<PAGE>
Section 240.14a-101 Schedule 14A.
Information required in proxy statement.
Schedule 14A Information
Proxy Statement Pursuant to Section 14(a) of the Securities
Exchange Act of 1934
(Amendment No. )
Filed by the Registrant [X]
Filed by a party other than the Registrant [ ]
Check the appropriate box:
[ ] Preliminary Proxy Statement
[ ] Confidential, for Use of the Commission Only (as permitted
by Rule 14a-6(e)(2))
[X] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to Section 240.14a-11(c) or Section
240.14a-12
HONEYWELL INC,
.................................................................
(Name of Registrant as Specified In Its Charter)
.................................................................
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
[X] No fee required
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(1)
and 0-11
(1) Title of each class of securities to which transaction
applies:
............................................................
(2) Aggregate number of securities to which transaction
applies:
.......................................................
(3) Per unit price or other underlying value of transaction
computed pursuant to Exchange Act Rule 0-11 (set forth the amount
on which the filing fee is calculated and state how it was
determined):
.......................................................
(4) Proposed maximum aggregate value of transaction:
.......................................................
(5) Total fee paid:
.......................................................
[ ] Fee paid previously with preliminary materials.
[ ] Check box if any part of the fee is offset as provided by
Exchange Act Rule 0-11(a)(2) and identify the filing for
which the offsetting fee was paid previously. Identify the
previous filing by registration statement number, or the
Form or Schedule and the date of its filing.
(1) Amount Previously Paid:
.......................................................
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.......................................................
(3) Filing Party:
.......................................................
(4) Date Filed:
.......................................................
<PAGE>
[ALLIEDSIGNAL LOGO] [HONEYWELL LOGO]
MERGER PROPOSED -- YOUR VOTE IS VERY IMPORTANT
The boards of directors of AlliedSignal Inc. and Honeywell Inc. have
approved a merger agreement that provides for the combination of our two
companies. We believe this combination will create a leading global technology
company that will have significant financial strength, customer focus,
technological leadership, 'Six Sigma' quality process discipline and reduced
exposure to economic cycles. In connection with the merger, AlliedSignal will be
renamed Honeywell International Inc. Its headquarters will remain in Morris
Township, New Jersey.
If we complete the merger, Honeywell shareowners will receive, for each
share of Honeywell common stock, 1.875 shares of common stock of the combined
company. We estimate that the combined company will issue approximately 240
million shares to Honeywell shareowners in the merger. Excluding employee
options and similar employee awards, these shares will represent in total
approximately 30% of the combined company's outstanding shares of common stock
after the merger. AlliedSignal shares held by AlliedSignal shareowners before
the merger will continue to remain outstanding after the merger and will
represent in total approximately 70% of the combined company's outstanding
shares.
The shares of the combined company will be listed on the New York, Chicago
and Pacific stock exchanges under the symbol 'HON' and will also be listed on
the London stock exchange.
We are asking AlliedSignal shareowners to approve the merger, including the
related issuance of shares of common stock to Honeywell shareowners, and to
approve an amendment to AlliedSignal's certificate of incorporation to increase
the number of shares of common and preferred stock the combined company will be
authorized to issue after the merger is completed.
We are asking Honeywell shareowners to approve the merger agreement and the
merger.
We cannot complete the merger unless shareowners of both companies approve
it. Approval of the amendment of AlliedSignal's certificate of incorporation is
not a condition to completing the merger.
We have each scheduled a special meeting of our respective shareowners to
vote on these important matters.
The dates, times and places of the meetings are:
For ALLIEDSIGNAL shareowners:
September 1, 1999,
10:00 a.m., local time
AlliedSignal Inc.
101 Columbia Road
Morris Township, New Jersey
For HONEYWELL shareowners:
September 1, 1999,
9:00 a.m., local time
Honeywell Inc.
2701 Fourth Avenue South
Minneapolis, Minnesota
This document gives you detailed information about the special meetings and
the proposed transactions. We encourage you to read this document carefully. IN
PARTICULAR, YOU SHOULD READ THE 'RISK FACTORS' SECTION BEGINNING ON PAGE 13 FOR
A DESCRIPTION OF VARIOUS RISKS YOU SHOULD CONSIDER IN EVALUATING THE PROPOSED
TRANSACTION.
We are very enthusiastic about this merger and the strength and
capabilities we expect from the combined company. We join all the other members
of the two companies' boards of directors in recommending that you vote in favor
of the merger.
Very truly yours,
<TABLE>
<S> <C>
/s/ Larry Bossidy /s/ MR Bonsignore
Lawrence A. Bossidy Michael R. Bonsignore
Chairman of the Board and Chairman of the Board and
Chief Executive Officer Chief Executive Officer
AlliedSignal Inc. Honeywell Inc.
</TABLE>
- -------------------------------------------------------------------------------
NEITHER THE SEC NOR ANY STATE SECURITIES COMMISSION HAS APPROVED THE SECURITIES
TO BE ISSUED UNDER THIS JOINT PROXY STATEMENT/PROSPECTUS OR DETERMINED IF THIS
JOINT PROXY STATEMENT/PROSPECTUS IS ACCURATE OR ADEQUATE. ANY REPRESENTATION TO
THE CONTRARY IS A CRIMINAL OFFENSE.
- -------------------------------------------------------------------------------
JOINT PROXY STATEMENT/PROSPECTUS, DATED JULY 23, 1999, AND FIRST MAILED TO
SHAREOWNERS ON JULY 29, 1999.
<PAGE>
[ALLIEDSIGNAL LOGO]
NOTICE OF A SPECIAL MEETING OF SHAREOWNERS
To the Shareowners of AlliedSignal Inc.:
A Special Meeting of Shareowners of AlliedSignal Inc. will be held on
Wednesday, September 1, 1999 at 10:00 a.m., local time, at AlliedSignal's
headquarters, 101 Columbia Road, Morris Township, New Jersey. At the special
meeting, shareowners will consider and vote on the following matters described
in the accompanying joint proxy statement/prospectus:
1. A proposed merger to be implemented pursuant to an Agreement and Plan of
Merger, dated as of June 4, 1999, among AlliedSignal Inc., Honeywell
Inc. and a subsidiary of AlliedSignal, including the related issuance of
shares of common stock;
2. A proposal to amend AlliedSignal's certificate of incorporation to
increase the number of authorized shares of common stock from one
billion to two billion shares, to increase the number of authorized
shares of preferred stock from 20 million to 40 million shares and to
eliminate several series of preferred stock not currently outstanding;
and
will transact any other business that may properly come before the special
meeting.
The board of directors has determined that owners of record of
AlliedSignal's common stock at the close of business on July 22, 1999 are
entitled to notice of and to vote at the special meeting.
By Order of the Board of Directors,
/s/ Peter Kreindler
Peter M. Kreindler
Senior Vice President,
General Counsel and Secretary
AlliedSignal Inc.
101 Columbia Road
Morris Township, New Jersey 07962
July 29, 1999
YOUR VOTE IS IMPORTANT
To be sure your shares are represented at the meeting,
please vote by telephone or complete, date, sign and return your proxy card
in the enclosed postage-paid envelope as soon as possible.
You may vote in person at the meeting even if you
vote by telephone or send in your proxy card.
<PAGE>
[HONEYWELL LOGO]
NOTICE OF A SPECIAL MEETING OF SHAREOWNERS
To the Shareowners of Honeywell Inc.:
A Special Meeting of Shareowners of Honeywell Inc. will be held on
Wednesday, September 1, 1999 at 9:00 a.m., local time, at Honeywell's
headquarters, 2701 Fourth Avenue South, Minneapolis, Minnesota to consider and
vote on the following matters described in the accompanying joint proxy
statement/prospectus:
The approval and adoption of an Agreement and Plan of Merger, dated as of
June 4, 1999, among AlliedSignal Inc., Honeywell Inc. and a subsidiary of
AlliedSignal, and the merger pursuant to this agreement; and
to transact any other business that may properly come before the special
meeting.
The board of directors has determined that owners of record of Honeywell's
common stock at the close of business on July 22, 1999 are entitled to notice of
and to vote at the special meeting.
By Order of the Board of Directors,
/s/ Kathleen M. Gibson
Kathleen M. Gibson
Vice President and Corporate Secretary
July 29, 1999
YOUR VOTE IS IMPORTANT
To be sure your shares are represented at the meeting,
please vote by telephone or complete, date, sign and return your proxy card
in the enclosed postage-paid envelope as soon as possible.
You may vote in person at the meeting even if you
vote by telephone or send in your proxy card.
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
QUESTIONS AND ANSWERS ABOUT THE
MERGER.............................. 1
SUMMARY............................... 2
The Companies.................... 2
Reasons for the Merger........... 2
Merger Recommendations to
Shareowners.................... 2
Interests of Officers and
Directors of Honeywell in the
Merger......................... 2
Opinions of Financial Advisors... 3
The Terms of the Merger
Agreement...................... 3
Name Change...................... 3
What Shareowners Will Receive.... 3
Comparative Per Share Market
Price Information.............. 3
Record Date for Shareowners to
Vote at the Special Meeting.... 4
Vote of Shareowners Required..... 4
Board of Directors of the
Combined Company and Related
Matters After the Merger....... 4
Employment Agreement with Michael
R. Bonsignore.................. 4
Amendment to AlliedSignal
By-Laws........................ 4
Amendment to AlliedSignal's
Certificate of Incorporation... 4
Accounting Treatment............. 5
Tax Consequences of the Merger... 5
Conditions to the Completion of
the Merger..................... 5
Regulatory Approvals............. 5
Termination of the Merger
Agreement...................... 6
Termination Fees and Expense
Reimbursement.................. 6
Stock Option Agreements.......... 7
No Appraisal Rights.............. 7
SELECTED HISTORICAL AND PRO FORMA
FINANCIAL DATA...................... 8
Selected Historical Financial
Data of AlliedSignal........... 9
Selected Historical Financial
Data of Honeywell.............. 10
Selected Unaudited Pro Forma
Combined Financial Data........ 11
Comparative Per Share Data....... 12
RISK FACTORS.......................... 13
We may not achieve the cost
savings and sales enhancements
we expect to result from the
integration of AlliedSignal and
Honeywell...................... 13
Honeywell shareowners will
receive consideration with a
lower market value if the
market price of AlliedSignal
common stock declines.......... 13
The combined company may be
required to make significant
payments when Honeywell's
current litigation with Litton
Systems, Inc. is resolved...... 13
A large decline in the aerospace
market could have a negative
impact on the combined
company's revenues and results
of operations, given that a
significant percentage of the
sales of the combined company
are to aerospace customers..... 14
We may become subject to year
2000 litigation as a result of
older Honeywell products....... 14
CAUTIONARY STATEMENT CONCERNING
FORWARD-LOOKING STATEMENTS.......... 15
THE MERGER TRANSACTION................ 16
AlliedSignal Proposals........... 16
Honeywell Proposal............... 16
Background of the Merger......... 16
Our Reasons for the Merger....... 20
Factors Considered by, and
Recommendation of, the Board of
Directors of AlliedSignal...... 22
Factors Considered by, and
Recommendation of, the Board of
Directors of Honeywell......... 25
Amendment of AlliedSignal's
By-laws........................ 27
Accounting Treatment............. 27
Material Federal Income Tax
Consequences................... 28
Regulatory Matters............... 29
Appraisal Rights................. 30
COMPARATIVE PER SHARE MARKET PRICE AND
DIVIDEND INFORMATION................ 31
INFORMATION ABOUT OUR COMPANIES....... 32
Information About AlliedSignal... 32
Information About Honeywell...... 33
UNAUDITED PRO FORMA COMBINED CONDENSED
FINANCIAL INFORMATION............... 34
</TABLE>
i
<PAGE>
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
INTERESTS OF CERTAIN PERSONS IN THE
MERGER.............................. 43
New Employment Agreement......... 43
Existing Termination Agreements
with Honeywell Executive
Officers....................... 44
Indemnification; Directors' and
Officers' Insurance............ 45
Incentive Compensation and Stock
Ownership Plans................ 45
OPINIONS OF FINANCIAL ADVISORS........ 46
Opinion of Financial Advisor to
AlliedSignal................... 46
Opinion of Financial Advisor to
Honeywell...................... 51
MATERIAL TERMS OF THE MERGER
AGREEMENT........................... 57
Structure of the Merger.......... 57
Timing of Closing and Effective
Time........................... 57
Merger Consideration............. 57
Cancellation of Shares........... 57
Procedures for Surrender of
Certificates; Fractional
Shares......................... 57
Treatment of Honeywell Stock
Options........................ 58
Name Change; Company
Headquarters; Board of
Directors and Related
Matters........................ 58
Covenants........................ 59
Representations and Warranties... 62
Additional Agreements............ 63
Conditions to the Completion of
the Merger..................... 63
Termination of the Merger
Agreement...................... 64
Amendments and Waiver............ 66
MATERIAL TERMS OF THE STOCK OPTION
AGREEMENTS.......................... 67
The Stock Options................ 67
Exercise of the Stock Options.... 67
Cash Election.................... 67
Effect of Stock Option
Agreements..................... 68
Standstill Provisions............ 68
DIRECTORS OF THE COMBINED COMPANY..... 69
MANAGEMENT OF THE COMBINED COMPANY.... 76
Chairman and Chief Executive
Officer........................ 76
Chief Operating Officers and
Executive Vice Presidents...... 76
Executive Office................. 76
Integration Team................. 76
Biographical Information......... 76
THE SPECIAL MEETINGS.................. 78
Date, Times and Places........... 78
Matters to be Considered at the
Special Meetings............... 78
Record Date; Stock Entitled to
Vote; Quorum................... 78
Votes Required................... 79
Share Ownership of Management.... 79
Shares Held in Street Name;
Voting of Proxies.............. 80
FEDERAL SECURITIES LAWS CONSEQUENCES;
STOCK TRANSFER RESTRICTIONS......... 82
COMPARISON OF SHAREOWNER RIGHTS....... 83
DESCRIPTION OF ALLIEDSIGNAL CAPITAL
STOCK............................... 87
Authorized Capital Stock......... 87
AlliedSignal Common Stock........ 87
AlliedSignal Preferred Stock..... 88
Possible Anti-Takeover
Provisions..................... 88
Proposed Amendment to
AlliedSignal's Certificate of
Incorporation.................. 89
WHERE YOU CAN FIND MORE INFORMATION... 90
EXPERTS............................... 91
LEGAL MATTERS......................... 92
SUBMISSION OF SHAREOWNER PROPOSALS.... 92
AlliedSignal or the Combined
Company........................ 92
Honeywell........................ 93
</TABLE>
ANNEXES
<TABLE>
<S> <C> <C>
ANNEX A Agreement and Plan of Merger................................ A-1
ANNEX B Honeywell Stock Option Agreement............................ B-1
ANNEX C AlliedSignal Stock Option Agreement......................... C-1
ANNEX D Opinion of J.P. Morgan Securities Inc. ..................... D-1
ANNEX E Opinion of Bear, Stearns & Co. Inc. ........................ E-1
ANNEX F Form of Amendment to Certificate of Incorporation of
AlliedSignal Inc. .......................................... F-1
</TABLE>
ii
<PAGE>
THIS DOCUMENT INCORPORATES IMPORTANT BUSINESS AND FINANCIAL INFORMATION
ABOUT OUR COMPANIES FROM DOCUMENTS WE HAVE FILED WITH THE SEC THAT WE HAVE NOT
INCLUDED IN OR DELIVERED WITH THIS DOCUMENT. ALLIEDSIGNAL WILL PROVIDE YOU WITH
COPIES OF THIS INFORMATION RELATING TO ALLIEDSIGNAL, WITHOUT CHARGE, UPON
WRITTEN OR ORAL REQUEST TO:
ALLIEDSIGNAL INC.
101 COLUMBIA ROAD
P.O. BOX 2245
MORRIS TOWNSHIP, NEW JERSEY 07962-2245
ATTENTION: CORPORATE PUBLICATIONS
TELEPHONE NUMBER: (973) 455-5402
HONEYWELL WILL PROVIDE YOU WITH COPIES OF THIS INFORMATION RELATING TO
HONEYWELL, WITHOUT CHARGE, UPON WRITTEN OR ORAL REQUEST TO:
HONEYWELL INC.
2701 FOURTH AVENUE SOUTH
MINNEAPOLIS, MINNESOTA 55408
ATTENTION: OFFICE OF INVESTOR RELATIONS
TELEPHONE NUMBER: (612) 951-2122
IN ORDER TO RECEIVE TIMELY DELIVERY OF THE DOCUMENTS IN ADVANCE OF OUR
SPECIAL MEETINGS OF SHAREOWNERS, YOU SHOULD MAKE YOUR REQUEST NO LATER THAN
AUGUST 25, 1999.
iii
<PAGE>
QUESTIONS AND ANSWERS ABOUT THE MERGER
Q: When and where are the special meetings of shareowners?
A: Each company's special meeting will take place on September 1, 1999. The
location of each special meeting is indicated on page 78.
Q: What do I need to do now?
A: After you have carefully read this document, just indicate on your proxy
card how you want to vote. Complete, sign, date and mail the proxy card in the
enclosed return envelope as soon as possible. If you are a shareowner of record,
you may also vote your shares by telephone by following the instructions
accompanying your proxy card. The boards of directors of AlliedSignal and
Honeywell each recommend that its shareowners vote in favor of the merger.
AlliedSignal's board of directors also recommends that AlliedSignal shareowners
vote to approve the proposed amendment to its certificate of incorporation.
Approval of the amendment is not a condition to completing the merger.
Q: If my shares are held in 'street name' by my broker, will my broker vote my
shares for me?
