Honeywell
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Notice of
1996 Annual Meeting &
Proxy Statement
April 16, 1996
To our Shareholders:
You are cordially invited to attend the Annual Meeting of Shareholders,
which will be held at 2:00 p.m., Tuesday, April 16, 1996, at the Minneapolis
Convention Center, 1301 Second Avenue South, Minneapolis, Minnesota.
The Notice of Meeting and the Proxy Statement that follow describe the
business to be conducted at the meeting. We will also report on matters of
current interest to our shareholders.
Please sign and return the enclosed proxy card in the envelope provided as
soon as possible so that your shares will be represented at the meeting. If you
plan to attend the meeting in Minneapolis, please mark the appropriate box on
your proxy card and detach the admission card to present at the meeting.
/s/ M. R. Bonsignore
Michael R. Bonsignore
Chairman of the Board and Chief Executive Officer
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Proxy Statement
Table of Contents
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Page
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NOTICE OF MEETING ..................................................... 1
*ELECTION OF DIRECTORS ................................................. 2
EXECUTIVE COMPENSATION ................................................ 14
*APPROVAL OF AUDITORS .................................................. 23
*PROPOSED HONEYWELL NON-EMPLOYEE DIRECTORS FEE AND STOCK UNIT PLAN ..... 23
OTHER INFORMATION ..................................................... 25
* Matters for shareholder action
YOUR VOTE IS IMPORTANT
Please complete, date and sign your proxy and promptly
return it in the enclosed envelope.
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Honeywell
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HONEYWELL INC., HONEYWELL PLAZA, MINNEAPOLIS, MINNESOTA 55408
Notice of Meeting:
The Annual Meeting of Shareholders of Honeywell Inc. ("Honeywell" or the
"Company"), a Delaware corporation, will be held at the Minneapolis Convention
Center, 1301 Second Avenue South, Minneapolis, Minnesota, Tuesday, April 16,
1996, at 2:00 p.m. for the following purposes:
1) to elect thirteen directors;
2) to approve the selection of Deloitte & Touche LLP as independent auditors;
3) to approve the Honeywell Non-Employee Directors Fee and Stock Unit Plan;
and to transact any other business appropriate to the Annual Meeting.
Holders of Honeywell Common Stock of record at the close of business on February
16, 1996 will be entitled to vote at the meeting and any adjournments. A list of
shareholders entitled to vote at the meeting will be available during business
hours for ten days prior to the meeting at the Company's offices, Honeywell
Plaza, Minneapolis, Minnesota, for examination by any shareholder for any
purpose germane to the meeting.
Attendance at the Annual Meeting will be limited to shareholders of record or
their authorized representative by proxy. Registered shareholders planning to
attend the Meeting should check the appropriate box on the enclosed Proxy Card,
and detach the admission ticket to present at the Meeting to gain attendance. If
your Honeywell shares are held through an intermediary, such as a bank or
broker, you should request a ticket from the intermediary, or present proof of
your ownership of Honeywell shares at the Meeting. Proof of ownership could
include a proxy from the intermediary or a copy of your account statement, which
confirms your beneficial ownership of Honeywell shares.
By Order of the Board of Directors
March 11, 1996
/s/ Sigurd Ueland
Sigurd Ueland
Secretary
1
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PROXY STATEMENT
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This Proxy Statement is furnished in connection with the solicitation of proxies
by the Board of Directors of Honeywell for use at the Annual Meeting of
Shareholders (the "Meeting"). The Proxy Statement and proxy card were first sent
to shareholders on or about March 11, 1996. Please sign the enclosed proxy card
and return it promptly in the enclosed postage-prepaid envelope.
A shareholder who is also a participant in the Investment Plus Plan,
Retirement Investment Plan or Retirement Savings Plan will receive a single
proxy card covering shares credited to such shareholder's Plan account and
shares of record registered in the same name. Accordingly, proxies executed by
such Plan participant will serve as a voting instruction to the Plans' Trustee,
T. Rowe Price Trust Company. If a participants' Plan account is not registered
in the same name as his or her shares of record, such participant will receive
separate proxy cards for both individual (or joint) and Plan holdings.
When proxies are returned properly executed, the shares represented will be
voted according to shareholders' directions. A shareholder giving a proxy has
the right to revoke it at any time before it is exercised by filing a written
revocation with the Secretary of the Company, by submitting a duly executed
proxy bearing a later date, or by attending the Meeting and voting in person.
Proxies, ballots and voting tabulations that identify the particular vote of a
shareholder are kept confidential except (i) as necessary to meet applicable
legal requirements, (ii) to allow the independent inspectors of election to
tabulate and certify the results of voting, or (iii) in the event of a proxy
solicitation in opposition to the Board of Directors based on an opposition
proxy statement filed with the Securities and Exchange Commission.
Shareholders of record at the close of business on the record date,
February 16, 1996, are entitled to one vote for each share then held on each
matter to come before the Meeting. At the record date there were 127,412,526
shares of Common Stock, par value $1.50 per share, of the Company outstanding
and entitled to be voted. Nominees for the Board of Directors who receive the
largest number of votes cast 'For' will be elected (up to the number of
directors to be elected at the Meeting). The affirmative vote of a majority of
shares present in person or by proxy at the Meeting is required for approval of
any other matter; and in accordance with Delaware law, abstentions will, and
broker non-votes will not, be counted as being present at the Meeting for this
purpose.
The Board of Directors does not intend to bring up any matters for a vote
other than those set forth in the Notice of Meeting. Discretionary voting
authority regarding any other matters which may properly come before the Meeting
is conferred upon those persons named in the proxy card.
Shareholders who wish to present director nominations or bring other
business before the annual meeting must fulfill the requirements set forth in
the Company's by-laws. A copy of the relevant portion of the by-laws may be
obtained on request to the Secretary of the Company at the address listed in the
Notice of Meeting.
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ELECTION OF DIRECTORS
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Thirteen directors of the Company are to be elected to serve until the 1997
Annual Meeting of Shareholders and until their successors are elected and
qualified. All of the nominees are currently directors of the Company and were
elected directors at the 1995 Annual Meeting of Shareholders except Catherine M.
Hapka who was elected by the Board in September 1995. It is intended that the
shares, represented by the enclosed proxy card, will be voted, unless authority
to vote is withheld, for the election of the thirteen nominees named on pages 3
through 9. If any of the nominees should become unavailable, which is not
anticipated, those shares will be voted for a Board-approved substitute, or the
Board may reduce the number of directors.
2
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[Photo of Albert J. Baciocco, Jr.]
Albert J. Baciocco, Jr.
o Retired Vice Admiral
United States Navy
o Director since 1988
o Member of Audit and Personnel
Committees of the Board
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Vice Admiral Baciocco, age 65, retired from the U.S. Navy in 1987 after 34 years
of distinguished service, principally within the submarine force and directing
the Department of the Navy research and technology development enterprise. He
graduated from the U.S. Naval Academy in 1953, receiving a bachelor's degree in
engineering. He subsequently completed graduate level studies in nuclear
engineering as part of his training for the naval nuclear propulsion program.
Upon retirement from the Navy, Admiral Baciocco formed The Baciocco Group,
Inc., a technical and management consulting practice providing services to
industry, primarily in areas of strategic planning, technology investment and
application, and business planning and development.
Admiral Baciocco is a director of Giddings and Lewis, Inc., The Ashton
Technology Group, Inc., Vectra Technologies, Inc., and Golder Federal Services,
Inc. He serves with several boards and committees of government and academe. He
is a member of the Army Science Board and the Naval Studies Board of the
National Research Council. In addition, he is a director of Oak Ridge Associated
Universities and the Foundation for Research Development, Medical University of
South Carolina, and a member of the Board of Visitors to the Software
Engineering Institute, Carnegie Mellon University.
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[Photo of Elizabeth E. Bailey]
Elizabeth E. Bailey
o John C. Hower Professor
of Public Policy and Management
The Wharton School, University of
Pennsylvania
o Director since 1985
o Member of Finance and Nominating and
Governance Committees of the Board
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Dr. Bailey, age 57, graduated from Radcliffe college and received an M.S. in
mathematics from Stevens Institute of Technology and a Ph.D. in economics from
Princeton University.
Dr. Bailey joined Bell Laboratories in 1960, where she held various
supervisory positions until 1977. From 1973 until 1977, she was also adjunct
professor of economics at New York University. In 1977, she was appointed a
commissioner of the Civil Aeronautics Board and was vice chairman of the Civil
Aeronautics Board from 1981 to 1983. From 1983 to 1990, she served as dean of
the Graduate School of Industrial Administration of Carnegie Mellon University.
From 1990 to 1991, she was a visiting scholar at Yale University, on leave from
Carnegie Mellon. Currently, Dr. Bailey is John C. Hower Professor of Public
Policy and Management at The Wharton School.
Dr. Bailey is also a director of Philip Morris Companies Inc., CSX
Corporation, National Westminster Bancorp, Inc. and the College Retirement
Equities Fund. She is a past member of the board of trustees of Princeton
University, and she serves on the board of the Brookings Institution and the
National Bureau of Economics Research.
3
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[Photo of Michael R. Bonsignore]
Michael R. Bonsignore
o Chairman of the Board and
Chief Executive Officer
Honeywell Inc.
o Director since 1990
o Member of Executive Committee of
the Board
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Mr. Bonsignore, age 54, is a graduate of the U.S. Naval Academy and received a
degree in electrical engineering in 1963. He also pursued graduate work in ocean
science and engineering at Texas A & M University.
Mr. Bonsignore began his business career at Honeywell in 1969. He has held
various marketing and operations management positions and was named the
Company's vice president for Marine Systems in 1981. In 1983, Mr. Bonsignore was
appointed president for Honeywell Europe, headquartered in Brussels, Belgium. In
1987, Mr. Bonsignore returned to Minneapolis as the Company's executive vice
president, International, and was elected president of this business in May
1987. In 1990, Mr. Bonsignore was elected executive vice president and chief
operating officer for International, and Home and Building Control, and a
director of the Company. In April 1993, Mr. Bonsignore was elected chairman of
the board and chief executive officer.
Mr. Bonsignore is also a director of Cargill, Inc., Donaldson Company, Inc.
and The St. Paul Companies, Inc. He serves as a member on various advisory
boards and committees including: the U.S. - China Business Council, Investment
and Services Policy Advisory Committee (INSPAC), U.S. - Russia Trade and
Economic Council and the Alliance to Save Energy Board.
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[Photo of Earnest Hubert Clark, Jr.]
Earnest Hubert Clark, Jr.
o Chairman of the Board and
Chief Executive Officer
The Friendship Group
o Director since 1984
o Member of Audit and Nominating and
Governance Committees of the Board
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Mr. Clark, age 69, graduated from the California Institute of Technology,
receiving B.S. and M.S. degrees in mechanical engineering.
In 1947, Mr. Clark joined Baker International Corporation (now known as
Baker Hughes Incorporated following the merger in 1987 of Baker International
and Hughes Tool Co.), a provider of products and services to the petroleum and
mining industries. He became chief research engineer in 1957 and vice president
and assistant general manager in 1958. Mr. Clark was elected president in 1962,
chief executive officer in 1965, and chairman of the board in 1969.
In January 1989, Mr. Clark retired from Baker Hughes Inc. and assumed the
post of chairman of the board and chief executive officer of the Friendship
Group, an investment partnership.
Mr. Clark is also a director of CBI Industries, Beckman Instruments, Inc.,
Kerr McGee Corporation, Regenesis Inc., and the American Mutual Fund, Inc. He is
past chairman of the board of the YMCA of the United States of America, and is a
trustee of Harvey Mudd College, Claremont, California.
4
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[Photo of William H. Donaldson]
William H. Donaldson
o Co-founder and Senior Advisor
Donaldson, Lufkin & Jenrette, Inc.
o Chairman and Chief Executive Officer
Donaldson Enterprises, Inc.
o Director since 1982
o Member of Nominating and Governance
and Finance Committees of the Board
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Mr. Donaldson, age 64, is a graduate of Yale University and received an MBA,
with distinction, from the Harvard University Graduate School of Business
Administration. He served as an officer in the United States Marine Corps.
