HONEYWELL INC, 10-K, 1996-03-25

HONEYWELL INC
10-K, 1996-03-25
AUTO CONTROLS FOR REGULATING RESIDENTIAL & COMML ENVIRONMENTS

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1995
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FORM 10-K
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

(Mark One)
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE
SECURITIES EXCHANGE ACT OF 1934 [ FEE REQUIRED ]

For the fiscal year ended December 31, 1995

[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE
SECURITIES EXCHANGE ACT OF 1934 [ NO FEE REQUIRED ]

For the transition period from.......... to....................................

Commission file number 1-971

HONEYWELL INC.
(Exact name of registrant as specified in its charter)

DELAWARE 41-0415010
(State or other jurisdiction of (I.R.S. Employer Identification No.)
incorporation or organization)

HONEYWELL PLAZA, MINNEAPOLIS, MINNESOTA 55408
(Address of principal executive offices) (Zip Code)

Registrant's telephone number, including area code 612-951-1000

Securities registered pursuant to section 12(b) of the act:

Name of each exchange
Title of each class on which registered
Common Stock, par value $1.50 New York Stock Exchange
per share
Preferred Stock Purchase Rights New York Stock Exchange

Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. Yes _X_ No ___.

Indicate by check mark if disclosure of delinquent filers pursuant to Item
405 of Regulation S-K (Section 229.405 of this chapter) is not contained herein,
and will not be contained, to the best of registrant's knowledge, in definitive
proxy or information statements incorporated by reference in Part III of this
Form 10-K or any amendment to this Form 10-K. / /

Based on the closing sales price of $51.875 on March 1, 1996, the aggregate
market value of the voting stock held by nonaffiliates of the registrant was
$6,569,271,238.

As of March 1, 1996, the number of shares outstanding of the registrant's
common stock, par value $1.50 per share, was 127,223,965 shares.

DOCUMENTS INCORPORATED IN PART BY REFERENCE

Incorporated Documents Location in Form 10-K
- -------------------------------------------------------- ---------------------
Honeywell Notice of 1996 Annual Meeting and Proxy Part III
Statement

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<PAGE>
PART I

ITEM 1. BUSINESS

Honeywell Inc., a Delaware corporation incorporated in 1927, is a
Minneapolis-based international controls corporation that supplies automation
and control systems, components, software, products and services for homes and
buildings, industry, and space and aviation. The purpose of the company is to
develop and apply advanced-technology products, systems and services to conserve
energy, improve productivity, protect the environment, enhance comfort and
increase safety. Development and modification occur continuously in Honeywell's
business as new or improved products and services are introduced, new markets
are created or entered, distribution methods are revised, and products and
services are discontinued.

INDUSTRY SEGMENT INFORMATION

Honeywell's products and services are classified by management into three
industry segments: (i) Home and Building Control, (ii) Industrial Control, and
(iii) Space and Aviation Control. Financial information relating to these
industry segments is set forth in Part II, Item 6 at page 10.

HOME AND BUILDING CONTROL

Honeywell's Home and Building Control business provides controls and systems
for building automation, energy management, fire and security, as well as
thermostats, air cleaners and other environmental controls and services for
buildings and homes.

Honeywell manufactures, markets and installs mechanical, pneumatic,
electrical and electronic control products and systems for heating, ventilation
and air conditioning in homes and commercial, industrial and public buildings.
The systems, which may be generic or specifically designed for each application,
may include panels and control systems to centralize mechanical and electrical
functions.

Honeywell also produces building management systems for commercial
buildings, burner and boiler controls, lighting controls, thermostatic radiator
valves, pressure regulators for water systems, thermostats, actuators,
humidistats, relays, contactors, transformers, air-quality products, and gas
valves and ignition controls for homes and commercial buildings. Sales of these
products are made directly to original equipment manufacturers, including
manufacturers of heating and air conditioning equipment; through wholesalers,
distributors, dealers, contractors, hardware stores and home-care centers; and
also through the company's nationwide sales and service organization.

Services provided include indoor air-quality services, central-station
burglary and fire protection services for homes and commercial buildings, video
surveillance, access control and entry management services for commercial
buildings, contract maintenance services for commercial building mechanical and
control systems, automated management of building operations for building
complexes, energy management services, energy retrofit services and training.

INDUSTRIAL CONTROL

The Industrial Control business serves the automation and control needs of
its worldwide industrial customers as a major supplier of products, systems and
services ranging from sensors to integrated systems designed for specific
applications.

Honeywell's Industrial Control segment supplies process control systems and
associated application software and services to customers in the process
industries such as refining, petrochemical, bulk and fine chemical, pulp and
paper, electric utility, food and consumer goods, pharmaceutical, metals and
transportation markets, as well as other industries. Honeywell also designs and
manufactures process instruments, process controllers, recorders, programmers,
programmable controllers, transmitters and other field instruments that may be
sold as stand-alone products or integrated into systems. These products are
generally used in indicating, recording and automatically controlling process
variables.

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Under the MICRO SWITCH trademark, Honeywell manufactures solid-state sensors
(including position, pressure, airflow, temperature and current sensors), sensor
interface devices, manual controls, explosion-proof switches and precision
snap-acting switches, as well as proximity, photoelectric and mercury switches
and lighted/unlighted pushbuttons. These products are used in industrial,
commercial and business equipment, and in consumer, medical, automotive,
aerospace and computer applications.

Other products include solenoid valves, optoelectronic devices, fiber-optic
systems and components, as well as microcircuits, sensors, transducers and
high-accuracy, noncontact measurement and detection products for factory
automation, quality inspection and robotics applications.

Honeywell also furnishes services, including product and component testing,
instrument maintenance, repair and calibration, contract services for industrial
control equipment and third-party maintenance for CAD/CAM and other industrial
control equipment, training, applications service and a range of customer
support services.

Services are generally sold directly to users on a monthly or annual
contract basis. Products are customarily sold by Honeywell on a delivered,
supervised or installed basis directly to end users, to equipment manufacturers
and contractors, or through third-party channels such as distributors and
systems houses.

SPACE AND AVIATION CONTROL

Honeywell's Space and Aviation Control business supplies avionics for the
commercial, military and space markets. The company designs, manufactures,
services and markets a variety of sophisticated electronic control systems and
components that are used on commercial and business aircraft, military aircraft
and spacecraft.

Products manufactured for aircraft use include ring laser gyro-based
inertial reference systems, navigation and guidance systems, flight control
systems, flight management systems, inertial sensors, air data computers, radar
altimeters, automatic test equipment, cockpit display systems and other
communication and flight instrumentation.

Honeywell products and services have been involved in every major U.S. space
mission since the mid-1960s. Products include guidance systems for launch and
re-entry vehicles, flight and engine control systems for manned spacecraft, and
precision components for strategic missiles and on-board data processing. Other
products include spacecraft attitude and positioning systems, and precision
pointing and isolation systems.

Space and Aviation Control products are sold through an integrated
international marketing organization, with customer service centers providing
international service for commercial and business aviation users.

OTHER PRODUCTS

Products and services not included in the foregoing segment information are
described below.

The Honeywell Technology Center provides systems analysis and applied
research and development on systems and products, including, application
software, sensors and advanced electronics.

Solid State Electronics Center, a semiconductor facility in Minnesota,
designs and manufactures integrated circuits and sensors for Honeywell,
government customers and selected external customers.

Honeywell, through its operations in Germany, develops, markets and sells to
European countries, among other things, military avionics and electro-optic
devices for flight control and nautical systems, including sonar transducers and
echo sounders.

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GENERAL INFORMATION

RAW MATERIALS

Honeywell experienced no significant or unusual problems in the purchase of
raw materials and commodities in 1995. Although it is impossible to predict what
effects shortages or price increases may have in the future, at present
management has no reason to believe a shortage of raw materials will cause any
material adverse impact during 1996.

PATENTS, TRADEMARKS, LICENSES AND DISTRIBUTION RIGHTS

Honeywell owns, or is licensed under, a large number of patents, patent
applications and trademarks acquired over a period of many years, which relate
to many of its products or improvements thereon and are of importance to its
business. From time to time, new patents and trademarks are obtained, and patent
and trademark licenses and rights are acquired from others. In addition,
Honeywell has distribution rights of varying terms in a number of products and
services produced by other companies. In the judgment of management, such rights
are adequate for the conduct of the business being done by Honeywell. See Item 3
at page 7 for information concerning litigation relating to patents in which
Honeywell is involved.

SEASONALITY

Although Honeywell's business is not seasonal in the traditional sense,
revenues and earnings have tended to concentrate to some degree in the fourth
quarter of each calendar year, reflecting the tendency of customers to increase
ordering and spending for capital goods late in the year.

MAJOR CUSTOMER

Honeywell provides products and services to the United States government as
a prime contractor or subcontractor, the majority of which are described under
the heading "Space and Aviation Control" on page 2. Such business is significant
because of its volume and its contribution to Honeywell's technical
capabilities, but Honeywell's dependence upon individual programs is minimized
by the large variety of products and services it provides. Contracts and
subcontracts for all of such sales are subject to the standard provisions
permitting the government to terminate for convenience or default.

BACKLOG

The total dollar amount of backlog of Honeywell's orders believed to be firm
was approximately $3,676 million at December 31, 1995, and $3,340 million at
December 31, 1994. All but approximately $706 million of the 1995 backlog is
expected to be delivered within the current fiscal year. Backlog is not a
reliable indicator of Honeywell's future revenues because a substantial portion
of backlog represents the value of orders can be canceled at the customer's
option.

COMPETITION

Honeywell is subject to active competition in substantially all products and
services. Competitors generally are engaged in business on a nationwide or an
international scale. Honeywell is the largest producer of control systems and
products used to regulate and control heating and air conditioning in commercial
buildings, and of systems to control industrial processes worldwide. Honeywell
is also a leading supplier of commercial aviation, space and avionics systems.
Honeywell's automation and control businesses compete worldwide, supported by a
strong distribution network with manufacturing and/or marketing capabilities,
for at least a portion of these businesses, in 95 countries.

Competitive conditions vary widely among the thousands of products and
services provided by Honeywell, and vary as well from country to country.
Markets, customers and competitors are becoming more international in their
outlook. In those areas of environmental and industrial components and controls
where sales are primarily to equipment manufacturers, price/performance is
probably the most significant competitive factor, but customer service and
applied technology are also important. Competition is increasingly being applied
to government procurements to improve price and product performance. In service
businesses, quality, reliability and promptness of service are the most
important competitive factors. Service must be offered from many areas because
of the localized

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nature of such business. In engineering, construction, consulting and research
activities, technological capability and a record of proven reliability are
generally the principal competitive factors. Although in a small number of
highly specialized products and services Honeywell may have relatively few
significant competitors, in most markets there are many competitors.

RESEARCH AND DEVELOPMENT

During 1995 Honeywell spent approximately $659.8 million on research and
development activities, including $336.6 million in customer-funded research,
relating to the development of new products or services, or the improvement of
existing products or services. Honeywell spent $659.5 million in 1994 and $742.2
million in 1993 on research and development activities, including $340.5 million
and $404.8 million, respectively, in customer-funded research.

ENVIRONMENTAL PROTECTION

Compliance with current federal, state and local provisions regulating the
discharge of materials into the environment, or otherwise relating to the
protection of the environment, has not had, and in the opinion of management
will not have, a material effect on Honeywell's financial position, net income,
capital expenditures or competitive position. See Item 7 at page 13 for further
information concerning environmental matters.

EMPLOYEES

Honeywell employed approximately 50,100 persons in total operations as of
December 31, 1995.

GEOGRAPHIC AREAS

Honeywell engages in material operations in foreign countries. A large
majority of Honeywell's foreign business is in Western Europe, Canada and the
Asian Pacific Rim.

Although there are risks attendant to foreign operations, such as potential
nationalization of facilities, currency fluctuation and restrictions on movement
of funds, Honeywell has taken action to mitigate such risks.

Financial information related to geographic areas is included in Note 19 to
the financial statements in Part II, Item 8 at page 37.

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EXECUTIVE OFFICERS OF THE REGISTRANT

<TABLE>
<CAPTION>
POSITION AGE AT
NAME OFFICE HELD SINCE 3/1/96
- ------------------------- ------------------------------------------------------------- ------------- -------------
<S> <C> <C> <C>
M. R. Bonsignore (1) Chairman of the Board and Chief Executive Officer 1993 54
D. L. Moore (2) President and Chief Operating Officer 1993 59
J. R. Dewane (3) President, Space & Aviation Control 1993 61
E. D. Grayson (4) Vice President and General Counsel 1992 57
W. M. Hjerpe (5) Vice President and Chief Financial Officer 1994 44
B. M. McGourty (6) President, Home and Building Control 1994 58
P. M. Palazzari (7) Vice President and Controller 1994 48
M. I. Tambakeras (8) President, Industrial Automation and Control 1995 45
Officers are elected by the Board of Directors to terms of one year and until their successors are elected and
qualified.
</TABLE>

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(1) Mr. Bonsignore was elected to this position on February 16, 1993, effective
April 20, 1993. For more than five years prior thereto, he was an executive
officer of the company.

(2) Dr. Moore was elected to this position on February 16, 1993, effective April
20, 1993. From November 1990 to April 1993, he was Executive Vice President
and Chief Operating Officer, Space and Aviation, and Industrial.

(3) Mr. Dewane was elected to this position on April 20, 1993, effective March
15, 1993. From April 1989 to March 1993, he was Group Vice President of
Honeywell's Commercial Flight Systems Group.

(4) Mr. Grayson was elected to this position on April 21, 1992, effective April
1, 1992, when he joined the company. For more than five years prior thereto,
he was Senior Vice President, General Counsel, Corporate Secretary and Clerk
of Wang Laboratories.

(5) Mr. Hjerpe was elected to this position on October 16, 1994. From February
1992 to October 1994, he was Vice President and Controller of the company.
From July 1990 to February 1992, he was Vice President and Treasurer of the
company.

(6) Mr. McGourty was elected to this position on April 19, 1994, effective April
1, 1994. From December 1991 to April 1994, he was Vice President, Field
Operations for Home and Building Control. From January 1990 to December
1991, he was Chairman, President and Chief Executive Officer of Honeywell
Limited, Canada.

(7) Mr. Palazzari was elected to this position on October 16, 1994. From May
1993 to October 1994, he was Vice President, Finance for Home and Building
Control. From March 1992 to April 1993, he was Vice President and Assistant
Controller of Operations for the company. From January 1990 to February
1992, he was Vice President for Financial Planning and Reporting for the
company.

(8) Mr. Tambakeras was elected to this position on February 21, 1995, effective
March 1, 1995. From January 1992 to February 1995, he was President of
Honeywell Asia Pacific. From February 1988 to December 1991, he was Vice
President of Business Operations for Industrial Automation Control.

ITEM 2. PROPERTIES

Honeywell and its subsidiaries operate facilities worldwide comprising
approximately 20,050,300 square feet of space for use as manufacturing, office
and warehouse space, of which approximately 12,528,000 square feet is owned and
approximately 7,522,300 square feet is leased. In the judgment of management,
the facilities used by Honeywell are adequate and suitable for the purposes they
serve.

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Facilities allocated for corporate use in the United States, including sales
offices, comprise approximately 3,380,300 square feet of space, of which
approximately 1,674,400 square feet is owned and approximately 1,705,900 square
feet is leased. These figures include Honeywell's principal executive offices in
Minneapolis, Minnesota which comprise approximately 957,400 square feet, all of
which is owned.

A summary of properties held by each segment of Honeywell is set forth
below, showing major plants, their location, size and type of holding. The
descriptions include approximately 533,400 square feet of space owned or leased
by Honeywell's operations in the United States that has been leased or subleased
to third parties. In addition, approximately 4,138,100 square feet of previously
leased space in the United States is under assignment to third parties
(including 2,417,000 square feet, 441,100 square feet and 102,600 square feet
which is assigned to Alliant Techsystems Inc., Federal Systems Inc. and Bull HN
Information Systems, Inc., respectively, all of which were formerly affiliates
of the company).

HOME AND BUILDING CONTROL

Home and Building Control occupies approximately 2,619,300 square feet of
space for operations in the United States, of which approximately 1,887,900
square feet is owned and approximately 731,400 square feet is leased.

Outside the United States, Home and Building Control operations occupy
approximately 4,450,800 square feet, of which approximately 1,665,800 square
feet is owned and approximately 2,785,000 square feet is leased. Principal
facilities operated outside the United States are located in Canada, Germany,
The Netherlands, the United Kingdom and Australia.

Facilities in the United States comprising 300,000 square feet or more are
listed below.

INDUSTRIAL CONTROL

Industrial Control occupies approximately 2,905,000 square feet of space for
operations in the United States, of which approximately 2,233,200 square feet is
owned and approximately 671,800 square feet is leased.

Outside the United States, Industrial Control operations occupy
approximately 2,277,700 square feet, of which approximately 846,900 square feet
is owned and approximately 1,430,800 square feet is leased. Principal facilities
operated outside the United States are located in the United Kingdom, Australia,
Canada, Switzerland, France, Germany, Belgium and The Netherlands.

Facilities in the United States comprising 300,000 square feet or more are
listed below.

SPACE AND AVIATION CONTROL

Space and Aviation Control occupies approximately 5,130,400 square feet of
space for operations in the United States, of which approximately 3,819,100
square feet is owned and approximately 1,311,300 square feet is leased.

Outside the United States, Space and Aviation Control operations occupy
approximately 537,800 square feet, of which approximately 309,300 square feet is
owned and approximately 228,500 square feet is leased. Principal facilities
operated outside the United States are located in Canada, the United Kingdom and
Singapore.

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Facilities in the United States comprising 300,000 square feet or more are
listed below.

<TABLE>
<CAPTION>
MAJOR USE OF APPROXIMATE OWNED OR
LOCATION FACILITY SQUARE FEET LEASED
- -------------------------- ------------------- ------------ ---------
<S> <C> <C> <C>
Phoenix, Ariz. Manufacturing 939,000 Owned
St. Louis Park, Minn. Manufacturing 559,000 Owned
Albuquerque, N.M. Manufacturing 526,600 Owned
Minneapolis, Minn. Manufacturing 525,100 Owned
Clearwater, Fla. Manufacturing 914,800 Owned
St. Petersburg, Fla. Manufacturing 304,000 Leased
</TABLE>

ITEM 3. LEGAL PROCEEDINGS

On March 13, 1990, Litton Systems, Inc. filed suit against Honeywell Inc. in
U.S. District Court, Central District of California, alleging Honeywell patent
infringement relating to the process used by Honeywell to coat mirrors
incorporated in its ring laser gyroscopes; attempted monopolization and
predatory pricing by Honeywell of certain alleged markets for products
containing ring laser gyroscopes; and intentional interference by Honeywell with
Litton's prospective advantage in European markets and with its contractual
relationships with Ojai Research, Inc., a California corporation. Honeywell
generally denied Litton's allegations, contested both the validity and
infringement of the patent, and alleged that the patent had been obtained by
Litton's inequitable conduct before the United States Patent and Trademark
Office. Honeywell also filed counterclaims against Litton alleging, among other
things, that Litton's business and litigation conduct violated federal and state
laws, causing Honeywell considerable damage and expense.

On January 9, 1995, Judge Mariana Pfaelzer of the U.S. District Court set
aside an August 1993 jury verdict and damage award of $1.2 billion against
Honeywell in the patent and interference with contract case. She ruled, among
other things, that the Litton patent was unenforceable because it was obtained
by inequitable conduct and invalid because it was an invention that would have
been obvious from combining existing processes. She further ruled that if her
judgment were ever subsequently vacated or reversed on appeal, Honeywell would
be granted a new trial on the issue of damages because the jury's 1993 award was
inconsistent with the clear weight of the evidence and permitting it to stand
would constitute a miscarriage of justice. Litton has appealed to the Court of
Appeals for the Federal Circuit, Washington, D.C. Briefs for the appeal have
been submitted by the parties and oral arguments were presented December 8,
1995. Honeywell believes that Judge Pfaelzer's rulings will be upheld on appeal.
As a result, no provision has been made in the financial statements with respect
to this contingent liability.

The trial for the antitrust case began on November 20, 1995, before Judge
Pfaelzer and a different jury. Prior to the jury's deliberations in the
antitrust trial, the court dismissed, for failure of proof, Litton's contentions
that Honeywell engaged in below-cost predatory pricing, illegal tying, bundling
and illegally acquiring Sperry Avionics in 1986. The case was submitted to the
jury on two claims, monopolization and attempt to monopolize, both based on
Litton's allegations that Honeywell entered into certain exclusive dealings and
penalty arrangements with aircraft manufacturers and airlines to exclude Litton
from the commercial aircraft market. On February 29, 1996, the jury returned a
$234 million verdict against Honeywell for the monopolization claim. On March 1,
1996, the jury indicated that it was unable to reach a verdict on damages for
the attempted monopolization claim, and a mistrial was declared on that claim.

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dispose of this case. If the $234 million jury verdict withstands post-verdict
motions, in whole or in part, any dollar judgment will be trebled under federal
antitrust laws and will be appealed by Honeywell. The case will conclude only
when the trial and appellate courts resolve all of the legal issues that could
reduce or eliminate the jury verdict. As a result, no provision has been made in
the financial statements with respect to this contingent liability.

Honeywell is a party to other various claims, legal and governmental
proceedings, including claims relating to previously reported environmental
matters. It is the opinion of management that any losses in connection with
these matters and the resolution of the environmental claims will not have a
material effect on net income, financial position or liquidity.

ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS

No matters were submitted to a vote of security holders during the fourth
quarter of 1995.

PART II

ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS

The principal U.S. market for Honeywell's common stock is the New York Stock
Exchange. The high and low sales prices for the stock as reported by the
consolidated transaction reporting system, of the two most recent fiscal years
is set forth in Note 23 to the financial statements in Part II, Item 8 at page
44.

Information regarding the frequency and amount of dividends paid by
Honeywell on its common stock during the two most recent years is set forth in
Note 23 to the financial statements in Part II, Item 8 at page 44. Further
information regarding the company's payment of dividends is set forth in Part
II, Item 7 at page 17.

Information regarding Honeywell's share repurchase plans is set forth in
Part II, Item 7 at page 17.

Stockholders of record on March 1, 1996 totaled 32,392, excluding individual
participants in security position listings.

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ITEM 6. SELECTED FINANCIAL DATA

HONEYWELL INC. AND SUBSIDIARIES
(DOLLARS AND SHARES IN MILLIONS EXCEPT PER SHARE AMOUNTS)

<TABLE>
<CAPTION>
1995 1994 1993 1992 1991 1990
-------- -------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C>
Results of Operations
Sales................................................... $6,731.3 $6,057.0 $5,963.0 $6,222.6 $6,192.9 $6,309.1
-------- -------- -------- -------- -------- --------
Cost of sales........................................... 4,584.2 4,082.1 4,019.6 4,195.3 4,185.1 4,308.7
Research and development................................ 323.2 319.0 337.4 312.6 300.7 279.6
Selling, general and administrative..................... 1,263.1 1,173.8 1,075.7 1,196.8 1,150.9 1,170.0
Litigation settlements (1).............................. (32.6) (287.9)
Special charges......................................... 62.7 51.2 128.4
Interest -- net......................................... 68.9 60.2 51.0 58.5 61.4 67.6
Gain on sale of assets.................................. (21.7)
Equity income........................................... (13.6) (10.5) (17.8) (15.8) (14.6) (11.5)
-------- -------- -------- -------- -------- --------
6,225.8 5,687.3 5,484.5 5,587.9 5,683.5 5,792.7
-------- -------- -------- -------- -------- --------
Income from continuing operations before income taxes... 505.5 369.7 478.5 634.7 509.4 516.4
Provision for income taxes.............................. 171.9 90.8 156.3 234.8 178.3 144.6
-------- -------- -------- -------- -------- --------
Income from continuing operations....................... 333.6 278.9 322.2 399.9 331.1 371.8
Income from discontinued operations..................... 10.1
Extraordinary item (2).................................. (8.6)
Cumulative effect of accounting changes (3)............. (144.5)
-------- -------- -------- -------- -------- --------
Net income.............................................. $ 333.6 $ 278.9 $ 322.2 $ 246.8 $ 331.1 $ 381.9
-------- -------- -------- -------- -------- --------
-------- -------- -------- -------- -------- --------
Earnings Per Common Share
Continuing operations................................... $ 2.62 $ 2.15 $ 2.40 $ 2.88 $ 2.35 $ 2.45
Discontinued operations................................. 0.07
Extraordinary item (2).................................. (0.06)
Cumulative effect of accounting changes (3)............. (1.04)
-------- -------- -------- -------- -------- --------
Net income.............................................. $ 2.62 $ 2.15 $ 2.40 $ 1.78 $ 2.35 $ 2.52
-------- -------- -------- -------- -------- --------
-------- -------- -------- -------- -------- --------
Cash Dividends Per Common Share........................... $ 1.01 $ 0.97 $ 0.91 $ 0.84 $ 0.77 $ 0.70

Financial Position
Current assets.......................................... $2,766.9 $2,649.4 $2,550.2 $2,707.8 $2,698.9 $2,582.2
Current liabilities..................................... 2,022.5 2,071.8 1,856.1 1,969.2 2,095.0 2,175.1
-------- -------- -------- -------- -------- --------
Working capital......................................... $ 744.4 $ 577.6 $ 694.1 $ 738.6 $ 603.9 $ 407.1
-------- -------- -------- -------- -------- --------
-------- -------- -------- -------- -------- --------
Short-term debt......................................... $ 312.4 $ 360.6 $ 187.9 $ 188.4 $ 168.4 $ 109.0
Long-term debt.......................................... 481.0 501.5 504.0 512.1 639.8 616.3
-------- -------- -------- -------- -------- --------
Total debt.............................................. 793.4 862.1 691.9 700.5 808.2 725.3
Stockholders' equity.................................... 2,040.1 1,854.7 1,773.0 1,790.4 1,850.8 1,696.9
-------- -------- -------- -------- -------- --------
Capitalization.......................................... $2,833.5 $2,716.8 $2,464.9 $2,490.9 $2,659.0 $2,422.2
-------- -------- -------- -------- -------- --------
-------- -------- -------- -------- -------- --------
</TABLE>

- --------------------------
(1) Litigation settlements in 1992 are one-time settlements, after associated
expenses, reached with various camera manufacturers for their use of
Honeywell's patented automatic focus camera technology and amounted to
$171.4 ($1.24 per share) after income taxes.

(2) Extraordinary item resulting from the loss on early redemption of debt.

(3) The cumulative effect of accounting changes is the result of adopting
Statement of Financial Accounting Standards (SFAS) No. 106, "Employers'
Accounting for Postretirement Benefits Other Than Pensions," which reduced
net income by $151.3 ($1.09 per share); SFAS No. 109, "Accounting for Income
Taxes," which increased net income by $31.4 ($0.23 per share); and SFAS No.
112, "Employers' Accounting for Postemployment Benefits," which reduced net
income by $24.6 ($0.18 per share).

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<PAGE>
HONEYWELL INC. AND SUBSIDIARIES
(DOLLARS AND SHARES IN MILLIONS EXCEPT PER SHARE AMOUNTS)

<TABLE>
<CAPTION>
1995 1994 1993 1992 1991 1990
-------- -------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C>
Sales
Home and Building Control............................... $3,034.7 $2,664.5 $2,424.3 $2,393.6 $2,249.1 $2,196.7
Industrial Control...................................... 2,035.9 1,835.3 1,691.5 1,743.9 1,626.8 1,653.5
Space and Aviation Control.............................. 1,527.4 1,432.0 1,674.9 1,933.1 2,132.3 2,071.3
Other................................................... 133.3 125.2 172.3 152.0 184.7 387.6
-------- -------- -------- -------- -------- --------
$6,731.3 $6,057.0 $5,963.0 $6,222.6 $6,192.9 $6,309.1
-------- -------- -------- -------- -------- --------
-------- -------- -------- -------- -------- --------
Operating Profit (1)(2)
Home and Building Control............................... $ 308.6 $ 236.5 $ 232.7 $ 193.4 $ 229.1 $ 237.0
Industrial Control...................................... 233.8 206.6 189.7 156.9 224.0 219.5
Space and Aviation Control.............................. 127.6 80.9 148.1 175.8 226.1 200.4
Other................................................... 2.8 (1.8) (9.5) (3.1) 18.8
-------- -------- -------- -------- -------- --------
Total operating profit.................................. 672.8 524.0 568.7 516.6 676.1 675.7
Interest expense........................................ (83.3) (75.5) (68.0) (89.9) (89.4) (106.0)
Litigation settlements.................................. 32.6 287.9
Gain on sale of assets.................................. 21.7
Equity income........................................... 13.6 10.5 17.8 15.8 14.6 11.5
General corporate expense............................... (97.6) (89.3) (72.6) (95.7) (91.9) (86.5)
-------- -------- -------- -------- -------- --------
Income before income taxes.............................. $ 505.5 $ 369.7 $ 478.5 $ 634.7 $ 509.4 $ 516.4
-------- -------- -------- -------- -------- --------
-------- -------- -------- -------- -------- --------
Assets
Home and Building Control............................... $1,727.2 $1,529.8 $1,327.3 $1,302.4 $1,282.8 $1,228.7
Industrial Control...................................... 1,307.2 1,273.3 1,059.8 1,057.5 1,001.7 955.3
Space and Aviation Control.............................. 971.1 1,174.9 1,219.6 1,403.6 1,594.5 1,684.7
Corporate and Other..................................... 1,054.7 907.9 991.4 1,106.6 927.7 877.5
-------- -------- -------- -------- -------- --------
$5,060.2 $4,885.9 $4,598.1 $4,870.1 $4,806.7 $4,746.2
-------- -------- -------- -------- -------- --------
-------- -------- -------- -------- -------- --------
Additional information
Average number of common shares outstanding............. 127.1 129.4 134.2 138.5 140.9 151.8
Return on average stockholders' equity.................. 17.1% 15.6% 18.4% 13.8% 19.2% 20.6%
Stockholders' equity per common share................... $ 16.09 $ 14.57 $ 13.48 $ 13.10 $ 13.25 $ 11.99
Percent of debt to total capitalization................. 28% 32% 28% 28% 30% 30%
Research and development
Honeywell-funded...................................... $ 323.2 $ 319.0 $ 337.4 $ 312.6 $ 300.7 $ 279.6
Customer-funded....................................... 336.6 340.5 404.8 390.5 373.5 417.5
Capital expenditures.................................... 238.1 262.4 232.1 244.1 240.2 251.5
Depreciation............................................ 236.1 235.3 235.3 242.8 238.5 236.1
Employees at year end................................... 50,100 50,800 52,300 55,400 58,200 60,300
</TABLE>

- --------------------------
(1) Operating profit is net of special charges amounting to $62.7, $51.2 and
$128.4 in 1994, 1993 and 1992, respectively, (see Note 4 to Financial
Statements) as follows: Home and Building Control, $28.7, $9.9 and $42.7;
Industrial Control, $14.4, $9.0 and $38.6; Space and Aviation Control,
$19.6, $7.4 and $34.9; Other, $--, $16.4 and $2.6; and General Corporate
Expense, $--, $8.5 and $9.6.

(2) Operating profit is net of the additional operating expense impact of
adopting SFAS 106 and SFAS 112 amounting to $16.4 and $3.8, respectively, in
1992 as follows: Home and Building Control, $4.3 and $1.0; Industrial
Control, $4.0 and $0.9; Space and Aviation Control, $7.0 and $1.6; Other,
$0.5 and $0.1; and General Corporate Expense, $0.6 and $0.2.

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ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS

OPERATIONS

SALES

Honeywell's 1995 sales were $6.731 billion, compared with $6.057 billion in
1994 and $5.963 billion in 1993. Sales in the United States of $4.087 billion
were up seven percent, as a result of increased volume in Home and Building
Control and Industrial Control, as well as an improved commercial aviation
market for Space and Aviation Control. International sales, which represent 39
percent of total sales, increased 18 percent to $2.644 billion in 1995. Sales
were particularly strong in Europe and Asia Pacific, increasing 22 percent and
24 percent respectively. The international sales increase was the result of
positive sales growth of 12 percent measured in local currency, along with
positive currency effects as the U.S. dollar weakened an average of six percent
against local currencies in countries where Honeywell does business. U.S. export
sales, including exports to foreign affiliates, were $839 million in 1995,
compared with $780 million in 1994 and $769 million in 1993.

COST OF SALES

Cost of sales was $4.584 billion in 1995, or 68.1 percent of sales, compared
with $4.082 billion (67.4 percent) in 1994 and $4.020 billion (67.4 percent) in
1993. Cost as a percentage of sales was higher in 1995 due to increased sales in
Space and Aviation Control at lower gross margins and an increase in lower
gross-margin service business in Industrial Control.

RESEARCH AND DEVELOPMENT

Honeywell spent $323 million, or 4.8 percent of sales, on research and
development in 1995, compared with $319 million (5.3 percent) in 1994 and $337
million (5.7 percent) in 1993. The higher 1993 and 1994 percentages reflect
significant investments in integrated avionics for the new Boeing 777 aircraft.
Honeywell expects to maintain its current rate of R&D spending in 1996.
Honeywell also received $337 million in funds for customer-funded research and
development in 1995, compared with $340 million in 1994 and $405 million in
1993.

OTHER EXPENSES AND INCOME

Selling, general and administrative expenses were $1.263 billion, or 18.8
percent of sales in 1995, compared with $1.174 billion (19.4 percent) in 1994
and $1.076 billion (18.0 percent) in 1993. Excluding royalties from autofocus
licensees (see Note 3 to Financial Statements on page 27), the percent of sales
would have been 19.5 percent and 18.6 percent in 1994 and 1993 respectively. The
higher percentage in 1994 was primarily due to increased legal costs.

On April 16, 1993, Honeywell announced the settlement of its lawsuits
against the Unisys Corporation and other parties in connection with Honeywell's
1986 purchase of the Sperry Aerospace Group. Honeywell received $70 million in
cash and notes, and recorded a gain of $22 million, or $14 million ($0.10 per
share) after income taxes (see Note 3 to Financial Statements on page 27).

