and be subject to all
of the restrictions, disabilities and duties of Honeywell and Merger Subsidiary,
all as provided under Delaware Law.
(d) The closing of the Merger (the "CLOSING") shall take place (i) at the
offices of Skadden, Arps, Slate, Meagher & Flom LLP, Four Times Square, New
York, New York, as soon as practicable, but in
A-1
<PAGE>
any event within three business days, after the day on which the last to be
fulfilled or waived of the conditions set forth in Article VIII (other than
those conditions that by their nature are to be fulfilled at the Closing, but
subject to the fulfillment or waiver of such conditions) shall be fulfilled or
waived in accordance with this Agreement or (ii) at such other place and time or
on such other date as Honeywell and Parent may agree in writing (the date of the
Closing being the "CLOSING DATE").
Section 1.2 CONVERSION OF SHARES.
(a) At the Effective Time by virtue of the Merger and without any action on
the part of the holder thereof:
(i) each share of Honeywell Common Stock held by Honeywell as treasury
stock or owned by Parent immediately prior to the Effective Time shall be
canceled, and no payment shall be made with respect thereto;
(ii) each share of common stock of Merger Subsidiary outstanding
immediately prior to the Effective Time shall be converted into and become
one share of common stock of the Surviving Corporation with the same rights,
powers and privileges as the shares so converted and shall constitute the
only outstanding shares of capital stock of the Surviving Corporation; and
(iii) each share of Honeywell Common Stock outstanding immediately prior
to the Effective Time shall, except as otherwise provided in
Section 1.2(a)(i), be converted into the right to receive 1.055 shares (the
"EXCHANGE RATIO") of common stock, par value $0.06 per share, of Parent (the
"PARENT COMMON STOCK").
(b) All Parent Common Stock issued as provided in
Section 1.2(a)(iii) shall be of the same class and shall have the same terms as
the currently outstanding Parent Common Stock. The shares of Parent Common Stock
to be received as consideration pursuant to the Merger with respect to shares of
Honeywell Common Stock (together with cash in lieu of fractional shares of
Parent Common Stock as specified below) are referred to herein as the "MERGER
CONSIDERATION."
(c) From and after the Effective Time, all shares of Honeywell Common Stock
converted in accordance with Section 1.2(a)(iii) shall no longer be outstanding
and shall automatically be canceled and retired and shall cease to exist, and
each holder of a certificate representing any such shares (a "CERTIFICATE")
shall cease to have any rights with respect thereto, except the right to receive
the Merger Consideration and any dividends payable pursuant to Section 1.3(f).
From and after the Effective Time, all certificates representing the common
stock of Merger Subsidiary shall be deemed for all purposes to represent the
number of shares of common stock of the Surviving Corporation into which they
were converted in accordance with Section 1.2(a)(ii).
Section 1.3 SURRENDER AND PAYMENT.
(a) Prior to the Effective Time, Parent shall appoint The Bank of New York
or such other exchange agent reasonably acceptable to Honeywell (the "EXCHANGE
AGENT") for the purpose of exchanging certificates for the Merger Consideration.
Parent will make available to the Exchange Agent, as needed, the Merger
Consideration to be delivered in respect of the shares of Honeywell Common
Stock. Promptly after the Effective Time, Parent will send, or will cause the
Exchange Agent to send, to each holder of record of shares of Honeywell Common
Stock as of the Effective Time, a letter of transmittal for use in such exchange
(which shall specify that the delivery shall be effected, and risk of loss and
title shall pass, only upon proper delivery of the Certificates to the Exchange
Agent) in such form as Honeywell and Parent may reasonably agree, for use in
effecting delivery of shares of Honeywell Common Stock to the Exchange Agent.
(b) Each holder of shares of Honeywell Common Stock that have been converted
into a right to receive the Merger Consideration, upon surrender to the Exchange
Agent of a Certificate, together with a properly completed letter of
transmittal, will be entitled to receive the Merger Consideration in
A-2
<PAGE>
respect of the shares of Honeywell Common Stock represented by such Certificate.
Until so surrendered, each such Certificate shall, after the Effective Time,
represent for all purposes only the right to receive such Merger Consideration.
(c) If any portion of the Merger Consideration is to be registered in the
name of a Person other than the Person in whose name the applicable surrendered
Certificate is registered, it shall be a condition to the registration of the
Merger Consideration that the surrendered Certificate shall be properly endorsed
or otherwise be in proper form for transfer and that the Person requesting such
delivery of the Merger Consideration shall pay to the Exchange Agent any
transfer or other taxes required as a result of such registration in the name of
a Person other than the registered holder of such Certificate or establish to
the reasonable satisfaction of the Exchange Agent that such tax has been paid or
is not payable. For purposes of this Agreement, "PERSON" means an individual, a
corporation, a limited liability company, a partnership, an association, a trust
or any other entity or organization, including a government or political
subdivision or any agency or instrumentality thereof.
(d) After the Effective Time, there shall be no further registration of
transfers of shares of Honeywell Common Stock. If, after the Effective Time,
Certificates are presented to the Exchange Agent, the Surviving Corporation or
Parent, they shall be canceled and exchanged for the Merger Consideration
provided for, and in accordance with the procedures set forth, in this
Article I.
(e) Any portion of the Merger Consideration made available to the Exchange
Agent pursuant to Section 1.3(a) that remains unclaimed by the holders of shares
of Honeywell Common Stock one year after the Effective Time shall be returned to
Parent, upon demand, and any such holder who has not exchanged his shares of
Honeywell Common Stock for the Merger Consideration in accordance with this
Section 1.3 prior to that time shall thereafter look only to Parent for delivery
of the Merger Consideration in respect of such holder's shares. Notwithstanding
the foregoing, Parent shall not be liable to any holder of shares for any Merger
Consideration delivered to a public official pursuant to applicable abandoned
property laws.
(f) No dividends or other distributions with respect to shares of Parent
Common Stock shall be paid to the holder of any unsurrendered Certificates until
such Certificates are surrendered as provided in this Section 1.3. Subject to
the effect of applicable laws, following such surrender, there shall be paid,
without interest, to the record holder of the shares of Parent Common Stock
issued in exchange therefor (i) at the time of such surrender, all dividends and
other distributions payable in respect of such Parent Common Stock with a record
date after the Effective Time and a payment date on or prior to the date of such
surrender and not previously paid and (ii) at the appropriate payment date, the
dividends or other distributions payable with respect to such Parent Common
Stock with a record date after the Effective Time but with a payment date
subsequent to such surrender. For purposes of dividends or other distributions
in respect of Parent Common Stock, all shares of Parent Common Stock to be
issued pursuant to the Merger shall be entitled to dividends pursuant to the
immediately preceding sentence as if issued and outstanding as of the Effective
Time.
Section 1.4 STOCK OPTIONS AND EQUITY AWARDS.
(a) At the Effective Time, each outstanding employee or director option to
purchase shares of Honeywell Common Stock (a "HONEYWELL STOCK OPTION") granted
under Honeywell's plans or agreements pursuant to which Honeywell Stock Options
or other stock-based awards of Honeywell have been or may be granted
(collectively, the "HONEYWELL STOCK PLANS"), whether vested or not vested, shall
be deemed assumed by Parent. At and after the Effective Time (1) each Honeywell
Stock Option then outstanding shall entitle the holder thereof to acquire the
number (rounded up to the nearest whole number) of shares of Parent Common Stock
determined by multiplying (x) the number of shares of Honeywell Common Stock
subject to such Honeywell Stock Option immediately prior to the Effective Time
by (y) the Exchange Ratio, and (2) the exercise price per share of Parent Common
Stock subject to any such Honeywell Stock Option at and after the Effective Time
shall be an amount (rounded up
A-3
<PAGE>
to the nearest one-hundredth of a cent) equal to (x) the exercise price per
share of Honeywell Common Stock subject to such Honeywell Stock Option prior to
the Effective Time, divided by (y) the Exchange Ratio. Other than as provided
above, as of and after the Effective Time, each Honeywell Stock Option shall be
subject to the same terms and conditions as in effect immediately prior to the
Effective Time. Notwithstanding the foregoing, any adjustment to a Honeywell
Stock Option which is an "incentive stock option" shall be made in a manner
consistent with Section 424(a) of the Code. Prior to the date hereof, Honeywell
has taken all actions necessary to cause holders of restricted shares,
restricted stock units and any other stock-based awards outstanding under
Honeywell Stock Plans, which would otherwise be settled in cash, to receive a
settlement of any such awards in shares of Parent Common Stock (with, in the
case of restricted stock units, each such unit representing one share of
Honeywell Common Stock and with the number of shares of Parent Common Stock to
be issued reflecting the Exchange Ratio). The holder of a restricted stock unit
to be settled in shares of Parent Common Stock shall receive within ninety days
following the Closing Date, a number of shares of Parent Common Stock equal to
(i) the cash value of such restricted stock unit based upon the "Merger Price
Per Share" (as defined in the applicable Honeywell Stock Plan), divided by
(ii) the closing price per share of Parent Common Stock on the Closing Date. All
fractional shares of Parent Common Stock shall be paid in cash.
(b) Parent shall take all corporate action necessary to reserve for issuance
a sufficient number of shares of Parent Common Stock for delivery upon exercise
of Honeywell Stock Options and settlement of other stock-based awards of
Honeywell at and after the Effective Time.
(c) On or as soon as practicable after the Effective Time, Parent shall file
with the Commission a registration statement on an appropriate form or a
post-effective amendment to a previously filed registration statement under the
Securities Act of 1933, as amended (the "SECURITIES ACT"), with respect to the
Parent Common Stock subject to Honeywell Stock Options and other stock-based
awards of Honeywell, and shall use its reasonable best efforts to maintain the
current status of the prospectus contained therein, as well as comply with any
applicable state securities or "blue sky" laws, for so long as such options or
other stock-based awards remain outstanding.
Section 1.5 ADJUSTMENTS. If at any time during the period between the date
of this Agreement and the Effective Time, any change in the outstanding shares
of capital stock of Parent or Honeywell shall occur by reason of any
reclassification, recapitalization, stock split or combination, exchange or
readjustment of shares, or any similar transaction, or any stock dividend
thereon with a record date during such period, the Merger Consideration shall be
appropriately adjusted to provide the holders of shares of Honeywell Common
Stock the same economic effect as contemplated by this Agreement prior to such
event.
Section 1.6 FRACTIONAL SHARES.
(a) No fractional shares of Parent Common Stock shall be issued in the
Merger and no dividend or distribution with respect to Parent Common Stock shall
be payable on or with respect to any fractional share and such fractional share
interests will not entitle the owner thereof to any rights of a stockholder of
Parent.
(b) As promptly as practicable following the Effective Time, the Exchange
Agent shall determine the excess of (x) the number of full shares of Parent
Common Stock delivered to the Exchange Agent by Parent over (y) the aggregate
number of full shares of Parent Common Stock to be distributed to holders of
Honeywell Common Stock (such excess being herein called the "EXCESS SHARES"). As
soon after the Effective Time as practicable, the Exchange Agent, as agent for
such holders of Parent Common Stock, shall sell the Excess Shares at the then
prevailing prices on the New York Stock Exchange, Inc. (the "NYSE"), all in the
manner provided in paragraph (c) of this Section 1.6.
A-4
<PAGE>
(c) The sale of the Excess Shares by the Exchange Agent shall be executed on
the NYSE through one or more member firms of the NYSE and shall be executed in
round lots to the extent practicable. The Exchange Agent shall use all
reasonable efforts to complete the sale of the Excess Shares as promptly
following the Effective Time as, in the Exchange Agent's reasonable judgment, is
practicable consistent with obtaining the best execution of such sales in light
of prevailing market conditions. Until the net proceeds of any such sale or
sales have been distributed to such holders of Honeywell Common Stock, the
Exchange Agent will hold such proceeds in trust for such holders of Honeywell
Common Stock. Parent shall pay all commissions, transfer taxes and other
out-of-pocket transaction costs of the Exchange Agent incurred in connection
with such sale or sales of Excess Shares. In addition, Parent shall pay the
Exchange Agent's compensation and expenses in connection with such sale or
sales. The Exchange Agent shall determine the portion of such net proceeds to
which each holder of Honeywell Common Stock shall be entitled, if any, by
multiplying the amount of the aggregate net proceeds by a fraction the numerator
of which is the amount of the fractional share interest to which such holder of
Honeywell Common Stock is entitled (after taking into account all shares of
Honeywell Common Stock then held by such holder) and the denominator of which is
the aggregate amount of fractional share interests to which all holders of
Certificates representing Honeywell Common Stock are entitled.
(d) Notwithstanding the provisions of this Section 1.6, Parent may elect, at
its option exercised prior to the Effective Time and in lieu of the issuance and
sale of Excess Shares and the making of the payments contemplated in such
subsections, to pay to the Exchange Agent an amount in cash sufficient for the
Exchange Agent to pay each holder of Honeywell Common Stock an amount in cash
equal to the product obtained by multiplying (x) the fractional share interest
to which such holder would otherwise be entitled (after taking into account all
shares of Honeywell Common Stock held at the Effective Time by such holder) by
(y) the closing price for a share of Parent Common Stock on the NYSE on the
first business day immediately following the Effective Time and, in such case,
all references herein to the cash proceeds of the sale of the Excess Shares and
similar references shall be deemed to mean and refer to the payments calculated
as set forth in this Section 1.6(d).
(e) As soon as practicable after the determination of the amount of cash, if
any, to be paid to holders of Honeywell Common Stock with respect to any
fractional share interests, the Exchange Agent shall promptly pay such amounts
to such holders of Honeywell Common Stock.
Section 1.7 WITHHOLDING RIGHTS. Each of the Surviving Corporation and
Parent shall be entitled to deduct and withhold from the consideration otherwise
payable to any person pursuant to this Article I such amounts as it is required
to deduct and withhold with respect to the making of such payment under any
provision of federal, state, local or foreign tax law. To the extent that
amounts are so withheld by the Surviving Corporation or Parent, as the case may
be, such withheld amounts shall be treated for all purposes of this Agreement as
having been paid to the holder of the shares of Honeywell Common Stock in
respect of which such deduction and withholding was made by the Surviving
Corporation or Parent, as the case may be.
Section 1.8 LOST CERTIFICATES. If any Certificate shall have been lost,
stolen or destroyed, upon the making of an affidavit of that fact by the Person
claiming the Certificate to be lost, stolen or destroyed and, if required by
Parent or the Surviving Corporation, the posting by that Person of a bond, in
such reasonable amount as the Surviving Corporation may direct (which shall not
exceed amounts generally required by Parent from holders of Parent Common Stock
under similar circumstances), as indemnity against any claim that may be made
against it with respect to such Certificate, the Exchange Agent will issue in
exchange for such lost, stolen or destroyed Certificate the Merger Consideration
to be paid in respect of the Shares represented by such Certificates as
contemplated by this Article I.
Section 1.9 SHARES HELD BY HONEYWELL AFFILIATES. Anything to the contrary
in this Agreement notwithstanding, no shares of Parent Common Stock (or
certificates therefor) shall be issued in
A-5
<PAGE>
exchange for any Certificate to any Person who may be an "affiliate" of
Honeywell (identified pursuant to Section 7.8) until the Person shall have
delivered to Parent and Honeywell a duly executed letter as contemplated by
Section 7.8.
Section 1.10 APPRAISAL RIGHTS. In accordance with Section 262 of the
Delaware Law, no appraisal rights shall be available to holders of shares of
Honeywell Common Stock in connection with the Merger.
ARTICLE II
CERTAIN GOVERNANCE MATTERS
Section 2.1 BOARD OF DIRECTORS. Prior to the Effective Time, the Board of
Directors of Parent shall take all action necessary to cause the Board of
Directors of Parent to be expanded to add three persons mutually acceptable to
Honeywell and Parent which persons shall be elected to the Board of Directors of
Parent effective as of the Effective Time, and which persons shall also be
nominated for election to the Board of Directors of Parent at the two annual
meetings of stockholders of Parent following the Effective Time.
Section 2.2 CERTIFICATE OF INCORPORATION OF THE SURVIVING CORPORATION. The
certificate of incorporation of the Surviving Corporation shall be amended as of
the Effective Time to contain the provisions in the certificate of incorporation
of Merger Subsidiary immediately prior to the Effective Time, except that such
certificate of incorporation shall provide that the name of the Surviving
Corporation shall be "Honeywell International Inc."
Section 2.3 BY-LAWS OF THE SURVIVING CORPORATION. The by-laws of Merger
Subsidiary in effect at the Effective Time shall be the by-laws of the Surviving
Corporation (until amended in accordance with applicable law).
Section 2.4 DIRECTORS AND OFFICERS OF THE SURVIVING CORPORATION. From and
after the Effective Time, until successors are duly elected or appointed and
qualified in accordance with applicable law, (a) the directors of Merger
Subsidiary at the Effective Time shall be the directors of the Surviving
Corporation, who shall consist as of the Effective Time of those people mutually
agreed upon by the chief executive officers of Honeywell and Parent, and
(b) the officers of Honeywell at the Effective Time shall be the officers of the
Surviving Corporation.
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF HONEYWELL
Honeywell represents and warrants to Parent that, except as set forth in the
disclosure schedules delivered by Honeywell to Parent simultaneously with the
execution of this Agreement (the "HONEYWELL DISCLOSURE SCHEDULE") or the
Honeywell Commission Documents filed prior to the date of this Agreement; it
being understood that any matter set forth in any section of the Honeywell
Disclosure Schedule or in the Honeywell Commission Documents shall be deemed
disclosed with respect to such section of this Article III to which such matter
logically relates, so long as the description of such matter contains sufficient
facts to provide reasonable notice of the relevance of such matter:
Section 3.1 CORPORATE EXISTENCE AND POWER. Honeywell is a corporation duly
incorporated, validly existing and in good standing under the laws of the State
of Delaware, and has all corporate powers and all governmental licenses,
authorizations, consents and approvals required to carry on its business as now
conducted, except for those the absence of which would not, individually or in
the aggregate, reasonably be expected to have a Material Adverse Effect on
Honeywell. Honeywell is duly qualified to do business as a foreign corporation
and is in good standing in each jurisdiction where the character of the property
owned or leased by it or the nature of its activities makes such qualification
necessary,
A-6
<PAGE>
except for those jurisdictions where the failure to be so qualified would not,
individually or in the aggregate, reasonably be expected to have a Material
Adverse Effect on Honeywell. For purposes of this Agreement, a "MATERIAL ADVERSE
EFFECT" with respect to any Person means a material adverse effect on the
financial condition, business, liabilities, properties, assets or results of
operations of such Person and its Subsidiaries, taken as a whole, except to the
extent resulting from (i) any changes in general United States or global
economic conditions, (ii) any changes in general economic conditions in
industries in which the Person operates which changes do not affect Honeywell or
Parent, as the case may be, disproportionately relative to other entities
operating in such industries, or (iii) any decline in the market price of the
common stock of such Person. Honeywell has heretofore made available to Parent
true and complete copies of Honeywell's restated certificate of incorporation
and by-laws as currently in effect.
Section 3.2 CORPORATE AUTHORIZATION.
(a) The execution, delivery and performance by Honeywell of this Agreement
and the Option Agreement and the consummation by Honeywell of the transactions
contemplated hereby and thereby are within Honeywell's corporate powers and,
except for any required approval by Honeywell's stockholders in accordance with
Delaware Law (the "HONEYWELL STOCKHOLDER APPROVAL") in connection with the
consummation of the Merger, have been duly authorized by all necessary corporate
action. The affirmative vote of holders of the outstanding shares of Honeywell
Common Stock having votes representing a majority of the votes of all such
outstanding capital stock, voting together as a single class, in favor of the
approval and adoption of this Agreement and the Merger is the only vote of the
holders of any of Honeywell's capital stock necessary in connection with
consummation of the Merger. Assuming due authorization, execution and delivery
of this Agreement and the Option Agreement by Parent and/or Merger Subsidiary,
as applicable, each of this Agreement and the Option Agreement constitutes a
valid and binding agreement of Honeywell enforceable against Honeywell in
accordance with its terms, subject to bankruptcy, insolvency, fraudulent
transfer, reorganization, moratorium and similar laws of general applicability
relating to or affecting creditors' rights, and to general equity principles.
(b) Honeywell's Board of Directors, at a meeting duly called and held, has
(i) determined that this Agreement and the Option Agreement and the transactions
contemplated hereby and thereby (including the Merger) are fair to and in the
best interests of Honeywell's stockholders, (ii) approved and adopted this
Agreement and the Option Agreement and the transactions contemplated hereby and
thereby (including the Merger), in compliance with any applicable supermajority
Board vote required by Honeywell's by-laws, and (iii) resolved (subject to
Section 5.2) to recommend that Honeywell stockholders vote for the approval and
adoption of this Agreement and the Merger.
Section 3.3 GOVERNMENTAL AUTHORIZATION. The execution, delivery and
performance by Honeywell of this Agreement and the Option Agreement and the
consummation by Honeywell of the transactions contemplated hereby and thereby
require no action by or in respect of, or filing with, any governmental body,
agency, official or authority other than (a) the filing of a certificate of
merger in connection with the Merger in accordance with Delaware Law,
(b) compliance with any applicable requirements of the Hart-Scott-Rodino
Antitrust Improvements Act of 1976 (the "HSR ACT"), (c) compliance with any
applicable requirements of Council Regulation No. 4064/89 of the European
Community, as amended (the "EC MERGER REGULATION"), (d) compliance with any
applicable requirements under the Competition Act of Canada, (e) compliance with
any other applicable requirements of foreign anti-trust, competition, trade
regulation or investment laws, (f) compliance with any applicable environmental
transfer statutes, (g) compliance with any applicable requirements of the
Securities Exchange Act of 1934, as amended, and the rules and regulations
promulgated thereunder (the "EXCHANGE ACT"), (h) compliance with any applicable
requirements of the Securities Act and (i) other actions or filings which if not
taken or made would not, individually or in the aggregate, reasonably be
expected to have
A-7
<PAGE>
a Material Adverse Effect on Honeywell or prevent or materially delay
Honeywell's consummation of the Merger.