In 1959, Mr. Donaldson co-founded Donaldson, Lufkin & Jenrette, Inc., an
investment banking firm, and in 1961, Alliance Capital Management Corporation,
an investment management firm, and served as chairman and chief executive
officer until 1973.
Mr. Donaldson was Undersecretary of State from 1973 to 1974. In 1975, he
served as special consultant and advisor to the Vice President of the United
States. During that year he became founding dean of the Yale Graduate School of
Management and was named William S. Beinecke Professor of Management Studies,
serving until 1980. Mr. Donaldson then founded Donaldson Enterprises, Inc., a
private investing firm, and served as its chairman and chief executive officer
until year-end 1990. From 1991 until June 1995, Mr. Donaldson served as chairman
of the board and chief executive officer of The New York Stock Exchange, Inc. In
June 1995, Mr. Donaldson rejoined Donaldson Enterprises, Inc., as its chairman
and chief executive officer. In September 1995, he was also elected senior
advisor to Donaldson, Lufkin & Jenrette, Inc., the firm he co-founded in 1959.
Mr. Donaldson is also a director of Aetna Life & Casualty Company and
Philip Morris Companies Inc. He serves as a trustee and director of a number of
philanthropic and educational institutions.
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[Photo of R. Donald Fullerton]
R. Donald Fullerton
o Chairman -- Executive Committee
CIBC
o Director since 1992
o Member of Audit (Chairman) and
Finance Committees of the Board
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Mr. Fullerton, age 64, graduated from the University of Toronto in 1953 and
received a B.A. degree.
In 1953, Mr. Fullerton joined the Canadian Bank of Commerce (now CIBC), a
Canadian financial services institution based in Toronto. In 1968, he was
appointed deputy chief general manager.
In 1971, Mr. Fullerton became senior vice president and in 1973, he was
promoted to executive vice president and chief general manager. Mr. Fullerton
was elected to CIBC's Board of Directors in 1974 and elected president and chief
operating officer in 1976. In 1984, he was elected chief executive officer, and
in 1985, he was named chairman.
In June 1992, Mr. Fullerton retired as chairman and chief executive officer
of CIBC, and now holds the position of chairman of its Executive Committee.
Mr. Fullerton is also a director of CIBC, Amoco Canada Petroleum Co. Ltd.,
Ontario Hydro, Westcoast Energy Inc., George Weston Ltd., Coca-Cola Beverages
Ltd., Hollinger Inc., and a member of the advisory board, IBM Canada Ltd., and
other cultural and medical entities.
5
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[Photo of Catherine M. Hapka]
Catherine M. Hapka
o Executive Vice President/Markets
US West Communications, Inc.
o Director since September 1995
o Member of Nominating and
Governance Committee of the Board
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Mrs. Hapka, age 41, received a B.S. degree in 1975 from the University of
Minnesota, and a master's degree in business administration from the University
of Chicago in 1979.
From 1975 to 1978 Mrs. Hapka held financial and operations management
positions at both General Electric Company and the Joseph Schlitz Brewing
Company. In 1979, Mrs. Hapka joined McKinsey & Company, Inc. and held a senior
management consulting position until 1984.
Mrs. Hapka rejoined General Electric Company in 1984, and was general
manager of several divisions within its Medical Systems Group until 1987.
In 1988, Mrs. Hapka joined Control Data Corporation (CDC) as vice
president, marketing, and in 1991, was promoted to president of CDC's Data
Services group.
Mrs. Hapka joined US West Communications, Inc. in 1991 as vice president
and general manager of Advanced Communications Services, a business unit
offering advanced network integration services, and in 1995, was promoted to
president and chief operating officer of !NTERPRISE Networking Services. In
1995, she was promoted to executive vice president, markets. In this position
she is responsible for all consumer and business sales, customer service and
marketing, including voice, data, cable/multimedia and wireless services.
Mrs. Hapka is also a director of Cray Research Inc.
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[Photo of James J. Howard]
James J. Howard
o Chairman of the Board,
President and Chief Executive Officer
Northern States Power Company
o Director since 1990
o Member of Executive, Personnel and
Nominating and Governance (Chairman)
Committees of the Board
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Mr. Howard, age 60, graduated from the University of Pittsburgh, receiving a
bachelor's degree in 1957. He was awarded a Sloan Fellowship to the
Massachusetts Institute of Technology and received a master of science degree in
1970.
Mr. Howard was president and chief operating officer of Ameritech, the
Chicago-based parent of the Bell companies serving Illinois, Indiana, Michigan,
Ohio and Wisconsin, prior to joining Northern States Power Company, an electric
and gas utility company, as its president and chief executive officer in 1987.
Mr. Howard has served as its chairman of the board and chief executive officer
since 1988, and in 1994, was also named president.
Mr. Howard is also a director of Walgreen Company, Ecolab Inc., ReliaStar
Financial and the Federal Reserve Bank of Minneapolis. He also serves on the
board of overseers for the Carlson School of Management, University of
Minnesota, the Board of Trustees for the University of St. Thomas, in St. Paul,
Minnesota, and the Board of Visitors for the University of Pittsburgh, Joseph M.
Katz School of Business.
Mr. Howard serves as chairman of the Nuclear Energy Institute, located in
Washington, D.C. He also served as the 1994-1995 chairman of the United Way of
Minneapolis Area and as chairman of the Edison Electric Institute.
6
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[Photo of Bruce Karatz]
Bruce Karatz
o Chairman, President and
Chief Executive Officer
Kaufman and Broad Home Corporation
o Director since 1992
o Member of Audit and Personnel
Committees of the Board
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Mr. Karatz, age 50, is a graduate of Boston University, where he received a
bachelor's degree in history. He also earned a law degree from the University of
Southern California.
In 1972, Mr. Karatz joined the predecessor of Kaufman and Broad Home
Corporation, the largest home builder in the Western United States and one of
the largest residential builders in Paris, France, where he held a number of
corporate positions prior to being named president of Kaufman and Broad-France
in 1976. After returning to the United States, in 1980, he was elected president
of all housing operations. In 1986, he was elected president and chief executive
officer of Kaufman and Broad Home Corporation, and in 1993, was named chairman
of the board.
Mr. Karatz also is a director of MacFrugal's Bargains Closeouts, Inc., and
National Golf Properties, Inc. Among his civic and cultural activities, Mr.
Karatz is a trustee of the RAND Corporation, co-chairman of the Mayor's Alliance
for a Safer L.A., and a member of the Board of the National Park Foundation,
University of Southern California Law Center Board of Councilors, and the
Executive Committee of the California Business Roundtable. In 1992, he was
inducted into the California Building Industry Hall of Fame.
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[Photo of D. Larry Moore]
D. Larry Moore
o President and
Chief Operating Officer
Honeywell Inc.
o Director since 1990
o Member of Executive Committee of
the Board
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Mr. Moore, age 59, is a graduate of the University of Arizona, where he received
a bachelor's degree in engineering in 1958 and a master's degree in business
administration in 1959. Mr. Moore also earned a Ph.D. in economics from Arizona
State University in 1973.
Mr. Moore joined Sperry Corporation in 1962 where he advanced with
assignments in information systems, operations and marketing. In 1978, he was
named vice president of the Sperry Avionics Division, and in 1985 he was chosen
to lead Sperry's commercial aviation business as vice president and general
manager of Commercial Flight Systems.
Mr. Moore joined Honeywell in December 1986, when the Sperry Aerospace
Group was acquired by the Company. In June 1987, Mr. Moore was appointed vice
president of Honeywell's Commercial Flight Systems Group, and in April 1989 he
was elected president, Space and Aviation. In 1990, Mr. Moore was elected
executive vice president and chief operating officer for Space and Aviation, and
Industrial, and a director of the Company. In April 1993, Mr. Moore was elected
president and chief operating officer.
Mr. Moore is also a director of Rohr Inc., Reynolds Metals Company and Geon
Company. He is also a member of the board of the Aerospace Industries
Association (AIA) and the National Association of Manufacturers (NAM).
7
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[Photo of A. Barry Rand]
A. Barry Rand
o Executive Vice President
Xerox Corporation
o Director since 1990
o Member of Finance and Personnel
Committees of the Board
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Mr. Rand, age 51, is a graduate of the American University, receiving a
bachelor's degree in marketing. He also graduated from Stanford University's
graduate program, receiving master's degrees in both business administration and
management sciences. In addition, Mr. Rand has received a number of honorary
doctorate degrees.
Mr. Rand joined Xerox Corporation, a document processing office equipment
company, in 1968. In May 1985, he was elected a corporate officer and in 1987 he
was elected president of Xerox's United States Marketing Group. In February
1992, Mr. Rand was promoted to executive vice president and is responsible for
worldwide operations.
Mr. Rand is also a director of Abbott Laboratories and Ameritech
Corporation. He serves on the board of overseers of the Rochester Philharmonic
Orchestra and is a member of the Stanford University Graduate School of Business
advisory council. In 1993, Mr. Rand was inducted into the National Sales Hall of
Fame.
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[Photo of Steven G. Rothmeier]
Steven G. Rothmeier
o Chairman of the Board and
Chief Executive Officer
Great Northern Capital
o Director since 1985
o Member of Executive, Finance
(Chairman) and Audit Committees of
the Board
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Mr. Rothmeier, age 49, is a graduate of the University of Notre Dame and
received a master's degree in business administration from the University of
Chicago.
In March 1993, Mr. Rothmeier formed Great Northern Capital, a private
investment and merchant banking firm, and serves as its chairman of the board
and chief executive officer. Prior to March 1993, Mr. Rothmeier served as
president at IAI Capital Group, a venture capital and merchant banking firm.
From 1973 to November 1989, he held various senior positions at Northwest
Airlines, Inc., and from 1986 to 1989, he served as chairman of the board and
chief executive officer of NWA Inc. and Northwest Airlines, Inc.
Mr. Rothmeier is also a director of Precision Castparts Corp., Department
56, Inc., E.W. Blanch Holdings, Inc., and the Argonne National
Laboratory/University of Chicago Development Corporation (ARCH). He also serves
as chairman of the St. Agnes Foundation in St. Paul, Minnesota, and of Catholic
Views Broadcast, Inc. Channel 53 Television in Minnesota.
Mr. Rothmeier is a member of the Council on the Graduate School of
Business, University of Chicago, a trustee of the University of Chicago, a
member of the American Council on Germany, a director of the Center of the
American Experiment, an advisor to the Metropolitan Economic Development
Association, and former vice chairman of the U.S. - China Business Council.
8
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[Photo of Michael W. Wright]
Michael W. Wright
o Chairman of the Board, President and
Chief Executive Officer
SUPERVALU INC.
o Director since 1987
Member of Executive, Finance and
Personnel (Chairman) Committees of
the Board
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Mr. Wright, age 57, is a graduate of the University of Minnesota, receiving a
B.A. degree in 1961 and an LL.B. in 1963. He was admitted to the Minnesota Bar
in 1963.
Mr. Wright was a member of the law firm of Dorsey and Whitney from 1963 to
1977. In 1977, he joined SUPERVALU INC., a food distributor and retailer, as
senior vice president of administration and as a member of the board of
directors. He was elected president and chief operating officer in 1978, chief
executive officer in 1981, and chairman of the board in 1982.
Mr. Wright is also a director of Cargill, Inc., Musicland Stores
Corporation, Norwest Corporation and ShopKo Stores, Inc. He is a member of the
board of directors of the Food Marketing Institute, National-American Wholesale
Grocers Association and the International Center for Companies of the Food and
Trade Industry (CIES).
9
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CORPORATE GOVERNANCE
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The Nominating and Governance Committee of the Board of Directors annually
reviews and evaluates Board practices at Honeywell and at other well-managed
companies and recommends appropriate changes to the Board. Below is a summary of
Board practices the Honeywell Board currently follows:
CEO Performance Evaluation
At the conclusion of each year, the non-employee directors evaluate the chief
executive officer's performance against performance objectives approved by the
Board at the start of the year. Each non-employee director provides an
anonymous, written evaluation of the CEO's performance to the Chair of the
Nominating and Governance Committee, who prepares an appraisal report that
covers the views expressed by directors. The non-employee directors then meet
privately to discuss the CEO's performance and to agree on the content of the
appraisal, which the Chair of the Nominating and Governance Committee later
reviews with the CEO. This performance evaluation is used by the Personnel
Committee in the course of its deliberations when considering the compensation
of the CEO.