A: If you do not provide your broker with instructions on how to vote your
shares held in 'street name', your broker will not be permitted to vote your
shares on the proposals presented at your special meeting. You should therefore
provide your broker with instructions as to how to vote your shares. Please
check the voting form used by your broker to see if you may vote by telephone.
Q: What do I do if I want to change my vote?
A: You may change your vote:
by sending a written notice to the corporate secretary of your company
prior to your special meeting stating that you would like to revoke your
proxy;
by completing, signing and dating another proxy card and returning it by
mail prior to your special meeting;
by telephone by following the instructions provided on your proxy card; or
by attending your special meeting and voting in person.
Q: Should I send in my stock certificates at this time?
A: No. After we complete the merger, we will send Honeywell shareowners written
instructions for exchanging their stock certificates. Stock certificates held by
AlliedSignal shareowners do not need to be exchanged even though the name of the
combined company will be changed to Honeywell International Inc.
Q: When do you expect to complete the merger?
A: We must first obtain the approvals of our shareowners at the special
meetings and the necessary regulatory clearances. We presently expect to
complete the merger in the fall of 1999. However, we cannot assure you when or
if the merger will occur.
Q: Where can I find more information about the companies, the special meetings
or the merger?
A: Both AlliedSignal and Honeywell file reports and other information with the
SEC. You may read and copy this information at the SEC's public reference
facilities. Please call the SEC at 1-800-SEC-0330 for information about these
facilities. This information is also available at the Internet site the SEC
maintains at http://www.sec.gov and at the offices of the New York Stock
Exchange, or you can request copies of these documents from us.
AlliedSignal and Honeywell shareowners may call 1-800-390-9338 for information
on the merger and the special meetings.
<PAGE>
SUMMARY
This summary highlights selected information from this joint proxy
statement/prospectus and may not contain all of the information that is
important to you. For a more complete description of the legal terms of the
merger, you should carefully read the rest of this document and the other
documents we refer to. See 'Where You Can Find More Information' on page 90. We
have included page references directing you to a more complete description of
each item presented in this summary.
THE COMPANIES (SEE PAGE 32)
ALLIEDSIGNAL INC.
101 Columbia Road
P.O. Box 4000
Morris Township, New Jersey 07962-2497
(973) 455-2000
website: http://www.alliedsignal.com
AlliedSignal is an advanced technology and manufacturing company serving
customers worldwide with aerospace products and services, automotive products,
chemicals, fibers, plastics and advanced materials. AlliedSignal is organized
into eleven strategic business units reporting results of operations and
financial condition in the following five segments: Aerospace Systems, Specialty
Chemicals & Electronic Solutions, Turbine Technologies, Performance Polymers and
Transportation Products.
HONEYWELL INC.
2701 Fourth Avenue South
Minneapolis, Minnesota 55408
(612) 951-1000
website: http://www.honeywell.com
Founded in 1885, Honeywell is one of the leading technology and controls
companies in the world, serving customers in homes, commercial buildings, the
industrial arena and space and aviation. Honeywell's home and building control
business is a global provider of comfortable, healthy, safe and energy-efficient
indoor environments, offering more than 3,500 products to both the consumer
market and the building industry. The industrial control business of Honeywell
is a worldwide leader in automation solutions from sensors to integrated
systems, serving industries such as hydrocarbon processing, chemicals and pulp
and paper. Honeywell's space and aviation control business is a leading supplier
of avionics systems and products for the commercial, military and space markets
with customers ranging from aircraft manufacturers and business aircraft
operators to prime space contractors and the U.S. government.
REASONS FOR THE MERGER (SEE PAGE 20)
We believe that the merger offers an excellent opportunity to create value
for the shareowners of AlliedSignal and Honeywell by creating a global
technology company with:
the opportunity to realize significant cost savings;
increased opportunities for growth, particularly through our complementary
aerospace businesses; and
reduced cyclicality and sustained earnings growth as a result of a diverse
business portfolio.
MERGER RECOMMENDATIONS TO SHAREOWNERS (SEE PAGES 22 AND 25)
To AlliedSignal shareowners:
The AlliedSignal board of directors believes that the merger is fair to you
and in your best interest and recommends that you vote FOR the merger, including
the related issuance of shares of common stock.
To Honeywell shareowners:
The Honeywell board of directors believes that the merger is advisable,
fair to you and in your best interest and recommends that you vote FOR the
approval and adoption of the merger agreement and the merger.
INTERESTS OF OFFICERS AND DIRECTORS OF HONEYWELL IN THE MERGER (SEE PAGE 43)
When Honeywell shareowners consider the Honeywell board of directors'
recommendation that Honeywell shareowners vote in favor of the merger, Honeywell
shareowners should be aware that a number of Honeywell officers and directors
may have interests in the merger that may be different from, or in addition to,
theirs.
2
<PAGE>
OPINIONS OF FINANCIAL ADVISORS (SEE PAGES 46 AND 51)
In deciding to approve the merger, each board of directors considered the
opinion of its financial advisor. AlliedSignal's board of directors received an
opinion from J.P. Morgan Securities Inc. that, as of the date the merger
agreement was entered into, the consideration to be paid by AlliedSignal in the
merger was fair from a financial point of view to AlliedSignal. Honeywell
received an opinion from Bear, Stearns & Co. Inc. that, as of the date the
merger agreement was entered into, the exchange ratio was fair from a financial
point of view to shareowners of Honeywell. These opinions are attached as
Annex D and Annex E to this joint proxy statement/prospectus. We encourage you
to review these opinions.
THE TERMS OF THE MERGER AGREEMENT (SEE PAGE 57)
We have attached the merger agreement as Annex A to this joint proxy
statement/prospectus. We encourage you to review the merger agreement as it
is the legal document that governs the merger.
NAME CHANGE (SEE PAGE 58)
In connection with the merger, AlliedSignal will change its name to
Honeywell International Inc.
WHAT SHAREOWNERS WILL RECEIVE (SEE PAGE 57)
Honeywell Shareowners
As a result of the merger, Honeywell shareowners will receive for each
share of Honeywell common stock 1.875 shares of common stock of the combined
company.
No fractional shares will be issued. Each Honeywell shareowner otherwise
entitled to receive a fractional share will receive a check in an amount,
rounded to the nearest one cent, equal to the average of the closing prices for
the shares of AlliedSignal common stock reported on the NYSE Composite
Transaction Reporting System over the ten trading days before the completion of
the merger multiplied by the fraction represented by that fractional share.
EXAMPLE:
If you currently own 500 shares of Honeywell common stock, after the
merger you will receive 937 shares of common stock of the combined company
(500 x 1.875 = 937.5) and a check for an amount equal to the average
closing price of the shares of AlliedSignal common stock reported on the
NYSE Composite Transaction Reporting System over the ten trading day
period before the completion of the merger multiplied by .50, rounded to
the nearest one cent.
On July 22, 1999 the closing price for AlliedSignal common stock on the
NYSE Composite Transaction Reporting System was $64.875. Applying the
1.875 exchange ratio to this closing price, a Honeywell shareowner would
be entitled to receive, for each share of Honeywell common stock, shares
of common stock of the combined company with a market value of
approximately $121.64. The market prices for the shares of AlliedSignal
and Honeywell common stock are likely to change between now and the date
the merger is completed. You are urged to obtain current price quotes for
the shares of AlliedSignal and Honeywell common stock.
AlliedSignal Shareowners
AlliedSignal shares held by AlliedSignal shareowners before the merger will
continue to remain outstanding after the merger and will represent an equal
number of shares of common stock of the combined company.
COMPARATIVE PER SHARE MARKET PRICE INFORMATION (SEE PAGE 31)
The shares of both AlliedSignal and Honeywell common stock are listed on
the New York Stock Exchange. On June 3, 1999, the last full trading day before
rumors of the merger appeared in the marketplace, the closing price for
AlliedSignal common stock reported on the NYSE Composite Transaction Reporting
System was $60.375 and the closing price for Honeywell common stock reported on
the NYSE Composite Transaction Reporting System was $95.875. On July 22, 1999,
AlliedSignal common stock closed at
3
<PAGE>
$64.875 and Honeywell common stock closed at $120.50.
RECORD DATE FOR SHAREOWNERS TO VOTE AT THE SPECIAL MEETING (SEE PAGE 78)
AlliedSignal
If you are an AlliedSignal shareowner, you may vote at your special meeting
if you owned shares of AlliedSignal common stock at the close of business on
July 22, 1999. As of the close of business on that day, 552,759,111 shares of
AlliedSignal common stock were outstanding.
Honeywell
If you are a Honeywell shareowner, you may vote at your special meeting if
you owned shares of Honeywell common stock at the close of business on July 22,
1999. As of the close of business on that day, 127,597,105 shares of Honeywell
common stock were outstanding.
VOTE OF SHAREOWNERS REQUIRED (SEE PAGE 79)
For AlliedSignal shareowners
Approval of the merger, including the related issuance of shares of common
stock, requires the affirmative vote of a majority of the votes cast on the
proposal, so long as the total number of votes cast in favor of and against the
proposal represents a majority of the shares of AlliedSignal common stock that
are outstanding on the AlliedSignal record date. AlliedSignal shareowners will
have one vote for each share of AlliedSignal common stock owned on the
AlliedSignal record date.
For Honeywell shareowners
Approval of the merger agreement requires the affirmative vote of a
majority of the outstanding shares of Honeywell common stock. Honeywell
shareowners will have one vote for each share of Honeywell common stock owned on
the Honeywell record date.
BOARD OF DIRECTORS OF THE COMBINED COMPANY AND RELATED MATTERS AFTER THE MERGER
(SEE PAGES 69 THROUGH 77)
Following the merger, the board of directors of the combined company will
consist of 15 members, nine of whom will be designated by AlliedSignal and six
of whom will be designated by Honeywell. Lawrence A. Bossidy, presently Chairman
of the Board and Chief Executive Officer of AlliedSignal, will remain as
Chairman of the Board of the combined company until April 1, 2000, or his
earlier retirement. Michael R. Bonsignore, presently Chairman of the Board and
Chief Executive Officer of Honeywell, will be the Chief Executive Officer of the
combined company as of the completion of the merger and has been elected to
become Chairman of the Board of the combined company effective upon Mr.
Bossidy's retirement.
EMPLOYMENT AGREEMENT WITH MICHAEL R. BONSIGNORE (SEE PAGE 43)
Upon the completion of the merger, Mr. Bonsignore will enter into a new
employment agreement with the combined company.
AMENDMENT TO ALLIEDSIGNAL'S BY-LAWS (SEE PAGE 27)
In accordance with the terms of the merger agreement, the board of
directors of AlliedSignal has approved an amendment to AlliedSignal's by-laws,
to be effective as of the completion of the merger. This amendment provides
that, until the second anniversary of completing the merger, a 75% supermajority
vote of the board of directors of the combined company will be required:
to remove Mr. Bonsignore as Chairman of the Board or Chief Executive
Officer of the combined company;
prior to the effective date of Mr. Bonsignore's election as Chairman of
the Board of the combined company, to reverse this election; and
without his concurrence, to change Mr. Bonsignore's duties and
responsibilities as provided in his employment agreement with the combined
company.
AMENDMENT TO ALLIEDSIGNAL'S CERTIFICATE OF INCORPORATION (SEE PAGE 89)
In addition to the vote on the merger, AlliedSignal's board of directors
has proposed, and requests that AlliedSignal shareowners approve, an amendment
to AlliedSignal's certificate of incorporation to:
4
<PAGE>
increase the number of authorized shares of common stock from one billion
to two billion shares;
increase the number of authorized shares of preferred stock from 20
million to 40 million shares; and
eliminate several series of preferred stock not currently outstanding.
We have attached the form of the proposed amendment as Annex F to this
joint proxy statement/prospectus and encourage you to review it.
Approval of the proposed amendment requires the affirmative vote of a
majority of the outstanding shares of AlliedSignal common stock.
The AlliedSignal board of directors believes that the proposed amendment to
AlliedSignal's certificate of incorporation is advisable and in your best
interest and recommends that you vote FOR the proposed amendment to
AlliedSignal's certificate of incorporation.
Approval of the proposed amendment is not a condition to completing the
merger.
ACCOUNTING TREATMENT (SEE PAGE 27)
We expect the merger to qualify as a pooling of interests, which means that
we will treat our companies as if they had always been combined for accounting
and financial reporting purposes.
TAX CONSEQUENCES OF THE MERGER (SEE PAGE 28)
Honeywell shareowners generally will not recognize any gain or loss on the
exchange of their Honeywell shares for shares of the combined company's common
stock, except for any gain or loss recognized in connection with cash received
for a fractional share of the combined company's common stock.
The federal income tax consequences described above may not apply to some
owners of Honeywell shares, including some types of owners specifically referred
to on page 28. Your tax consequences will depend upon your personal situation.
You should consult your tax advisor for a full understanding of the tax
consequences of the merger to you.
CONDITIONS TO THE COMPLETION OF THE MERGER (SEE PAGE 63)
Our respective obligations to complete the merger are subject to a number
of conditions. These include:
approval of the merger by the shareowners of AlliedSignal and Honeywell;
expiration or termination of the relevant waiting period under the
Hart-Scott-Rodino Antitrust Improvements Act;
receipt of all material regulatory approvals that are required to complete
the merger, including the approval of the European Commission;
our respective independent public accountants confirming that the merger
will qualify for pooling of interests accounting treatment; and
our respective attorneys having issued opinions that the merger will
qualify as a reorganization.
AlliedSignal's obligation to complete the merger is also conditioned on:
there being no legal proceeding existing in which a governmental agency is
seeking to require the combined company to divest assets or limit its
ability to conduct business to an extent that could reasonably be expected
to have a material adverse effect on the combined company; and
there being no law or court order in effect that would reasonably be
expected to have a material adverse effect on the combined company.
REGULATORY APPROVALS (SEE PAGE 29)
Under the Hart-Scott-Rodino Antitrust Improvements Act, we cannot complete
the merger until:
we have given certain information and materials to the Federal Trade
Commission and the Antitrust Division of the U.S. Department of Justice;
and
5
<PAGE>
a required waiting period has expired or been terminated.
We submitted pre-merger notification and report forms to the Federal Trade
Commission and the Department of Justice on June 25, 1999. Based on discussions
we have had with the Department of Justice, we anticipate receiving a request
from the Department of Justice for additional information regarding certain of
our companies' aerospace businesses. We cannot complete the merger until
20 days after we have substantially complied with the request, unless the
waiting period is terminated earlier. The Federal Trade Commission and the
Department of Justice have the authority to challenge the merger on antitrust
grounds by seeking a federal court order enjoining the transaction pending an
administrative hearing.
The merger is also subject to the approval of the European Commission under
the competition laws of the European Union. We made the required filings to
obtain this approval with the European Commission on July 15, 1999.
The merger may also be subject to regulatory review by U.S. state
governmental authorities and by regulatory authorities in other jurisdictions.
We are working to obtain the required regulatory approvals and consents.
However, we can give no assurance as to when or whether any of these approvals
and consents will be obtained or the terms and conditions that may be imposed,
such as divestitures of product lines.
TERMINATION OF THE MERGER AGREEMENT (SEE PAGE 64)
Either AlliedSignal or Honeywell may terminate the merger agreement if any
of the following occurs:
(1) we do not complete the merger by February 4, 2000; however, that date
becomes April 4, 2000 if the merger is not completed by February 4,
2000 only because we have not yet received all necessary regulatory
approvals;
(2) AlliedSignal or Honeywell shareowners do not approve the merger;
(3) a law or court order permanently prohibits the completion of the
merger; or
(4) the other company is in material breach of the representations or
warranties it made in the merger agreement or there is a material
breach by the other company of its obligations under the merger
agreement, in each case which is incapable of being cured.
In addition, AlliedSignal may terminate the merger agreement if the
Honeywell board of directors changes, in a manner adverse to AlliedSignal, its
recommendation of the merger. An adverse change would include the Honeywell
board of directors' withdrawing or qualifying its recommendation or changing its
recommendation to support another transaction. Honeywell may similarly terminate
the merger agreement if the AlliedSignal board of directors changes its
recommendation of the merger in a manner adverse to Honeywell.
Neither Honeywell nor AlliedSignal may terminate the merger agreement
because it receives a proposal for another transaction, without first presenting
the merger to a vote of its shareowners.
TERMINATION FEES AND EXPENSE REIMBURSEMENT (SEE PAGE 65)
Honeywell or AlliedSignal, as applicable, would be required to pay the
other company a termination fee of:
(1) $350 million, if the merger agreement is terminated because its board
of directors changes, in a manner adverse to the other company, its
recommendation of the merger;
(2) $200 million, if the merger agreement is terminated because (a) the
merger is not approved by its shareowners or (b) because it breaches
the merger agreement, and in either case, before the merger agreement
is terminated, it receives a proposal for another transaction. An
additional $150 million will be payable if, within nine months of the
termination of the merger
6
<PAGE>
agreement, it enters into an agreement for another transaction; or
(3) $350 million, if (a) the merger agreement is terminated because the
merger has not been completed by February 4, 2000, or April 4, 2000 if
the failure to complete the merger is only because of the failure to
obtain the necessary governmental approvals, (b) before the merger
agreement is terminated, it receives a proposal for another transaction
and (c) within nine months of termination it enters into another
transaction.
Honeywell or AlliedSignal, as applicable, would be required to reimburse
the other company for up to $20 million of the other company's transaction
expenses if the merger agreement is terminated because (a) its shareowners fail
to approve the merger or (b) it materially breaches its representations,
warranties or obligations under the merger agreement and, in either case, no
proposal for another transaction had been made to that company before
termination.