Section 3.4 NON-CONTRAVENTION. The execution, delivery and performance by
Honeywell of this Agreement and the Option Agreement and the consummation by
Honeywell of the transactions contemplated hereby and thereby do not and will
not (a) contravene or conflict with the restated certificate of incorporation or
by-laws of Honeywell, (b) assuming compliance with the matters referred to in
Section 3.3 and subject to receipt of Honeywell Stockholder Approval, contravene
or conflict with or constitute a violation of any provision of any law,
regulation, judgment, injunction, order or decree binding upon or applicable to
Honeywell or any of its Subsidiaries, (c) subject to receipt of Honeywell
Stockholder Approval, constitute a default under or give rise to any right of
termination, cancellation or acceleration of any right or obligation of
Honeywell or any of its Subsidiaries or to a loss of any benefit to which
Honeywell or any of its Subsidiaries is entitled under any provision of any
agreement, contract, lease or other instrument binding upon Honeywell or any of
its Subsidiaries or any license, franchise, permit or other similar
authorization held by Honeywell or any of its Subsidiaries, or (d) result in the
creation or imposition of any Lien on any asset of Honeywell or any of its
Subsidiaries, except for such contraventions, conflicts or violations referred
to in clause (b) or defaults, rights of termination, cancellation or
acceleration, or losses or Liens referred to in clause (c) or (d) that would
not, individually or in the aggregate, reasonably be expected to have a Material
Adverse Effect on Honeywell. For purposes of this Agreement, "LIEN" means, with
respect to any asset, any mortgage, lien, pledge, charge, security interest or
encumbrance of any kind in respect of such asset other than any such mortgage,
lien, pledge, charge, security interest or encumbrance (i) for Taxes not yet due
or being contested in good faith or (ii) which is a carriers', warehousemen's,
mechanics', materialmen's, repairmen's or other like lien arising in the
ordinary course of business. Neither Honeywell nor any Subsidiary of Honeywell
is a party to any agreement that (x) limits the ability of Honeywell or any
Subsidiary of Honeywell to compete in or conduct any line of business or compete
with any Person or in any geographic area or during any period of time except to
the extent that any such limitation would not, individually or in the aggregate,
reasonably be expected to have a Material Adverse Effect on Honeywell or on the
Surviving Corporation, immediately after the Effective Time or (y) immediately
after the Effective Time to the knowledge of Honeywell, would materially limit
the ability of Parent or any Subsidiary of Parent, other than Honeywell and any
Subsidiary of Honeywell to compete in or conduct any material line of business
or compete with any Person or in any geographic area or during any period of
time.
Section 3.5 CAPITALIZATION. The authorized capital stock of Honeywell
consists of 2,000,000,000 shares of Honeywell Common Stock and 40,000,000 shares
of preferred stock, no par value. As of the close of business on September 30,
2000 (i) there were outstanding 797,720,500 shares of Honeywell Common Stock and
(ii) no shares of Honeywell preferred stock and no other shares of capital stock
or other voting securities of Honeywell were then outstanding. As of
December 31, 1999, approximately 162,466,000 shares of Honeywell Common Stock
were held in Honeywell's treasury. All outstanding shares of capital stock of
Honeywell have been duly authorized and validly issued and are fully paid and
nonassessable. Except for (a) Honeywell Stock Options to acquire no more than
55,239,576 shares of Honeywell Common Stock issued pursuant to Honeywell Stock
Plans, (b) the option granted to Parent pursuant to the Option Agreement,
(c) stock units for no more than 2,993,561 shares of Honeywell Common Stock and
(d) shares issuable under Honeywell's employee stock purchase plans in the
ordinary course of business consistent with past practice, as of the close of
business on September 30, 2000, there were no outstanding options, warrants or
other rights to acquire from Honeywell, and no preemptive or similar rights,
subscription or other rights, convertible or exchangeable securities,
agreements, arrangements or commitments of any character, relating to the
capital stock of Honeywell, obligating Honeywell to issue, transfer or sell, any
capital stock, voting securities or securities convertible into or exchangeable
for capital stock or voting securities of Honeywell or obligating Honeywell to
grant, extend or enter into any such option, warrant, subscription
A-8
<PAGE>
or other right, convertible or exchangeable security, agreement, arrangement or
commitment (each of the foregoing, a "HONEYWELL CONVERTIBLE SECURITY"). Since
the close of business on September 30, 2000, Honeywell has not issued any shares
of capital stock or any Honeywell Convertible Securities other than the issuance
of Honeywell Common Stock in connection with the exercise of Honeywell Stock
Options described in clause (a) above and/or as permitted by Section 5.1 hereof.
Except as required by the terms of any Honeywell Stock Plans and grants
thereunder and/or as permitted by Section 5.1, there are no outstanding
obligations of Honeywell or any of its Subsidiaries to repurchase, redeem or
otherwise acquire any shares of capital stock of Honeywell or any Honeywell
Convertible Securities.
Section 3.6 SUBSIDIARIES.
(a) Each Subsidiary of Honeywell is duly organized, validly existing and in
good standing under the laws of its jurisdiction of organization, has all powers
and all governmental licenses, authorizations, consents and approvals required
to carry on its business as now conducted, except for those the absence of which
would not, individually or in the aggregate, reasonably be expected to have a
Material Adverse Effect on Honeywell. For purposes of this Agreement, the word
"SUBSIDIARY" when used with respect to any Person means any other Person,
whether incorporated or unincorporated, of which (i) more than fifty percent of
the securities or other ownership interests or (ii) securities or other
interests having by their terms ordinary voting power to elect more than fifty
percent of the board of directors or others performing similar functions with
respect to such corporation or other organization, is directly owned or
controlled by such Person or by any one or more of its Subsidiaries. Each
Subsidiary of Honeywell is duly qualified to do business and is in good standing
in each jurisdiction where the character of the property owned or leased by it
or the nature of its activities makes such qualification necessary, except for
those jurisdictions where failure to be so qualified would not, individually or
in the aggregate, reasonably be expected to have a Material Adverse Effect on
Honeywell.
(b) Except for directors' qualifying shares and except as set forth in
Honeywell's annual report on Form 10-K for the fiscal year ended December 31,
1999, all of the outstanding capital stock of, or other ownership interests in,
each Significant Subsidiary (as such term is defined in rule 12b-2 under the
Exchange Act) of Honeywell is, directly or indirectly, owned by Honeywell. All
shares of capital stock of, or other ownership interests in, Subsidiaries of
Honeywell, directly or indirectly, owned by Honeywell are owned free and clear
of any Lien and free of any other limitation or restriction (including any
restriction on the right to vote, sell or otherwise dispose of such capital
stock or other ownership interests), except as would not, individually or in the
aggregate, reasonably be expected to have a Material Adverse Effect on
Honeywell. There are no outstanding options, warrants or other rights to acquire
from Honeywell or any of its Subsidiaries, and, except as may be required by
applicable foreign corporate laws, no preemptive or similar rights,
subscriptions or other rights, convertible or exchangeable securities,
agreements, arrangements or commitments of any character, relating to the
capital stock of any Subsidiary of Honeywell, obligating Honeywell or any of its
Subsidiaries to issue, transfer or sell, any capital stock, voting securities or
other ownership interests in, or any securities convertible into or exchangeable
for any capital stock, voting securities or ownership interests in, any
Subsidiary of Honeywell or obligating Honeywell or any Subsidiary of Honeywell
to grant, extend or enter into any such option, warrant, subscription or other
right, convertible or exchangeable security, agreement, arrangement or
commitment (each of the foregoing, a "HONEYWELL SUBSIDIARY CONVERTIBLE
SECURITY"). There are no outstanding obligations of Honeywell or any of its
Subsidiaries to repurchase, redeem or otherwise acquire from any Person (other
than Honeywell or a wholly owned Subsidiary of Honeywell) any outstanding shares
of capital stock of any Subsidiary of Honeywell or any Honeywell Subsidiary
Convertible Securities.
A-9
<PAGE>
Section 3.7 COMMISSION FILINGS.
(a) Honeywell has filed, or will file at or prior to the time due, all
forms, reports and documents required to be filed by it with the Commission
since December 31, 1997. Honeywell has made available to Parent (i) its annual
reports on Form 10-K for its fiscal years ended December 31, 1997, 1998 and
1999, (ii) its quarterly reports on Form 10-Q for its fiscal quarters ended
after December 31, 1999, (iii) its proxy or information statements relating to
meetings of, or actions taken without a meeting by, the stockholders of
Honeywell held since December 31, 1999, and (iv) all of its other reports,
statements, schedules and registration statements filed with the Commission
since December 31, 1999 (the documents referred to in this Section 3.7(a) being
referred to collectively as the "HONEYWELL COMMISSION DOCUMENTS"). Honeywell's
quarterly report on Form 10-Q for its fiscal quarter ended June 30, 2000 is
referred to as the "Honeywell 10-Q". No Subsidiary of Honeywell is required to
file any form, report or other document with the Commission.
(b) As of its filing date, each Honeywell Commission Document complied as to
form in all material respects with the applicable requirements of the Exchange
Act and the Securities Act.
(c) As of its filing date, each Honeywell Commission Document filed pursuant
to the Exchange Act did not contain any untrue statement of a material fact or
omit to state any material fact necessary in order to make the statements made
therein, in the light of the circumstances under which they were made, not
misleading.
(d) Each registration statement, as amended or supplemented, if applicable,
filed by Honeywell pursuant to the Securities Act since December 31, 1997, as of
the date such statement or amendment became effective did not contain any untrue
statement of a material fact or omit to state any material fact required to be
stated therein or necessary to make the statements therein not misleading.
Section 3.8 FINANCIAL STATEMENTS. The audited consolidated financial
statements and unaudited consolidated interim financial statements of Honeywell
(including any related notes and schedules) included in its annual reports on
Form 10-K and the quarterly reports on Form 10-Q referred to in Section 3.7
present fairly, in all material respects, the financial position of Honeywell
and its subsidiaries as of the dates thereof and their results of operations and
cash flows for the periods then ended (subject to normal year-end adjustments
and the absence of notes in the case of any unaudited interim financial
statements), in each case in conformity with GAAP applied on a consistent basis
(except as may be indicated in the notes thereto). For purposes of this
Agreement, "HONEYWELL BALANCE SHEET" means the consolidated balance sheet of
Honeywell as of June 30, 2000 set forth in the Honeywell 10-Q and "HONEYWELL
BALANCE SHEET DATE" means June 30, 2000.
Section 3.9 DISCLOSURE DOCUMENTS. None of the information supplied or to
be supplied by Honeywell for inclusion or incorporation by reference in the
Proxy Statement/Prospectus or in the Form S-4 or any amendment or supplement
thereto will, at the time the Proxy Statement/Prospectus or any such supplement
or amendment thereto is first mailed to the stockholders of Honeywell or at the
time the stockholder vote on the Honeywell Stockholder Approval or at the time
the Form S-4 or any such amendment or supplement becomes effective under the
Securities Act or at the Effective Time, as the case may be, contain any untrue
statement of a material fact or omit to state a material fact necessary in order
to make the statements therein, in light of the circumstances under which they
were made, not misleading. No representation or warranty is made by Honeywell in
this Section 3.9 with respect to statements made or incorporated by reference
therein based on information supplied by Parent or Merger Subsidiary for
inclusion or incorporation by reference in the Proxy Statement/ Prospectus or
the Form S-4. The Proxy Statement/Prospectus will comply as to form in all
material respects with the requirements of the Exchange Act.
A-10
<PAGE>
Section 3.10 ABSENCE OF CERTAIN CHANGES.
(a) Since the Honeywell Balance Sheet Date there has not been any event,
occurrence or development which would, individually or in the aggregate,
reasonably be expected to have a Material Adverse Effect on Honeywell.
(b) Since the Honeywell Balance Sheet Date and, prior to the date hereof,
Honeywell and its Subsidiaries have conducted their respective businesses in the
ordinary course, consistent with past practices, and there has not been:
(i) any declaration, setting aside or payment of any dividend or other
distribution with respect to any shares of capital stock of Honeywell (other
than regular quarterly cash dividends payable by Honeywell in respect of the
shares of Honeywell Common Stock consistent with past practice), or any
repurchase (other than repurchases of Honeywell Common Stock which occurred
subsequent to the Honeywell Balance Sheet Date and prior to the date
hereof), redemption or other acquisition by Honeywell or any of its
Significant Subsidiaries of any outstanding shares of their capital stock or
any Honeywell Convertible Securities or Honeywell Subsidiary Convertible
Securities (except (x) in accordance with any dividend reinvestment plan as
in effect on the date of this Agreement in the ordinary course of the
operation of such plan consistent with past practice and/or (y) as otherwise
permitted by Section 5.1);
(ii) any amendment of any material term of any outstanding security of
Honeywell or any of its Significant Subsidiaries;
(iii) any transaction or commitment made, or any contract, agreement or
settlement entered into, by (or judgment, order or decree affecting)
Honeywell or any of its Subsidiaries relating to its assets or business
(including the acquisition or disposition of any material amount of assets)
or any relinquishment by Honeywell or any of its Subsidiaries of any
contract or other right, in either case, material to Honeywell and its
Subsidiaries taken as a whole, other than transactions, commitments,
contracts, agreements or settlements (including without limitation
settlements of litigation and tax proceedings) in the ordinary course of
business consistent with past practice and those contemplated by this
Agreement;
(iv) any change in any method of accounting or accounting practice by
Honeywell or any of its Subsidiaries, except for any such change which is
not material or which is required by reason of a concurrent change in GAAP;
or
(v) any (A) grant of any severance or termination pay to (or amendment
to any such existing arrangement with) any director, officer or employee of
Honeywell or any of its Subsidiaries, (B) entering into of any employment,
deferred compensation, supplemental retirement or other similar agreement
(or any amendment to any such existing agreement) with any director, officer
or employee of Honeywell or any of its Subsidiaries, (C) increase in, or
accelerated vesting and/or payment of, benefits under any existing severance
or termination pay policies or employment agreements or (D) increase in or
enhancement of any rights or features related to compensation, bonus or
other benefits payable to directors, officers or employees of Honeywell or
any of its Subsidiaries, in each case other than in the ordinary course of
business consistent with past practice or as permitted by this Agreement.
Section 3.11 NO UNDISCLOSED MATERIAL LIABILITIES. There are no liabilities
of Honeywell or any Subsidiary of Honeywell of any kind whatsoever, whether
accrued, contingent, absolute, determined, determinable or otherwise, other
than:
(a) liabilities disclosed or provided for in the Honeywell Balance Sheet or
in the notes thereto;
(b) liabilities incurred since such date that would not, individually or in
the aggregate, reasonably be expected to have a Material Adverse Effect on
Honeywell;
A-11
<PAGE>
(c) liabilities disclosed in Honeywell Commission Documents filed prior to
the date of this Agreement; and
(d) liabilities under this Agreement.
Section 3.12 LITIGATION. There is no action, suit, investigation or
proceeding (an "ACTION") pending against, or to the knowledge of Honeywell
threatened against or affecting, Honeywell or any of its Subsidiaries or any of
their respective properties or any of their respective officers or directors
before any court or arbitrator or any governmental body, agency or official
except as would not, individually or in the aggregate, reasonably be expected to
have a Material Adverse Effect on Honeywell or prevent or materially delay the
consummation of the Merger.
Section 3.13 TAXES. Except as reserved for in the Honeywell Balance Sheet
(including the notes thereto) or as would not, individually or in the aggregate,
reasonably be expected to have a Material Adverse Effect on Honeywell, (i) all
Honeywell Tax Returns required to be filed with any taxing authority by, or with
respect to, Honeywell and its Subsidiaries have been filed in accordance with
all applicable laws; (ii) Honeywell and its Subsidiaries have timely paid all
Taxes shown as due and payable on Honeywell Tax Returns that have been so filed,
and, as of the time of filing, Honeywell Tax Returns correctly reflected the
facts regarding the income, business, assets, operations, activities and the
status of Honeywell and its Subsidiaries (other than Taxes which are being
contested in good faith and for which adequate reserves are reflected on the
Honeywell Balance Sheet); (iii) Honeywell and its Subsidiaries have made
provision for all Taxes payable by Honeywell and its Subsidiaries for which no
Honeywell Tax Return has yet been filed; (iv) the charges, accruals and reserves
for Taxes with respect to Honeywell and its Subsidiaries reflected on the
Honeywell Balance Sheet are adequate under GAAP to cover the Tax liabilities
accruing through the date thereof; (v) there is no action, suit, proceeding,
audit or claim now proposed or pending against or with respect to Honeywell or
any of its Subsidiaries in respect of any Tax where there is a reasonable
possibility of an adverse determination; and (vi) neither Honeywell nor any of
its Subsidiaries is liable for any Tax imposed on any entity other than such
Person, except as the result of the application of Treas. Reg. Sections 1.1502-6
(and any comparable provision of the tax laws of any state, local or foreign
jurisdiction) to the affiliated group of which Honeywell is the common parent.
For purposes of this Agreement, "TAXES" shall mean any and all taxes, charges,
fees, levies or other assessments, including, without limitation, all net
income, gross income, gross receipts, excise, stamp, real or personal property,
ad valorem, withholding, social security (or similar), unemployment, occupation,
use, production, service, service use, license, net worth, payroll, franchise,
severance, transfer, recording, employment, premium, windfall profits,
environmental (including taxes under Section 59A of the Code), customs duties,
capital stock, profits, disability, sales, registration, value added,
alternative or add-on minimum, estimated or other taxes, assessments or charges
imposed by any federal, state, local or foreign governmental entity and any
interest, penalties, or additions to tax attributable thereto. For purposes of
this Agreement, "TAX RETURNS" shall mean any return, report, form or similar
statement required to be filed with respect to any Tax (including any attached
schedules), including, without limitation, any information return, claim for
refund, amended return or declaration of estimated Tax.
Section 3.14 EMPLOYEE BENEFIT PLANS.
(a) For purposes of this Agreement, the term "HONEYWELL EMPLOYEE PLANS"
shall mean and include: each material management, consulting, non-compete,
employment, severance or similar contract, plan, including, without limitation,
all Honeywell Stock Plans, arrangement or policy applicable to any director,
former director, employee or former employee of Honeywell and each material
plan, program, policy, agreement or arrangement (written or oral), providing for
compensation, bonuses, profit-sharing, stock option or other stock-related
rights or other forms of incentive or deferred compensation, vacation benefits,
insurance coverage (including any self-insured arrangements), health or medical
benefits, disability benefits, workers' compensation, supplemental unemployment
benefits, severance
A-12
<PAGE>
benefits and post-employment or retirement benefits (including compensation,
pension, health, medical or life insurance benefits) or other employee benefits
of any kind, whether funded or unfunded, which is maintained, administered or
contributed to by Honeywell or any Subsidiary and covers any employee or
director or former employee or director of Honeywell or any Subsidiary, or under
which Honeywell has any liability contingent or otherwise (including but not
limited to each material "employee benefit plan," as defined in Section 3(3) of
the Employee Retirement Income Security Act of 1974, as amended ("ERISA"), but
excluding any such plan that is a "multiemployer plan," as defined in
Section 3(37) of ERISA).
Honeywell agrees to deliver to Parent a list of each Honeywell Employee Plan
maintained in the United States by Honeywell, by December 31, 2000. Honeywell
does not have any express or implied commitment with respect to arrangements in
the United States (i) to create, or incur any material liability with respect to
or cause to exist any other material employee benefit plan, program or
arrangement, (ii) to enter into any material contract or agreement to provide
compensation or benefits to any officer or director or (iii) to modify, change
or terminate any material plan in any material respect, other than with respect
to a modification, change or termination required by ERISA or the Code.
(b) Each Honeywell Employee Plan has been established and maintained in
compliance with its terms and with the requirements (including funding
requirements) prescribed by any and all statutes, orders, rules and regulations
(including but not limited to ERISA and the Code) which are applicable to such
Plan, except where failure to so comply would not, individually or in the
aggregate, reasonably be expected to have a Material Adverse Effect on
Honeywell.
(c) Except as would not, individually or in the aggregate, reasonably be
expected to have a Material Adverse Effect on Honeywell, (i) neither Honeywell
nor any affiliate of Honeywell has incurred a liability under Title IV of ERISA
that has not been satisfied in full, and no condition exists that presents a
material risk to Honeywell or any affiliate of Honeywell of incurring any such
liability other than liability for premiums due the Pension Benefit Guaranty
Corporation (which premiums have been paid when due), (ii) all contributions
required to be made under the terms of any Honeywell Employee Plan have been
made, and, (iii) where applicable to a Honeywell Employee Plan, Honeywell and
its affiliates have complied with the minimum funding requirements under
Section 412 of the Code and Section 302 of ERISA with respect to each such
Honeywell Employee Plan.
(d) Except as would not, individually or in the aggregate, reasonably be
expected to have a Material Adverse Effect on Honeywell, each Honeywell Employee
Plan which is intended to be qualified under Section 401(a) of the Code is so
qualified and has been so qualified during the period from its adoption to date,
and each trust forming a part thereof is exempt from federal income tax pursuant
to section 501(a) of the Code and, to Honeywell's knowledge, no circumstances
exist which will adversely affect such qualification or exemption.
(e) No Honeywell Employee Plan provides that any director or officer or
other employee of Honeywell or any of its Subsidiaries will become entitled to
any retirement, severance or similar benefit or enhanced or accelerated benefit
(including any acceleration of vesting or lapse of repurchase rights or
obligations with respect to any Honeywell Stock Plans or other benefit under any
compensation plan or arrangement of Honeywell) solely as a result of the
transactions contemplated hereby (or as a result of any termination of
employment in connection with the transactions contemplated hereby).
(f) Since the Honeywell Balance Sheet Date, there has been no amendment to,
or change in employee participation or coverage under, any Honeywell Employee
Plan which would increase materially the expense of maintaining such Honeywell
Employee Plan above the level of the expense incurred in respect thereof for the
12 months ended on the Honeywell Balance Sheet Date.
A-13
<PAGE>
(g) Honeywell and its Subsidiaries are in compliance with all applicable
federal, state, local and foreign statutes, laws (including without limitation,
common law), judicial decisions, regulations, ordinances, rules, judgments,
orders and codes respecting employment, employment practices, labor, terms and
conditions of employment and wages and hours, and no work stoppage or labor
strike against Honeywell and its Subsidiaries are pending or threatened, nor are
Honeywell and its Subsidiaries involved in or threatened with any labor dispute,
grievance, or litigation relating to labor matters involving any employees, in
each case except as would not, individually or in the aggregate, reasonably be
expected to have a Material Adverse Effect on Honeywell. There are no suits,
actions, disputes, claims (other than routine claims for benefits),
investigations or audits pending or, to the knowledge of Honeywell, threatened
relating to discrimination in employment or employment practices or in
connection with any Honeywell Employee Plan, but excluding any of the foregoing
which would not, individually or in the aggregate, reasonably be expected to
have a Material Adverse Effect on Honeywell.
(h) The execution of this Agreement shall not constitute an event causing
Honeywell to fund any "rabbi" or similar trust.
(i) No material employee benefit plan contributed to by Honeywell or its
Subsidiaries is a multiemployer plan within the meaning of Section 3(37) or
4001(a)(3) of ERISA.