Board Performance Evaluation
The Nominating and Governance Committee biennially conducts an assessment of the
Board's performance. This process involves a survey of the individual views of
all non-employee directors, which are then shared with the full Board and with
management. The assessment is of the Board's contributions as a whole and has
the goal of increasing the effectiveness of the Board and its relationship with
management.
CEO Succession
The Board views CEO selection as one of its most important responsibilities. The
chief executive officer reports annually to the Nominating and Governance
Committee on planning for CEO succession either in the event of a sudden
emergency or, longer range, when it is time for the CEO's retirement. When a
succession of the CEO occurs, the Nominating and Governance Committee manages
the process of identifying and selecting the new CEO with the full participation
of each of the non-employee directors and the current CEO.
Board Size and Composition
The Board presently has thirteen directors, consisting of eleven non-employee
directors and two employee directors. It is the sense of the Board that a size
of from ten to fifteen directors is appropriate, and the Board believes there
should be a substantial majority of independent, non-employee directors on the
Company's Board. The Nominating and Governance Committee is responsible for
reviewing on an annual basis the appropriate skills and characteristics required
of Board members in the context of the current make-up of the Board. This
assessment includes issues of diversity, age, skills such as understanding of
manufacturing, finance, marketing, technology, regulation and public policy,
international background, etc. The principal qualification for a director is the
ability to act on behalf of all of the shareholders.
Selection of Directors
The Board is responsible for selecting its own members. The Board delegates the
screening process involved to the Nominating and Governance Committee with
direct input from the chairman and chief executive officer and from the other
directors. The Nominating and Governance Committee annually reviews employment
and other relationships of directors, and the Board believes there is no current
relationship between any non-employee director and Honeywell that would be
construed in any way as compromising the independence of any director.
Director Retirement
Non-employee directors do not stand for re-election at the annual meeting
following the first to occur of (i) age seventy or (ii) fifteen years of service
as a director. Directors who change the responsibility they held when initially
elected are expected to offer to resign from the Board. At that time, the
Nominating and Governance Committee reviews the continued appropriateness of
Board membership under these new circumstances. The Board has adopted a policy
calling for employee directors, including the CEO, to retire from the Board at
the time of a change in their status as an officer of the Company, although in
special circumstances the Nominating and Governance Committee may request a
former CEO to continue as a director for a maximum of one year.
10
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Director Compensation
The staff of the Company reports annually to the Nominating and Governance
Committee the status of Honeywell Board compensation in relation to a group of
peer companies with which the Company compares its performance. It is policy of
the Board that a significant portion of director compensation be in the form of
Honeywell stock or stock equivalent units, which fluctuate with the value of
Honeywell stock.
Board Agendas and Meetings
The chairman and chief executive officer establishes the agendas for Board
meetings. Each director is free to suggest items on the agenda, and each
director is free to raise at any Board meeting subjects that are not on the
agenda for that meeting. The Board reviews and approves Honeywell's yearly
operating plan and specific financial goals at the start of each year, and the
Board monitors performance throughout the year. The Board also reviews
long-range strategic issues at regular Board meetings as well as at periodic,
multi-day off-site meetings devoted solely to strategic issues.
Executive Sessions of Outside Directors
The non-employee directors meet privately in executive sessions to review the
performance of the chairman and chief executive officer and to review
recommendations of the Personnel Committee concerning compensation for the
employee directors. The non-employee directors may also meet in executive
session at other times during the year to consider issues they deem important to
consider without management present. In those instances where the non-employee
directors meet without the chairman and chief executive officer present, the
chair of the meeting is the chair of the Board committee most relevant to the
subject under discussion.
Committees of the Board
The Board currently has the following committees: Audit, Finance, Nominating and
Governance, Personnel and Executive, with functions described below. Only
non-employee directors serve on the Audit, Finance, Nominating and Governance,
and Personnel Committees. At each meeting of the Audit Committee, Committee
members meet privately with representatives of Deloitte & Touche LLP, the
Company's independent auditors, and with the Company vice president responsible
for carrying out the internal audit function. The members of the Personnel
Committee meet privately several times during the year to discuss compensation
of the employee directors and other issues that Committee wishes to review.
BOARD MEETINGS -- COMMITTEES OF THE BOARD
- --------------------------------------------------------------------------------
The Board of Directors held eight regular and one special meeting during 1995.
The Executive Committee of the Board does not have scheduled meetings and did
not meet during the year. The Board maintains four other standing committees:
Audit, Finance, Nominating and Governance, and Personnel. Membership on these
four committees is limited to non-employee directors. Committees on which
directors serve are listed adjacent to the pictures of directors on pages 3
through 9.
The Audit Committee met three times in 1995. Its functions are to:
recommend to the Board the independent auditors for Honeywell, establish and
review the activities of the independent auditors and the internal auditors,
review recommendations of the independent auditors and responses of management,
review and discuss with the independent auditors and management Honeywell
financial reporting, loss exposures and asset control, monitor the Honeywell
program for compliance with policies on business ethics, and direct and
supervise any special investigations the Committee deems necessary.
The Finance Committee met four times in 1995. The functions of the
Committee are to review the financial structure, policies, and future plans of
the Company as developed and presented by management and to make recommendations
concerning them to the Board.
The Nominating and Governance Committee met four times in 1995. The
functions of this Committee are to determine and recommend to the Board criteria
for Board membership and the composition, compensation and retirement policy of
the Board, to approve nominees for election to the Board, to evaluate
performance of the Board and to evaluate the performance of the chief executive
officer and other employee directors and
11
<PAGE>
recommend their successors. The Committee also evaluates Board practices at
Honeywell and at other well-managed companies and recommends appropriate changes
to the Board of Directors.
The Personnel Committee met five times in 1995. The functions of the
Committee are to review and report to the Board on Honeywell programs for
developing senior management personnel, to review and make recommendations to
the Board regarding executive compensation plans and annual compensation for
employee directors, and to review, approve and report to the Board concerning
administration of existing executive compensation plans and compensation of
certain executives.
The average attendance at meetings of the Board and Board Committees during
1995 was 97 percent.
The Nominating and Governance Committee will consider qualified nominees
for director recommended by shareholders. Recommendations should be sent to:
Secretary of the Company, Honeywell Inc., Honeywell Plaza, Minneapolis,
Minnesota 55408. Any nominations for director to be made at a shareholder
meeting must be made in accordance with the requirements set forth in
Honeywell's by-laws. A copy of the relevant portion of the by-laws may be
obtained upon request from the Secretary of the Company at the address listed
above.
DIRECTOR COMPENSATION
- --------------------------------------------------------------------------------
The fees for non-employee directors consist of an annual payment of $32,000 in
cash or Honeywell Common Stock, or a combination of cash and stock as determined
by each director, plus the sum of $1,200 for each Board meeting and for each
Committee meeting attended ($1,800 for the Chair of the Committee). Directors
may elect to defer the receipt of fees until retirement from the Board. Amounts
so deferred earn interest, compounded annually, at Honeywell's corporate
borrowing rate. Directors may also elect to receive their fees in restricted
stock equivalent to 110 percent of the underlying retainer or meeting fees
selected under this option.
Non-employee directors who have never been Honeywell employees are not
eligible to participate in any of the remuneration or retirement programs for
executives. Employee directors do not receive any fees or remuneration for
serving on the Board or on any Board Committee.
Non-employee directors participate in the Restricted-Stock Retirement Plan
for Non-Employee Directors. Under that Plan non-employee directors receive
annual awards of restricted stock having a market value equal to one-half of the
fees earned by a director since the prior annual meeting. Stock issued under the
Plan entitles the director to all of the rights of a shareholder, including the
right to vote and receive cash dividends. However, such restricted stock is
subject to certain restrictions against sale or transfer until a director has
served at least five years and until (a) retirement in accordance with Board
retirement policy, (b) the director's death or disability, (c) the director is
not nominated for reelection to the Board (other than at the director's own
request), or (d) the director is not reelected by the shareholders. If a
director leaves the Board for any other reason, the director forfeits all rights
in all stock awarded under the Plan (unless the Board of Directors, in its
discretion, waives forfeiture as to some or all of such stock). The number of
shares of stock listed on page 13 as being owned by the following directors
includes the following shares awarded under the Plan: A.J. Baciocco, Jr. --
4,840 shares, E.E. Bailey -- 7,799 shares, E.H. Clark, Jr. -- 8,699 shares, W.H.
Donaldson -- 10,351 shares, R.D. Fullerton -- 1,896 shares, J.J. Howard -- 3,340
shares, B. Karatz -- 1,905 shares, A.B. Rand -- 2,540 shares, S.G. Rothmeier --
6,980 shares, and M.W. Wright -- 5,984 shares.
Future compensation of non-employee directors will be determined under the
Honeywell Non-Employee Directors Fee and Stock Unit Plan, described on pages 23
and 24, if that Plan is approved by shareholders.
12
<PAGE>
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS
- --------------------------------------------------------------------------------
Brinson Partners, Inc. ("Brinson Partners"), 209 South LaSalle Chicago, Illinois
60604-1295, notified the Company that as of December 31, 1995, it was
"beneficial owner" (as defined in rules of the Securities and Exchange
Commission) of 8,897,400 of shares of Honeywell Common Stock, representing 7% of
all outstanding shares, and that these shares include 2,368,800 shares
"beneficially owned" by its affiliate, Brinson Trust Company. Brinson Partners
is a registered investment adviser and has informed Honeywell that all of these
shares are held on behalf of various clients.
SECURITY OWNERSHIP OF MANAGEMENT
- --------------------------------------------------------------------------------
The following table lists, as of February 29, 1996, the beneficial ownership of
Honeywell Common Stock by each director, Named Officer (as hereinafter defined),
and all directors and executive officers as a group. No individual director or
nominee for director beneficially owned as much as 1% of the total outstanding
shares of Common Stock, and all directors and executive officers as a group
beneficially owned approximately 1% of the outstanding shares.
Options
Exercisable
Name of Shares Within 60
Beneficial Owner Owned Days
- --------------------------------------------------------------------------------
A. J. Baciocco, Jr. ........................... 7,956 --
E. E. Bailey .................................. 11,492 --
M. R. Bonsignore .............................. 126,425* 289,730
E. H. Clark, Jr. .............................. 10,494 --
J. R. Dewane .................................. 33,101* 86,674
W. H. Donaldson ............................... 12,334 --
R. D. Fullerton ............................... 7,491 --
E. D. Grayson ................................. 13,845* 48,262
C. M. Hapka ................................... 621 --
J. J. Howard .................................. 7,027 --
E. T. Hurd .................................... 16,585 --
B. Karatz ..................................... 6,715 --
D. L. Moore ................................... 83,480* 142,838
A. B. Rand .................................... 4,167 --
S. G. Rothmeier ............................... 8,108 --
M. W. Wright .................................. 8,497 --
Directors and Executive Officers
as a group .................................. 470,024 727,761
- --------------------------------------------------------------------------------
* Includes the following shares of restricted stock subject to compensation
plans described on pages 18-19: M.R. Bonsignore 47,343; J.R. Dewane 5,874;
E.D. Grayson 6,893; and D.L. Moore 15,275.
13
<PAGE>
================================================================================
EXECUTIVE COMPENSATION
- --------------------------------------------------------------------------------
The following table shows compensation for services to Honeywell of the persons
who during 1995 were the chief executive officer and the other four most highly
compensated Executive Officers (hereafter, sometimes collectively referred to as
the Named Officers).