STOCK OPTION AGREEMENTS (SEE PAGE 67)
In connection with the merger agreement, AlliedSignal and Honeywell entered
into two stock option agreements under which Honeywell granted to AlliedSignal
an option to purchase approximately 19.9% of Honeywell's outstanding common
stock, at a price of $109.453 per share, and AlliedSignal granted to Honeywell
an option to purchase approximately 19.9% of AlliedSignal's outstanding common
stock, at a price of $58.375 per share. The option is exercisable under the same
circumstances in which Honeywell is required to pay to AlliedSignal or
AlliedSignal is required to pay to Honeywell, as applicable, the full $350
million termination fee as described above.
The stock option agreements limit the amount of profit a company is
permitted to receive as a result of payment of the termination fee and the
exercise of the option to $400 million in total. We have attached the stock
option agreements as Annexes B and C to this joint proxy statement/prospectus.
NO APPRAISAL RIGHTS (SEE PAGE 30)
The owners of shares of AlliedSignal and Honeywell common stock do not have
any right to an appraisal of the value of their shares in connection with the
merger.
7
<PAGE>
SELECTED HISTORICAL AND PRO FORMA FINANCIAL DATA
HOW WE PREPARED THE FINANCIAL STATEMENTS
We are providing the following information to aid you in your analysis of
the financial aspects of the merger. We derived this information from:
the audited financial statements of AlliedSignal for the years ended
December 31, 1994 through 1998;
the unaudited financial statements of AlliedSignal for the quarters ended
March 31, 1998 and 1999;
the audited financial statements of Honeywell for the years ended December
31, 1994 through 1998; and
the unaudited financial statements of Honeywell for the quarters ended
April 5, 1998 and April 4, 1999.
The following information is only a summary and you should read it together
with our historical financial statements and related notes contained in the
annual reports, quarterly reports and other information that we have filed with
the SEC and incorporated by reference. To obtain copies of these documents, see
'Where You Can Find More Information' on page 90.
POOLING OF INTERESTS ACCOUNTING TREATMENT
We expect that the merger will be accounted for as a pooling of interests.
This means that, for accounting and financial reporting purposes, we will treat
our companies as if they had always been combined. For a more detailed
description of pooling of interests accounting, see 'The Merger Transaction --
Accounting Treatment' on page 27.
We have presented unaudited pro forma combined condensed financial
information that reflects the pooling of interests method of accounting to give
you a better picture of what our businesses might have looked like had they been
combined since January 1, 1996. We prepared the pro forma combined condensed
statements of income and pro forma combined condensed balance sheet by adding or
combining the historical accounts of each company. The accounting policies of
AlliedSignal and Honeywell are substantially comparable. Consequently, we did
not make adjustments to the unaudited pro forma combined condensed financial
statements to conform the accounting policies of the combined companies. The
companies may have performed differently had they always been combined. You
should not rely on the unaudited pro forma combined condensed financial
information as being indicative of the historical results that we would have
achieved had our companies always been combined or the future results that the
combined company will experience after the merger. See 'Unaudited Pro Forma
Combined Condensed Financial Information' on page 34.
MERGER-RELATED EXPENSES
We estimate that merger-related fees and expenses, consisting primarily of
SEC filing fees, fees and expenses of investment bankers, attorneys and
accountants, and financial printing and other related charges, will be
approximately $63 million. See note 5 on page 41.
INTEGRATION-RELATED EXPENSES
Based on our current plans, we estimate that costs of between approximately
$400 million and $600 million will be incurred for severance and other
integration-related expenses, including the elimination of duplicate facilities
and excess capacity, operational realignment and related workforce reductions.
These expenditures are necessary to reduce costs and operate efficiently. These
costs will be charged to operations in the relevant period and therefore are not
reflected in the unaudited pro forma combined condensed financial statements.
See note 5 on page 41.
8
<PAGE>
PERIODS COVERED
The unaudited pro forma combined condensed statements of income combine
AlliedSignal's results of operations for the years ended December 31, 1998, 1997
and 1996 and for the quarters ended March 31, 1999 and 1998 with Honeywell's
results of operations for the years ended December 31, 1998, 1997 and 1996 and
for the quarters ended April 4, 1999 and April 5, 1998, giving effect to the
merger as if it had occurred on January 1, 1996. The unaudited pro forma
combined condensed balance sheet combines the balance sheet of AlliedSignal as
of March 31, 1999, the last day of AlliedSignal's first quarter of 1999, and the
statement of financial position of Honeywell as of April 4, 1999, the last day
of Honeywell's first quarter of 1999, giving effect to the merger as if it had
occurred as of the end of the combined company's first quarter of 1999.
SELECTED HISTORICAL FINANCIAL DATA OF ALLIEDSIGNAL
AlliedSignal derived the selected historical financial data set out below
for each of the years ended December 31, 1994 through 1998 from AlliedSignal's
audited consolidated financial statements for those years, and derived the
selected historical financial data set out below for each of the quarters ended
March 31, 1999 and 1998 from AlliedSignal's unaudited consolidated financial
statements for those quarters. This information is only a summary and you should
read it together with AlliedSignal's historical financial statements and related
notes contained in the annual reports, quarterly reports and other information
that we have filed with the SEC and incorporated by reference. To obtain copies
of these documents, see 'Where You Can Find More Information' on page 90.
<TABLE>
<CAPTION>
QUARTERS ENDED
MARCH 31, YEARS ENDED DECEMBER 31,
----------------- -----------------------------------------------
1999 1998 1998 1997 1996 1995 1994
---- ---- ---- ---- ---- ---- ----
(IN MILLIONS, EXCEPT PER SHARE AMOUNTS)
<S> <C> <C> <C> <C> <C> <C> <C>
STATEMENT OF INCOME DATA:
Net sales.................... $ 3,596 $ 3,646 $15,128 $14,472 $13,971 $14,346 $12,817
Net income................... 335 300 1,331 1,170 1,020 875 759
Earnings per share of common
stock -- basic............. 0.60 0.53 2.37 2.07 1.80 1.54 1.34
Earnings per share of common
stock -- assuming
dilution................... 0.59 0.52 2.32 2.02 1.76 1.52 1.32
BALANCE SHEET DATA:
(AS OF THE END OF THE
PERIOD)
Total assets................. 15,380 13,608 15,560 13,707 12,829 12,465 11,321
Long-term debt............... 1,457 1,592 1,476 1,215 1,317 1,366 1,424
DIVIDENDS:
Cash dividends per share of
common stock............... 0.17 0.15 0.60 0.52 0.45 0.39 0.3238
</TABLE>
9
<PAGE>
SELECTED HISTORICAL FINANCIAL DATA OF HONEYWELL
Honeywell derived the selected historical financial data set out below for
each of the years ended December 31, 1994 through 1998 from Honeywell's audited
consolidated financial statements for those years, and derived the selected
historical financial data set out below for each of the quarters ended April 4,
1999 and April 5, 1998 from Honeywell's unaudited consolidated financial
statements for those quarters. This information is only a summary and you should
read it together with Honeywell's historical financial statements and related
notes contained in the annual reports, quarterly reports and other information
that we have filed with the SEC and incorporated by reference. To obtain copies
of these documents, see 'Where You Can Find More Information' on page 90.
<TABLE>
<CAPTION>
QUARTERS ENDED YEARS ENDED DECEMBER 31,
------------------- ------------------------------------------
APRIL 4, APRIL 5,
1999 1998 1998 1997 1996 1995 1994
---- ---- ---- ---- ---- ---- ----
(IN MILLIONS, EXCEPT PER SHARE AMOUNTS)
<S> <C> <C> <C> <C> <C> <C> <C>
INCOME STATEMENT DATA:
Sales............................... $1,986 $1,923 $8,427 $8,027 $7,312 $6,731 $6,057
Net income.......................... 105 96 572 471 403 334 279
Basic earnings per common share..... 0.84 0.76 4.54 3.71 3.18 2.62 2.15
Diluted earnings per common share... 0.83 0.75 4.48 3.65 3.11 2.58 2.15
STATEMENT OF FINANCIAL POSITION DATA:
AS OF THE END OF THE PERIOD)
Total assets........................ 6,844 6,406 7,170 6,411 5,493 5,060 4,886
Long-term debt...................... 1,300 1,173 1,299 1,177 715 481 502
DIVIDENDS:
Cash dividends per common share..... 0.29 0.28 1.13 1.09 1.06 1.01 0.97
</TABLE>
10
<PAGE>
SELECTED UNAUDITED PRO FORMA COMBINED FINANCIAL DATA
The following selected unaudited pro forma combined financial data has been
derived from and should be read with the unaudited pro forma combined condensed
financial statements and related notes on pages 34 through 42. This information
is based on the historical consolidated balance sheet and related historical
consolidated statements of income of AlliedSignal and the historical
consolidated statement of financial position and the related historical
consolidated income statements of Honeywell, giving effect to the merger using
the pooling of interests method of accounting for business combinations. This
information is for illustrative purposes only. The companies may have performed
differently had they always been combined. You should not rely on the selected
unaudited pro forma combined financial data as being indicative of the
historical results that would have been achieved had the companies always been
combined or the future results that the combined company will experience after
the merger.
<TABLE>
<CAPTION>
FIRST QUARTERS OF YEARS ENDED DECEMBER 31,
----------------- ---------------------------
1999 1998 1998 1997 1996
---- ---- ---- ---- ----
(IN MILLIONS, EXCEPT PER SHARE AMOUNTS)
<S> <C> <C> <C> <C> <C>
STATEMENT OF INCOME DATA:
Net sales...................................... $ 5,582 $ 5,569 $23,555 $22,499 $21,283
Net income..................................... 440 396 1,903 1,641 1,423
Earnings per share of common stock -- basic.... 0.55 0.49 2.38 2.04 1.77
Earnings per share of common stock -- assuming
dilution..................................... 0.54 0.48 2.34 2.00 1.73
BALANCE SHEET DATA AS OF END OF FIRST QUARTER
OF 1999:
Total assets................................... 22,224
Long-term debt................................. 2,757
DIVIDENDS:
Cash dividends per share of common stock....... 0.16 0.15 0.60 0.54 0.49
</TABLE>
11
<PAGE>
COMPARATIVE PER SHARE DATA
We present below separate net income, cash dividends and book value per
common share data for AlliedSignal on an historical basis, for the combined
company on a pro forma combined basis, for Honeywell on an historical basis and
for the combined company on a pro forma combined basis per Honeywell equivalent
share.
We derived the pro forma data for the combined company by combining the
historical consolidated financial information of AlliedSignal and Honeywell
using the pooling of interests method of accounting for business combinations as
described under 'Unaudited Pro Forma Combined Condensed Financial Information'
beginning on page 34.
Under 'Pro Forma Combined per Honeywell Equivalent Common Share Data'
below, we show the effect of the merger from the perspective of an owner of
shares of Honeywell common stock. We computed the information set out under that
caption by multiplying the combined company pro forma information by the
exchange ratio of 1.875.
You should read the information below together with our respective
historical financial statements and related notes contained in the annual
reports, quarterly reports and other information that we have filed with the SEC
and incorporated by reference. To obtain copies of these documents, see 'Where
You Can Find More Information' on page 90. We have provided the unaudited pro
forma combined data below for illustrative purposes only. The companies may have
performed differently had they always been combined. You should not rely on this
information as being indicative of the historical results that we would have
achieved had our companies always been combined or the future results that the
combined company will experience after the merger.
<TABLE>
<CAPTION>
FIRST QUARTERS OF YEARS ENDED DECEMBER 31,
----------------- ----------------------------
1999 1998 1998 1997 1996
---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C>
ALLIEDSIGNAL HISTORICAL PER COMMON SHARE DATA:
Earnings -- basic................................. $ 0.60 $0.53 $ 2.37 $2.07 $1.80
Earnings -- assuming dilution..................... 0.59 0.52 2.32 2.02 1.76
Cash dividends.................................... 0.17 0.15 0.60 0.52 0.45
Book value (as of end of the period).............. 9.52 9.49
PRO FORMA COMBINED PER COMMON SHARE DATA FOR THE
COMBINED COMPANY:
Earnings -- basic................................. $ 0.55 $0.49 $ 2.38 $2.04 $1.77
Earnings -- assuming dilution..................... 0.54 0.48 2.34 2.00 1.73
Cash dividends.................................... 0.16 0.15 0.60 0.54 0.49
Book value (as of end of the period).............. 10.11 10.08
HONEYWELL HISTORICAL PER COMMON SHARE DATA:
Earnings -- basic................................. $ 0.84 $0.76 $ 4.54 $3.71 $3.18
Earnings -- diluted............................... 0.83 0.75 4.48 3.65 3.11
Cash dividends.................................... 0.29 0.28 1.13 1.09 1.06
Book value (as of end of the period).............. 22.04 22.05
PRO FORMA COMBINED PER HONEYWELL EQUIVALENT
COMMON SHARE DATA:
Earnings -- basic................................. $ 1.03 $0.92 $ 4.46 $3.83 $3.32
Earnings -- assuming dilution..................... 1.01 0.90 4.39 3.75 3.24
Cash dividends.................................... 0.30 0.28 1.13 1.01 0.92
Book value (as of end of the period).............. 18.96 18.90
</TABLE>
12
<PAGE>
RISK FACTORS
In addition to the other information that we have included and incorporated
by reference in this joint proxy statement/prospectus, you should carefully read
and consider the following factors in evaluating the proposals to be voted on at
your special shareowners' meeting.
WE MAY NOT ACHIEVE THE COST SAVINGS AND SALES ENHANCEMENTS WE EXPECT TO
RESULT FROM THE INTEGRATION OF ALLIEDSIGNAL AND HONEYWELL.
We expect the integration of AlliedSignal and Honeywell to result in
significant cost savings and enhanced sales. However, our success in realizing
these cost savings and sales enhancements, and the timing of this realization,
depends on the quality and speed of the integration of our two companies. Our
two companies have already established an integration team that has identified
specific areas for cost savings and is continuing to plan the integration of the
two companies. However, we may not realize the cost savings and sales
enhancements that we anticipate from integrating our operations following
completion of the merger as fully or as quickly as we expect for a number of
reasons, including:
our large size and worldwide presence and the resulting complexity of our
organization;
errors in our planning or integration;
unexpected events such as major changes in the markets in which we
operate; and
conditions antitrust or competition regulatory authorities may impose on
us in connection with granting approval of the merger, such as
divestiture of product lines.
HONEYWELL SHAREOWNERS WILL RECEIVE CONSIDERATION WITH A LOWER MARKET VALUE
IF THE MARKET PRICE OF ALLIEDSIGNAL COMMON STOCK DECLINES.
Because the number of shares of common stock of the combined company that
Honeywell shareowners will receive in the merger is fixed, the market value of
these shares will depend on the market price of AlliedSignal common stock when
the merger becomes effective. If the AlliedSignal common stock price declines,
the market value of the combined company's common stock to be received by
Honeywell shareowners in the merger will correspondingly decline. The price of
AlliedSignal common stock may vary from its price at the date of this joint
proxy statement/prospectus because of various factors, including:
general market, industry and economic conditions;
changes in the business, operations or prospects of AlliedSignal and the
combined company; and
market assessments of the timing and probability of achieving integration
cost savings and sales enhancements after the merger.
Neither AlliedSignal nor Honeywell will have the right to terminate the
merger agreement as a result of changes in AlliedSignal's common stock price.
You should obtain current market quotations for AlliedSignal common stock.
THE COMBINED COMPANY MAY BE REQUIRED TO MAKE SIGNIFICANT PAYMENTS WHEN
HONEYWELL'S CURRENT LITIGATION WITH LITTON SYSTEMS, INC. IS RESOLVED.
Litton Systems, Inc. has filed two lawsuits against Honeywell alleging that
Honeywell is engaging in monopolistic practices in violation of federal
antitrust laws and has infringed a Litton patent. Depending on the ultimate
resolution of these lawsuits, the combined company may be required to make
significant payments.
Earlier this year, a federal District Court entered a $750 million judgment
against Honeywell on the antitrust claim. Although Honeywell's obligation to
satisfy this judgment is suspended pending post-judgment motions and appeals, at
this time, we are not able to predict the outcome of these motions and appeals.
The potential remains for adverse judgments against Honeywell which could have a
material adverse impact on the combined company's financial position or results
of operations.
In January 1995, a $1.2 billion jury verdict rendered against Honeywell in
the patent infringement suit was set aside by a federal District Court. On
appeal, the Litton patent was found
13
<PAGE>
to be valid but not literally infringed by Honeywell. The matter has been
returned to the District Court before which motions to dispose of the matter are
now pending. If the District Court does not dispose of the matter, Litton may
request a jury trial to address its allegations with respect to the patent
infringement claim and other claims under state law. If the jury finds Honeywell
liable under any of these claims, it could return another verdict against
Honeywell which could have a material adverse impact on the combined company's
financial position or results of operations.
A LARGE DECLINE IN THE AEROSPACE MARKET COULD HAVE A NEGATIVE IMPACT ON THE
COMBINED COMPANY'S REVENUES AND RESULTS OF OPERATIONS, GIVEN THAT A SIGNIFICANT
PERCENTAGE OF THE SALES OF THE COMBINED COMPANY ARE TO AEROSPACE CUSTOMERS.
AlliedSignal's 1998 sales to aerospace customers, including sales of
aircraft engines and components through its Turbine Technologies business unit,
were approximately 50% of its total sales. Honeywell's 1998 sales to aerospace
customers were approximately 28% of its total sales. On a pro forma combined
basis, the combined company's 1998 sales to aerospace customers, including sales
of aircraft engines and components through its Turbine Technologies business
unit, would have been approximately 42% of total sales.