(j) Except as would not, individually or in the aggregate, reasonably be
expected to have a Material Adverse Effect on Honeywell with respect to each
Honeywell Employee Plan that is not subject to United States law (a "FOREIGN
BENEFIT PLAN"), (i) all employer and employee contributions to each Foreign
Benefit Plan required by Law or by the terms of such Foreign Benefit Plan have
been made or, if applicable, accrued in accordance with normal accounting
practices, (ii) the fair market value of the assets of each funded Foreign
Benefit Plan, the liability of each insurer for any Foreign Benefit Plan funded
through insurance or the book reserve established for any Foreign Benefit Plan,
together with any accrued contributions, is sufficient to procure or provide for
the benefit obligations, as of the date of this Agreement, with respect to all
current and former participants in such plan according to the reasonable
actuarial assumptions and valuations most recently used to determine employer
contributions to such Foreign Benefit Plan and no transaction contemplated by
this Agreement shall cause such assets or insurance to be less than such benefit
obligations, and (iii) each Foreign Benefit Plan required to be registered has
been registered and has been maintained in good standing with applicable
regulatory authorities.
Section 3.15 COMPLIANCE WITH LAWS.
(a) Honeywell and its Subsidiaries have, since January 1, 1998 conducted
their business and operations in compliance with all applicable provisions of
any laws, statutes, ordinances or regulations, except for any failures to be in
compliance that, individually or in the aggregate, would not reasonably be
expected to have a Material Adverse Effect on Honeywell.
(b) Neither Honeywell nor any of its Subsidiaries has failed to obtain any
licenses, permits, franchises or other governmental authorizations necessary to
the ownership of its properties or to the conduct of its business, which failure
would, individually, or in the aggregate, reasonably be excepted to have a
Material Adverse Effect on Honeywell, and, after giving effect to the
transactions contemplated hereby, all such licenses, permits, franchises and
other governmental authorizations will continue to be valid and in full force
and effect, except where the failure to be valid and in full force and effect
would not have a Material Adverse Effect on Honeywell.
Section 3.16 FINDERS' OR ADVISORS' FEES. Except for Bear, Stearns &
Co. Inc., a copy of whose engagement agreement has been previously provided to
Parent, there is no investment banker, broker, finder or other intermediary
which has been retained by or is authorized to act on behalf of Honeywell
A-14
<PAGE>
or any of its Subsidiaries who might be entitled to any fee or commission in
connection with the transactions contemplated by this Agreement.
Section 3.17 ENVIRONMENTAL MATTERS.
(a) Except for matters which, individually or in the aggregate, would not
reasonably be expected to have a Material Adverse Effect on Honeywell, (i) no
written notice, notification, demand, request for information, citation,
summons, complaint or order has been received by, and no investigation, action,
claim, suit, proceeding or review is pending or, to the knowledge of Honeywell
or any of its Subsidiaries, threatened by any Person against, Honeywell or any
of its Subsidiaries, and no penalty has been assessed within the past three
years against Honeywell or any of its Subsidiaries, in each case with respect to
any matters relating to or arising out of any Environmental Law; (ii) Honeywell
and its Subsidiaries are in compliance with all Environmental Laws; and
(iii) there are no liabilities of or relating to Honeywell or any of its
Subsidiaries relating to or arising out of any Environmental Law and there is no
existing condition, situation or set of circumstances which would reasonably be
expected to result in such a liability.
(b) For purposes of this Section 3.17 and Section 4.17, the term
"ENVIRONMENTAL LAWS" means federal, state, local and foreign statutes, laws,
judicial decisions, regulations, ordinances, rules, judgments, orders, codes,
injunctions, permits and governmental agreements relating to human health and
the environment, including, but not limited to, Hazardous Materials; and the
term "HAZARDOUS MATERIAL" means all substances or materials regulated as
hazardous, toxic, explosive, dangerous, flammable or radioactive under any
Environmental Law including, but not limited to: (i) petroleum, asbestos, or
polychlorinated biphenyls and (ii) in the United States, all substances defined
as Hazardous Substances, Oils, Pollutants or Contaminants in the National Oil
and Hazardous Substances Pollution Contingency Plan, 40 C.F.R. Section 300.5.
Section 3.18 OPINION OF FINANCIAL ADVISOR. Honeywell has received the
opinion of Bear, Stearns & Co. Inc., to the effect that, as of the date of its
opinion, the Exchange Ratio is fair from a financial point of view to the
holders of shares of Honeywell Common Stock.
Section 3.19 POOLING; TAX TREATMENT.
(a) Honeywell intends that the Merger be accounted for under the "pooling of
interests" method under the requirements of Opinion No. 16 (Business
Combinations) of the Accounting Principles Board of the American Institute of
Certified Public Accountants and the rules and regulations of the SEC.
(b) Neither Honeywell nor any of its affiliates has taken or agreed to take
any action or is aware of any fact or circumstance with respect to Honeywell or
its affiliates that would prevent (i) the Merger from qualifying (A) for
"pooling of interests" accounting treatment as described in (a) above or (B) as
a reorganization within the meaning of Section 368(a) of the Code and (ii) the
merger between Honeywell and AlliedSignal Inc. consummated on December 1, 1999
(the "ALLIED MERGER") from qualifying for "pooling of interests" accounting
treatment as described in (a) above.
Section 3.20 TAKEOVER STATUTES. The Board of Directors of Honeywell has
taken the necessary action to render Section 203 of the Delaware Law, and any
other potentially applicable anti-takeover or similar statute or regulation,
inapplicable to this Agreement and the Option Agreement and the transactions
contemplated hereby and thereby.
Section 3.21 INTELLECTUAL PROPERTY MATTERS.
(a) Honeywell and its Subsidiaries own, free and clear of all Liens, or have
the right to use pursuant to valid license, sublicense, agreement or permission
all items of Intellectual Property necessary for their operations as presently
conducted or as contemplated to be conducted, except where the failure to have
such rights, individually or in the aggregate, would not be reasonably be
expected to have a Material Adverse Effect on Honeywell. The conduct of
Honeywell's and its Subsidiaries'
A-15
<PAGE>
businesses as currently conducted or contemplated to be conducted does not
interfere, infringe, misappropriate or violate any of the Intellectual Property
rights of any third party, except for interferences, infringements,
misappropriations and violations which, individually or in the aggregate, would
not be reasonably expected to have a Material Adverse Effect on Honeywell. To
Honeywell's knowledge, no third party has interfered with, infringed upon,
misappropriated, diluted, violated or otherwise come into conflict with any
Intellectual Property rights of Honeywell or any of its Subsidiaries, except for
misappropriations and violations which, individually or in the aggregate, would
not be reasonably expected to have a Material Adverse Effect on Honeywell.
(b) The term "INTELLECTUAL PROPERTY" as used in this Agreement means,
collectively, patents, trademarks, service marks, trade dress, logos, trade
names, Internet domain names, designs, slogans and general intangibles of like
nature, copyrights and all registrations, applications, reissuances,
continuations, continuations-in-part, revisions, extensions, reexaminations and
associated good will with respect to each of the foregoing, computer software
(including source and object codes), computer programs, computer data bases and
related documentation and materials, data, documentation, technology, trade
secrets, confidential business information (including ideas, formulae,
algorithms, models, methodologies, compositions, know-how, manufacturing and
production processes and techniques, research and development information,
drawings, designs, plans, proposals and technical data, financial, marketing and
business data and pricing and cost information) and other intellectual property
rights (in whatever form or medium).
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF PARENT
Parent represents and warrants to Honeywell that, except as set forth in the
disclosure schedules delivered by Parent to Honeywell simultaneously with the
execution of this Agreement (the "PARENT DISCLOSURE SCHEDULE") or the Parent
Commission Documents filed prior to the date of this Agreement; it being
understood that any matter set forth in any section of the Parent Disclosure
Schedule or in the Parent Commission Documents shall be deemed disclosed with
respect to such section of this Article IV to which such matter logically
relates, so long as the description of such matter contains sufficient facts to
provide reasonable notice of the relevance of such matter.
Section 4.1 CORPORATE EXISTENCE AND POWER. Parent is and prior to the
Effective Time, Merger Subsidiary will be, a corporation duly incorporated,
validly existing and in good standing under the laws of its jurisdiction of
incorporation and has all corporate powers and all governmental licenses,
authorizations, consents and approvals required to carry on its business as now
conducted, except for those the absence of which would not, individually or in
the aggregate, reasonably be expected to have a Material Adverse Effect on
Parent. Parent is duly qualified to do business as a foreign corporation and is
in good standing in each jurisdiction where the character of the property owned
or leased by it or the nature of its activities makes such qualification
necessary, except for those jurisdictions where the failure to be so qualified
would not, individually or in the aggregate, reasonably be expected to have a
Material Adverse Effect on Parent. From and after the date of its incorporation,
Merger Subsidiary will not engage in any activities other than in connection
with or as contemplated by this Agreement. Parent has heretofore made available
to Honeywell true and complete copies of Parent's certificate of incorporation
and by-laws as currently in effect and, promptly after the incorporation of
Merger Subsidiary, will make available to Honeywell the Certificate of
Incorporation and by-laws of Merger Subsidiary. As of the date hereof, neither
Parent nor any of its Subsidiaries owns any shares of Honeywell Common Stock.
A-16
<PAGE>
Section 4.2 CORPORATE AUTHORIZATION.
(a) The execution, delivery and performance by Parent of this Agreement and
the Option Agreement, and the consummation by Parent and Merger Subsidiary of
the transactions contemplated hereby and thereby are within the corporate powers
of Parent and will be within the corporate powers of Merger Subsidiary prior to
the Effective Time, and have been duly authorized by all necessary corporate
action of Parent and will have been duly authorized by all necessary corporate
action of Merger Subsidiary prior to the Effective Time. Assuming due
authorization, execution and delivery of this Agreement and the Option Agreement
by Honeywell, this Agreement constitutes a valid and binding agreement of each
of Parent and (upon its execution and delivery thereof) Merger Subsidiary and
the Option Agreement constitutes a valid and binding agreement of Parent, in
each case enforceable against such party in accordance with its terms, subject
to bankruptcy, insolvency, fraudulent transfer, reorganization, moratorium and
similar laws of general applicability relating to or affecting creditors' rights
and to general equity principles. The shares of Parent Common Stock issued
pursuant to the Merger, when issued in accordance with the terms hereof, will be
duly authorized, validly issued, fully paid and nonassessable and not subject to
preemptive rights.
(b) Parent's Board of Directors, at a meeting duly called and held, has
(i) determined that this Agreement and the Option Agreement and the transactions
contemplated hereby and thereby (including the Merger) are fair to and in the
best interests of Parent's stockholders and (ii) approved this Agreement and the
Option Agreement and the transactions contemplated hereby and thereby.
Section 4.3 GOVERNMENTAL AUTHORIZATION. The execution, delivery and
performance by Parent of this Agreement and by Parent of the Option Agreement,
and the consummation by Parent and Merger Subsidiary of the transactions
contemplated hereby and thereby require no action by or in respect of, or filing
with, any governmental body, agency, official or authority other than (a) the
filing of a certificate of merger in connection with the Merger, in each case in
accordance with Delaware Law, (b) compliance with any applicable requirements of
the HSR Act, (c) compliance with any applicable requirements of the EC Merger
Regulation, (d) compliance with any applicable requirements under the
Competition Act of Canada, (e) compliance with any other applicable requirements
of foreign anti-trust, competition, trade regulation or investments laws,
(f) compliance with any applicable environmental transfer statutes,
(g) compliance with any applicable requirements of the Exchange Act,
(h) compliance with any applicable requirements of the Securities Act, and
(i) other actions or filings which if not taken or made would not, individually
or in the aggregate, reasonably be expected to have a Material Adverse Effect on
Parent or prevent or materially delay Parent's and/or Merger Subsidiary's
consummation of the Merger.
Section 4.4 NON-CONTRAVENTION. The execution, delivery and performance by
Parent and Merger Subsidiary of this Agreement and by Parent of the Option
Agreement and the consummation by Parent and Merger Subsidiary of the
transactions contemplated hereby and thereby do not and will not (a) contravene
or conflict with the certificate of incorporation or by-laws of Parent or Merger
Subsidiary, (b) assuming compliance with the matters referred to in
Section 4.3, contravene or conflict with or constitute a violation of any
provision of any law, regulation, judgment, injunction, order or decree binding
upon or applicable to Parent or any of its Subsidiaries, (c) constitute a
default under or give rise to any right of termination, cancellation or
acceleration of any right or obligation of Parent or any of its Subsidiaries or
to a loss of any benefit to which Parent or any of its Subsidiaries is entitled
under any provision of any agreement, contract, lease or other instrument
binding upon Parent or any of its Subsidiaries or any license, franchise, permit
or other similar authorization held by Parent or any of its Subsidiaries or
(d) result in the creation or imposition of any Lien on any asset of Parent or
any of its Subsidiaries, except for such contraventions, conflicts or violations
referred to in clause (b) or defaults, rights of termination, cancellation or
acceleration, or losses or Liens referred to in clause (c) or (d) that would
not, individually or in the aggregate, reasonably be expected to prevent or
materially delay the consummation of the Merger.
A-17
<PAGE>
Section 4.5 CAPITALIZATION. The authorized capital stock of Parent
consists of 13,200,000,000 shares of Parent Common Stock and 50,000,000 shares
of preferred stock, par value $1.00 per share. As of the close of business on
June 30, 2000, there were outstanding 9,898,772,000 shares of Parent Common
Stock and no other shares of capital stock or other voting securities of Parent
were outstanding. All outstanding shares of capital stock of Parent have been
duly authorized and validly issued and are fully paid and nonassessable. Except
for (a) employee or director stock options to acquire no more than 343,000,000
shares of Parent Common Stock and (b) shares of Parent Common Stock to be issued
in connection with the Merger, as of the close of business on September 30,
2000, there were no outstanding options, warrants or other rights to acquire
from Parent, and no preemptive or similar rights, subscription or other rights,
convertible or exchangeable securities, agreements, arrangements, or commitments
of any character, relating to the capital stock of Parent, obligating Parent to
issue, transfer or sell any capital stock, voting securities or securities
convertible into or exchangeable for capital stock or voting securities of
Parent or obligating Parent to grant, extend or enter into any such option,
warrant, subscription or other right, convertible or exchangeable security,
agreement, arrangement or commitment (each of the foregoing, a "PARENT
CONVERTIBLE SECURITY"). Since the close of business on June 30, 2000 through the
date hereof, Parent has not issued any shares of capital stock or Parent
Convertible Securities, other than in connection with the exercise of employee
stock options and/or in the ordinary course of business. Except as required by
the terms of any employee or director stock options or employee stock ownership
plan and/or as may be entered into in the ordinary course of business, there are
no outstanding obligations of Parent or any of its Subsidiaries to repurchase,
redeem or otherwise acquire any shares of capital stock of Parent and of any
Parent Convertible Securities.
Section 4.6 COMMISSION FILINGS.
(a) Parent has filed, or will file at or prior to the time due, all forms,
reports and documents required to be filed by it with the Commission since
December 31, 1997. Parent has made available to Honeywell (i) its annual reports
on Form 10-K for its fiscal years ended December 31, 1997, 1998 and 1999,
(ii) its quarterly reports on Form 10-Q for its fiscal quarters ended after
December 31, 1999, (iii) its proxy or information statements relating to
meetings, of, or actions taken without a meeting by, the stockholders of Parent
held since December 31, 1999, and (iv) all of its other reports, statements,
schedules and registration statements filed with the Commission since
December 31, 1999 (the documents referred to in this Section 4.7(a) being
referred to collectively as the "PARENT COMMISSION DOCUMENTS"). Parent's
quarterly report on Form 10-Q for its fiscal quarter ended June 30, 2000 is
referred to as the "PARENT 10-Q".
(b) As of its filing date, each Parent Commission Document complied as to
form in all material respects with the applicable requirements of the Exchange
Act and the Securities Act.
(c) As of its filing date, each Parent Commission Document filed pursuant to
the Exchange Act did not contain any untrue statement of a material fact or omit
to state any material fact necessary in order to make the statements made
therein, in the light of the circumstances under which they were made, not
misleading.
(d) Each registration statement, as amended or supplemented, if applicable,
filed by Parent pursuant to the Securities Act since December 31, 1997, as of
the date such statement or amendment became effective did not contain any untrue
statement of a material fact or omit to state any material fact required to be
stated therein or necessary to make the statements therein not misleading.
Section 4.7 FINANCIAL STATEMENTS. The audited consolidated financial
statements and unaudited consolidated interim financial statements of Parent
(including any related notes and schedules) included in the annual reports on
Form 10-K and the quarterly reports on Form 10-Q referred to in Section 4.6
present fairly, in all material respects, the financial position of Parent and
its subsidiaries as of the dates thereof and their results of operations and
cash flows for the periods then ended (subject to normal year-end adjustments
and the absence of notes in the case of any unaudited interim financial
A-18
<PAGE>
statements), in each case in conformity with GAAP applied on a consistent basis
(except as may be indicated in the notes thereto). For purposes of this
Agreement, "PARENT BALANCE SHEET" means the consolidated balance sheet of Parent
as of December 31, 1999 set forth in the Parent 10-K and "PARENT BALANCE SHEET
DATE" means December 31, 1999.
Section 4.8 DISCLOSURE DOCUMENTS. Neither the Proxy Statement/Prospectus
nor any amendment or supplement thereto, will, at the date the Proxy
Statement/Prospectus or any such amendment or supplement is first mailed to
stockholders of Honeywell or at the time the stockholders vote on the Honeywell
Stockholder Approval, contain any untrue statement of a material fact or omit to
state any material fact necessary in order to make the statements therein, in
light of the circumstances under which they were made, not misleading. Neither
the Form S-4 nor any amendment or supplement thereto will at the time it becomes
effective under the Securities Act or at the Effective Time contain any untrue
statement of a material fact or omit to state a material fact required to be
stated therein or necessary to make the statements therein not misleading. No
representation or warranty is made by Parent in this Section 4.9 with respect to
statements made or incorporated by reference therein based on information
supplied by Honeywell for inclusion or incorporation by reference in the Proxy
Statement/Prospectus or the Form S-4. The Form S-4 and the Proxy
Statement/Prospectus will comply as to form in all material respects with the
requirements of the Exchange Act.
Section 4.9 ABSENCE OF CERTAIN CHANGES. Since the Parent Balance Sheet
Date, there has not been any event, occurrence or development which would,
individually or in the aggregate, reasonably be expected to have a Material
Adverse Effect on Parent.
Section 4.10 NO UNDISCLOSED MATERIAL LIABILITIES. There are no liabilities
of Parent or any Subsidiary of Parent of any kind whatsoever, whether accrued,
contingent, absolute, determined, determinable or otherwise, other than:
(a) liabilities disclosed or provided for in the Parent Balance Sheet or in
the notes thereto;
(b) other liabilities incurred since such date that would not reasonably be
expected, individually or in the aggregate, to have a Material Adverse Effect on
Parent;
(c) liabilities disclosed in the Parent Commission Documents filed prior to
the date of this Agreement; and
(d) liabilities under this Agreement.
Section 4.11 LITIGATION. There is no Action pending against, or to the
knowledge of Parent threatened against or affecting, Parent or any of its
Subsidiaries or any of their respective properties or any of their respective
officers or directors before any court or arbitrator or any governmental body,
agency or official except as would not reasonably be expected to prevent or
materially delay the consummation of the Merger.
Section 4.12 FINDERS' OR ADVISORS' FEES. Except for Chase
Securities Inc., whose fees will be provided by Parent, there is no investment
banker, broker, finder or other intermediary which has been retained by or is
authorized to act on behalf of Parent or any of its Subsidiaries who might be
entitled to any fee or commission in connection with the transactions
contemplated by this Agreement.
Section 4.13 POOLING; TAX TREATMENT.
(a) Parent intends that the Merger be accounted for as a "pooling of
interests" as described in Section 3.19(a).
(b) Neither Parent nor any of its affiliates has taken or agreed to take any
action or is aware of any fact or circumstance with respect to Parent or its
affiliates that would prevent the Merger from qualifying (i) for "pooling of
interests" accounting treatment as described in Section 3.19(a) or (ii) as a
reorganization within the meaning of Section 368(a) of the Code.
A-19
<PAGE>
ARTICLE V
COVENANTS OF HONEYWELL
Honeywell agrees that:
Section 5.1 CONDUCT OF HONEYWELL. From the date of this Agreement until
the Effective Time, Honeywell and its Subsidiaries shall, subject to the last
sentence of this Section 5.1, conduct their business in the ordinary course
consistent with past practice and shall use their reasonable best efforts to
preserve intact their business organizations and relationships with third
parties. Without limiting the generality of the foregoing and subject to the
last sentence of this Section 5.1, and except as set forth in Section 5.1 of the
Honeywell Disclosure Schedules or as contemplated by this Agreement or the
Option Agreement, without the prior written consent of Parent (which shall not
be unreasonably withheld), from the date of this Agreement until the Effective
Time:
(a) Honeywell will not, and will not permit any of its Subsidiaries to,
adopt or propose any change in its certificate of incorporation or by-laws;
(b) Honeywell will not, and will not permit any Subsidiary of Honeywell to,
adopt a plan or agreement of complete or partial liquidation, dissolution,
merger, consolidation, restructuring, recapitalization or other reorganization
of Honeywell or any of its Subsidiaries (other than transactions between direct
and/or indirect wholly owned Subsidiaries of Honeywell);
(c) Honeywell will not, and will not permit any Subsidiary of Honeywell to,
issue, sell, transfer, pledge, dispose of or encumber any shares of, or
securities convertible into or exchangeable for, or options, warrants, calls,
commitments or rights of any kind to acquire, any shares of capital stock of any
class or series of Honeywell or its any of its Subsidiaries other than
(i) issuances of Honeywell Common Stock pursuant to the exercise of Honeywell
Stock Options that are outstanding on the date of this Agreement and
(ii) pursuant to the terms of the Honeywell Dividend Reinvestment Plan as in
effect as of the date hereof;
(d) Honeywell will not (i) split, combine, subdivide or reclassify its
outstanding shares of capital stock, or (ii) declare, set aside or pay any
dividend or other distribution payable in cash, stock or property with respect
to its capital stock other than, subject to Sections 7.4 and 7.9, regular
quarterly cash dividends not in excess of $0.1875 per quarter payable by
Honeywell in respect of shares of Honeywell Stock consistent with past practice;
(e) Honeywell will not, and will not permit any Subsidiary of Honeywell to,
redeem, purchase or otherwise acquire directly or indirectly any of Honeywell's
capital stock, Honeywell Convertible Securities or Honeywell Subsidiary
Convertible Securities, except for repurchases, redemptions or acquisitions
(x) required by or in connection with the terms of any Honeywell Stock Plan or
(y) in accordance with any dividend reinvestment plan as in effect on the date
of this Agreement in the ordinary course of the operations of such plan
consistent with past practice and, in the case of each of (x) and (y) above,
only to the extent consistent with Section 7.4;
(f) Honeywell will not amend the terms (including the terms relating to
accelerating the vesting or lapse of repurchase rights or obligations) of any
employee or director stock options or other stock based awards;
(g) Honeywell will not, and will not permit any Subsidiary of Honeywell to,
(i) grant any severance or termination pay to (or amend any such existing
arrangement with) any director, officer or employee of Honeywell or any of its
Subsidiaries, (ii) enter into any employment, deferred compensation or other
similar agreement (or any amendment to any such existing agreement) with any
director, officer or employee of Honeywell or any of its Subsidiaries,
(iii) materially increase any benefits payable under any existing severance or
termination pay policies or employment agreements, (iv) materially increase any
compensation, bonus or other benefits payable to directors, officers or
employees of Honeywell or any of its Subsidiaries or (v) permit any director,
officer or employee who is not already a party to an agreement or a participant
in a plan providing benefits upon or following a "change of control" to
A-20
<PAGE>
become a party to any such agreement or a participant in any such plan, other
than pursuant to a pre-existing contractual commitment, as required by
applicable law, or in the ordinary course of business consistent with past
practice but subject to Section 7.4;
(h) Honeywell will not, and will not permit any of its Subsidiaries to
(i) acquire a material amount of assets or property of any other Person except
in the ordinary course of business consistent with past practice or (ii) incur
any additional incremental indebtedness in excess of $1.5 billion, in the
aggregate;
(i) other than as contemplated by Section 7.1, Honeywell will not, and will
not permit any of its Subsidiaries to, sell, lease, license or otherwise dispose
of any material amount of assets or property except pursuant to existing
contracts or commitments and except in the ordinary course of business
consistent with past practice;
(j) except for any such change which is not material or which is required by
reason of a concurrent change in GAAP, Honeywell will not, and will not permit
any Subsidiary of Honeywell to, change any method of accounting or accounting
practice used by it;
(k) Honeywell will not, and will not permit any Subsidiary of Honeywell to,
enter into any material joint venture, partnership or other similar arrangement;
(l) Honeywell will not, and will not permit any of its Subsidiaries to, take
any action that would make any representation or warranty of Honeywell hereunder
inaccurate in any material respect at, or as of any time prior to, the Effective
Time;
(m) Honeywell will not settle or compromise any material Action for an
amount in excess of $100 million or enter into any consent decree, injunction or
similar restraint or form of equitable relief in settlement of any Action,
except for such consent decrees, injunctions or restraints which would not
individually or in the aggregate adversely affect the businesses or operations
of Honeywell, Parent or the combined entity at or after the Effective Time in
any material respect;
(n) take any action to exempt or make any person, entity or action (other
than Parent) not subject to the provision of Section 203 of the Delaware Law or
any other potentially applicable anti-takeover or similar statute or regulation;
and
(o) Honeywell will not, and will not permit any of its Subsidiaries to, make
any election with respect to Taxes or settle any material claim with respect to
Taxes which, in each case, would have a Material Adverse Effect on Honeywell.