SUMMARY COMPENSATION TABLE
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Long-Term Compensation
---------------------------
Annual Compensation Awards
---------------------------------- ---------------------------
Other
Annual All Other
Name and Compen- Restricted Stock Options Compen-
Principal Position Year Salary ($) Bonus ($) sation ($) Awards($)(1)(2) (Shares) sation($)(3)
- -------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
M.R. Bonsignore 1995 682,917 541,616 31,714 -0- 113,131 17,682
Chairman of the Board 1994 624,375 391,858 45,311 -0- 60,000 15,274
and Chief 1993 552,771 359,657 27,873 2,245,203 105,000 10,698
Executive Officer
- -------------------------------------------------------------------------------------------------------------------------
D.L. Moore 1995 595,104 471,973 19,253 -0- 56,566 15,401
President and Chief 1994 567,188 355,967 51,140 -0- 30,000 14,160
Operating Officer 1993 517,673 336,500 17,231 2,096,208(4) 80,000 13,104
- -------------------------------------------------------------------------------------------------------------------------
J.R. Dewane 1995 279,802 210,806 4,934 -0- 27,475 6,656
President, Space 1994 263,970 145,052 5,107 -0- 17,500 6,801
and Aviation Control (5) 1993 244,888 134,949 2,793 421,341 10,000 10,678
- -------------------------------------------------------------------------------------------------------------------------
E.D. Grayson 1995 300,420 189,781 5,693 108,750 29,091 14,308
Vice President 1994 288,720 155,389 4,663 -0- 12,500 12,393
and General Counsel 1993 275,000 141,000 7,342 280,500 7,000 4,832
- -------------------------------------------------------------------------------------------------------------------------
E.T. Hurd 1995 312,075 206,282 57,006 -0- 25,859 7,707
Senior Vice President (5) 1994 277,740 172,338 6,877 -0- 17,500 7,172
1993 260,820 121,399 5,360 439,725 11,000 10,250
- -------------------------------------------------------------------------------------------------------------------------
</TABLE>
(1) Amounts in this column represent the value on the date of grant of (i)
restricted stock awards in 1993 and 1995 and (ii) performance restricted
stock awards in 1993 under the Performance Stock Program, described in the
Report on Executive Compensation on pages 18-19. Awards in the Performance
Stock Program involve restricted stock with restrictions that lapse in nine
years or at an earlier date (usually three years from the date of grant) if
specific performance goals have been achieved.
(2) As of December 29, 1995, the number and value of aggregate shares of
restricted stock held by the Named Officers is: M.R. Bonsignore (67,866
shares; $3,299,984); D.L. Moore (33,351 shares; $1,621,692); J.R. Dewane
(12,825 shares; $623,616); E.D. Grayson (l1,500 shares; $559,187); and E.T.
Hurd (13,200 shares; $641,850). Dividends are paid on all restricted Common
Stock at the same rate as paid on the Company's Common Stock.
(3) Compensation reported represents (a) the value of Company contributions of
Honeywell stock to the Company 401(k) Plan, and (b) the value of premiums
paid by the Company on split-dollar life insurance. For 1995, the dollar
value of each benefit is: M.R. Bonsignore; (a) $4,350, (b) $13,332; D.L.
Moore; (a) $4,351, (b) $11,050; J.R. Dewane; (a) $4,276, (b) $2,380; E.D.
Grayson; (a) $3,817, (b) $10,491; and E.T. Hurd; (a) $4,359, (b) $3,348.
(4) Under the terms of an employment agreement, D.L. Moore initially received
30,000 shares of restricted stock, of which 5,000 shares were to vest in
1995; while included in the amount set forth in this table, all of these
shares of restricted stock were forfeited by Mr. Moore on February 21, 1995
in the amendment to the employment agreement described on page 19.
(5) J.R. Dewane and E.T. Hurd became Executive Officers of the Company in
April, 1993.
14
<PAGE>
<TABLE>
<CAPTION>
OPTION GRANTS IN LAST FISCAL YEAR
- ------------------------------------------------------------------------------------------------------------------------------------
Potential Realizable Value at Assumed Annual
Rates of Stock Price Appreciation for Option
Individual Grants (1) Term (2)
- -------------------------------------------------------------------------------- ------------------------------------------------
Number of % of Total
Securities Options
Underlying Granted to
Options Employees Exercise or
Granted in Fiscal Base Price Expiration
Name (#) Year ($/Sh) Date 0%($) 5% ($) 10% ($)
- ---- ------- ---- ---- ---- ----- ------ -------
<S> <C> <C> <C> <C> <C> <C> <C>
M.R. Bonsignore ........... 113,131 6.10 43.3125 7/17/05 0 3,081,575 7,809,316
D.L. Moore ................ 56,566 3.00 43.3125 7/17/05 0 1,540,801 3,904,693
J.R. Dewane ............... 27,475 1.50 43.3125 7/17/05 0 748,391 1,896,571
E.D. Grayson .............. 29,091 1.60 43.3125 7/17/05 0 792,410 2,008,122
E.T. Hurd ................. 25,859 1.40 43.3125 7/17/05 0 704,373 1,785,020
- ------------------------------------------------------------------------------------------------------------------------------------
All Shareholders (3) ...... N/A N/A N/A N/A 0 3,458,765,131 8,765,189,928
All Optionees ............. 1,876,366 100.0 43.4450 0 50,232,609 126,995,268
Optionee Gain as % of All
Shareholders' Gain ........ N/A N/A N/A N/A N/A 1.4% 1.4%
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
(1) Stock options to executives, including the Named Officers, become
exercisable eighteen months after the grant date, and to other optionees,
one year after the grant date; and the option exercise price may be paid in
cash, shares or a combination. The options shown for Named Officers include
both Incentive Stock Options and nonqualified stock options. Nonqualified
stock options currently are subject to a reload feature: when a
nonqualified option is excercised with the payment of the exercise price by
delivery of previously-owned shares of the Company's Common Stock, a reload
option is granted for the number of shares used to pay the exercise price,
with a new exercise price equal to the market value of the Company's Common
Stock on the date of exercise and a term expiring on the expiration date of
the original option.
(2) The dollar amounts under these columns are the result of calculations at 0%
and at the 5% and 10% rates set by the Securities and Exchange Commission
and therefore are not intended to forecast possible future appreciation, if
any, in the Company's stock price.
(3) For "All Shareholders" the gain is calculated from $43.3125, the fair
market value of the Company's Common Stock on July 18, 1995, when stock
options were granted, and is measured over the ten-year period ending July
17, 2005, when those stock options expire.
AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR
AND FY-END OPTION VALUES
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Number of Securities
Underlying Value of Unexercised
Unexercised Options In-the-Money Options
at at
FY-End (#) FY-End ($)
-------- ----------
Shares Acquired Value Exercisable/ Exercisable/
Name on Exercise (#) Realized ($) Unexercisable Unexercisable
- ---- --------------- ------------ ------------- -------------
<S> <C> <C> <C> <C>
M.R. Bonsignore ........... -0- -0- 289,730/168,131 5,766,277/1,355,302
D.L. Moore ................ 36,718 747,359 124,838/111,566 2,003,624/1,090,153
J.R. Dewane ............... 4,556 79,662 86,674/ 27,475 1,813,377/ 128,789
E.D. Grayson .............. -0- -0- 48,262/ 29,091 618,512/ 136,364
E.T. Hurd ................. 55,487 597,186 -0- / 25,859 -0- / 121,214
</TABLE>
15
<PAGE>
- --------------------------------------------------------------------------------
REPORT ON EXECUTIVE COMPENSATION
- --------------------------------------------------------------------------------
Personnel Committee
The Personnel Committee of the Board of Directors, consisting of independent
directors, is responsible for establishing compensation policies that apply to
executives and managers of the Company, including the Executive Officers. The
Personnel Committee has adopted a management compensation program based on the
following compensation principles:
o Honeywell provides the level of total compensation necessary to
attract and retain the best executives in its industries.
o Compensation is linked to performance and to the interests of
shareholders.
o Compensation programs recognize both individual and team performance.
o Compensation balances rewards for short-term vs. long-term results.
o Compensation programs include features that encourage executives to
make a long-term career commitment to Honeywell and its shareholders.
o Plans include measurements based on quality and customer satisfaction.
The Personnel Committee annually reviews total compensation for Honeywell
executives, as well as each component of compensation, with decisions on
compensation for employee directors subject to the approval of the Board of
Directors. The review of compensation involves a market comparison of
compensation and changes in compensation for equivalent positions in related
industrial groups and selected peer companies, based on surveys provided by the
Company's staff and by independent compensation consultants. Honeywell's primary
market comparison is a group of twenty-one manufacturing companies, each with
annual revenue in excess of $4 billion (hereinafter referred to as the
"Compensation Peer Group"). These companies were chosen because they (i) operate
in businesses similar to Honeywell's, (ii) compete for executives with
experience and skills similar to those Honeywell requires, (iii) have an
extended history of successful financial performance, and (iv) submit their
executive compensation data to the executive compensation database maintained by
the consulting firm that provides this executive compensation survey
information to Honeywell. The Compensation Peer Group is not the same as the
composite of the S&P Electrical Equipment Index and the S&P Aerospace and
Defense Index used in the performance graph on page 20; however, ten of the
twenty-one companies in the Compensation Peer Group are among the eighteen
companies included in the composite index.
In analyzing compensation, the Personnel Committee utilizes a compensation
consulting firm to survey executive jobs at the Compensation Peer Group in order
to develop a target compensation for each executive job category. Target
compensation is based on the median of actual compensation as adjusted by the
consultant to reflect variations in revenue among the companies in the
Compensation Peer Group, i.e. positions with similar responsibilities will
receive greater compensation at a company with greater revenue. Target
compensation is compared to results in several standard compensation surveys to
verify market position. Compensation decisions on individual executives may also
be based on other, subjective factors such as individual performance, level of
responsibility or unique skills of the executive.
The compensation program for 1995 was designed to ensure that compensation
paid to the Named Officers will qualify for deductibility under Section 162(m)
of the Internal Revenue Code. In 1995, the Company's shareholders approved the
Honeywell Senior Management Performance Incentive Plan (hereinafter the
"Performance Incentive Plan"),which provides for annual incentive payments to
participants in the Performance Incentive Plan that qualify for deductibility
under Section 162(m). The Personnel Committee has determined that it will make
every reasonable effort, consistent with sound executive compensation principles
and the needs of the Company, to ensure that amounts paid the Named Officers are
deductible by the Company. The Committee notes, however, that increases in
compensation granted to Mr. Bonsignore and Mr. Moore on April 20, 1993, upon
their respective promotions to chief executive officer and chief operating
officer (described more fully on page 19), could result in a loss of
deductibility in years after 1995 under regulations, issued by the Internal
Revenue Service, covering Section 162(m), which was enacted into law on August
10, 1993 (i.e. the contracts were adopted before passage of the new law but
after the effective date of the new law).
Annual Compensation
The Personnel Committee has established the Corporate Executive Compensation
Plan to provide annual cash compensation consisting of base salary and
16
<PAGE>
short-term annual incentive (reported in the Bonus column of the Summary
Compensation Table on page 14). The objective of the Corporate Executive
Compensation Plan is to deliver total annual cash compensation competitive with
compensation offered at other leading, high-technology companies for similar
jobs while at the same time linking the payment of the annual cash incentive to
the achievement of specific objectives in the Company's annual operating plan as
approved by the Board of Directors. The mix between salary and annual incentive
pay is related to an executive's job grade. Executives at higher grade levels in
the Company have a greater percentage of their total cash compensation
contingent on the accomplishment of business objectives, i.e. the higher the
executive grade level, the greater the proportion of annual compensation is at
risk.
Salary
Annual salary is designed to compensate executives for their sustained
performance. Salary ranges and target increases for each compensation grade are
established under spending guidelines approved by the Personnel Committee.
Spending guidelines for increases to the executive base salaries are based on a
comparison of Honeywell salaries to the survey of the Compensation Peer Group,
anticipated salary increases at other companies for the upcoming year and
Honeywell operating budget requirements. Salary increases are also affected by
the subjective review of an executive's performance through annual review by the
executive's superior. Yearly salary increases for Executive Officers are
reviewed and approved in advance by the Personnel Committee. For 1995, the
Personnel Committee approved average salary increases (excluding promotions) for
the Executive Officers of 6.3 percent at an average frequency of 12.6 months
from the date of the last increase. The salaries paid to Executive Officers in
1995 were projected to be at the median of the Compensation Peer Group.
Annual Incentive
The maximum annual incentive for Mr. Bonsignore and Mr. Moore, who were both
selected by the Personnel Committee to be participants in the Performance
Incentive Plan, is (i) 35 percent and 25 percent, respectively, of an incentive
compensation pool consisting of l percent of income from continuing operations
before income taxes, or (ii) a lesser amount based on factors established under
the Corporate Executive Compensation Plan, which is applicable to all other
executives in the Company.