Honeywell filed suits and reached agreement with various major camera
manufacturers for their use of Honeywell's patented automatic focus camera
technology. The total of all autofocus settlements recorded, after associated
expenses, was $10 million, or $6 million ($0.05 per share) after income taxes,
in 1993 (see Note 3 to Financial Statements on page 27).

Honeywell remains committed to efforts to reduce operating costs and improve
margins. As a result of identifying opportunities to restructure and streamline
operations, Honeywell recorded special charges of $63 million, or $38 million
($0.29 per share) after income taxes in 1994. The actions undertaken included a
continuation of right-sizing the Space and Aviation Control business segment, a
worldwide consolidation of manufacturing capacity, a streamlining and
realignment of the overhead structure and reductions in corporate expense.
Special charges of $51 million, or $29 million ($0.22 per share) after income
taxes, were recorded in 1993 for productivity initiatives to strengthen the
company's competitiveness.

11
<PAGE>
Special charges include costs for work force reductions, worldwide
facilities consolidation and other cost accruals. Work force reduction costs
primarily include severance costs related to involuntary termination programs
instituted to improve efficiency and reduce costs. These costs amounted to $53
million in 1994 and $44 million in 1993. Facilities consolidation costs are
primarily associated with consolidations of branch office space and product
lines to restructure and streamline Honeywell's operations. These costs amounted
to $10 million in 1994 and $2 million in 1993. Other cost accruals include costs
of exiting several product lines no longer considered complementary to
Honeywell's businesses, which amounted to $5 million in 1993.

The estimated cost savings of the restructuring actions in 1994 will exceed
$30 million annually, when fully realized. Special-charge accruals remaining to
be paid were $12 million, $74 million and $79 million at December 31, 1995, 1994
and 1993 respectively. Total expenditures amounted to $54 million in 1995, $50
million in 1994 and $93 million in 1993. Cash flows from operating activities
have funded and are expected to fund all special charges. Further information
about special charges is provided in Note 4 to Financial Statements on page 27.

Net interest expense was $69 million in 1995, $60 million in 1994 and $51
million in 1993. Net interest expense increased in 1995 as a result of higher
average debt. Net interest expense increased in 1994 as a result of a
combination of higher market interest rates and higher average debt compared
with 1993. Information concerning Honeywell's exposure to and management of
interest rate risk through the use of derivative financial instruments is
provided on page 18 and in Notes 14 and 15 to Financial Statements on pages 32
and 34 respectively.

Earnings of companies owned 20 percent to 50 percent (primarily
Yamatake-Honeywell Co., Ltd), which are accounted for using the equity method,
were $14 million in 1995, $11 million in 1994 and $18 million in 1993. The
decline in 1994 primarily resulted from a decline in earnings, the writedown of
assets and a bad-debt reserve increase.

INCOME TAXES

The provision for income taxes was $172 million in 1995, compared with $91
million in 1994 and $156 million in 1993. The 1994 income tax provision was
reduced by $38 million ($0.29 per share) as a result of a favorable tax
settlement. The enactment by Congress of the Omnibus Budget Reconciliation Act
of 1993, which raised the U.S. federal statutory income tax rate for
corporations from 34 percent to 35 percent retroactive to January 1, 1993, did
not have a material impact on the 1993 provision, but did result in the
recognition of a one-time gain of $9 million ($0.07 per share) in 1993 from the
revaluation of deferred tax assets. Further information about income taxes is
provided in Note 5 to Financial Statements on page 28.

NET INCOME

Honeywell's net income increased 20 percent in 1995, primarily due to
increased sales volume and improved operating margins. Net income was $334
million ($2.62 per share) in 1995, compared with $279 million ($2.15 per share)
in 1994 and $322 million ($2.40 per share) in 1993. Net income in 1994 includes
an after-tax provision for special charges of $38 million ($0.29 per share) and
a reduction of the provision for income taxes of $38 million ($0.29 per share)
from a favorable tax settlement. Net income in 1993 includes an after-tax gain
from litigation settlements, after associated expenses, of $20 million ($0.15
per share); an after-tax provision for special charges of $29 million ($0.22 per
share); and a gain of $9 million ($0.07 per share) from the revaluation of
deferred tax assets.

RETURN ON EQUITY AND INVESTMENT

Return on equity (ROE) was 17.1 percent in 1995, 15.6 percent in 1994 and
18.4 percent in 1993. Return on investment (ROI) was 13.5 percent in 1995, 12.3
percent in 1994 and 14.6 percent in 1993.

CURRENCY

The U.S. dollar weakened an average of six percent in 1995 compared with
1994, in relation to the principal foreign currencies in countries where
Honeywell products are sold. A weaker dollar has a

12
<PAGE>
positive effect on international results because foreign-exchange denominated
profits translate into more U.S. dollars of profit. Information about
Honeywell's exposure to and management of currency risk through the use of
derivative financial instruments is provided on page 18 and in Notes 6, 14 and
15 to Financial Statements on pages 29, 32 and 34 respectively.

INFLATION

Highly competitive market conditions have minimized inflation's impact on
the selling prices of Honeywell's products and the cost of its purchased
materials. Productivity improvements and cost-reduction programs have largely
offset the effects of inflation on other costs and expenses.

EMPLOYMENT

Honeywell employed 50,100 people worldwide at year-end 1995, compared with
50,800 people in 1994 and 52,300 people in 1993. Approximately 30,600 employees
work in the United States, with 19,500 employed outside the country, primarily
in Europe. Total compensation and benefits in 1995 were $2.8 billion, or 45
percent of total costs and expenses. Sales per employee were $132,800 in 1995,
compared with $118,600 in 1994 and $110,900 in 1993.

ENVIRONMENTAL MATTERS

Honeywell is committed to protecting the environment, a commitment evidenced
both by Honeywell's products and its manufacturing operations. Honeywell's
manufacturing sites generate both hazardous and nonhazardous wastes, the
treatment, storage, transportation and disposal of which are subject to various
local, state and federal laws relating to protection of the environment.
Honeywell is in varying stages of investigation or remediation of potential,
alleged or acknowledged contamination at currently or previously owned or
operated sites and at off-site locations where its wastes were taken for
treatment or disposal. In connection with the cleanup of various off-site
locations, Honeywell, along with a large number of other entities, has been
designated a potentially responsible party (PRP) by the U.S. Environmental
Protection Agency under the Comprehensive Environmental Response, Compensation
and Liability Act or by state agencies under similar state laws (Superfund),
which potentially subject PRPs to joint and several liability for the costs of
such cleanup. In addition, Honeywell is incurring costs relating to
environmental remediation pursuant to the federal Resource Conservation and
Recovery Act. Based on Honeywell's assessment of the costs associated with its
environmental responsibilities, compliance with federal, state and local laws
regulating the discharge of materials into the environment, or otherwise
relating to the protection of the environment, has not had and in the opinion of
Honeywell management, will not have a material effect on Honeywell's financial
position, net income, capital expenditures or competitive position. Honeywell's
opinion with regard to Superfund matters is based on its assessment of the
predicted investigation, remediation and associated costs, its expected share of
those costs and the availability of legal defenses. Honeywell's policy is to
record environmental liabilities when loss amounts are probable and reasonably
estimable.

NEW ACCOUNTING STANDARDS

In March 1995, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards No. 121, "Accounting for the Impairment of
Long-Lived Assets and for Long-Lived Assets to Be Disposed Of." This Statement
requires that assets to be held and used be reviewed for impairment whenever
events or changes in circumstances indicate that the carrying amount of an asset
may not be recoverable. An impairment loss should be recognized when the
estimated future cash flows from the asset are less than the carrying value of
the asset. Assets to be disposed of should be reported at the lower of their
carrying amount or their fair value, less cost to sell. This Statement is
effective for financial statements for fiscal years beginning after December 15,
1995, and adoption by Honeywell in 1996 is not expected to have a material
impact on results of operations or financial position.

13
<PAGE>
In October 1995, the Financial Accounting Standards Board issued Statement
of Financial Accounting Standards No. 123 (SFAS 123), "Accounting for
Stock-Based Compensation." As permitted by SFAS 123, Honeywell has elected to
continue following the guidance of Accounting Principles Board Opinion No. 25,
"Accounting for Stock Issued to Employees," for measurement and recognition of
stock-based transactions with employees. Honeywell will adopt the disclosure
provisions of SFAS 123 in 1996.

SAFE HARBOR STATEMENT

Except for the historical information contained herein, certain of the
matters discussed in this annual report are "forward-looking statements" as
defined in the Private Securities Litigation Reform Act of 1995, which involve
risks and uncertainties, including but not limited to, changing economic
conditions, international trade factors and government policies affecting
Honeywell's operations, markets, products, services and prices.

Economic downturns or recessionary conditions in the United States and
international markets served by Honeywell can adversely affect the demand for
Honeywell's products and services. Changes in international policy may result in
unfavorable conditions such as trading sanctions or increased tariffs between
various countries and restrict the markets for Honeywell's products and
services. Changes in government spending and budgetary policies, both in the
United States and in other countries, may adversely affect the demand for
Honeywell's products and services by government entities.

DISCUSSION AND ANALYSIS BY SEGMENT

HOME AND BUILDING CONTROL

Sales in Home and Building Control were $3.035 billion in 1995, compared
with $2.665 billion in 1994 and $2.424 billion in 1993. Sales in 1995 benefited
from an improving economy in Europe and solid growth in the Asia Pacific region.
Home Control experienced strong sales growth from acquisitions and business in
the trade and retail channels, and also broadened its product offerings in gas
valves, actuators and thermostats in key markets. The business introduced the
Perfect Climate Comfort Control Center-TM-, a low-cost, automated, integrated
home temperature and indoor air quality control system. Building Control
experienced strong sales growth, fueled by strength overall in Europe and by its
comprehensive energy retrofit and service solutions business in U.S. healthcare
and government markets; and there was a strong worldwide acceptance of
Honeywell's Excel Security Manager, an access control system for buildings. We
anticipate that Home and Building Control's large worldwide installed product
and service base and market strategies will continue to support future sales
growth.

Sales in 1994 were up moderately as U.S. sales continued to benefit from an
improving economy and growing consumer confidence. International sales were
aided by the beginnings of economic recovery. Home Control continued to achieve
greater market penetration with original equipment manufacturers worldwide and
to broaden its product offerings in key markets such as burner boiler control.
Honeywell acquired Metallwerke Neheim Goeke & Co. GmbH, a leading German
manufacturer of water heating control products, to complement its current
offerings in Europe. In addition, there were a number of new product
introductions which included a new line of smart gas valves and integrated
boiler and furnace controls. Building Control experienced continued success with
its comprehensive energy retrofit and service solutions, particularly in the
schools and industrial markets in the United States.

Home and Building Control operating profit was $309 million in 1995,
compared with $236 million in 1994 and $233 million in 1993. Operating profit
included special charges of $29 million in 1994 and $10 million in 1993 to
consolidate facilities, streamline operations and improve productivity.
Excluding the impact of special charges, operating profit increased 16 percent
in 1995, primarily from strong international volume increases, new product
introductions and cost-reduction initiatives. Cost-

14
<PAGE>
reduction initiatives included the re-engineering of the installed systems
business, transfer of an electric heat thermostat line from Canada to Mexico and
headcount reductions in the protection services business.

Excluding the impact of special charges, operating profit increased
moderately in 1994, benefiting from increasing volume in an improving U.S.
economy and growing consumer confidence.

Both Home Control and Building Control experienced strong orders growth in
1995, benefiting from international strength and new product introductions. The
backlog of orders increased moderately for 1995.

INDUSTRIAL CONTROL

Industrial Control sales were $2.036 billion in 1995, compared with $1.835
billion in 1994 and $1.692 billion in 1993. Industrial Automation and Control
sales increased moderately in 1995. The business continued to make inroads in
key markets such as pulp and paper and hydrocarbon processing as a result of
increased domestic and international demand for TotalPlant-TM- open solutions,
as industry continues to focus on improving productivity and meeting stringent
environmental and safety regulations. The business entered into a strategic
alliance with Sinopec, the world's third-largest petroleum refiner, representing
the first major application of TotalPlant advanced services in international
markets. The business also introduced a major new release of software and
enhanced hardware components for its TDC 3000x-Registered Trademark- industrial
automation system that will significantly increase customer productivity, safety
and regulatory compliance, SMV 3000, the first multi-variable transmitter, and
SCAN 3000 on the NT platform. Sensing and Control sales increased moderately in
1995, benefiting from strong international sales of commercial sensors and
switches, particularly in Europe and Asia Pacific. The business introduced the
Smart Distributed System, a revolutionary sensor network for distributed machine
control, into Europe and Asia Pacific. A new solenoid valve series, designed for
the process control market, was introduced globally and will help customers meet
stringent environmental and safety regulations. We expect continued growth for
both Industrial Automation and Control's and Sensing and Control's systems and
products in 1996.

Excluding year-earlier results of the Keyboard Division, which was sold in
the third quarter of 1993, sales increased moderately in 1994. Industrial
Automation and Control experienced improving sales for TotalPlant open
solutions. Sales to the hydrocarbon processing market were strong as companies
invested to comply with the U.S. Environmental Protection Agency regulations for
reformulated fuels. Honeywell acquired Allied Data Communications, the systems
business from Pepperl + Fuchs Systems, and Profimatics during the year and
forged alliances with other companies to expand its TotalPlant open solutions
portfolio and provide more one-stop shopping and a broader range of services to
its industrial customers. Sensing and Control benefited from continued
improvements in the U.S. durable goods market, particularly in the automotive,
appliance and information technology industries. The business introduced the
Smart Distributed System in the United States.

Industrial Control operating profit was $234 million in 1995, $207 million
in 1994 and $190 million in 1993. Operating profit included special charges of
$14 million in 1994 and $9 million in 1993 to consolidate facilities, streamline
operations and improve productivity. Excluding the impact of special charges,
Industrial Automation and Control operating profit declined slightly in 1995,
reflecting the timing of TotalPlant project implementation and the current mix
of lower margin services. Sensing and Control experienced a sharp increase in
operating profit as a result of improvement in solid state and electrical switch
margins in the United States and increased international profits driven by
volume and lower product costs in Europe.

Excluding the impact of special charges, 1994 operating profit showed a
moderate increase as a result of volume increases in Industrial Automation and
Control, where environmental and safety regulations were key drivers of spending
around the world, particularly in the hydrocarbon processing and chemicals
markets; and volume increases in Sensing and Control, where durable goods
markets continued to improve, particularly in the automotive and appliance
industries.

15
<PAGE>
In 1995, Industrial Automation and Control experienced a solid increase in
order activity both domestically and internationally in such key markets as pulp
and paper and hydrocarbon processing. Sensing and Control orders increased
modestly, driven by commercial and automative sensors in Europe and the United
States. The backlog of orders was up moderately for the year.

SPACE AND AVIATION CONTROL

Sales in Space and Aviation Control were $1.527 billion in 1995, compared
with $1.432 billion in 1994 and $1.675 billion in 1993. Sales increased
moderately in 1995, driven by the recovery in the business jet and commuter
aircraft market, strength in the retrofit and repair business and improved
production efficiencies in the air transport market, and increased sales from
the International Space Station program. We anticipate a modest increase in
Space and Aviation Control sales in 1996 and stronger growth in 1997 with the
cyclical recovery of the commercial aircraft industry and onset of the volume
production phase on two large military contracts.

Sales in 1994 experienced an anticipated decline, reflecting lower
commercial aircraft production rates and reduced government spending.

Space and Aviation Control operating profit was $127 million in 1995,
compared with $81 million in 1994 and $148 million in 1993. Operating profit
included special charges of $20 million in 1994 and $7 million in 1993 to
consolidate facilities, streamline operations and improve productivity.
Excluding the impact of special charges, 1995 operating profit increased as a
result of the strong performance in Commercial Aviation Systems. Commercial
margins improved as a result of increased volume, completion of a major
next-generation technology development effort and the benefit of earlier
restructuring activities. Operating profit was down modestly in the military
business and flat in the space business.

Excluding the impact of special charges, 1994 operating profit declined
sharply due to lower sales volume and continued investment in next-generation
technology. This was partially offset by favorable warranty performance and
termination settlements in the military and space businesses.

Space and Aviation Control orders increased slightly in 1995. Adjusting for
Space Systems' 1994 multi-year contract award to supply command and
data-handling systems for the International Space Station, orders increased
modestly in 1995. The increase was aided by a rebound in the business jet
market, a large multi-year military award for an F-16 avionics upgrade, and a
strengthening in orders for military retrofit and repair products. The backlog
of orders increased modestly from 1994 levels.

OTHER

Sales from other operations were $133 million in 1995, compared with $125
million in 1994 and $172 million in 1993. These sales included the activities of
various units such as the Solid State Electronics and the Honeywell Technology
research and development centers, which do not correspond with Honeywell's
primary business segments. Other operations had an operating profit of $3
million in 1995, broke even in 1994 and incurred an operating loss of $2 million
in 1993. The 1993 loss included special charges of $16 million for work force
reductions.

FINANCIAL POSITION

FINANCIAL CONDITION

At year-end 1995, Honeywell's capital structure comprised $312 million of
short-term debt, $481 million of long-term debt and $2.040 billion of
stockholders' equity. The ratio of debt-to-total capital was 28 percent,
compared with 32 percent at year-end 1994. Honeywell's debt-to-total capital
policy range is 30 to 40 percent.

Total debt decreased $69 million during 1995, to $793 million. The decrease
resulted from reduced general corporate financing requirements, including
capital expenditures, working capital and acquisitions.

16
<PAGE>
Stockholders' equity increased $185 million in 1995 to $2.040 billion. The
increase was primarily due to an increase in retained earnings of $334 million
from net income, an $89 million increase from stock option exercises and
employee stock plans, and a $33 million increase in accumulated foreign currency
translation, offset by dividends of $128 million, $129 million of treasury stock
purchases and a $14 million increase in the pension liability adjustment.

CASH GENERATION AND DEPLOYMENT

In 1995, $573 million of cash was generated from operating activities,
compared with $470 million in 1994 and $475 million in 1993. The increase in
1995 was largely due to improved earnings compared with 1994. In 1995, cash
generated from investing and financing activities included $19 million of
proceeds from the sale of assets and $60 million of proceeds from employee stock
plans and the exercise of Honeywell Foundation stock options. These funds were
used to support $238 million of capital expenditures, $128 million of dividend
payments and $137 million of payments for share repurchases. Cash balances
increased $24 million in 1995.

CONTROLLED WORKING CAPITAL

Cash generated from decreases in "controlled working capital" consisting of
trade and long-term receivables and inventories, offset by accounts payable and
customer advances, was $4 million in 1995. This portion of working capital as a
percentage of sales was 26 percent compared with 28 percent in 1994. The two
percentage point improvement reflects the continuing effort by Honeywell to
reduce "controlled working capital" as a percent of sales. The increase in
receivable and payable balances in 1995 was consistent with the increase in
fourth-quarter sales.

CAPITAL EXPENDITURES AND ACQUISITIONS

Capital expenditures for property, plant and equipment were $238 million in
1995, compared with $262 million in 1994 and $232 million in 1993. The 1995
depreciation charges were $236 million. Honeywell continues to invest at levels
believed to be adequate to maintain its technological leadership position.
During 1995, Honeywell invested $38 million in complementary business
acquisitions.

SHARE REPURCHASE PLANS

In December 1994, the Board of Directors authorized a program to purchase up
to 2 million Honeywell shares; this program was completed in the third quarter
1995. In July 1995, the Board of Directors authorized an open-ended program to
repurchase $250 million of Honeywell shares, of which $49 million was utilized
in the second half of 1995. Honeywell repurchased $240 million of shares in
1993, $168 million of shares in 1994 and $129 million of shares in 1995.

At year-end 1995, Honeywell had 188 million shares issued, 127 million
shares outstanding and 32,569 stockholders of record. At year-end 1994,
Honeywell had 188 million shares issued, 127 million shares outstanding and
32,025 stockholders of record.

DIVIDENDS

In November 1994, the Board of Directors approved a 4 percent increase in
the regular annual dividend to $1.00 per share, from $0.96 per share, effective
in the fourth quarter 1994. In November 1995, the Board of Directors approved an
additional 4 percent increase in the regular annual dividend to $1.04 per share
effective in the fourth quarter 1995. Honeywell paid $1.01 per share in
dividends in 1995, compared with $0.97 in 1994 and $0.9075 in 1993.

Honeywell has paid a quarterly dividend since 1932 and has increased the
annual payout per share in each of the last 20 years.

EMPLOYEE STOCK PROGRAM

In 1995, Honeywell contributed 571,905 shares of Honeywell common stock to
employees under its U.S. employee stock match savings plan. The number of shares
contributed under this program depends on employee savings levels and company
performance.

17
<PAGE>
PENSION CONTRIBUTIONS

Cash contributions to Honeywell's pension and retirement plans amounted to
$172 million in 1995, $141 million in 1994 and $154 million in 1993.

TAXES

In 1995, taxes paid were $128 million. Accrued income taxes and related
interest decreased $29 million during 1995.

FUNDING SPECIAL CHARGES

During 1994 and 1993, Honeywell established reserves for productivity
initiatives to strengthen the company's competitiveness (see page 11 and Note 4
to Financial Statements on page 27). Future cash flows from operating activities
are expected to be sufficient to fund these accrued costs.

LIQUIDITY

Short-term debt at year-end 1995 was $312 million, consisting of $65 million
of commercial paper, $63 million of notes payable and $184 million of current
maturities of long-term debt. Short-term debt at year-end 1994 totaled $361
million, consisting of $125 million of commercial paper, $102 million of notes
payable and $134 million of current maturities of long-term debt.

Through its banks, Honeywell has access to various credit facilities,
including committed credit lines for which Honeywell pays commitment fees and
uncommitted lines provided by banks on a non-committed, best-efforts basis.
Available general-purpose lines of credit at year-end 1995 totaled $1.089
billion. This consisted of $725 million of committed credit lines to meet
Honeywell's financing requirements, including support of commercial paper and
bank note borrowings, and $364 million of uncommitted credit lines available to
certain foreign subsidiaries. This compared with $1.076 billion of available
credit lines at year-end 1994, consisting of $737 million of committed credit
lines for general financing requirements and $339 million of uncommitted credit
lines available to certain foreign subsidiaries.

In addition to its committed credit lines, Honeywell has access to the
public debt markets as evidenced by its $500 million medium-term note program
initiated in August 1994. The medium-term note program allows note issuances
with maturities ranging from nine months to 30 years. At December 31, 1995, $222
million of notes was outstanding under this program. Long-term debt maturities
consist of $185 million in 1996, $109 million in 1997 and $98 million in 1998.

Cash and short-term investments totaled $301 million at year-end 1995 and
$275 million at year-end 1994. Honeywell believes its available cash, committed
credit lines and access to the public debt markets, through its medium-term note
and commercial paper programs, provide adequate short-term and long-term
liquidity.

DERIVATIVE FINANCIAL INSTRUMENTS

Honeywell is exposed to market risk from changes in interest rates and
foreign currency exchange rates, which may adversely affect its results of
operations and financial condition. In seeking to minimize this risk, Honeywell
manages exposure to changes in interest rates and foreign currency rates through
its regular operating and financing activities and, when deemed appropriate,
through the use of derivative financial instruments. Honeywell policy prohibits
the use of derivative financial instruments for trading or other speculative
purposes and Honeywell is not a party to leveraged financial instruments.

Honeywell has entered into various foreign currency exchange contracts
designed to minimize its net exposure to exchange rate fluctuations on foreign
currency transactions (see Notes 6, 14 and 15 to Financial Statements on pages,
29, 32 and 34 respectively). Foreign exchange contracts reduce Honeywell's
overall exposure to exchange rate movements, since the gains and losses on these
contracts offset losses and gains on the assets, liabilities and transactions
being hedged. Transactions that are hedged include foreign currency denominated
receivables and payables on the statement of financial

18
<PAGE>
position, firm purchase orders and firm sales commitments. At year-end 1995, the
notional amount of outstanding foreign exchange contracts, including contracts
to hedge intercompany transactions, was $1.262 billion.

It is Honeywell's practice to manage the relative proportions of its fixed
and floating rate debt in the context of the interest rate environment. The
objective is to minimize the cost of Honeywell's debt financing over an extended
period of time. To manage this mix in a cost efficient manner, Honeywell enters
into interest rate swap agreements, in which it agrees to exchange, at specified
intervals, the difference between fixed and variable interest amounts calculated
by reference to an agreed-upon notional principal amount (see Notes 14 and 15 to
Financial Statements on pages 32 and 34 respectively). At year-end 1995, the
notional amount of outstanding interest rate swaps was $225 million.

LITIGATION

On January 9, 1995, Judge Mariana Pfaelzer of the U.S. District Court set
aside an August 1993 jury verdict and damage award of $1.2 billion against
Honeywell in the patent and interference with contract case. She ruled, among
other things, that the Litton patent was unenforceable because it was obtained
by inequitable conduct and invalid because it was an invention that would have
been obvious from combining existing processes. She further ruled that if her
judgment were ever subsequently vacated or reversed on appeal, Honeywell would
be granted a new trial on the issue of damages because the jury's 1993 award was
inconsistent with the clear weight of the evidence, and permitting it to stand
would constitute a miscarriage of justice. Litton has appealed to the Court of
Appeals for the Federal Circuit, Washington, D.C. Briefs for the appeal have
been submitted by the parties and oral arguments were presented December 8,
1995. Honeywell believes that Judge Pfaelzer's rulings will be upheld on appeal.
As a result, no provision has been made in the financial statements with respect
to this contingent liability.

19
<PAGE>
alternative, for a new trial, and will argue important procedural and other
matters which could dispose of this case. If the $234 million jury verdict
withstands post-verdict motions, in whole or in part, any dollar judgment will
be trebled under federal antitrust laws and will be appealed by Honeywell. The
case will conclude only when the trial and appellate courts resolve all of the
legal issues that could reduce or eliminate the jury verdict. As a result, no
provision has been made in the financial statements with respect to this
contingent liability.

CREDIT RATINGS

Honeywell's credit ratings remained unchanged during 1995. Ratings for
long-term and short-term debt are, respectively, A/A-1 by Standard and Poor's
Corporation, A/Duff1 by Duff and Phelps Corporation and A3/P-2 by Moody's
Investors Service, Inc.

STOCK PERFORMANCE

The market price of Honeywell stock ranged from $49 1/2 to $30 3/4 in 1995,
and was $48 5/8 at year end. Book value per common share at year end was $16.09
in 1995 and $14.57 in 1994.

20
<PAGE>
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

INDEPENDENT AUDITORS' REPORT

To the Stockholders of Honeywell Inc.:

We have audited the statement of financial position of Honeywell Inc. and
subsidiaries as of December 31, 1995 and 1994, and the related statements of
income and cash flows for each of the three years in the period ended December
31, 1995. Our audits also included the financial statement schedule listed at
Part IV, Item 14(a)2. These financial statements are the responsibility of the
Company's management. Our responsibility is to express an opinion on these
financial statements based on our audits.

We have conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.

In our opinion, such financial statements present fairly, in all material
respects, the financial position of Honeywell Inc. and subsidiaries at December
31, 1995 and 1994, and the results of their operations and their cash flows for
each of the three years in the period ended December 31, 1995, in conformity
with generally accepted accounting principles. Also, in our opinion, such
financial statement schedule, when considered in relation to the basic financial
statements taken as a whole, presents fairly in all material respects the
information set forth therein.

Deloitte & Touche LLP
Minneapolis, Minnesota
February 13, 1996
(February 29, 1996 and March 1, 1996
as to certain information included in
Note 22 and March 15, 1996 as to
certain information included in Note
24)

21
<PAGE>
INCOME STATEMENT
HONEYWELL INC. AND SUBSIDIARIES
(DOLLARS AND SHARES IN MILLIONS
EXCEPT PER SHARE AMOUNTS)

<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31
---------------------------------
1995 1994 1993
--------- ---------- ----------
<S> <C> <C> <C>
Sales......................................................................... $ 6,731.3 $ 6,057.0 $ 5,963.0
--------- ---------- ----------
Costs and Expenses
Cost of sales............................................................... 4,584.2 4,082.1 4,019.6
Research and development.................................................... 323.2 319.0 337.4
Selling, general and administrative......................................... 1,263.1 1,173.8 1,075.7
Litigation settlements...................................................... (32.6)
Special charges............................................................. 62.7 51.2
--------- ---------- ----------
6,170.5 5,637.6 5,451.3
--------- ---------- ----------
Interest
Interest expense............................................................ 83.3 75.5 68.0
Interest income............................................................. 14.4 15.3 17.0
--------- ---------- ----------
68.9 60.2 51.0
--------- ---------- ----------
Equity Income................................................................. 13.6 10.5 17.8
--------- ---------- ----------
Income before Income Taxes.................................................... 505.5 369.7 478.5
Provision for Income Taxes.................................................... 171.9 90.8 156.3
--------- ---------- ----------
Net Income.................................................................... $ 333.6 $ 278.9 $ 322.2
--------- ---------- ----------
--------- ---------- ----------
Earnings Per Common Share..................................................... $ 2.62 $ 2.15 $ 2.40
--------- ---------- ----------
--------- ---------- ----------
Average Number of Common Shares Outstanding................................... 127.1 129.4 134.2
</TABLE>

See accompanying Notes to Financial Statements.

22
<PAGE>
STATEMENT OF FINANCIAL POSITION
HONEYWELL INC. AND SUBSIDIARIES
(DOLLARS IN MILLIONS)

ASSETS

<TABLE>
<CAPTION>
DECEMBER 31
-----------------------
1995 1994
---------- -----------
<S> <C> <C>
Current Assets
Cash and cash equivalents............................................................. $ 291.6 $ 267.4
Short-term investments................................................................ 9.0 7.4
Receivables........................................................................... 1,477.3 1,406.9
Inventories........................................................................... 794.4 760.2
Deferred income taxes................................................................. 194.6 207.5
---------- -----------
2,766.9 2,649.4
Investments and Advances................................................................ 244.8 242.8
Property, Plant and Equipment
Property, plant and equipment......................................................... 2,857.1 2,716.8
Less accumulated depreciation......................................................... 1,758.2 1,617.3
---------- -----------
1,098.9 1,099.5
Other Assets
Long-term receivables................................................................. 46.8 40.1
Goodwill.............................................................................. 240.7 209.8
Patents, licenses and trademarks...................................................... 43.4 66.1
Software and other intangibles........................................................ 340.1 290.3
Deferred income taxes................................................................. 71.8 98.5
Other................................................................................. 206.8 189.4
---------- -----------
Total Assets........................................................................ $ 5,060.2 $ 4,885.9
---------- -----------
---------- -----------

LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities
Short-term debt....................................................................... $ 312.4 $ 360.6
Accounts payable...................................................................... 491.5 429.6
Customer advances..................................................................... 93.2 72.6
Accrued compensation and benefit costs................................................ 374.3 434.6
Accrued income taxes.................................................................. 274.8 309.6
Deferred income taxes................................................................. 20.4
Other accrued liabilities............................................................. 455.9 464.8
---------- -----------
2,022.5 2,071.8
Long-Term Debt.......................................................................... 481.0 501.5
Other Liabilities
Accrued benefit costs................................................................. 416.3 359.0
Deferred income taxes................................................................. 39.2 39.8
Other................................................................................. 61.1 59.1
Stockholders' Equity
Common stock -- $1.50 par value
Authorized -- 250,000,000 shares
Issued -- 1995 -- 188,126,704 shares.................................................. 282.2
1994 -- 188,286,000 shares................................................... 282.4
Additional paid-in capital............................................................ 481.3 446.9
Retained earnings..................................................................... 2,805.8 2,600.4
Treasury stock -- 1995 -- 61,306,251 shares........................................... (1,650.2)
1994 -- 61,030,565 shares............................................ (1,576.5)
Accumulated foreign currency translation.............................................. 140.9 107.4
Pension liability adjustment.......................................................... (19.9) (5.9)
---------- -----------
2,040.1 1,854.7
---------- -----------
Total Liabilities and Stockholders' Equity.......................................... $ 5,060.2 $ 4,885.9
---------- -----------
---------- -----------
</TABLE>

See accompanying Notes to Financial Statements.

23
<PAGE>
STATEMENT OF CASH FLOWS
HONEYWELL INC. AND SUBSIDIARIES
(DOLLARS IN MILLIONS)

<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31
-------------------------------
1995 1994 1993
--------- --------- ---------
<S> <C> <C> <C>
Cash Flows from Operating Activities
Net income..................................................................... $ 333.6 $ 278.9 $ 322.2
Adjustments to reconcile net income to net cash flows from operating
activities:
Depreciation................................................................. 236.1 235.3 235.3
Amortization of intangibles.................................................. 56.8 52.1 49.6
Deferred income taxes........................................................ 67.2 14.0 28.8
Equity income, net of dividends received..................................... (11.0) (7.6) (14.5)
Loss on sale of assets....................................................... 7.2 1.0 6.2
Contributions to employee stock plans........................................ 27.4 26.5 28.7
Increase in receivables...................................................... (38.4) (83.8) (62.7)
(Increase) decrease in inventories........................................... (27.6) 20.9 54.2
Increase in accounts payable................................................. 50.1 27.7 28.8
Increase (decrease) in accrued income taxes and interest..................... (35.4) (4.6) 8.3
Other changes in working capital, excluding short-term investments and
short-term debt............................................................. (99.1) (93.9) (146.6)
Other noncurrent items -- net................................................ 5.6 3.0 (63.5)
--------- --------- ---------
Net cash flows from operating activities......................................... 572.5 469.5 474.8
--------- --------- ---------
Cash Flows from Investing Activities
Reduction of investment in Sperry Aerospace Group.............................. 20.0
Proceeds from sale of assets................................................... 18.7 22.6 46.8
Capital expenditures........................................................... (238.1) (262.4) (232.1)
Investment in acquisitions..................................................... (37.7) (104.6) (14.2)
(Increase) decrease in short-term investments.................................. (1.4) 6.7 (10.2)
Other -- net................................................................... (5.2) 10.5 (23.3)
--------- --------- ---------
Net cash flows from investing activities......................................... (263.7) (327.2) (213.0)
--------- --------- ---------
Cash Flows from Financing Activities
Net increase (decrease) in short-term debt..................................... (101.0) 35.7 2.8
Proceeds from issuance of long-term debt....................................... 167.5 126.5 0.6
Repayment of long-term debt.................................................... (156.4) (1.8) (7.3)
Purchase of treasury stock..................................................... (137.3) (162.5) (241.2)
Proceeds from exercise of stock options........................................ 60.4 5.9 17.6
Dividends paid................................................................. (127.5) (125.6) (122.0)
--------- --------- ---------
Net cash flows from financing activities......................................... (294.3) (121.8) (349.5)
--------- --------- ---------
Effect of exchange rate changes on cash.......................................... 9.7 4.6 (12.4)
--------- --------- ---------
Increase (decrease) in cash and cash equivalents................................. 24.2 25.1 (100.1)
Cash and cash equivalents at beginning of year................................... 267.4 242.3 342.4
--------- --------- ---------
Cash and cash equivalents at end of year......................................... $ 291.6 $ 267.4 $ 242.3
--------- --------- ---------
--------- --------- ---------
</TABLE>

See accompanying Notes to Financial Statements.