(p) Honeywell will not, and will not permit any of its Subsidiaries to,
agree or commit to do any of the foregoing.
For purposes of this Section 5.1 acquisitions of property, assets or any
business involving the payment of consideration in an amount in excess of
$500 million, in the aggregate, and sales, transactions or dispositions of
assets or property by Honeywell and its Subsidiaries having a fair market value
in excess of $500 million, in the aggregate, shall be deemed to be material.
Section 5.2 HONEYWELL STOCKHOLDER MEETING.
(a) Honeywell shall cause a meeting of its stockholders (the "HONEYWELL
STOCKHOLDER MEETING") to be duly called and noticed for the purpose of obtaining
the Honeywell Stockholder Approval. In connection with the Honeywell Stockholder
Meeting, Honeywell (x) will mail to its stockholders as promptly as practicable,
the Proxy Statement/Prospectus and all other proxy materials for the Honeywell
Stockholder Meeting, (y) will use its reasonable best efforts, subject to
paragraph (b) of this Section 5.2, to obtain the Honeywell Stockholder Approval
and (z) will otherwise comply with all legal requirements applicable to the
Honeywell Stockholder Meeting.
(b) Except as provided in the next sentence, the Board of Directors of
Honeywell shall recommend approval and adoption of this Agreement and the Merger
by Honeywell's stockholders. The Board of Directors of Honeywell shall be
permitted (i) not to recommend to Honeywell's stockholders that they give the
Honeywell Stockholder Approval or (ii) to withdraw or modify in a manner adverse
to Parent
A-21
<PAGE>
its recommendation to Honeywell's stockholders that they give the Honeywell
Stockholder Approval, only if after receiving an Acquisition Proposal that
constitutes a Superior Proposal, the Board of Directors of Honeywell determines
in its good faith judgment, after receiving the advice of outside legal counsel,
that, in light of this Superior Proposal, there is a reasonable probability that
the Board of Directors would be in violation of its fiduciary duties under
applicable law if it failed to withdraw or modify its recommendation, such
determination to be in the sole discretion of the Board of Directors of
Honeywell.
ARTICLE VI
COVENANTS OF PARENT
Section 6.1 OBLIGATIONS OF MERGER SUBSIDIARY.
(a) Promptly following the date hereof (and in any event prior to the
Effective Time), Parent shall cause the incorporation of Merger Subsidiary
pursuant to and in accordance with Delaware Law by causing to be filed with the
Secretary of State of the State of Delaware a certificate of incorporation of
Merger Subsidiary and, promptly following the date of such filing and the
incorporation of Merger Subsidiary, Parent shall cause Merger Subsidiary to take
all necessary action to execute a counterpart of, and become a party to, this
Agreement.
(b) Parent will take all action necessary to cause Merger Subsidiary to
perform its obligations under this Agreement and to consummate the Merger on the
terms and conditions set forth in this Agreement.
Section 6.2 DIRECTOR AND OFFICER LIABILITY.
(a) Parent shall cause the Surviving Corporation to, and the Surviving
Corporation shall, indemnify and hold harmless, to the fullest extent permitted
under applicable law, the individuals who on or prior to the Effective Time were
officers, directors and employees of Honeywell or its Subsidiaries
(collectively, the "INDEMNITEES") with respect to all acts or omissions by them
in their capacities as such or taken at the request of Honeywell or any of its
Subsidiaries at any time on or prior to the Effective Time. In the event the
Surviving Corporation or Parent or any of their successors or assigns
(i) consolidates with or merges into any other Person and shall not be the
continuing or surviving corporation or entity of such consolidation or merger or
(ii) transfers all or substantially all of its properties and assets to any
Person, then and in each such case, proper provisions shall be made so that the
successors and assigns of the Surviving Corporation or Parent shall assume the
obligations of the Surviving Corporation or the Parent, as the case may be, as
set forth in this Section 6.2. An Indemnitee shall have a right to participate
in (but not control) the defense of any such matter with its own counsel and at
its own expense. Notwithstanding the right of the Surviving Corporation to
assume and control the defense of such litigation, claim or proceeding, such
Indemnitee shall have the right to employ separate counsel and to participate in
the defense of such litigation, claim or proceeding, and the Surviving
Corporation shall bear the reasonable fees, costs and expenses of such separate
counsel and shall pay such fees, costs and expenses promptly after receipt of an
invoice from such Indemnitee if (i) the use of counsel chosen by the Surviving
Corporation to represent such Indemnitee would present such counsel with a
conflict of interest or (ii) such Indemnitee shall have legal defenses available
to it or to other Indemnitees which are different from or in addition to those
available to the Surviving Corporation; PROVIDED, HOWEVER, that the Indemnitee
shall be required to deliver an undertaking to Honeywell as contemplated by
Section 2 of Article VI of the restated certificate of incorporation of
Honeywell. The Surviving Corporation shall not settle any matter set forth in
Section 6.2 of the Honeywell Disclosure Schedule unless the terms of the
settlement provide that the Indemnitee shall have no responsibility for the
discharge of any settlement amount and impose no other obligations or duties on
the Indemnitee and the settlement discharges all rights against Indemnitee with
respect to such matter. Parent shall cause the Surviving Corporation to honor
all indemnification agreements with Indemnitees (including under Honeywell's
by-laws) in effect as of the
A-22
<PAGE>
date of this Agreement in accordance with the terms thereof. Honeywell has
disclosed to Parent all such indemnification agreements prior to the date of
this Agreement.
(b) For three years after the Effective Time, Parent shall procure the
provision of officers' and directors' liability insurance in respect of acts or
omissions occurring prior to the Effective Time covering each such Person
currently covered by Honeywell's officers' and directors' liability insurance
policy on terms with respect to coverage and in amounts no less favorable than
those of such policy in effect on the date hereof; PROVIDED, that if the
aggregate annual premiums for such insurance at any time during such period
shall exceed 200% of the per annum rate of premium paid by Honeywell and its
Subsidiaries as of the date hereof for such insurance, then Parent shall, or
shall cause its Subsidiaries to, provide only such coverage as shall then be
available at an annual premium equal to 200% of such rate.
(c) The certificate of incorporation of the Surviving Corporation shall,
from and after the Effective Time, contain provisions no less favorable with
respect to limitation of certain liabilities of directors and indemnification
than are set forth as of the date of this Agreement in Article Eleventh of the
restated certificate of incorporation of Honeywell, which provisions shall not
be amended, repealed or otherwise modified for a period of six years from the
Effective Time in a manner that would adversely affect the rights thereunder of
individuals who at the Effective Time were directors, officers or employees of
Honeywell.
(d) The obligations of Parent under this Section 6.2 shall not be terminated
or modified in such a manner as to adversely affect any Indemnitee to whom this
Section 6.2 applies without the consent of the affected Indemnitee (it being
expressly agreed that the Indemnitees to whom this Section 6.2 applies shall be
third party beneficiaries of this Section 6.2).
Section 6.3 STOCK EXCHANGE LISTING. Parent shall use its reasonable best
efforts to cause the shares of Parent Common Stock to be issued in connection
with the Merger to be approved for listing on the NYSE, subject to official
notice of issuance.
Section 6.4 EMPLOYEE BENEFITS.
(a) From and after the Effective Time, Parent shall cause the Surviving
Corporation to honor in accordance with their terms all benefits and obligations
under Honeywell Employee Plans, each as in effect on the date of this Agreement
(or as amended as contemplated or permitted hereby or with the prior written
consent of Parent). Subject to the previous sentence and Section 6.4(b), no
provision of this Agreement shall be construed as a limitation on the right of
Parent or the Surviving Corporation to amend or terminate any Honeywell Employee
Plan to the extent permitted by the terms thereof (as in effect on the date
hereof) and applicable law, and no provision of this Agreement shall be
construed to create a right in any employee or beneficiary of such employee
under a Honeywell Employee Plan that such employee or beneficiary would not
otherwise have under the terms of that Honeywell Employee Plan. The "Change of
Control" provisions of the Honeywell Employee Plans set forth on Section 6.4(a)
of the Honeywell Disclosure Schedule will be triggered by the consummation of
the Merger.
(b) For a period of at least one year following the Effective Time, Parent
shall provide to employees of Honeywell and its Subsidiaries as of the Effective
Time ("AFFECTED EMPLOYEES"), for so long as such Affected Employees remain
employed by Parent or its Subsidiaries, employee benefits (including salary,
performance based incentive compensation and stock-based benefits) which, in the
aggregate, are at least as favorable as the benefits provided pursuant to
Honeywell's or its Subsidiaries' (as applicable) employee benefit plans,
programs, policies and arrangements immediately prior to the Effective Time,
PROVIDED, HOWEVER, that the foregoing shall not be construed to limit Parent's
flexibility in determining the design of any benefit plan or program.
(c) Parent will, or will cause the Surviving Corporation to, give Affected
Employees full credit for purposes of eligibility, vesting, and determination of
the level of and entitlement to benefits under
A-23
<PAGE>
severance benefit, vacation and other employee benefit plans or arrangements
maintained by Parent or any Subsidiary of Parent (if such Affected Employees
participate in any such employee benefit plan or arrangement) for such Affected
Employees' service with Honeywell or any Subsidiary of Honeywell to the same
extent recognized by Honeywell immediately prior to the Effective Time for
similar Honeywell employee benefit plans or arrangements, provided, however,
that this Section 6.4(c) shall, except as required by law, not provide crediting
of service for benefit accrual purposes under Parent defined benefit pension
plans, or where such crediting of service would result in a duplication of
benefits.
(d) Parent will, or will cause the Surviving Corporation to, (i) waive all
limitations as to preexisting conditions, exclusions and waiting periods with
respect to participation and coverage requirements applicable to the Affected
Employees under any welfare benefit plans of Parent that such employees may be
eligible to participate in after the Effective Time, other than limitations or
waiting periods that would have been in effect with respect to such employees as
of the Effective Time under any welfare plan maintained for the Affected
Employees immediately prior to the Effective Time, and (ii) provide each
Affected Employee with credit for any co-payments and deductibles paid prior to
the Effective Time in satisfying any applicable deductible or out-of-pocket
requirements under any welfare plans that such employees are eligible to
participate in after the Effective Time during the same plan year in which such
co-payments and deductibles were paid.
(e) Prior to the Effective Time, Honeywell and Parent shall take all such
action necessary to ensure that no "rabbi" or similar trust maintained by
Honeywell or Parent, respectively, is required to be funded as a result of the
transactions contemplated by this Agreement.
Section 6.5 CONSULTANT AGREEMENT. At the Effective Time, Parent shall
enter into a consulting agreement with Michael R. Bonsignore substantially on
the terms set forth in Section 6.5 of the Honeywell Disclosure Schedule.
ARTICLE VII
COVENANTS OF PARENT AND HONEYWELL
The parties hereto agree that:
Section 7.1 REASONABLE BEST EFFORTS.
(a) Subject to Section 7.1(b), Honeywell and Parent shall each cooperate
with the other and use (and shall cause their respective Subsidiaries to use)
their respective reasonable best efforts to promptly (i) take or cause to be
taken all necessary actions, and do or cause to be done all things, necessary,
proper or advisable under this Agreement and applicable laws to consummate and
make effective the Merger and the other transactions contemplated by this
Agreement as soon as practicable, including, without limitation, preparing and
filing promptly and fully all documentation to effect all necessary filings,
notices, petitions, statements, registrations, submissions of information,
applications and other documents (including, without limitation, any required
filings under the HSR Act or any foreign antitrust, competition or trade
regulation law, regulation or statute, or any amendments to any thereof) and
(ii) obtain all approvals, consents, registrations, permits, authorizations and
other confirmations required to be obtained from any third party necessary,
proper or advisable to consummate the Merger and the other transactions
contemplated by this Agreement. Subject to applicable laws relating to the
exchange of information and in addition to Section 7.1(c), Honeywell and Parent
shall have the right to review in advance, and to the extent practicable each
will consult the other on, all the information relating to Honeywell and its
Subsidiaries or Parent and its Subsidiaries, as the case may be, that appears in
any filing made with, or written materials submitted to, any third party and/or
any governmental authority in connection with the Merger and the other
transactions contemplated by this Agreement.
A-24
<PAGE>
(b) Without limiting Section 7.1(a), Parent and Honeywell shall:
(i) each use its reasonable best efforts to avoid the entry of, or to
have vacated or terminated, any decree, order, or judgment that would
restrain, prevent or delay the Closing, on or before the End Date, including
without limitation defending through litigation on the merits any claim
asserted in any court by any Person; and
(ii) each use its reasonable best efforts to avoid or eliminate each and
every impediment under any antitrust, competition or trade regulation law
that may be asserted by any governmental authority with respect to the
Merger so as to enable the Closing to occur as soon as reasonably possible
(and in any event no later than the End Date), including, with respect to
Parent, Parent shall take all such actions, including, without limitation
(x) proposing, negotiating, committing to and effecting, by consent decree,
hold separate order, or otherwise, the sale, divestiture or disposition of
such assets or businesses of Parent (or any of its Subsidiaries) and
(y) otherwise taking or committing to take actions that limit Parent or its
Subsidiaries' freedom of action with respect to, or its ability to retain,
one or more of its or its Subsidiaries' businesses, product lines or assets,
in each case as may be required in order to avoid the entry of, or to effect
the dissolution of, any injunction, temporary restraining order, or other
order in any suit or proceeding, which would otherwise have the effect of
preventing or materially delaying the Closing; PROVIDED, HOWEVER, that
Parent shall not be required to take any such actions if such action with
respect to a comparable amount of assets, businesses or products lines of
Honeywell would be reasonably likely, in the aggregate, to have a Material
Adverse Effect on Honeywell and its Subsidiaries, taken as a whole;
PROVIDED, FURTHER, HOWEVER, that neither Parent nor Honeywell shall be
required to sell, divest or otherwise dispose of any assets, businesses or
product lines of Honeywell if such actions would be reasonably likely, in
the aggregate, to have a Material Adverse Effect on Honeywell and its
Subsidiaries. Honeywell shall take such of the foregoing actions as the
Parent may request; PROVIDED that any such action is conditioned upon the
consummation of the Merger.
(c) Parent and Honeywell shall keep the other reasonably apprised of the
status of matters relating to the completion of the transactions contemplated
hereby and work cooperatively in connection with obtaining all required
approvals or consents of any governmental authority (whether domestic, foreign
or supranational). In that regard, each party shall without limitation:
(i) promptly notify the other of, and if in writing, furnish the other with
copies of (or, in the case of material oral communications, advise the other
orally of) any communications from or with any governmental authority (whether
domestic, foreign or supranational) with respect to the Merger or any of the
other transactions contemplated by this Agreement, (ii) permit the other to
review and discuss in advance, and consider in good faith the views of the other
in connection with, any proposed written (or any material proposed oral)
communication with any such governmental authority, (iii) not participate in any
meeting with any such governmental authority unless it consults with the other
in advance and to the extent permitted by such governmental authority gives the
other the opportunity to attend and participate thereat, (iv) furnish the other
with copies of all correspondence, filings and communications (and memoranda
setting forth the substance thereof) between it and any such governmental
authority with respect to this Agreement and the Merger, and (v) furnish the
other with such necessary information and reasonable assistance as Parent or
Honeywell may reasonably request in connection with its preparation of necessary
filings or submissions of information to any such governmental authority. Parent
and Honeywell may, as each deems advisable and necessary, reasonably designate
any competitively sensitive material provided to the other under this Section as
"outside counsel only." Such materials and the information contained therein
shall be given only to the outside legal counsel of the recipient and will not
be disclosed by such outside counsel to employees, officers, or directors of the
recipient unless express permission is obtained in advance from the source of
the materials (Parent or Honeywell, as the case may be) or its legal counsel.
A-25
<PAGE>
Section 7.2 PROXY MATERIALS; CERTAIN FILINGS. Honeywell and Parent shall
promptly prepare and file with the Commission a proxy statement relating to the
meeting of Honeywell to be held in connection with this Agreement and the
transactions contemplated hereby (the "PROXY STATEMENT/ PROSPECTUS"). Honeywell
and Parent shall promptly prepare, and Parent shall file with the Commission, a
registration statement on Form S-4 (the "FORM S-4") in which the Proxy
Statement/Prospectus will be included as a prospectus, and Parent shall use its
reasonable best efforts to cause the Form S-4 to be declared effective by the
Commission as promptly as practicable after filing. Parent shall promptly take
any action required to be taken under foreign or state securities or Blue Sky
laws in connection with the issuance of Parent Common Stock in connection with
the Merger. Honeywell and Parent shall cooperate with one another (a) in
determining whether any action by or in respect of, or filing with, any
governmental body, agency or official, or authority is required, or any actions,
consents, approvals or waivers are required to be obtained from parties to any
material contracts, in connection with the consummation of the transactions
contemplated by this Agreement and (b) in seeking any such actions, consents,
approvals or waivers or making any such filings, furnishing information required
in connection therewith or with the Proxy Statement/Prospectus or the Form S-4
and seeking timely to obtain any such actions, consents, approvals or waivers.
Section 7.3 ACCESS TO INFORMATION. From the date hereof until the
Effective Time, to the extent permitted by applicable law, Honeywell and Parent
will upon reasonable request give the other party, its counsel, financial
advisors, auditors and other authorized representatives access to the offices,
properties, books and records of such party and its Subsidiaries during normal
business hours, furnish to the other party, its counsel, financial advisors,
auditors and other authorized representatives such financial and operating data
and other information as such Persons may reasonably request and will instruct
its own employees, counsel and financial advisors to cooperate with the other
party in its investigation of the business of Honeywell or Parent, as the case
may be; PROVIDED that no investigation of the other party's business shall
affect any representation or warranty given by either party hereunder, and
neither party shall be required to provide any such information if the provision
of such information may cause a waiver of an attorney-client privilege. All
information obtained by Parent or Honeywell pursuant to this Section 7.3 shall
be kept confidential in accordance with, and shall otherwise be subject to the
terms of, the Confidentiality Agreement dated October 21, 2000 between Parent
and Honeywell (the "CONFIDENTIALITY AGREEMENT").
Section 7.4 TAX AND ACCOUNTING TREATMENT.
(a) Neither Parent nor Honeywell shall, nor shall they permit their
Subsidiaries to, take any action or fail to take any action which action or
failure to act would prevent, or would be reasonably likely to prevent, the
Merger from qualifying (i) for "pooling of interests" accounting treatment under
GAAP and the rules and regulations of the Commission or (ii) as a reorganization
within the meaning of Section 368(a) of the Code. Honeywell shall not, and shall
not permit its Subsidiaries to, take any action which action or failure to act
would prevent, or would be reasonably likely to prevent, the Allied Merger from
qualifying for "pooling of interests" accounting treatment under GAAP and the
rules and regulations of the Commission. In the event Parent receives advice
from its independent public accountants that it is advisable for Parent to
obtain customary "affiliate" agreements in order to qualify for "pooling of
interests" accounting treatment, Parent shall use its reasonable best efforts to
obtain such letters from the appropriate affiliates of Parent.
(b) Parent shall use its reasonable best efforts to provide to Shearman &
Sterling (or such other counsel reasonably acceptable to Parent) and Skadden,
Arps, Slate, Meagher & Flom LLP (or such other counsel reasonably acceptable to
Honeywell) a certificate containing representations reasonably requested by such
counsel in connection with the opinions to be delivered pursuant to Sections
8.2(d) and 8.3(b) hereof. Honeywell shall use its reasonable best efforts to
provide to Shearman & Sterling (or such other counsel reasonably acceptable to
Parent) and Skadden, Arps, Slate, Meagher & Flom LLP (or such other counsel
reasonably acceptable to Honeywell) a certificate containing
A-26
<PAGE>
representations reasonably requested by such counsel in connection with the
opinions to be delivered pursuant to Sections 8.2(d) and 8.3(b) hereof.
(c) Subject to paragraph (a) above, Parent and Honeywell agree to cooperate
in good faith with proposals to reduce Taxes on the transactions contemplated by
this Agreement and the continuing operations of Honeywell and its affiliates
(including the Surviving Corporation) and Parent and its affiliates after the
Effective Time, it being understood that no actions will be required which
Honeywell reasonably concludes would adversely affect (i) Honeywell and its
affiliates in the event the Merger is not consummated or (ii) the rights or
benefits of employees of Honeywell and its affiliates arising from their
employment relationship or provided for or permitted by this Agreement.