Approximately 17% of AlliedSignal's 1998 sales and approximately 16% of
Honeywell's 1998 sales were to original equipment aerospace manufacturers. On a
pro forma combined basis, the combined company's 1998 sales to original
equipment aerospace manufacturers would have been approximately 17% of total
sales. If there were a large decline in sales of aircraft that use the combined
company's components, sales revenue and results of operations could be
negatively impacted.
In addition, approximately 25% of AlliedSignal's 1998 sales and
approximately 7% of Honeywell's 1998 sales were to aftermarket customers of
aerospace products and services. On a pro forma combined basis, the combined
company's 1998 sales to aftermarket customers of aerospace products and services
would have been approximately 18% of total sales. If there were a large decline
in the number of flight hours for aircraft that use the combined company's
components or services, sales revenue and results of operations could be
negatively impacted.
WE MAY BECOME SUBJECT TO YEAR 2000 LITIGATION AS A RESULT OF OLDER
HONEYWELL PRODUCTS.
While substantially all of Honeywell's current product offerings are year
2000 ready, certain older Honeywell products still in use by customers may not
be year 2000 ready, including access control systems used in public and private
institutions and industrial process control systems used in petroleum refineries
and chemical processing plants. Honeywell has communicated with, and is
continuing to locate and communicate with, distributors and customers to make
them aware of potential year 2000 problems with these products and encourage
them to modify or replace the affected products. We cannot assure you that all
customers with these products will be located or that all necessary
modifications and replacements to these products will be made by customers. The
failure of Honeywell products that are not year 2000 ready to be properly
modified or replaced could result in these products malfunctioning and the
combined company becoming subject to litigation.
14
<PAGE>
CAUTIONARY STATEMENT CONCERNING FORWARD-LOOKING STATEMENTS
We have made forward-looking statements in this document and in documents
that are incorporated by reference in this document that are subject to risks
and uncertainties. Forward-looking statements include information concerning
possible or assumed future actions, events or results of operations of
AlliedSignal, Honeywell and the combined company, generally. Forward-looking
statements include the information in this document, specifically, regarding:
<TABLE>
<S> <C>
efficiencies business diversification
cost savings future economic performance
sales enhancements the combined company
income and margins the timetable for completing the merger
earnings per share future acquisitions
free cash flow management's plans
growth business portfolios
merger and integration related expenses
</TABLE>
With respect to all forward-looking statements, we claim the protection of
the safe harbor for forward-looking statements contained in the Private
Securities Litigation Reform Act of 1995.
You should understand that the following important factors, in addition to
those discussed in 'Risk Factors' above and elsewhere in this document and in
the documents which are incorporated by reference, could affect the future
results of AlliedSignal and Honeywell, and of the combined company after the
completion of the merger, and could cause those results or other outcomes to
differ materially from those expressed or implied in our forward-looking
statements:
Economic and Industry Conditions
materially adverse changes in economic and industry conditions and
customer demand generally or in the markets served by our companies
supply and demand for and pricing of supplies and components
changes in demographics and consumer preferences or demands for
AlliedSignal's and Honeywell's goods and services
fluctuations of foreign currencies
Competitive Factors
the competitiveness of product substitutes
the actions of competitors
new technologies
industry consolidation
deregulation
Operating Factors
supply disruptions
technical difficulties, including the inability of material customers and
suppliers to replace, modify or upgrade computer programs in order to
adequately address Year 2000 concerns
acquisitions or divestitures
changes in operating conditions and costs
risks relating to performance of contracts, including dependence on
performance of third-parties
availability of intellectual property rights for newly developed products
changes in regulatory environment
Transaction Factors
the challenges inherent in diverting management's focus and resources
from other strategic opportunities and from operational matters during
the integration process
the impact of the loss of employees
15
<PAGE>
THE MERGER TRANSACTION
We are furnishing this joint proxy statement/prospectus to shareowners of
AlliedSignal and Honeywell in connection with the solicitation of proxies by the
board of directors of AlliedSignal and the board of directors of Honeywell for
use at the special meetings of their respective shareowners.
ALLIEDSIGNAL PROPOSALS
At AlliedSignal's special meeting, shareowners will be asked to vote to:
(1) approve the merger pursuant to the merger agreement, including the
related issuance of shares of common stock; and
(2) approve an amendment to the certificate of incorporation of
AlliedSignal providing for:
an increase in the number of authorized shares of common stock of
AlliedSignal from one billion to two billion shares;
an increase in the number of authorized shares of preferred stock of
AlliedSignal from 20 million to 40 million shares; and
the elimination of the Series A, Series C, Series D, Series F, Series
G and Series AA preferred stock of AlliedSignal, none of which is
currently outstanding.
We have attached a copy of the proposed amendment as Annex F and encourage
you to review it.
The merger will not be completed unless AlliedSignal's shareowners approve
proposal (1). Approval of proposal (2), however, is not required to complete the
merger.
HONEYWELL PROPOSAL
At Honeywell's special meeting, Honeywell shareowners will be asked to vote
to approve and adopt the merger agreement and the merger.
The merger will not be completed until the merger agreement and the merger
are approved and adopted by Honeywell's shareowners.
BACKGROUND OF THE MERGER
AlliedSignal's board of directors and management continually review
AlliedSignal's results of operations and competitive position in the industries
in which it operates. In connection with these reviews, AlliedSignal's board of
directors and management evaluate and consider a range of strategic options that
might be available to AlliedSignal to sustain AlliedSignal's past level of
growth and further enhance shareowner value, including acquisitions and
dispositions of assets, possible partnerships and joint ventures and other
strategic corporate transactions.
Honeywell's board of directors and management also regularly review
industry trends and Honeywell's results of operations and competitive position,
as well as Honeywell's strategic goals and options.
The following describes events leading to execution of the merger agreement
by AlliedSignal and Honeywell.
In early 1998, Lawrence A. Bossidy, Chairman of the Board and Chief
Executive Officer of AlliedSignal, telephoned Michael R. Bonsignore, Chairman of
the Board and Chief Executive Officer of Honeywell, to schedule a meeting to
discuss the possibility of exploring strategic alternatives involving
AlliedSignal and Honeywell.
On February 24, 1998, Mr. Bossidy and Mr. Bonsignore met at the St. Regis
Hotel in New York City to discuss a possible business combination of their
respective companies. Shortly thereafter, the Vice Chairman responsible for
AlliedSignal's aerospace business and the President of Honeywell's avionics
business met to discuss strategic opportunities. Following these meetings,
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Mr. Bonsignore indicated that Honeywell had no interest in pursuing a business
combination with AlliedSignal.
After receiving Honeywell's negative response, AlliedSignal's board of
directors and management reviewed other potential strategic business
combinations. In August 1998, AlliedSignal commenced an unsolicited tender offer
for all of the outstanding shares of common stock of AMP Incorporated, a
Pennsylvania manufacturer of electrical connectors. After AMP announced a merger
with Tyco International Ltd. on November 23, 1998, AlliedSignal discontinued its
attempt to acquire AMP.
In mid-February 1999, in an effort to assess possible strategic options
available at that time to AlliedSignal, Mr. Bossidy telephoned Mr. Bonsignore to
inquire whether Honeywell had changed its view and would be interested in
discussing a business combination or other strategic initiatives. Mr. Bonsignore
indicated that he would consider Mr. Bossidy's inquiry.
As a result of their periodic review of strategic alternatives, the board
of directors and senior management of Honeywell had come to recognize that
Honeywell may need to increase the scale and scope of Honeywell's business
activities in order to secure Honeywell's long-term future.
On April 9, 1999, in response to Mr. Bossidy's earlier telephone call in
mid-February 1999, Mr. Bonsignore telephoned Mr. Bossidy to express interest in
commencing discussions regarding possible combination alternatives involving
AlliedSignal and Honeywell and to determine AlliedSignal's level of interest.
Mr. Bonsignore indicated to Mr. Bossidy that he would have an interest in
discussions if a transaction could be structured as a strategic combination, not
as an acquisition, and if he and Mr. Bossidy could reach agreement regarding the
management of a combined company and other issues relating to the corporate
governance of a combined company. Mr. Bossidy and Mr. Bonsignore agreed to meet
again later in April.
At a regular meeting of the board of directors of Honeywell held on April
20, 1999, Mr. Bonsignore informed the board of directors of his earlier
conversation with Mr. Bossidy and indicated that a meeting with Mr. Bossidy was
to be held later in the month. Historical financial information with respect to
AlliedSignal was reviewed with the board of directors. Representatives of Bear
Stearns, Honeywell's financial advisor, were also present at the meeting.
On April 28, 1999, Mr. Bossidy and Mr. Bonsignore again met at the St.
Regis Hotel in New York City. At this meeting, Mr. Bossidy confirmed his
interest in exploring further the possibility of a combination of the two
companies. Messrs. Bossidy and Bonsignore agreed that any transaction should be
structured as a strategic combination, bringing together the best of both
companies. Mr. Bossidy confirmed his intention to retire no later than April 1,
2000 and indicated that he would support Mr. Bonsignore's becoming the Chief
Executive Officer of a combined company upon completion of the merger and, when
Mr. Bossidy retires, Chairman of the Board of a combined company. Messrs.
Bossidy and Bonsignore also agreed that the composition of the board of
directors of a combined company should be reflective of both companies' boards.
They agreed to discuss at subsequent meetings the composition of the management
team of a combined company and an acceptable exchange ratio for the merger.
A meeting of the respective senior management teams of the two companies
was scheduled for May 12, 1999. Messrs. Bossidy and Bonsignore recognized the
importance of their respective management teams' support of the transaction if
their two companies were to continue their efforts to pursue a transaction.
Between April 28 and May 12, 1999, Mr. Bossidy and Mr. Bonsignore had several
telephone conversations regarding the purpose of and agenda for the May 12th
meeting.
On May 12, 1999, Mr. Bossidy and several other members of AlliedSignal's
senior management met with Mr. Bonsignore and several other members of
Honeywell's senior management at the Four Seasons Hotel in Chicago. At this
meeting, AlliedSignal and Honeywell signed a confidentiality and standstill
agreement in connection with the proposed transaction restricting the disclosure
of confidential information and the purchase of the other company's common
stock. Pursuant to this agreement, each company agreed, for a period of thirty
days, not to enter into discussions with another party regarding a possible
business combination. Members of each
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company's senior management then conducted a due diligence review of the other
company's business and operations and discussed the potential benefits of a
combination. Following the meeting, it was the consensus of senior management of
AlliedSignal and Honeywell that a combination would be beneficial to both
companies and that further efforts should be made to explore a potential
combination.
On May 16, 1999, Mr. Bossidy telephoned Mr. Bonsignore to confirm a meeting
for the upcoming week. Mr. Bonsignore again stressed to Mr. Bossidy the
importance of a potential combination being structured as a strategic
combination and establishing an acceptable exchange ratio.
On May 18, 1999, members of senior management of the two companies met to
discuss the potential bases for setting an acceptable exchange ratio and to
prepare relevant financial information to be presented to their respective Chief
Executive Officers in subsequent discussions regarding the establishment of an
acceptable exchange ratio. Representatives of Bear Stearns were also present at
this meeting.
On May 20, 1999, members of senior management of AlliedSignal and Honeywell
met to discuss possible transaction structures, further due diligence that
AlliedSignal and Honeywell expected to conduct, potential terms of a merger
transaction and a possible timetable for the transaction. Representatives of
Bear Stearns; Fried, Frank, Harris, Shriver & Jacobson, AlliedSignal's outside
counsel; and Skadden, Arps, Slate, Meagher & Flom LLP, Honeywell's outside
counsel, were also present at the meeting. At the end of this meeting,
representatives of AlliedSignal and Honeywell agreed that they would continue
their discussions on Monday, May 24th, assuming that a meeting between Messrs.
Bossidy and Bonsignore scheduled for May 21st was productive.
On May 21, 1999, Mr. Bossidy met with Mr. Bonsignore in Santa Barbara,
California. At this meeting, Messrs. Bossidy and Bonsignore reached an
understanding, subject to approval of the respective boards of directors, on the
following important items, which would serve as a basis for further exploration
of a potential business combination:
the proposed combination would be a strategic combination;
the exchange ratio would be 1.875 AlliedSignal shares for each Honeywell
share;
the composition of the board of directors and executive management of the
combined company;
a combined entity would be called 'Honeywell'; and
while a combined company would maintain Honeywell's commitment to the
Minneapolis-St. Paul community, its corporate headquarters would be in
Morris Township, New Jersey.
At the conclusion of the meeting, the two Chief Executive Officers agreed
to have further discussions relating to the integration of the managements of
the two companies.
On May 24, 1999, members of AlliedSignal's and Honeywell's management and
their respective advisors conducted a telephonic meeting. At this meeting, the
representatives discussed the tasks that each company would have to complete in
order to be ready to present a possible transaction to its board of directors,
including additional due diligence and the preparation and negotiation of
definitive agreements.
On May 25, 1999, Mr. Bossidy telephoned Mr. Bonsignore. During their
conversation, Messrs. Bossidy and Bonsignore discussed the potential timing for
presenting a transaction for consideration by their respective boards of
directors. They also discussed the potential cost savings that could be derived
from a combination, as well as other issues related to the integration of the
two companies.
On May 26, 1999, the board of directors of Honeywell held a telephonic
meeting to review and consider the proposed transaction with AlliedSignal and
the proposed terms of the merger, including the exchange ratio, the name of a
combined company, the location of its headquarters, succession of the Chief
Executive Officer and Chairman of the Board and composition of the
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board of directors of a combined company. Management discussed with the board of
directors the strategic rationale for the merger. At the meeting, management
reviewed with the board of directors preliminary financial information with
respect to the proposed merger, as well as historical financial information of
each of AlliedSignal and Honeywell. Mr. Bonsignore informed the board of
directors that management intended, subject to the board of directors'
concurrence, to continue merger negotiations with AlliedSignal and, assuming
these negotiations were successful, to reconvene the board of directors on
June 3, 1999, at which time a more in-depth analysis and presentation would be
made to the board of directors regarding the proposed merger.
On May 26, 1999, Fried Frank, AlliedSignal's outside counsel, distributed a
draft merger agreement and related transaction documents to Honeywell and its
outside counsel, Skadden Arps. During the week of May 30 through June 4,
representatives of AlliedSignal and Fried Frank and Honeywell and Skadden Arps
engaged in discussions regarding the proposed merger agreement and related
documents.
On May 27 and 28, 1999, the board of directors of AlliedSignal met to
review and consider the proposed transaction with Honeywell and the terms of the
merger agreement being negotiated with Honeywell. During this meeting, Mr.
Bossidy described AlliedSignal's prior discussions with Honeywell and the status
of the ongoing negotiations. He also described Honeywell's business, historical
operating results and analysts' estimates of Honeywell's future performance, as
well as Honeywell's competitive position in the industries in which it operates.
Mr. Bossidy discussed with the AlliedSignal board of directors the potential
benefits of the merger and the anticipated senior management of a combined
company, indicating that the current proposal was that Mr. Bonsignore would
become the Chief Executive Officer of a combined company at the completion of
the merger and would become Chairman of the Board on April 1, 2000, or upon Mr.
Bossidy's earlier retirement.
At that meeting, Peter M. Kreindler, Senior Vice President, General Counsel
and Secretary of AlliedSignal, reviewed the proposed legal terms and conditions
of the then current draft of the merger agreement and the legal duties and
responsibilities of the board of directors in connection with the proposed
transaction. Mr. Kreindler also described to the board of directors the results
of the due diligence investigations conducted by AlliedSignal, including the
status of Honeywell's antitrust and patent litigation with Litton Systems, Inc.
At the meeting, J.P. Morgan, AlliedSignal's financial advisor, presented an
analysis of the financial terms of the merger, reviewing among other things
those matters described below under 'Opinions of Financial Advisors -- Opinion
of Financial Advisor to AlliedSignal.' The AlliedSignal board of directors
engaged in discussions regarding AlliedSignal, Honeywell and the benefits and
risks to AlliedSignal and its shareowners of the proposed transaction,
considering the matters described below under ' -- Our Reasons for the Merger'
and ' -- Factors Considered by, and Recommendation of, the Board of Directors of
AlliedSignal.' As a result of these discussions, AlliedSignal's board of
directors instructed AlliedSignal management to continue merger negotiations
with Honeywell.
Between May 26, 1999 and June 4, 1999, Mr. Bossidy and Mr. Bonsignore
communicated on a regular basis regarding the potential transaction, including
the post-closing integration of the two companies and Honeywell's request that a
supermajority board vote be required to change Mr. Bonsignore's responsibilities
as Chief Executive Officer or Chairman of the Board during the two-year period
following consummation of the merger.
On June 3, 1999, the board of directors of Honeywell met to review the
terms and conditions of the proposed merger agreement. Honeywell management once
again reviewed in detail the objectives and strategic benefits of a merger with
AlliedSignal, including those matters discussed below under ' -- Our Reasons for
the Merger' and ' -- Factors Considered by, and Recommendation of, the Board of
Directors of Honeywell'. The legal advisors to Honeywell reviewed the fiduciary
duties of directors, as well as the principal terms and conditions of the
proposed merger agreement and related documents. Bear Stearns, Honeywell's
financial advisor, then gave a detailed presentation with respect to the
financial terms of the proposed merger, reviewing, among other things, those
matters described below under 'Opinions of Financial Advisors -- Opinion of
Financial Advisor to Honeywell'. Management also reported on the results
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of its due diligence investigations of AlliedSignal. After discussion, it was
the consensus of the members of the board of directors of Honeywell that
management should complete the negotiations so that the merger agreement and
related documents, in definitive form, could be presented the following day for
the board of directors' consideration.