24
<PAGE>
NOTES TO FINANCIAL STATEMENTS
HONEYWELL INC. AND SUBSIDIARIES
(DOLLARS IN MILLIONS EXCEPT PER SHARE AMOUNTS)

NOTE 1 -- ACCOUNTING POLICIES

CONSOLIDATION

The consolidated financial statements and accompanying data comprise
Honeywell Inc. and subsidiaries. All material intercompany transactions are
eliminated.

ESTIMATES

The preparation of financial statements in conformity with generally
accepted accounting principles requires Honeywell to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the dates of the financial
statements and the reported amounts of revenues and expenses during the
reporting periods.

SALES

Product sales are recorded when title is passed to the customer, which
usually occurs at the time of delivery or acceptance. Sales under long-term
contracts are recorded on the percentage-of-completion method measured on the
cost-to-cost basis for engineering-type contracts and the units-of-delivery
basis for production-type contracts. Provisions for anticipated losses on
long-term contracts are recorded in full when they become evident.

EARNINGS PER COMMON SHARE

Earnings per common share are based on the average number of common shares
outstanding during the year.

STATEMENT OF CASH FLOWS

Cash equivalents are all highly liquid, temporary cash investments with an
original maturity of three months or less.

Cash flows from purchases and maturities of held-to-maturity securities are
classified as cash flows from investing activities. Cash flows from contracts
used to hedge cash dividend payments from subsidiaries are classified as part of
the effect of exchange rate changes on cash.

INVENTORIES

Inventories are valued at the lower of cost or market. Cost is determined
using the weighted-average method. Market is based on net realizable value.

Payments received from customers relating to the uncompleted portion of
contracts are deducted from applicable inventories.

INVESTMENTS

Investments in companies owned 20 to 50 percent are accounted for using the
equity method.

PROPERTY

Property is carried at cost and depreciated primarily using the
straight-line method over estimated useful lives of 10 to 40 years for buildings
and improvements, and three to 15 years for machinery and equipment.

INTANGIBLES

Intangibles are carried at cost and amortized using the straight-line method
over their estimated useful lives of not more than 40 years for goodwill; four
to 17 years for patents, licenses and trademarks; and three to 24 years for
software and other intangibles. Intangibles also include the asset resulting
from recognition of the defined benefit pension plan minimum liability, which is
amortized as part of net periodic pension cost.

25
<PAGE>
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
HONEYWELL INC. AND SUBSIDIARIES
(DOLLARS IN MILLIONS EXCEPT PER SHARE AMOUNTS)

NOTE 1 -- ACCOUNTING POLICIES (CONTINUED)
DERIVATIVES

In 1994, Honeywell adopted Statement of Financial Accounting Standards No.
119, "Disclosure about Derivative Financial Instruments and Fair Value of
Financial Instruments." Honeywell uses derivative financial instruments such as
foreign currency contracts (forwards, swaps and options) to manage its foreign
currency exposure (see Notes 6, 14 and 15) and interest rate swaps to manage its
exposure to interest rate fluctuations and its mix of fixed and floating
interest rates (see Notes 14 and 15).

The carrying amounts of foreign currency contracts purchased to hedge firm
foreign currency commitments are deferred and included in the measurement of the
related foreign currency transactions. These hedges are scheduled to mature
coincident with the timing of the underlying foreign currency commitments and
transactions. Gains and losses from other foreign currency transactions are
included in selling, general and administrative expenses on the income statement
and were not material in any year.

The amount to be paid or received from interest rate swaps is charged or
credited to interest expense over the lives of the interest rate swap
agreements. Any gains realized upon the termination of interest rate swap
agreements are deferred and amortized as an adjustment to interest expense of
the underlying liabilities over the original term of the interest rate swap
agreements.

FOREIGN CURRENCY

Foreign currency assets and liabilities are generally translated into U. S.
dollars using the exchange rates in effect at the statement of financial
position date. Results of operations are generally translated using the average
exchange rates throughout the period. The effects of exchange rate fluctuations
on translation of assets, liabilities and hedges of cash dividend payments from
subsidiaries are reported as accumulated foreign currency translation and
increased/(reduced) stockholders' equity $33.5 in 1995, $54.5 in 1994 and $(3.0)
in 1993.

POSTEMPLOYMENT BENEFITS

The enactment by Congress of the Omnibus Budget Reconciliation Act of 1993,
which made Medicare the primary provider of medical benefits for disabled former
employees after 29 months of disability, reduced the accumulated benefit
obligation for postemployment benefits by $33.4 in 1993. This change in estimate
is included in cost of sales on the income statement.

NOTE 2 -- ACQUISITIONS AND SALE OF ASSETS
Honeywell acquired nine companies in 1995, 15 companies in 1994 and eight
companies in 1993 for $37.7, $104.6 and $14.2 in cash, respectively. These
acquisitions were accounted for as purchases, and accordingly, the assets and
liabilities of the acquired entities have been recorded at their estimated fair
values at the dates of acquisition. The excess of purchase price over the
estimated fair values of the net assets acquired, in the amount of $32.4 in
1995, $87.4 in 1994 and $11.8 in 1993, has been recorded as goodwill and is
amortized over estimated useful lives. The pro forma results for 1995, 1994 and
1993, assuming these acquisitions had been made at the beginning of the year,
would not be significantly different from reported results.

In 1993, Honeywell sold its Keyboard Division to Key Tronic Corporation for
$29.7 in cash, notes and common stock. Proceeds from other asset sales,
including the collection of notes receivable and sale of stock received from
asset sales made in previous years, amounted to $8.1 in 1995, $8.6 in 1994 and
$22.9 in 1993. Gains and losses from asset sales were not material in any year
and are included in selling, general and administrative expenses on the income
statement.

26
<PAGE>
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
HONEYWELL INC. AND SUBSIDIARIES
(DOLLARS IN MILLIONS EXCEPT PER SHARE AMOUNTS)

NOTE 3 -- LITIGATION SETTLEMENTS
On April 16, 1993, Honeywell announced the settlement of its lawsuits
against the Unisys Corporation and other parties in connection with Honeywell's
1986 purchase of the Sperry Aerospace Group. Honeywell received $70.0 in cash
and notes and recorded a gain of $22.4 in 1993 to offset previously incurred
costs associated with the matter. In addition, the portion of the purchase price
originally allocated to goodwill and other intangibles was reduced by $47.6.

Honeywell has reached agreement with various camera manufacturers for their
use of Honeywell's patented automatic focus camera technology. The total of all
one-time settlements recorded in these matters, after associated expenses,
resulted in a gain of $10.2 in 1993. Several settlements also included licensing
agreements that require the payment of royalties to Honeywell based upon the
amount of product manufactured or sold by the licensee. Autofocus royalty income
from the licensing agreements amounted to $8.2 in 1994 and $31.4 in 1993, and is
included in selling, general and administrative expenses on the income
statement. Autofocus royalty income from licensing agreements was not material
in 1995.

NOTE 4 -- SPECIAL CHARGES
In December 1994, Honeywell's management, with the approval of the board of
directors, committed itself to a plan of action and recorded special charges of
$62.7. The actions undertaken included a continuation of right-sizing the Space
and Aviation Control business segment, a worldwide consolidation of
manufacturing capacity, a streamlining and realignment of the overhead structure
and corporate expense reductions. Special charges of $51.2 were recorded in 1993
for productivity initiatives to strengthen the company's competitiveness.
Special charges include costs for work force reductions, worldwide facilities
consolidation and other cost accruals.

Work force reduction costs primarily include severance costs related to
involuntary termination programs instituted to improve efficiency and reduce
costs. These costs amounted to $52.4 in 1994 and $43.7 in 1993. As a result of
the 1994 plan, approximately 1,200 employees were terminated. Total expenditures
of $42.9 in 1995 included $38.3, $3.8 and $0.8 related to costs incurred in
1994, 1993 and 1992, respectively. Total expenditures of $36.0 in 1994 included
$2.9, $26.4 and $6.7 related to costs incurred in 1994, 1993 and 1992,
respectively. Total expenditures of $49.8 in 1993 included $7.8 and $42.0
related to costs incurred in 1993 and 1992, respectively. Special charges of
$8.0 from 1994 remain to be paid out as a result of longer-term agreements.

Facilities consolidation costs are primarily associated with consolidations
of branch office space and product lines to restructure and streamline
Honeywell's operations. These costs amounted to $10.3 in 1994 and $2.0 in 1993.
Total expenditures of $11.4 in 1995 included $6.9, $0.4 and $4.1 related to
costs incurred in 1994, 1993 and 1992, respectively. Total expenditures of $8.5
in 1994 included $1.6 and $6.9 related to costs incurred in 1993 and 1992,
respectively. Total expenditures of $26.2 in 1993 related to costs incurred in
1992. Special charges of $2.6 from 1994 and $0.9 from 1992 remain to be paid out
as a result of lease costs associated with vacated facilities.

Other cost accruals include costs of exiting several product lines which
were no longer considered complementary to Honeywell's businesses and amounted
to $5.5 in 1993. Total expenditures of $5.5 in 1994 related to costs incurred in
1993. Total expenditures of $17.0 in 1993 related to costs incurred in 1992.

Cash flows from operating activities have funded and are expected to fund
all special charges.

27
<PAGE>
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
HONEYWELL INC. AND SUBSIDIARIES
(DOLLARS IN MILLIONS EXCEPT PER SHARE AMOUNTS)

NOTE 5 -- INCOME TAXES
The components of income before income taxes consist of the following:

<TABLE>
<CAPTION>
1995 1994 1993
------ ------ ------
<S> <C> <C> <C>
Domestic..................................... $285.4 $208.4 $316.9
Foreign...................................... 220.1 161.3 161.6
------ ------ ------
$505.5 $369.7 $478.5
</TABLE>

The provision for income taxes on that income is as follows:

<TABLE>
<CAPTION>
1995 1994 1993
------ ------ ------
<S> <C> <C> <C>
Current tax expense
United States.............................. $ 39.8 $ 33.8 $ 81.7
Foreign.................................... 59.9 40.6 36.0
State and local............................ 8.9 2.9 11.3
------ ------ ------
Total current.............................. 108.6 77.3 129.0
------ ------ ------
Deferred tax expense
United States.............................. 41.7 13.0 17.9
Foreign.................................... 17.5 (0.8) 5.8
State and local............................ 4.1 1.3 3.6
------ ------ ------
Total deferred............................. 63.3 13.5 27.3
------ ------ ------
Provision for income taxes................... $171.9 $ 90.8 $156.3
</TABLE>

A favorable tax settlement reduced the 1994 provision for income taxes by
$37.6 ($0.29 per share).

The enactment by Congress of the Omnibus Budget Reconciliation Act of 1993,
which raised the U.S. federal statutory income tax rate for corporations from 34
percent to 35 percent retroactive to January 1, 1993, did not have a material
impact on the 1993 provision for income taxes; however, the enactment of this
legislation did result in a one-time gain of $9.2 ($0.07 per share) in 1993 from
the revaluation of deferred tax assets.

A reconciliation of the provision for income taxes to the amount computed
using U.S. federal statutory rates is as follows:

<TABLE>
<CAPTION>
1995 1994 1993
------ ------ ------
<S> <C> <C> <C>
Taxes on income at U.S. federal statutory
rates....................................... $176.9 $129.4 $167.5
Tax effects of foreign income................ (11.7) (15.5) (26.0)
State taxes.................................. 9.9 4.2 10.9
Tax effect of settlement..................... (37.6)
Adjustments to effective tax rates used in
recording tax assets and liabilities........ 2.7
Other........................................ (3.2) 7.6 3.9
------ ------ ------
Provision for income taxes................... $171.9 $ 90.8 $156.3
</TABLE>

Interest costs related to prior years' tax issues are included in the
provision for income taxes. Taxes paid were $128.3 in 1995, $79.4 in 1994 and
$111.2 in 1993.

28
<PAGE>
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
HONEYWELL INC. AND SUBSIDIARIES
(DOLLARS IN MILLIONS EXCEPT PER SHARE AMOUNTS)

NOTE 5 -- INCOME TAXES (CONTINUED)
Deferred income taxes are provided for the temporary differences between the
financial reporting basis and the tax basis of Honeywell's assets and
liabilities. Temporary differences comprising the net deferred taxes shown on
the statement of financial position are:

<TABLE>
<CAPTION>
1995 1994
------ ------
<S> <C> <C>
Employee benefits............................ $101.6 $142.2
Miscellaneous accruals....................... 76.4 95.2
Excess of tax over book
depreciation/amortization................... (8.4) (24.0)
Asset valuation reserves..................... 37.6 43.0
Long-term contracts.......................... 16.0 4.2
State taxes.................................. 24.3 28.5
Pension liability adjustment................. 12.7 3.7
Other........................................ (53.4) (26.6)
------ ------
$206.8 $266.2
</TABLE>

The components of net deferred taxes shown on the statement of financial
position are:

<TABLE>
<CAPTION>
1995 1994
------ ------
<S> <C> <C>
Deferred tax assets.......................... $463.7 $463.8
Deferred tax liabilities..................... 256.9 197.6
</TABLE>

Provision has not been made for U.S. or additional foreign taxes on $585.2
of undistributed earnings of international subsidiaries, as those earnings are
considered to be permanently reinvested in the operations of those subsidiaries.
It is not practicable to estimate the amount of tax that might be payable on the
eventual remittance of such earnings.

At December 31, 1995, foreign subsidiaries had tax operating loss
carryforwards of $13.6.

NOTE 6 -- FOREIGN CURRENCY
Honeywell has entered into various foreign currency exchange contracts
(primarily Belgian francs, Deutsche marks and Canadian dollars) designed to
minimize its exposure to exchange rate fluctuations on foreign currency
transactions. Honeywell only uses foreign currency exchange contracts to hedge
underlying exposures such as non-functional currency receivables and payables
and foreign currency imports and exports. Company policy prohibits speculation
in foreign currency contracts.

Foreign exchange contracts reduce Honeywell's overall exposure to exchange
rate movements, since the gains and losses on these contracts offset losses and
gains on the assets, liabilities and transactions being hedged. Honeywell hedges
a significant portion of all known foreign exchange exposures, including
intercompany transactions. The notional amount of Honeywell's outstanding
foreign currency contracts, consisting of forwards, purchased options and swaps
was approximately $1,262.2 and $1,088.6 at December 31, 1995, and 1994,
respectively. These contracts generally have a term of less than one year.

NOTE 7 -- INVESTMENTS IN DEBT AND EQUITY SECURITIES
In 1994, Honeywell adopted Statement of Financial Accounting Standards No.
115, "Accounting for Certain Investments in Debt and Equity Securities," which
specifies certain accounting and reporting for investments in equity securities
that have readily determinable fair values and for all investments in debt
securities.

29
<PAGE>
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
HONEYWELL INC. AND SUBSIDIARIES
(DOLLARS IN MILLIONS EXCEPT PER SHARE AMOUNTS)

NOTE 7 -- INVESTMENTS IN DEBT AND EQUITY SECURITIES (CONTINUED)
Honeywell's investments in held-to-maturity securities are reported at
amortized cost in the statement of financial position as follows:

<TABLE>
<CAPTION>
1995 1994
------ ------
<S> <C> <C>
Cash equivalents............................. $161.6 $124.9
Short-term investments....................... 9.0 6.6
Investments and advances..................... 6.9 12.9
------ ------
$177.5 $144.4
</TABLE>

Held-to-maturity securities generally mature within one year and include the
following:

<TABLE>
<CAPTION>
1995 1994
------ ------
<S> <C> <C>
Time deposits with financial institutions.... $ 53.4 $ 85.8
Commercial paper............................. 109.3 42.4
Other........................................ 14.8 16.2
------ ------
$177.5 $144.4
</TABLE>

Honeywell's purchases of held-to-maturity securities, consisting primarily
of commercial paper amounted to $3,528.0 and $1,674.8 in 1995 and 1994,
respectively. Proceeds from maturities of held-to-maturity securities amounted
to $3,494.3 and $1,673.9 in 1995 and 1994, respectively. Honeywell has no
investments in trading securities, and available-for-sale securities are not
material. The estimated aggregate fair value of these securities approximates
their carrying amounts in the statement of financial position. Gross unrealized
holding gains and losses were not material in any year.

NOTE 8 -- RECEIVABLES
Receivables have been reduced by an allowance for doubtful accounts as
follows:

<TABLE>
<CAPTION>
1995 1994
----------- -----------
<S> <C> <C>
Receivables, current............................................................... $ 34.5 $ 31.1
Long-term receivables.............................................................. 0.7 0.7
</TABLE>

Receivables include approximately $20.1 in 1995 and $21.9 in 1994 billed to
customers but not paid pursuant to contract retainage provisions. These balances
are due upon completion of the contracts, generally within one year.

Unbilled receivables related to long-term contracts amount to $314.0 and
$295.9 at December 31, 1995, and 1994, respectively, and are generally billable
and collectible within one year.

Long-term, interest-bearing notes receivable from the sale of assets have
been reduced by valuation reserves of $1.8 in 1995 and $1.9 in 1994 to an amount
that approximates realizable value.

In 1992, Honeywell entered into a three-year agreement, with a large
international banking institution, whereby it can sell an undivided interest in
a designated pool of trade accounts receivable up to a maximum of $50.0 on an
ongoing basis and without recourse. As collections reduce accounts receivable
sold, Honeywell may sell an additional undivided interest in new receivables to
bring the amount sold up to the $50.0 maximum. Proceeds received from the sale
of receivables are included in cash flows from operating activities in the
statement of cash flows and amounted to $22.4 in 1995, $34.4 in 1994 and $193.7
in 1993. The uncollected balance of receivables sold amounted to $1.5 and $2.4
at December 31, 1995, and 1994, respectively, and averaged $2.7 and $4.2 during
those respective years. The discount recorded on sale of receivables is included
in selling, general and administrative

30
<PAGE>
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
HONEYWELL INC. AND SUBSIDIARIES
(DOLLARS IN MILLIONS EXCEPT PER SHARE AMOUNTS)

NOTE 8 -- RECEIVABLES (CONTINUED)
expenses on the income statement and amounted to $0.2, $0.4 and $0.7 in 1995,
1994 and 1993, respectively. Honeywell, as agent for the purchaser, retains
collection and administrative responsibilities for the participating interests
sold.

NOTE 9 -- INVENTORIES

<TABLE>
<CAPTION>
1995 1994
--------- ---------
<S> <C> <C>
Finished goods........................................................ $ 356.6 $ 297.4
Inventories related to long-term contracts............................ 73.6 89.1
Work in process....................................................... 159.5 156.9
Raw materials and supplies............................................ 204.7 216.8
--------- ---------
$ 794.4 $ 760.2
</TABLE>

Inventories related to long-term contracts are net of payments received from
customers relating to the uncompleted portions of such contracts in the amounts
of $56.4 and $32.5 at December 31, 1995, and 1994, respectively.

NOTE 10 -- PROPERTY, PLANT AND EQUIPMENT

<TABLE>
<CAPTION>
1995 1994
--------- ----------
<S> <C> <C>
Land.................................................................. $ 77.7 $ 78.2
Buildings and improvements............................................ 585.8 623.4
Machinery and equipment............................................... 2,100.3 1,937.3
Construction in progress.............................................. 93.3 77.9
--------- ----------
$ 2,857.1 $ 2,716.8
</TABLE>

NOTE 11 -- FOREIGN SUBSIDIARIES
The following is a summary of financial data pertaining to foreign
subsidiaries:

<TABLE>
<CAPTION>
1995 1994 1993
--------- ---------- ----------
<S> <C> <C> <C>
Net income................................................ $ 142.9 $ 121.5 $ 119.8
Assets.................................................... $ 1,849.4 $ 1,742.3 $ 1,546.5
Liabilities............................................... 802.8 726.4 620.5
--------- ---------- ----------
Net assets................................................ $ 1,046.6 $ 1,015.9 $ 926.0
</TABLE>

Insofar as can be reasonably determined, there are no foreign exchange
restrictions that materially affect the financial position or the operating
results of Honeywell and its subsidiaries.

31
<PAGE>
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
HONEYWELL INC. AND SUBSIDIARIES
(DOLLARS IN MILLIONS EXCEPT PER SHARE AMOUNTS)

NOTE 12 -- INVESTMENTS IN OTHER COMPANIES
Following is a summary of financial data pertaining to companies 20 to 50
percent owned. The principal company included is Yamatake-Honeywell Co., Ltd.,
of which Honeywell owns 24.2 percent of the outstanding common stock. This
investment had a market value of $316.3 and $327.3 at December 31, 1995, and
1994, respectively.

<TABLE>
<CAPTION>
1995 1994 1993
-------- -------- --------
<S> <C> <C> <C>
Sales........................................ $2,065.1 $1,877.0 $1,866.7
Gross profit................................. 743.5 680.7 682.4
Net income................................... 54.2 48.4 69.8
Equity in net income......................... 13.6 10.5 17.8

Current assets............................... $1,400.6 $1,371.4 $1,297.0
Noncurrent assets............................ 598.8 616.8 588.2
-------- -------- --------
1,999.4 1,988.2 1,885.2
-------- -------- --------
Current liabilities.......................... 742.6 841.6 704.5
Noncurrent liabilities....................... 327.8 225.8 359.3
-------- -------- --------
1,070.4 1,067.4 1,063.8
-------- -------- --------
Net assets................................... $ 929.0 $ 920.8 $ 821.4

Equity in net assets......................... $ 236.8 $ 225.5 $ 200.3
</TABLE>

NOTE 13 -- INTANGIBLE ASSETS
Intangible assets have been reduced by accumulated amortization as follows:

<TABLE>
<CAPTION>
1995 1994
-------- --------
<S> <C> <C>
Goodwill..................................... $ 49.2 $ 42.3
Patents, licenses and trademarks............. 75.8 175.4
Software and other intangibles............... 168.1 152.4
</TABLE>

NOTE 14 -- DEBT

SHORT-TERM DEBT

Honeywell had general purpose lines of credit available totaling $1,089.2 at
December 31, 1995. Committed revolving credit lines with 21 banks total $725.0,
which management believes is adequate to meet its financing requirements,
including support of commercial paper and bank note borrowings. These lines have
commitment fee requirements. There were no borrowings on these lines at December
31, 1995. The remaining credit facilities of $364.2 have been arranged by
non-U.S. subsidiaries in accordance with customary lending practices in their
respective countries of operation. Borrowings against these lines amounted to
$5.3 at December 31, 1995. The weighted-average interest rate on short-term
borrowings outstanding at December 31, 1995, and 1994, respectively, was as
follows: commercial paper, 6.0 percent and 5.7 percent; and notes payable, 6.5
percent and 5.8 percent.

Short-term debt consists of the following:

<TABLE>
<CAPTION>
1995 1994
-------- --------
<S> <C> <C>
Commercial paper............................. $ 65.0 $ 125.0
Notes payable................................ 62.8 102.2
Current maturities of long-term debt......... 184.6 133.4
-------- --------
$ 312.4 $ 360.6
</TABLE>

32
<PAGE>
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
HONEYWELL INC. AND SUBSIDIARIES
(DOLLARS IN MILLIONS EXCEPT PER SHARE AMOUNTS)

NOTE 14 -- DEBT (CONTINUED)
LONG-TERM DEBT

<TABLE>
<CAPTION>
1995 1994
--------- ---------
<S> <C> <C>
Honeywell Inc.
8% dual-currency yen/U.S. dollar notes due 1995......................... $ 120.2
7 7/8% due 1996......................................................... $ 100.0 100.0
6 1/4% Deutsche mark bonds due 1997..................................... 104.7 95.2
7.15% to 7.71% medium-term notes due 1998............................... 50.0 30.0
7.36% to 7.46% medium-term notes due 1999............................... 70.5 70.5
7.35% medium-term notes due 2000........................................ 75.0
7.45% medium-term notes due 2001........................................ 16.0
7.48% medium-term notes due 2002........................................ 10.0
8 5/8% due 2006......................................................... 100.0 100.0
9 1/2% to 10 1/2% due 2003 to 2010...................................... 2.0 10.2
Subsidiaries
9.6% Canadian dollar notes due 1996..................................... 84.4 82.0
7.0% to 10.0% due 1996 to 2001, various currencies...................... 53.0 26.8
--------- ---------
665.6 634.9
Less amount included in short-term debt................................. 184.6 133.4
--------- ---------
$ 481.0 $ 501.5
</TABLE>

The 8 percent dual-currency yen/U.S. dollar notes matured in August 1995.
These notes were repaid at a fixed exchange rate and were linked to a currency
exchange agreement that resulted in a fixed U.S. dollar interest cost of 10.5
percent.

The 6 1/4 percent Deutsche mark bonds due 1997 are linked to a currency
exchange agreement that converts principal and interest payments into fixed U.S.
dollar obligations with an interest cost of 8.17 percent.

In August 1994, Honeywell initiated a $500.0 medium-term note program
whereby it may issue notes with maturities of nine months to 30 years
denominated in U.S. dollars or foreign currencies with fixed or variable
interest rates. Honeywell issued $121.0 and $100.5 of U.S. dollar fixed-rate
medium-term notes in 1995 and 1994, respectively.

Honeywell utilizes interest rate swaps to manage its interest rate exposures
and its mix of fixed and floating interest rates. In 1992, Honeywell entered
into interest rate swap agreements effectively converting $100.0 of its 8 5/8
percent debentures due 2006 from fixed-rate debt to floating-rate debt based on
six-month LIBOR rates. During 1993, $50.0 of the $100.0 swap was terminated
resulting in a gain of $0.9, which was amortized over the remaining life of the
swap agreement. In 1993, Honeywell entered into interest rate swap agreements
effectively converting the 9.6 percent Canadian dollar notes due 1996 to
floating-rate debt based on three-month Canadian bankers acceptance rates. In
1994, Honeywell entered into interest rate swap agreements effectively
converting $30.0 of medium-term notes due 1998 and $70.5 of medium-term notes
due 1999 to floating rate debt based on three-month LIBOR rates. In 1995,
interest rate swap agreements were initiated to effectively convert $40.0 of
medium-term notes back to fixed-rate debt. The swap agreements for the 9.6
percent Canadian dollar notes expire in December 1996 and for the medium-term
notes: $20.0 in December 1996, $20.0 in July 1997, $20.0 in May 1998, $10.0 in
September 1998, $50.0 in August 1999 and $20.5 in September 1999. The swap
agreement for 8 5/8 percent debentures expired in September 1995.

33
<PAGE>
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
HONEYWELL INC. AND SUBSIDIARIES
(DOLLARS IN MILLIONS EXCEPT PER SHARE AMOUNTS)

NOTE 14 -- DEBT (CONTINUED)
Annual sinking-fund and maturity requirements for the next five years on
long-term debt outstanding at December 31, 1995, are as follows:

Interest paid amounted to $86.0, $69.1 and $63.9 in 1995, 1994 and 1993,
respectively.

NOTE 15 -- FAIR VALUE OF FINANCIAL INSTRUMENTS
All financial instruments are held for purposes other than trading. The
estimated fair values of all nonderivative financial instruments approximate
their carrying amounts in the statement of financial position with the exception
of long-term debt. The estimated fair value of long-term debt is based on quoted
market prices for the same or similar issues or on current rates available to
Honeywell for debt of the same remaining maturities. The carrying amount of
long-term debt was $665.6 and $634.9 at December 31, 1995, and 1994,
respectively; and the fair value was $702.6 and $630.3 at December 31, 1995, and
1994, respectively.

The carrying amount of interest rate swaps was zero at December 31, 1995 and
1994. The gross unrealized market loss on interest rate swaps was $4.7 and $7.5
at December 31, 1995, and 1994, respectively. The carrying amount of foreign
currency contracts was $25.7 and $18.3 at December 31, 1995, and 1994,
respectively. The gross unrealized market gain on foreign currency contracts was
$32.5 and $26.6 and the gross unrealized market loss was $27.8 and $28.3 at
December 31, 1995, and 1994, respectively. The estimated fair value of interest
rate swaps and foreign currency contracts, which is the gross unrealized market
gain or loss, is based primarily on quotes obtained from various financial
institutions that deal in these types of instruments.

Honeywell is exposed to credit risk to the extent of nonperformance by the
counterparties to the foreign currency contracts and the interest rate swaps
discussed above. However, the credit ratings of the counterparties, which
consist of a diversified group of financial institutions, are regularly
monitored and risk of default is considered remote.

NOTE 16 -- LEASING ARRANGEMENTS
As lessee, Honeywell has minimum annual lease commitments outstanding at
December 31, 1995, with the majority of the leases having initial periods
ranging from one to 10 years. Following is a summary of operating lease
information:

<TABLE>
<CAPTION>
OPERATING
LEASES
-----------
<S> <C>
1996........................................................... $ 105.6
1997........................................................... 82.5
1998........................................................... 60.7
1999........................................................... 44.5
2000........................................................... 34.2
2001 and beyond................................................ 131.0
-----------
$ 458.5
</TABLE>

Rent expense for operating leases was $143.4 in 1995, $136.9 in 1994 and
$134.2 in 1993.

34
<PAGE>
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
HONEYWELL INC. AND SUBSIDIARIES
(DOLLARS IN MILLIONS EXCEPT PER SHARE AMOUNTS)

NOTE 16 -- LEASING ARRANGEMENTS (CONTINUED)
Substantially all leases are for plant, warehouse, office space and
automobiles. A number of the leases contain renewal options ranging from one to
10 years.

NOTE 17 -- CAPITAL STOCK

<TABLE>
<CAPTION>
ADDITIONAL
COMMON PAID-IN TREASURY
STOCK CAPITAL STOCK
----------- ----------- -----------
<S> <C> <C> <C>
Balance January 1, 1993............................................. $ 282.7 $ 423.8 $ (1,219.0)
Purchase of treasury stock --
6,916,868 shares.................................................. (240.0)
Issued for employee stock plans --
1,907,165 treasury shares......................................... 7.7 30.6
110,934 shares canceled........................................... (0.2)
----------- ----------- -----------
Balance December 31, 1993........................................... 282.5 431.5 (1,428.4)
Purchase of treasury stock --
5,223,800 shares.................................................. (168.0)
Issued for employee stock plans --
962,242 treasury shares........................................... 15.4 19.9
42,570 shares canceled............................................ (0.1)
----------- ----------- -----------
Balance December 31, 1994........................................... 282.4 446.9 (1,576.5)
Purchase of treasury stock --
3,090,400 shares.................................................. (129.3)
Issued for Honeywell Foundation pledge
1,000,000 treasury shares......................................... 13.4 21.7
Issued for employee stock plans --
1,814,714 treasury shares......................................... 21.0 33.9
159,296 shares canceled........................................... (0.2)
----------- ----------- -----------
Balance December 31, 1995........................................... $ 282.2 $ 481.3 $ (1,650.2)
</TABLE>

KEY EMPLOYEE PLANS

In 1993, the Board of Directors adopted, and the stockholders approved, the
1993 Honeywell Stock and Incentive Plan. The plan, which terminates December 31,
1998, provides for the award of up to 7,500,000 shares of common stock. The
purpose of the plan is to further the growth, development and financial success
of Honeywell and its subsidiaries by aligning the personal interests of key
employees, through the ownership of shares of common stock and through other
incentives, to those of Honeywell stockholders. The plan is further intended to
provide flexibility to Honeywell in its ability to compensate key employees and
to motivate, attract and retain the services of such key employees who have the
ability to enhance the value of Honeywell and its subsidiaries. Awards made
under the plan may be in the form of stock options, restricted stock or other
stock-based awards. The plan replaced existing similar plans, and awards
currently outstanding under those plans were not affected. There were 9,099,612
shares reserved for all key employee plans at December 31, 1995.

35
<PAGE>
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
HONEYWELL INC. AND SUBSIDIARIES
(DOLLARS IN MILLIONS EXCEPT PER SHARE AMOUNTS)

NOTE 17 -- CAPITAL STOCK (CONTINUED)
Options to purchase common stock have been granted to key employees at 100
percent of the market price on date of grant. The following is a summary of
stock options under all plans:

<TABLE>
<CAPTION>
1995 1994 1993
---------- ----------- -----------
<S> <C> <C> <C>
Granted --
Number of shares.................................... 1,891,333 1,001,250 969,173
Price per share..................................... $31-$48 $33-$36 $31-$38
Exercised --
Number of shares.................................... 1,248,457 320,337 1,020,769
Price per share..................................... $15-$38 $12-$33 $12-$33
Outstanding December 31 --
Number of shares.................................... 5,963,023 5,346,237 4,739,683
Price per share..................................... $15-$48 $15-$38 $12-$38
</TABLE>

Options totaling 4,086,647 shares at prices ranging from $16 to $38 were
exercisable at December 31, 1995.