Section 7.5 PUBLIC ANNOUNCEMENTS. The initial press release with respect
to the Merger shall be a joint press release, to be agreed upon by Parent and
Honeywell. Thereafter, Parent and Honeywell will consult with each other before
issuing any press release or making any public statement with respect to this
Agreement and the transactions contemplated hereby and shall not issue any press
release or make any public statement without the prior consent of the other
party, unless such consent shall have been unreasonably withheld.
Notwithstanding the foregoing, any such press release or public statement as may
be required by applicable law or any listing agreement with any national
securities exchange (or the London Stock Exchange) may be issued prior to such
consultation, if the party making the release or statement has used its
reasonable efforts to consult with the other party.
Section 7.6 FURTHER ASSURANCES. At and after the Effective Time, the
officers and directors of the Surviving Corporation will be authorized to
execute and deliver, in the name and on behalf of Honeywell or Merger
Subsidiary, any deeds, bills of sale, assignments or assurances and to take any
other actions and do any other things, in the name and on behalf of Honeywell or
Merger Subsidiary, reasonably necessary to vest, perfect or confirm of record or
otherwise in the Surviving Corporation any and all right, title and interest in,
to and under any of the rights, properties or assets of Honeywell acquired or to
be acquired by the Surviving Corporation as a result of, or in connection with,
the Merger.
Section 7.7 NOTICES OF CERTAIN EVENTS.
(a) Each of Honeywell and Parent shall promptly notify the other party of:
(i) any notice or other communication from any Person alleging that the
consent of such Person is or may be required in connection with the
transactions contemplated by this Agreement if the failure of Honeywell or
Parent, as the case may be, to obtain such consent would be material to
Honeywell or Parent as applicable; and
(ii) any notice or other communication from any governmental or
regulatory agency or authority in connection with the transactions
contemplated by this Agreement.
(b) Honeywell and Parent shall promptly notify the other party of any
actions, suits, claims, investigations or proceedings commenced or, to its
knowledge threatened against, relating to or involving or otherwise affecting
such party or any of its Subsidiaries which relate to the consummation of the
transactions contemplated by this Agreement.
Section 7.8 AFFILIATES.
(a) As soon as practicable after the date hereof and in any event not less
than 30 days prior to the Effective Time, Honeywell (i) shall have delivered to
Parent a letter identifying all Persons who, in the opinion of Honeywell may be,
as of the date of the Honeywell Stockholder Meeting, its "affiliates" for
purposes of SEC Accounting Series Releases 130 and 135 and/or for purposes of
Rule 145 under the Securities Act, and (ii) shall use its reasonable best
efforts to cause each Person who is identified as an "affiliate" of Honeywell in
such letter to deliver, as promptly as practicable but in no event later than
20 days prior to the Closing (or after such later date as the Parent and
Honeywell may agree), a signed
A-27
<PAGE>
agreement to Honeywell, substantially in the form attached as Exhibit A.
Honeywell shall notify Parent from time to time after the delivery of the letter
described in Section 7.8(a)(i) of any Person not identified on such letter who
then is, or may be, such an "affiliate" and use its reasonable best efforts to
cause each additional Person who is identified as an "affiliate" to execute a
signed agreement as set forth in this Section 7.8(a).
(b) Shares of Honeywell Common Stock beneficially owned by each such
"affiliate" of Honeywell who has not provided a signed agreement in accordance
with Section 7.8(a) shall not be transferable during any period prior to and
after the Effective Time if, as a result of this transfer during any such
period, taking into account the nature, extent and timing of this transfer and
similar transfers by all other "affiliates" of Honeywell, this transfer will, in
the reasonable judgment of accountants of Parent, interfere with, or prevent the
Merger from being accounted for, as a "pooling of interests" under GAAP and/or
the rules and regulations of the Commission. Parent shall not register, or allow
its transfer agent to register, on its books any transfer of any shares of
Parent Common Stock of any affiliate of Honeywell who has not provided a signed
agreement in accordance with Section 7.8(a). The restrictions on the
transferability of shares held by Persons who execute an agreement pursuant to
Section 7.8(a) shall be as provided in those agreements.
Section 7.9 PAYMENT OF DIVIDENDS. From the date of the Agreement until the
Effective Time, Parent and Honeywell will coordinate with each other regarding
the declaration of dividends in respect of the shares of Parent Common Stock and
the shares of Honeywell Common Stock and the record dates and payment dates
relating thereto, it being the intention of the parties that holders of shares
of Honeywell Common Stock will not receive two dividends, or fail to receive one
dividend, for any single calendar quarter with respect to their shares of
Honeywell Common Stock and the shares of Parent Common Stock any holder of
shares of Honeywell Common Stock receives in exchange therefor in connection
with the Merger.
Section 7.10 NO SOLICITATION.
(a) Honeywell shall not, and shall cause its Subsidiaries not to, and will
use its reasonable best efforts to cause its officers, directors, employees,
investment bankers, consultants, attorneys, accountants, agents and other
representatives not to, directly or indirectly, take any action to solicit,
initiate, encourage or facilitate the making of any Acquisition Proposal or any
inquiry with respect thereto or engage in substantive discussions or
negotiations with any Person with respect thereto, or in connection with any
Acquisition Proposal or potential Acquisition Proposal, disclose any nonpublic
information relating to it or its Subsidiaries or afford access to the
properties, books or records of it or its Subsidiaries to, any Person that has
made, or to such party's knowledge, is considering making, any Acquisition
Proposal; PROVIDED, HOWEVER, that, in the event that (x) Honeywell shall receive
an Acquisition Proposal that the Board of Directors of Honeywell concludes in
good faith could result in a Superior Proposal that was not solicited by it and
did not otherwise result from a breach of this Section 7.10, (y) prior to
receipt of the Honeywell Stockholder Approval, the Board of Directors of
Honeywell determines in its good faith judgment, after receiving the advice of
outside counsel, that, in light of this Acquisition Proposal, if Honeywell fails
to participate in such discussions or negotiations with, or provide such
information to, the party making the Acquisition Proposal, there is a reasonable
probability that such Board of Directors would be in violation of its fiduciary
duties under applicable law, such determination to be in the sole discretion of
the Board of Directors of Honeywell, and (z) after giving Parent written notice
of its intention to do so Honeywell may (i) furnish information with respect to
it and its subsidiaries to the Person making such Acquisition Proposal pursuant
to a customary confidentiality agreement and (ii) participate in discussions and
negotiations regarding such Acquisition Proposal.
(b) Nothing contained in this Agreement shall prevent the Board of Directors
of Honeywell from complying with Rule 14e-2 under the Exchange Act with regard
to an Acquisition Proposal; PROVIDED
A-28
<PAGE>
that the Board of Directors of Honeywell shall not recommend that its
stockholders tender their shares in connection with a tender offer except to the
extent, after receiving a Superior Proposal, the Board of Directors of Honeywell
determines in its good faith judgment, after receiving the advice of outside
legal counsel, that, in light of the Superior Proposal, there is a reasonable
probability that the Board of Directors would be in violation of its fiduciary
duties under applicable law if it fails to make such a recommendation, such
determination to be in the sole discretion of the Board of Directors of
Honeywell.
(c) Upon receiving an Acquisition Proposal, Honeywell will promptly (and in
no event later than 24 hours after receipt of any Acquisition Proposal) notify
Parent, after receipt of any Acquisition Proposal or any amendment or change in
any previously received Acquisition Proposal, or any request for nonpublic
information relating to Honeywell or any Subsidiary of Honeywell or for access
to the properties, books or records of Honeywell or any Subsidiary of Honeywell
by any Person that has made, or to such party's knowledge may be considering
making, an Acquisition Proposal, and shall promptly provide copies of any
proposals, indications of interest, draft agreements and correspondence relating
to such Acquisition Proposal. Honeywell shall, and shall cause its Subsidiaries
to, immediately cease and cause to be terminated, and use reasonable best
efforts to cause its officers, directors, employees, investment bankers,
consultants, attorneys, accountants, agents and other representatives to,
immediately cease and cause to be terminated, all discussions and negotiations,
if any, that have taken place prior to the date hereof with any Persons with
respect to any Acquisition Proposal and shall request the return or destruction
of all confidential information provided to any such Person.
For purposes of this Agreement, "ACQUISITION PROPOSAL" means any offer or
proposal for, or any indication of interest in, any (i) direct or indirect
acquisition or purchase of a business or asset of Honeywell or any of its
Subsidiaries that constitutes 20% or more of the net revenues, net income or
assets of Honeywell and its Subsidiaries, taken as a whole; (ii) direct or
indirect acquisition or purchase of 20% or more of any class of equity
securities of Honeywell or any of its Subsidiaries whose business constitutes
20% or more of the net revenues, net income or assets of Honeywell and its
Subsidiaries, taken as a whole; (iii) tender offer or exchange offer that, if
consummated, would result in any Person beneficially owning 20% or more of any
class of equity securities of Honeywell, or any of its Subsidiaries whose
business constitutes 20% or more the net revenues, net income or assets of
Honeywell and its Subsidiaries, taken as a whole; or (iv) merger, consolidation,
business combination, recapitalization, liquidation, dissolution or similar
transaction involving Honeywell or any of its Subsidiaries whose business
constitutes 20% or more of the net revenue, net income or assets of Honeywell
and its Subsidiaries, taken as a whole, other than the transactions contemplated
by this Agreement. For purposes of this Agreement, "SUPERIOR PROPOSAL" means any
bona fide written Acquisition Proposal obtained not in breach of this
Section 7.10 for or in respect of all of the outstanding shares of Honeywell
Common Stock, on terms that the Board of Directors of Honeywell, determines in
its good faith judgment (after consultation with a financial advisor of
nationally recognized reputation and taking into account all the terms and
conditions of the Acquisition Proposal and this Agreement deemed relevant by
such Board of Directors, including any break-up fees, expense reimbursement
provisions, conditions to and expected timing and risks of consummation, and the
ability of the party making such proposal to obtain financing for such
Acquisition Proposal and taking into account all other legal, financial,
regulatory and all other aspects of such proposal) are more favorable (other
than in immaterial respects) from a financial point of view to its stockholders
than the Merger and which has a reasonable likelihood of being consummated.
(d) Honeywell agrees that it will take the necessary steps promptly to
inform its officers, directors, investment bankers, consultants, attorneys,
accountants, agents and other representatives of the obligations undertaken in
this Section 7.10.
A-29
<PAGE>
Section 7.11 LETTERS FROM ACCOUNTANTS.
(a) Parent shall use reasonable best efforts to cause to be delivered to
Parent and Honeywell a letter from KPMG LLP dated as of the Closing Date,
addressed to the Boards of Directors of Parent and Honeywell, stating that KPMG
LLP concurs with Parent management's conclusion that accounting for the Merger
as a "pooling of interests" under Opinion No. 16 (Business Combination) of the
Accounting Principles Board of the American Institute of Certified Public
Accountants and the rules and regulations of the Commission is appropriate if
the Merger is closed and consummated in accordance with the terms hereof.
(b) Honeywell shall use reasonable best efforts to cause to be delivered to
Parent a letter from PricewaterhouseCoopers LLP, dated as of the Closing Date,
addressed to the Boards of Directors of Honeywell and Parent, stating that
PricewaterhouseCoopers LLP concurs with Honeywell's management's conclusion that
Honeywell is eligible to participate in a transaction accounted for as a
"pooling of interests" under Opinion No. 16 (Business Combination) of the
Accounting Principles Board of the American Institute of Certified Public
Accountants and the rules and regulations of the Commission.
Section 7.12 TAKEOVER STATUTES. If any anti-takeover or similar statute or
regulation is or may become applicable to the transactions contemplated hereby,
each of the parties and its Board of Directors shall grant such approvals and
take all such actions as are legally permissible so that the transactions
contemplated hereby may be consummated as promptly as practicable on the terms
contemplated hereby and otherwise act to eliminate or minimize the effects of
any such statute or regulation on the transactions contemplated hereby.
Section 7.13 HONEYWELL NAME AND INTEGRITY OF FRANCHISE. Parent will use
the Honeywell name in areas where Honeywell has been strong historically. Parent
will use the Honeywell name in conjunction with the Parent name for the
Honeywell Home and Building Control business and the Honeywell avionics
business. Parent will consider the use of the Honeywell name in conjunction with
the Parent name for the Honeywell industrial controls business.
Section 7.14 TRANSFER STATUTES. Each of Parent and Honeywell agrees to use
its commercially reasonable efforts to comply promptly with all requirements of
the New Jersey, Connecticut and other state property transfer statutes to the
extent applicable to the transactions contemplated hereby, and to take all
actions necessary to cause the transactions contemplated hereby to be effected
in compliance with such statutes. Parent and Honeywell agree that they will
consult with each other to determine what, if any, actions must be taken prior
to or after the Effective Time to ensure compliance with such statutes. Each of
Parent and Honeywell agrees to provide the other with any documents to be
submitted to the relevant state agencies prior to submission. For purposes of
this section, the New Jersey and Connecticut Property Transfer Statutes means
the New Jersey Industrial Site Recovery Act, 1993 N.J. Laws 139, and the
Connecticut Transfer Act, Conn. Gen. Stat. Ann. SectionSection 22a.-134(b).
Section 7.15 SECTION 16(B). Parent and Honeywell shall take all such steps
reasonably necessary to cause the transactions contemplated hereby and any other
dispositions of equity securities of Honeywell (including derivative securities)
or acquisitions of Parent equity securities (including derivative securities) in
connection with this Agreement by each individual who (a) is a director or
officer of Honeywell or (b) at the Effective Time, will become a director or
officer of Parent, to be exempt under Rule 16b-3 promulgated under the Exchange
Act.
A-30
<PAGE>
ARTICLE VIII
CONDITIONS TO THE MERGER
Section 8.1 CONDITIONS TO THE OBLIGATIONS OF EACH PARTY. The obligations
of Honeywell, Parent and Merger Subsidiary to consummate the Merger are subject
to the satisfaction (or, to the extent legally permissible, waiver) of the
following conditions:
(a) this Agreement and the Merger shall have been approved and adopted by
the stockholders of Honeywell in accordance with Delaware Law;
(b) any applicable waiting period (including any extension thereof) under
the HSR Act relating to the Merger shall have expired or been terminated;
(c) the approval by the European Commission of the transactions contemplated
by this Agreement shall have been obtained pursuant to the EC Merger Regulation;
(d) all applicable waiting periods under the Competition Act of Canada shall
have expired or been terminated;
(e) no provision of any applicable law or regulation and no judgment,
injunction (preliminary or permanent), order or decree that prohibits,
materially restricts, makes illegal or enjoins the consummation of the Merger or
any of the other transactions contemplated by this Agreement, shall be in
effect;
(f) the Form S-4 shall have been declared effective under the Securities Act
and no stop order suspending the effectiveness of the Form S-4 shall be in
effect and no proceedings for such purpose shall be pending before or threatened
by the SEC;
(g) the shares of Parent Common Stock to be issued in the Merger shall have
been approved for listing on the NYSE, subject to official notice of issuance;
and
(h) the letters of KPMG LLP and PricewaterhouseCoopers LLP contemplated by
paragraphs (a) and (b) of Section 7.11 shall have been delivered as contemplated
thereby.
Section 8.2 CONDITIONS TO THE OBLIGATIONS OF PARENT AND MERGER
SUBSIDIARY. The obligations of Parent and Merger Subsidiary to consummate the
Merger are subject to the satisfaction (or, to the extent legally permissible,
waiver) of the following further conditions:
(a) (i) Honeywell shall have performed in all material respects all of its
obligations hereunder required to be performed by it at or prior to the
Effective Time, (ii) the representations and warranties of Honeywell contained
in this Agreement and in any certificate or other writing delivered by Honeywell
pursuant hereto shall be true and correct (without giving effect to any
limitation as to "materiality" or "Material Adverse Effect" set forth therein)
at and as of the Effective Time as if made at and as of such time (except to the
extent expressly made as of an earlier date, in which case as of such earlier
date), except where the failure of such representations and warranties to be
true and correct (without giving effect to any limitation as to "materiality" or
"Material Adverse Effect" set forth therein) would not, individually or in the
aggregate, have a Material Adverse Effect on Honeywell, and (iii) Parent shall
have received a certificate signed by an executive officer of Honeywell on its
behalf to the foregoing effect;
(b) there shall not be any statute, rule, regulation, injunction, order or
decree, enacted, enforced, promulgated, entered, issued or deemed applicable to
the Merger and the other transactions contemplated hereby (or in the case of any
statute, rule or regulation, awaiting signature or reasonably expected to become
law), by any court, government or governmental authority or agency or
legislative body, domestic, foreign or supranational, that would, or would
reasonably be expected to, have a Material Adverse Effect on Honeywell at or
after the Effective Time.
A-31
<PAGE>
(c) (i) all required approvals or consents of any governmental authority or
third party including those described in Section 3.3, 3.4, 4.3 and 4.4 shall
have been obtained (and all relevant statutory, regulatory or other governmental
waiting periods, whether domestic, foreign or supranational, shall have
expired), except, in the case of consents the absence of which would not result
in civil or criminal sanctions being imposed on Parent or the Surviving
Corporation or their respective affiliates, where the failure to obtain any such
consents and approvals would not reasonably be expected to have a Material
Adverse Effect on Honeywell and (ii) all such approvals and consents which have
been obtained shall be on terms that would not reasonably be expected to have a
Material Adverse Effect on Honeywell.
(d) Parent shall have received an opinion of Shearman & Sterling (or other
counsel reasonably acceptable to Parent), on the basis of representations and
assumptions set forth in such opinion, to the effect that the Merger will be
treated for federal income tax purposes as a reorganization within the meaning
of Section 368(a) of the Code and that each of Parent, Merger Subsidiary and
Honeywell will be a party to the reorganization within the meaning of
Section 368(b) of the Code, and such opinion shall not have been withdrawn as of
the Effective Time. In rendering its opinion, counsel shall be entitled to rely
upon representations of officers of Parent and Honeywell reasonably requested by
counsel.
Section 8.3 CONDITIONS TO THE OBLIGATIONS OF HONEYWELL. The obligation of
Honeywell to consummate the Merger is subject to the satisfaction (or, to the
extent legally permissible, waiver) of the following further conditions:
(a) (i) Parent shall have performed in all material respects all of its
obligations hereunder required to be performed by it at or prior to the
Effective Time, (ii) the representations and warranties of Parent and Merger
Subsidiary contained in this Agreement and in any certificate or other writing
delivered by Parent pursuant hereto shall be true and correct (without giving
effect to any limitation as to "materiality" or "Material Adverse Effect" set
forth herein) at and as of the Effective Time as if made at and as of such time
(except to the extent expressly made as of an earlier date, in which case as of
such earlier date, except where the failure of such representations to be true
and correct (without giving effect to any limitation as to "materiality" or
"Material Adverse Effect" set forth herein) would not, individually as in the
aggregate, have a Material Adverse Effect on Parent and (iii) Honeywell shall
have received a certificate signed by an executive officer of Parent on its
behalf to the foregoing effect; and
(b) Honeywell shall have received an opinion of Skadden, Arps, Slate,
Meagher & Flom LLP (or other counsel reasonably acceptable to Honeywell), on the
basis of representations and assumptions set forth in such opinion, to the
effect that the Merger will be treated for federal income tax purposes as a
reorganization within the meaning of Section 368(a) of the Code and that each of
Parent, Merger Subsidiary and Honeywell will be a party to the reorganization
within the meaning of Section 368(b) of the Code, and such opinion shall not
have been withdrawn as of the Effective Time. In rendering this opinion, counsel
shall be entitled to rely upon representations of officers of Parent and
Honeywell reasonably requested by counsel.
ARTICLE IX
TERMINATION
Section 9.1 TERMINATION. This Agreement may be terminated and the Merger
may be abandoned at any time prior to the Effective Time (except as provided
below, notwithstanding any approval of this Agreement by the stockholders of
Honeywell):
(a) by mutual written consent of Honeywell and Parent;
(b) by either Honeywell or Parent,
A-32
<PAGE>
(i) if the Merger has not been consummated as of June 30, 2001 (the "END
DATE"); PROVIDED, HOWEVER, that if (x) the Effective Time has not occurred
by such date by reason of nonsatisfaction of any of the conditions set forth
in Section 8.1(b), 8.1(c), 8.1(d), 8.1(e), 8.2(b) and 8.2(c) and (y) all
other conditions set forth in Article VIII have heretofore been satisfied or
waived or are then capable of being satisfied, then such date shall
automatically be extended to November 30, 2001 (which shall then be the "END
DATE"); PROVIDED, FURTHER that at the End Date the right to terminate this
Agreement under this Section 9.1(b)(i) shall not be available to any party
whose failure to fulfill in any material respect any obligation under this
Agreement has caused or resulted in the failure of the Effective Time to
occur on or before the End Date; or
(ii) if the Honeywell Stockholder Approval shall not have been obtained
by reason of the failure to obtain the required vote at a duly held meeting
of stockholders or any adjournment thereof;
(c) by either Honeywell or Parent, if there shall be any law or regulation
that materially restricts the consummation of the Merger or makes consummation
of the Merger illegal or otherwise prohibited or if any judgment, injunction,
order or decree enjoining Parent or Honeywell from consummating the Merger is
entered and such judgment, injunction, order or decree shall become final and
nonappealable; PROVIDED that the terminating party has fulfilled its obligations
under Section 7.1;
(d) by Parent, if the Board of Directors of Honeywell shall have failed to
recommend or withdrawn or modified or changed, in a manner adverse to Parent,
its approval or recommendation of this Agreement or the Merger, whether or not
permitted by the terms hereof, or shall have failed to call the Honeywell
Stockholder Meeting in accordance with Section 5.2, or shall have recommended a
Superior Proposal (or the Board of Directors of Honeywell shall resolve to do
any of the foregoing); or
(e) by either Parent or Honeywell, if there shall have been a breach by the
other of any of its representations, warranties, covenants or obligations
contained in this Agreement, which breach would result in the failure to satisfy
one or more of the conditions set forth in Section 8.2(a) (in the case of a
breach by Honeywell) or Section 8.3(a) (in the case of a breach by Parent), and
in any such case such breach shall be incapable of being cured or, if capable of
being cured, shall not have been cured within 30 days after written notice
thereof shall have been received by the party alleged to be in breach.
The party desiring to terminate this Agreement pursuant to clause (b), (c),
(d) or (e) of this Section 9.1 shall give written notice of such termination to
the other party in accordance with Section 10.1, specifying the provision hereof
pursuant to which such termination is effected.