Under the Corporate Executive Compensation Plan each executive grade level
is assigned a fixed percentage of annual salary as the target, on-plan annual
incentive opportunity. The percentage is established by the Personnel Committee
based on survey information on short-term incentive opportunity available for
similar positions at the Compensation Peer Group, and for 1995, annual incentive
was targeted at the median of the Compensation Peer Group. For the Executive
Officers, this ranges from 40 percent of annual salary to 60 percent of annual
salary in the case of the chief executive officer.
The formula for payment of annual incentive relating to Company performance
during 1995 was based on the Company's operating results (adjusted for special
items) with 50 percent of the on-plan incentive to be paid if the Company
achieved the net income objective established in the 1995 operating plan
approved by the Board of Directors, 30 percent to be paid if the Company
achieved the return-on-investment objective in the 1995 operating plan, and 20
percent to be paid if the Company achieved the working capital objective in the
1995 operating plan. Participants in the Plan receive no payment on each
objective until a fixed threshold of the performance objective is achieved, with
payments increasing, as results improve, from 50 percent to 100 percent of
target incentive at the on-plan performance objective and to a maximum of
two-times the target incentive if a specified premium to the performance
objective is achieved. For participants other than Mr. Bonsignore and Mr. Moore,
the target, on-plan annual incentive could be increased or decreased by 10
percent for each of two supplemental objectives relating to how well a
participant's business unit performed on (i) customer satisfaction and (ii) a
specific performance objective established for that unit. In no event can the
amount paid as annual incentive to an individual exceed two times the target
incentive opportunity (percent of annual salary) established by the Committee at
the beginning of 1995.
The Company achieved the 1995 objectives in net income,
return-on-investment and working capital, and with the adjustments for the two
supplemental objectives, the resulting annual incentive approved by the
Committee for Executive Officers averaged 142 percent of the target incentive
opportunity. The 1995 annual incentive for the five Named Officers is set forth
in the Bonus column of the Summary Compensation Table. The 1995 incentive
17
<PAGE>
compensation paid to Executive Officers was not impacted by the Company's by-law
limitation, as more fully described on page 21, as the total amount awarded in
1995 did not exceed the available amount as prescribed under the by-law.
Stock Ownership
Ownership of Honeywell stock is expected of Honeywell executives. The
Personnel Committee believes that linking a significant portion of an
executive's current and potential future net worth to the Company's success, as
reflected in the stock price, gives the executive a stake similar to that of the
Company owners and results in management for the benefit of those owners.
In 1990, the Personnel Committee established ownership guidelines to
promote this alignment of management and shareholder interests. Senior
executives are expected to accumulate and hold Honeywell stock having a value at
least equal to a set percentage of their annual salary level; executives in
higher grade levels are expected to own a larger multiple of their salary in
stock. The Executive Officers have the following ownership goals: chief
executive officer and chief operating officer -- three times the mid-point of
grade salary range; business presidents and chief financial officer -- two times
the mid-point of grade salary range; and other Executive Officers -- one and
one-half times the mid-point of grade salary range. To meet ownership guidelines
executives may exercise stock options, retain unrestricted shares paid out in
incentive programs or make open market purchases; however, shares received as
restricted stock or through the Company's match of stock in the 401(k) Plan will
not be counted.
Long Term Incentive -- Stock Options
Stock options provide compensation that closely links the interests of
management and shareholders. Stock options have been granted periodically at the
fair market value of Honeywell Common Stock on the date of the grant,
exercisable one year from the date of the grant. Based on annual market surveys
of long-term incentive, the Personnel Committee approves a target number of
shares for each executive grade level. Management makes recommendations to the
Committee as to how many, if any, shares will be granted to each executive based
on the subjective application of one or more of the following criteria:
o executive's ability to impact financial performance in terms of
profitability and revenue,
o executive's past performance,
o expectations of executive's future contributions.
All individual stock option grants are reviewed and approved by the Personnel
Committee. In 1995, the Committee increased the usual numbers of shares granted
and extended vesting to eighteen months, to reflect the Committee's decision to
defer the next regular grant of options from July 1996 until February 1997. In
approving stock options granted in 1995, the Committee did not take into
consideration the amount of stock options and restricted stock already held by
an executive.
Long Term Incentive -- Performance Stock Program
The Performance Stock Program (hereinafter the "Program"), established pursuant
to the 1988 Honeywell Stock and Incentive Plan, was designed to motivate senior
executives whose work most affects Company earnings and tie their compensation
directly to Honeywell's long-term financial objectives. For the current award
period of this Program, the Personnel Committee selected eligible executives
early in 1993 and determined the number of shares of restricted stock to be
issued to each participant. The shares were restricted until the earlier to
occur of: (i) the achievement of performance goals within a specified
measurement period, usually three years, or (ii) nine years.
For the three-year period, 1993 to 1995, the Personnel Committee
established the following performance objectives for the Program: one-third of
the shares granted were tied to the Company's achieving the cumulative pre-tax
profit objective for 1993-1995 that had been established in the 1993 long-range
plan approved by the Board of Directors. If the objective was reached or
exceeded at the end of 1995, the restrictions on this one-third of the shares
were to be released. If 90 percent of the objective was reached, restrictions
were to be waived on one-half of this one-third portion, and if results fell
within 90 and 100 percent of the objective, this portion of the award was to be
pro-rated.
For a second objective, the Personnel Com-mittee tied one-third of the
shares granted to Honeywell's total shareholder return (stock appreciation plus
dividends) compared to the performance of a group of selected peer companies. If
Honeywell ranked in the top quartile, restrictions were to be waived on this
one-third portion of shares; if Honeywell ranked in the second quartile,
restrictions were to be waived on one-half of this portion. Performance of this
objective was measured at the end of 1995 against results for 1993-1995; and,
alternatively, performance was measured each year within the three-year period
with any resulting award applied to one-third of the shares allocated to this
objective.
18
<PAGE>
For a third objective, one-third of the shares granted were tied to the
Company's achieving the revenue objective for 1995 that had been established in
the 1993 long-range plan approved by the Board of Directors. If the objective
was reached or exceeded by the end of 1995, the restrictions on this one-third
of the shares were to be released. If 90 percent of the objective was reached,
restrictions were to be waived on one-half of this one-third portion, and if
results fell within 90 and 100 percent of the objective, this portion of the
award was to be pro-rated.
Honeywell financial performance for 1993-1995 measured against the three
performance objectives resulted in the release of 54.2 percent of the
performance restricted shares granted to Executive Officers including the Named
Officers. The shares of restricted stock initially awarded in 1993 under this
Program to the five Named Officers are included in the Restricted Stock Awards
column of the Summary Compensation Table.
Long term incentive, including stock options and the Performance Stock
Program, awarded to Executive Officers in 1995 is at the median of the
Compensation Peer Group.
Restricted Stock
The Personnel Committee has occasionally granted restricted stock with a fixed
restriction period to insure retention of key executives or as part of the
compensation provided to a new executive hired from outside the Company. During
1995, three Executive Officers were granted a total of 36,000 shares of
restricted stock with vesting restrictions of from three to six years.
Employment Agreements
At the time Mr. Moore became president and chief operating officer, in April
1993, he entered into an employment agreement with the Company, which was
subsequently amended in February 1995. Under the agreement, as amended, Mr.
Moore received stock options for 55,000 shares, priced at fair market value on
the date of grant, with options vesting under the following schedule: options
for 18,000 shares on March 1, 1996, options for 18,000 shares on March 1, 1997,
and options for 19,000 shares on March 1, 1998. The agreement also provides that
upon his retirement from the Company, Mr. Moore will receive sixty monthly
payments of $34,026, in addition to his normal retirement benefit, which,
regardless of when he retires, is guaranteed to be not less than the retirement
benefit he would have received if he retired at age 60.
At the time of Mr. Hurd's reassignment as senior vice president, in January
1995, he entered into an employment agreement with the Company, guaranteeing
salary and regular annual incentive through January 1996 and providing Mr. Hurd,
when he retires, a severance payment equivalent to one year's base pay plus
on-plan annual incentive.
Chief Executive Officer
Michael R. Bonsignore became chairman of the board and chief executive officer
at the 1993 Annual Meeting of Shareholders. The non-employee directors on the
Board of Directors meet annually, in private, to review the chief executive
officer's performance, and the conclusions of these directors are used by the
Personnel Committee in setting salary and other compensation for the coming
year. In 1995, Mr. Bonsignore received a 8.3 percent salary increase 13 months
after his previous increase. The Committee determined that the 1995 annual
incentive award to Mr. Bonsignore should be based on the factors established
under the Corporate Executive Compensation Plan, described on pages 16 through
18, and therefore as a result of the Company's performance during the year, Mr.
Bonsignore received 132 percent of the target incentive opportunity established
at the beginning of the year. Mr. Bonsignore's total annual compensation,
including salary and annual incentive, is below the median for his position in
the Compensation Peer Group.
Participation in the Performance Stock Program by Mr. Bonsignore is
governed by the same performance measurement factors that apply to other
Executive Officers. (See the explanation of Long Term Incentive--Stock Options,
page 18.) In July 1995, Mr. Bonsignore received a stock option grant for 113,131
shares, which was above the median for his position but reflects the Committee's
decision to defer the next regular grant of options from July 1996 until
February l997. At the time he became chief executive officer in 1993, Mr.
Bonsignore received a special long-term award consisting of 30,000 shares of
restricted stock and a stock option, priced at current fair market value, for
55,000 shares, both vesting in April 1998.
Submitted by the Personnel Committee of the Board of Directors:
A. J. Baciocco, Jr.
J. J. Howard
B. Karatz
A. B. Rand
M. W. Wright, Chair
19
<PAGE>
PERFORMANCE GRAPH
- --------------------------------------------------------------------------------
The graph below compares the cumulative total shareholder return on Honeywell's
Common Stock for the last five fiscal years with the cumulative total return of
(1) the S&P 500 Index and (2) a composite of the S&P Electrical Equipment Index
and the S&P Aerospace and Defense Index. The composite index is weighted
two-thirds Electrical Equipment and one-third Aerospace and Defense to reflect
the approximate division in the Company's revenue between (i) its Home and
Building Control and Industrial businesses and (ii) its Space and Aviation
business. The graph assumes the investment of $100 in Honeywell's Common Stock,
the S&P 500 Index and the Composite Industry Index at the market close on
December 31, 1990 and the reinvestment of all dividends.
[The following table was represented by a line graph in the printed material]
- --------------------------------------------------------------------------------
S&P EE/SP
Aerospace
Year Honeywell S&P 500 & Defense
- ---- --------- ------- ---------
1990 100 100 100
1991 150 130 128
1992 157 140 139
1993 166 154 171
1994 157 156 177
1995 249 215 263
- --------------------------------------------------------------------------------
20
<PAGE>
BY-LAW LIMITATION ON INCENTIVE COMPENSATION PAYMENTS
- --------------------------------------------------------------------------------
Article XII of the by-laws, adopted by the stockholders in 1954, limits the
total amount of incentive compensation which may be paid to "officers, heads of
departments and other executives and key employees of the Corporation and its
subsidiaries whose work most affects the Corporation's earnings." Incentive
compensation set aside for any year for that group may not exceed three percent
of the Company's consolidated income for that year (excluding the whole or any
part of any item of unusual or nonrecurring income or loss as determined by the
Personnel Committee of the Board) before federal or state taxes on income and
before provision for incentive payments, provided that no payments may be made
for any year in which a dividend of less than $.0625 Per share of Common Stock
(as presently constituted) is paid. The Personnel Committee has identified the
62 senior executives whose work most affects Company earnings. Incentive
compensation awarded under the Honeywell Senior Management Performance Incentive
Plan and the Corporate Executive Compensation Plan described on pages 16 through
18 in the Report on Executive Compensation and the incentive portion of awards
accrued under the Performance Stock Program described on pages 18 and 19, are
subject to this by-law limitation. The total amount available under Article XII
of the by-laws for 1995 incentive compensation to the 62 executives who were
eligible in 1995 is $15,360,030 and the total incentive compensation awarded or
accrued under all incentive arrangements for these 62 executives of the Company
and its subsidiaries in 1995 is $6,490,365.