Restricted shares of common stock are issued to certain key employees as
compensation. Restricted shares are awarded with a fixed restriction period,
usually five years, or with a restriction period that may be shortened dependent
on the achievement of performance goals within a specified measurement period.
Participants have the rights of stockholders, including the right to receive
cash dividends and the right to vote. Restricted shares forfeited revert to
Honeywell at no cost. Restricted shares issued totaled 212,781 in 1995, 141,376
in 1994 and 533,995 in 1993. The cost of restricted stock is charged to income
over the restriction period and amounted to $3.2 in 1995, $5.6 in 1994 and $6.3
in 1993. At December 31, restricted shares outstanding pursuant to key employee
plans totaled 746,150 in 1995, 767,209 in 1994 and 775,861 in 1993.

EMPLOYEE STOCK MATCH PLANS

In 1990, Honeywell adopted Stock Match and Performance Stock Match plans
under which Honeywell matches, in the form of Honeywell common stock, certain
eligible U.S. employee savings plan contributions. Shares issued under the stock
match plans totaled 571,905 shares in 1995, 634,561 shares in 1994 and 643,913
shares in 1993 at a cost of $24.2, $20.7 and $22.3, respectively. There were
1,141,829 shares reserved for employee stock match plans at December 31, 1995.

STOCK PLEDGE

In 1993, Honeywell pledged to the Honeywell Foundation a five-year option to
purchase 2,000,000 shares of common stock at $33 per share. This option is
transferable to charitable organizations and exercisable in whole or in part,
subject to certain conditions, from time to time during its term. Shares
purchased under the option totaled 1,000,000 in 1995. No shares were purchased
under this option in 1994 or 1993.

PREFERENCE STOCK

Twenty-five million preference shares with a par value of $1 have been
authorized. None have been issued at December 31, 1995.

36
<PAGE>
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
HONEYWELL INC. AND SUBSIDIARIES
(DOLLARS IN MILLIONS EXCEPT PER SHARE AMOUNTS)

NOTE 18 -- RETAINED EARNINGS

<TABLE>
<CAPTION>
1995 1994 1993
--------- ---------- ----------
<S> <C> <C> <C>
Balance January 1......................................... $ 2,600.4 $ 2,447.3 $ 2,247.0
Net income................................................ 333.6 278.9 322.2
Dividends
1995-$1.01 PER SHARE.................................... (128.2)
1994-$0.97 per share.................................... (125.8)
1993-$0.9075 per share.................................. (121.9)
--------- ---------- ----------
Balance December 31....................................... $ 2,805.8 $ 2,600.4 $ 2,447.3
</TABLE>

Included in retained earnings are undistributed earnings of companies 20 to
50 percent owned, amounting to $144.7 at December 31, 1995.

NOTE 19 -- SEGMENT INFORMATION
Honeywell is a global controls company focused on creating value through
control technology. Honeywell serves customers worldwide through operations
engaged in the design, development, manufacture, marketing and service of
control solutions in three industry segments -- Home and Building Control,
Industrial Control and Space and Aviation Control.

Home and Building Control provides products and services to create
efficient, safe, comfortable environments by offering controls for heating,
ventilation, humidification and air-conditioning equipment; security and fire
alarm systems; home automation systems; energy-efficient lighting controls; and
building management systems and services. Customers include building managers
and owners; distributors and wholesalers; heating, ventilation and air
conditioning manufacturers; home builders; home owners; and original equipment
manufacturers.

Industrial Control produces systems for the automation and control of
process operations in industries such as oil refining, oil and gas drilling,
pulp and paper manufacturing, food processing, chemical manufacturing and power
generation; solid-state sensors for position, pressure, air flow, temperature
and current; precision electromechanical switches; manual controls; advanced
vision-based sensors; fiber-optic components; and solenoid valves used in fluid
control and processing industries. Customers include appliance manufacturers;
automotive companies; food processing companies; oil and gas producers; refining
and petrochemical companies; pharmaceutical companies; paper companies; and
utilities.

Space and Aviation Control is a full-line avionics supplier and systems
integrator for commercial, military and space applications, providing automatic
flight control systems; electronic cockpit displays; flight management systems;
navigation, surveillance and warning systems; severe weather avoidance systems;
and flight reference sensors. Customers include airframe manufacturers;
international, national and regional airlines; NASA; prime U.S. defense
contractors; and the U.S. Department of Defense.

The "other" category comprises primarily research and development
operations, such as Solid State Electronics Center and Honeywell Technology
Center, that are not a significant part of Honeywell's operations either
individually or in the aggregate.

Information concerning Honeywell's sales, operating profit and identifiable
assets by industry segment can be found on page 10. This information for 1995,
1994 and 1993 is an integral part of these financial statements. Sales include
external sales only. Intersegment sales are not significant. Corporate and other
assets include the assets of the entities in the "other" category and cash,
short-term investments, investments, property and deferred taxes held by
corporate.

37
<PAGE>
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
HONEYWELL INC. AND SUBSIDIARIES
(DOLLARS IN MILLIONS EXCEPT PER SHARE AMOUNTS)

NOTE 19 -- SEGMENT INFORMATION (CONTINUED)
Following is additional financial information relating to industry segments:

<TABLE>
<CAPTION>
1995 1994 1993
----------- ----------- -----------
<S> <C> <C> <C>
Capital expenditures
Home and Building Control............................... $ 87.2 $ 95.6 $ 73.6
Industrial Control...................................... 73.0 73.6 72.8
Space and Aviation Control.............................. 42.9 54.9 58.4
Corporate and other..................................... 35.0 38.3 27.3
----------- ----------- -----------
$ 238.1 $ 262.4 $ 232.1
Depreciation and amortization
Home and Building Control............................... $ 87.4 $ 71.8 $ 67.9
Industrial Control...................................... 69.3 67.1 59.9
Space and Aviation Control.............................. 109.7 120.0 127.0
Corporate and other..................................... 26.5 28.5 30.1
----------- ----------- -----------
$ 292.9 $ 287.4 $ 284.9
</TABLE>

Honeywell engages in material operations in foreign countries, the majority
of which are located in Europe. Other geographic areas of operation include
Canada, Latin America and Asia Pacific.

Following is financial information relating to geographic areas:

<TABLE>
<CAPTION>
1995 1994 1993
--------- ---------- ----------
<S> <C> <C> <C>
External sales
United States........................................... $ 4,087.5 $ 3,824.7 $ 3,895.1
Europe.................................................. 1,858.9 1,528.5 1,441.2
Other areas............................................. 784.9 703.8 626.7
--------- ---------- ----------
$ 6,731.3 $ 6,057.0 $ 5,963.0
Transfers between geographic areas
United States........................................... $ 318.6 $ 293.3 $ 246.7
Europe.................................................. 67.1 46.3 36.9
Other areas............................................. 61.5 54.3 47.6
--------- ---------- ----------
$ 447.2 $ 393.9 $ 331.2
Total sales
United States........................................... $ 4,406.1 $ 4,118.0 $ 4,141.8
Europe.................................................. 1,926.0 1,574.8 1,478.1
Other areas............................................. 846.4 758.1 674.3
Eliminations............................................ (447.2) (393.9) (331.2)
--------- ---------- ----------
$ 6,731.3 $ 6,057.0 $ 5,963.0
</TABLE>

38
<PAGE>
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
HONEYWELL INC. AND SUBSIDIARIES
(DOLLARS IN MILLIONS EXCEPT PER SHARE AMOUNTS)

NOTE 19 -- SEGMENT INFORMATION (CONTINUED)

<TABLE>
<CAPTION>
1995 1994 1993
--------- ---------- ----------
<S> <C> <C> <C>
Operating profit
United States........................................... $ 425.4 $ 343.7 $ 384.1
Europe.................................................. 191.7 139.1 140.2
Other areas............................................. 55.7 41.2 44.4
--------- ---------- ----------
Operating profit........................................ 672.8 524.0 568.7
Interest expense........................................ (83.3) (75.5) (68.0)
Litigation settlements.................................. 32.6
Equity income........................................... 13.6 10.5 17.8
General corporate expense............................... (97.6) (89.3) (72.6)
--------- ---------- ----------
Income before income taxes.............................. $ 505.5 $ 369.7 $ 478.5

Identifiable assets
United States........................................... $ 2,331.1 $ 2,356.2 $ 2,337.5
Europe.................................................. 1,375.0 1,303.1 1,111.4
Other areas............................................. 461.4 434.9 357.1
Corporate............................................... 892.7 791.7 792.1
--------- ---------- ----------
$ 5,060.2 $ 4,885.9 $ 4,598.1
</TABLE>

Honeywell transfers products from one geographic region for resale in
another. These transfers are priced to provide both areas with an equitable
share of the overall profit.

Operating profit is net of provisions for special charges amounting to $62.7
and $51.2 in 1994 and 1993, respectively, (see Note 4) as follows: United
States, $23.2 and $22.4; Europe, $29.6 and $20.3; other areas, $9.9 in 1994.
General corporate expense includes special charges of $8.5 in 1993.

General corporate expense has been reduced by royalty income of $8.2 in 1994
and $31.4 in 1993 (see Note 3).

NOTE 20 -- PENSION PLANS
Honeywell and its subsidiaries have noncontributory defined benefit pension
plans that cover substantially all of their U.S. employees. The plan covering
non-union employees provides pension benefits based on employee average earnings
during the highest paid 60 consecutive calendar months of employment during the
10 years prior to retirement. The plan covering union employees provides pension
benefits of stated amounts for each year of credited service. Funding for these
plans is provided solely through contributions from Honeywell determined by the
Board of Directors after consideration of recommendations from the plans'
independent actuary. Such recommendations are based on actuarial valuations of
benefits payable under the plans.

The components of net periodic pension cost for U.S. defined benefit pension
plans are as follows:

<TABLE>
<CAPTION>
1995 1994 1993
----------- ----------- -----------
<S> <C> <C> <C>
Service cost of benefits earned during the period......... $ 50.5 $ 53.8 $ 48.3
Interest cost of projected benefit obligation............. 222.8 201.5 198.9
Actual return on assets................................... (400.8) (73.3) (225.7)
Net amortization and deferral............................. 228.9 (92.6) 69.3
----------- ----------- -----------
$ 101.4 $ 89.4 $ 90.8
</TABLE>

39
<PAGE>
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
HONEYWELL INC. AND SUBSIDIARIES
(DOLLARS IN MILLIONS EXCEPT PER SHARE AMOUNTS)

NOTE 20 -- PENSION PLANS (CONTINUED)
Following is a summary of assumptions used in the accounting for the U.S.
defined benefit plans.

<TABLE>
<CAPTION>
1995 1994 1993
------------- ------------- -------------
<S> <C> <C> <C>
Discount rate used in determining present values................... 7.5% 8.5% 7.5%
Annual increase in future compensation levels...................... 3.5% 4.5% 4.0%
Expected long-term rate of return on assets........................ 8.5% 8.5% 8.5%
</TABLE>

Employees in foreign countries who are not U.S. citizens are covered by
various retirement benefit arrangements, some of which are considered to be
defined benefit pension plans for accounting purposes. The net cost of all
foreign pension plans amounted to $(3.6) in 1995, $1.2 in 1994 and $14.2 in
1993.

The components of net periodic pension cost for foreign defined benefit
pension plans are as follows:

<TABLE>
<CAPTION>
1995 1994 1993
--------------- ------------- -------------
<S> <C> <C> <C>
Service cost of benefits earned during the period.................. $ 31.2 $ 30.3 $ 25.8
Interest cost of projected benefit obligation...................... 55.7 47.6 46.3
Actual return on assets............................................ (90.6) (43.2) (111.7)
Net amortization and deferral...................................... (3.2) (37.1) 50.7
------ ------------- -------------
$ (6.9) $ (2.4) $ 11.1
</TABLE>

Assumptions used in the accounting for foreign defined benefit plans were:

<TABLE>
<CAPTION>
1995 1994 1993
------------- ------------- -------------
<S> <C> <C> <C>
Discount rate used in determining present values................... 4.5-9.5% 4.5-9.0% 5.0-9.0%
Annual increase in future compensation levels...................... 2.0-7.25% 2.0-8.0% 2.0-8.0%
Expected long-term rate of return on assets........................ 5.5-9.0% 5.5-9.5% 6.0-9.5%
</TABLE>

The plans' funded status as of September 30 and amounts recognized in
Honeywell's statement of financial position for its pension plans are summarized
below.

<TABLE>
<CAPTION>
Plans Whose Plans Whose
Assets Exceed Accumulated
Accumulated Benefits
1995 (U.S. AND FOREIGN) Benefits Exceed Assets
- ----------------------------------------------------------------------------------- ------------- -------------
<S> <C> <C>
Actuarial present value of benefit obligations:
Vested benefit obligation........................................................ $ (503.3) $ (2,778.7)
Accumulated benefit obligation................................................... $ (506.5) $ (2,988.4)
Projected benefit obligation..................................................... $ (631.4) $ (3,236.0)
Plan assets at fair value.......................................................... 809.2 2,740.5
------------- -------------
Projected benefit obligation (in excess of) less than plan assets.................. 177.8 (495.5)
Remaining unrecognized net transition obligation (asset)........................... (68.6) 11.1
Unrecognized prior service cost.................................................... 3.8 205.9
Unrecognized net (gain) loss....................................................... (34.6) 259.8
Fourth-quarter 1995 contributions to plans......................................... 36.1
Adjustment to recognize minimum liability.......................................... (220.2)
------------- -------------
Overfunded (unfunded) pension asset (liability) recognized in the statement of
financial position................................................................ $ 78.4 $ (202.8)
</TABLE>

40
<PAGE>
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
HONEYWELL INC. AND SUBSIDIARIES
(DOLLARS IN MILLIONS EXCEPT PER SHARE AMOUNTS)

NOTE 20 -- PENSION PLANS (CONTINUED)

<TABLE>
<CAPTION>
Plans Whose Plans Whose
Assets Exceed Accumulated
Accumulated Benefits
1994 (U.S. and Foreign) Benefits Exceed Assets
- ----------------------------------------------------------------------------------- ------------- -------------
<S> <C> <C>
Actuarial present value of benefit obligations:
Vested benefit obligation........................................................ $ (409.2) $ (2,412.7)
Accumulated benefit obligation................................................... $ (414.7) $ (2,581.3)
Projected benefit obligation..................................................... $ (587.6) $ (2,847.8)
Plan assets at fair value.......................................................... 723.8 2,386.9
------------- -------------
Projected benefit obligation (in excess of) less than plan assets.................. 136.2 (460.9)
Remaining unrecognized net transition obligation (asset)........................... (76.3) 5.2
Unrecognized prior service cost.................................................... 1.7 233.4
Unrecognized net loss.............................................................. 10.6 160.4
Fourth-quarter 1994 contributions to plans......................................... 24.8
Adjustment to recognize minimum liability.......................................... (129.4)
------------- -------------
Overfunded (unfunded) pension asset (liability) recognized in the statement of
financial position................................................................ $ 72.2 $ (166.5)
</TABLE>

Adjustments recorded to recognize the minimum liability required for defined
benefit pension plans whose accumulated benefits exceed assets amounted to
$220.2 in 1995 and $129.4 in 1994. A corresponding amount was recognized as an
intangible asset to the extent of unrecognized prior service cost and
unrecognized transition obligation. At December 31, 1995, $32.6 of excess
minimum liability resulted in a reduction in stockholders' equity, net of income
taxes, of $19.9. At December 31, 1994, $9.6 of excess minimum liability resulted
in a reduction in stockholders' equity, net of income taxes, of $5.9.

Plan assets are held by trust funds devoted to servicing pension benefits
and are not available to Honeywell until all covered benefits are satisfied
after a plan is terminated. The assets held by the trust funds consist of a
diversified portfolio of fixed-income investments and equity securities.

NOTE 21 -- POSTRETIREMENT BENEFITS OTHER THAN PENSIONS
Substantially all of Honeywell's domestic and Canadian employees who retire
from Honeywell between the ages of 55 and 65 with 10 or more years of service
are eligible to receive health-care benefits, until age 65, identical to those
available to active employees. Honeywell funds postretirement benefits on a
pay-as-you-go basis.

The components of net periodic postretirement benefit cost are as follows:

<TABLE>
<CAPTION>
1995 1994 1993
-------- -------- --------
<S> <C> <C> <C>
Service cost of benefits earned during the period........... $ 11.5 $ 10.4 $ 11.5
Interest cost on accumulated postretirement benefit
obligation................................................. 23.1 18.0 22.2
Net amortization............................................ 1.1 0.5
-------- -------- --------
$ 35.7 $ 28.9 $ 33.7
</TABLE>

41
<PAGE>
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
HONEYWELL INC. AND SUBSIDIARIES
(DOLLARS IN MILLIONS EXCEPT PER SHARE AMOUNTS)

NOTE 21 -- POSTRETIREMENT BENEFITS OTHER THAN PENSIONS (CONTINUED)
The amounts recognized in Honeywell's statement of financial position are as
follows:

<TABLE>
<CAPTION>
1995 1994
------ ------
<S> <C> <C>
Accumulated postretirement benefit obligation:
Retirees.................................................. $ 90.4 $ 87.7
Fully eligible active plan participants................... 63.8 58.7
Other active plan participants............................ 175.5 151.8
Unrecognized prior service cost........................... (6.9) (7.7)
Unrecognized net gain (loss).............................. (14.8) 2.3
------ ------
Accrued postretirement benefit cost......................... $308.0 $292.8
</TABLE>

The discount rate used in determining the APBO was 7.0 percent in 1995 and
8.0 percent in 1994. The assumed health-care cost trend rate used in measuring
the APBO was 8.2 percent in 1996, then declining by 0.5 percent per year to an
ultimate rate of 5.5 percent. The health-care cost trend rate assumption has a
significant effect on the amounts reported. For example, a one percent increase
in the health-care trend rate would increase the APBO by 11.3 percent at
December 31, 1995, and the net periodic postretirement benefit cost by 13.6
percent for 1995.

NOTE 22 -- CONTINGENCIES

LITTON LITIGATION

On March 13, 1990, Litton Systems, Inc. filed suit against Honeywell in U.S.
District Court, Central District of California, alleging Honeywell patent
infringement relating to the process used by Honeywell to coat mirrors
incorporated in its ring laser gyroscopes; attempted monopolization and
predatory pricing by Honeywell of certain alleged markets for products
containing ring laser gyroscopes; and intentional interference by Honeywell with
Litton's prospective advantage in European markets and with its contractual
relationships with Ojai Research, Inc., a California corporation. Honeywell
generally denied Litton's allegations, contested both the validity and
infringement of the patent, and alleged that the patent had been obtained by
Litton's inequitable conduct before the United States Patent and Trademark
Office. Honeywell also filed counterclaims against Litton alleging, among other
things, that Litton's business and litigation conduct violated federal and state
laws, causing Honeywell considerable damage and expense.

On January 9, 1995, Judge Mariana Pfaelzer of the U.S. District Court set
aside an August 1993 jury verdict and damage award of $1,200.0 against Honeywell
in the patent and interference with contract case. She ruled, among other
things, that the Litton patent was unenforceable because it was obtained by
inequitable conduct and invalid because it was an invention that would have been
obvious from combining existing processes. She further ruled that if her
judgment were ever subsequently vacated or reversed on appeal, Honeywell would
be granted a new trial on the issue of damages because the jury's 1993 award was
inconsistent with the clear weight of the evidence and permitting it to stand
would constitute a miscarriage of justice. Litton has appealed to the Court of
Appeals for the Federal Circuit, Washington, D.C. Briefs for the appeal have
been submitted by the parties and oral arguments were presented December 8,
1995. Honeywell believes that Judge Pfaelzer's rulings will be upheld on appeal.
As a result, no provision has been made in the financial statements with respect
to this contingent liability.

42
<PAGE>
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
HONEYWELL INC. AND SUBSIDIARIES
(DOLLARS IN MILLIONS EXCEPT PER SHARE AMOUNTS)

NOTE 22 -- CONTINGENCIES (CONTINUED)
monopolization and attempt to monopolize, both based on Litton's allegations
that Honeywell entered into certain exclusive dealings and penalty arrangements
with aircraft manufacturers and airlines to exclude Litton from the commercial
aircraft market. On February 29, 1996, the jury returned a $234 million verdict
against Honeywell for the monopolization claim. On March 1, 1996, the jury
indicated that it was unable to reach a verdict on damages for the attempted
monopolization claim, and a mistrial was declared on that claim.

Honeywell continues to maintain that it competed vigorously and lawfully in
the inertial navigation business and will continue to defend itself against
Litton's allegations. Honeywell believes that the jury's partial verdict should
be overturned because Litton (i) failed to prove essential elements of liability
and (ii) failed to submit competent evidence to support its claim for damages by
offering only a speculative, all-or-nothing $298.5 million damage study.
Honeywell will file post-verdict motions with the trial court asking that
judgment be granted in favor of Honeywell as a matter of law or, in the
alternative, for a new trial, and will argue important procedural and other
matters which could dispose of this case. If the $234 million jury verdict
withstands post-verdict motions, in whole or in part, any dollar judgment will
be trebled under federal antitrust laws and will be appealed by Honeywell. The
case will conclude only when the trial and appellate courts resolve all of the
legal issues that could reduce or eliminate the jury verdict. As a result, no
provision has been made in the financial statements with respect to this
contingent liability.

ENVIRONMENTAL MATTERS

Honeywell's manufacturing sites generate both hazardous and nonhazardous
wastes, the treatment, storage, transportation and disposal of which are subject
to various local, state and national laws relating to protection of the
environment. Honeywell is in varying stages of investigation or remediation of
potential, alleged or acknowledged contamination at currently or previously
owned or operated sites and at off-site locations where its wastes were taken
for treatment or disposal. In connection with the cleanup of various off-site
locations, Honeywell, along with a large number of other entities, has been
designated a potentially responsible party (PRP) by the U.S. Environmental
Protection Agency under the Comprehensive Environmental Response, Compensation
and Liability Act or by state agencies under similar state laws (Superfund),
which potentially subject PRPs to joint and several liability for the costs of
such cleanup. In addition, Honeywell is incurring costs relating to
environmental remediation pursuant to the federal Resource Conservation and
Recovery Act. Based on Honeywell's assessment of the costs associated with its
environmental responsibilities, compliance with federal, state and local laws
regulating the discharge of materials into the environment, or otherwise
relating to the protection of the environment, has not had, and in the opinion
of Honeywell management, will not have a material effect on Honeywell's
financial position, net income, capital expenditures or competitive position.
Honeywell's opinion with regard to Superfund matters is based on its assessment
of the predicted investigation, remediation and associated costs, its expected
share of those costs and the availability of legal defenses. Honeywell's policy
is to record environmental liabilities when loss amounts are probable and
reasonably estimable.

OTHER MATTERS

Honeywell is a party to a large number of other legal proceedings, some of
which are for substantial amounts. It is the opinion of management that any
losses in connection with these matters will not have a material effect on
Honeywell's net income, financial position or liquidity.

Honeywell has entered into letter of credit agreements with various
financial institutions to support certain financing instruments and insurance
policies aggregating approximately $135.0 at December 31, 1995.

43
<PAGE>
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
HONEYWELL INC. AND SUBSIDIARIES
(DOLLARS IN MILLIONS EXCEPT PER SHARE AMOUNTS)

NOTE 23 -- QUARTERLY DATA (UNAUDITED)

<TABLE>
<CAPTION>
1995 1ST QTR. 2ND QTR. 3RD QTR. 4TH QTR.
- ------------------------------------------------------ ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C>
Sales................................................. $1,478.7 $1,655.6 $1,680.3 $1,916.7
Cost of sales......................................... 1,013.2 1,137.8 1,148.1 1,285.1
Net income............................................ 54.7 68.9 84.2 125.8
Per share........................................... 0.43 0.54 0.66 0.99
</TABLE>

<TABLE>
<CAPTION>
1994 1st Qtr. 2nd Qtr. 3rd Qtr. 4th Qtr.
- ------------------------------------------------------ ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C>
Sales................................................. $1,347.9 $1,463.8 $1,507.6 $1,737.7
Cost of sales......................................... 917.3 1,001.8 1,011.9 1,151.1
Net income............................................ 47.7 56.9 69.4 104.9
Per share........................................... 0.36 0.44 0.54 0.81
</TABLE>

The fourth quarter of 1994 includes special charges of $62.7, or $37.6
($0.29 per share) after income taxes (see Note 4). The fourth quarter of 1994
also includes a reduction of the provision for income taxes of $37.6 ($0.29 per
share) related to a favorable tax settlement (see Note 5).

<TABLE>
<CAPTION>
Common Stock Price
(New York Stock
Exchange
Dividends Composite)
Per Share High Low
---------- ------- -------
<S> <C> <C> <C> <C>
1995 FIRST QUARTER................................ $.25 $38 1/2 $30 3/4
SECOND QUARTER............................... .25 44 3/4 36 3/4
THIRD QUARTER................................ .25 46 1/2 40 5/8
FOURTH QUARTER............................... .26 49 1/2 39 1/4

1994 First Quarter................................ $.24 $35 1/2 $31 3/4
Second Quarter............................... .24 34 1/2 30 1/2
Third Quarter................................ .24 36 7/8 31
Fourth Quarter............................... .25 35 5/8 28 1/4
</TABLE>

Stockholders of record on February 2, 1996, totaled 32,529.

NOTE 24 -- SUBSEQUENT EVENT
On February 12, 1996, Honeywell announced that it had entered into a
definitive agreement to acquire Duracraft Corp. for approximately $283.0 in
cash. Under the terms of the agreement, which was unanimously approved by the
boards of directors of both companies, a Honeywell subsidiary commenced an
all-cash tender offer for all the shares of Duracraft, which was concluded on
March 15 with approximately 93.4 percent of such shares being tendered.
Duracraft Corp. develops, manufactures and markets consumer household products
in five major areas: heaters, fans, humidifiers, air cleaners and vaporizers.
The acquisition will be accounted for as a purchase and will be included in the
Home and Building Control industry segment.

44
<PAGE>
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE

No report on Form 8-K reporting a change in Honeywell's certifying
independent accountants has been filed within the 24 months prior to the date of
the most recent financial statements.

PART III

ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT

Pages 3 through 9 and page 25 of the Honeywell Notice of 1996 Annual Meeting
and Proxy Statement are incorporated herein by reference.

ITEM 11. EXECUTIVE COMPENSATION

Pages 14 through 22 of the Honeywell Notice of 1996 Annual Meeting and Proxy
Statement are incorporated herein by reference.

ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT

Page 13 of the Honeywell Notice of 1996 Annual Meeting and Proxy Statement
are incorporated herein by reference.

ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

None.

PART IV

ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K

(A) DOCUMENTS FILED AS A PART OF THIS REPORT

1. FINANCIAL STATEMENTS
The financial statements required to be filed as part of this Annual Report
on Form 10-K are listed below with their location in this report.

<TABLE>
<CAPTION>
PAGE
---------
<S> <C>
Honeywell Inc. and Subsidiaries:
Independent Auditors' Report....................................................... 21
Income Statement................................................................... 22
Statement of Financial Position.................................................... 23
Statement of Cash Flows............................................................ 24
Notes to Financial Statements...................................................... 25-44
</TABLE>

2. FINANCIAL STATEMENT SCHEDULES
The schedules required to be filed as part of this Annual Report on Form
10-K are listed below with their location in this report.

PAGE
----
Honeywell Inc. and Subsidiaries:
Independent Auditors' Report...................................... 21
Schedules for the Years Ended December 31, 1995, 1994 and 1993:
II -- Valuation Reserves................................ 49

All schedules, other than indicated above, are omitted because of the
absence of the conditions under which they are required or because the
information required is shown in the financial statements or notes thereto.

45
<PAGE>
3. EXHIBITS
Documents Incorporated by Reference:

<TABLE>
<S> <C>
(3)(a) Restated Certificate of Incorporation of Honeywell Inc. dated June 18,
1991.
(4)(a) Rights Agreement between Honeywell Inc. and Chemical Mellon Shareholder
Services L.L.C., as Rights Agent, dated as of January 16, 1996 is
incorporated by reference to Exhibit 4 to Honeywell's Current Report on
Form 8-K dated January 31, 1996.
(4)(b) Indenture, dated as of August 1, 1994, between Honeywell Inc. and The Chase
Manhattan Bank (National Association), as Trustee for Honeywell Inc.
Medium-Term Notes, Series A is incorporated by reference to Exhibit (4)(b)
to Honeywell's Annual Report on Form 10-K for 1994.
(10)(iii)(a) Honeywell Key Employee Severance Plan, as amended is incorporated by
reference to Exhibit (10)(iii)(a) to Honeywell's Annual Report on Form 10-K
for 1994.*
(10)(iii)(b) Honeywell Supplementary Executive Retirement Plan for Mid-Career Hires, as
amended is incorporated by reference to Exhibit (10)(iii)(b) to Honeywell's
Annual Report on Form 10-K for 1994.*
(10)(iii)(c) Honeywell-Norwest Rabbi Trust Agreement, as amended is incorporated by
reference to Exhibit (10)(iii)(c) to Honeywell's Annual Report on Form 10-K
for 1994.*
(10)(iii)(d) 1993 Honeywell Stock and Incentive Plan, as amended is incorporated by
reference to Exhibit (10)(iii)(d) to Honeywell's Annual Report on Form 10-K
for 1994.*
(10)(iii)(e) 1988 Honeywell Stock and Incentive Plan, as amended is incorporated by
reference to Exhibit (10)(iii)(e) to Honeywell's Annual Report on Form 10-K
for 1994.*
(10)(iii)(h) Honeywell Supplementary Executive Retirement Plan for Compensation in
Excess of $200,000, as amended is incorporated by reference to Exhibit
(10)(iii)(h) to Honeywell's Annual Report on Form 10-K for 1994.*
(10)(iii)(i) Honeywell Supplementary Executive Retirement Plan for CECP Participants, as
amended is incorporated by reference to Exhibit (10)(iii)(i) to Honeywell's
Annual Report on Form 10-K for 1994.*
(10)(iii)(j) Honeywell Supplementary Retirement Plan, as amended is incorporated by
reference to Exhibit (10)(iii)(j) to Honeywell's Annual Report on Form 10-K
for 1994.*
(10)(iii)(k) Honeywell Supplementary Executive Retirement Plan for Benefits in Excess of
Limits Under Tax Reform Act of 1986, as amended is incorporated by
reference to Exhibit (10)(iii)(k) to Honeywell's Annual Report on Form 10-K
for 1994.*
(10)(iii)(l) Honeywell Executive Life Insurance Agreement, is incorporated by reference
to Exhibit 10(iii)(m) to Honeywell's Annual Report on Form 10-K for 1993.*
(10)(iii)(m) Form of Executive Termination Contract is incorporated by reference to
Exhibit to Honeywell's Annual Report on Form 10-K for 1994.*
(99)(ii) Honeywell Notice of 1996 Annual Meeting and Proxy Statement.**
Exhibits submitted herewith:
(3)(b) By-laws of Honeywell Inc., as amended through September 19, 1995.
(10)(iii)(f) Restricted-Stock Retirement Plan for Non-Employee Directors, as amended.*
(10)(iii)(g) Honeywell Corporate Executive Compensation Plan, as amended*
(10)(iii)(n) Honeywell Inc. Compensation Plan for Outside Directors.*
(10)(iii)(o) Honeywell Senior Management Performance Incentive Plan.*
(11) Computation of Earnings Per Share.
(12) Computation of Ratios of Earnings to Fixed Charges.
(21) Subsidiaries of Honeywell.
(23) Consent of Independent Auditors.
(24) Powers of Attorney.
</TABLE>

46
<PAGE>
3. EXHIBITS (CONTINUED)
<TABLE>
<S> <C>
(27) Financial Data Schedule.
(B) REPORTS ON FORM 8-K
None
</TABLE>

- ------------------------
*Management contract or compensatory plan or arrangement.
**Only the portions of Exhibit (99)(ii) specifically incorporated by reference
are deemed filed with the Commission.

47
<PAGE>
SIGNATURES

Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the registrant has duly caused this report to be signed on
its behalf by the undersigned, thereunto duly authorized.

HONEYWELL INC.

By: /s/ SIGURD UELAND, JR.
____________________________________
Sigurd Ueland, Jr., Vice President

Dated: March 25, 1996

Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed below by the following persons on behalf of the
registrant and in the capacities and on the dates indicated.