Section 9.2 EFFECT OF TERMINATION. (a) If this Agreement is terminated
pursuant to Section 9.1, this Agreement shall become void and of no effect with
no liability on the part of any party hereto, except (i) as set forth in
Section 9.3, (ii) that the agreements contained in this Section 9.2, in
Section 10.4, and in the Confidentiality Agreement, shall survive the
termination hereof and (iii) that no such termination shall relieve any party of
any liability or damages resulting from any willful breach by that party of this
Agreement.
Section 9.3 FEE AND EXPENSES. (a) In the event that:
(i) this Agreement shall be terminated by either party pursuant to
Section 9.1(b)(ii), and, at or prior to the time of the failure of
Honeywell's Stockholders to approve this Agreement and the Merger, an
Acquisition Proposal shall have been made public and not withdrawn; or
(ii) this Agreement is terminated pursuant to Section 9.1(d);
then, in any such event, Honeywell shall pay Parent promptly (but in no event
later than two business days after the first of such events shall have occurred)
a fee of $1.35 billion (the "Fee"), which amount shall be payable in immediately
available funds; PROVIDED, that in the event of a termination by Honeywell, such
fee will be paid prior to or simultaneously with such termination.
A-33
<PAGE>
(b) Except as set forth in this Section 9.3, all costs and expenses incurred
in connection with this Agreement, the Option Agreement, the Merger and the
transactions contemplated thereby shall be paid by the party incurring such
expenses, whether or not the Merger is consummated.
(c) In the event that Honeywell shall fail to pay the Fee when due, the Fee
shall be deemed to include the costs and expenses actually incurred or accrued
by Parent (including, without limitation, fees and expenses of counsel) in
connection with the collection under and enforcement of this Section 9.3,
together with interest on such unpaid Fee, commencing on the date that the Fee
became due, at a rate equal to the rate of interest publicly announced by
Citibank, N.A., from time to time, in the City of New York, as such bank's Base
Rate plus 2.00%.
ARTICLE X
MISCELLANEOUS
Section 10.1 NOTICES. All notices, requests and other communications to
any party hereunder shall be in writing (including facsimile or similar writing)
and shall be given,
<TABLE>
<S> <C>
(a) if to Parent or Merger Subsidiary, to:
General Electric Company
3135 Easton Turnpike, W3
Fairfield, Connecticut 06431
Attention: Senior Counsel--Transactions
Facsimile No.: (203) 373-3008
with a copy to:
Shearman & Sterling
599 Lexington Avenue
New York, New York 10022
Attention: John A. Marzulli Jr., Esq.
Facsimile No.: (212) 848-7179
</TABLE>
<TABLE>
<S> <C>
(b) if to Honeywell, to:
Honeywell International Inc.
101 Columbia Road
P.O. Box 4000
Morristown, New Jersey 07962-2497
Attention: Peter M. Kreindler, Esq.,
Senior Vice President and General Counsel
Facsimile No.: (973) 455-4217
with a copy to:
Skadden, Arps, Slate, Meagher & Flom LLP
Four Times Square
New York, New York 10036-6522
Attention: Peter Allan Atkins, Esq.
David J. Friedman, Esq.
Facsimile No.: (212) 735-2000
</TABLE>
A-34
<PAGE>
or such other address or facsimile number as such party may hereafter specify
for the purpose by notice to the other parties. Each such notice, request or
other communication shall be effective (a) if given by facsimile, when such
facsimile is transmitted to the facsimile number specified in this Section and
the appropriate facsimile confirmation is received or (b) if given by any other
means, when delivered at the address specified in this Section.
Section 10.2 NON-SURVIVAL OF REPRESENTATIONS AND WARRANTIES. The
representations and warranties contained herein and in any certificate or other
writing delivered pursuant hereto shall not survive the Effective Time.
Section 10.3 AMENDMENTS; NO WAIVERS. (a) Any provision of this Agreement
(including the Exhibit and Schedules hereto) may be amended or waived prior to
the Effective Time at any time prior to or after the receipt of the Honeywell
Stockholder Approval, if, and only if, such amendment or waiver is in writing
and signed, in the case of an amendment, by Honeywell, Parent and Merger
Subsidiary, or in the case of a waiver, by the party against whom the waiver is
to be effective; PROVIDED that after the receipt of any such approval, if any
such amendment or waiver shall by law or in accordance with the rules and
regulations of any relevant securities exchange requires further approval of
stockholders, the effectiveness of such amendment or waiver shall be subject to
the necessary stockholder approval.
(b) No failure or delay by any party in exercising any right, power or
privilege hereunder shall operate as a waiver thereof nor shall any single or
partial exercise thereof preclude any other or further exercise thereof or the
exercise of any other right, power or privilege. The rights and remedies herein
provided shall be cumulative and not exclusive of any rights or remedies
provided by law.
Section 10.4 EXPENSES. Except as otherwise agreed to in writing by the
parties, all costs and expenses incurred in connection with this Agreement and
the transactions contemplated by this Agreement shall be paid by the party
incurring such cost or expense, except that (a) the filing fees in respect to
filings made pursuant to the HSR Act, the EC Merger Regulation and all similar
filings in other jurisdictions, (b) filing fees in connection with the filing
with the SEC of the Form S-4 and the Proxy Statement/Prospectus, (c) all
printing, mailing and related expenses incurred in connection with printing and
mailing of the Form S-4 and the Proxy Statement/Prospectus and (d) all other
expenses not directly attributable to any one of the parties, shall be shared
equally by Parent and Honeywell.
Section 10.5 SUCCESSORS AND ASSIGNS. The provisions of this Agreement
shall be binding upon and inure to the benefit of the parties hereto and their
respective successors and assigns; PROVIDED that no party may assign, delegate
or otherwise transfer any of its rights or obligations under this Agreement
without the consent of the other parties hereto except that Merger Subsidiary
may transfer or assign, in whole or from time to time in part, to one or more of
its affiliates, its rights under this Agreement, but any such transfer or
assignment will not relieve Merger Subsidiary of its obligations hereunder.
Section 10.6 GOVERNING LAW. This Agreement shall be construed in
accordance with and governed by the law of the State of Delaware, without regard
to principles of conflicts of law.
Section 10.7 JURISDICTION. Any suit, action or proceeding seeking to
enforce any provision of, or based on any matter arising out of or in connection
with, this Agreement or the transactions contemplated hereby or thereby may be
brought in any federal or state court located in the State of Delaware, and each
of the parties hereby consents to the jurisdiction of such courts (and of the
appropriate appellate courts therefrom) in any such suit, action or proceeding
and irrevocably waives, to the fullest extent permitted by law, any objection
which it may now or hereafter have to the laying of the venue of any such suit,
action or proceeding in any such court or that any such suit, action or
proceeding which is brought in any such court has been brought in an
inconvenient forum. Process in any such suit, action or proceeding may be served
on any party anywhere in the world, whether within or without the jurisdiction
of any such court. Without limiting the foregoing, each party agrees that
A-35
<PAGE>
service of process on such party as provided in Section 10.1 shall be deemed
effective service of process on such party.
Section 10.8 WAIVER OF JURY TRIAL. EACH OF THE PARTIES HERETO HEREBY
IRREVOCABLY WAIVES ANY AND ALL RIGHT TO TRIAL BY JURY IN ANY LEGAL PROCEEDING
ARISING OUT OF OR RELATED TO THIS AGREEMENT OR THE TRANSACTIONS CONTEMPLATED
HEREBY.
Section 10.9 COUNTERPARTS; EFFECTIVENESS. This Agreement may be signed in
any number of counterparts, each of which shall be an original, with the same
effect as if the signatures thereto and hereto were upon the same instrument.
This Agreement shall become effective when each party hereto shall have received
counterparts hereof signed by all of the other parties hereto.
Section 10.10 ENTIRE AGREEMENT; NO THIRD PARTY BENEFICIARIES. This
Agreement (including the Exhibit and Schedules), the Option Agreement and the
Confidentiality Agreement constitute the entire agreement between the parties
with respect to the subject matter of this Agreement and supersede all prior
agreements and understandings, both oral and written, between the parties with
respect to the subject matter hereof and thereof. Except as provided in
Section 6.2(d), no provision of this Agreement or any other agreement
contemplated hereby is intended to confer on any Person other than the parties
hereto any rights or remedies.
Section 10.11 CAPTIONS. The captions herein are included for convenience
of reference only and shall be ignored in the construction or interpretation
hereof.
Section 10.12 SEVERABILITY. If any term, provision, covenant or
restriction of this Agreement is held by a court of competent jurisdiction or
other authority to be invalid, void or unenforceable, the remainder of the
terms, provisions, covenants and restrictions of this Agreement shall remain in
full force and effect and shall in no way be affected, impaired or invalidated
so long as the economic or legal substance of the transactions contemplated
hereby is not affected in any manner materially adverse to any party. Upon such
a determination, the parties shall negotiate in good faith to modify this
Agreement so as to effect the original intent of the parties as closely as
possible in an acceptable manner in order that the transactions contemplated
hereby be consummated as originally contemplated to the fullest extent possible.
A-36
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be duly
executed by their respective authorized officers as of the day and year first
above written.
<TABLE>
<S> <C> <C>
GENERAL ELECTRIC COMPANY
By: /s/ JOHN F. WELCH, JR.
-----------------------------------------
Name: John F. Welch, Jr.
Title: Chairman and CEO
HONEYWELL INTERNATIONAL INC.
By: /s/ MICHAEL R. BONSIGNORE
-----------------------------------------
Name: Michael R. Bonsignore
Title: Chairman and CEO
</TABLE>
A-37
<PAGE>
IN WITNESS WHEREOF, the undersigned has caused this Agreement to be duly
executed by its president on this 9th day of November, 2000.
<TABLE>
<S> <C> <C>
GENERAL ELECTRIC 2000 MERGER SUB, INC.
By: /s/ PAMELA DALEY
-----------------------------------------
Name: Pamela Daley
Title: President
</TABLE>
A-38
<PAGE>
EXHIBIT A
HONEYWELL INTERNATIONAL INC.
AFFILIATE LETTER
General Electric Company
3135 Easton Turnpike, W3
Fairfield, Connecticut 06431
Ladies and Gentlemen:
I have been advised that as of the date of this letter I may be deemed to be
an "affiliate" of Honeywell International Inc., a Delaware corporation
("HONEYWELL"), as the term "affiliate" is (i) defined for purposes of paragraphs
(c) and (d) of Rule 145 of the rules and regulations (the "RULES AND
REGULATIONS") of the Securities and Exchange Commission (the "COMMISSION") under
the Securities Act of 1933, as amended (the "SECURITIES ACT"), and/or (ii) used
in and for purposes of Accounting Series, Releases 130 and 135, as amended, of
the Commission. Pursuant to the terms of the Agreement and Plan of Merger, dated
as of October 22, 2000 (the "MERGER AGREEMENT"), between Honeywell and General
Electric Company, a New York corporation ("PARENT"), a newly formed Delaware
corporation and a wholly owned subsidiary of Parent ("MERGER SUBSIDIARY"),
Merger Subsidiary will be merged with and into Honeywell (the "MERGER").
As a result of the Merger, I may receive shares of common stock, par value
$0.06 per share, of Parent (the "PARENT COMMON STOCK") in exchange for shares
owned by me of common stock, par value $1.00 per share, of Honeywell (or upon
the exercise of options for such shares of Honeywell).
I hereby represent and warrant to, and covenant with, Parent that in the
event I receive any Parent Common Stock as a result of the Merger:
1. I shall not make any sale, transfer or other disposition of the
Parent Common Stock in violation of the Securities Act or the Rules and
Regulations.
2. I have carefully read this letter and the Merger Agreement and
discussed the requirements of such documents and other applicable
limitations upon my ability to sell, transfer or otherwise dispose of the
Parent Common Stock, to the extent I felt necessary, with my counsel or
counsel for Honeywell.
3. I have been advised that the issuance of Parent Common Stock to me
pursuant to the Merger has been, or will be, registered with the Commission
under the Securities Act on a Registration Statement on Form S-4. However, I
have also been advised that, since at the time the Merger was submitted for
a vote of the stockholders of Honeywell, (i) I may be deemed to have been an
affiliate of Honeywell and (ii) the distribution by me of the Parent Common
Stock has not been registered under the Securities Act, I may not sell,
transfer or otherwise dispose of the Parent Common Stock issued to me in the
Merger unless (x) such sale, transfer or other disposition has been
registered under the Securities Act, (y) such sale, transfer or other
disposition is made in conformity with Rule 145 (as such rule may be
hereafter amended) promulgated by the Commission under the Securities Act,
or (z) Parent shall have received either opinion of counsel, which opinion
and counsel shall be reasonably acceptable to Parent, or a "no action"
letter
A-1-1
<PAGE>
obtained by me from the staff of the Commission, to the effect that such
sale, transfer or other disposition is otherwise exempt from registration
under the Securities Act.
4. I understand that Parent is under no obligation to register the sale,
transfer or other disposition of the Parent Common Stock by me or on my
behalf under the Securities Act or to take any other action necessary in
order to make compliance with an exemption from such registration available.
5. I also understand that stop transfer instructions will be given to
Parent's transfer agents with respect to the Parent Common Stock and that
there will be placed on the certificates for the Parent Common Stock issued
to me, or any substitutions therefor, a legend stating in substance:
"THE SHARES REPRESENTED BY THIS CERTIFICATE WERE ISSUED IN A TRANSACTION
TO WHICH RULE 145 PROMULGATED UNDER THE SECURITIES ACT OF 1933 APPLIES,
AND MAY ONLY BE SOLD OR OTHERWISE TRANSFERRED (I) IN COMPLIANCE WITH THE
REQUIREMENTS OF RULE 145 OR PURSUANT TO A REGISTRATION STATEMENT UNDER
THAT ACT OR AN EXEMPTION FROM SUCH REGISTRATION AND (II) AFTER GENERAL
ELECTRIC COMPANY ("GE") SHALL HAVE PUBLISHED FINANCIAL RESULTS COVERING
AT LEAST 30 DAYS OF COMBINED OPERATIONS OF GE AND HONEYWELL
INTERNATIONAL INC."
6. I also understand that unless the transfer by me of my Parent Common
Stock has been registered under the Securities Act or is a sale made in
conformity with the provisions of Rule 145, Parent reserves the right to
place the following legend on the certificates issued to my transferee:
"THE SHARES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED
UNDER THE SECURITIES ACT OF 1933 AND WERE ACQUIRED FROM A PERSON WHO
RECEIVED SUCH SHARES IN A TRANSACTION TO WHICH RULE 145 PROMULGATED UNDER
THE SECURITIES ACT OF 1933 APPLIES. THE SHARES HAVE BEEN ACQUIRED BY THE
HOLDER NOT WITH A VIEW TO, OR FOR RESALE IN CONNECTION WITH, ANY
DISTRIBUTION THEREOF WITHIN THE MEANING OF THE SECURITIES ACT OF 1933 AND
MAY NOT BE SOLD, PLEDGED OR OTHERWISE TRANSFERRED EXCEPT IN ACCORDANCE
WITH AN EXEMPTION FROM THE REGISTRATION REQUIREMENTS OF THE SECURITIES
ACT OF 1933."
It is understood and agreed that the legends set forth in paragraphs 4 and 5
above shall be removed by delivery of substitute certificates without such
legend if such legend is not required for purposes of the Securities Act or this
Agreement. It is understood and agreed that such legends and the stop orders
referred to above will be removed if (i) evidence or representations
satisfactory to Parent that the Parent Common Stock represented by such
certificates are being or have been sold in a transaction made in conformity
with the provisions of Rule 145(d) (as such rule may be hereafter amended) or
(ii) Parent has received either an opinion of counsel, which opinion and counsel
shall be reasonably satisfactory to Parent, or a "no action" letter obtained by
me from the staff of the Commission, to the effect that the restrictions imposed
by Rule 145 under the Securities Act no longer apply to me.
I further represent and warrant to, and covenant with, Parent that I will
not sell, transfer or otherwise dispose of or reduce my risk (as contemplated by
the Commission Accounting Series Release No. 135) with respect to shares of the
capital stock of Honeywell and/or Parent, including, without limitation, Parent
Common Stock received by me in the Merger, that I may hold during the 30 day
period prior to the Effective Time (as defined in the Merger Agreement) and
after the Effective Time until after such time as combined financial results
(including combined sales and net income figures) covering at least 30 days of
combined operations of Honeywell and Parent have been published by
A-1-2
<PAGE>
Parent, in the form of a quarterly earnings report, an effective registration
statement filed with the Commission, a report to the Commission on Form 10-K,
10-Q or 8-K, or any other public filing or announcement which includes such
combined results of operations.
This letter agreement shall be governed by and construed in accordance with
the laws of the State of Delaware. This letter agreement shall terminate if and
when the Merger Agreement is terminated according to its terms.
Execution of this letter should not be considered an admissions on my part
that I am an "affiliate" of Honeywell as described in the first paragraph of
this letter, or as a waiver of any rights I may have to object to any claim that
I am such an affiliate on or after the date of this letter.
Very truly yours,
Name:
Accepted this day of
, 2000 by
<TABLE>
<S> <C> <C>
GENERAL ELECTRIC COMPANY
-----------------------------------------
Name:
Title:
By:
</TABLE>
A-1-3
<PAGE>
ANNEX B
STOCK OPTION AGREEMENT
THIS STOCK OPTION AGREEMENT (this "AGREEMENT"), dated as of October 22,
2000, between GENERAL ELECTRIC COMPANY, a New York corporation ("GRANTEE"), and
HONEYWELL INTERNATIONAL INC., a Delaware corporation ("ISSUER").
W I T N E S S E T H:
WHEREAS, Grantee and Issuer are concurrently with the execution and delivery
of this Agreement entering into an Agreement and Plan of Merger (the "MERGER
AGREEMENT") pursuant to which, among other things, a wholly owned subsidiary of
Grantee will merge with and into Issuer on the terms and subject to the
conditions stated therein; and
WHEREAS, in order to induce Grantee to enter into the Merger Agreement and
as a condition for Grantee's agreeing so to do, Issuer has granted to Grantee
the Stock Option (as hereinafter defined), on the terms and conditions set forth
herein;
NOW, THEREFORE, in consideration of the mutual covenants and agreements set
forth herein and in the Merger Agreement, and for other good and valuable
consideration, the adequacy of which is hereby acknowledged, the parties hereto
agree as follows:
Section 1. DEFINITIONS. Capitalized terms used and not defined herein have
the respective meanings assigned to them in the Merger Agreement.
Section 1. GRANT OF STOCK OPTION. Issuer hereby grants to Grantee an
irrevocable option (the "STOCK OPTION") to purchase, on the terms and subject to
the conditions hereof, for $55.12375 per share (the "EXERCISE PRICE") in cash,
up to 158,746,379 fully paid and non-assessable shares of Issuer's common stock,
par value $1.00 per share (the "COMMON STOCK"), representing approximately 19.9%
of Issuer's issued and outstanding Common Stock or such greater number of shares
as represent 19.9% of the number of shares of Common Stock issued and
outstanding at the time of first exercise (without giving effect to any shares
subject to the Stock Option) (the "OPTION SHARES"). The Exercise Price and
number of Option Shares shall be subject to adjustment as provided in Section 5
below.
Section 3. EXERCISE OF STOCK OPTION.
(a) Grantee may, subject to the provisions of this Section 3, exercise the
Stock Option, in whole or in part, at any time or from time to time, after the
occurrence of a Company Trigger Event (defined below) and prior to the
Termination Date. "TERMINATION DATE" shall mean, subject to Section 1.2
Section 10(a), the earliest of (i) the Effective Time of the Merger,
(ii) 120 days after the date full payment contemplated by Section 9.3(a) of the
Merger Agreement is made by Issuer to Grantee thereunder (or if, at the
expiration of such period, the Stock Option cannot be exercised by reason of any
applicable judgment, decree, order, law or regulation, 10 business days after
such impediment to exercise shall have been removed), (iii) the date of the
termination of the Merger Agreement in circumstances which do not constitute a
Company Trigger Event or (iv) the first anniversary of the date of termination
of the Merger Agreement. Notwithstanding the occurrence of the Termination Date,
Grantee shall be entitled to purchase Option Shares pursuant to any exercise of
the Stock Option, on the terms and subject to the conditions hereof, to the
extent Grantee exercised the Stock Option prior to the occurrence of the
Termination Date. A "COMPANY TRIGGER EVENT" shall mean an event the result of
which is that the Fee required to be paid by Issuer to Grantee pursuant to
Section 9.3(a) of the Merger Agreement is payable.
(b) Grantee may purchase Option Shares pursuant to the Stock Option only if
all of the following conditions are satisfied: (i) no preliminary or permanent
injunction or other order issued by any federal
B-1
<PAGE>
or state court of competent jurisdiction in the United States shall be in effect
prohibiting delivery of the Option Shares, (ii) any waiting period applicable to
the purchase of the Option Shares under the HSR Act shall have expired or been
terminated, and (iii) any prior notification to or approval of any other
regulatory authority in the United States or elsewhere required in connection
with such purchase shall have been made or obtained, other than those which if
not made or obtained would not reasonably be expected to result in a significant
detriment to Issuer and its Subsidiaries, taken as a whole.
(c) If Grantee shall be entitled to and wishes to exercise the Stock Option,
it shall do so by giving Issuer written notice (the "STOCK EXERCISE NOTICE") to
such effect, specifying the number of Option Shares to be purchased and a place
and closing date not earlier than three business days nor later than 10 business
days from the date of such Stock Exercise Notice. If the closing cannot be
consummated on such date because any condition to the purchase of Option Shares
set forth in Section 3(b) has not been satisfied or as a result of any
restriction arising under any applicable law or regulation, the closing shall
occur five days (or such earlier time as Grantee may specify) after satisfaction
of all such conditions and the cessation of all such restrictions.
(d) So long as the Stock Option is exercisable pursuant to the terms of
Section 3(a), Grantee may elect to send a written notice to Issuer (the "CASH
EXERCISE NOTICE") specifying a date not later than 20 business days and not
earlier than 5 business days following the date such notice is given on which
date Issuer shall pay to Grantee in exchange for the cancellation of the
relevant portion of the Stock Option an amount in cash equal to the Spread (as
hereinafter defined) multiplied by all or such relevant portion of the Option
Shares subject to the Stock Option as Grantee shall specify. As used herein,
"SPREAD" shall mean the excess, if any, over the Exercise Price of the higher of
(x) if applicable, the highest price per share of Common Stock paid or proposed
to be paid by any Person pursuant to any Acquisition Proposal relating to Issuer
(the "PROPOSED ALTERNATIVE TRANSACTION PRICE") or (y) the average of the closing
prices of the shares of Common Stock on the principal securities exchange or
quotation system on which the Common Stock is then listed or traded as reported
in The Wall Street Journal (but subject to correction for typographical or other
manifest errors in such reporting) for the five consecutive trading days
immediately preceding the date on which the Cash Exercise Notice is given (the
"AVERAGE MARKET PRICE"). If the Proposed Alternative Transaction Price includes
any property other than cash, the Proposed Alternative Transaction Price shall
be the sum of (i) the fixed cash amount, if any, included in the Proposed
Alternative Transaction Price plus (ii) the fair market value of such other
property. If such other property consists of securities with an existing public
trading market, the average of the closing prices (or the average of the closing
bid and asked prices if closing prices are unavailable) for such securities in
their principal public trading market on the five trading days ending five days
prior to the date on which the Cash Exercise Notice is given shall be deemed to
equal the fair market value of such property. If such other property includes
anything other than cash or securities with an existing public trading market,
the Proposed Alternative Transaction Price shall be deemed to equal the Average
Market Price. Upon exercise of its right pursuant to this Section 3(d) and the
receipt by Grantee of the applicable cash amount with respect to the Option
Shares or the applicable portion thereof, the obligations of Issuer to deliver
Option Shares pursuant to Section 3(e) shall be terminated with respect to the
number of Option Shares specified in the Cash Exercise Notice. The Spread shall
be appropriately adjusted, if applicable, to give effect to Section 5.