On the morning of June 4, 1999, Messrs. Bossidy and Bonsignore met to
finalize their plans regarding the establishment of an integration team and the
structure of the initial management team of the combined company. Later that
day, Mr. Bonsignore met with two members of the AlliedSignal board of directors,
both of whom are members of the board's Management Development and Compensation
Committee, in order to provide Mr. Bonsignore and those directors the
opportunity to speak with one another before the meeting of the board of
directors of each company scheduled for later that day.
Later on June 4, 1999, the board of directors of AlliedSignal again met to
review the terms and conditions of the proposed merger agreement. Prior to the
meeting, the board's Management Development and Compensation Committee
considered and approved the terms of a proposed employment agreement and related
compensation package for Mr. Bonsignore. At the meeting of the full board of
directors of AlliedSignal, Mr. Kreindler described to the board of directors the
prior weeks' negotiations with Honeywell and the changes to the proposed terms
of the merger agreement that resulted from those negotiations. J.P. Morgan gave
its opinion, confirmed in writing, that, as of that date, the consideration to
be paid by AlliedSignal in the proposed merger was fair from a financial point
of view to AlliedSignal.
Following discussion, the AlliedSignal board of directors unanimously
approved the merger agreement, the related documents, the merger, including the
related issuance of shares of common stock, the change of AlliedSignal's name to
Honeywell International Inc., and the proposed employment agreement for Mr.
Bonsignore. The AlliedSignal board of directors also determined that it was
advisable that the certificate of incorporation of AlliedSignal be amended to
increase the number of authorized shares of common and preferred stock and
eliminate several series of preferred stock not currently outstanding. The
AlliedSignal board of directors also elected Mr. Bonsignore as Chief Executive
Officer, effective as of the completion of the merger, and as Chairman of the
Board, effective as of April 1, 2000 or upon the earlier retirement of Mr.
Bossidy, and approved the proposed amendment to the by-laws to be effective upon
completion of the merger.
In the evening of June 4, 1999, a special telephonic meeting of the board
of directors of Honeywell was held, at which all of Honeywell's directors were
present. At this meeting, Bear Stearns delivered its fairness opinion and the
legal advisors updated the board of directors on the final terms of the merger
agreement. Following these presentations and further discussion, the Honeywell
board of directors unanimously approved the merger agreement and determined to
recommend that the Honeywell shareowners approve and adopt the merger agreement
and the merger.
On June 4, 1999, following the approval of AlliedSignal's and Honeywell's
respective boards of directors, the parties executed the merger agreement and
the related documents. Prior to the commencement of trading on June 7, 1999,
AlliedSignal and Honeywell issued a joint press release announcing the execution
of the merger agreement.
OUR REASONS FOR THE MERGER
Since January 1, 1994, AlliedSignal and Honeywell have enjoyed consistent
sales growth from continuing businesses, continuous margin improvement and
double-digit earnings growth. While each company continues to have positive
growth potential and good prospects for its immediate and long term future, we
believe that a combination of the two companies will create a leading global
supplier of products and services with greater diversity, breadth and financial
resources that will have the opportunity to enhance shareowner value in ways
that are unlikely to be achieved by AlliedSignal or Honeywell on an individual
basis. Specifically, the combined company will be uniquely positioned to:
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realize significant cost savings;
achieve accelerated growth, particularly as a result of the joining of our
two companies' complementary aerospace businesses; and
enjoy reduced cyclicality and sustained earnings growth as a result of a
diverse business portfolio.
Significant Cost Savings: Based on our review of and assumptions about the
operations and infrastructure of the two companies, we expect that the combined
company will realize annual cost savings of approximately $250 million in 2000,
$400 million in 2001 and $500 million in 2002. We expect to realize
approximately $500 million in cost savings in 2002 as follows:
$150 million, by accelerating implementation of AlliedSignal's 'Six Sigma'
initiative to achieve defect-free performance in manufacturing and other
business processes, and applying this initiative to Honeywell's business,
to further enhance the quality of our products and services and increase
productivity;
$100 million, by achieving procurement and purchasing efficiencies by
utilizing AlliedSignal's and Honeywell's combined purchasing capabilities,
centralizing the two companies' purchasing processes and benefiting from
the added buying efficiencies that we expect as a result of higher volume
purchases;
$90 million, by rationalizing corporate overhead costs through the
elimination of redundant corporate functions and facilities;
$90 million, by reducing overhead in the combined company's aerospace
businesses by eliminating redundancies in the sales and administrative
functions and field service operations of these businesses;
$30 million, by integrating the two companies' research and development
programs and achieving research and development efficiencies;
$20 million, by reducing the combined company's infrastructure costs by
integrating AlliedSignal's and Honeywell's international operations and
eliminating infrastructure redundancies; and
$20 million, by providing to Honeywell's business units administrative
services in the areas of accounting, human resources, travel, information
technology and training, through AlliedSignal's centralized shared
services organization, and eliminating similar services currently provided
by Honeywell to its business units.
While we expect that we will be able to realize these cost savings, we can
give no assurance that we will actually be able to do so.
Achieving Accelerated Growth: We believe that because of the highly
complementary nature of our aerospace businesses, the combined company will be
in a unique position to achieve accelerated growth by:
taking advantage of our complementary capabilities in the flight control,
navigation and safety areas to:
-- lower development and production costs; and
-- develop safety improvement products and systems that will be
affordable by regional airlines as well as business and general
aviation customers;
utilizing our complementary technologies and products to create:
-- a complete global positioning system with air navigation and safety
capability; and
-- airport systems linking AlliedSignal's airborne capabilities with
Honeywell's ground-based systems; and
taking advantage of the many areas in which our respective aerospace
products and services have complementary strengths, including general air
transportation, business and regional jets and military and space
aircraft.
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The combined company will also be in a position to achieve accelerated growth in
other areas of its business by:
utilizing its financial strength to pursue business opportunities;
accelerating the use of e-commerce in our businesses;
offering more competitive pricing and products to customers as a result of
its implementation of AlliedSignal's 'Six Sigma' initiative;
capitalizing on the wide recognition of the Honeywell name; and
utilizing the combined company's larger, more diverse servicing
capabilities to provide enhanced and more comprehensive services to
customers.
Diverse Business Portfolio: The merger of AlliedSignal and Honeywell will
create a combined company with a diverse business portfolio and reduced reliance
on any particular industry. The estimated pro forma combined sales of the two
companies for 1999 is expected to be divided up among the following businesses
as indicated:
<TABLE>
<S> <C>
Aerospace............................................... 30%
Turbine technologies, including aerospace engines....... 16%
Home and buildings controls............................. 15%
Industrial controls..................................... 11%
Specialty chemicals and electronic solutions............ 10%
Transportation products................................. 10%
Performance polymers.................................... 8%
</TABLE>
The increased diversification will also reduce the combined company's
overall exposure to cyclical economic swings and industry specific fluctuations
and increase the likelihood of achieving consistent earnings growth.
Our immediate task, beginning prior to the completion of the merger, is to
plan the integration of our two businesses and then successfully and quickly
complete the integration. In that regard, we have jointly appointed an
integration team co-chaired by Raymond C. Stark, presently Vice President --
Six Sigma and Productivity of AlliedSignal, and William M. Hjerpe, presently
President of Honeywell Europe. The remaining members of the team consist of an
equal number of senior AlliedSignal and Honeywell management personnel. Messrs.
Bossidy and Bonsignore, together with Robert D. Johnson, presently President and
Chief Executive Officer of AlliedSignal Aerospace, and Giannantonio Ferrari,
presently President and Chief Operating Officer of Honeywell, will form an
Executive Office which will closely supervise the work of the integration team.
Messrs. Johnson and Ferrari will each be a Chief Operating Officer and Executive
Vice President of the combined company.
Based on our current plans, we estimate that we will incur costs of between
approximately $400 million and $600 million for severance and other
integration-related expenses, including the elimination of duplicate facilities
and excess capacity, operations realignment and related workforce reductions.
FACTORS CONSIDERED BY, AND RECOMMENDATION OF, THE BOARD OF DIRECTORS OF
ALLIEDSIGNAL
The AlliedSignal board of directors believes that:
the terms of the merger, including the related issuance of shares of
common stock, are fair to and in the best interests of AlliedSignal and
its shareowners; and
it is advisable to amend AlliedSignal's certificate of incorporation to
increase the number of authorized shares of common and preferred stock and
eliminate several series of preferred stock not currently outstanding.
The AlliedSignal board of directors unanimously recommends to the
AlliedSignal shareowners that they vote:
FOR the merger, including the related issuance of shares of common stock;
and
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FOR the proposed amendment to AlliedSignal's certificate of incorporation.
In reaching its decision to approve and recommend the merger, including the
related issuance of shares of common stock, the AlliedSignal board of directors
and management considered the following material factors:
the reasons described above under ' -- Our Reasons for the Merger,'
including the anticipated cost savings, accelerated growth and the
combined company's diverse business portfolio;
information concerning the businesses, assets, liabilities, results of
operations and financial performance of Honeywell, AlliedSignal and the
combined company;
the opinion of J.P. Morgan that, as of June 4, 1999, and subject to the
matters set out in its opinion, the consideration to be paid by
AlliedSignal in the merger is fair, from a financial point of view, to
AlliedSignal;
the merger would create a larger combined company with greater financial
resources and increased free cash flow and as a result increased
flexibility and opportunity for future growth;
Honeywell is a leader in comfort and control products, including space and
aviation controls, and has global operations, diverse end markets, brand
strength and world-wide name recognition and strong technical
capabilities;
the combined company's overseas presence will be greater than
AlliedSignal's current overseas presence;
the board of directors of the combined company will consist of nine
current AlliedSignal directors and six current Honeywell directors and the
combined company will be able to draw on the diverse experiences of the
members of its board of directors;
the headquarters of the combined company will remain in Morris Township,
New Jersey;
in connection with the merger, AlliedSignal will change its name to
Honeywell International Inc., capitalizing on the strong international
recognition of the Honeywell name;
the expected composition of the combined company's senior management after
the merger as described in 'Management of the Combined Company' on
page 76, including that:
-- Lawrence A. Bossidy will remain as Chairman of the Board of the
combined company until April 1, 2000 or his earlier retirement;
-- Michael R. Bonsignore, currently Chairman of the Board and Chief
Executive Officer of Honeywell, will become Chief Executive Officer
of the combined company upon the completion of the merger and
Chairman of the Board on April 1, 2000, or upon the earlier
retirement of Mr. Bossidy; and
-- Mr. Bossidy, along with Mr. Bonsignore, Robert D. Johnson, currently
President and Chief Executive Officer of AlliedSignal Aerospace, and
Giannantonio Ferrari, currently President and Chief Operating Officer
of Honeywell, will oversee the integration of AlliedSignal and
Honeywell;
a significant portion of Mr. Bonsignore's incentive compensation is
conditioned upon the combined company's achieving certain performance
targets, as described below in 'Interests of Certain Persons in the
Merger -- New Employment Agreement';
neither approval of the merger by AlliedSignal shareowners nor the
completion of the merger will result in a change in control of
AlliedSignal or the acceleration of benefits under its employee benefit
plans;
the merger is consistent with AlliedSignal's objective to grow through
acquisitions;
the long-term interests of AlliedSignal and its shareowners, as well as
the effects of the proposed merger on AlliedSignal's employees, customers,
creditors, suppliers and the communities in which it has operations;
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the value and stock price premium represented by the exchange ratio of the
merger relative to the then-current market price of Honeywell and stock
price premiums paid in mergers of comparable size as discussed by J.P.
Morgan;
AlliedSignal shareowners would hold approximately 70% of the outstanding
shares of the combined company after the merger;
the merger is expected to be accounted for as a pooling of interests,
which results in:
-- combined financial statements prepared on a basis consistent with the
view that the interests of AlliedSignal and Honeywell shareowners
have simply been combined; and
-- the preservation of the historical accounting values of the assets of
AlliedSignal and Honeywell;
the merger is expected to qualify as a reorganization under the Internal
Revenue Code in which Honeywell shareowners generally will not recognize
any gain or loss, except for any gain or loss recognized in connection
with cash received for a fractional share of the combined company's common
stock;
the merger agreement does not permit either party to terminate the
agreement prior to a shareowners' vote on the merger on the basis of the
receipt of another acquisition proposal, whether or not superior, although
it does permit each party to provide information and engage in
negotiations with a third party in certain circumstances; this inability
to terminate the agreement for a superior bid may inhibit competing bids;
the ability of AlliedSignal's or Honeywell's board of directors, under the
merger agreement, to modify or withdraw its recommendation of the merger
if it receives an unsolicited proposal for a competing transaction that is
superior to our proposed merger; and
the stock options granted by AlliedSignal and Honeywell to each other and
the termination fees payable by each of them to the other under limited
circumstances, including the potential effect that the stock options and
the termination fees may have on competing offers for AlliedSignal or
Honeywell; thus, if triggered, a stock option may preclude the granting
company from effecting a transaction that is accounted for as a pooling of
interests for two years.
The AlliedSignal board of directors and management also considered a number
of countervailing factors in its deliberations concerning the merger, including:
Honeywell is a defendant in antitrust and patent lawsuits brought by
Litton Systems, Inc.:
-- in the antitrust lawsuit, Honeywell was found liable for $750 million
in damages, plus interest and attorneys' fees, which awards are now
contested in a post-trial motion and, if the motion is unsuccessful,
will be subject to appeal; and
-- in the patent lawsuit, a $1.2 billion verdict returned against
Honeywell by a jury was overturned and, if pending motions do not
dispose of the matter, a new trial could be requested by Litton;
the merger agreement eliminates the possibility of AlliedSignal's entering
into business combinations with companies other than Honeywell prior to
the merger or the termination of the merger agreement and the fact that
the termination fees, restrictions on negotiations and the reciprocal
options may inhibit third parties from proposing an offer for either
party;
the challenges and costs of combining the businesses of two companies of
AlliedSignal's and Honeywell's size, including combining, reducing and
relocating work forces and consolidating, relocating and eliminating
facilities and offices;
the risks that the companies will not be able to combine their businesses
without encountering operational difficulties or failing to realize the
cost savings and sales improvement expected from the integration of their
businesses;
the interests of Honeywell's management in the merger as described in
'Interests of Certain Persons in the Merger' on page 43; and
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the risk that regulators might impose conditions on the grant of necessary
approvals such as requiring the divestiture of a portion of the combined
company's business.
In the view of the AlliedSignal board of directors and management these
potential countervailing factors did not, individually or in the aggregate,
outweigh the advantages of the merger.
In view of the wide variety of factors considered in connection with its
evaluation of the merger and the complexity of these matters, AlliedSignal's
board of directors did not find it practicable to and did not attempt to
quantify, rank or otherwise assign relative weights to these factors.
AlliedSignal's board of directors conducted an overall analysis of the factors
described above, including through discussions with and questioning of
AlliedSignal's management and AlliedSignal's legal and financial advisors. In
considering the factors described above, individual members of AlliedSignal's
board of directors may have given different weight to different factors.
FACTORS CONSIDERED BY, AND RECOMMENDATION OF, THE BOARD OF DIRECTORS OF
HONEYWELL
At its meeting on June 4, 1999, the Honeywell board of directors
unanimously:
determined that the merger is advisable and fair to, and in the best
interests of, Honeywell and its shareowners;
directed that the proposed transaction be submitted for consideration by
the Honeywell shareowners; and
recommended that the Honeywell shareowners vote FOR approval and adoption
of the merger and the merger agreement.
In the course of reaching its decision to adopt the merger agreement, the
Honeywell board of directors consulted with Honeywell's management, as well as
its outside legal counsel and its financial advisors, and considered the
following material factors:
(1) information concerning the financial condition, results of operations,
prospects and businesses of Honeywell and AlliedSignal, including:
the revenues of the companies, their complementary businesses and
the potential for cost savings and revenue enhancement;
the recent and historical stock price performance of Honeywell
common stock and AlliedSignal common stock; and
the percentage of the combined company Honeywell's shareowners would
own following the merger;
(2) the strategic nature of the transaction, which combines AlliedSignal's
and Honeywell's diverse and complementary businesses, and creates a
broader and more diverse company with global reach and greater
resources, reduced cyclicality and, with the depth of its resources,
enhanced future operating flexibility and increased opportunity for
growth;
(3) the board of directors' knowledge of the industries in which Honeywell
competes and its belief that greater size and resources are important
to the long-term future of Honeywell;
(4) the combined company will adopt the Honeywell name and the merger will
help preserve the 'Honeywell' franchise on a long-term basis;
(5) the potential benefits to be derived from a combination of the two
companies as described under ' -- Our Reasons for the Merger';
(6) the terms of the merger, including the board of directors and
management structure of the combined company and the establishment of
an integration team with equal representation from both companies, are
designed to help ensure that the transaction will be a 'true'
combination and that the combined company will represent the best of
both companies;
(7) the merger will present the opportunity for the holders of Honeywell
common stock to receive a meaningful premium over the trading value of
Honeywell common stock on
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June 3, 1999, the last day of trading before rumors of a possible
transaction appeared in the marketplace, while at the same time
allowing those shareowners to participate in a larger and more
diversified company and, as shareowners of the combined company,
benefit from any future growth of the combined company;
(8) the exchange ratio will enable the Honeywell shareowners to own
approximately 30% of the outstanding stock of the combined company,
which percentage compared favorably with Honeywell's expected
contribution to the combined company;
(9) the analyses and presentations prepared by Bear Stearns, and Bear
Stearns' written opinion to the effect that, as of June 4, 1999, and
subject to the matters set out in its opinion, the exchange ratio was
fair from a financial point of view to Honeywell's shareowners;
(10) the intended accounting of the merger as a pooling of interests which
results in combined financial statements prepared on a basis
consistent with the underlying view that shareowner interests in the
two companies have simply been combined, and in the preservation of
the historical cost approach for both Honeywell and AlliedSignal;
(11) the ability to complete the merger as a reorganization for United
States federal income tax purposes in which Honeywell shareowners
generally will not recognize any gain or loss, except for any gain or
loss recognized in connection with cash received for a fractional
share of the combined company's common stock;
(12) the board of directors' belief, after considering the advice of
counsel, that the parties should be able to satisfy all conditions to
completion of the merger, including the receipt of the necessary
regulatory approvals in accordance with the terms of the merger
agreement, while recognizing the risk that regulators might impose
conditions on the grant of their approval;
(13) the terms of the merger agreement regarding third party proposals,
including (a) the potential payment to AlliedSignal of a termination
fee, (b) the grant to AlliedSignal of an option to purchase shares of
Honeywell common stock and (c) that Honeywell cannot terminate the
merger agreement in order to enter into a transaction with a third
party before the Honeywell shareowners have had an opportunity to vote
on the proposed merger with AlliedSignal, and the potential effect of
such provisions on possible efforts by other parties to acquire or
otherwise combine with Honeywell;
(14) the board of directors' faith in the abilities of Michael R.