SIGNATURE TITLE
- -------------------- --------------------------------------------------------

M. R. BONSIGNORE Chairman of the Board and Chief Executive Officer and
Director

W. M. HJERPE Vice President and Chief Financial Officer

P. M. PALAZZARI Vice President and Controller

A. J. BACIOCCO, JR. Director

E. E. BAILEY Director

E. H. CLARK, JR. Director

W. H. DONALDSON Director

R. D. FULLERTON Director

C. M. HAPKA Director

J. J. HOWARD Director

B. E. KARATZ Director

D. L. MOORE Director

A. B. RAND Director

S. G. ROTHMEIER Director

M. W. WRIGHT Director

By: /s/ SIGURD UELAND, JR.
____________________________________
Sigurd Ueland, Jr.,
ATTORNEY-IN-FACT
March 25, 1996

48
<PAGE>
SCHEDULE II

HONEYWELL INC. AND SUBSIDIARIES
VALUATION RESERVES
FOR THE YEARS ENDED DECEMBER 31, 1995, 1994 AND 1993
(DOLLARS IN MILLIONS)

<TABLE>
<CAPTION>
BALANCE AT ADDITIONS DEDUCTIONS BALANCE
BEGINNING CHARGED TO FROM AT CLOSE
OF YEAR INCOME RESERVES OF YEAR
------------- ---------------- --------------- -----------
<S> <C> <C> <C> <C>
Reserves deducted from assets to which they apply --
allowance for doubtful accounts:

RECEIVABLES -- CURRENT
- --------------------------------------------------------
Year ended December 31, 1995............................ $ 31.1 $ 10.4(1) $ 7.0(2) $ 34.5
------------- ------ ------- -----------
------------- ------ ------- -----------
Year ended December 31, 1994............................ $ 24.3 $ 12.5(1) $ 5.7(2) $ 31.1
------------- ------ ------- -----------
------------- ------ ------- -----------
Year ended December 31, 1993............................ $ 26.7 $ 9.1(1) $ 11.5(2) $ 24.3
------------- ------ ------- -----------
------------- ------ ------- -----------
LONG-TERM RECEIVABLES
- --------------------------------------------------------
Year ended December 31, 1995............................ $ 0.7 $ -- $ -- $ 0.7
------------- ------ ------- -----------
------------- ------ ------- -----------
Year ended December 31, 1994............................ $ 0.5 $ -- $ (0.2)(2) $ 0.7
------------- ------ ------- -----------
------------- ------ ------- -----------
Year ended December 31, 1993............................ $ 0.8 $ -- $ 0.3(2) $ 0.5
------------- ------ ------- -----------
------------- ------ ------- -----------
Reserves deducted from assets to which they apply --
valuation reserve:

LONG-TERM RECEIVABLES
- --------------------------------------------------------
Year ended December 31, 1995............................ $ 1.9 $ (0.1)(1) $ -- $ 1.8
------------- ------ ------- -----------
------------- ------ ------- -----------
Year ended December 31, 1994............................ $ 3.6 $ (1.7)(1) $ -- $ 1.9
------------- ------ ------- -----------
------------- ------ ------- -----------
Year ended December 31, 1993............................ $ 2.9 $ 0.7(1) $ -- $ 3.6
------------- ------ ------- -----------
------------- ------ ------- -----------
Reserves deducted from assets to which they apply --
allowance for amortization of intangibles:

GOODWILL
- --------------------------------------------------------
Year ended December 31, 1995............................ $ 42.3 $ 12.6(3) $ 5.7(4) $ 49.2
------------- ------ ------- -----------
------------- ------ ------- -----------
Year ended December 31, 1994............................ $ 34.3 $ 8.6(3) $ 0.6(4) $ 42.3
------------- ------ ------- -----------
------------- ------ ------- -----------
Year ended December 31, 1993............................ $ 30.4 $ 6.7(3) $ 2.8(4) $ 34.3
------------- ------ ------- -----------
------------- ------ ------- -----------
PATENTS, LICENSES AND TRADEMARKS
- --------------------------------------------------------
Year ended December 31, 1995............................ $ 175.4 $ 24.0(3) $ 123.6(4) $ 75.8
------------- ------ ------- -----------
------------- ------ ------- -----------
Year ended December 31, 1994............................ $ 170.0 $ 24.2(3) $ 18.8(4) $ 175.4
------------- ------ ------- -----------
------------- ------ ------- -----------
Year ended December 31, 1993............................ $ 144.2 $ 25.8(3) $ -- $ 170.0
------------- ------ ------- -----------
------------- ------ ------- -----------
SOFTWARE AND OTHER INTANGIBLES
- --------------------------------------------------------
Year ended December 31, 1995............................ $ 152.4 $ 20.2(3) $ 4.5(4) $ 168.1
------------- ------ ------- -----------
------------- ------ ------- -----------
Year ended December 31, 1994............................ $ 135.4 $ 19.3(3) $ 2.3(4) $ 152.4
------------- ------ ------- -----------
------------- ------ ------- -----------
Year ended December 31, 1993............................ $ 117.8 $ 17.1(3) $ (0.5)(4) $ 135.4
------------- ------ ------- -----------
------------- ------ ------- -----------
</TABLE>

- --------------------------
Notes: (1) Represents amounts included in selling, general and administrative
expenses.

(2) Represents uncollectible accounts written off, less recoveries and
translation adjustments.

(3) Represents amounts included in cost of sales.

(4) Represents removal of fully amortized amounts and translation
adjustments.

<PAGE>
---------------------------------------------------------
---------------------------------------------------------

HONEYWELL INC.

------------------

INCORPORATED UNDER THE LAWS OF THE STATE OF DELAWARE

OCTOBER 27, 1927

------------------------

BY-LAWS

AS ADOPTED OCTOBER 27, 1927, AND AMENDED

THROUGH SEPTEMBER 19, 1995

----------------------------------------------------
----------------------------------------------------
<PAGE>
INDEX OF BY-LAWS

<TABLE>
<CAPTION>
PAGE

<C> <S> <C>
ARTICLE I. MEETINGS OF
STOCKHOLDERS................................................................... 1
Section 1. Annual Meetings................................................................. 1
Section 2. Advance Notice of Stockholder-
Proposed Business at Annual Meetings........................................... 1
Section 3. Special Meetings................................................................ 2
Section 4. Place of Meeting................................................................ 3
Section 5. Notices of Meetings............................................................. 3
Section 6. Quorum.......................................................................... 4
Section 7. Organization.................................................................... 5
Section 8. Order of Business............................................................... 5
Section 9. Voting.......................................................................... 5
Section 10. List of Stockholders............................................................ 7
Section 11. Inspectors of Election.......................................................... 8

ARTICLE II. CONSENTS TO CORPORATE ACTION.................................................... 8
Section 1. Consent of Stockholders in Lieu of Meeting...................................... 8
Section 2. Record Date..................................................................... 9
Section 3. Procedures...................................................................... 10
</TABLE>

<PAGE>
ii

<TABLE>
<C> <S> <C>
ARTICLE III. BOARD OF DIRECTORS.............................................................. 11
Section 1. General Powers.................................................................. 11
Section 2. Number, Qualifications and
Term of Office................................................................. 11
Section 3. Nominations of Directors........................................................ 11
Section 4. Election of Directors........................................................... 12
Section 5. Organization.................................................................... 13
Section 6. Resignations.................................................................... 13
Section 7. Qualifications and Retirement................................................... 13
Section 8. Vacancies....................................................................... 15
Section 9. Place of Meeting, etc........................................................... 15
Section 10. First Meeting................................................................... 15
Section 11. Regular Meetings................................................................ 16
Section 12. Special Meetings; Notice........................................................ 16
Section 13. Quorum and Manner of Acting..................................................... 17
Section 14. Removal of Directors............................................................ 17
Section 15. Compensation.................................................................... 17
Section 16. Committees...................................................................... 18
Section 17. Indemnification of Employees, Officers and Directors............................ 19
Section 18. Action Without Meeting.......................................................... 21
Section 19. Presence at Meetings............................................................ 21
</TABLE>

<PAGE>
iii

<TABLE>
<C> <S> <C>
ARTICLE IV. OFFICERS........................................................................ 22
Section 1. Number.......................................................................... 22
Section 2. Election, Term of Office and Qualifications..................................... 23
Section 3. Removal......................................................................... 23
Section 4. Resignations.................................................................... 23
Section 5. Vacancies....................................................................... 23
Section 6. The Chairman of the
Board of Directors............................................................. 24
Section 7. The Vice Chairman of the
Board of Directors............................................................. 24
Section 8. The President of the Corporation................................................ 25
Section 9. Authority and Duties of the Business Presidents, Executive Vice Presidents,
Senior Vice Presidents, and Vice Presidents.................................... 25
Section 10. The Treasurer................................................................... 26
Section 11. The Secretary................................................................... 27
Section 12. Assistant Treasurers, Assistant Secretaries and Attesting Secretaries........... 28
Section 13. Salaries........................................................................ 29
Section 14. Subordinate Positions, etc...................................................... 29

ARTICLE V. CONTRACTS, LOANS, CHECKS, DEPOSITS, ETC......................................... 29
Section 1. Contracts, etc. How Executed.................................................... 29
Section 2. Loans........................................................................... 30
Section 3. Checks, Drafts, etc............................................................. 30
Section 4. Deposits........................................................................ 30
Section 5. General and Special Bank Accounts............................................... 31

ARTICLE VI. SHARES AND THEIR TRANSFER....................................................... 31
Section 1. Certificates for Stock.......................................................... 31
Section 2. Transfer of Stock............................................................... 32
Section 3. Transfer and Registry Agents.................................................... 33
Section 4. Lost, Stolen, Destroyed,
and Mutilated Certificates..................................................... 33
Section 5. Fixing Date for Determination
of Stockholders of Record...................................................... 33
</TABLE>

<PAGE>
iv

<TABLE>
<C> <S> <C>
ARTICLE VII. OFFICES......................................................................... 35
Section 1. Registered Office............................................................... 35
Section 2. Other Offices................................................................... 35

ARTICLE VIII. DIVIDENDS, SURPLUS, ETC......................................................... 35

ARTICLE IX. SEAL............................................................................ 36

ARTICLE X. FISCAL YEAR AND AUDIT........................................................... 36
Section 1. Fiscal Year..................................................................... 36
Section 2. Audit of Books and Accounts..................................................... 36

ARTICLE XI. WAIVER OF NOTICES............................................................... 37

ARTICLE XII. INCENTIVE COMPENSATION PAYMENTS................................................. 37

ARTICLE XIII. NATIONAL EMERGENCY.............................................................. 39
Section 1. Definition and Application...................................................... 39
Section 2. Meetings, etc................................................................... 39
Section 3. Amendment....................................................................... 40
Section 4. Chief Executive Officer......................................................... 41
Section 5. Substitute Directors............................................................ 41

ARTICLE XIV. AMENDMENTS...................................................................... 41

CERTIFICATION.................................................................................... 42
</TABLE>
<PAGE>
BY-LAWS
OF
HONEYWELL INC.
---------

ARTICLE I.

MEETINGS OF STOCKHOLDERS

SECTION 1. ANNUAL MEETINGS. The annual meeting of the stockholders of
Honeywell Inc. (hereinafter called the Corporation) for the election of
directors and for the transaction of any other proper business, notice of which
is given in the notice of the meeting, shall be held on such date and at such
hour as may be determined from time to time by the Board of Directors, which
date and hour shall be designated in the notice thereof. If any annual meeting
for the election of directors shall not be held on the date designated therefor,
the Board of Directors shall cause the meeting to be held as soon thereafter as
convenient.

SECTION 2. ADVANCE NOTICE OF STOCKHOLDER-PROPOSED BUSINESS AT ANNUAL
MEETINGS. At an annual meeting of the stockholders, only such business shall be
conducted as shall have been properly brought before the meeting. To be properly
brought before an annual meeting, business must be specified in the notice of
meeting (or any supplement thereto) given by or at the direction of the Board,
otherwise properly brought before the meeting by or at the direction of the
Board, or otherwise properly brought before the meeting by a stockholder. In
addition to any other applicable requirements, for business to be properly
brought before an annual meeting by a stockholder, the stockholder must have
given timely notice thereof in writing to the Secretary, Honeywell Inc. To be
timely, a stockholder's notice must be delivered to or mailed and received at
the principal executive offices of the
<PAGE>
2

Corporation, not less than 50 days nor more than 75 days prior to the meeting;
provided, however, that in the event that less than 65 days' notice or prior
public disclosure of the date of the meeting is given or made to stockholders,
notice by the stockholder to be timely must be so received not later than the
close of business on the 15th day following the day on which such notice of the
date of the annual meeting was mailed or such public disclosure was made. A
stockholder's notice to the Secretary shall set forth as to each matter the
stockholder proposes to bring before the annual meeting (i) a brief description
of the business desired to be brought before the annual meeting and the reasons
for conducting such business at the annual meeting, (ii) the name and record
address of the stockholder proposing such business, (iii) the class and number
of shares of the Corporation which are beneficially owned by the stockholder,
and (iv) any material interest of the stockholder in such business.

Notwithstanding anything in the By-Laws to the contrary, no business shall be
conducted at the annual meeting except in accordance with the procedures set
forth in this Section 2, PROVIDED, HOWEVER, that nothing in this Section 2 shall
be deemed to preclude discussion by any stockholder of any business properly
brought before the annual meeting in accordance with said procedure.

The Chairman of an annual meeting shall, if the facts warrant, determine and
declare to the meeting that business was not properly brought before the meeting
in accordance with the provisions of this Section 2, and if he should so
determine, he shall so declare to the meeting and any such business not properly
brought before the meeting shall not be transacted.

SECTION 3. SPECIAL MEETINGS. A special meeting of the stockholders for any
purpose or purposes may be called at any time by the Board of Directors, or by
the Chairman of the
<PAGE>
3

Board of Directors, or by the President of the Corporation, or as otherwise
prescribed by statute or by the Certificate of Incorporation of the Corporation.

SECTION 4. PLACE OF MEETING. Meetings of the stockholders (including annual
meetings, special meetings, meetings for the election of directors, and any and
all other meetings of stockholders) may be held at such places, within or
without the State of Delaware, as may be designated from time to time by the
Board of Directors or in the notices thereof. The Board of Directors is
authorized to and shall fix the place of meeting. Such action by the Board of
Directors may be taken from time to time and may fix different places from time
to time.

SECTION 5. NOTICES OF MEETINGS. Every stockholder shall furnish the
Secretary of the Corporation with an address at which notices of meetings and
all other corporate communications may be served on or mailed to him. Except in
special cases with respect to which other provision is made by statute or by the
Certificate of Incorporation of the Corporation, and except in those situations
in which action is to be taken pursuant to Section 1 of Article II, written or
printed notice of each meeting of the stockholders, whether annual or special,
shall be given, not less than ten (10) nor more than fifty (50) days before the
date on which the meeting is to be held, to each stockholder of record of the
Corporation entitled to vote at such meeting by delivering such notice thereof
to him personally or by depositing such notice in the United States mail, in a
postage-prepaid envelope directed to him at the post office address furnished by
him to the Secretary of the Corporation for such purpose, or, if he shall not
have furnished to the Secretary of the Corporation his address for such purpose,
then at his address as it shall otherwise appear on the records of the
Corporation. Except in special cases where other provision is made by statute,
no publication of any notice of a meeting of stockholders shall be required.
Every notice of a
<PAGE>
4

meeting of stockholders shall state the place, date and hour of the meeting and
the purpose or purposes for which the meeting is called. Nevertheless, notice of
any meeting of stockholders shall not be required to be given to any stockholder
who shall attend such meeting in person or by proxy except a stockholder who
shall attend such meeting for the express purpose of objecting, at the beginning
of the meeting, to the transaction of any business because the meeting was not
lawfully called or convened. Except where otherwise required by statute, notice
of any adjourned meeting of the stockholders of the Corporation shall not be
required to be given if the time and place thereof are announced at the meeting
which is adjourned.

SECTION 6. QUORUM. At all meetings of the stockholders of the Corporation,
except where other provision is made by statute, stockholders of the Corporation
holding of record a majority of the shares of stock of the Corporation entitled
to vote thereat shall be present in person or by proxy to constitute a quorum
for the transaction of business. In the absence of a quorum at any meeting or
any adjournment thereof, a majority in voting interest of those present in
person or by proxy and entitled to vote may adjourn such meeting from time to
time. At any such adjourned meeting at which a quorum may be present any
business may be transacted which might have been transacted at the meeting as
originally called. The absence from any meeting of stockholders holding the
number of shares of stock of the Corporation required by statute or by the
Certificate of Incorporation of the Corporation or by these by-laws for action
upon any given matter shall not prevent action at such meeting upon any other
matter or matters which may properly come before the meeting, if there shall be
present thereat in person or by proxy stockholders holding the number of shares
of stock of the Corporation required in respect of such other matter or matters.
<PAGE>
5

SECTION 7. ORGANIZATION. At each meeting of the stockholders the Chairman of
the Board of Directors, or in his absence the Vice Chairman of the Board of
Directors, or in their absence the President of the Corporation, or in the
absence of the Chairman of the Board, the Vice Chairman of the Board and the
President of the Corporation, a chairman (who shall be one of the other
Executive Vice Presidents or Vice Presidents, if any of them be present) chosen
by a majority in voting interest of the stockholders present in person or by
proxy and entitled to vote, shall act as chairman; and the Secretary of the
Corporation or, in his absence, an Assistant Secretary or, in the absence of the
Secretary and Assistant Secretaries of the Corporation, any person whom the
chairman of the meeting shall appoint, shall act as secretary of the meeting.

SECTION 8. ORDER OF BUSINESS. The order of business at all meetings of the
stockholders shall be determined by the chairman of the meeting, but such order
of business may be changed by the vote of a majority in voting interest of those
present or represented at said meeting and entitled to vote thereat.

SECTION 9. VOTING. Each stockholder of the Corporation entitled to vote at a
meeting of stockholders or entitled to give consent in writing to corporate
action without a meeting shall have one vote in person or by proxy for each
share of stock having voting rights held by him and registered in his name on
the books of the Corporation:

(a) on the date fixed pursuant to the provisions of
Subsection (a) of Section 5 of Article VI of these by-laws as the record date
for the determination of stockholders who shall be entitled to notice of and
to vote at such meeting or to give consent in writing to corporate action
without a meeting, or
<PAGE>
6

(b) if no such record date shall have been so fixed,
then as provided by the provisions of Subsection (b) of Section 5 of Article
VI of these by-laws.

Shares of its own capital stock belonging to the Corporation or to another
corporation, if a majority of the shares entitled to vote in the election of
directors of such other corporation is held by the Corporation, shall not be
entitled to vote. Persons holding stock in a fiduciary capacity shall be
entitled to vote the shares so held, and persons whose stock is pledged shall be
entitled to vote, unless in the transfer by the pledgor on the books of the
Corporation he shall have expressly empowered the pledgee to vote thereon, in
which case only the pledgee or his proxy may represent said stock and vote
thereon. If shares shall stand of record in the names of two or more persons,
whether fiduciaries, members of a partnership, joint tenants, tenants in common,
tenants by the entirety or otherwise, or if two or more persons shall have the
same fiduciary relationship respecting the same shares, unless the Secretary of
the Corporation shall have been given written notice to the contrary and have
been furnished with a copy of the instrument of order appointing them or
creating the relationship wherein it is so provided, their acts with respect to
voting shall have the following effect:

(i) if only one shall vote, his act shall bind all,

(ii) if more than one shall vote, the act of the majority
so voting shall bind all, or

(iii) if more than one shall vote, but the vote shall be
evenly split on any particular matter, then, except as otherwise required by
statute, each faction may vote the shares in question proportionally.

If the instrument so filed shall show that any such tenancy is held in unequal
interests, a majority or even-split for the purpose of the next preceding
sentence shall be a majority or
<PAGE>
7

even-split in interest. Any vote on stock of the Corporation may be given by the
stockholder entitled thereto in person or by his proxy appointed by an
instrument in writing, subscribed by such stockholder or by his attorney
thereunto authorized and delivered to the secretary of the meeting; provided,
however, that no proxy shall be voted or acted upon after three years from its
date unless said proxy provides for a longer period. Except as provided in
Section 1 of Article II and Section 13 of Article III of these by-laws, and
except also in special cases where otherwise made mandatory by statute or by the
Certificate of Incorporation of the Corporation, all matters coming before the
stockholders shall be decided by the vote of a majority in voting interest of
the stockholders of the Corporation present in person or by proxy at a meeting
and entitled to vote thereat, a quorum being present.

SECTION 10. LIST OF STOCKHOLDERS. It shall be the duty of the Secretary, or
other officer of the Corporation who shall have charge of the stock ledger,
either directly or through a transfer agent appointed by the Board of Directors,
to prepare and make, at least ten days before every meeting of stockholders, a
complete list of stockholders entitled to vote thereat, arranged in alphabetical
order, and showing the address of each stockholder and the number of shares
registered in the name of each stockholder. Such list shall be open to the
examination of any stockholder, for any purpose germane to the meeting, during
ordinary business hours, for a period of at least ten (10) days prior to the
meeting, either at a place within the city where the meeting is to be held,
which place shall be specified in the notice of the meeting, or, if not so
specified, at the place where the meeting is to be held. The list shall also be
produced and kept at the time and place of the meeting during the whole time
thereof, and may be inspected by any stockholder who is present. Upon the wilful
neglect or refusal of the directors to produce such a list at any meeting for
the election of directors, they shall be ineligible for election to any office
at
<PAGE>
8

such meeting. The stock ledger shall be the only evidence as to who are
stockholders entitled to examine the stock ledger, such list or the books of the
Corporation, or to vote in person or by proxy, at any meeting of stockholders.

SECTION 11. INSPECTORS OF ELECTION. At each meeting of the stockholders, the
chairman of such meeting may appoint two Inspectors of Election to act thereat.
Each Inspector of Election so appointed shall first subscribe an oath or
affirmation faithfully to execute the duties of an Inspector of Election at such
meeting with strict impartiality and according to the best of his ability. Such
Inspectors of Election, if any, shall take charge of the ballots at such meeting
and after the balloting thereat on any question shall count the ballots cast
thereon and shall make a report in writing to the secretary of such meeting of
the results thereof. An Inspector of Election need not be a stockholder of the
Corporation, and any officer or employee of the Corporation may be an Inspector
of Election on any question other than a vote for or against his election to any
position with the Corporation or on any other question in which he may be
directly interested.

ARTICLE II.

CONSENTS TO CORPORATE ACTION

SECTION 1. CONSENT OF STOCKHOLDERS IN LIEU OF MEETING. The election of
directors and any other action required by the General Corporation Law of the
State of Delaware or these by-laws to be taken at any annual or special meeting
of stockholders, or any action which may be taken at any annual or special
meeting of such stockholders, may be taken without a meeting, without prior
notice and without a vote, if a consent in writing, setting forth the action so
taken, shall be signed by the holders of outstanding stock having not less than
the
<PAGE>
9

minimum number of votes that would be necessary to authorize or take such action
at a meeting at which all shares entitled to vote thereon were present and
voted. Separate written consents may be signed by stockholders severally. Prompt
notice of the taking of the corporate action without a meeting by less than
unanimous written consent shall be given to those stockholders who have not
consented in writing.

SECTION 2. RECORD DATE. The record date for determining stockholders
entitled to express consent to corporate action in writing without a meeting
shall be as fixed by the Board or as otherwise established under this Section.
Any person seeking to have the stockholders authorize or take corporate action
by written consent without a meeting may, by written notice addressed to the
Secretary and delivered to the Company as set forth below, request that a record
date be fixed for such purpose. The record date for determining stockholders
entitled to consent in writing without a meeting to corporate action for which
no prior action by the Board is required under the General Corporation Law of
the State of Delaware shall be (i) the date fixed by the Board or (ii) if no
record date has been so fixed prior to the first date on which a signed written
consent setting forth the action taken or proposed to be taken is delivered to
the Company by delivery to its registered office in Delaware, its principal
place of business or an officer or agent of the corporation having custody of
the book in which proceedings of meetings of stockholders are recorded, then
such first date. The record date for determining stockholders entitled to
consent in writing without a meeting to corporate action for which prior action
by the Board is required under the General Corporation Law of the State of
Delaware shall be (i) the date fixed by the Board or (ii) if the Board has not
taken action to fix the record date then such record date shall be the close of
business on the date upon which the Board adopts the resolution taking such
prior action. In connection with a record date fixed by the Board, in
<PAGE>
10

no case shall such record date (i) precede or (ii) be fixed more than 10 days
after the date upon which the resolution fixing the record date is adopted by
Board.

SECTION 3. PROCEDURES. In the event of the delivery to the Corporation of a
written consent or consents purporting to authorize or take corporate action
and/or related revocations (each such written consent and related revocation is
referred to in this Article II as a "Consent"), the Secretary of the Corporation
shall provide for the safe-keeping of such Consent and shall promptly conduct
such ministerial review of the sufficiency of the consents and of the validity
of the action to be taken by stockholder consent as he deems necessary or
appropriate including, determining whether the holders of shares having the
requisite voting power to authorize or take the action specified in the Consent
have given consent; PROVIDED, HOWEVER, that if the corporate action to which the
Consent relates is the removal or replacement of one or more members of the
Board, the Secretary of the Corporation shall designate two persons, who may not
be members of the Board, to serve as Inspectors with respect to such Consent and
such Inspectors shall discharge the functions of the Secretary of the
Corporation under this Section 3. If after such investigation the Secretary or
the Inspectors (as the case may be) shall determine that the Consent is valid
and that the action purported to be authorized or taken has been validly
authorized, that fact shall be noted on the records of the Corporation kept for
the purpose of recording the proceedings of meetings of stockholders, and the
Consent shall be filed in such records, at which time the Consent shall become
effective as stockholder action. In conducting the investigation required by
this Section 3, the Secretary or the Inspectors (as the case may be) may, at the
expense of the Corporation, retain special legal counsel and other necessary or
appropriate professional advisors, and such other personnel as they may deem
necessary or appropriate, to assist them.
<PAGE>
11

ARTICLE III.

BOARD OF DIRECTORS

SECTION 1. GENERAL POWERS. The property, affairs and business of the
Corporation shall be managed by the Board of Directors.

SECTION 2. NUMBER, QUALIFICATIONS AND TERM OF OFFICE. The number of
directors shall be thirteen, but the number may be increased, or diminished to
not less than three, by amendment of these by-laws. Directors need not be
stockholders. Each of the directors of the Corporation shall hold office until
the annual meeting held next after his election and shall qualify, or until his
earlier death or his earlier resignation or removal in the manner hereinafter
provided.

SECTION 3. NOMINATIONS OF DIRECTORS. Only persons who are nominated in
accordance with the following procedures shall be eligible for election as
directors. Nominations of persons for election to the Board of Directors of the
Corporation may be made at a meeting of stockholders by or at the direction of
the Board of Directors by any nominating committee or person appointed by the
Board or by any stockholder of the Corporation entitled to vote for the election
of directors at the meeting who complies with the notice procedures set forth in
this Section 3. Such nominations, other than those made by or at the direction
of the Board, shall be made pursuant to timely notice in writing to the
Secretary, Honeywell Inc. To be timely, a stockholder's notice shall be
delivered to or mailed and received at the principal executive offices of the
Corporation not less than 50 days nor more than 75 days prior to the meeting;
PROVIDED, HOWEVER, that in the event that less than 65 days' notice or prior
public disclosure of the date of the meeting is given or made to stockholders,
notice by the
<PAGE>
12

stockholder to be timely must be so received not later than the close of
business on the 15th day following the day on which such notice of the date of
the meeting was mailed or such public disclosure was made. Such stockholder's
notice to the Secretary shall set forth (a) as to each person whom the
stockholder proposes to nominate for election or re-election as a director, (i)
the name, age, business address and residence address of the person, (ii) the
principal occupation or employment of the person, (iii) the class and number of
shares of capital stock of the Corporation which are beneficially owned by the
person and (iv) any other information relating to the person that is required to
be disclosed in solicitations for proxies for election of directors pursuant to
Rule 14a under the Securities Exchange Act of 1934, as amended; and (b) as to
the stockholder giving the notice (i) the name and record address of stockholder
and (ii) the class and number of shares of capital stock of the Corporation
which are beneficially owned by the stockholder. The Corporation may require any
proposed nominee to furnish such other information as may reasonably be required
by the Corporation to determine the eligibility of such proposed nominee to
serve as director of the Corporation. No person shall be eligible for election
as a director of the Corporation unless nominated in accordance with the
procedures set forth herein.

The Chairman of the meeting shall, if the facts warrant, determine and
declare to the meeting that a nomination was not made in accordance with the
foregoing procedure, and if he should so determine, he shall so declare to the
meeting and the defective nomination shall be disregarded.

SECTION 4. ELECTION OF DIRECTORS. At each meeting of stockholders for the
election of directors at which a quorum is present, the persons receiving the
largest number of votes (up to and including the number of directors to be
elected) shall be directors. If directors are to be elected by consent in
writing of the stockholders without a meeting pursuant to Section 1 of
<PAGE>
13

Article II of these by-laws, those persons receiving the consent in writing of
the largest number of shares in the aggregate and constituting not less than a
majority of the total outstanding shares entitled to give consent in writing
thereon (up to and including the number of directors to be elected) shall be
directors.

SECTION 5. ORGANIZATION. At each meeting of the Board of Directors, the
Chairman of the Board of Directors, or in his absence, the President of the
Corporation, or in his absence an Executive Vice President, if a member of the
Board of Directors, or in the absence of all of said officers, a Vice President,
if a member of the Board of Directors, or in the absence of all of said
officers, a chairman chosen by the majority of the directors present, shall
preside. The Secretary of the Corporation, or in his absence, an Assistant
Secretary, if any, or, in the absence of both the Secretary and Assistant
Secretaries, any person whom the chairman shall appoint, shall act as secretary
of the meeting. Any person so appointed as secretary of the meeting shall, if so
required by the Board of Directors, be sworn to the faithful discharge of his
duties before entering thereupon.

SECTION 6. RESIGNATIONS. Any director of the Corporation may resign at any
time by giving written notice to the Chairman of the Board of Directors or to
the President of the Corporation or to the Secretary of the Corporation. Such
resignation shall take effect at the time specified therein, or, if the time be
not specified, upon receipt thereof by the Chairman of the Board of Directors,
the President of the Corporation or the Secretary, as the case may be; and,
unless otherwise specified therein, the acceptance of such resignation shall not
be necessary to make it effective.

SECTION 7. QUALIFICATIONS AND RETIREMENT.

(a) CHIEF EXECUTIVE OFFICERS OF HONEYWELL. A director who is also the Chief
Executive Officer of the Company shall
<PAGE>
14

no longer be qualified to act as a director and his or her term of office shall
expire at the time he or she ceases to hold that position; PROVIDED, HOWEVER,
that in the event the Nominating Committee determines that it will be in the
best interests of the Company for the former Chief Executive Officer to continue
as a director, the Committee may ask him or her to continue as a director
through the completion of any remaining part of his or her current, regular term
of office as a director and, in addition to any such partial year, may nominate
the former Chief Executive Officer to be a director for a single term of one
year.

(b) OTHER INSIDE DIRECTORS. Any director who is an officer of the Company,
other than the Chief Executive Officer, shall no longer be qualified to act as a
director and his or her term of office shall expire on the earliest to occur of:
(i) the time of a diminution in his or her duties or responsibilities as an
officer unless the Nominating Committee at its sole discretion determines such
officer continues to be qualified to act as a director, (ii) the time he or she
ceases to be an employee of the Corporation for any reason, or (iii) on his or
her sixty-fifth birthday.

(c) OUTSIDE DIRECTORS. Any director who is not and has not been an officer
of the Company (an Outside Director) shall not be nominated for re-election as a
director at the next annual meeting following either (i) fifteen years service
as a director or (ii) the director's seventieth birthday. At the time an Outside
Director retires from or changes the principal occupation engaged in when
initially elected as a director, he or she shall notify the Nominating Committee
of his or her change of position together with an indication of whether or not
he or she is willing to stand for election as a director at the next annual
meeting; thereafter the Nominating Committee at
<PAGE>
15

its discretion will determine whether or not to ask that director to stand for
re-election to the Board, provided the director shall not be permitted to stand
for re-election beyond the age and years-of-service limits set forth above.

(d) INTERPRETATION. The Nominating Committee in its sole discretion shall
have the responsibility for interpretation of qualifications for directors
identified in this Section 7.

SECTION 8. VACANCIES. Except as otherwise provided by law, any vacancy in
the Board of Directors (whether because of death, resignation, removal, an
increase in the number of directors or any other cause) may be filled by a
majority of the directors then in office, though less than a quorum; and each
director so chosen shall hold office until the next annual election and until
his successor shall be duly elected and qualified, unless sooner displaced.

SECTION 9. PLACE OF MEETING, ETC. The Board of Directors may hold its
meetings at such place or places within or without the State of Delaware as the
Board may from time to time determine, or as shall be specified or fixed in the
respective notices or waivers of notice thereof. The Corporation may have one or
more offices, and may keep its books and records at such place or places within
or without the State of Delaware as the Board shall from time to time determine.

SECTION 10. FIRST MEETING. As soon as practicable after each annual election
of directors and on the same day, the Board of Directors may meet for the
purposes of organization and of choosing the officers of the Corporation and for
the transaction of other business at the place where regular meetings of the
Board of Directors are held. Notice of such meeting need not be given. Such
first meeting may be held at any other time or place which shall be specified in
a notice given as hereinafter provided for special meetings of the Board, or in
a consent and waiver of notice thereof signed by all the directors.
<PAGE>
16

SECTION 11. REGULAR MEETINGS. Regular meetings of the Board of Directors
shall be held at such times as the Board of Directors shall by resolution from
time to time determine. If any day fixed for a regular meeting shall be a legal
holiday at the place where the meeting is to be held, then the meeting shall be
held at the same hour and place on the next succeeding secular day not a legal
holiday. Notice of regular meetings need not be given, except of the regular
meetings at which it is proposed to alter or repeal these by-laws or to adopt
one or more new by-laws, of each of which meetings a notice, which shall state
at least the substance of the proposed change, shall be given in the same manner
as is required for a special meeting.

SECTION 12. SPECIAL MEETINGS; NOTICE. Special meetings of the Board of
Directors shall be held whenever called by the Chairman of the Board of
Directors or by the President of the Corporation or by any two of the directors.
A notice shall be given as hereinafter in this section provided of each such
special meeting, in which shall be stated the time and place of such meeting,
but, except as otherwise expressly provided by law or by these by-laws, the
purposes thereof need not be stated in such notice. Except in special cases
where other provision is made by statute, notice of each such meeting shall be
mailed to each director, addressed to him at his residence or usual place of
business, at least two days before the day on which the meeting is to be held,
or shall be sent to him at such place by telegraph or cable or be delivered
personally or by telephone not later than the day before the day on which the
meeting is to be held. Any meeting of the Board of Directors shall be a legal
meeting without any notice thereof having been given if all the directors shall
be present thereat or if notice thereof shall be waived either before or after
such meeting in writing or by telegraph or cable by all absentees therefrom
provided a quorum be present thereat. Notice of any adjourned meeting need not
be given.
<PAGE>
17

SECTION 13. QUORUM AND MANNER OF ACTING. One third of the directors in
office at the time of any regular or special meeting of the Board of Directors
shall be present in person at such meeting in order to constitute a quorum for
the transaction of business and, except as specified in Sections 8, 16 and 17 of
this Article III and Section 4 of Article IV of these by-laws, and except also
in special cases where other provision is made by statute, the vote of a
majority of the directors present at any such meeting, at which a quorum is
present, shall be the act of the Board of Directors. In the absence of a quorum,
a majority of directors present at any meeting may adjourn the same from time to
time until a quorum be had. The directors shall act only as a board and the
individual directors shall have no power as such.