(e) (i) At any closing pursuant to Section 3(c) hereof, Grantee shall make
payment to Issuer of the aggregate purchase price for the Option Shares to be
purchased and Issuer shall deliver to Grantee a certificate representing the
purchased Option Shares, registered in the name of Grantee or its designee and
(ii) at any closing pursuant to Section 3(d) hereof, Issuer will deliver to
Grantee cash in an amount determined pursuant to Section 3(d) hereof. Any
payment made by Grantee to Issuer, or by Issuer to Grantee, pursuant to this
Agreement shall be made by wire transfer of immediately available funds to a
bank designated by the party receiving such funds, provided that the failure or
refusal by Issuer to
B-2
<PAGE>
designate such a bank account shall not preclude Grantee from exercising the
Stock Option. If at the time of the issuance of Option Shares pursuant to the
exercise of the Stock Option, rights pursuant to any shareholder rights plan are
outstanding, then the Option Shares issued pursuant to such exercise shall be
accompanied by corresponding shareholder rights.
(f) Certificates for Common Stock delivered at the closing described in
Section 3(c) hereof shall be endorsed with a restrictive legend which shall read
substantially as follows:
"The transfer of the shares represented by this certificate is subject
to resale restrictions arising under the Securities Act of 1933, as
amended."
It is understood and agreed that the above legend shall be removed by
delivery of substitute certificate(s) without this reference (i) if Grantee
shall have delivered to Issuer a copy of a no-action letter from the staff of
the Securities and Exchange Commission, or a written opinion of counsel, in form
and substance reasonably satisfactory to Issuer, to the effect that such legend
is not required for purposes of, or resale may be effected pursuant to an
exemption from registration under, the Securities Act or (ii) in connection with
any sale registered under the Securities Act. In addition, these certificates
shall bear any other legend as may be required by applicable law.
Section 4. REPRESENTATIONS OF GRANTEE. Grantee hereby represents and
warrants to Issuer that any Option Shares acquired by Grantee upon the exercise
of the Stock Option will not be, and the Stock Option is not being, acquired by
Grantee with the intention of making a public distribution thereof, other than
pursuant to an effective registration statement under the Securities Act or
otherwise in compliance with the Securities Act.
Section 5. ADJUSTMENT UPON CHANGES IN CAPITALIZATION OR MERGER.
(a) In the event of any change in the outstanding shares of Common Stock by
reason of a stock dividend, stock split, reverse stock split, split-up, merger,
consolidation, recapitalization, combination, conversion, exchange of shares,
extraordinary or liquidating dividend or similar transaction which would affect
Grantee's rights hereunder, the type and number of shares or securities
purchasable upon the exercise of the Stock Option and the Exercise Price shall
be adjusted appropriately, and proper provision will be made in the agreements
governing such transaction, so that Grantee will receive upon exercise of the
Stock Option a number and class of shares or amount of other securities or
property that Grantee would have received in respect of the Option Shares had
the Stock Option been exercised immediately prior to such event or the record
date therefor, as applicable. In no event shall the number of shares of Common
Stock subject to the Stock Option exceed 19.9% of the number of shares of Common
Stock issued and outstanding at the time of first exercise (without giving
effect to any shares subject or issued pursuant to the Stock Option).
(b) Without limiting the foregoing, whenever the number of Option Shares
purchasable upon exercise of the Stock Option is adjusted as provided in this
Section 5, the Exercise Price shall be adjusted by multiplying the Exercise
Price by a fraction, the numerator of which is equal to the number of Option
Shares purchasable prior to the adjustment and the denominator of which is equal
to the number of Option Shares purchasable after the adjustment.
(c) Without limiting or altering the parties' rights and obligations under
the Merger Agreement, in the event that Issuer enters into an agreement (i) to
consolidate with or merge into any Person, other than Grantee or one of its
Subsidiaries, and Issuer will not be the continuing or surviving corporation in
such consolidation or merger, (ii) to permit any Person, other than Grantee or
one of its Subsidiaries, to merge into Issuer and Issuer will be the continuing
or surviving corporation, but in connection with this merger, the shares of
Common Stock outstanding immediately prior to the consummation of this merger
will be changed into or exchanged for stock or other securities of Issuer or any
other Person or cash or any other property, or the shares of Common Stock
outstanding immediately prior to the consummation of such merger will, after
such merger, represent less than 50%
B-3
<PAGE>
of the outstanding voting securities of the merged company, or (iii) to sell or
otherwise transfer all or substantially all of its assets to any Person, other
than Grantee or one of its Subsidiaries, then, and in each such case, the
agreement governing this transaction shall make proper provision so that the
Stock Option will, upon the consummation of any such transaction and upon the
terms and conditions set forth herein, be converted into, or exchanged for, an
option with identical terms appropriately adjusted to acquire the number and
class of shares or other securities or property that Grantee would have received
in respect of Option Shares had the Stock Option been exercised immediately
prior to such consolidation, merger, sale or transfer or the record date
therefor, as applicable, and will make any other necessary adjustments. Issuer
shall take such steps in connection with such consolidation, merger, liquidation
or other transaction as may be reasonably necessary to assure that the
provisions hereof shall thereafter apply as nearly as possible to any securities
or property thereafter deliverable upon exercise of the Stock Option.
Section 6. FURTHER ASSURANCES; REMEDIES.
(a) Issuer agrees to maintain, free from preemptive rights, sufficient
authorized but unissued or treasury shares of Common Stock so that the Stock
Option may be fully exercised without additional authorization of Common Stock
after giving effect to all other options, warrants, convertible securities and
other rights of third parties to purchase shares of Common Stock from Issuer,
and to issue the appropriate number of shares of Common Stock pursuant to the
terms of this Agreement. All of the Option Shares to be issued pursuant to the
Stock Option, upon issuance and delivery thereof pursuant to this Agreement,
will be duly authorized, validly issued, fully paid and nonassessable, and will
be delivered free and clear of all claims, liens, charges, encumbrances and
security interests (other than those created by this Agreement).
(b) Issuer agrees not to avoid or seek to avoid (whether by charter
amendment or through reorganization, consolidation, merger, issuance of rights,
dissolution or sale of assets, or by any other voluntary act) the observance or
performance of any of the covenants, agreements or conditions to be observed or
performed hereunder by Issuer.
(c) Issuer agrees that promptly after the occurrence of a Company Trigger
Event it shall take all actions as may from time to time be required (including
(i) complying with all applicable premerger notification, reporting and waiting
period requirements under the HSR Act and (ii) in the event that prior
notification to or approval of any other regulatory authority in the United
States or elsewhere is necessary before the Stock Option may be exercised,
complying with its obligations thereunder and cooperating with Grantee in
Grantee's preparing and processing the required notices or applications) in
order to permit Grantee to exercise the Stock Option and purchase Option Shares
pursuant to such exercise.
(d) The parties agree that Grantee would be irreparably damaged if for any
reason Issuer failed, in breach of its obligations hereunder, to issue any of
the Option Shares (or other securities or property deliverable pursuant to
Section 5 hereof) upon exercise of the Stock Option or to perform any of its
other obligations under this Agreement, and that Grantee would not have an
adequate remedy at law for money damages in such event. Accordingly, Grantee
shall be entitled to specific performance and injunctive and other equitable
relief to enforce the performance of this Agreement by Issuer. Accordingly, if
Grantee should institute an action or proceeding seeking specific enforcement of
the provisions hereof, Issuer hereby waives the claim or defense that Grantee
has an adequate remedy at law and hereby agrees not to assert in any such action
or proceeding the claim or defense that such a remedy at law exists. Issuer
further agrees to waive any requirements for the securing or posting of any bond
in connection with obtaining any such equitable relief. This provision is
without prejudice to any other rights that Grantee may have against Issuer for
any failure to perform its obligations under this Agreement.
B-4
<PAGE>
Section 7. LISTING OF OPTION SHARES. Promptly after the occurrence of a
Company Trigger Event and from time to time thereafter if necessary, Issuer will
apply to list all of the Option Shares subject to the Stock Option on the NYSE
and will use its reasonable best efforts to obtain approval of such listing as
soon as practicable.
Section 8. REGISTRATION OF THE OPTION SHARES.
(a) If, within two years of the exercise of the Stock Option, Grantee
requests Issuer in writing to register under the Securities Act any of the
Option Shares received by Grantee hereunder, Issuer will use its reasonable best
efforts to cause the Option Shares so specified in such request to be registered
as soon as practicable so as to permit the sale or other distribution by Grantee
of the Option Shares specified in its request (and to keep such registration in
effect for a period of at least 90 days), and in connection therewith Issuer
shall prepare and file as promptly as reasonably possible (but in no event later
than 60 days from receipt of Grantee's request) a registration statement under
the Securities Act (which complies with the requirements of applicable federal
and state securities laws) to effect such registration on an appropriate form,
which would permit the sale of the Option Shares by Grantee in accordance with
the plan of disposition specified by Grantee in its request. Issuer shall not be
obligated to make effective more than two registration statements pursuant to
the foregoing sentence; PROVIDED, HOWEVER, that Issuer may postpone the filing
of a registration statement relating to a registration request by Grantee under
this Section 8 for a period of time (not in excess of 90 days) if in Issuer's
reasonable, good faith judgment such filing would require the disclosure of
material information that Issuer has a bona fide business purpose for preserving
as confidential (but in no event shall Issuer exercise such postponement right
more than once in any twelve month period).
(b) Issuer shall notify Grantee in writing not less than 10 days prior to
filing a registration statement under the Securities Act (other than a filing on
Form S-4 or S-8 or any successor form) with respect to any shares of Common
Stock. If Grantee wishes to have any portion of its Option Shares included in
such registration statement, it shall advise Issuer in writing to that effect
within two business days following receipt of such notice, and Issuer will
thereupon include the number of Option Shares indicated by Grantee under such
Registration Statement; provided that if the managing underwriter(s) of the
offering pursuant to such registration statement advise Issuer that in their
opinion the number of shares of Common Stock requested to be included in such
registration exceeds the number which can be sold in such offering on a
commercially reasonable basis, priority shall be given to securities intended to
be registered by Issuer for its own account and, thereafter, Issuer shall
include in such registration Option Shares requested by Grantee to be included
therein pro rata with the shares of Common Stock intended to be included therein
by other stockholders of Issuer.
(c) All expenses relating to or in connection with any registration
contemplated under this Section 8 and the transactions contemplated thereby
(including all filing, printing, reasonable professional, roadshow and other
fees and expenses relating thereto) will be at Issuer's expense except for
underwriting discounts or commissions and brokers' fees. Issuer and Grantee
agree to enter into a customary underwriting agreement with underwriters upon
such terms and conditions as are customarily contained in underwriting
agreements with respect to secondary distributions. Issuer shall indemnify and
hold harmless Grantee, its officers, directors, agents, other controlling
persons and any underwriters retained by Grantee in connection with such sale of
such Option Shares in the customary way, and shall agree to customary
contribution provisions with such persons, with respect to claims, damages,
losses and liabilities (and any expenses relating thereto) arising (or to which
Grantee, its officers, directors, agents, other controlling persons or
underwriters may be subject) in connection with any such offer or sale under the
federal securities laws or otherwise, except for information furnished in
writing by Grantee or its underwriters to Issuer. Grantee and its underwriters,
respectively, shall indemnify and hold harmless Issuer to the same extent with
respect to information furnished in writing to Issuer by Grantee and such
underwriters, respectively.
B-5
<PAGE>
Section 9. REPURCHASE ELECTION.
(a) Grantee shall have the option, at any time and from time to time
commencing upon the first occurrence of a Company Trigger Event in which the
consideration to be received by Issuer or its stockholders, as the case may be,
upon consummation of an Acquisition Proposal consists in whole or in part of
shares of capital stock of a third party and ending on the tenth business day
after the first mailing to Issuer's stockholders of a proxy statement, tender
offer statement or other disclosure or offering document relating to such
Acquisition Proposal, to send a written notice to Issuer (a "REPURCHASE NOTICE")
that it will require Issuer (or any successor entity thereof) to pay to Grantee
the Repurchase Fee (as defined below) as provided in Section 9(b) below, upon
delivery by Grantee of the shares of Common Stock acquired hereunder with
respect to which Grantee then has beneficial ownership. The date on which
Grantee delivers the Repurchase Notice under this Section 9 is referred to as
the "REPURCHASE REQUEST DATE". The "REPURCHASE FEE" shall be equal to the sum of
the following:
(i) the aggregate Exercise Price paid by Grantee for any shares of
Common Stock acquired pursuant to the Stock Option with respect to which
Grantee then has beneficial ownership; and
(ii) subject to the maximum amounts specified in Section 11, the Spread,
multiplied by the number of shares of Common Stock with respect to which the
Stock Option has been exercised and with respect to which Grantee then has
beneficial ownership.
(b) If Grantee exercises its rights under this Section 9, within five
business days after the Repurchase Request Date, (i) Issuer shall pay by wire
transfer to Grantee the Repurchase Fee in immediately available funds to an
account designated in writing by Grantee to Issuer, and (ii) Grantee shall
surrender to Issuer certificates evidencing the shares of Common Stock acquired
hereunder with respect to which Grantee then has beneficial ownership, and
Grantee shall warrant that it has sole record and beneficial ownership of such
shares and that the same are then free and clear of all liens, claims, charges
and encumbrances of any kind whatsoever.
(c) Issuer shall use its reasonable best efforts to ensure that it can fully
perform all of its obligations under this Section 9 under applicable law.
Section 10. MISCELLANEOUS.
(a) EXTENSION OF EXERCISE PERIODS. The periods during which Grantee may
exercise its rights under Sections 2 and 3 hereof shall be extended in each such
case at the request of Grantee to the extent necessary to avoid liability by
Grantee under Section 16(b) of the Exchange Act by reason of such exercise and
to the extent necessary to obtain all regulatory approvals required for the
exercise of such rights.
(b) AMENDMENTS; ENTIRE AGREEMENT. This Agreement may not be modified,
amended, altered or supplemented, except upon the execution and delivery of a
written agreement executed by the parties hereto. This Agreement, together with
the Merger Agreement (including any exhibits and schedules thereto), contains
the entire agreement between the parties hereto with respect to the subject
matter hereof and supersedes all prior and contemporaneous agreements and
understandings, oral or written, with respect to such transactions.
(c) NOTICES. All notices, requests and other communications to either
party hereunder shall be in writing (including facsimile or similar writing) and
shall be given,if to Grantee, to:
General Electric Company
3135 Easton Turnpike, W3
Fairfield, Connecticut 06431
Attention: Senior Counsel--Transactions
Facsimile No.: (203) 373-3008
B-6
<PAGE>
with a copy to:
Shearman & Sterling
599 Lexington Avenue
New York, New York 10022-6069
Attention: John A. Marzulli Jr., Esq.
Facsimile No.: (212) 848-7179
if to Issuer, to:
Honeywell International Inc.
101 Columbia Road
P.O. Box 4000
Morristown, New Jersey
Attention: Peter M. Kreindler, Esq.,
Senior Vice President and General Counsel
Facsimile No.: (973) 455-4217
with a copy to:
Skadden, Arps, Slate, Meagher & Flom LLP
Four Times Square
New York, New York 10036-6522
Attention: Peter Allan Atkins, Esq.
David J. Friedman, Esq.
Facsimile No.: (212) 735-2000
or to such other address or facsimile number as either party may hereafter
specify for the purpose by notice to the other party hereto. Each such notice,
request or other communication shall be effective (i) if given by facsimile,
when such facsimile is transmitted to the facsimile number specified in this
Section 10 and the appropriate facsimile confirmation is received or (ii) if
given by any other means, when delivered at the address specified in this
Section 10.
(d) EXPENSES. Each party hereto shall pay its own expenses incurred in
connection with this Agreement, except as otherwise specifically provided herein
and without limiting anything contained in the Merger Agreement.
(e) SEVERABILITY. If any term, provision, covenant or restriction of this
Agreement is held to be invalid, void or unenforceable, the remainder of the
terms, provisions, covenants and restrictions of this Agreement shall remain in
full force and effect and shall in no way be affected, impaired or invalidated.
(f) GOVERNING LAW. This Agreement shall be governed by and construed in
accordance with the laws of the State of Delaware without regard to principles
of conflicts of law.
(g) JURISDICTION. Any suit, action or proceeding seeking to enforce any
provision of, or based on any matter arising out of or in connection with, this
Agreement or the transactions contemplated hereby or thereby may be brought in
any federal or state court located in the State of Delaware, and each of the
parties hereby consents to the jurisdiction of such courts (and of the
appropriate appellate courts therefrom) in any such suit, action or proceeding
and irrevocably waives, to the fullest extent permitted by law, any objection
which it may now or hereafter have to the laying of the venue of any such suit,
action or proceeding in any such court or that any such suit, action or
proceeding which is brought in any such court has been brought in an
inconvenient forum. Process in any such suit, action or proceeding may be served
on any party anywhere in the world, whether within or without the jurisdiction
of any such court. Without limiting the foregoing, each party agrees that
service of process on such party as provided in Section 10(c) shall be deemed
effective service of process on such party.
B-7
<PAGE>
(h) COUNTERPARTS. This Agreement may be executed in two or more
counterparts, each of which shall be an original, but all of which together
shall constitute one and the same Agreement.
(i) HEADINGS. The section headings herein are for convenience only and
shall not affect the construction hereof.
(j) ASSIGNMENT. This Agreement shall be binding upon each party hereto and
such party's successors and assigns. This Agreement shall not be assignable by
Issuer, but may be assigned by Grantee in whole or in part to any direct or
indirect wholly-owned subsidiary of Grantee, provided that Grantee shall remain
liable for any obligations so assigned.
(k) SURVIVAL. All representations, warranties and covenants contained
herein shall survive the execution and delivery of this Agreement and the
consummation of the transactions contemplated hereby.
(l) TIME OF THE ESSENCE. The parties agree that time shall be of the
essence in the performance of obligations hereunder.
(m) PUBLIC ANNOUNCEMENT. Grantee and Issuer will consult with each other
before issuing any press release or making any public statement with respect to
this Agreement and the transactions contemplated hereby and shall not issue any
press release or make any public statement without the prior consent of the
other party, which shall not be unreasonably withheld. Notwithstanding the
foregoing, any such press release or public statement as may be required by
applicable law or any listing Agreement with any national securities exchange,
may be issued prior to such consultation, if the party making the release or
statement has used its reasonable efforts to consult with the other party.
Section 11. PROFIT LIMITATION.
(a) Notwithstanding any other provision of this Agreement or the Merger
Agreement, in no event shall Grantee's Total Profit (as defined below) exceed
$1.35 billion (the "MAXIMUM AMOUNT") and, if it otherwise would exceed such
Maximum Amount, Grantee at its sole election may (i) pay cash to Issuer,
(ii) deliver to Issuer for cancellation Option Shares previously purchased by
Grantee, (iii) waive payment of any portion of the Fee payable pursuant to
Section 9.3(a) of the Merger Agreement, or (iv) any combination thereof, so that
Grantee's actually realized Total Profit (as defined below) shall not exceed the
Maximum Amount after taking into account the foregoing actions.
(b) Notwithstanding any other provision of this Agreement, the Stock Option
may not be exercised for a number of Option Shares as would, as of the date of
the Stock Exercise Notice or Cash Exercise Notice, as applicable, result in a
Notional Total Profit (as defined below) of more than the Maximum Amount and, if
exercise of the Stock Option otherwise would result in the Notional Total Profit
exceeding such amount, Grantee, at its discretion, may (in addition to any of
the actions specified in Section 11(a) above) increase the Exercise Price for
that number of Option Shares set forth in the Stock Exercise Notice or Cash
Exercise Notice, as applicable, so that the Notional Total Profit shall not
exceed the Maximum Amount; provided, that nothing in this sentence shall
restrict any exercise of the Stock Option permitted hereby on any subsequent
date at the Exercise Price set forth in Section 2 hereof.
(c) As used herein, the term "TOTAL PROFIT" shall mean the aggregate amount
(before taxes) of the following: (i) the cash amount actually received by
Grantee pursuant to Section 9.3(a) of the Merger Agreement less any repayment by
Grantee to Issuer pursuant to Section 11(a) hereof (including the value of any
Option Shares delivered pursuant to Section 11(a)(ii) or Section 11(a)(iv)),
(ii) (x) the net cash amounts or the fair market value of any property received
by Grantee pursuant to the sale of Option Shares (or of any other securities
into or for which such Option Shares are converted or exchanged), less
(y) Grantee's purchase price for such Option Shares (or other securities) plus
(iii) the aggregate amounts received by Grantee pursuant to Section 3(d) and
Section 9 hereof.
B-8
<PAGE>
(d) As used herein, the term "NOTIONAL TOTAL PROFIT" with respect to any
number of Option Shares as to which Grantee may propose to exercise the Stock
Option shall mean the Total Profit determined as of the date of the Stock
Exercise Notice or Cash Exercise Notice, as applicable, assuming that the Stock
Option was exercised on such date for such number of Option Shares and assuming
that such Option Shares, together with all other Option Shares previously
acquired upon exercise of the Stock Option and held by Grantee and its
affiliates as of such date, were sold for cash at the closing price on the NYSE
for the Common Stock as of the close of business on the preceding trading day
(less customary brokerage commissions).
IN WITNESS WHEREOF, each of the parties hereto have caused this Agreement to
be executed as of the date first written above by their respective officers
thereunto duly authorized.
<TABLE>
<S> <C> <C>
ISSUER:
HONEYWELL INTERNATIONAL INC.,
a Delaware corporation
/s/ MICHAEL R. BONSIGNORE
---------------------------------------------
By: Michael R. Bonsignore
Its: Chairman and CEO
GRANTEE:
GENERAL ELECTRIC COMPANY,
a New York corporation
/s/ JOHN F. WELCH, JR.