<TABLE>
<CAPTION>
PENSION PLAN TABLE
- --------------------------------------------------------------------------------
Remuneration Years of Service
--------------------------------------------------------------------
(Average of Salaries Plus Incentive
Payments During Highest 60 Consecutive
Months of 120 Months Prior to Retirement) 15 20 25 30 35
- ------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
$ 100,000 $ 21,786 $ 29,048 $ 36,310 $ 43,572 $ 46,072
--------------------------------------------------------------------
300,000 69,786 93,048 116,310 139,572 147,072
--------------------------------------------------------------------
500,000 117,786 157,048 196,310 235,572 248,072
--------------------------------------------------------------------
700,000 165,786 221,048 276,310 331,572 349,072
--------------------------------------------------------------------
900,000 213,786 285,048 356,310 427,572 450,072
--------------------------------------------------------------------
1,100,000 261,786 349,048 436,310 523,572 551,072
--------------------------------------------------------------------
1.300,000 309,786 413,048 516,310 619,572 652,072
- ------------------------------------------------------------------------------------------------------------------
</TABLE>
Honeywell and its subsidiaries maintain a variety of pension and retirement
plans for their employees. The table above illustrates the annual benefits
payable by the Company in specified remuneration and years-of-service
classifications at normal retirement under the Retirement Benefit Plan.
Remuneration utilized for pension formula purposes includes salary and annual
bonus reported as set forth in the Table on page 14. (Directors who have not
been employees of the Company do not receive benefits under this Plan.) This
Plan was amended, effective July 1, 1989, to comply with the Tax Reform Act of
1986. The Plan is a defined benefit plan. Contributions by Honeywell, when
required by the Plan, are determined on an actuarial basis and are not made
primarily for the benefit of any individual. The credited years of service for
the Named Officers in the Table on page 14 are: M.R. Bonsignore -- 25 years;
D.L. Moore -- 33 years; J.R. Dewane -- 35 years; E.D. Grayson -- 3 years; and
E.T. Hurd -- 33 years. A portion of the benefits shown in the table may be paid
pursuant to the Company's supplementary retirement plans, rather than from plan
trusts, due to limitations imposed by the Internal Revenue Code, which restricts
the amount of benefits payable under tax-qualified plans.
CHANGE IN CONTROL AND TERMINATION ARRANGEMENTS
- --------------------------------------------------------------------------------
The Company maintains several executive benefit plans and agreements which
provide for enhanced employee benefits upon "a change in control" of the
Company. The 1993 Honeywell Stock and Incentive Plan, and 1988 Honeywell Stock
and Incentive Plan have change in control provisions. Under these Plans, a
change of control will generally be deemed to have occurred upon (i) a third
21
<PAGE>
party's acquisition of thirty percent or more of the Company's stock, (ii) a
change in the majority of the members of the Company's Board of Directors, (iii)
a merger, consolidation or liquidation of the Company, or (iv) a sale of all or
substantially all of the assets of the Company. The term "change in control" is
defined identically in each of the Plans.
The 1993 Honeywell Stock and Incentive Plan and the 1988 Honeywell Stock
and Incentive Plan generally provide for the award of options, restricted stock
and stock-based awards. Upon a change in control, all options become immediately
exercisable and all restricted shares become immediately vested. Additionally,
all performance-based awards are paid out, assuming attainment of Company
performance goals, based on the highest per share amount paid by a third party
in connection with a change in control, prorated to the date of change in
control.
The Company's Retirement Benefit Plan (the "Retirement Plan") provides
retirement benefits as described herein. In the event of (i) the Retirement
Plan's termination, (ii) the Retirement Plan's merger or consolidation with
another plan or (iii) the transfer of assets from the Retirement Plan to another
plan, within the three-year period following a change in control, all assets in
excess of those needed to satisfy the Retirement Plan's obligations to its
participants and beneficiaries will first be applied to Company payments for
pre-65 post-retiree medical benefits to the maximum extent permitted by law,
with any remaining assets applied to provide increased retirement benefits on a
proportional basis to active participants, retired participants and some vested
terminated participants.
The supplementary retirement plans generally provide for the payment of
retirement benefits in excess of those provided by the Company's qualified
retirement plans. Upon a change in control, participants' accrued benefits under
any of the plans become fully vested and are paid out in a lump sum following
termination of employment after the change in control.
The Company has established a grantor trust under Sections 671 through 677
of the Internal Revenue Code in connection with the Honeywell Corporate
Executive Compensation Plan, the Honeywell Supplementary Retirement Plan and
various Supplementary Executive Retirement Plans. The trust agreement requires
the Company to transfer amounts to the trust that are intended to pay all or a
portion of its obligations under the plans set forth above. Under the trust, the
trustee will pay participants in the supplementary retirement plans or their
beneficiaries, subject to claims of the Company's creditors, the amounts to
which they are entitled under the terms of those plans unless the Company elects
to pay the benefits directly. If the funds in the grantor trust are insufficient
to pay amounts due supplementary retirement plan participants or their
beneficiaries, the deficiency will be paid by the Company.
The Company has entered into executive termination agreements (the
"Agreements") with 25 of its executives, including each of the Named Officers.
The Agreements will be automatically extended each January 1 unless the Company
gives notice to an executive by October 1 of the preceding year that it does not
wish to extend the term of the executive's Agreement. If a change in control
occurs at any time during the term of an Agreement, the term is automatically
extended for a period of thirty-six months, but not beyond the end of the month
in which the executive would reach age 65. If subsequent to a change in control
an executive's employment is terminated during the term of the executive's
Agreement by the Company for reasons other than cause (as defined in the
Agreement) or by the executive as a result of certain changes in the executive's
duties, compensation, benefits or location, the executive will receive a lump
sum payment equal to up to three-times (in some cases, two-times) the
executive's annual salary and on-plan incentive bonus or the average of the
executive's annual bonuses during the three-year period preceding a change in
control, whichever is higher. The Company will also provide the executive with
medical, life insurance and disability coverage for a period of up to three
years (in some cases, two years). In the event that any payments made to an
executive in connection with a change in control are subject to the excise tax
imposed by Section 4999 of the Internal Revenue Code, the Company will make
additions to such executive's payments as necessary to restore the executive to
the same after-tax position he or she would have had if the excise tax had not
been imposed.
22
<PAGE>
================================================================================
APPROVAL OF AUDITORS
- --------------------------------------------------------------------------------
It is intended that the shares represented by the enclosed proxy will be voted
(unless the proxy indicates to the contrary) to approve the selection of
Deloitte & Touche LLP, independent public accountants, to examine the financial
statements to be included in the 1996 Annual Report to Shareholders.
A partner of Deloitte & Touche LLP will be present at the Meeting, will be
given the opportunity to make a statement, and will also respond to appropriate
questions.
The Board of Directors recommends a vote FOR approval of the selection of
Deloitte & Touche LLP as the independent public accountants.
================================================================================
PROPOSED HONEYWELL NON-EMPLOYEE DIRECTORS FEE AND
STOCK UNIT PLAN
- --------------------------------------------------------------------------------
Introduction
The Board of Directors has adopted, subject to shareholder approval, the
Honeywell Non-Employee Directors Fee and Stock Unit Plan (hereinafter the "New
Director Plan"). If approved by shareholders, the New Director Plan will replace
(i) the Honeywell Restricted-Stock Retirement Plan for Non-Employee Directors,
which was approved by shareholders in 1988, (hereinafter the "1988
Restricted-Stock Plan") and (ii) the Compensation Plan for Outside Directors
(hereinafter the "Director Compensation Plan").
The Board of Directors believes that a significant portion of director
compensation should be in the form of Honeywell stock or stock equivalent units
whose value fluctuates with the value of Honeywell stock (hereinafter "Stock
Units"). The principal purpose of the New Director Plan is to utilize Stock
Units in replacement of restricted Honeywell Common Stock (hereinafter
"Restricted Stock") either (i) issued under the 1988 Restricted-Stock Plan or
(ii) available to directors as an option under the Director Compensation Plan.
It is not intended that the New Director Plan offer directors any increase in
compensation.
The following summary description of the New Director Plan is qualified in
its entirety by reference to the full text of the New Director Plan, which is
attached to this Proxy Statement as Exhibit A.
Principal Features of New Director Plan
o Basic Elements of Compensation Remain Unchanged with Stock Units
Replacing Restricted Stock Used in Prior Plans.
(a) Directors have the option of receiving their annual retainer and
meeting fees (i) in cash, (ii) in Stock Units or (iii) in a combination of cash
and Stock Units. A director may elect to defer any portion of such fees that is
otherwise payable in cash; amounts so deferred earn interest at Honeywell's
corporate borrowing rate. If a director elects to receive the annual retainer or
fees in Stock Units, the director will receive Stock Units having a value equal
to 110 percent of the annual retainer or meeting fees selected under this
option.
(b) On the date of each Annual Meeting, commencing with the 1996 Annual
Meeting, each director who has served as a director during the preceding year
will receive an award of Stock Units having a value equal to one-half of the
annual retainer and meeting fees earned by the director during the preceding
year.
o Conversion of Awards under Prior Plans.
(a) On the date of the 1996 Annual Meeting, directors' Restricted Stock
issued under the 1988 Restricted-Stock Plan (currently 54,334 shares) or the
Director Compensation Plan (currently 12,845 shares) will be canceled and
directors will be credited with an equivalent number of Stock Units.
(b) Under the terms of the 1988 Restricted-Stock Plan, six of the directors
also own a total of 1,541 shares of restricted common stock of Alliant
Techsystems, Inc., which was issued to shareholders of Honeywell on September
28, 1990. On the date of the 1996 Annual Meeting, these shares will be canceled,
and directors will receive the number of Stock Units equal to the total value,
on that date, of their restricted common stock of Alliant Techsystems, Inc.
divided by the fair market value of Honeywell Common Stock on that date. On
February 29, 1996, the closing price of the common stock of Alliant Techsystems,
Inc. was $50.00, and the closing price of Honeywell Common Stock was $53.00.
23
<PAGE>
(c) Under the Director Compensation Plan, six of the current directors had
elected during prior years of service to defer receipt of the annual retainer or
meeting fees until retirement from the Board, with the deferred funds earning
interest annually at the Company's corporate borrowing rate. The New Director
Plan allows these directors a one-time option to cancel, as of the 1996 Annual
Meeting, all or a portion of their deferred compensation accounts in exchange
for an award of the number of Stock Units equal to the amount so canceled
divided by the fair market value of Honeywell Common Stock on the date of the
1996 Annual Meeting. As of December 31, 1995 the total value of the six deferred
compensation accounts amounted to $1,607,182.
o Dividend Equivalents Rights. The grant of Stock Units will not confer on a
director any rights as a shareholder of the Company (such as the right to vote
and the right to receive dividends); however, on each dividend payment date,
each outstanding Stock Unit will be credited with additional Stock Units
(including fractional Stock Units) having a value equivalent to the applicable
dividend per share on Honeywell Common Stock.
o Delivery of Shares and Payment of preferred Fees. Shares of Honeywell Common
Stock will be delivered in respect of Stock Units upon a director's termination
of service as a director. However, upon a change-in-control of the Company, a
director will receive cash in lieu of Common Stock based on the higher of the
fair market value of Honeywell Common Stock on the date of the change-in-control
and the price paid for Honeywell Common Stock in the transaction constituting
the change-in-control. Deferred fees will be paid on the earlier of a director's
termination of service as a director and a change-of-control of the Company.
o Administration and Amendment. The New Director Plan will be administered by a
committee of the Board of Directors (currently the Nominating and Governance
Committee). The Board of Directors may, at any time, amend or terminate the New
Director Plan, but no amendment or termination may reduce a director's rights
under previously granted awards or with respect to any fees previously earned
without the consent of a director. No amendment that requires shareholder
approval in order for the New Director Plan to continue to comply with Rule
16b-3, promulgated under the Securities Exchange Act of 1934, as amended, will
be effective unless approved by the requisite vote of shareholders.
o Shares Available for Issuance. A maximum of 300,000 shares of Honeywell Common
Stock may be issued under the New Director Plan, subject to adjustment in the
event of certain corporate transactions, including stock dividends and splits
and other changes in the capital of the Company. Approximately 68,000 issued and
outstanding shares of Honeywell Common Stock will be canceled with the
replacement of Restricted Stock issued under the 1988 Restricted-Stock Plan and
the Director Compensation Plan.