Bonsignore and the fact that Mr. Bonsignore has been elected as the
Chief Executive Officer of the combined company as of the effective
time of the merger and has been elected as Chairman of the Board of
the combined company upon Mr. Bossidy's retirement in April 2000, or
such earlier date that Mr. Bossidy retires;
(15) the difficulties in successfully integrating the two companies and the
associated risks therewith;
(16) while the percentage of the combined company's sales to aerospace
customers will increase relative to Honeywell's sales to aerospace
customers, the nature of the products and services to be sold and the
customer base to be served will be broader and more diverse;
(17) the headquarters of the combined company will be in Morris Township,
New Jersey and the effect that that may have on the corporate
headquarters staff at Honeywell;
(18) the intention of both parties, as confirmed in the merger agreement,
to continue Honeywell's charitable endeavors in the Minneapolis/St.
Paul community and to explore opportunities to minimize the effects on
the local communities served by Honeywell that may result from the
headquarters of the combined company being located in Morris Township;
and
26
<PAGE>
(19) the interests that certain executive officers and directors of
Honeywell may have with respect to the merger in addition to their
interests as shareowners of Honeywell generally. See 'Interests of
Certain Persons in the Merger' on page 43.
In view of the variety of factors and the amount of information considered,
the Honeywell board of directors did not find it practicable to and did not
quantify, rank or otherwise assign relative weights to the specific factors it
considered in reaching its decision. The determination was made after
consideration of all of the factors as a whole. In addition, individual members
of the Honeywell board of directors may have given different weights to
different factors.
The Honeywell board of directors considered all these factors and
determined that these factors, as a whole, supported the conclusions and
recommendations described above. In reaching this determination, the factors
described above generally figured positively, as advantages or opportunities,
with the exception of the factors described in clauses 13, 15 and 17 above,
which figured negatively as a risk, uncertainty or drawback, and the factor
described in clause 19 above, which the Honeywell board of directors considered
to be neutral in its evaluation.
In considering the recommendation of the Honeywell board of directors with
respect to approving the merger and adopting the merger agreement, Honeywell
shareowners should be aware that certain officers and directors of Honeywell
have certain interests in the proposed merger that are different from and in
addition to the interests of Honeywell shareowners generally. The Honeywell
board of directors was aware of these interests and considered them in approving
the merger agreement and the merger. See 'Interests of Certain Persons in the
Merger' on page 43.
AMENDMENT OF ALLIEDSIGNAL'S BY-LAWS
In accordance with the terms of the merger agreement, the board of
directors of AlliedSignal has approved an amendment to AlliedSignal's by-laws,
to be effective upon completion of the merger. This amendment provides that,
until the second anniversary of the completion of the merger, the affirmative
vote of at least 75% of the members of the combined company's board of directors
other than Mr. Bonsignore will be required:
to remove Mr. Bonsignore from his positions of Chief Executive Officer or
Chairman of the Board of the combined company;
prior to the effective date of Mr. Bonsignore's election as Chairman of
the Board of the combined company, to reverse this election;
without his concurrence, to change Mr. Bonsignore's duties and
responsibilities as provided in his employment agreement with the combined
company; and
to amend this provision.
If at any time during the two-year period after the merger, fewer than 25%
of the members of the combined company's board of directors are directors who
were designated by Honeywell, the board of directors of the combined company
will not be permitted to take any of the actions described above without the
approval of at least one Honeywell designee, in addition to the 75% vote
described above.
ACCOUNTING TREATMENT
We expect the merger to qualify as a pooling of interests for accounting
and financial reporting purposes. Under this method of accounting, the recorded
assets and liabilities of AlliedSignal and Honeywell will be carried forward to
the books of the combined company at their historical recorded amounts, subject
to any adjustments required to conform the accounting policies of the two
companies. In addition, net income of the combined company will include income
of AlliedSignal and Honeywell for the entire fiscal year in which the merger
occurs. The historical reported net income of AlliedSignal and Honeywell for
prior periods will be combined and restated as net income of the combined
company after addressing any accounting conformity issues.
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MATERIAL FEDERAL INCOME TAX CONSEQUENCES
The income tax discussion below is based on the opinions of Fried, Frank,
Harris, Shriver & Jacobson, counsel to AlliedSignal, and of Skadden, Arps,
Slate, Meagher & Flom LLP, counsel to Honeywell, and summarizes the material
United States federal income tax consequences of the merger. The opinions of
counsel are included as exhibits to AlliedSignal's registration statement of
which this joint proxy statement/prospectus forms a part. This discussion is not
a comprehensive description of all of the tax consequences that may be relevant
to any given shareowner. For example, we have not described tax consequences
that arise from rules that apply generally to all taxpayers or to some classes
of taxpayers. We have also not described tax consequences that are generally
assumed to be known by investors. This discussion, and counsels' opinions, are
based upon the Internal Revenue Code, the regulations of the United States
Treasury Department, and court and administrative rulings and decisions in
effect on the date of this joint proxy statement/prospectus. These authorities
may change, possibly retroactively, and any change could affect the continuing
validity of counsels' opinions and of this discussion.
This discussion, and counsels' opinions, are also based upon (1)
representations made by AlliedSignal and Honeywell contained in the tax
representation letters, signed by officers of AlliedSignal and Honeywell,
attached to the opinions included as exhibits to AlliedSignal's registration
statement and (2) the assumptions that the merger will be effected pursuant to
applicable state law and otherwise completed according to the terms of the
merger agreement and as described in this joint proxy statement/prospectus. The
validity of counsels' opinions and of this discussion depends upon the
continuing validity of these representations and assumptions.
This discussion, and counsels' opinions, assume that Honeywell shareowners
hold their shares of Honeywell common stock as capital assets and do not address
the tax consequences that may be relevant to a particular shareowner receiving
special treatment under some United States federal income tax laws. Shareowners
receiving this special treatment include:
banks;
tax-exempt organizations;
insurance companies;
dealers in securities or foreign currencies;
Honeywell shareowners who received their Honeywell common stock
through the exercise of employee stock options or otherwise as
compensation;
Honeywell shareowners who are not U.S. persons; and
Honeywell shareowners who hold shares of Honeywell common stock as
part of a hedge, straddle or conversion transaction.
Neither counsels' opinion, nor this discussion, addresses any consequences
arising under the laws of any state, locality or foreign jurisdiction. Based on
the assumptions and representations discussed above, the material United States
federal income tax consequences of the merger are as follows:
(1) the merger will qualify as a reorganization within the meaning of
Section 368(a) of the Internal Revenue Code;
(2) each of AlliedSignal, Honeywell and Blossom Acquisition Corp., the
subsidiary of AlliedSignal that will merge with and into Honeywell,
will be a party to the reorganization within the meaning of Section
368(b) of the Internal Revenue Code;
(3) no gain or loss will be recognized by AlliedSignal, Honeywell or
Blossom Acquisition Corp. as a result of the merger;
(4) no gain or loss will be recognized by a shareowner of Honeywell who
exchanges shares of Honeywell common stock solely for shares of common
stock of the combined company; except gain will be recognized with
respect to cash received instead of a fractional share of the combined
company's common stock;
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<PAGE>
(5) the aggregate tax basis of the shares of the combined company's common
stock received by a Honeywell shareowner who exchanges all of the
shareowners' shares of Honeywell common stock for shares of common
stock of the combined company in the merger will be the same as the
aggregate tax basis of the shares of Honeywell common stock
surrendered in exchange (reduced by any amount allocable to a
fractional share of the combined company's common stock for which cash
is received);
(6) the holding period of the shares of the combined company's common
stock received by a Honeywell shareowner will include the holding
period of shares of Honeywell common stock surrendered in exchange;
and
(7) a Honeywell shareowner who receives cash instead of a fractional share
of the combined company's common stock will, in general, recognize
capital gain or loss equal to the difference between the cash amount
received and the portion of the shareowner's tax basis in shares of
Honeywell common stock allocable to the fractional share. This gain or
loss will be long-term capital gain or loss for United States federal
income tax purposes if the shareowner's holding period in the shares
of Honeywell common stock exchanged for the fractional share of the
combined company's common stock is more than one year.
It is a condition to the merger that each of AlliedSignal and Honeywell
receives another tax opinion from its counsel, prior to completing the merger,
that the merger will be treated for United States federal income tax purposes as
a reorganization and that each of AlliedSignal, Honeywell and Blossom
Acquisition Corp. will be a party to the reorganization. The opinions will be
based on customary assumptions and factual representations and will assume that
the merger will be effected pursuant to applicable state law and otherwise
completed according to the terms of the merger agreement and as described in
this joint proxy statement/prospectus. Opinions of counsel are not binding upon
the Internal Revenue Service or the courts. Neither AlliedSignal nor Honeywell
has requested or will request an advance ruling from the Internal Revenue
Service as to the tax consequences of the merger.
TAX MATTERS ARE VERY COMPLICATED, AND THE TAX CONSEQUENCES OF THE MERGER TO
EACH HONEYWELL SHAREOWNER WILL DEPEND ON THE FACTS OF THAT SHAREOWNER'S
SITUATION. HONEYWELL SHAREOWNERS ARE ENCOURAGED TO CONSULT THEIR OWN TAX
ADVISORS REGARDING THE SPECIFIC TAX CONSEQUENCES OF THE MERGER.
REGULATORY MATTERS
U.S. Antitrust. Under the Hart-Scott-Rodino Antitrust Improvements Act of
1976, we cannot complete the merger until:
we have given to the Federal Trade Commission and the Antitrust Division
of the United States Department of Justice:
-- notification that AlliedSignal and Honeywell desire to merge; and
-- certain information relating to the competitive nature of the
businesses and industries in which AlliedSignal and Honeywell operate;
and
one or more specified waiting periods expire or are earlier terminated.
We both filed notification and report forms under the Hart-Scott-Rodino Act
with the Federal Trade Commission and the Antitrust Division on June 25, 1999.
Based on discussions we have had with the Department of Justice, we anticipate
receiving a request from the Department of Justice for additional information
regarding certain of our companies' aerospace businesses. We cannot complete the
merger until 20 days after we have substantially complied with the request,
unless the waiting period is terminated earlier. Even after the waiting period
expires or is terminated, the Federal Trade Commission and the Antitrust
Division retain the authority to challenge the merger on antitrust grounds and
may seek to enjoin the completion of the merger, rescind the merger or
conditionally approve the merger on the divestiture of substantial assets of
either AlliedSignal or Honeywell or both. In addition, each state in which
AlliedSignal or Honeywell operates may also seek to review the merger. It is
possible that some of these authorities may also seek to challenge
29
<PAGE>
the merger. Expiration or termination of all waiting periods under the
Hart-Scott-Rodino Act is a condition to completing the merger.
European Union. Both AlliedSignal and Honeywell conduct business in member
states of the European Union. European Union Council Regulation No. 4064/89 and
accompanying regulations require notification of and approval by the European
Commission of specific mergers or acquisitions involving parties with aggregate
worldwide sales and individual European Union sales exceeding specified
thresholds before these mergers and acquisitions can be implemented.
AlliedSignal and Honeywell informally notified the European Commission of the
merger on June 7, 1999 and filed formal notifications with the European
Commission of the merger on July 15, 1999. Completing a review and gaining
approval under the European Commission merger regulation is a condition to
completing the merger.
Other Laws. AlliedSignal and Honeywell conduct operations in a number of
other jurisdictions, including Brazil and Canada, where other regulatory filings
or approvals may be required or advisable in connection with the completion of
the merger. AlliedSignal and Honeywell are currently in the process of reviewing
whether other filings or approvals may be required or desirable in these other
jurisdictions.
General. It is possible that other state, local or foreign governmental
entities or third parties may seek to challenge the merger. In addition, it is
possible that governmental entities having jurisdiction over AlliedSignal and
Honeywell may seek regulatory concessions as conditions for granting approval of
the merger. Under the merger agreement, we have both agreed to use our
'reasonable best efforts' to take all actions to obtain all necessary regulatory
and governmental approvals necessary to complete the merger and to address
concerns of regulators and governmental officials. Addressing these concerns
could require that we sell portions of our businesses. Neither AlliedSignal nor
Honeywell is required to sell any portion of its business, product line or
assets if the divestiture would have a material adverse effect on the combined
company at or after the merger. While we do not expect the closing of the merger
to be prevented or materially delayed by any challenge by regulatory authorities
within or outside the United States, we can give no assurance that the required
regulatory approvals will be obtained on terms that satisfy the conditions to
completion of the merger or within the time frame contemplated by AlliedSignal
and Honeywell. See 'Material Terms of the Merger Agreement -- Conditions to the
Completion of the Merger' on page 63.
APPRAISAL RIGHTS
Both AlliedSignal and Honeywell are organized under Delaware law. Under
Delaware law, neither AlliedSignal's nor Honeywell's shareowners have a right to
dissent and receive the appraised value of their shares in connection with the
merger.
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COMPARATIVE PER SHARE MARKET PRICE AND DIVIDEND INFORMATION
Market Prices and Dividends
AlliedSignal common stock is listed on the New York, Chicago and Pacific
stock exchanges under the symbol 'ALD' and is also listed on the London stock
exchange. Honeywell common stock is listed on the New York Stock Exchange under
the symbol 'HON' and is also listed on exchanges in London, Paris, Amsterdam,
Brussels and Zurich.
The table below sets forth, for the periods indicated, the high and low
sale prices of the shares of AlliedSignal common stock and Honeywell common
stock as reported on the NYSE Composite Transaction Reporting System, in each
case based on published financial sources, and the cash dividends declared on
AlliedSignal common stock and Honeywell common stock.
AlliedSignal's common stock prices and the cash dividend amounts in the
following table have been adjusted to reflect AlliedSignal's two-for-one stock
split on September 15, 1997.
<TABLE>
<CAPTION>
ALLIEDSIGNAL COMMON STOCK HONEYWELL COMMON STOCK
------------------------------ ------------------------------
HIGH LOW DIVIDEND HIGH LOW DIVIDEND
---- --- -------- ---- --- --------
<S> <C> <C> <C> <C> <C> <C>
1997:
First Fiscal Quarter $38.25 $33.25 $.13 $76.625 $63.875 $.27
Second Fiscal Quarter 42.50 33.875 .13 78.75 65.50 .27
Third Fiscal Quarter 47.125 41.125 .13 80.75 66.4375 .27
Fourth Fiscal Quarter 43.9375 31.625 .13 76.1875 64.9375 .28
1998:
First Fiscal Quarter 43.8125 34.625 .15 86.00 65.50 .28
Second Fiscal Quarter 47.5625 39.625 .15 96.375 77.50 .28
Third Fiscal Quarter 46.6875 32.625 .15 90.1875 61.0625 .28
Fourth Fiscal Quarter 45.125 33.0625 .15 84.375 58.625 .29
1999:
First Fiscal Quarter 50.9375 37.8125 .17 79.50 62 .29
Second Fiscal Quarter 68.625 49.25 .17 125.375 75.75 .29
Third Fiscal Quarter (through
July 22, 1999) 68 61.4375 .17 126.3125 112.875 .29
</TABLE>
On June 4, 1999, the last full trading day prior to the signing of the
merger agreement, the closing prices of AlliedSignal common stock and Honeywell
common stock reported on the NYSE Composite Transaction Reporting System were
$58.375 per share and $105 per share, respectively. On June 3, 1999, the last
full trading day before rumors of the merger appeared in the marketplace, the
closing prices of AlliedSignal common stock and Honeywell common stock reported
on the NYSE Composite Transaction Reporting System were $60.375 per share and
$95.875 per share, respectively. On July 22, 1999, the last trading day prior to
the printing of this joint proxy statement/prospectus for which it was
practicable to include prices, the closing prices of AlliedSignal common stock
and Honeywell common stock reported on the NYSE Composite Transaction Reporting
System were $64.875 per share and $120.50 per share, respectively. WE URGE YOU
TO OBTAIN CURRENT MARKET QUOTATIONS PRIOR TO MAKING ANY DECISION WITH RESPECT TO
THE MERGER.
Following the merger, the combined company common stock will be traded on
the New York, Chicago and Pacific stock exchanges under the symbol 'HON', as
well as on the London stock exchange.
Dividend Policy. The merger agreement permits AlliedSignal and Honeywell to
pay, prior to completing the merger, regular quarterly cash dividends to their
shareowners. AlliedSignal and Honeywell have agreed in the merger agreement to
coordinate declaring dividends and the related record dates and payment dates so
that Honeywell shareowners do not receive two dividends, or fail to receive one
dividend, for any single calendar quarter. Following the merger, the combined
company expects to continue to pay dividends on the combined company's common
stock. However, the payment of dividends will be at the discretion of the
combined company's board of directors and will be determined after consideration
of various factors, including the earnings and financial condition of the
combined company and its subsidiaries.