---------------------------------------------
By: John F. Welch, Jr.
Its: Chairman and CEO
</TABLE>
B-9
<PAGE>
ANNEX C
[LETTERHEAD OF BEAR, STEARNS & CO. INC.]
October 22, 2000
Board of Directors
Honeywell International Inc.
101 Columbia Road
P.O. Box 4000
Morristown, NJ 07962-2497
Attention: Michael R. Bonsignore
Chairman and Chief Executive Officer
Ladies and Gentlemen:
We understand that Honeywell International Inc. ("Honeywell") and General
Electric Company ("GE") have entered into an Agreement and Plan of Merger dated
October 22, 2000 (the "Merger Agreement"), pursuant to which a newly-formed
acquisition subsidiary of GE will be merged with and into Honeywell and
Honeywell will continue as the surviving entity as a wholly-owned subsidiary of
GE (the "Transaction"). Pursuant to the terms of the Merger Agreement, each
outstanding share of common stock, par value $1.00 per share, of Honeywell
("Honeywell Common Stock") will be converted into 1.055 shares of common stock,
par value $0.06 per share, of GE ("GE Common Stock") in accordance with the
terms of the Merger Agreement. Such ratio of GE Common Stock to Honeywell Common
Stock is hereinafter referred to as the "Exchange Ratio".
You have asked us to render our opinion as to whether the Exchange Ratio is
fair, from a financial point of view, to the shareholders of Honeywell.
In the course of performing our review and analyses for rendering this opinion,
we have:
- reviewed the Merger Agreement;
- reviewed Honeywell's Annual Report to Shareholders and Annual Report on
Form 10-K for the year ended December 31, 1999, its quarterly reports on
Form 10-Q for the periods ended March 31 and June 30, 2000, its Reports on
Form 8-K since December 31, 1999 and Honeywell's press release announcing
third quarter earnings;
- reviewed certain operating and financial information, including
projections for the three years ended December 31, 2003, provided to us by
management relating to Honeywell's business and prospects;
- reviewed certain estimates of cost savings and other combination benefits
expected to result from the Transaction prepared and provided to us by
Honeywell's management;
- met with certain members of Honeywell's senior management to discuss
Honeywell's business, operations, historical and projected financial
results and future prospects;
- reviewed GE's Annual Report to Shareholders and Annual Report on
Form 10-K for the year ended December 31, 1999, and its quarterly reports
on Form 10-Q for the periods ended
C-1
<PAGE>
March 31 and June 30, 2000, its Reports on Form 8-K since December 31,
1999 and GE's press release announcing third quarter earnings;
- met with certain members of GE's senior management to discuss GE's
business, operations, historical and projected financial results and
future prospects;
- reviewed the historical prices, trading multiples and trading volumes of
the shares of Honeywell Common Stock and GE Common Stock;
- reviewed publicly available financial data, stock market performance data
and trading multiples of companies which we deemed generally comparable to
Honeywell and GE;
- reviewed the terms of recent acquisitions of companies which we deemed
generally comparable to Honeywell and the Transaction;
- reviewed the pro forma financial results, financial condition and
capitalization of GE giving effect to the Transaction; and
- conducted such other studies, analyses, inquiries and investigations as we
deemed appropriate.
We have relied upon and assumed, without independent verification, the accuracy
and completeness of the financial and other information, including without
limitation, the projections and synergy estimates, provided to us by Honeywell.
With respect to Honeywell's projected financial results and the potential
synergies that could be achieved upon consummation of the Transaction, we have
assumed that they have been reasonably prepared on bases reflecting the best
currently available estimates and judgments of the senior management of
Honeywell as to the expected future performance of Honeywell. With your consent,
we have relied upon certain estimates made by Wall Street analysts with regard
to GE's projected financial results. We have not assumed any responsibility for
the independent verification of any such information or of the projections and
the synergy estimates provided to us, and we have further relied upon the
assurances of the senior management of Honeywell that they are unaware of any
facts that would make such information, projections or synergy estimates
provided to us incomplete or misleading.
In arriving at our opinion, we have not performed or obtained any independent
appraisal of the assets or liabilities (contingent or otherwise) of Honeywell or
GE, nor have we been furnished with any such appraisals. During the course of
our engagement, we were not asked by the Board of Directors to solicit
indications of interest from third parties regarding a transaction with
Honeywell; however, we have considered the results of certain proposals received
by Honeywell in rendering our opinion. We have assumed that the Transaction will
(i) qualify as a tax-free "reorganization" within the meaning of Section 368 of
the Internal Revenue Code, (ii) be accounted for under the pooling-of-interests
method of accounting in accordance with U.S. generally accepted accounting
principles and (iii) otherwise be consummated in a timely manner in accordance
with the terms in the Merger Agreement, without any regulatory limitations,
restrictions, conditions, amendments or modifications that collectively would
have a material effect on Honeywell or GE.
We do not express any opinion as to the price or range of prices at which shares
of Honeywell Common Stock and GE Common Stock may trade subsequent to the
announcement of the Transaction or as to the price or range of prices at which
the shares of GE Common Stock may trade subsequent to the consummation of the
Transaction.
We have acted as financial advisor to Honeywell in connection with the
Transaction and will receive a customary fee for such services, a substantial
portion of which is contingent upon the successful consummation of the
Transaction. Bear Stearns has previously been engaged by Honeywell and GE to
provide certain investment banking and financial advisory services for which we
received customary fees. In the ordinary course of business, Bear Stearns may
actively trade the equity and debt securities
C-2
<PAGE>
of Honeywell and/or GE for our own account and for the account of our customers
and, accordingly, may at any time hold a long or short position in such
securities.
It is understood that this letter is intended for the benefit and use of the
Board of Directors of Honeywell and does not constitute a recommendation to the
Board of Directors of Honeywell or any holders of Honeywell Common Stock as to
how to vote in connection with the Transaction. This opinion does not address
Honeywell's underlying business decision to pursue the Transaction, the relative
merits of the Transaction as compared to any alternative business strategies
that might exist for Honeywell or the effects of any other transaction in which
Honeywell might engage. This opinion is not intended to be relied upon or confer
any rights or remedies upon any creditor or shareholder of Honeywell, or any
other third party. This letter is not to be used for any other purpose, or be
reproduced, disseminated, quoted from or referred to at any time, in whole or in
part, without our prior written consent; provided, however, that this letter may
be included in its entirety in any proxy statement/prospectus to be distributed
to the holders of Honeywell Common Stock in connection with the Transaction. Our
opinion is subject to the assumptions and conditions contained herein and is
necessarily based on economic, market and other conditions, and the information
made available to us, as of the date hereof. We assume no responsibility for
updating or revising our opinion based on circumstances or events occurring
after the date hereof.
Based on and subject to the foregoing, it is our opinion that, as of the date
hereof, the Exchange Ratio is fair, from a financial point of view, to the
shareholders of Honeywell.
<TABLE>
<S> <C> <C>
Very truly yours,
BEAR, STEARNS & CO. INC.
/s/ EDWARD M. RIMLAND
-----------------------------------------
Edward M. Rimland
Senior Managing Director
By:
</TABLE>
C-3
<PAGE>
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 20. INDEMNIFICATION OF DIRECTORS AND OFFICERS.
Indemnification. Section 721 of the New York Business Corporation
Law--hereinafter, referred to as the NYBCL--provides that, in addition to
indemnification provided in Article 7 of the NYBCL, a corporation may indemnify
a director or officer by a provision contained in the certificate of
incorporation or by-laws or by a duly authorized resolution of its shareowners
or directors or by agreement, provided that no indemnification may be made to or
on behalf of any director or officer if a judgment or other final adjudication
adverse to the director or officer establishes that his acts were committed in
bad faith or were the result of active and deliberate dishonesty and material to
the cause of action, or that such director or officer personally gained in fact
a financial profit or other advantage to which he was not legally entitled.
Section 722(a) of the NYBCL provides that a corporation may indemnify a
director or officer made, or threatened to be made, a party to any action other
than a derivative action, whether civil or criminal, against judgments, fines,
amounts paid in settlement and reasonable expenses actually and necessarily
incurred as a result of such action, if such director or officer acted in good
faith, for a purpose which he reasonably believed to be in, or not opposed to,
the best interests of the corporation and, in criminal actions or proceedings,
in addition, has no reasonable cause to believe that his conduct was unlawful.
Section 722(c) of the NYBCL provides that a corporation may indemnify a
director or officer, made or threatened to be made a party in a derivative
action, against amounts paid in settlement and reasonable expenses actually and
necessarily incurred by him in connection with the defense or settlement of such
action or in connection with an appeal therein if such director or officer acted
in good faith, for a purpose which he reasonably believed to be in, or not
opposed to, the best interests of the corporation, except that no
indemnification will be available under Section 722(c) of the NYBCL in respect
of a threatened or pending action which is settled or otherwise disposed of, or
any claim as to which such director or officer shall have been adjudged liable
to the corporation, unless and only to the extent that the court in which the
action was brought, or, if no action was brought, any court of competent
jurisdiction, determines, upon application, that, in view of all the
circumstances of the case, the director or officer is fairly and reasonably
entitled to indemnity for such portion of the settlement amount and expenses as
the court deems proper.
Section 723 of the NYBCL specifies the manner in which payment of
indemnification under Section 722 of the NYBCL or indemnification permitted
under Section 721 of the NYBCL may be authorized by the corporation. It provides
that indemnification may be authorized by the corporation. It provides that
indemnification by a corporation is mandatory in any case in which the director
or officer has been successful, whether on the merits or otherwise, in defending
an action. In the event that the director or officer has not been successful or
the action is settled, indemnification must be authorized by the appropriate
corporate action as set forth in Section 723.
Section 724 of the NYBCL provides that, upon application by a director or
officer, indemnification may be awarded by a court to the extent authorized.
Section 722 and Section 723 of the NYBCL contain certain other miscellaneous
provisions affecting the indemnification of directors and officers.
Section 726 of the NYBCL authorizes the purchase and maintenance of
insurance to indemnify (1) a corporation for any obligation which it incurs as a
result of the indemnification of directors and officers under the above section,
(2) directors and officers in instances in which they may be indemnified by a
corporation under such section, and (3) directors and officers in instances in
which they may not otherwise be indemnified by a corporation under such section,
provided the contract of
II-1
<PAGE>
insurance covering such directors and officers provides, in a manner acceptable
to the New York State Superintendent of Insurance, for a retention amount and
for co-insurance.
Section 6 of the restated certificate of incorporation, as amended, of GE
provides in part as follows:
"A person who is or was a director of the corporation shall have no
personal liability to the corporation or its shareowners for damages for any
breach of duty in such capacity except that the foregoing shall not
eliminate or limit liability where such liability is imposed under the
Business Corporation Law of the State of New York."
Article XI of the bylaws, as amended, of GE provides, in part, as follows:
"The Company shall, to the fullest extent permitted by applicable law as
the same exists or may hereafter be in effect, indemnify any person who is
or was or has agreed to become a director or officer of the Company and who
is or was made or threatened to be made a party to or is involved in any
threatened, pending or completed action, suit or proceeding, whether civil,
criminal, administrative or investigative, including an action by or in the
right of the Company to procure a judgment in its favor and an action by or
in the right of any other corporation of any type or kind, domestic or
foreign, or any partnership, joint venture, trust, employee benefit plan or
other enterprise, which such person is serving, has served or has agreed to
serve in any capacity at the request of the Company, by reason of the fact
that he or she is or was or has agreed to become a director or officer of
the Company, or is or was serving or has agreed to serve such other
corporation, partnership, joint venture, trust, employee benefit plan or
other enterprise in any capacity, against judgments, fines, amounts paid or
to be paid in settlement, taxes or penalties, and costs, charges and
expenses, including attorney's fees, incurred in connection with such action
or proceeding or any appeal therein, provided, however, that no
indemnification shall be provided to any such person if a judgment or other
final adjudication adverse to the director or officer establishes that
(i) his or her acts were committed in bad faith or were the result of active
and deliberate dishonesty and, in either case, were material to the cause of
action so adjudicated, or (ii) he or she personally gained in fact a
financial profit or other advantage to which he or she was not legally
entitled. The benefits of this [p]aragraph shall extend to the heirs and
legal representatives of any person entitled to indemnification under this
paragraph."
GE has purchased liability insurance for its officers and directors as
permitted by Section 727 of the NYBCL.
The merger agreement also provides that after the effective time of the
merger, GE shall cause the corporation surviving the merger to indemnify and
hold harmless, to the fullest extent permitted under applicable law, individuals
who either are or were directors, officers or employees of Honeywell and of its
subsidiaries against all liabilities and expenses, including reasonable
attorneys' fees, arising out of or pertaining to any action or omission in their
capacity as an officer or director, in each case occurring before the effective
time of the merger.
GE will procure, for three years after the merger, directors' and officers'
liability insurance covering acts or omissions occurring prior to the effective
time of the merger for persons currently covered by Honeywell's officers' and
directors' liability insurance policies. GE will not be required to pay, in
total, an annual premium for the insurance described in this paragraph in excess
of 200% of the current annual premium paid by Honeywell for its existing
coverage prior to the merger. However, if the annual premiums of that insurance
coverage exceed that amount, GE will be obligated to provide, or cause its
subsidiaries to provide, coverage available for a cost equal to 200% of the
current annual premium.
II-2
<PAGE>
ITEM 21. EXHIBITS
<TABLE>
<C> <S>
2.1 Agreement and Plan of Merger, dated as of October 22, 2000,
between Honeywell International Inc. and General Electric
Company (included as Annex A to the Proxy
Statement/Prospectus).
3.1 The Certificate of Incorporation, as amended, and By-laws,
as amended, of General Electric Company are incorporated by
reference to Exhibit (3) of General Electric's Current
Report on Form 8-K dated April 27, 2000.
5.1 Opinion of Robert E. Healing, Corporate Counsel for General
Electric Company, as to the legality of the securities being
registered.*
8.1 Opinion of Shearman & Sterling as to the United States
federal income tax consequences of the merger.*
8.2 Opinion of Skadden, Arps, Slate, Meagher & Flom LLP as to
the United States federal income tax consequences of the
merger.*
15.1 Acknowledgement Letter of PricewaterhouseCoopers LLP as to
incorporation of their reports relating to unaudited interim
financial information.
23.1 Consent of KPMG LLP.
23.2 Consent of PricewaterhouseCoopers LLP.
23.3 Consent of Deloitte & Touche LLP.
23.4 Consent of Robert E. Healing (included in Exhibit 5.1 to
this Registration Statement).*
23.5 Consent of Shearman & Sterling (included in Exhibit 8.1 to
this Registration Statement).*
23.6 Consent of Skadden, Arps, Slate, Meagher & Flom LLP
(included in Exhibit 8.2 to this Registration Statement).*
23.7 Consent of Bear, Stearns & Co. Inc. (included in Exhibit
99.3 to the Registration Statement).
24.1 Powers of Attorney.
99.1 Stock Option Agreement, dated as of October 22, 2000,
between GE and Honeywell (included as Annex B to the Proxy
Statement/Prospectus).
99.2 Form of proxy card to be mailed to shareowners of Honeywell.
99.3 Opinion of Bear, Stearns & Co. Inc. (included as Annex C to
the Proxy Statement/Prospectus).
</TABLE>
------------------------
* To be filed as an amendment to this registration statement.
ITEM 22. UNDERTAKINGS
(a) The undersigned registrant hereby undertakes that, for purposes of
determining any liability under the Securities Act of 1933, each filing of the
registrant's annual report pursuant to section 13(a) or section 15(d) of the
Exchange Act of 1934 (and, where applicable, each filing of an employee benefit
plan's annual report pursuant to section 15(d) of the Securities Exchange Act of
1934) that is incorporated by reference in the registration statement shall be
deemed to be a new registration statement relating to the securities offered
therein, and the offering of such securities at that time shall be deemed to be
the initial bona fide offering thereof.
(b) (1) The undersigned registrant hereby undertakes as follows: that prior
to any public reoffering of the securities registered hereunder through use of a
prospectus which is a part of this registration
II-3
<PAGE>
statement, by any person or party who is deemed to be an underwriter within the
meaning of Rule 145(c), the issuer undertakes that such reoffering prospectus
will contain the information called for by the applicable registration form with
respect to reofferings by persons who may be deemed underwriters, in addition to
the information called for by the other Items of the applicable form.
(2) The registrant undertakes that every prospectus (i) that is filed
pursuant to the paragraph immediately preceding, or (ii) that purports to meet
the requirements of section 10(a)(3) of the Securities Act and is used in
connection with an offering of securities subject to Rule 415, will be filed as
a part of an amendment to the registration statement and will not be used until
such amendment is effective, and that, for purposes of determining any liability
under the Securities Act of 1933, each such post-effective amendment shall be
deemed to be a new registration statement relating to the securities offered
therein, and the offering of such securities at that time shall be deemed to be
the initial bona fide offering thereof.
(c) Insofar as indemnification for liabilities arising under the Securities
Act of 1933 may be permitted to directors, officers and controlling persons of
the registrant pursuant to the foregoing provisions, or otherwise, the
registrant has been advised that in the opinion of the Commission such
indemnification is against public policy as expressed in the Securities Act of
1933 and is, therefore, unenforceable. In the event that a claim for
indemnification against such liabilities (other than the payment by the
registrant of expenses incurred or paid by a director, officer or controlling
person of the registrant in the successful defense of any action, suit or
proceeding) is asserted by such director, officer or controlling person in
connection with the securities being registered, the registrant will, unless in
the opinion of its counsel the matter has been settled by controlling precedent,
submit to a court of appropriate jurisdiction the question whether such
indemnification by it is against public policy as expressed in the Securities
Act of 1933 and will be governed by the final adjudication of such issue.
(d) The undersigned registrant hereby undertakes to respond to requests for
information that is incorporated by reference into the prospectus pursuant to
Item 4, 10(b), 11, or 13 of this Form, within one business day of receipt of
such request, and to send the incorporated documents by first class mail or
other equally prompt means. This includes information contained in documents
filed subsequent to the effective date of the registration statement through the
date of responding to the request.
(e) The undersigned registrant hereby undertakes to supply by means of a
post-effective amendment all information concerning a transaction, and the
company being acquired involved therein, that was not the subject of and
included in the Registration Statement when it became effective.
II-4
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the registrant
has duly caused this Registration Statement to be signed on its behalf by the
undersigned, thereunto duly authorized, in the City of Fairfield, State of
Connecticut, on November 9, 2000.
Date: November 9, 2000
<TABLE>
<S> <C> <C>
GENERAL ELECTRIC COMPANY
(Registrant)
By: /s/ PHILIP D. AMEEN
-----------------------------------------
Name: Philip D. Ameen
Title: Vice President and Comptroller
</TABLE>
Pursuant to the requirements of the Securities Act of 1933, as amended, this
Registration Statement has been signed below by the following persons in the
capacities and on the dates indicated.
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
--------- ----- ----
<C> <S> <C>
Chairman of the Board,
* Chief Executive Officer
------------------------------------------- (and Principal Executive November 9, 2000
John F. Welch, Jr. Officer)
*
------------------------------------------- Director November 9, 2000
James I. Cash, Jr.
*
------------------------------------------- Director November 9, 2000
Silas S. Cathcart
*
------------------------------------------- Director November 9, 2000
Dennis D. Dammerman
*
------------------------------------------- Director November 9, 2000
Ann M. Fudge
------------------------------------------- Director
Kenneth G. Langone
</TABLE>
II-5
<PAGE>
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
--------- ----- ----
<C> <S> <C>
*
------------------------------------------- Director November 9, 2000
Scott G. McNealy
------------------------------------------- Director
Frank H. T. Rhodes
*
------------------------------------------- Director November 9, 2000
Douglas A. Warner, III
*
------------------------------------------- Director November 9, 2000
Paolo Fresco
*
------------------------------------------- Director November 9, 2000
Claudio X. Gonzalez
*
------------------------------------------- Director November 9, 2000
Gertrude G. Michelson
*
------------------------------------------- Director November 9, 2000
Sam Nunn
------------------------------------------- Director
Roger S. Penske
*
------------------------------------------- Director November 9, 2000
Andrew C. Sigler
*
------------------------------------------- Director November 9, 2000
Andrea Jung
------------------------------------------- Director
Robert G. Wright
</TABLE>
II-6
<PAGE>
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
--------- ----- ----
<C> <S> <C>
* Senior Vice President--
------------------------------------------- Finance and Chief November 9, 2000
Keith S. Sherin Financial Officer
* Vice President, Comptroller
------------------------------------------- and Chief Accounting November 9, 2000
Philip D. Ameen Officer
</TABLE>
<TABLE>
<S> <C> <C> <C>
*By: /s/ ROBERT E. HEALING
--------------------------------------
ATTORNEY-IN-FACT
</TABLE>
II-7
<PAGE>
EXHIBITS INDEX
<TABLE>
<CAPTION>
EXHIBIT
NUMBER
------ DESCRIPTION
<C> <S>
2.1 Agreement and Plan of Merger, dated as of October 22, 2000,
between Honeywell International Inc. and General Electric
Company (included as Annex A to the Proxy
Statement/Prospectus).
3.1 The Certificate of Incorporation, as amended, and By-laws,
as amended, of General Electric Company are incorporated by
reference to Exhibit (3) of General Electric's Current
Report on Form 8-K dated April 27, 2000.
5.1 Opinion of Robert E. Healing, Corporate Counsel for General
Electric Company, as to the legality of the securities being
registered.*
8.1 Opinion of Shearman & Sterling as to the United States
federal income tax consequences of the merger.*
8.2 Opinion of Skadden, Arps, Slate, Meagher & Flom LLP as to
the United States federal income tax consequences of the
merger.*
15.1 Acknowledgement Letter of PricewaterhouseCoopers LLP as to
incorporation of their reports relating to unaudited interim
financial information.
23.1 Consent of KPMG LLP.
23.2 Consent of PricewaterhouseCoopers LLP.
23.3 Consent of Deloitte & Touche LLP.
23.4 Consent of Robert E. Healing (included in Exhibit 5.1 to
this Registration Statement).*
23.5 Consent of Shearman & Sterling (included in Exhibit 8.1 to
this Registration Statement).*
23.6 Consent of Skadden, Arps, Slate, Meagher & Flom LLP
(included in Exhibit 8.2 to this Registration Statement).*
23.7 Consent of Bear, Stearns & Co. Inc. (included in Exhibit
99.3 to the Registration Statement).
24.1 Powers of Attorney.
99.1 Stock Option Agreement, dated as of October 22, 2000,
between GE and Honeywell (included as Annex B to the Proxy
Statement/Prospectus).
99.2 Form of proxy card to be mailed to shareowners of Honeywell.
99.3 Opinion of Bear, Stearns & Co. Inc. (included as Annex C to
the Proxy Statement/ Prospectus).
</TABLE>
------------------------
* To be filed as an amendment to this registration statement.