SECTION 14. REMOVAL OF DIRECTORS. Any director may be removed for cause at
any time by the affirmative vote of the holders of a majority of all the shares
of stock outstanding and entitled to vote for the election of directors, given
at a special meeting of such stockholders called for the purpose; and the
vacancy in the Board of Directors caused by such removal shall be filled by such
stockholders at such meeting, or, if the stockholders shall fail to fill such
vacancy, by the Board of Directors.

SECTION 15. COMPENSATION. Directors and members of any committee of the
Corporation contemplated by these by-laws or otherwise provided for by
resolution of the Board of Directors, who are not salaried officers of the
Corporation, shall receive such fixed sum per meeting attended, or such annual
sum or sums, as shall be determined from time to time by resolution of the Board
of Directors. All directors and members of any such committee shall receive
their expenses, if any, of attendance at meetings of the Board of Directors or
of such committee. Nothing herein contained shall be construed to preclude any
director from serving the Corporation in any other capacity, and receiving
proper compensation therefor.
<PAGE>
18

SECTION 16. COMMITTEES.

(a) There shall be an Executive Committee which
shall have such powers and authority provided by resolution passed by a
majority of the Board of Directors.

(b) The Board of Directors may, by resolution
passed by a majority of the whole Board, designate one or more committees, in
addition to the Executive Committee, which, to the extent provided in said
resolution, shall have and may exercise the powers and authority of the Board
in the management of the business and affairs of the Corporation and may
authorize the seal of the Corporation to be affixed to all papers which may
require it.

(c) Each committee, for which provision is made by
paragraph (a) or (b) of this Section 16, shall consist of one or more
directors of the Corporation who shall be appointed by the Chairman of the
Board of Directors provided, however, that each such appointment shall be
reported promptly to the Board of Directors and no member of a committee
shall participate in any action by a committee which shall constitute an
exercise of a power of the Board until the appointment of such member has
been ratified by a majority of the full Board. Any vacancy on a committee
shall be filled by appointment by the Chairman of the Board of Directors in
the same manner in which original appointments to such committee were made.
The chairman of each committee shall be designated by the Chairman of the
Board of Directors. A majority of those entitled to vote at any meeting of
any committee shall constitute a quorum for the transaction of business at
that meeting. In the absence or disqualification of a member of a committee,
the member or members thereof present at any meeting and not disqualified
from voting, whether or not he or they constitute a quorum, may unanimously
appoint another member of the Board to act at the meeting in the place of any
such absent or disqualified member.
<PAGE>
19

SECTION 17. INDEMNIFICATION OF EMPLOYEES, OFFICERS AND DIRECTORS.

(a) Any person who is or was an employee, officer or
director of the Corporation, or of any other corporation, partnership, joint
venture, trust or other enterprise, including service with respect to
employee benefit plans, which he served as such at the request of the
Corporation, shall, unless prohibited by law, be indemnified by the
Corporation in accordance with paragraph (b) below, against reasonable
expenses, paid or incurred by him in connection with or resulting from any
claim, action, suit or proceeding (whether brought by or in the right of the
Corporation or otherwise), civil, criminal, administrative or investigative,
including any appeal therein in which he may be involved, or threatened to be
involved, as a party or otherwise, by reason of the fact he is or was an
employee, officer or director, provided such person acted, in good faith, in
what he reasonably believed to be in or not opposed to the best interest of
the Corporation or such other corporation or organization and, in addition,
with respect to any criminal actions or proceedings, had no reasonable cause
to believe his conduct was unlawful, provided further the Corporation shall
indemnify any such person in connection with a claim, action, suit or
proceeding initiated by such person only if such matter was authorized by the
Board of Directors, and provided further no indemnification shall be made in
respect of any claim, issue or matter as to which such person shall have been
adjudged to be liable to the corporation unless and only to the extent that
the Court of Chancery or the court in which such action or suit was brought
shall determine upon application that, despite the adjudication of liability
but in view of all the circumstances of the case, such person is fairly and
reasonably entitled to indemnity for such expenses which the Court of
Chancery or such other court
<PAGE>
20

shall deem proper. The termination of any claim, action, suit or proceeding,
by judgment, settlement (whether with or without court approval), adverse
decision or conviction after trial or upon a plea of guilty or of NOLO
CONTENDERE, or its equivalent, shall not create a presumption that such
person did not meet the standards of conduct set forth in this paragraph (a).
As used in this Section 17 the term "expenses" shall include, but not be
limited to, counsel fees and disbursements, amounts of judgments, fines or
penalties against, and amounts paid in settlement by, such person.

(b) To the extent that any person claiming
indemnification under paragraph (a) of this Section 17 has been successful, on
the merits or otherwise, in defense of any claim, action, suit or proceeding
of the character described in paragraph (a), he shall be reimbursed by the
Corporation for the amounts of all reasonable expenses paid or incurred by
him in connection with such successful defense. Any person claiming
indemnification under said paragraph (a) shall be reimbursed by the
Corporation for his reasonable expenses if (i) the Board of Directors by a
majority vote of a quorum consisting of directors who are not parties to such
claim, action, suit or proceeding shall deliver to the Corporation its
written findings that such person is entitled to reimbursement under the
provisions of said paragraph or (ii) if such a quorum is not attainable, or
even if obtainable a quorum of disinterested directors so directs,
independent legal counsel (who may be regular counsel for the Corporation)
selected by the Board of Directors shall deliver to the Corporation written
advice that, in their judgment, such person is so entitled.

(c) Any expenses incurred by an officer or director
with respect to any claim, action, suit or proceeding of the character
described in paragraph (a) of this Section 17 may be advanced by the
Corporation prior to the final
<PAGE>
21

disposition thereof upon receipt of an undertaking by or on behalf of the
person to repay such amount if it is ultimately determined that he is not to
be indemnified under this Section 17. Such expenses incurred by other
employees may be so paid upon such terms and conditions, if any, as the Board
of Directors shall determine to be appropriate.

(d) The rights of indemnification provided in this
Section 17 shall be in addition to any other rights to which any such person
may otherwise be entitled by contract or as a matter of law; and such rights
shall continue as to a person who has ceased to be an employee, officer or
director and, in the event of such person's death, shall extend to his heirs
and legal representatives.

SECTION 18. ACTION WITHOUT MEETING. Any action required or permitted to be
taken at any meeting of the Board of Directors or of any committee thereof may
be taken without a meeting if all members of the Board or of such committee, as
the case may be, consent thereto in writing, and the writing or writings are
filed with the minutes of proceedings of the Board or of such committee.

SECTION 19. PRESENCE AT MEETINGS. Members of the Board of Directors or of
any committee designated by it may participate in a meeting of such Board or
committee by means of conference telephone or similar communications equipment
by means of which all persons participating in the meeting can hear each other,
and participation in a meeting pursuant to this Section 19 shall constitute
presence in person at such meeting.
<PAGE>
22

ARTICLE IV.

OFFICERS

SECTION 1. NUMBER. The officers of the Corporation shall be a Chairman of
the Board of Directors who shall be chosen by the directors from their own
number, one or more Vice Chairmen of the Board of Directors if the Board of
Directors shall so determine, a President of the Corporation if the Board of
Directors shall so determine, one or more Presidents of the businesses of the
Corporation if the Board of Directors shall so determine, one or more Vice
Presidents, a Treasurer, a Secretary and such other officers as may be appointed
in accordance with the provisions of this Article. The Board of Directors may
designate one or more Vice Presidents to be an Executive Vice President or
Senior Vice President. The Board of Directors, by resolution, the Chairman of
the Board of Directors, the President of the Corporation, or the Treasurer may
create the offices of and appoint one or more Assistant Treasurers. The Board of
Directors, by resolution, the Chairman of the Board of Directors, the President
of the Corporation, or the Secretary may create the offices of and appoint one
or more Assistant Secretaries and one or more Attesting Secretaries. The term of
office for each Assistant Treasurer, each Assistant Secretary and Attesting
Secretary appointed by any of the foregoing officers shall be determined by the
officer making such appointment but shall not in any event exceed twelve months.
No more than three Assistant Treasurers and three Assistant Secretaries may be
appointed by those officers at any one time. The officer making the appointment
shall give to the Secretary written notification of each such appointment. The
notification shall be placed in the book containing the proceedings of the Board
of Directors.
<PAGE>
23

Any two or more of the above-mentioned offices may be held by the same
person.

SECTION 2. ELECTION, TERM OF OFFICE AND QUALIFICATIONS. Except for Assistant
Treasurers, Assistant Secretaries and Attesting Secretaries appointed by the
Chairman of the Board of Directors, the President of the Corporation, the
Treasurer, or the Secretary, the officers of the Corporation shall be chosen
annually by the Board of Directors at the first meeting thereof held after each
annual meeting of stockholders for the election of directors and shall hold
office until his successor shall have been duly chosen and shall qualify, or
until his earlier death or his earlier resignation or removal in the manner
hereinafter provided.

SECTION 3. REMOVAL. Any officer may be removed, either with or without
cause, at any time, by resolution adopted by a majority of the whole Board of
Directors at a special meeting of the Board called for that purpose, or, except
in the case of any officer elected or appointed by the stockholders or by the
Board of Directors, by any committee or superior officer upon whom such power of
removal may be conferred by the Board of Directors.

SECTION 4. RESIGNATIONS. Any officer may resign at any time by giving
written notice of his resignation to the Board of Directors, or to the Chairman
of the Board of Directors, or to the President of the Corporation, or to the
Secretary of the Corporation. Any such resignation shall take effect at any time
specified therein; and, unless otherwise specified therein, the acceptance of
such resignation shall not be necessary to make it effective.

SECTION 5. VACANCIES. A vacancy in any office because of death, resignation,
removal, disqualification or otherwise,
<PAGE>
24

shall be filled for the unexpired portion of the term in the manner prescribed
in these by-laws for regular appointments or elections to such office.

SECTION 6. THE CHAIRMAN OF THE BOARD OF DIRECTORS. The Chairman of the Board
of Directors shall, be the chief executive officer of the corporation and shall
have general supervision over the business and affairs of the Corporation and
over its several officers and employees, subject, however, to the control of the
Board of Directors. He shall, if present, preside at all meetings of the Board
of Directors and of the stockholders. The Chairman of the Board of Directors
shall see that all orders and resolutions of the Board of Directors are carried
into effect and shall from time to time report to the Board of Directors all
matters within his knowledge which the interests of the Corporation may require
to be brought to their notice. The Chairman of the Board of Directors may sign,
execute and deliver in the name of the Corporation, certificates for shares of
the capital stock of the Corporation, any deeds, mortgages, bonds, contracts or
other instruments which the Board of Directors shall have authorized to be
executed, except in cases where the signing and execution thereof shall be
expressly delegated by the Board or by these by-laws to some other officer or
agent of the Corporation or shall be required by law otherwise to be signed or
executed. In general, the Chairman of the Board of Directors shall perform all
duties incident to the office of the Chairman of the Board of Directors, and
such other duties as from time to time may be assigned by the Board of
Directors.

SECTION 7. THE VICE CHAIRMAN OF THE BOARD OF DIRECTORS. In the absence of
the Chairman of the Board of Directors, the Vice Chairman of the Board of
Directors shall, if present, preside at meetings of the Board of Directors, and
shall perform such other duties that may be assigned to him by the Board of
Directors.
<PAGE>
25

SECTION 8. THE PRESIDENT OF THE CORPORATION. The President of the
Corporation shall be the chief operating officer of the Corporation and shall
perform the duties assigned to him from time to time by the Chairman of the
Board of Directors or by the Board of Directors. In the absence of the Chairman
of the Board of Directors or a Vice Chairman of the Board of Directors (if that
position has been filled by the Board of Directors) the President of the
Corporation shall, if present, preside at meetings of the Board of Directors.
The President of the Corporation may sign, with the Secretary or Treasurer or
any other proper officer of the Corporation thereunto authorized by the Board of
Directors, certificates for shares of the capital stock of the Corporation, any
deeds, mortgages, bonds, contracts or other instruments which the Board of
Directors shall have authorized to be executed, except in cases where the
signing and execution thereof shall be expressly delegated by the Board or by
these by-laws to some other officer or agent of the Corporation or shall be
required by law otherwise to be signed or executed; and, in general, shall
perform all duties incident to the office of the President of the Corporation.

SECTION 9. AUTHORITY AND DUTIES OF THE BUSINESS PRESIDENTS, EXECUTIVE VICE
PRESIDENTS, SENIOR VICE PRESIDENTS, AND VICE PRESIDENTS. Any Business
President, Executive Vice President, Senior Vice President, or Vice President
authorized so to do by the Board of Directors may sign, with the Secretary or
the Treasurer or any other proper officer of the Corporation thereunto
authorized by the Board of Directors, certificates for shares of the capital
stock of the Corporation; and shall perform such other duties as from time to
time may be assigned to them by the Chairman of the Board of Directors or by the
President of the Corporation or by the Board of Directors.
<PAGE>
26

SECTION 10. THE TREASURER. The Treasurer shall:

(a) Have charge and custody of, and be responsible
for, all funds and securities of the Corporation, receive and give receipts
for moneys due and payable to the Corporation from any sources whatsoever,
and deposit all such moneys in the name of the Corporation in such banks,
trust companies or other depositaries as shall be selected in accordance with
the provisions of Article V of these by-laws;

(b) Have the right to require, from time to time,
reports or statements giving such information as he may desire with respect
to any and all financial transactions of the Corporation from the officers or
agents transacting the same;

(c) Render to the Board of Directors, whenever the
Board of Directors shall require him so to do, an account of the financial
condition of the Corporation and of all of his transactions as Treasurer;

(d) Exhibit at all reasonable times his books of
account and other records to any of the directors of the Corporation upon
application during business hours at the office of the Corporation where such
books and records are kept;

(e) Sign (unless the Secretary or other proper officer
thereunto duly authorized by the Board of Directors shall sign), with the
Chairman of the Board of Directors or the President of the Corporation or an
Executive Vice President or a Vice President, certificates for shares of the
capital stock of the Corporation the issue of which shall have been
authorized by resolution of the Board of Directors, provided that the
signatures of the officers of the Corporation thereon may be facsimile as
provided in Section 1 of Article VI of these by-laws; and
<PAGE>
27

(f) In general, perform all the duties incidental to
the office of Treasurer and such other duties as from time to time may be
assigned to him by the Chairman of the Board of Directors or by the President
of the Corporation or by the Board of Directors.

SECTION 11. THE SECRETARY. The Secretary shall:

(a) Record all the proceedings of the stockholders,
the Board of Directors and the Executive Committee in one or more books kept
for that purpose;

(b) See that all notices are duly given in accordance
with the provisions of these by-laws or as required by law;

(c) Be custodian of the corporate records and of the
seal of the Corporation and see that the seal or a facsimile thereof is
affixed to or impressed or reproduced on all stock certificates prior to the
issue thereof and to all documents the execution of which on behalf of the
Corporation under its seal is duly authorized in accordance with the
provisions of these by-laws. Unless the Board of Directors shall otherwise
direct in specific instances, the seal of the Corporation when so affixed,
impressed or reproduced shall always be attested by the signature of the
Secretary, or, if any, of an Assistant Secretary or an Attesting Secretary,
provided that signatures on certificates for shares of the capital stock of
the Corporation may be facsimile as provided in Section 1 of Article VI of
these by-laws;

(d) Keep a register of the post office address of each
stockholder which shall be furnished to the Secretary by such stockholder in
accordance with the provisions of Section 1 of Article II of these by-laws;

(e) See that the duties prescribed by Section 9 of
Article I of these by-laws are performed;
<PAGE>
28

(f) Sign (unless the Treasurer or other proper officer
thereunto duly authorized by the Board of Directors shall sign), with the
Chairman of the Board of Directors or the President of the Corporation or an
Executive Vice President or a Vice President, certificates for shares of the
capital stock of the Corporation the issue of which shall have been
authorized by resolution of the Board of Directors, provided that the
signatures of the officers of the Corporation thereon may be facsimile as
provided in Section 1 of Article VI of these by-laws;

(g) Have general charge of the stock certificate
books of the Corporation and also of the other books and papers of the
Corporation and see that the books, reports, statements, certificates and all
other documents and records required by law are properly kept and filed; and

(h) In general, perform all duties incident to the
office of Secretary, and such other duties as from time to time may be
assigned to him by the Chairman of the Board of Directors or by the President
of the Corporation or by the Board of Directors.

SECTION 12. ASSISTANT TREASURERS, ASSISTANT SECRETARIES AND ATTESTING
SECRETARIES. The Assistant Treasurers and Assistant Secretaries, if thereunto
authorized by the Board of Directors, may sign, with the Chairman of the Board
of Directors, or the President of the Corporation, or an Executive Vice
President, or a Vice President, certificates for shares of the capital stock of
the Corporation the issue of which shall have been authorized by resolution of
the Board of Directors and, in general, shall perform such duties as shall be
assigned to them by the Treasurer or the Secretary, respectively, or by the
Board of Directors. The Assistant Secretaries and Attesting
<PAGE>
29

Secretaries shall have the power to affix and attest the corporate seal of the
Corporation and to attest the execution of documents on behalf of the
Corporation.

SECTION 13. SALARIES. The salaries of the officers shall be fixed from time
to time by the Board of Directors, or by one or more committees or officers to
the extent so authorized from time to time by the Board of Directors, and no
officer shall be prevented from receiving such salary by reason of the fact that
he is also a director of the Corporation.

SECTION 14. SUBORDINATE POSITIONS, ETC. The Corporation may provide titles,
including the title of Vice President, for other individuals who serve in
management positions with the corporate staff, or with group, division or other
operational units of the Corporation but who do not perform the function of
officer for the Corporation. Individuals in such positions shall hold such
titles at the discretion of the appointing officer and shall have such authority
and perform such duties as the Chairman of the Board of Directors, or the Vice
Chairman of the Board of Directors, or any officer to whom they delegate their
authority in this regard, may from time to time determine.

ARTICLE V.

CONTRACTS, LOANS, CHECKS, DEPOSITS, ETC.

SECTION 1. CONTRACTS, ETC. HOW EXECUTED. The Board of Directors, except as
in these by-laws otherwise provided, may authorize any officer or officers,
agent or agents, to enter into any contract or execute and deliver any
instrument in the name of and on behalf of the Corporation, and such authority
may be general or confined to specific instances; and, unless so authorized by
the Board of Directors or by the provisions of these by-laws, no officer, agent
or employee other than the Chairman of the Board of Directors and the President
shall
<PAGE>
30

have any power or authority to bind the Corporation by any contract or
engagement or to pledge its credit or to render it liable pecuniarily for any
purpose or to any amount.

SECTION 2. LOANS. No loans shall be contracted on behalf of the Corporation
and no negotiable paper shall be issued in its name, unless authorized by vote
of the Board of Directors. When so authorized by the Board of Directors any
officer or agent of the Corporation designated by the Board of Directors may
effect loans and advances at any time for the Corporation from any bank, trust
company or other institution, or from any firm, corporation or individual, and
for such loans and advances may make, execute and deliver bonds, notes and other
obligations or evidences of indebtedness of the Corporation, and when authorized
as aforesaid, as security for the payment of any and all loans, advances,
indebtedness and liabilities of the Corporation and of the interest thereon, may
pledge, hypothecate or transfer any and all stocks, securities and other
personal property held or owned by the Corporation and to that end endorse,
assign and deliver the same. Such authority may be general or confined to
specific instances.

SECTION 3. CHECKS, DRAFTS, ETC. All checks, drafts or other orders for the
payment of money, notes, or other evidences of indebtedness issued in the name
of the Corporation, shall be signed by such officer or officers, agent or agents
of the Corporation and in such manner as shall from time to time be determined
by resolution of the Board of Directors.

SECTION 4. DEPOSITS. All funds of the Corporation not otherwise employed
shall be deposited from time to time to the credit of the Corporation in such
banks, trust companies or other depositaries as the Board of Directors may
select or as may be selected by any officer or officers, agent or agents of the
Corporation to whom such power may from time to time be delegated by the Board
of Directors. For the purpose of
<PAGE>
31

such deposit, checks, drafts and other orders for the payment of money which are
payable to the order of the Corporation may be endorsed, assigned and delivered
by the Chairman of the Board of Directors, the President of the Corporation, any
Business President, any Executive Vice President, any Vice President, the
Treasurer or the Secretary, or by any officer, agent or employee of the
Corporation to whom any of said officers, in writing, or the Board of Directors,
by resolution, shall have delegated such power.

SECTION 5. GENERAL AND SPECIAL BANK ACCOUNTS. The Board of Directors may
from time to time authorize the opening and keeping of general and special bank
accounts with such banks, trust companies or other depositaries as the Board of
Directors may select, and may make such special rules and regulations with
respect thereto, not inconsistent with the provisions of these by-laws, as they
may deem expedient.

ARTICLE VI.

SHARES AND THEIR TRANSFER

SECTION 1. CERTIFICATES FOR STOCK. Every owner of stock of the Corporation
shall be entitled to a certificate to be in such form as the Board of Directors
shall prescribe, certifying the number and class of shares of stock of the
Corporation owned by him. The certificates for the respective classes of such
stock shall be numbered in the order in which they shall be issued and shall be
signed in the name of the Corporation by the Chairman of the Board of Directors,
or the President of the Corporation, or Executive Vice President, or a Vice
President and by the Secretary or the Treasurer, or by any other proper officer
of the Corporation thereunto authorized by the Board of Directors and the seal
of the Corporation shall be affixed thereto, provided that the signatures of the
officers of
<PAGE>
32

the Corporation and the seal thereon may be facsimile if such certificates are
signed by a transfer agent other than the Corporation or an employee of the
Corporation or by a registrar other than the Corporation or an employee of the
Corporation. The signature by or on behalf of the transfer agent on any such
certificate may also be facsimile if such certificate is signed by a registrar
other than the Corporation or an employee of the Corporation. A record shall be
kept of the name of the person, firm or corporation owning the stock represented
by such certificates, the number and class of shares represented by such
certificates, respectively, and the respective dates thereof, and in case of
cancellation, the respective dates of cancellation. Every certificate
surrendered to the Corporation for exchange or transfer shall be cancelled and
no new certificate or certificates shall be issued in exchange for any existing
certificate until such existing certificate shall have been so cancelled, except
in cases provided for in Section 4 of this Article VI.

SECTION 2. TRANSFER OF STOCK. Transfers of shares of the capital stock of
the Corporation shall be made only on the books of the Corporation by the
registered holder thereof, or by his attorney thereunto authorized by power of
attorney duly executed and filed with the Secretary of the Corporation, or with
its transfer agent, and on surrender for cancellation of the certificate or
certificates for such shares. The person in whose name shares of stock stand on
the books of the Corporation shall be deemed the owner thereof for all purposes
as regards the Corporation; provided that whenever any transfers of shares shall
be made as collateral security, and not absolutely, such fact shall be so
expressed in the entry of transfer if, when the certificate or certificates
shall be presented to the Corporation or to said transfer agent for transfer,
both the transferor and the transferee request the Corporation to do so.
<PAGE>
33

SECTION 3. TRANSFER AND REGISTRY AGENTS. The Corporation may maintain a
transfer office or agency where its stock shall be directly transferable and a
registry office, which may be identical with the transfer office or agency,
where its stock shall be registered; and the Corporation may, from time to time,
maintain one or more other transfer offices or agencies, and registry offices;
and the Board of Directors may from time to time, define the duties of such
transfer agents and registrars and make such rules and regulations as it may
deem expedient, not inconsistent with these By-laws, concerning the issue,
transfer and registration of certificates for shares of the capital stock of the
Corporation.

SECTION 4. LOST, STOLEN, DESTROYED AND MUTILATED CERTIFICATES. The owner of
any stock of the Corporation shall immediately notify the Corporation of any
loss, theft, destruction or mutilation of the certificate therefor, and the
Corporation may issue a new certificate of stock in the place of any certificate
theretofore issued by it, alleged to have been lost, stolen or destroyed, and
the Board of Directors may, in its discretion, require the owner of the lost,
stolen or destroyed certificate or his legal representatives to give the
Corporation a bond in such sum as it may direct, not exceeding double the value
of the stock, to indemnify the Corporation against any claim that may be made
against it on account of the alleged loss, theft or destruction of any such
certificate. A new certificate may be issued without requiring any bond when, in
the judgment of the Board of Directors, it is proper so to do.

SECTION 5. FIXING DATE FOR DETERMINATION OF STOCKHOLDERS OF RECORD.

(a) In order that the Corporation may determine the stockholders entitled
to notice of or to vote at any meeting of stockholders or any adjournment
thereof, or to express consent to corporate action in writing without a
meeting, or entitled to receive payment of any dividend or other
<PAGE>
34

distribution or allotment of any rights, or entitled to exercise any rights
in respect of any change, conversion or exchange of stock or for the purpose
of any other lawful action, the Board of Directors may fix, in advance, a
record date, which shall not be more than sixty (60) nor less than ten (10)
days before the date of such meeting, nor more than sixty (60) days prior to
any other action.

(b) If no record date is fixed:

(1) The record date for determining stockholders
entitled to notice of or to vote at a meeting of stockholders shall be at
the close of business on the day next preceding the day on which notice
is given, or, if notice is waived, at the close of business on the day
next preceding the day on which the meeting is held.

(2) The record date for determining stockholders
entitled to express consent to corporate action in writing without a
meeting, when no prior action by the Board of Directors is necessary,
shall be the day on which the first written consent is expressed.

(3) The record date for determining stockholders
for any other purpose shall be at the close of business on the day on
which the Board of Directors adopts the resolution relating thereto.

(c) A determination of stockholders of record entitled to notice of or to
vote at a meeting of stockholders shall apply to any adjournment of the
meeting; provided, however, that the Board of Directors may fix a new record
date for the adjourned meeting.
<PAGE>
35

ARTICLE VII.

OFFICES

SECTION 1. REGISTERED OFFICE. The registered office of the Corporation in
the State of Delaware shall be in the City of Wilmington, County of New Castle,
and the registered agent of the Corporation in said State is Corporation Trust
Company of America. The Corporation's "principal office or place of business" in
said State and its "resident agent" in said State shall be deemed to mean said
registered office and registered agent, respectively.

SECTION 2. OTHER OFFICES. The Corporation shall also have an office in the
City of Minneapolis, State of Minnesota, and at such other places as the Board
of Directors may from time to time appoint or the business of the Corporation
require.

ARTICLE VIII.

DIVIDENDS, SURPLUS, ETC.

Subject to the provisions of law, of the Certificate of Incorporation of the
Corporation and of these by-laws, the Board of Directors may declare and pay
dividends upon the shares of stock of the Corporation either (a) out of its
surplus as defined in and computed in accordance with the provisions of the laws
of the State of Delaware or (b) in case there shall be no such surplus, out of
its net profits for the fiscal year in which the dividend is declared and/or the
preceding fiscal year, whenever, and in such amounts as, in its opinion, the
condition of the affairs of the Corporation shall render it advisable. Subject
as aforesaid, the Board of Directors in its discretion may use and apply any of
the surplus or net profits of the Corporation applicable for such purpose in
purchasing
<PAGE>
36

or acquiring any of the shares of the capital stock of the Corporation in
accordance with law, or any of its bonds, debentures, notes, scrip or other
securities or evidences of indebtedness, or from time to time may set aside from
such surplus or net profits such sum or sums as it, in its absolute discretion,
may think proper, as a reserve fund to meet contingencies, or for the purpose of
maintaining or increasing the property or business of the Corporation, or for
any other purpose it may think conducive to the best interests of the
Corporation.

ARTICLE IX.

SEAL

The Board of Directors shall provide a corporate seal, which shall be in the
form of a circle and shall bear the name of the Corporation and words and
figures showing that it was incorporated in the State of Delaware in the year
1927.

ARTICLE X.

FISCAL YEAR AND AUDIT

SECTION 1. FISCAL YEAR. The fiscal year of the Corporation shall end on the
thirty-first day of December in each year.

SECTION 2. AUDIT OF BOOKS AND ACCOUNTS. The books and accounts of the
Corporation shall be audited at least once in each fiscal year, by certified
public accountants of good standing selected by the Board of Directors.
<PAGE>
37

ARTICLE XI.

WAIVER OF NOTICES

Whenever any notice whatever is required to be given by these by-laws or the
Certificate of Incorporation of the Corporation or any of the corporate laws of
the State of Delaware, a waiver thereof in writing, signed by the person or
persons entitled to said notice, whether before or after the time stated
therein, shall be deemed equivalent to notice.

ARTICLE XII.

INCENTIVE COMPENSATION PAYMENTS

As an incentive to efficient and profitable management, there is hereby
authorized to be set aside for payment, for any fiscal year, beginning with the
year 1954, as additional compensation to officers, heads of departments and
other executives and key employees of the Corporation and its subsidiaries whose
work most affects the Corporation's earnings, amounts which, in the aggregate,
shall not exceed 3% of the consolidated net income during such year of the
Corporation and its subsidiaries, before deducting Federal or state taxes based
on income and before any provision for such additional compensation, provided
that no such additional compensation shall be paid for any year unless cash
dividends shall be paid in that year on the Common Stock of the Corporation at
the rate of at least $2 per share as constituted at January 1, 1954. Such
consolidated net income shall exclude, to the extent that the Committee
hereinafter mentioned shall in its discretion deem proper, the whole or any part
of any item of unusual or non-recurring income or loss not arising in the
ordinary course of business. Such aggregate amounts of
<PAGE>
38

additional compensation for any fiscal year shall be in addition to deferred
portions of additional compensation authorized for a prior year or years.
Subject to the foregoing limitations (which shall not be changed without the
approval of the holders of a majority of the outstanding stock of the
Corporation having general voting power), the total amount of additional
compensation, if any, that may be authorized for any year, the participants in
such additional compensation, the apportionment thereof among such participants
and the time or times of payment thereof shall be determined by a Committee of
the Board of Directors consisting of not less than three nor more than five of
those Directors who are not entitled to share in the payments or who shall have
advised the Board of Directors in writing that they irrevocably have elected not
to participate in the payments, as the Chairman of the Board of Directors shall
appoint to such Committee from time to time. Said Committee, which shall act by
a majority of its members, shall be authorized to determine that any award to
any participant for any year shall be paid at one time or to direct the payment
of all or any part thereof in such deferred installments over a period of not
exceeding ten consecutive years commencing not later than the tenth year
following the year for which the award was made, the payment of any such
deferred installments to be subject to such conditions, if any, with respect to
the continued employment of the participant, his refraining from competing with
the Corporation or otherwise, as the Committee shall determine. Said Committee
shall also be authorized to determine that any payment to be made to any
participant in any year shall be made in cash or partly in cash and partly in
Common Stock of the Corporation purchased in the open market for that purpose,
in such proportions as the Committee shall determine, such stock being valued
for such purpose at the mean price thereof on the New York Stock Exchange on
such date as the Committee shall determine. The total amount authorized under
this Article for
<PAGE>
39

any year shall be reported to the stockholders at or before the annual meeting
of stockholders following such year. The provisions of this Article shall not be
deemed to preclude such forms of incentive compensation for other employees of
the Corporation as shall be authorized from time to time by the Board of
Directors.

ARTICLE XIII.

NATIONAL EMERGENCY

SECTION 1. DEFINITION AND APPLICATION. For the purposes of this Article XIII
the term "national emergency" is defined as an emergency situation resulting
from an attack upon the United States, a nuclear disaster within the United
States, a catastrophe, or other emergency condition, as a result of which
attack, disaster, catastrophe or emergency condition a quorum of the Board of
Directors cannot readily be convened for action. Persons not directors of the
Corporation may conclusively rely upon a determination by the Board of Directors
of the Corporation, at a meeting held or purporting to be held pursuant to this
Article XIII that a national emergency as hereinabove defined exists regardless
of the correctness of such determination made or purporting to be made as
hereinafter provided. During the existence of a national emergency the
provisions of this Article XIII shall become operative, but, to the extent not
inconsistent with such provisions, the other provisions of these by-laws shall
remain in effect during any national emergency and upon its termination the
provisions of this Article XIII shall cease to be operative.

SECTION 2. MEETINGS, ETC. When it is determined in good faith by any
director that a national emergency exists, special meetings of the Board of
Directors may be called by such director. The director calling any such special
meeting shall make a reasonable effort to notify all other directors of
<PAGE>
40

the time and place of such special meeting, and such effort shall be deemed to
constitute the giving of notice of such special meeting, and every director
shall be deemed to have waived any requirement, of law or otherwise, that any
other notice of such special meeting be given. At any such special meeting two
directors shall constitute a quorum for the transaction of business including,
without limiting the generality hereof, the filling of vacancies among directors
and officers of the Corporation and the election of additional Vice Presidents,
Assistant Secretaries and Assistant Treasurers. The act of a majority of the
directors present thereat shall be the act of the Board of Directors. If at any
such special meeting of the Board of Directors there shall be only one director
present, such director present may adjourn the meeting from time to time until a
quorum is obtained, and no further notice thereof need be given of any such
adjournment.

The directors present at any such special meeting shall make reasonable
effort to report any action taken thereat to all absent directors, but failure
to give such report shall not affect the validity of the action taken at any
such meeting. All directors, officers, employees and agents of, and all persons
dealing with, the Corporation, if acting in good faith, may conclusively rely
upon any action taken at any such special meeting.

SECTION 3. AMENDMENT. The Board of Directors shall have the power to alter,
amend, or repeal any of these by-laws by the affirmative vote of at least
two-thirds (2/3) of the directors present at any special meeting attended by two
(2) or more directors and held in the manner prescribed in Section 2 of this
Article, if it is determined in good faith by said two-thirds (2/3) that such
alteration, amendment or repeal would be conducive to the proper direction of
the Corporation's affairs.
<PAGE>
41

SECTION 4. CHIEF EXECUTIVE OFFICER. If, during the existence of a national
emergency, the Chairman of the Board of Directors of the Corporation becomes
incapacitated, cannot by reasonable effort be located or otherwise is unable or
unavailable to perform the duties of his office, the Vice Chairman of the Board
of Directors of the Corporation is hereby designated as Chairman of the Board of
Directors. If the Vice Chairman of the Board of Directors is unable or
unavailable to perform the duties of the Chairman of the Board, unless otherwise
determined by the Board of Directors in accordance with the provisions of this
Article XIII, the senior available officer of the Corporation is hereby
designated as Chairman of the Board of Directors of the Corporation, the
seniority of such officer to be determined in order of rank of office and within
the same rank by the date on which he was first elected or appointed to such
office.