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INFORMATION ABOUT OUR COMPANIES
INFORMATION ABOUT ALLIEDSIGNAL
AlliedSignal is a leading advanced technology and manufacturing company
serving customers worldwide with aerospace products and services, automotive
products, chemicals, fibers, plastics and advanced materials. We operate through
eleven strategic business units that offer products and services which are sold
principally for use in the following applications: commercial and military
aviation, defense, space, automotive and heavy vehicles, electronics, carpeting,
refrigeration, construction, computers, utilities, pharmaceutical and
agriculture. Our strategic business units have been aggregated into five
reportable segments. A description of our five reportable segments follows:
Aerospace Systems. AlliedSignal's Aerospace Systems segment provides sales
and service for a wide range of aerospace products for both original equipment
manufacturers and aftermarket customers, including:
systems and components for commercial, military, regional and general
aviation aircraft, including environmental control systems, aircraft
wheels and brakes, power generation systems and engine controls;
advanced electronics, avionics and lighting for military aircraft,
defense and space stations, large and regional air transport, business
and general aviation, including communications, navigation, flight
control and management, weather radar systems, microwave landing and
electronic systems, flight guidance and control systems, sensors and
components, automatic test systems, cockpit display systems and internal
and external aircraft lighting;
maintenance, repair and overhaul services and spares and hardware sales
to support aerospace aftermarket customers; and
management and technical services for the government.
This segment accounted for approximately 32% of AlliedSignal's 1998 total
sales.
Specialty Chemicals & Electronic Solutions. AlliedSignal's Specialty
Chemicals & Electronic Solutions segment manufactures engineered materials used
in numerous applications and technologically advanced materials used in the
manufacturing of electronics and semiconductors. The Specialty Chemicals &
Electronic Solutions segment's products include:
specialty and fine chemical products, including hydrofluoric acid,
polyethylene and petroleum-based specialty waxes and wax blends,
environmentally safer fluorocarbons, pharmaceutical bulk active and
advanced intermediate chemicals and process technology, for use in a
diverse range of applications, including pharmaceutical, polymer, crop
protection, petroleum, personal care products, security coding,
semiconductor, air conditioning and refrigeration, medical, coatings,
textile, electronics and nuclear; and
materials and solutions for the global electronics market, including
laminate and prepeg materials used as the base material for printed
circuit boards, interconnect materials and solutions for semiconductor
wafer manufacturing, electron beam curing equipment and amorphous
metals.
This segment accounted for approximately 15% of AlliedSignal's 1998 total
sales.
Turbine Technologies. AlliedSignal's Turbine Technologies segment provides
products based on technologically advanced turbine applications. Turbine
Technologies' products include:
auxilary power units for commercial and regional airlines and business
and military aircraft;
turbofan, turboshaft and turboprop propulsion engines for business
aviation, regional airlines, military aircraft and marine and industrial
markets; and
turbochargers, charged air coolers, radiators and complete cooling
modules for passenger cars, racecars, trucks, buses, agricultural
equipment, diesel locomotives and marine, mining, construction,
military, aviation, and power generation applications.
This segment accounted for approximately 24% of AlliedSignal's 1998 total
sales.
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Performance Polymers. AlliedSignal's Performance Polymers segment
manufactures high performance fibers, specialty films, plastics and intermediate
chemicals such as caprolactam, the base chemical used to make nylon. These
products have broad applications in industries such as commercial and
residential carpeting, autos and auto components, food and pharmaceutical
packaging, specialty chemicals and electronics. This segment accounted for
approximately 13% of AlliedSignal's 1998 total sales.
Transportation Products. AlliedSignal's Transportation Products segment
provides parts, supplies and systems for vehicles to both original equipment
manufacturers and aftermarket customers. Transportation Products manufactures
and distributes:
well-recognized consumer-branded automotive products for aftermarket
customers, as well as to automotive original equipment manufacturers and
installers, such as oil and air filters (FRAM'r'), spark plugs
(Autolite'r') and car care products including antifreeze, windshield
washer fluids and waxes, washes and specialty cleaners (for example,
Prestone'r' and Simoniz'r');
brake friction materials, including disc brake pads and drum brake
linings, and aftermarket brake hard parts, used for a broad range of
car, truck, railway and aerospace applications worldwide; and
air brake and filtration systems and components for heavy-duty trucks,
tractors, trailers, buses and other commercial vehicles sold through a
joint venture owned 65% by AlliedSignal and 35% by Knorr-Bremse AG of
Germany.
This segment accounted for approximately 16% of AlliedSignal's 1998 total
sales.
INFORMATION ABOUT HONEYWELL
Honeywell was founded in 1885 with the invention of the automatic
thermostat control for home heating and has evolved into what is today one of
the leading technology and controls companies in the world, serving customers in
homes and commercial buildings, in industry, and in space and aviation.
Honeywell has three businesses, all with a focus on controls:
Home and Building Control. Honeywell's Home and Building Control business
is a global provider of comfortable, healthy, safe and energy-efficient indoor
environments, offering more than 3,500 products to both the consumer and the
building industry. The Home and Building Control business provides products,
services and solutions to create efficient, safe, comfortable indoor
environments, offering controls for heating, ventilating, humidification and
air-conditioning equipment; security and fire alarm systems; home automation
systems; energy-efficient lighting controls; and building management systems and
services. This business accounted for approximately 41% of Honeywell's 1998
total sales.
Industrial Control. Honeywell is a worldwide provider of automation
solutions from sensors to integrated systems, serving industries such as
hydrocarbon processing, chemicals, and pulp and paper. The Industrial Control
business provides one-stop, integrated automation solutions, including systems,
products and services for process industries such as hydrocarbon processing,
chemicals, and pulp and paper, and manufactures switches and sensors for use in
vehicles, consumer products, data communication and industrial process
applications and systems, as well as smart position-sensing devices and systems
used in factories and package distribution systems. The Industrial Control
business accounted for approximately 30% of Honeywell's 1998 total sales.
Space and Aviation Control. Honeywell is a supplier of avionics systems and
products for the commercial, military and space markets with customers ranging
from aircraft manufacturers and business aircraft operators to prime space
contractors and the U.S. government. Honeywell's systems are on board virtually
every commercial aircraft produced in the Western world and every manned flight
launched in the United States. This business accounted for approximately 28% of
Honeywell's 1998 total sales.
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UNAUDITED PRO FORMA COMBINED CONDENSED FINANCIAL INFORMATION
The following unaudited pro forma combined condensed financial statements
combine the historical consolidated balance sheets and statements of income of
AlliedSignal and Honeywell giving effect to the merger using the pooling of
interests method of accounting for a business combination. Under this method of
accounting, AlliedSignal and Honeywell are treated as if they had always been
combined for accounting and financial reporting purposes.
We are providing the following information to aid your analysis of the
financial aspects of the merger. We derived this information from the audited
consolidated financial statements of AlliedSignal for the years ended
December 31, 1998, 1997 and 1996 and the unaudited consolidated financial
statements of AlliedSignal for the quarters ended March 31, 1999 and 1998, and
from the audited consolidated financial statements of Honeywell for the years
ended December 31, 1998, 1997 and 1996 and the unaudited consolidated financial
statements of Honeywell for the quarters ended April 4, 1999 and April 5, 1998.
The information is only a summary and you should read it in conjunction with our
historical financial statements and related notes contained in the annual
reports, quarterly reports and other information that we have filed with the SEC
and incorporated by reference. To obtain copies of these documents, see 'Where
You Can Find More Information' on page 90.
The unaudited pro forma combined condensed statements of income for the
years ended December 31, 1998, 1997 and 1996 and the first quarters of 1999 and
1998 assume the merger was effected on January 1, 1996. The unaudited pro forma
combined condensed balance sheet gives effect to the merger as if it had
occurred at the end of the combined company's first quarter of 1999. The
accounting policies of Honeywell and AlliedSignal are substantially comparable.
Consequently, we did not make adjustments to the unaudited pro forma combined
condensed financial statements to conform the accounting policies of the two
companies.
The unaudited pro forma combined condensed financial information is for
illustrative purposes only. The companies may have performed differently had
they always been combined. You should not rely on the pro forma combined
condensed financial information as being indicative of the historical results
that would have been achieved had the companies always been combined or the
future results that the combined company will experience after the merger.
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UNAUDITED PRO FORMA COMBINED CONDENSED BALANCE SHEET
<TABLE>
<CAPTION>
HISTORICAL
------------------------------
ALLIEDSIGNAL HONEYWELL PRO FORMA PRO FORMA
MARCH 31, 1999 APRIL 4, 1999 ADJUSTMENTS(1) COMBINED
-------------- ------------- -------------- --------
(IN MILLIONS)
<S> <C> <C> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents........... $ 795 $ 74 $ $ 869
Short-term investments.............. -- 7 7
Accounts and notes receivable....... 1,817 1,780 3,597
Inventories......................... 2,344 1,134 3,478
Other current assets................ 561 283 844
------- ------ ------- -------
Total current assets........... 5,517 3,278 8,795
Investments and long-term receivables.... 1,509 303 1,812
Property, plant and equipment............ 9,262 3,347 12,609
Accumulated depreciation and
amortization........................... (4,969) (2,082) (7,051)
Cost in excess of net assets of acquired
companies -- net....................... 2,975 942 3,917
Other assets............................. 1,086 1,056 2,142
------- ------ ------- -------
Total assets........................ $15,380 $6,844 $ -- $22,224
------- ------ ------- -------
------- ------ ------- -------
LIABILITIES
Current liabilities:
Accounts payable.................... $ 1,328 $ 616 $ $ 1,944
Short-term borrowings............... 70 36 106
Commercial paper.................... 1,962 16 1,978
Current maturities of long-term
debt.............................. 88 123 211
Accrued liabilities................. 1,636 1,334 63 (5) 3,033
------- ------ ------- -------
Total current liabilities...... 5,084 2,125 63 7,272
Long-term debt........................... 1,457 1,300 2,757
Deferred income taxes.................... 806 55 861
Postretirement benefit obligations other
than pensions.......................... 1,722 333 2,055
Other liabilities........................ 1,014 252 1,266
SHAREOWNERS' EQUITY
Capital - common stock issued............ 716 281 (45)(6) 952
- additional paid-in capital..... 3,109 720 (1,998)(6) 1,831
Common stock held in treasury, at cost... (3,714) (2,043) 2,043 (6) (3,714)
Accumulated other nonowner changes....... (136) (84) (220)
Retained earnings........................ 5,322 3,905 (63)(5) 9,164
------- ------ ------- -------
Total shareowners' equity...... 5,297 2,779 (63) 8,013
------- ------ ------- -------
Total liabilities and shareowners'
equity............................ $15,380 $6,844 $ -- $22,224
------- ------ ------- -------
------- ------ ------- -------
</TABLE>
See Accompanying Notes to Unaudited Pro Forma Combined
Condensed Financial Statements
35
<PAGE>
UNAUDITED PRO FORMA COMBINED CONDENSED STATEMENTS OF INCOME
FOR THE FIRST QUARTER OF 1999
<TABLE>
<CAPTION>
HISTORICAL
-----------------------------
ALLIEDSIGNAL HONEYWELL
QUARTER ENDED QUARTER ENDED PRO
MARCH 31, APRIL 4, PRO FORMA FORMA
1999 1999 ADJUSTMENTS(1) COMBINED
---- ---- -------------- --------
(IN MILLIONS, EXCEPT PER SHARE AMOUNTS)
<S> <C> <C> <C> <C>
Net sales................................. $3,596 $1,986 $ $5,582
------ ------ ------
Cost of goods sold........................ 2,709 1,483 4,192
Selling, general and administrative
expenses................................ 381 318 699
------ ------ -------- ------
Total costs and expenses............. 3,090 1,801 4,891
------ ------ -------- ------
Income from operations.................... 506 185 691
Equity in income (loss) of affiliated
companies............................... 12 (2) 10
Other income (expense).................... 15 3 18
Interest and other financial charges...... (44) (29) (73)
------ ------ -------- ------
Income before taxes on income............. 489 157 646
Taxes on income........................... 154 52 206
------ ------ -------- ------
Net income................................ $ 335 $ 105 $ -- $ 440
------ ------ -------- ------
------ ------ -------- ------
Earnings per share of common
stock -- basic.......................... $ 0.60 $ 0.84 $ 0.55(3)
Earnings per share of common stock --
assuming dilution....................... 0.59 0.83 0.54(3)
Weighted average number of shares
outstanding -- basic.................... 557 126 793(3)
Weighted average number of shares
outstanding -- assuming dilution........ 568 127 806(3)
Cash dividends per share of common
stock................................... 0.17 0.29 0.16(3)
</TABLE>
See Accompanying Notes to Unaudited Pro Forma Combined
Condensed Financial Statements
36
<PAGE>
UNAUDITED PRO FORMA COMBINED CONDENSED STATEMENTS OF INCOME
FOR THE FIRST QUARTER OF 1998
<TABLE>
<CAPTION>
HISTORICAL
-------------------------------
ALLIEDSIGNAL HONEYWELL
QUARTER ENDED QUARTER ENDED
MARCH 31, APRIL 5, PRO FORMA PRO FORMA
1998 1998 ADJUSTMENTS(1) COMBINED
---- ---- -------------- --------
(IN MILLIONS, EXCEPT PER SHARE AMOUNTS)
<S> <C> <C> <C> <C>
Net sales................................. $3,646 $1,923 $ $5,569
------ ------ ------
Cost of goods sold........................ 2,809 1,440 4,249
Selling, general and administrative
expenses................................ 398 315 713
------ ------ ------ ------
Total costs and expenses............. 3,207 1,755 4,962
------ ------ ------ ------
Income from operations.................... 439 168 607
Equity in income of affiliated
companies............................... 34 -- 34
Other income (expense).................... (1) 2 1
Interest and other financial charges...... (34) (26) (60)
------ ------ ------ ------
Income before taxes on income............. 438 144 582
Taxes on income........................... 138 48 186
------ ------ ------ ------
Net income................................ $ 300 $ 96 $ -- $ 396
------ ------ ------ ------
------ ------ ------ ------
Earnings per share of common
stock -- basic.......................... $ 0.53 $ 0.76 $ 0.49(3)
Earnings per share of common stock --
assuming dilution....................... 0.52 0.75 0.48(3)
Weighted average number of shares
outstanding -- basic.................... 564 126 800(3)
Weighted average number of shares
outstanding -- assuming dilution........ 578 128 818(3)
Cash dividends per share of common
stock................................... 0.15 0.28 0.15(3)
</TABLE>
See Accompanying Notes to Unaudited Pro Forma Combined
Condensed Financial Statements
37
<PAGE>
UNAUDITED PRO FORMA COMBINED CONDENSED STATEMENTS OF INCOME
FOR THE YEAR ENDED DECEMBER 31, 1998
<TABLE>
<CAPTION>
HISTORICAL PRO
------------------------ PRO FORMA FORMA
ALLIEDSIGNAL HONEYWELL ADJUSTMENTS(1) COMBINED
------------ --------- -------------- --------
(IN MILLIONS, EXCEPT PER SHARE AMOUNTS)
<S> <C> <C> <C> <C>
Net sales....................................... $15,128 $8,427 $ $23,555
------- ------ -------
Cost of goods sold.............................. 11,476 6,213 17,689
Selling, general and administrative expenses.... 1,690 1,318 3,008
------- ------ ------ -------
Total costs and expenses................... 13,166 7,531 20,697
------- ------ ------ -------
Income from operations.......................... 1,962 896 2,858
Equity in income of affiliated companies........ 150 12 162
Other income (expense).......................... (7) 34 27
Interest and other financial charges............ (162) (113) (275)
------- ------ ------ -------
Income before taxes on income................... 1,943 829 2,772
Taxes on income................................. 612 257 869
------- ------ ------ -------
Net income...................................... $ 1,331 $ 572 $ -- $ 1,903
------- ------ ------ -------
------- ------ ------ -------
Earnings per share of common stock -- basic..... $ 2.37 $ 4.54 $ 2.38(3)
Earnings per share of common stock -- assuming
dilution...................................... 2.32 4.48 2.34(3)
Weighted average number of shares outstanding --
basic......................................... 562 126 798(3)
Weighted average number of shares outstanding --
assuming dilution............................. 574 128 814(3)
Cash dividends per share of common stock........ 0.60 1.13 0.60(3)
</TABLE>
See Accompanying Notes to Unaudited Pro Forma Combined
Condensed Financial Statements
38
<PAGE>
UNAUDITED PRO FORMA COMBINED CONDENSED STATEMENTS OF INCOME
FOR THE YEAR ENDED DECEMBER 31, 1997
<TABLE>
<CAPTION>
HISTORICAL PRO
------------------------ PRO FORMA FORMA
ALLIEDSIGNAL HONEYWELL ADJUSTMENTS(1) COMBINED
------------ --------- -------------- --------
(IN MILLIONS, EXCEPT PER SHARE AMOUNTS)
<S> <C> <C> <C> <C>
Net sales....................................... $14,472 $8,027 $ $22,499
------- ------ -------
Cost of goods sold.............................. 11,481 5,963 17,444
Selling, general and administrative expenses.... 1,581 1,359 2,940
Gain on sale of strategic business units........ (226) (77) (303)
------- ------ ------ -------
Total costs and expenses................... 12,836 7,245 20,081
------- ------ ------ -------
Income from operations.......................... 1,636 782 2,418
Equity in income of affiliated companies........ 178 13 191
Other income (expense).......................... 77 10 87
Interest and other financial charges............ (175) (102) (277)
------- ------ ------ -------
Income before taxes on income................... 1,716 703 2,419
Taxes on income................................. 546 232 778
------- ------ ------ -------
Net income...................................... $ 1,170 $ 471 $ -- $ 1,641
------- ------ ------ -------
------- ------ ------ -------
Earnings per share of common stock -- basic..... $ 2.07 $ 3.71 $ 2.04(3)
Earnings per share of common stock -- assuming
dilution...................................... 2.02 3.65 2.00(3)
Weighted average number of shares outstanding --
basic......................................... 565 127 803(3)
Weighted average number of shares outstanding --
assuming dilution............................. 580 129 822(3)
Cash dividends per share of common stock........ 0.52 1.09 0.54(3)
</TABLE>
See Accompanying Notes to Unaudited Pro Forma Combined
Condensed Financial Statements
39
<PAGE>
UNAUDITED PRO FORMA COMBINED CONDENSED STATEMENTS OF INCOME
FOR THE YEAR ENDED DECEMBER 31, 1996
<TABLE>
<CAPTION>
HISTORICAL PRO
------------------------ PRO FORMA FORMA
ALLIEDSIGNAL HONEYWELL ADJUSTMENTS(1) COMBINED
------------ --------- -------------- --------
(IN MILLIONS, EXCEPT PER SHARE AMOUNTS)
<S> <C> <C> <C> <C>
Net sales....................................... $13,971 $7,312 $ $21,283
------- ------ -------
Cost of goods sold.............................. 11,606 5,329 16,935
Selling, general and administrative expenses.... 1,511 1,313 2,824
Gain on sale of strategic business units........ (655) -- (655)
------- ------ ------ -------
Total costs and expenses................... 12,462 6,642 19,104
------- ------ ------ -------
Income from operations.......................... 1,509 670 2,179
Equity in income of affiliated companies........ 143 13 156
Other income (expense).......................... 87 8 95
Interest and other financial charges............ (186) (81) (267)
------- ------ ------ -------
Income before taxes on income................... 1,553 610 2,163
Taxes on income................................. 533 207 740
------- ------ ------ -------
Net income...................................... $ 1,020 $ 403 $ -- $ 1,423
------- ------ ------ -------
------- ------ ------ -------
Earnings per share of common stock -- basic..... $ 1.80 $ 3.18 $ 1.77(3)
Earnings per share of common stock -- assuming
dilution...................................... 1.76 3.11 1.73(3)
Weighted average number of shares outstanding --
basic......................................... 566 127 804(3)
Weighted average number of shares outstanding --
assuming dilution............................. 580 130 824(3)
Cash dividends per share of common stock........ 0.45 1.06 0.49(3)
</TABLE>
See Accompanying Notes to Unaudited Pro Forma Combined
Condensed Financial Statements
40
<PAGE>
NOTES TO UNAUDITED PRO FORMA COMBINED
CONDENSED FINANCIAL STATEMENTS
Note 1. Basis of Presentation
The unaudited pro forma combined condensed statements of income are based
on the audited consolidated statements of income of AlliedSignal for the years
ended December 31, 1998, 1997 and 1996 and the unaudited consolidated statements
of income of AlliedSignal for the quarters ended March 31, 1999 and 1998, and
the audited consolidated income statements of Honeywell for the years ended
December 31, 1998, 1997 and 1996, and the unaudited consolidated income
statements of Honeywell for the quarters ended April 4, 1999 and April 5, 1998.