Other Information
There are currently eleven non-employee directors of the Company. The New
Director Plan includes provisions applicable only to Canadian citizens who serve
as non-employee director, which provide: (i) Restricted Stock previously issued
under either the 1988 Restricted Stock Plan or the Director Compensation Plan
will not be converted to Stock Units, and (ii) no shares of Honeywell Common
Stock will be delivered in respect of Stock Units, and no deferred fees will be
paid, except upon termination of service as a director.
The favorable vote of a majority of shares present in person or by proxy at the
Annual Meeting is required for approval of the New Director Plan; abstentions
will, and broker non-votes will not, be counted as being present at the Annual
Meeting for this purpose. In the event the New Director Plan does not receive
the favorable majority vote, the 1988 Restricted-Stock Plan and the Director
Compensation Plan will continue in effect.
The Board of Directors recommends a vote FOR approval of the Honeywell
Non-Employee Directors Fee and Stock Unit Plan.
24
<PAGE>
================================================================================
OTHER INFORMATION
FURNISHED PURSUANT TO REGULATIONS OF THE
SECURITIES AND EXCHANGE COMMISSION
- --------------------------------------------------------------------------------
Honeywell pays the cost of preparing, assembling and mailing this
proxy-soliciting material. In addition to the use of the mail, proxies may be
solicited personally, by telephone or telegraph, or by Honeywell officers and
employees without additional compensation. Honeywell pays all costs of
solicitation, including certain expenses of brokers and nominees who mail proxy
material to their customers or principals. In addition, Georgeson & Company Inc.
has been retained to assist in the solicitation of proxies for the 1996 Annual
Meeting of Shareholders at a fee of approximately $18,000 plus associated costs
and expenses.
Compliance with Section 16(a) of the Securities
Exchange Act of 1934
Section 16(a) requires the Company's directors and executive officers to file
with the Securities and Exchange Commission and the New York Stock Exchange
reports of ownership and changes in ownership of the Company's Common Stock, and
the Company is required to identify any of those persons who fail to file such
reports on a timely basis. The Form 4 reports previously filed by the Company on
behalf of Mr. A. Rand, a director, failed to include stock acquired by him under
the Company's dividend reinvestment plan. The Company subsequently filed with
the Securities and Exchange Commission a Form 5 report that included this stock
information.
Shareholder Proposals for 1996
An eligible shareholder who wants to have a qualified proposal considered for
inclusion in the proxy statement for the 1997 Annual Meeting of Shareholders
must notify the Secretary of the Company. The proposal must be received at the
Company's offices no later than November 11, 1996. A shareholder must have been
a registered or beneficial owner of at least one percent of the Company's
outstanding common stock or stock with a market value of $1,000 for at least one
year prior to submitting the proposal, and the shareholder must continue to own
such stock through the date on which the Meeting is held.
The Company's by-laws outline procedures, including minimum notice provisions,
for shareholder nomination of directors and other shareholder business to be
brought before the Annual Meeting. A copy of the pertinent by-law provisions is
available on request to the Secretary of the Company, Honeywell Inc., Honeywell
Plaza, Minneapolis, Minnesota 55408.
By Order of the Board of Directors
Sigurd Ueland
Secretary
Dated March 11, 1996
See enclosed proxy -- please sign and mail promptly.
25
<PAGE>
EXHIBIT A
================================================================================
HONEYWELL NON-EMPLOYEE DIRECTORS FEE AND STOCK UNIT PLAN
- --------------------------------------------------------------------------------
1. Purpose of the Plan. The purpose of the Honeywell Non-Employee Directors
Fee and Stock Unit Plan ("Plan") is to grant Awards of Stock Units to
non-employee directors of the Company in order to align their compensation with
the equity interests of the Company's stockholders. The Plan provides for
compensation through the payment of Directors' Annual Retainer and Meeting Fees
in cash or Stock Units, or for the deferral of such fees. The Plan shall become
effective on the date ("Effective Date") the Plan is approved by the
stockholders or such later date as may be established by the Board.
2. Definitions.
"Alliant Restricted Stock" shall mean Restricted Stock (as defined in the
Prior Plans) of Alliant Techsystems, Inc.
"Annual Meeting" shall mean an annual meeting of stockholders of the
Company.
"Annual Retainer" shall mean the retainer fee, established by the Board,
paid to a Director for services on the Board for a Director Year.
"Award" shall mean an award of Stock Units pursuant to the Plan.
"Board" shall mean the Board of Directors of the Company.
"Canadian Director" shall mean a Director who is a citizen of Canada.
"Change in Control" of the Company shall have occurred if:
(i) any "person", as such term is used in Sections 13(d) and 14(d) of
the Exchange Act (other than the Company or any of its subsidiaries; any
trustee or other fiduciary holding securities under an employee benefit
plan of the Company or any of its subsidiaries; an underwriter temporarily
holding securities pursuant to an offering of such securities; or any
corporation owned, directly or indirectly, by the stockholders of the
Company in substantially the same proportions as their ownership of stock
of the Company), is or becomes the "beneficial owner" (as defined in Rule
13d-3 under the Exchange Act), directly or indirectly, of securities of the
Company representing 30% or more of the combined voting power of the
Company's then outstanding securities; or
(ii) during any period of not more than two consecutive years (not
including any period prior to the execution of this amendment to the Plan),
individuals who at the beginning of such period constitute the Board, and
any new director (other than a director designated by a person who has
entered into an agreement with the Company to effect a transaction
described in clause (i), (iii) or (iv) of this Section) whose election by
the Board or nomination for election by the Company's stockholders was
approved by a vote of at least two-thirds (2/3) of the directors then still
in office who either were directors at the beginning of the period or whose
election or nomination for election was previously so approved, cease for
any reason to constitute at least a majority thereof;
(iii) the stockholders of the Company approve a merger or
consolidation of the Company with any other corporation, other than (A) a
merger or consolidation which would result in the voting securities of the
Company outstanding immediately prior thereto continuing to represent
(either by remaining outstanding or by being converted into voting
securities of the surviving entity) more than 50% of the combined voting
power of the voting securities of the Company or such surviving entity
outstanding immediately after such merger or consolidation or (B) a merger
or consolidation effected to implement a recapitalization of the Company
(or similar transaction) in which no "person" (as hereinabove defined)
acquires more than 30% of the combined voting power of the Company's then
outstanding securities; or
(iv) the stockholders of the Company approve a plan of complete
liquidation of the Company or an agreement for the sale or disposition of
the Company of all or substantially all of the Company's assets (or any
transaction having a similar effect).
A-1
<PAGE>
"Change in Control Price" of the Stock shall equal the higher of (i) if
applicable, the price paid for the Stock in the transaction constituting Change
in Control and (ii) the reported closing price of the Stock on the New York
Stock Exchange on the last trading day preceding the date of the Change in
Control.
"Committee" shall mean the Nominating and Governance Committee of the Board
or such other committee as may be designated by the Board.
"Company" shall mean Honeywell Inc.
"Company Restricted Stock" shall mean Restricted Stock (as defined in the
Prior Plans) of the Company.
"Deferred Account" shall mean the account established and maintained by the
Company for specified deferrals by a Director in accordance with Section 5(c).
"Director" shall mean a non-employee director of the Company.
"Director Year" shall mean the fiscal year commencing on the date of the
Company's Annual Meeting and ending on the date immediately preceding the next
Annual Meeting.
"Dividend Equivalent Rights" shall mean a right, described in Section 7
hereof, of a holder of Stock Units with respect to certain dividends paid on
outstanding shares of Stock.
"ERISA" shall mean the Employee Retirement Income Security Act of 1974, as
amended.
"Fair Market Value" of the Stock on a particular date shall equal the
average of the reported closing prices for the Stock on the New York Stock
Exchange for the ten (10) consecutive trading days immediately preceding such
date.
"Fees" shall mean the sum, for any Director Year, of the Annual Retainer,
the Meeting Fees and Per Diem Fees, if any.
"Meeting Fees" shall mean the fees, established by the Board, paid to a
Director for attending a meeting of the Board or a committee of the Board. This
term shall include all fees paid to a Director for extraordinary or special
Board and/or committee meetings.
"Per Diem Fee" shall mean a fee, established by the Board, authorized by
the Chief Executive Officer of the Company, in his or her sole discretion, to a
Director who is asked to work on Board issues for a significant part of a day
outside of normal Board or committee meetings.
"Prior Plans" shall mean the Honeywell Restricted-Stock Retirement Plan for
Non-Employee Directors and the Honeywell Inc. Compensation Plan for Outside
Directors.
"Rule 16b-3" shall mean Rule 16b-3 promulgated under the Securities
Exchange Act of 1934, as amended.
"Stock" shall mean shares of Common Stock, par value $1.50 per share, of
the Company.
"Stock Unit" shall mean a right to receive payment, in accordance with the
conditions set forth herein, of the Fair Market Value of a share of Stock.
"Termination Date" shall mean the date the Director's service on the Board
terminates for any reason.
3. Stock Subject to the Plan. The maximum number of shares of Stock
reserved for issuance pursuant to the Plan shall be 300,000 shares, subject to
adjustment as provided in Section 11 of the Plan.
4. Annual Stock Unit Awards. On the date of each Annual Meeting, commencing
with the 1996 Annual Meeting, each person who has served as a Director during
the preceding Director Year shall receive an Award of Stock Units (including
fractional Stock Units) with respect to Stock having a Fair Market Value equal
to one-half the Fees earned by the Director for the immediately preceding
Director Year.
5. Fees. Each Director shall be entitled to receive Fees with respect to
each Director Year in accordance with the provisions of this Section 5. Each
Director shall be given an opportunity by the Company on an annual basis to
elect ("Annual Election") to receive his or her Annual Retainer and Meeting
Fees: (i) in cash, (ii) in Stock Units, or (iii) in a combination of cash and
Stock Units. In addition a Director may elect to defer receipt of the Annual
Retainer and Meeting Fees that the Director has the opportunity to earn during
the next succeeding Director Year, which would otherwise be payable in cash.
A-2
<PAGE>
(a) The Annual Election must be in writing and shall be delivered to
the Secretary of the Company no later than the tenth day preceding the date
of the Annual Meeting. (The Annual Election shall be irrevocable after the
tenth day preceding the date of the Annual Meeting.) The Annual Election
shall specify the applicable percentage of the Annual Retainer and Meeting
Fees that such Director elects to receive in cash, or Stock Units, or to
defer.
(b) If a Director elects to receive Fees in cash, cash payment for the
Annual Retainer shall be paid as soon as practicable after the beginning of
a Director Year, and cash payment for Meeting Fees shall be paid as soon as
practicable after a meeting. If a Director elects to receive Stock Units in
lieu of all or a portion of the Annual Retainer, the Director shall receive
Stock Units (including fractional Stock Units) with respect to Stock having
a Fair Market Value (on the date of the Company's Annual Meeting) equal to
110% of the portion of the Annual Retainer payable in Stock Units. If a
Director elects to receive Stock Units in lieu of all or a portion of the
Meeting Fees, then with respect to all meetings occurring within a calendar
quarter, the Director shall receive Stock Units (including fractional Stock
Units) with respect to Stock having a Fair Market Value (determined as of
the last trading day for such quarter) equal to 110% of the portion of such
Meetings Fees payable in Stock Units.
(c) If a Director elects to defer all or a portion of the Fees, such
deferred Fees shall be credited to the Deferred Account established for
each Director. Interest shall be credited to each Deferred Account
annually, as of December 31, and at the time of distribution of the entire
balance of the Deferred Account, on the daily average balance of such
Deferred Account for such year or portion thereof at an interest rate equal
to the Company's average five-year borrowing rate.
(d) Any person who becomes a Director following an Annual Meeting,
whether by appointment or election as a director (or by change in status
from a full-time employee), shall receive an Annual Retainer prorated for
the balance of that Director Year. In the event a Director voluntarily
resigns from the Board during a Director Year, (i) the Director shall
return to the Company any cash payment covering the prorated portion of the
Annual Retainer for the balance of that Director Year, (ii) any Stock Units
awarded, and any Fees credited to the Deferred Account, in respect of the
prorated portion of the Annual Retainer for the balance of that Director
Year shall be forfeited. No return of any portion of the Annual Retainer
shall be required in the event a Director leaves the Board as the result of
retirement, incapacity or death.