SECTION 5. SUBSTITUTE DIRECTORS. To the extent required to constitute a
quorum at any meeting of the Board of Directors during a national emergency, the
officers of the Corporation who are present shall be deemed, in order of rank of
office and within the same rank in order of election or appointment to such
offices, directors for such meeting.

ARTICLE XIV.

AMENDMENTS

The Board of Directors of the Corporation is expressly authorized (except as
otherwise provided in these by-laws) to make by-laws for the Corporation and
from time to time to alter or repeal by-laws so made but the by-laws made or
altered by the Board of Directors may be altered or repealed by the stockholders
at any annual or special meeting thereof, provided that notice of the proposal
so to alter or repeal such by-laws be included in the notice of such meeting.

<PAGE>

RESTRICTED-STOCK RETIREMENT PLAN FOR
NON-EMPLOYEE DIRECTORS

1. PURPOSE OF THE PLAN. The purpose of the Honeywell Restricted-Stock
Retirement Plan for Non-Employee Directors ("Plan") is to grant to
non-employee directors of Honeywell Inc. ("Company") awards ("Awards") of
shares of Common Stock, par value $1.50 per share, of the Company ("Stock")
that will be available without restriction on retirement from the Board and
will increase their proprietary interest in the Company and their
identification with the interests of the Company's stockholders
("Stockholders"). 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 of Directors of the Company ("Board").

2. GRANT OF AWARDS. Each non-employee director ("Director") of the
Company elected at or after the 1988 Annual Meeting of Stockholders shall be
granted Awards under the Plan as follows:

(a) ANNUAL AWARDS. On the date of each Annual Meeting of
Stockholders ("Annual Meeting"), each person who has served as a
Director since the prior Annual Meeting shall receive an Award of Stock
having the Fair Market Value (as defined in Section 3) equal to one-half
the fees earned by the Director since the date of the prior Annual
Meeting.

(b) INITIAL AWARD. Each Director who, at the time of the 1988
Annual Meeting, has served at least two full years as Director shall
receive an additional initial award of Stock having the Fair Market
Value equal to the number of full years of service as a Director ending
with the 1987 Annual Meeting times the Fair Market Value of the Award
that Director receives under Section 2(a).

3. FAIR MARKET VALUE. For purposes of determining the number of shares
of Stock granted under any Award, the "Fair Market Value" of the Stock shall
equal the average of the reported closing prices for the Stock on the New
York Stock Exchange for the twenty (20) consecutive trading business days
immediately preceding the Annual Meeting; and all fractional shares shall be
rounded to the nearest whole number.

4. ISSUANCE OF STOCK. As promptly as practical following the Annual
Meeting for each Award, the Company shall issue certificates
("Certificates"), registered in the name of each Director receiving an Award,
representing the number of shares of Stock covered by the Award. The Stock
shall have the rights and be subject to the restrictions and other terms and
conditions of the Plan.

5. RIGHTS. Upon issuance of the Certificates, the Directors in whose
names they are registered shall, subject to the restrictions of the Plan,
have all of the rights of a

<PAGE>

-2-

Stockholder with respect to the Stock, including the right to vote the Stock
and receive cash dividends and other cash distributions thereon.

6. RESTRICTED PERIOD. The Stock shall be subject to the restrictions
of the Plan for a period ("Restricted Period") from the date of grant of
Stock until the earlier of:

(I) the occurrence of a Change in Control (as defined below); and

(II) the date on which the Director will have served five years as a
Director (including service prior to the grant of the Stock) and the first to
occur of the following events:

(a) the Director retires from the Board in compliance with the
Board's retirement policy as then in effect;

(b) the Director's service on the Board terminates as a result of
not being nominated for reelection by the Board, but not as a result of
the Director's declining to serve again;

(c) the Director's service on the Board terminates because the
Director, although nominated for reelection by the Board, is not
reelected by the Stockholders;

(d) the Director is unable to serve because of disabilities;

(e) the Director dies.

For purposes of the Plan, a "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

<PAGE>

-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 of Directors of the Company (the "Board"), and
any new director (other than a director designated by a person who
has entered into an agreement with the Company to effect a
transaction described in clause (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).

7. FORFEITURE OF STOCK. If the date ("Termination Date") a Director's
service on the Board terminates is before the end of the Restricted Period,
the Director shall forfeit and return to the Company all Stock awarded to the
Director under the Plan.

8. RECEIPT OF STOCK. If a Director's Termination Date is at or after
the end of the Restricted Period, the Director shall receive, free and clear
of the restrictions of the Plan, all Stock previously awarded under the Plan.

<PAGE>

-4-

9. RESTRICTIONS. The Stock shall be subject to the following
restrictions during the Restricted Period:

(a) The Stock shall be subject to forfeiture to the Company as
provided in the Plan.

(b) The Stock may not be sold, assigned, transferred, pledged,
hypothecated or otherwise disposed of; and neither the right to receive
Stock nor any interest under the Plan may be assigned by a Director, and
any attempted assignment shall be void.

(c) The Certificates shall be held by the Company and shall, at
the option of the Company, bear an appropriate restrictive legend and be
subject to appropriate "stop transfer" orders. The Director shall
deliver to the Company a stock power endorsed in blank to the Company.

(d) Any additional Stock or other securities or property (other
than cash) that may be issued with respect to Stock awarded under the
Plan as a result of any stock dividend, stock split, business
combination or other event, shall be subject to the restrictions and
other terms and conditions of the Plan.

(e) A Director shall not be entitled to receive any Stock prior to
the completion of any registration or qualification of the Stock under
any federal or state law or governmental rule or regulation that the
Company, in its sole discretion, determines to be necessary or advisable.

10. WAIVER. In the event a Director's service on the Board terminates,
the Board, in its sole discretion, may waive the forfeiture provisions of
Section 7 as to some or all of the Stock subject to forfeiture thereunder.

11. ADMINISTRATION OF THE PLAN. The Plan shall be administered by a
committee ("Committee") that shall be the Nominating Committee of the Board
or such other committee of Directors as may be designated by the Board. 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 shares of Stock 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.

12. 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. No amendment

<PAGE>

-5-

shall, without approval of the Stockholders, increase the percentage of fees
on which an Annual Award is based in Section 2(a), or modify the requirements
of Sections 1 and 2 as to eligibility for participation in the Plan.

13. 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.

14. STATEMENT OF ACCOUNT. Each Director shall receive an annual
statement, within thirty days following each Annual Meeting, showing the
number of shares of Stock that have been awarded to the Director under the
Plan.

<PAGE>

HONEYWELL CORPORATE EXECUTIVE COMPENSATION PLAN
(Amended and Restated Effective February 21, 1995)

SECTION 1 - PURPOSE OF THE PLAN

The purpose of the Honeywell Corporate Executive Compensation Plan is to
provide compensation to executives that (a) is compatible with the diverse
sizes and characteristics of the operating units within Honeywell, (b) is
equitable internally and competitive externally, and (c) meets Honeywell's
"pay for performance" philosophy by directly relating individual, unit, and
company-wide performance to compensation.

<PAGE>

SECTION 2 - DEFINITIONS

2.1 BASE PLAN. The Honeywell Retirement Benefit Plan, as from time to time
amended.

2.2 BASE SALARY. The regular, monthly, straight-time cash earnings,
including salary continuations because of illness, disability or other
authorized leave of absence. Excluded are any other salary continuations,
stock incentives, special payments or allowances because of work location, or
any other benefits or special payments.

2.3 BOARD OF DIRECTORS. The Board of Directors of Honeywell.

2.4 COMMITTEE. The Personnel Committee of the Board of Directors.

2.5 COMPANY. Honeywell and any domestic or foreign subsidiary of Honeywell
in which it owns a majority of the voting stock.

2.6 COMPOSITE INCENTIVE PERCENTAGE. That percentage obtained by weighing
the Leveraged Incentive Percentage of a Unit in accordance with approved
Influence Weightings.

2.7 COMPOSITE PERFORMANCE PERCENTAGE. The percent of actual performance of
On-Plan objectives by a Unit after applying any Unit Performance Adjustment
and weighting such Unit performance in accordance with predetermined
financial measures assigned by Corporate Management.

2.8 CORPORATE MANAGEMENT. The Chief Executive Officer and the Chief
Operating Officer of Honeywell, respectively, and any other officials to whom
they delegate responsibility hereunder.

2.9 DEFERRED AWARD ACCOUNT OR ACCOUNT. The unfunded bookkeeping account
maintained by the Company for a Participant who elects to defer payment of
his or her Incentive Award(s) pursuant to Section 6.1.

<PAGE>

2.10 EARLY RETIREMENT DATE. Retirement by a Participant under his or her
Base Plan, which is defined as the termination of employment on or after his
or her 55th birthday and after he or she has been credited with 10 or more
years of "Credited Service for Benefit Accrual" under the Base Plan.

2.11 FINAL INCENTIVE FUND. The actual fund available for allocation of
incentive awards to a Unit's Participants after making any Incentive Fund
Adjustments.

2.12 HONEYWELL. Honeywell Inc., a Delaware corporation.

2.13 INCENTIVE AWARD OR AWARD. An award of incentive pay to a Participant
under Section 5 of the Plan.

2.14 INCENTIVE FUND ADJUSTMENT. An adjustment to a Unit's Incentive Fund
by the Unit's cognizant President of a dollar amount equal to a plus or minus
percentage no greater than 20 percent of the Unit's On-Plan Incentive Fund to
reflect his or her assessment of the Unit's total performance.

2.15 INCENTIVE UNIT OR UNIT. The Company or a part thereof (for example,
Strategic Business Unit, operation, division, group, business, or major
corporate staff department) for which Unit objectives are set.

2.16 INFLUENCE WEIGHTINGS. Multipliers resulting from an assessment of the
degree of interdependence between Incentive Units based on a percentage
relationship established by Corporate Management.

2.17 LEVERAGED INCENTIVE PERCENTAGE. A percentage which equals 100 percent
plus or minus specified multiples, as determined by Corporate Management
prior to the beginning of the calendar year to which an award relates, times
the Unit's variance from On-Plan performance and which is not less than 0
percent nor greater than 200 percent.

2.18 NORMAL RETIREMENT DATE. Retirement by a Participant on or after his
or her "Social Security Retirement Age" as defined under his or her Base Plan.

<PAGE>

2.19 ON-PLAN. A financial performance of a Participant or Unit which
equals 100 percent of his or her or its annual approved objectives.

2.20 ON-PLAN INCENTIVE FUND. The sum of On-Plan incentive amounts for each
Participant in a Unit.

2.21 ON-PLAN INCENTIVE PERCENTAGE. That percentage of a Participant's Base
Salary determined from time to time by Corporate Management for each
Honeywell salary grade level which determines the On-Plan incentive amount
for such Participant.

2.22 PARTICIPANT. An employee of the Company employed in a position which
satisfies the eligibility requirements of Section 3.4, whose participation is
recommended by the top management of his Unit and approved by a level of
management designated by the Company as appropriate on the job level
involved, during any portion of the Term of the Plan during which such
employee is within the grade levels "A" through "U" under the Plan.

2.23 PERMANENT AND TOTAL DISABILITY. The disability of a Participant
whereby such Participant is wholly disabled by bodily injury or disease and
will be permanently, continuously and wholly prevented thereby for life from
engaging in his or her customary occupation or employment for wage or profit,
as determined by the Committee.

2.24 PLAN. This Honeywell Corporate Executive Compensation Plan, as
amended and restated effective February 21, 1995.

2.25 TERM. The term of the Plan shall be indefinite and continuing subject
to amendment, cancellation or termination at any time by the Board of
Directors.

2.26 TOP MANAGEMENT OF UNIT. The manager with the highest level of
authority, as designated by Corporate Management, of an Incentive Award Unit.

2.27 UNIT INCENTIVE FUND. The dollar amount available to a Unit for
Incentive Awards, prior to the application of the Incentive Fund Adjustment,
obtained by

<PAGE>

multiplying the Unit's Composite Incentive Percentage by the Unit's On-Plan
Incentive Fund.

2.28 UNIT OBJECTIVES. The annual financial objectives set for the Company
and each Unit by Corporate Management (for example, operating profit, net
income, and return on investment). With approval by Corporate Management,
Unit Objectives may also include specified non-financial objectives.

2.29 UNIT PERFORMANCE ADJUSTMENT. A dollar or percentage adjustment
applied by Corporate Management to compensate for unforeseen circumstances
which significantly impact the Unit's attainment of its established financial
objectives (for example, unplanned acquisitions, divestitures, or foreign
exchange effects).

<PAGE>

SECTION 3 - ADMINISTRATION OF THE PLAN

3.1 AMENDMENT AND TERMINATION. The Board of Directors may amend, cancel,
or terminate the Plan at any time and any such amendment, cancellation or
termination may be retroactively effective except that no amendment,
cancellation or termination shall adversely affect Awards earned under the
Plan for calendar years completed before adoption of any such amendment,
cancellation or termination. The Plan shall not be deemed to be a contract
for employment or a guarantee of compensation.

3.2 COMMITTEE. The Plan shall be administered by the Committee, with the
assistance of the Honeywell Corporate Compensation Department. All payments
of Incentive Awards under the Plan are subject to the discretion of the
Committee. The Committee shall have authority to establish, administer, and
interpret such rules with respect to the Plan as it deems appropriate. Any
decision of the Committee with respect to such rules and the interpretation,
construction, administration and application of the Plan shall be conclusive
and binding.

3.3 ESTABLISHMENT OF OBJECTIVES. Corporate Management shall recommend to
the Committee what objectives and performance measures shall be utilized for
the Company and each Unit and Participant for purposes of the Plan. The
Committee shall have the authority to make final decisions as to such annual
objectives and appropriate performance measures which shall be applied under
the Plan. Honeywell shall maintain an appropriate recordkeeping system for
Incentive Awards.

3.4 ELIGIBILITY OF EMPLOYEE'S POSITION. The employee's position must be
recommended for participation by the top management of his or her unit, and
satisfy the following criteria:

(a) ACCOUNTABILITY OF POSITION.
The employee's position must be sufficiently accountable to directly
impact the financial results of Honeywell or one or more of its
operating Units.

<PAGE>

(b) REPORTING LEVEL OF POSITION.
The employee's position must report at a sufficiently high level
in the organization to regularly impact management decisions of
Honeywell or one or more of its operating Units.

<PAGE>

SECTION 4 - SALARY STRUCTURE OF PARTICIPANTS

4.1 DETERMINATION OF BASE SALARY. The Base Salary of Participants is
determined from time to time as follows:

(a) JOB EVALUATION. The Honeywell executive job evaluation method is
used for preparing position descriptions, assessing position
responsibilities, and assigning positions to salary grades and
ranges. Each position is evaluated by the Honeywell Corporate
Compensation Department and approved by a level of management
designated by the Company as appropriate for the job level
involved.

(b) SALARY GRADES AND RANGES. Each salary grade is assigned a salary
range. A salary grade encompasses positions whose market pay
typically falls within a plus or minus 20 percent of the salary
grade midpoint. Salary grade midpoints generally have a 13 to 15
percent differential.

4.2 ADJUSTMENTS TO BASE SALARY. The Base Salary of Participants may be
adjusted from time to time as follows:

(a) REVIEW OF SALARY RANGES. Salary ranges are reviewed at least
annually and adjusted as necessary to assure that they are
competitive with pay opportunities provided by selected, large,
high-technology companies. Changes in salary ranges are approved
by the Committee.

(b) CHANGES IN BASE SALARY. Changes in Base Salary are designed to
reflect performance of the Participant over time, as measured
against the performance requirements of the Participant's position.
Such adjustments to Base Salary must be approved by the next two
higher levels of Company management or, if no such levels exist, the
Committee.

<PAGE>

SECTION 5 - CALCULATION OF INCENTIVE AWARD

5.1 ESTABLISHING UNIT OBJECTIVES. At the beginning of each year, Unit
Objectives are approved by Corporate Management for the Company and each of
the Incentive Units for the year. Such objectives may vary by Unit to
reflect the characteristics and emphases of the Units.

5.2 ASSESSING UNIT PERFORMANCE. After the end of each year, actual
performance against unit objectives is measured for the Company and each of
its Units. Actual results for each objective are expressed as a percentage
of the objective or plan. Performance against any one objective is limited to
200 percent after leveraging under Section 5.5.

5.3 ADJUSTING UNIT FINANCIAL RESULTS. A Unit Performance Adjustment to
compensate for unforeseen circumstances which significantly impact the Unit's
performance may be applied by Corporate Management to reflect a dollar impact
which was not taken into account in establishing Unit objectives for the
calendar year.

5.4 WEIGHTING UNIT PERFORMANCE. The percentage of the Unit's performance
determined under Section 5.2, after application of any Unit Performance
Adjustment, shall thereupon be weighted by the respective percentage assigned
by Corporate Management to each objective (for example, 50 percent ROI, 50
percent Operating Profit), equal to a 100 percent total, to arrive at the
Composite Performance Percentage for the Unit.

5.5 CALCULATING LEVERAGED INCENTIVE PERCENTAGE. The Unit's Composite
Performance Percentage is then adjusted up or down by a Leveraged Incentive
Percentage for each one percent deviation from On-Plan performance between 70
and 130 percent, or such other range as determined by Corporate Management
and approved by the Committee prior to the beginning of the calendar year to
which an Award relates, to arrive at the Unit's Leveraged Incentive
Percentage.

5.6 DETERMINING ORGANIZATIONAL INFLUENCE WEIGHTINGS. Unless otherwise
approved by the Chief Executive Officer, the Unit's Leveraged Incentive
Percentage

<PAGE>

shall be weighted according to Influence Weightings to determine the Composite
Incentive Percentage of the Unit:

(a) COMPANY INFLUENCE. From 0 to 20 percent of a Unit's
Composite Incentive Percentage, as determined in the sole
discretion of the Chief Executive Officer, shall be based upon
the performance of the Company.

(b) UNIT INFLUENCE. At least 40 percent of a Unit's
Composite Incentive Performance shall be based on its own
performance.

(c) OTHER UNIT INFLUENCE. Where a Unit has a significant
interdependence with another Unit, additional approved Influence
Weightings may be used in determining the Unit's Composite
Incentive Percentage.

5.7 ESTABLISHING ON-PLAN INCENTIVE FUND. The On-Plan Incentive Percentage
for each Participant is multiplied by his or her annual Base Salary for the
calendar year or, (i) in the event that the Participant is promoted or
demoted during the calendar year by each Base Salary applicable to the
Participant on a pro-rata basis for that portion of the calendar year, (ii)
in the event a Participant retires, was laid off, or left work because of
death or Permanent and Total Disability, or who became a Participant in the
Plan after January 1 of the calendar year, by his or her Base Salary for the
months he or she was a Participant in the Plan. Such amounts shall then be
added to an amount calculated in that manner for all other Participants in
the Unit in order to arrive at the On-Plan Incentive Fund for the Unit.

5.8 COMPUTING UNIT INCENTIVE FUND. The Unit's Composite Incentive
Percentage is multiplied by the On-Plan Incentive Fund of the Unit and may
then be increased or decreased by Corporate Management provided that the sum
of Unit Incentive Funds so adjusted may not exceed the sum of such funds
prior to such adjustment.

5.9 DETERMINING FINAL INCENTIVE FUND. At the end of each calendar year,
Corporate Management assesses a Unit's performance against both its financial
and non-financial objectives and may, in its discretion, adjust the Unit
Incentive Fund by an Incentive Fund Adjustment of a plus or minus percentage
no greater than 20 percent of the Unit's On Plan Incentive Fund to reflect
his or her assessment of the Unit's total

<PAGE>

performance, including its attainment of non-financial objectives, to
determine the Final Incentive Fund of the Unit. Non-financial objectives may
vary by Unit and may include, among other factors, innovation, risk taking,
human resource productivity improvement, equal opportunity, Company image,
customer service, product development, and progress toward long-term
objectives. In the case of individual Presidents and inside directors of
Honeywell, the Committee assesses the performance of these Participants
against such objectives which it may select and may adjust the Incentive Fund
applicable to those Participants in the same manner as provided above for
other Participants in this Section 5.9 to reflect its assessment of such
Participants' performance.

5.10 ALLOCATING THE UNIT'S FINAL INCENTIVE FUND TO PARTICIPANTS. The
Unit's Final Incentive Fund is allocated to individual Participants by the
Top Management of Unit, reviewed by appropriate higher level management,
approved by Corporate Management and, except as otherwise provided in Section
7, paid to the Participant in the month of February of the calendar year
following the incentive year during which the Award was earned unless the
Participant has elected to defer payment of the Award in accordance with
Section 8. Individual Awards are based on the Unit's Final Incentive Fund
adjusted to reflect the Participant's actual performance against individual
goals and objectives. The sum of individual awards for a Unit cannot exceed
such Unit's Final Incentive Fund.

5.11 LIMITATIONS. The amount of total Incentive Awards distributed under
the Plan is limited as follows:

(a) PERCENTAGE OF ON-PLAN INCENTIVE. No Participant or
Unit may receive more than 200 percent of his or its On-Plan
Incentive Fund.

(b) AMOUNT OF INCENTIVE COMPENSATION. The amount which
the Company may distribute as Awards for any calendar year
pursuant to the Plan to those Participants that are determined by
the Committee to be the executives subject to the limit on
incentive compensation under Article XI of Honeywell's By-laws
shall not exceed the amount which, when added to the amount of
incentive compensation accrued for such year under the Honeywell
Long-Range Stock Incentive Plan and any performance-

<PAGE>

related award under the Honeywell Stock and Incentive Plan with
respect to such executives, would equal the limit on incentive
compensation for such year under that Article of the By-Laws, as
in effect at the end of such year. Individual payments under this
Plan to such Participants shall be reduced pro rata to the extent
necessary to comply with this limitation after any payments under
the Honeywell Long-Range Stock Incentive Plan to these
Participants have first been reduced.

<PAGE>

SECTION 6 - LOCATION EXECUTIVE COMPENSATION PLANS

6.1 GENERAL. An Incentive Unit may, with the approval of the Committee,
administer a "location executive compensation plan" under and pursuant to the
provisions of this Plan. Such plans shall be administered by the Unit's
president with all payments of Incentive awards subject to his or her
discretion as exercised in accordance with the rules established by the
Committee as permitted by Section 3.2.

6.2 HOME AND BUILDING CONTROL/INTERNATIONAL EXECUTIVE COMPENSATION PLAN.
The Home and Building Control/International Executive Compensation Plan
constitutes a location executive compensation plan which has been approved by
the Committee. It shall be administered by the President, Home and Building
Control/International, pursuant to the terms of this Plan except that Section
5.6(a) shall not be applicable.

6.3 INDUSTRIAL AUTOMATION CONTROL EXECUTIVE COMPENSATION PLAN. The
Industrial Automation Control Executive Compensation Plan constitutes a
location executive compensation plan which has been approved by the
Committee. It shall be administered by the President, Industrial Automation
Control, pursuant to the terms of this Plan except that Section 5.6(a) shall
not be applicable.

6.4 MICROSWITCH EXECUTIVE COMPENSATION PLAN. The Microswitch Executive
Compensation Plan constitutes a location executive compensation plan which
has been approved by the Committee. It shall be administered by the
President, Industrial Automation Control, pursuant to the terms of this Plan
except that Section 5.6(a) shall not be applicable.

<PAGE>

SECTION 7 - DEFERRED PAYMENT OF AWARDS

7.1 ELECTION TO DEFER. Not later than the last day of the first calendar
quarter during 1985 and not later than the last day of the year prior to the
year to which an Incentive Award relates during calendar years thereafter,
each Participant shall be provided the opportunity to make an irrevocable
election to defer the payment of the Award for that respective calendar year.

7.2 AMOUNT OF DEFERRAL. Each Participant may elect to defer the payment of
a specified dollar amount, any excess over a specified dollar amount, or a
designated percentage of the Award. The minimum amount of the Award which
may be deferred with respect to a calendar year is $1,000.

7.3 PERIOD OF DEFERRAL. Subject to earlier payment under Section 7.6, a
Participant may elect to defer commencement of payment of the Award until the
earlier of March 15 of the calendar year following the Participant's Early
Retirement Date or Normal Retirement following the Participant's Normal
Retirement Date.

7.4 DESIGNATION OF FORM OF PAYMENT. Each Participant who elects to receive
deferred payment of his Award may specify whether such deferred amount is to
be paid in a lump sum on or about March 15 of the year following the earlier
of the year in which the Participant's Early Retirement Date or Normal
Retirement Date occurs, or in approximately equal annual installments over a
period of not more than ten (10) years commencing on or about March 15 of the
year following the earlier of the year in which the Participant's Early
Retirement Date or Normal Retirement Date occurs.

7.5 CREDITS TO DEFERRED AWARD ACCOUNT. In the event that the Participant
elects to defer payment of his or her Award, a credit in the amount of such
deferred payment shall be made to the Participant's Deferred Award Account no
later than February 28 of the calendar year following the incentive year
during which the Award was earned. During the term of the Plan, interest
shall be credited to each Participant's Deferred Award Account (a) annually
as of February 15, (b) as of the last day of the month preceding a Change in
Control of the Company, and (c) at the time of distribution of the entire
balance of or annual installment from such Account for the year or portion
thereof then ended, based on the average daily balance of the Account for
such year or portion

<PAGE>

thereof, at the average effective interest rate on the composite of long-term
and short-term borrowings of Honeywell Inc. and designated finance company
subsidiaries for the five (5) years ending with the calendar year prior to
the calendar year in which interest is being credited, as such rate may be
determined for purposes of the financial reports prepared for the Honeywell
Corporate Treasurer.

7.6 EVENT TRIGGERING PAYMENT OF DEFERRED AWARD ACCOUNT. Participant's
Deferred Award Account shall be paid or commenced to be paid by Honeywell to
such Participant, or, in the event of his or her death or incapacity, to the
person or persons legally entitled thereto, after the earliest to occur of
the following events:

(a) the Participant's Early Retirement Date,

(b) the Participant's Normal Retirement Date,

(d) termination of the Participant's employment with the
Company for any reason other than death, Early Retirement, or
retirement on or after his or her Normal Retirement Date, or

(e) a Change in Control as defined in Section 8, with the
form and commencement of such payment being determined by the
provisions of Section 7.7.

7.7 MANNER OF PAYMENT OF DEFERRED AWARD ACCOUNT. The manner of payment of
the Deferred Award Account to a Participant where clauses (a) and (b) of
Section 7.6 are applicable shall be in a lump sum which shall be paid to him
or her on or about March 15 of the year following the year in which the
earlier of such events set forth in clauses (a) or (b) occur unless the
Participant has elected installment payments pursuant to Section 7.4 whereby
approximately equal annual installments over a period of not more than ten
(10) years shall be made beginning with an initial installment to be paid on
or about March 15 of the year following the year in which such event occurs.
The form of payment of the Deferred Award Account to a Participant where
clauses (c) or (d) of Section 7.6 are applicable shall be in a lump sum which
shall be paid to the

<PAGE>

Participant within sixty (60) days following the occurrence of any event set
forth in such clauses. The form of payment of the Deferred Award Account to
a Participant upon a Change in Control shall be in a manner set forth in
Section 8.

7.8 EARLY PAYMENT OF DEFERRED AWARD ACCOUNT. Notwithstanding any contrary
provisions of Section 7, in the event that the Participant or beneficiary
incurs a financial hardship, he or she may apply to the Committee to receive
an amount from the Participant's Deferred Award Account sufficient to satisfy
the emergency need. If the application is approved by the Committee, it will
direct Honeywell to pay an amount necessary to meet the emergency need. The
term "financial hardship" shall mean an event resulting from an illness or
accident of the Participant or of a dependent of the Participant, loss of the
Participant's property due to casualty, the layoff of the Participant or
other circumstances arising as a result of events beyond the control of the
Participant. An event shall not constitute a "financial hardship" to the
extent that such hardship may be relieved through reimbursement or
compensation by insurance or otherwise or by liquidation of the Participant's
assets, to the extent that the liquidation of such assets would not itself
cause a financial hardship. Also, a "financial hardship" shall not include
the need to send a Participant's child to college or the desire to purchase a
home.

7.9 ADMINISTRATIVE PROCEDURES. The Committee may adopt such rules and
regulations governing such deferrals and specifications as it deems
appropriate. All deferred payments hereunder shall be paid in cash from the
general funds of the Company and no special or separate fund shall be
established and no other segregation of assets shall be made to assure the
payment of benefits hereunder.

<PAGE>

SECTION 8 - CHANGE IN CONTROL

8.1 PAYMENTS UPON CHANGE IN CONTROL. Notwithstanding any provision in the
Plan to the contrary, in the event of a "Change in Control", as defined in
this Section, each Participant shall receive payment of:

(a) the Participant's Incentive Award, based upon an
assumption of On-Plan performance for the incentive year during
which such Change in Control occurs, multiplied by a fraction,
the numerator of which is the number of months (calculated to the
nearest whole month) of such Participant's participation in the
Plan during the incentive year in which the Change in Control
occurs and the denominator being twelve and

(b) all amounts, if any, credited to the Participant's
Deferred Award Account, as of the effective date of such Change
in Control, including any interest accrued in accordance with
Section 7.5 of the Plan,

which payments shall be distributed on the fifth business day after such
Change in Control as a lump sum cash payment.

8.2 DEFINITION OF CHANGE OF CONTROL. For all purposes of the Plan, a
"Change in Control" of the Company shall have occurred if:

(a) any "person", as such term is used in Sections 13(d)
and 14(d) of the Securities Exchange Act of 1934, as amended (the
"Exchange Act") (other than the Company, any subsidiary of the
Company, any "person" (as hereinabove defined) acting on behalf
of the Company as underwriter pursuant to an offering who is
temporarily holding securities in connection with such offering,
any trustee or other fiduciary holding securities under an
employee benefit plan of the Company or any corporation owned,
directly or indirectly, by the stockholders of the Company in
substantially the same proportions as their ownership of stock of
the Company), is or becomes the "beneficial owner" (as defined in
Rule 13d-3 under the Exchange Act), directly or indirectly, of
securities of the Company

<PAGE>

representing 30 percent or more of the combined voting power of
the Company's then outstanding securities;

(b) during any period of not more than two consecutive
years (not including any period prior to the execution of this
amendment to the Plan), individuals who at the beginning of such
period constitute the Board of Directors of the Company (the
"Board"), and any new director (other than a director designated
by a person who has entered into an agreement with the Company to
effect a transaction described in clause (a), (c) or (d) of this
Section) whose election by the Board or nomination for election
by the Company's stockholders was approved by a vote of at least
two-thirds (2/3) of the directors then still in office who either
were directors at the beginning of the period or whose election
or nomination for election was previously so approved, cease for
any reason to constitute at least a majority thereof;

(c) the stockholders of the Company approve a merger or
consolidation of the Company with any other corporation, other
than (i) a merger or consolidation which would result in the
voting securities of the Company outstanding immediately prior
thereto continuing to represent (either by remaining outstanding
or by being converted into voting securities of the surviving
entity) more than 50 percent of the combined voting power of the
voting securities of the Company or such surviving entity
outstanding immediately after such merger or consolidation or
(ii) a merger or consolidation effected to implement a
recapitalization of the Company (or similar transaction) in which
no "person" (as hereinabove defined) acquires more than 30
percent of the combined voting power of the Company's then
outstanding securities; or

(d) the stockholders of the Company approve a plan of
complete liquidation of the Company or an agreement for the sale
or disposition by the Company of all or substantially all of the
Company's assets (or any transaction having a similar effect).

<PAGE>

SECTION 9 - CHANGES IN EMPLOYEE STATUS

9.1 TRANSFERS BETWEEN UNITS. A Participant who transfers between Units
before the end of a calendar year shall be eligible to receive an Award based
on the performance of either the old or new Unit or a combination thereof.
The determination will be made by Corporate Management on a case-by-case
basis. Generally, a pro rata allocation will be made, but if an individual
transfers early in a calendar year, the Award may be calculated as if the
Participant had been in the new Unit all year. If the transfer is late in
the year, it may be calculated as if the Participant had been in the former
Unit the entire year. Transfers in the second or third quarter generally
result in a prorated calculation (for example, six months based on the old
Unit and six months based on the new Unit).

9.2 PARTICIPATION FOR A PARTIAL YEAR. A Participant who (i) ceases to be a
Participant in the Plan during a calendar year because of voluntary
retirement, layoff, position assignment, Permanent and Total Disability, or
death, or (ii) becomes a Participant in the Plan after January 1 of any year,
shall be eligible for an Incentive Award determined under Section 5, but
pro-rated to reflect the portion of the year in which he or she was a
Participant.

A Participant whose employment terminates because of resignation or
Company-initiated employment termination shall not be eligible for an
Incentive Award for the calendar year in which such employment termination
occurs. Notwithstanding the foregoing, the Incentive Award for any
Participant who becomes a Participant in the Plan after January 1 of any year
solely as a result of ceasing to be a participant in the Honeywell Senior
Management Performance Incentive Plan, shall be pro-rated only to the extent
such person was not an employee of the Company during such year.

9.3 DISCHARGE. If a Participant is discharged from the Company before an
Incentive Award has been made for a calendar year because of malfeasance
(which shall include, among other reasons, neglect of duties, divulgence of
Company secrets, or breach of Company policy), the Participant shall forfeit
any and all rights he or she would have had to an Incentive Award under the
Plan for that year, unless a specific contrary decision is made by Corporate
Management.