6. Conversion of Prior Awards. As of the Effective Date, all Company
Restricted Stock and all Alliant Restricted Stock outstanding under the Prior
Plans which is held by Directors who are not Canadian Directors, shall be
cancelled. Each Director who, immediately prior to the Effective Date, holds
Company Restricted Stock or Alliant Restricted Stock, which shall be cancelled
in accordance with the immediately preceding sentence, shall receive, in
consideration for such cancellation, an Award of Stock Units with respect to the
number of shares of Stock equal to the sum of (i) number of such Director's
cancelled Company Restricted Stock and (ii) the total value, as of the Effective
Date, of the stock underlying such Director's Alliant Restricted Stock divided
by the Fair Market Value per share of Stock on the Effective Date. Prior to the
Effective Date (but in no event later than the tenth day preceding the Effective
Date), each Director may elect to cancel, as of the Effective Date, all or a
portion of such Director's Fees then held in the Director's deferred
compensation account under the Prior Plans in exchange for an Award of Stock
Units with respect to the number of shares of Stock equal to the amount so
cancelled divided by the Fair Market Value per share of Stock on the Effective
Date. Any such election shall be irrevocable.
7. Dividend Equivalent Rights. Outstanding Stock Units shall be credited
with Dividend Equivalent Rights based upon dividends paid on outstanding shares
of Stock between the date such Stock Units are granted and the date of payment
in respect of such Stock Units. Such Dividend Equivalent Rights, once credited,
shall be converted into an equivalent number of Stock Units (including
fractional Stock Units). If a dividend is paid in cash, each Director shall be
credited, as of each dividend payment date, in accordance with the following
formula:
(A x B) / C
in which "A" equals the number of Stock Units held by the Director on the
dividend payment date, "B" equals the cash dividend per share and "C" equals the
Fair Market Value per share of Stock on the dividend payment date. If a dividend
is paid in property other than cash, Dividend Equivalent Rights shall be
A-3
<PAGE>
credited, as of the dividend payment date, in accordance with the formula set
forth above, except that "B" shall equal the fair market value per share of the
property which the Director would have received in respect of the number of
shares of Stock equal to the number of Stock Units held by the Director as of
the dividend payment date, had such shares been owned as of the record date for
such dividend.
8. Time of Payment. Unless otherwise provided herein, all payments in
respect of a Director's Stock Units and in settlement of a Director's Deferred
Account shall be made as soon as practicable after the earlier of: (i) the
occurrence of a Change in Control and (ii) the Termination Date; provided,
however, that no payment in respect of a Canadian Director's Stock Units and in
settlement of a Canadian Director's Deferred Account shall be made prior to such
Canadian Director's Termination Date.
9. Form of Payment.
(a) Except as described in Section 9 (c), payment in respect of Stock
Units shall be made in Stock.
(b) Payment in settlement of the Director's Deferred Account shall be
made in cash.
(c) Any payment made upon an occurrence of a Change in Control,
whether in respect of Stock Units or in settlement of the Deferred Account
(including Stock Units of Deferred Accounts with respect to which one or
more installment payments have previously been made), shall be made in a
single lump sum cash payment. For purposes of the preceding sentence, the
amount of cash delivered in full or partial payment of Stock Units shall
equal the Change in Control Price of the number of shares of Stock relating
to the Stock Units with respect to which such cash payment is being made.
(d) Except as described in sections 9(c) or 17 above, payments with
respect to Stock Units or in settlement of Deferred Accounts shall be paid
in annual installments over a specified period of time or in a lump sum,
all as the Director may elect and subject to change from time to time;
provided, however, that no such election, change or revocation will be
given effect if it is made less than one year in advance of the Director's
Termination Date; and provided further that any payment with respect to a
Canadian Director's Stock Units or in settlement of a Canadian Director's
Deferred Accounts shall be made in a single lump sum as soon as practicable
after, and in any case by the end of the first calendar year following the
Termination Date.
(e) The Company shall not issue fractions of shares. Whenever under
the terms of the Plan, a fractional share would otherwise be required to be
issued, the Director shall be paid in cash for such fractional share.
10. Statement of Account. Each director shall receive an annual statement
showing the number of Stock Units that have been awarded to the director under
the Plan.
11. Change in Capital Structure. In the event of any change in the Stock by
reason of any stock dividend, split, combination of shares, exchange of shares,
warrants or rights offering to purchase Stock at a price below its fair market
value, reclassification, recapitalization, merger, consolidation or other change
in capitalization, appropriate adjustment shall be made by the Committee in the
number and kind of shares subject to the Plan and any other relevant provisions
of the Plan, whose determination shall be binding and conclusive on all persons.
12. Nontransferability. Stock Units shall not be transferable by a Director
except by will or the laws of descent and distribution. Notwithstanding the
above, Stock Units shall be transferable to the extent the Company concludes
that nontransferability is not then required in order for the Plan to continue
to comply with Rule 16b-3.
13. Rights. Except to the extent otherwise set forth herein, the Directors
shall not have any of the rights of a stockholder with respect to the Stock
Units.
14. Administration of the Plan. The Plan shall be administered by the
Committee. The Committee shall have full power, discretion and authority to
interpret and administer the Plan, except that the Committee shall have no power
to (a) determine the eligibility for Awards or the number of Stock Units or
timing or value of Awards to be granted to any Director, or (b) take any action
specifically delegated to the Board under the Plan. The Committee's
interpretations and actions shall, except as otherwise determined by the Board,
be final, conclusive and binding on all persons for all purposes.
A-4
<PAGE>
15. Amendment or Termination of the Plan. The Board may, at any time, amend
or terminate the Plan; but no amendment or termination shall, without the
written consent of a Director, reduce the Director's rights under previously
granted Awards or with respect to any Fees previously earned. No amendment which
requires stockholder approval in order for the Plan to continue to comply with
Rule 16b-3 shall be effective unless the same shall be approved by the requisite
vote of the stockholders of the Company. To the extent then required in order
for the Plan to continue to comply with Rule 16b-3, the Plan may not be amended
more than once every six months other than to comply with the changes in the
Internal Revenue Code of 1986, as amended, or ERISA or rules thereunder.
16. No Right to Renomination. Nothing in the Plan or in any Award shall
confer upon any Director the right to be nominated for reelection to the Board.
17. Payments upon Death. In the event of a Director's death, payments with
respect to any Stock Units or in settlement of any Deferred Account (including
Stock Units or Deferred Account with respect to which one or more installment
payments have previously been made) shall be made in a single lump sum payment
(in Stock with respect to the Stock Units and in cash with respect to the
Deferred Account) to the beneficiary designated by the Director (which
beneficiary, for any Canadian Director, must be a relative or a dependent of the
Canadian Director), or in the absence of an executed beneficiary form, to the
person legally entitled thereto, as designated under his or her will, or to such
heirs as determined under the laws of intestacy for the state of his or her
domicile.
18. Governing Law. The Plan and all actions taken thereunder shall be
governed by and construed in accordance with the laws of the State of Minnesota.
A-5
<PAGE>
Exhibit B
HONEYWELL INC.
PROXY
Proxy Solicited on Behalf of The Board of Directors for
Annual Meeting of Shareholders
on April 16, 1996
The undersigned hereby appoints M.R. Bonsignore, E.D. Grayson and S.
Ueland, and each of them, proxies (each with power of substitution) of the
undersigned to attend the above annual meeting of shareholders of Honeywell Inc.
and any adjournment thereof and thereat to vote all shares of stock held by the
undersigned, including any shares that may be held for the undersigned's account
under the Automatic Dividend Reinvestment Plan for Honeywell Common Shares
administered by Chemical Mellon Shareholder Services, L.L.C., as specified on
the reverse side, and on any other matters that may properly come before said
meeting.
For those participants who may hold shares in the Investment Plus Plan
(IPP) or Retirement Savings Plan (RSP) or Retirement Investment Plan (RIP)
(collectively, the "Plans"), please fill in and sign this card and mail it in
time to be received no later than April 10, 1996, in order to be voted in a
timely manner by the Trustee, T. Rowe Price Trust Company. After April 10, 1996,
the instructions cannot be revoked and, in accordance with the Plans, you may
not vote these shares in person at the Meeting. The Trustee is authorized to
vote the Plan shares for which instructions have been given upon such other
business as may come before the meeting. Chemical Mellon Shareholder Services,
L.L.C. will tally the vote on behalf of the Trustee.
THIS PROXY CARD IS CONTINUED ON THE REVERSE SIDE.
PLEASE SIGN ON THE REVERSE SIDE AND RETURN PROMPTLY.
- --------------------------------------------------------------------------------
Comments
- --------------------------------------------------------------------------------
-----------
See Reverse
Side
-----------
MINNEAPOLIS
CONVENTION CENTER
1301 SECOND AVENUE SOUTH
MINNEAPOLIS, MINNESOTA 55403
(612) 335-6000
HONEYWELL
ANNUAL MEETING
The Meeting will be held in
the Ballroom, commencing at
2:00 p.m. Coffee will be
served before the Meeting
beginning at 1:00 p.m.
PUBLIC ENTRANCES--There are 4
main public entrance rotundas
located on Second Ave S. &
Grant St., labelled "Ballroom [MAP OF LOCATION]]
Entrance", "Hall 1", "Hall 2"
& "Hall 3". Designated
handicap entrances (power
assisted doors) are adjacent
to Hall 3 (entrance closest to
Wesley Church), Third Avenue
Entrance and 12th Street
Entrance.
ENTRANCES/EXITS TO UNDERGROUND
PLAZA PARKING RAMP--Enter
either on Second Avenue S. or
on 12th Street S. The Plaza
Ramp has handicap
parking--elevators & a skyway
connect the Ramp to the
Convention Center, allowing
easy access for wheelchairs.
If you park in the underground
Plaza Ramp, use elevator 1 to
enter the building on the
skyway level, Hall 3 Entrance.
If you park elsewhere, the
most convenient access to the
Meeting is the Ballroom
Entrance facing Second Avenue.
<PAGE>
<TABLE>
<CAPTION>
Please mark ----
your vote as X
indicated in ----
this example.
BOARD OF DIRECTORS RECOMMENDS A VOTE FOR.
<S> <C>
1. Election of Directors TO WITHHOLD 2. Approval of the selection FOR AGAINST ABSTAIN
FOR all nominees AUTHORITY (For all of Deloitte & Touche LLP ---- ---- ----
(Except as marked Nominees listed) as auditors.
to the contrary*) ---- ---- ----
---- ---- 3. Approval of Honeywell FOR AGAINST ABSTAIN
Non-Employee Directors ---- ---- ----
---- ---- Fee and Stock Unit Plan.
---- ---- ----
----
Will attend meeting
----
Nominees: ----
A.J. Baciocco, Jr., E.E. Bailey, M.R. Bonsignore, I have noted comments
E.H. Clark, Jr., W.H. Donaldson, R.D. Fullerton, on reverse side ----
C.M. Hapka, J.J. Howard, B. Karatz, D.L. Moore, ----
A.B. Rand, S.G. Rothmeier, M.W. Wright Change of Address
----
-----------------------------------
-----------------------------------
* INSTRUCTION:
To withhold authority to vote for any individual This proxy will be voted FOR items 1-3
nominee, strike a line through the nominee's name above. if no choice is specified.
Signature(s)________________________________________________ Date _________________
NOTE: Please sign as name appears hereon. Joint owners should each sign. When signing as
attorney, executor, administrator, trustee or guardian, please give full title as such.
</TABLE>
FOLD AND DETACH HERE
RETURN PROXY CARD IN ENCLOSED ENVELOPE AFTER COMPLETING, SIGNING AND DATING
Admission Ticket
HONEYWELL INC.
1996 Annual Meeting of Shareholders
Tuesday, April 16, 1996
2:00 P.M.
Minneapolis Convention Center
1301 Second Avenue South
Minneapolis, Minnesota
Coffee will be served before the Meeting beginning at 1:00 p.m.
PLEASE ADMIT NON-TRANSFERABLE