<PAGE>

SECTION 10 - ASSIGNMENT AND BENEFICIARIES

10.1 DESIGNATION OF BENEFICIARY. Neither amounts awarded to a Participant
or credited to the Participant's Deferred Award Compensation Account nor any
other rights or benefits of a Participant under the Plan may be assigned,
transferred, pledged or alienated in any way; provided, however, that a
Participant may designate a beneficiary or beneficiaries to receive after the
Participant's death payments at the times and in the amounts to which the
Participant would have been entitled under the Plan if he or she were alive.
The beneficiary or beneficiaries last designated by the Participant to
receive the proceeds under the Company Basic Life Insurance Plan upon his or
her death shall be the designated beneficiary or beneficiaries for purposes
of this Plan. Such designation of a Participant's beneficiary or
beneficiaries may be replaced by a new designation or may be revoked by the
Participant at any time. The designation or revocation of a beneficiary
shall not be effective unless it is on a form provided for that purpose by
the Company, signed by the Participant and delivered to the Company prior to
the Participant's death.

10.2 DISTRIBUTION TO DESIGNATED BENEFICIARY. In the case of death of a
Participant who has made a valid beneficiary designation which has not been
subsequently replaced or revoked, amounts to which the Participant would have
been entitled under the Plan shall be distributed in accordance with the Plan
to the designated beneficiary or beneficiaries to the extent the designation
of such beneficiary or beneficiaries is valid and enforceable under
applicable law. Any amount distributable to a Participant upon death and not
subject to such a designation shall be distributed to the Participant's legal
representative or estate. If there is any question as to the legal right of
any beneficiary to receive the distribution under the Plan, the amount in
question may be paid to the legal representative or estate of the
Participant, at the option of the Committee, in which event the Company shall
have no further liability to anyone with respect to such amount.

<PAGE>

SECTION 11 - GENERAL CONDITIONS

11.1 LIMITATION OF RIGHTS. Nothing in this Plan and no action taken
pursuant to its provisions shall be construed to:

(a) give any employee of the Company any right to any
compensation, except as specifically provided herein;

(b) be evidence of any agreement, contract, or understanding,
expressed or implied, that the Company will employ
a Participant in any particular position or at any particular
rate of remuneration;

(d) give any Participant any right, title, or interest
whatever in or to any investments which the Company may make to
aid it in meeting its obligations hereunder;

(e) create a trust of any kind or a fiduciary relationship
between the Company and a Participant or any other person; and

no assets of the Company or any of its subsidiaries shall be segregated with
respect to any deferred amounts and all such amounts shall constitute
unsecured contractual obligations of the Company and its subsidiaries.

11.2 APPLICABLE LAW. All questions pertaining to the construction,
validity and effect of the Plan shall be determined in accordance with the
laws of the United States and the State of Minnesota, other than its laws
respecting choice of law.

<PAGE>
EXHIBIT (11)

HONEYWELL INC. AND SUBSIDIARIES
COMPUTATION OF EARNINGS PER SHARE
FOR THE FIVE YEARS ENDED DECEMBER 31, 1995
(DOLLARS IN MILLIONS EXCEPT PER SHARE AMOUNTS)

<TABLE>
<CAPTION>
1995 1994 1993 1992 1991
----------- ----------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C>
Primary:
Income:
Income before extraordinary item and cumulative effect of
accounting changes......................................... $ 333.6 $ 278.9 $ 322.2 $ 399.9 $ 331.1
Extraordinary item -- loss on early redemption of debt...... (8.6)
Cumulative effect of accounting changes (Note).............. (144.5)
----------- ----------- ----------- ----------- -----------
Net income................................................ $ 333.6 $ 278.9 $ 322.2 $ 246.8 $ 331.1
----------- ----------- ----------- ----------- -----------
----------- ----------- ----------- ----------- -----------
Shares:
Weighted average of shares outstanding during the year...... 127,138,774 129,440,052 134,242,394 138,525,414 140,868,222
----------- ----------- ----------- ----------- -----------
----------- ----------- ----------- ----------- -----------
Earnings per share:
Income before extraordinary item and cumulative effect of
accounting changes......................................... $ 2.62 $ 2.15 $ 2.40 $ 2.88 $ 2.35
Extraordinary item -- loss on early redemption of debt...... (0.06)
Cumulative effect of accounting changes (Note).............. (1.04)
----------- ----------- ----------- ----------- -----------
Net income................................................ $ 2.62 $ 2.15 $ 2.40 $ 1.78 $ 2.35
----------- ----------- ----------- ----------- -----------
----------- ----------- ----------- ----------- -----------
Assuming full dilution:
Income:
Income before extraordinary item and cumulative effect of
accounting changes......................................... $ 333.6 $ 278.9 $ 322.2 $ 399.9 $ 331.1
Extraordinary item -- loss on early redemption of debt...... (8.6)
Cumulative effect of accounting changes (Note).............. (144.5)
----------- ----------- ----------- ----------- -----------
Net income................................................ $ 333.6 $ 278.9 $ 322.2 $ 246.8 $ 331.1
----------- ----------- ----------- ----------- -----------
----------- ----------- ----------- ----------- -----------
Shares:
Weighted average of shares outstanding during the year...... 127,138,774 129,440,052 134,242,394 138,525,414 140,868,222
Shares issuable in connection with stock plans less shares
purchaseable from proceeds................................ 2,364,352 541,811 1,069,901 1,599,395 2,120,234
----------- ----------- ----------- ----------- -----------
Total shares.............................................. 129,503,126 129,981,863 135,312,295 140,124,809 142,988,456
----------- ----------- ----------- ----------- -----------
----------- ----------- ----------- ----------- -----------
Earnings per share:
Income before extraordinary item and cumulative effect of
accounting changes......................................... $ 2.58 $ 2.15 $ 2.38 $ 2.85 $ 2.32
Extraordinary item -- loss on early redemption of debt...... (0.06)
Cumulative effect of accounting changes..................... (1.03)
----------- ----------- ----------- ----------- -----------
Net income................................................ $ 2.58 $ 2.15 $ 2.38 $ 1.76 $ 2.32
----------- ----------- ----------- ----------- -----------
----------- ----------- ----------- ----------- -----------
</TABLE>

- ------------------------------
Note: The cumulative effect of accounting changes in 1992 are the result of
adopting Statement of Financial Accounting Standards (SFAS) No. 106,
"Employers' Accounting for Postretirement Benefits Other Than Pensions,"
which reduced net income by $151.3 ($1.09 per share); SFAS No. 109,
"Accounting for Income Taxes," which increased net income by $31.4 ($0.23
per share); and SFAS No. 112, "Employers' Accounting for Postemployment
Benefits," which reduced net income by $24.6 ($0.18 per share).

<PAGE>
EXHIBIT (12)

HONEYWELL INC. AND SUBSIDIARIES
COMBINED WITH PROPORTIONAL SHARES OF 50% OWNED COMPANIES
COMPUTATION OF RATIOS OF EARNINGS TO FIXED CHARGES
FOR THE FIVE YEARS ENDED DECEMBER 31, 1995
(DOLLARS IN MILLIONS)

<TABLE>
<CAPTION>
1995 1994 1993 1992 1991
--------- --------- --------- --------- ---------
<S> <C> <C> <C> <C> <C>
Income before income taxes............................................ $ 505.50 $ 369.70 $ 478.50 $ 634.70 $ 509.40
Deduct:
Equity income....................................................... 13.60 10.50 17.80 15.80 14.60
--------- --------- --------- --------- ---------
Subtotal............................................................ 491.90 359.20 460.70 618.90 494.80
Add (Deduct):
Dividends from less than 50% owned companies........................ 2.58 2.37 2.10 1.54 1.44
Proportional share of income (loss) before
income taxes of 50% owned companies................................ .41 (2.83) .30 .79 .31
--------- --------- --------- --------- ---------
Adjusted income....................................................... 494.89 358.74 463.10 621.23 496.55
--------- --------- --------- --------- ---------
Fixed charges
Interest on indebtedness:
Honeywell Inc. and subsidiaries..................................... 79.66 72.89 65.46 87.54 87.23
50% owned companies................................................. -- -- -- -- --
--------- --------- --------- --------- ---------
Subtotal............................................................ 79.66 72.89 65.46 87.54 87.23
Amortization of debt expense.......................................... 3.66 2.61 2.54 2.36 2.17
Interest portion of rent expense...................................... 47.80 45.64 44.75 42.68 39.87
--------- --------- --------- --------- ---------
Total fixed charges................................................... 131.12 121.14 112.75 132.58 129.27
--------- --------- --------- --------- ---------
Total available income................................................ $ 626.01 $ 479.88 $ 575.85 $ 753.81 $ 625.82
--------- --------- --------- --------- ---------
--------- --------- --------- --------- ---------
Ratio of earnings to fixed charges.................................... 4.77 3.96 5.11 5.69 4.84
--------- --------- --------- --------- ---------
--------- --------- --------- --------- ---------
</TABLE>

<PAGE>
HONEYWELL INC. AFFILIATES -- AS OF DECEMBER 31, 1995

<TABLE>
<CAPTION>
A %
I COUNTRY OWNED COMPANY*
- ---- ------------------------- ----- -------------------------------------------------------------------
<C> <S> <C> <C>
I UNITED STATES:CALIF. 100 HONEYWELL ADVANCED SYSTEMS INC.
A UNITED STATES:DEL. 100 HONEYWELL ASIA PACIFIC INC.
A UNITED STATES:DEL. 100 HONEYWELL BUILDING MANAGEMENT SERVICES INC.
A UNITED STATES:DEL. 100 HONEYWELL CHINA INC.
I UNITED STATES:MINN. 100 HONEYWELL COMMUNICATIONS COMPANY
A UNITED STATES:DEL. 100 HONEYWELL DISC INC.
A UNITED STATES:DEL. 100 HONEYWELL ENVIRONMENTAL AIR CONTROL INC.
I UNITED STATES:DEL. 100 HONEYWELL EUROPE INC. (HEI)
A UNITED STATES:DEL. 100 HONEYWELL FINANCE INC.
A UNITED STATES:DEL. 100 HONEYWELL FINANCE INTERNATIONAL INC.
I UNITED STATES:DEL. 100 HONEYWELL HIGH-TECH TRADING INC.
A BRAZIL 50 HONEYWELL DO BRASIL & CIA. (Partnership)
(Other partner is HONEYWELL OVERSEAS FINANCE CO., owning 50%)
A UNITED STATES:DEL. 100 HONEYWELL OVERSEAS FINANCE COMPANY
A UNITED STATES:DEL. 100 HONEYWELL REALTY, INC.
A UNITED STATES:DEL. 100 HONEYWELL TCAS INC.
A UNITED STATES:MASS. 100 HONEYWELL DMC SERVICES, INC.
A UNITED STATES:DEL. 50 CONTROL SYSTEMS CONTRACTING AND CONSULTING LLC
(Other 50% ownership is held by MINNEAPOLIS--HONEYWELL
REGULATOR COMPANY INC.)
A UNITED STATES:IL. 49 FOSTER/HONEYWELL JOINT VENTURE (Partnership)
A UNITED STATES:DEL. 50 GE/MICROSWITCH CONTROL INC.
I UNITED STATES:DEL. 100 MINNEAPOLIS-HONEYWELL REGULATOR COMPANY INC.
I UNITED STATES:CALIF. 100 TETRA TECH SYSTEMS, INC.
I UNITED STATES:CALIF. 100 TETRA TECH MANAGEMENT SERVICES, INC.
I SAUDI ARABIA 75 SAUDI ARABIAN TETRA TECH LIMITED
A UNITED STATES:DEL. 100 HONEYWELL ELECTRONICS CORPORATION
A UNITED STATES:DEL. 100 COEUR D'ALENE DEVELOPMENT INC.
A ENGLAND 100 HONEYWELL LIMITED
A ENGLAND 100 HONEYWELL CONTROL SYSTEMS LIMITED
A SOUTH AFRICA 100 HONEYWELL SOUTHERN AFRICA (PROPRIETARY) LIMITED
A BOTSWANA 100 HONEYWELL BOTSWANA (PTY.) LIMITED
A ENGLAND 100 HONEYWELL AVIONICS SYSTEMS LIMITED
A ENGLAND 100 HONEYWELL AEROSPACE AND DEFENCE LIMITED
A ENGLAND 100 KODEN MAINTENANCE COMPANY LIMITED
A ENGLAND 100 HONEYWELL INFORMATION SYSTEMS LIMITED
I ENGLAND 100 HONEYWELL LEASING LIMITED
A ENGLAND 100 HONEYWELL PROFIMATICS LIMITED
A ENGLAND 100 HONEYWELL PENSION TRUSTEES LIMITED
I ENGLAND 100 HONEYWELL I.S. LIMITED
A ENGLAND 100 HONEYWELL PCS LIMITED
A ENGLAND 100 COMFORT COOLING LIMITED
ENGLAND 100 FIRST MOVE FACILITIES MANAGEMENT LIMITED
A ARGENTINA 100 HONEYWELL S.A.I.C.
I ARGENTINA 100 CONTROLES HONEYWELL S.A.C.I.
A AUSTRALIA 100 HONEYWELL HOLDINGS PTY. LIMITED
A AUSTRALIA 100 BLENDAIR PTY. LIMITED
A AUSTRALIA 100 HONEYWELL LIMITED
A NEW ZEALAND 100 HONEYWELL HOLDINGS LIMITED
A NEW ZEALAND 100 HONEYWELL LIMITED
I NEW ZEALAND 100 HONEYWELL (WHOLESALE) LIMITED
A BELGIUM 100 HONEYWELL S.A.
A BELGIUM 100 HONEYWELL EUROPE S.A.
A BERMUDA 100 HONEYWELL ASSURANCE LIMITED
I BRAZIL 49 EMBRASID S.A.
A CANADA 100 HONEYWELL LIMITED -- HONEYWELL LIMITEE
A CANADA 100 SACDA, INC.
A CANADA 49 COMCEPT CANADA, INC.
A CHILE 100 HONEYWELL CHILE S.A.
A CHINA 55 SINOPEC HONEYWELL (TIANJIN) LIMITED
A CHINA 100 HONEYWELL (TIANJIN) LIMITED
A COLOMBIA 100 HONEYWELL COLOMBIA S.A.

</TABLE>

<PAGE>

HONEYWELL INC. AFFILIATES -- AS OF DECEMBER 31, 1995

<TABLE>
<CAPTION>
A %
I COUNTRY OWNED COMPANY*
- ---- ------------------------- ----- -------------------------------------------------------------------
<C> <S> <C> <C>
A DENMARK 100 HONEYWELL A/S
A DENMARK 100 HONEYWELL EJENDOMSVIRKE A/S
I DOMINICAN REPUBLIC 100 HONEYWELL DOMINICANA C. POR A.
A ECUADOR 100 HONEYWELL S.A.
A FINLAND 100 HONEYWELL OY
A FINLAND 100 KIINTEISTOHUOLTO MERATEK OY
I FINLAND 100 VM--KIINTEISTOHUOLTO OY
A FINLAND 80.1 HONEYWELL-AHLSTROM ADVANCED CONTROLS OY
A FINLAND 100 TULLINTORIN KIINTEISTPALVELU OY
A FRANCE 99.9 HONEYWELL S.A.
A FRANCE 99.9 DAVILOR TECHNOLOGIE S.A.
A FRANCE 99.9 HONEYWELL AEROSPACE S.A.
A FRANCE 99.9 AURIS S.A.
A FRANCE 99.9 APPLICATEL S.A.
A FRANCE 99.9 ALARME ET PROTECTION -- SOCOMEX S.A.
A FRANCE 99.9 ALARME ET PROTECTION S.A.
A FRANCE 99.9 HONEYWELL GERDS S.A.
A GERMANY 100 HONEYWELL HOLDING AG
A GERMANY 100 INGENIEURBETRIEB FUR AUTOMATISIERUNGSTECHNIK G.m.b.H.
A GERMANY 100 HONEYWELL REGELSYSTEME G.m.b.H.
A GERMANY 70 HONEYWELL IAL VERTRIEBS G.m.b.H.
A GERMANY 100 HONEYWELL PAPER MACHINE AUTOMATION CENTER G.m.b.H.
A GERMANY 100 HONEYWELL SAFETY MANAGEMENT SYSTEMS G.m.b.H.
A GERMANY 100 METALLWERKE NEHEIM GOEKE & CO.
A FRANCE 100 MNG FRANCE E.U.R.L.
A BULGARIA 100 HONEYWELL EOOD
A CZECH REPUBLIC 100 HONEYWELL spol.sr.o.
A HUNGARY 100 HONEYWELL SZABALYOZASTECHNIKAI KFT
A POLAND 100 HONEYWELL SP.Z.O.O.
A RUSSIA 100 HONEYWELL AVIATION CONTROL MOSCOW
A RUSSIA 100 HONEYWELL HOME AND BUILDING CONTROL
A GERMANY 100 HONEYWELL AG
A GERMANY 100 HONEYWELL UNTERSTUTZUNGSKASSE G.m.b.H.
A GERMANY 100 HONEYWELL BRAUKMANN UNTERSTUTZUNGSKASSE G.m.b.H.
A GERMANY 100 CENTRA-BUERKLE G.m.b.H.
A SWITZERLAND 100 HONEYWELL CENTRABUERKLE AG
A GERMANY 100 B&S KAELTE-WAERME KLIMA G.m.b.H. -- GARCHING
A GERMANY 100 ERG BETRIEBSGESELLSCHAFT m.b.H.
A AUSTRIA 100 HONEYWELL AUSTRIA Ges.m.b.H.
I AUSTRIA 100 PAPIERMASCHINEN HANDELSGESELLSCHAFT m.b.H. & CO., KG
A RUSSIA 70 STERCH CONTROLS
A UKRAINE 100 HONEYWELL LIMITED
A HONG KONG 100 HONEYWELL LIMITED
A INDIA 100 HONEYWELL INDIA SOFTWARE OPERATION PTE. LTD.
A INDIA 39.5 TATA HONEYWELL LIMITED
I INDIA 40 HONEYWELL INDIA LIMITED
A ITALY 100 HONEYWELL S.p.A.
A ITALY 100 UNIVERSAL GAS VALVES S.r.l.
A ITALY 100 STRUMENTECNICA S.r.l.
A ITALY 100 TECNOREG S.r.l.
A ITALY 25 SINTED S.p.A.
A ITALY 40 SPACE CONTROLS ALENIA-HONEYWELL S.p.A.
A PORTUGAL 70 HONEYWELL PORTUGAL AUTOMACAO E CONTROLE LDA.
[Also, HONEYWELL S.A. (Spain) owns 30%]
I JAPAN 50 NEC HONEYWELL SPACE SYSTEMS LTD.
A JAPAN 24.2 YAMATAKE-HONEYWELL CO., LTD.
A JAPAN 71.9 YAMATAKE & CO., LTD
A JAPAN 50 TAISHIN CO., LTD.
A JAPAN 100 YAMATAKE KEISO CO., LTD.
A JAPAN 60 YAMATAKE ENGINEERING CO., LTD.
A JAPAN 100 YAMATAKE CONTROL PRODUCTS CO., LTD.
A JAPAN 100 YAMATAKE TECHNO-SYSTEMS CO., LTD.
A CHINA 100 DALIAN YAMATAKE CONTROL INSTRUMENTS CO., LTD.
A CHINA 60 SHANGHAI YAMATAKE-CHUANYI BUILDING AUTOMATION CO., LTD.
A CHINA 52.9 YAMATAKE-SIC CONTROL SYSTEMS CO., LTD.

</TABLE>

<PAGE>
HONEYWELL INC. AFFILIATES -- AS OF DECEMBER 31, 1995

<TABLE>
<CAPTION>
A %
I COUNTRY OWNED COMPANY*
- ---- ------------------------- ----- -------------------------------------------------------------------
<C> <S> <C> <C>
A KOREA 40 LG-HONEYWELL COMPANY, LTD.
(Also, YAMATAKE-HONEYWELL CO., LTD. owns 10%)
A MALAYSIA 100 HONEYWELL AUTOMATION AND CONTROLS SDN. BHD.
A MALAYSIA 100 HONEYWELL ENGINEERING SDN. BHD.
A MALAYSIA 30 BERKAT HONEYWELL SDN. BHD.
A MEXICO 100 HONEYWELL S.A. DE C.V.
A MEXICO 100 HONEYWELL OPTOELECTRONICA, S.A. DE C.V.
A MEXICO 100 MEXHON S.A. DE C.V.
A MEXICO 100 HONEYWELL MANUFACTURAS DE CHIHUAHUA, S.A. DE C.V.
A NETHERLANDS ANTILLES 100 HONEYWELL CAPITAL N.V.
A NETHERLANDS 100 HONEYWELL FAR EAST B.V.
A NETHERLANDS 100 HONEYWELL MIDDLE EAST B.V.
A KUWAIT 40 HONEYWELL KUWAIT K.S.C.
A EGYPT 98 HONEYWELL (EGYPT)
(Also, HONEYWELL S.p.A. owns 2%)
A OMAN 60 HONEYWELL & CO. OMAN L.L.C.
A TURKEY 80 HONEYWELL OTOMASYON VE KONTROL SISTEMLERI SAN.
VE TIC.A.S.
A SWITZERLAND 100 HONEYWELL-LUCIFER S.A.
A GERMANY 100 HONEYWELL EUROPE HOLDING G.m.b.H.
A NETHERLANDS 100 HONEYWELL EUROPEAN DISTRIBUTION CENTER B.V.
A NETHERLANDS 100 SKINNER EUROPA B.V.
A NETHERLANDS 92.6 HONEYWELL B.V.
(Other 7.4% owned by SKINNER EUROPA B.V.)
A NETHERLANDS 100 HONEYWELL PROFIMATICS B.V.
A NETHERLANDS 100 GASMODUL B.V.
A NETHERLANDS 50 TURNKIEK PROCESS CONTROL B.V.
A NETHERLANDS 50 CARA C'AIR B.V.
A NETHERLANDS 100 HONEYWELL SAFETY MANAGEMENT SYSTEMS B.V.
A SINGAPORE 100 HONEYWELL SAFETY MANAGEMENT SYSTEMS PTE. LTD.
A GERMANY 100 PROFIMATICS EUROPE G.m.b.H.
A NETHERLANDS 100 HONEYWELL FOREIGN SALES CORPORATION B.V.
A NETHERLANDS 100 HONEYWELL FINANCE B.V.
A NORWAY 100 HONEYWELL A/S
A NORWAY 100 HONEYWELL MILJOPARTNER A/S
A NORWAY 100 HONEYWELL KOLBERG SERVICE A/S
A NORWAY 100 FLEBU BERGEN A/S
A NORWAY 40 NORD VENTILASJON A/S
A PANAMA 100 HONEYWELL PROFIMATICS LATINOAMERICANA S.A.
VENEZUELA 100 HONEYWELL PROFIMATICS C.A.
A SAUDI ARABIA 50 HONEYWELL TURKI-ARABIA LTD.
A SINGAPORE 100 HONEYWELL PRIVATE LIMITED
A SINGAPORE 100 HONEYWELL AEROSPACE PTE. LTD.
I SINGAPORE 100 HONEYWELL COMPUTERS PRIVATE LIMITED
I SINGAPORE 100 HONEYWELL-SYNERTEK PTE. LTD.
A SPAIN 100 HONEYWELL S.A.
A SPAIN 100 MANTIMIENTO Y CONTROL S.A.
A SWEDEN 100 HONEYWELL AB
A SWEDEN 100 INUCONTROL AB
A SWITZERLAND 100 HONEYWELL AG
A TAIWAN 100 HONEYWELL TAIWAN LIMITED
A THAILAND 100 HONEYWELL SYSTEMS (THAILAND) LIMITED
A VENEZUELA 100 HONEYWELL C.A.
I VENEZUELA 100 SERVICIOS HONEYWELL C.A.
A PANAMA 100 HONEYWELL PANAMA, S.A.

</TABLE>

NOTE: A = ACTIVE
I = INACTIVE

* SUBSIDIARIES OF HONEYWELL INC.s AFFILIATES OR SUBSIDIARIES ARE
INDICATED BY THE INDENTATION OF THE NAME BELOW THE NAME OF THE
OWNING COMPANY: e.g., HONEYWELL & CO. OMAN L.L.C. IS 60% OWNED BY
HONEYWELL MIDDLE EAST B.V., WHICH IS 100% OWNED BY HONEYWELL
CAPITAL N.V., WHICH IS 100% OWNED BY HONEYWELL INC.

<PAGE>
EXHIBIT (23)

INDEPENDENT AUDITORS CONSENT

We consent to the incorporation by reference in Registration Statements Nos.
2-64351, 2-98660, 33-29442, 33-44282, 33-44283, 33-44284, 33-49819, 33-59355,
33-59357 and 33-59359 on Form S-8, and Nos. 33-62300 and 33-57135 on Form S-3,
of our report dated February 13, 1996 (February 29, 1996 and March 1, 1996 as to
certain information included in Note 22 and March 15, 1996 as to certain
information included in Note 24), appearing in this Annual Report on Form 10-K
of Honeywell Inc. for the year ended December 31, 1995.

Deloitte & Touche LLP
Minneapolis, Minnesota
March 25, 1996

<PAGE>

POWER OF ATTORNEY

KNOW ALL BY THESE PRESENTS, that the undersigned director of HONEYWELL
INC., a Delaware corporation, constitutes and appoints SIGURD UELAND, JR. and
WILLIAM M. HJERPE, each of them with full power to act without the other, as
true and lawful attorneys-in-fact, for him in his name, place and stead in
any and all capacities to sign the Form 10-K Annual Report to be filed
pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 as
amended for the fiscal year ended December 31, 1995, with full power to file
such report, with all amendments and exhibits thereto and other documents in
connection therewith.

I certify that I have read a draft of such Form 10-K Annual Report for
fiscal year ended December 31, 1995, and am aware of the contents thereof.

I hereby grant to said attorneys-in-fact, and each of them, full power and
authority to do and perform any and all acts necessary to be done, hereby
ratifying and confirming all that said attorneys-in-fact, or either of them,
may lawfully do or cause to be done pursuant hereto.

IN WITNESS WHEREOF, the undersigned has hereunto set his hand as of the
20th day of February, 1996.

/s/ M. R. Bonsignore
---------------------------------------------
M. R. Bonsignore
Chairman of the Board and
Chief Executive Officer,
and Director

<PAGE>

POWER OF ATTORNEY

KNOW ALL BY THESE PRESENTS, that the undersigned officer of HONEYWELL
INC., a Delaware corporation, constitutes and appoints SIGURD UELAND, JR. as
true and lawful attorney-in-fact, for him in his name, place and stead in any
and all capacities to sign the Form 10-K Annual Report to be filed pursuant
to Section 13 or 15(d) of the Securities Exchange Act of 1934 as amended for
the fiscal year ended December 31, 1995, with full power to file such report,
with all amendments and exhibits thereto and other documents in connection
therewith.

I certify that I have read a draft of such Form 10-K Annual Report for
fiscal year ended December 31, 1995, and am aware of the contents thereof.

I hereby grant to said attorney-in-fact full power and authority to do and
perform any and all acts necessary to be done, hereby ratifying and
confirming all that said attorney-in-fact may lawfully do or cause to be done
pursuant hereto.

IN WITNESS WHEREOF, the undersigned has hereunto set his hand as of the
20th day of February, 1996.

/s/ W. M. Hjerpe
---------------------------------------------
W. M. Hjerpe
Vice President
and Chief Financial Officer

<PAGE>

POWER OF ATTORNEY

I certify that I have read a draft of such Form 10-K Annual Report for
fiscal year ended December 31, 1995, and am aware of the contents thereof.

IN WITNESS WHEREOF, the undersigned has hereunto set his hand as of the
20th day of February, 1996.

/s/ P. M. Palazzari
---------------------------------------------
P. M. Palazzari
Vice President and Controller

<PAGE>

POWER OF ATTORNEY

I certify that I have read a draft of such Form 10-K Annual Report for
fiscal year ended December 31, 1995, and am aware of the contents thereof.

IN WITNESS WHEREOF, the undersigned has hereunto set his hand as of the
20th day of February, 1996.

/s/ A. J. Baciocco, Jr.
---------------------------------------------
A. J. Baciocco, Jr.
Director

<PAGE>

POWER OF ATTORNEY

KNOW ALL BY THESE PRESENTS, that the undersigned director of HONEYWELL
INC., a Delaware corporation, constitutes and appoints SIGURD UELAND, JR. and
WILLIAM M. HJERPE, each of them with full power to act without the other, as
true and lawful attorneys-in-fact, for her in her name, place and stead in
any and all capacities to sign the Form 10-K Annual Report to be filed
pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 as
amended for the fiscal year ended December 31, 1995, with full power to file
such report, with all amendments and exhibits thereto and other documents in
connection therewith.

I certify that I have read a draft of such Form 10-K Annual Report for
fiscal year ended December 31, 1995, and am aware of the contents thereof.

IN WITNESS WHEREOF, the undersigned has hereunto set her hand as of the
20th day of February, 1996.

/s/ E. E. Bailey
---------------------------------------------
E. E. Bailey
Director

<PAGE>

POWER OF ATTORNEY

I certify that I have read a draft of such Form 10-K Annual Report for
fiscal year ended December 31, 1995, and am aware of the contents thereof.

IN WITNESS WHEREOF, the undersigned has hereunto set his hand as of the
20th day of February, 1996.

/s/ E. H. Clark, Jr.
---------------------------------------------
E. H. Clark, Jr.
Director

<PAGE>

POWER OF ATTORNEY

I certify that I have read a draft of such Form 10-K Annual Report for
fiscal year ended December 31, 1995, and am aware of the contents thereof.

IN WITNESS WHEREOF, the undersigned has hereunto set his hand as of the
20th day of February, 1996.

/s/ W. H. Donaldson
---------------------------------------------
W. H. Donaldson
Director

<PAGE>

POWER OF ATTORNEY

I certify that I have read a draft of such Form 10-K Annual Report for
fiscal year ended December 31, 1995, and am aware of the contents thereof.

IN WITNESS WHEREOF, the undersigned has hereunto set his hand as of the
20th day of February, 1996.

/s/ R. D. Fullerton
---------------------------------------------
R. D. Fullerton
Director

<PAGE>

POWER OF ATTORNEY

KNOW ALL BY THESE PRESENTS, that the undersigned director of HONEYWELL
INC., a Delaware corporation, constitutes and appoints SIGURD UELAND, JR. and
WILLIAM M. HJERPE, each of them with full power to act without the other, as
true and lawful attorneys-in-fact, for her in her name, place and stead in
any and all capacities to sign the Form 10-K Annual Report to be filed
pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 as
amended for the fiscal year ended December 31, 1995, with full power to file
such report, with all amendments and exhibits thereto and other documents in
connection therewith.

I certify that I have read a draft of such Form 10-K Annual Report for
fiscal year ended December 31, 1995, and am aware of the contents thereof.

IN WITNESS WHEREOF, the undersigned has hereunto set her hand as of the
20th day of February, 1996.

/s/ C. M. Hapka
---------------------------------------------
C. M. Hapka
Director

<PAGE>

POWER OF ATTORNEY

I certify that I have read a draft of such Form 10-K Annual Report for
fiscal year ended December 31, 1995, and am aware of the contents thereof.

IN WITNESS WHEREOF, the undersigned has hereunto set his hand as of the
20th day of February, 1996.

/s/ J. J. Howard
---------------------------------------------
J. J. Howard
Director

<PAGE>

POWER OF ATTORNEY

I certify that I have read a draft of such Form 10-K Annual Report for
fiscal year ended December 31, 1995, and am aware of the contents thereof.

IN WITNESS WHEREOF, the undersigned has hereunto set his hand as of the
20th day of February, 1996.

/s/ B. Karatz
---------------------------------------------
B. Karatz
Director

<PAGE>

POWER OF ATTORNEY

I certify that I have read a draft of such Form 10-K Annual Report for
fiscal year ended December 31, 1995, and am aware of the contents thereof.

IN WITNESS WHEREOF, the undersigned has hereunto set his hand as of the
20th day of February, 1996.

/s/ D. L. Moore
---------------------------------------------
D. L. Moore
President

<PAGE>

POWER OF ATTORNEY

I certify that I have read a draft of such Form 10-K Annual Report for
fiscal year ended December 31, 1995, and am aware of the contents thereof.

IN WITNESS WHEREOF, the undersigned has hereunto set his hand as of the
20th day of February, 1996.

/s/ A. B. Rand
---------------------------------------------
A. B. Rand
Director

<PAGE>

POWER OF ATTORNEY

I certify that I have read a draft of such Form 10-K Annual Report for
fiscal year ended December 31, 1995, and am aware of the contents thereof.

IN WITNESS WHEREOF, the undersigned has hereunto set his hand as of the
20th day of February, 1996.

/s/ S. G. Rothmeier
---------------------------------------------
S. G. Rothmeier
Director

<PAGE>

POWER OF ATTORNEY

I certify that I have read a draft of such Form 10-K Annual Report for
fiscal year ended December 31, 1995, and am aware of the contents thereof.

IN WITNESS WHEREOF, the undersigned has hereunto set his hand as of the
20th day of February, 1996.

/s/ M. W. Wright
---------------------------------------------
M. W. Wright
Director

<PAGE>
<ARTICLE> 5
<MULTIPLIER> 1,000,000

<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-START> JAN-01-1995
<PERIOD-END> DEC-31-1995
<CASH> 292
<SECURITIES> 9
<RECEIVABLES> 1,512
<ALLOWANCES> 35
<INVENTORY> 794
<CURRENT-ASSETS> 2,767
<PP&E> 2,857
<DEPRECIATION> 1,758
<TOTAL-ASSETS> 5,060
<CURRENT-LIABILITIES> 2,023
<BONDS> 481
0
0
<COMMON> 282
<OTHER-SE> 1,758
<TOTAL-LIABILITY-AND-EQUITY> 5,060
<SALES> 6,731
<TOTAL-REVENUES> 6,731
<CGS> 4,584
<TOTAL-COSTS> 4,584
<OTHER-EXPENSES> 323
<LOSS-PROVISION> 10
<INTEREST-EXPENSE> 83
<INCOME-PRETAX> 506
<INCOME-TAX> 172
<INCOME-CONTINUING> 334
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 334
<EPS-PRIMARY> 2.62
<EPS-DILUTED> 2.58

</TABLE>