No pro forma adjustments were necessary in preparing the unaudited pro forma
combined condensed statements of income. The unaudited pro forma combined
condensed balance sheet is based on the unaudited consolidated balance sheet of
AlliedSignal as of March 31, 1999 and on the unaudited consolidated statement of
financial position of Honeywell as of April 4, 1999.
AlliedSignal's and Honeywell's respective consolidated financial statements
are prepared in conformity with generally accepted accounting principles and
require management of AlliedSignal and Honeywell, as applicable, to make
estimates and assumptions that affect the reported amounts in the financial
statements and related disclosures in the accompanying notes. In the opinion of
AlliedSignal and Honeywell, the unaudited pro forma combined condensed financial
statements include all adjustments necessary to present fairly the results of
the periods presented. Actual results could differ materially from these
estimates.
Note 2. Accounting Principles and Financial Statement Classifications
The accounting policies of AlliedSignal and Honeywell are substantially
comparable. Consequently, we did not make adjustments to the unaudited pro forma
combined condensed financial statements to conform the accounting policies of
the combining companies.
We have reclassified certain items in the historical financial statements
of Honeywell to conform to the presentation expected to be used by the combined
company.
Note 3. Pro Forma Earnings Per Share and Dividends Per Share
The 'pro forma combined earnings per share of common stock -- basic' is
based on net income and the weighted average number of outstanding common
shares. 'Earnings per share of common stock -- assuming dilution' is based on
net income and the weighted average number of outstanding common shares and the
dilutive effect of stock options and restricted stock units. The weighted
average number of outstanding common shares has been adjusted to reflect the
exchange ratio of 1.875 shares of common stock of the combined company for each
share of Honeywell common stock.
The pro forma combined dividends per share reflect the sum of dividends
paid by AlliedSignal and Honeywell divided by the number of shares that would
have been outstanding for the periods, after adjusting the Honeywell shares for
the exchange ratio of 1.875 shares of common stock of the combined company.
Note 4. Intercompany Transactions
There were no significant transactions between AlliedSignal and Honeywell
during any of the periods presented.
Note 5. Merger-Related and Integration-Related Expenses
We estimate that merger-related fees and expenses, consisting primarily of
SEC filing fees, fees and expenses of investment bankers, attorneys and
accountants, and financial printing and other related charges, will be
approximately $63 million. We have reflected these fees and expenses as an
41
<PAGE>
increase to accrued liabilities and a reduction in retained earnings in the
unaudited pro forma combined condensed balance sheet as of the end of the first
quarter of 1999. We have not reflected this charge in the unaudited pro forma
combined condensed statements of income or in the pro forma combined per share
data.
Based on our current plans, we estimate that we will incur costs of between
approximately $400 million and $600 million for severance and other
integration-related expenses, including the elimination of duplicate facilities
and excess capacity, operations realignment and related workforce reductions.
These expenditures are necessary to reduce costs and operate efficiently. The
unaudited pro forma combined condensed financial statements reflect neither the
impact of these charges nor the benefits from the expected cost savings or
revenue enhancements. The costs for severance and other integration-related
expenses will be charged to operations in the periods in which the obligations
occur.
Note 6. Other Pro Forma Adjustments
We have made pro forma adjustments to the unaudited pro forma combined
condensed balance sheet to reflect the cancellation of Honeywell common stock
accounted for as treasury stock and the assumed issuance of approximately 236
million shares of common stock of the combined company in exchange for all of
the shares of Honeywell common stock outstanding (based on the number of shares
of Honeywell common stock outstanding as of the end of Honeywell's first quarter
of 1999 and the exchange ratio of 1.875). The actual number of shares of common
stock of the combined company to be issued in connection with the merger will be
based on the number of shares of Honeywell common stock issued and outstanding
as of the completion of the merger.
42
<PAGE>
INTERESTS OF CERTAIN PERSONS IN THE MERGER
In considering the recommendation of the Honeywell board of directors with
respect to the merger agreement, shareowners should be aware that certain
members of the management of Honeywell and the Honeywell board of directors have
interests in the merger that may be different from, or in addition to, the
interests of the other shareowners of Honeywell generally.
NEW EMPLOYMENT AGREEMENT
In connection with Mr. Bonsignore's employment with the combined company,
Mr. Bonsignore will enter into a new employment agreement upon the completion of
the merger which will supersede his existing severance agreement with Honeywell.
The new employment agreement will have a term which runs through December 31,
2004. During the term of the agreement, Mr. Bonsignore will have an annual base
salary of not less than $1.5 million and, beginning January 1, 2000, will have
an annual target bonus equal to 100% of such base salary. Under the terms of the
agreement, Mr. Bonsignore will receive a minimum bonus in respect of 1999 of
$1.0 million less any bonus payable to him in respect of 1999 under the
Honeywell plans in effect prior to the completion of the merger.
Under the terms of his new agreement, Mr. Bonsignore will receive a grant
of options to purchase one million shares of the combined company common stock,
which will have a ten year term from the date of grant and an exercise price
equal to fair market value on the date of completion of the merger. The options
will become exercisable in increments of 40%, 30% and 30% respectively, on
December 31 of 2000, 2001 and 2002. They will also become exercisable on any
termination of Mr. Bonsignore's employment with the combined company other than
termination for 'cause' or voluntary resignation without 'good reason' (as these
terms are defined in the employment agreement). Once vested, the options will
remain exercisable for the balance of their full ten-year term from the date of
grant. Mr. Bonsignore will receive an additional grant of options to purchase
500,000 shares of the combined company common stock, which will also have an
exercise price equal to the fair market value of this stock on the completion of
the merger. These performance options will become exercisable in increments of:
40% on April 1, 2001 if consolidated earnings per share (adjusted to omit
extraordinary items, gains or losses on disposal of business segments,
unusual or infrequently occurring events or transactions and the effects
of changes in accounting principles) of the combined company increases at
least 20% from 1999 to 2000;
30% on April 1, 2002 if consolidated earnings per share of the combined
company increases at least 17% from 2000 to 2001;
30% on April 1, 2003 if consolidated earnings per share of the combined
company increases at least 16% from 2001 to 2002; and
notwithstanding the above schedule, 100% on April 1, 2003 if cumulative
growth in consolidated earnings per share of the combined company is at
least 53% for the three-year period ending December 31, 2002 over calendar
year 1999.
If Mr. Bonsignore's employment terminates other than for cause or voluntary
resignation without good reason prior to 2003, any of these performance options
which are not then exercisable as of this termination may become exercisable
depending on actual performance through the end of the applicable measurement
period, as if Mr. Bonsignore had remained employed. Once they become
exercisable, these options will also remain outstanding for the balance of their
full ten-year term from the date of grant. Mr. Bonsignore will also receive a
grant of 375,000 restricted units of the combined company's common stock.
Restrictions on these units will lapse as to one-third of the units on each of
April 1, 2001, 2002 and 2003, but only if the combined company achieves
specified operating margin targets of 15% in 2000, 16% in 2001, and 17% in 2002.
Units with respect to which restrictions have not lapsed prior to April 1, 2003
will expire. If Mr. Bonsignore's employment terminates prior to April 1, 2003
other than for cause or voluntary resignation prior to 2003 without good reason,
the restrictions on the units may lapse
43
<PAGE>
depending on the combined company's actual performance through the end of the
measurement period as if Mr. Bonsignore had remained employed through the end of
the period.
The employment agreement provides for Mr. Bonsignore to receive an annual
supplemental retirement benefit equal to 60% of his final average compensation
less annual amounts payable to him under the retirement plans of Honeywell and
the combined company. This supplemental retirement benefit will be fully vested
as of the date of completion of the merger. The supplemental retirement benefit
provides for a survivor benefit payable to Mr. Bonsignore's surviving spouse of
50% of the benefit payable to Mr. Bonsignore. The supplemental retirement
benefit will not be reduced if benefit payments commence after December 31,
2002, but these benefits will be reduced by 3% per year if benefit payments
commence prior to January 1, 2003. During the term of the agreement, Mr.
Bonsignore will be entitled to participate in all benefit and welfare benefit
plans of the combined company, and will receive the fringe benefits and
perquisites available to senior officers of the combined company. In addition,
Mr. Bonsignore will receive the following specific perquisites: an annual
financial planning allowance up to $50,000; a car and driver; and the use of the
company airplane for personal travel in accordance with the combined company's
security requirements. These benefits will continue to be provided to Mr.
Bonsignore after the term of the agreement expires (or, if earlier, following
his voluntary termination after December 31, 2002), except that he will not have
use of the company airplane for personal travel. Appropriate relocation benefits
will be provided to Mr. Bonsignore in connection with his move to the combined
company's headquarters.
As a general rule, during the first two years of the term of his agreement,
a vote of 75% of the members of the combined company's board of directors (other
than Mr. Bonsignore) is required in order to remove Mr. Bonsignore as Chief
Executive Officer or Chairman of the Board, terminate his employment or diminish
his duties and responsibilities. On any termination of Mr. Bonsignore's
employment without cause or a voluntary termination of his employment by Mr.
Bonsignore for good reason, Mr. Bonsignore will receive severance benefits under
the combined company severance plan except as otherwise provided by his
employment agreement, which will include a severance payment equal to three
years' salary and bonus. Mr. Bonsignore is also entitled to an additional
payment from the combined company of an amount sufficient to make him whole in
the event that he is subject to any excess parachute excise tax in connection
with the merger, his employment with the combined company or Honeywell, or a
subsequent termination of employment.
EXISTING TERMINATION AGREEMENTS WITH HONEYWELL EXECUTIVE OFFICERS
Honeywell is party to executive termination agreements with all ten of its
executive officers. As of the date on which Honeywell shareowners approve the
merger, the term of each of these agreements, other than the existing agreement
with Mr. Bonsignore, will be extended for a period of twenty-four months or
thirty-six months beyond the month in which the merger is approved but not
beyond the end of the month during which the executive attains age 65. Mr.
Bonsignore's executive termination agreement with Honeywell will terminate upon
completion of the merger. If the employment of an executive (other than
Mr. Bonsignore) covered by an executive termination agreement terminates
following the date on which Honeywell shareowners approve the merger and during
the term of the agreement, other than due to the executive's death, disability,
termination for cause or voluntary termination by the executive without good
reason, he or she will receive a severance payment equal to two or three times
the sum of his or her annual base salary and bonus, two or three years of life,
health, disability and accident insurance benefit continuation and an additional
payment of an amount sufficient to make the executive whole in the event that he
or she is subject to any excess parachute excise tax in connection with the
merger, his or her employment with the combined company or Honeywell or a
subsequent termination of employment. If the employment of the executive
officers, other than Mr. Bonsignore, is terminated immediately following the
date on which Honeywell shareowners approve the merger, they would be entitled
to an aggregate of approximately $17 million in severance payments.
44
<PAGE>
INDEMNIFICATION; DIRECTORS' AND OFFICERS' INSURANCE
The combined company will be required to indemnify, to the fullest extent
allowed under law, each individual who is or was an officer, director or
employee of Honeywell for all actions taken by them in their capacities as such
or at the request of Honeywell or a Honeywell subsidiary prior to the completion
of the merger and to honor all indemnification obligations of Honeywell to those
persons, whether pursuant to Honeywell's certificate of incorporation, by-laws
or an indemnification agreement. For six years after completing the merger,
AlliedSignal will also provide officers' and director's liability insurance in
respect of acts or omissions prior to the completion of the merger for each
individual covered under the comparable Honeywell policy as of the date of the
merger agreement. The combined company will not be required to pay, in total, an
annual premium for the insurance described in this paragraph in excess of 200%
of the current annual premium paid by Honeywell for its existing coverage prior
to the merger. However, if the annual premiums of that insurance coverage exceed
that amount, the combined company will be obligated to provide coverage
available for a cost equal to 200% of the current annual premium.
INCENTIVE COMPENSATION AND STOCK OWNERSHIP PLANS
Pursuant to the terms of Honeywell's equity-based compensation plans, all
unvested options to purchase Honeywell shares will become vested and exercisable
as of the date on which Honeywell shareowners approve the merger, and
restrictions will lapse on that date with respect to shares of restricted stock
issued under those plans. Performance-based shares for the 1998-2000 performance
period will be paid out pro rata, assuming performance at target levels. In
addition, annual bonus awards under Honeywell's Corporate Executive Compensation
Plan will be paid out pro rata for 1999, assuming performance at the 'on-plan'
performance level to all plan participants. As of July 22, 1999, Honeywell's
executive officers hold unvested options to acquire an aggregate of 680,866
shares of Honeywell common stock with a weighted average exercise price of
$72.58 per share which will become exercisable as of the date Honeywell
shareowners approve the merger. In the merger, these options will be converted
into options to acquire an aggregate of 1,276,623 shares of common stock of the
combined company with a weighted average exercise price of $38.71 per share. In
addition, as of the date on which Honeywell shareowners approve the merger,
restrictions with respect to an aggregate of 112,639 shares of Honeywell common
stock held by Honeywell's executive officers will lapse, an aggregate of 76,018
performance shares will be issuable to Honeywell's executive officers and they
will be entitled to receive aggregate pro rata bonus payments of approximately
$2.4 million.
45
<PAGE>
OPINIONS OF FINANCIAL ADVISORS
OPINION OF FINANCIAL ADVISOR TO ALLIEDSIGNAL
Pursuant to an engagement letter dated as of May 27, 1999, AlliedSignal
retained J.P. Morgan to deliver a fairness opinion in connection with the
proposed merger with Honeywell. At the meeting of AlliedSignal's board of
directors on May 28, 1999, J.P. Morgan gave its oral opinion, subsequently
confirmed in writing on June 4, 1999, to the board of directors that, as of each
of these dates and based upon and subject to the various considerations set
forth in the opinion, the consideration to be paid by AlliedSignal in the
proposed merger was fair from a financial point of view to AlliedSignal.
AlliedSignal's board of directors did not limit J.P. Morgan in any way in the
investigations it made or the procedures it followed in giving its opinion.
We have attached as Annex D to this document the full text of J.P. Morgan's
written opinion and urge you to read the opinion in its entirety. This opinion
sets forth the assumptions made, matters considered and limits on the review
undertaken and is incorporated by reference. J.P. Morgan addressed its opinion
to the AlliedSignal board of directors. The opinion addresses only the
consideration to be paid in the merger and is not a recommendation to any
AlliedSignal shareowner as to how that shareowner should vote at AlliedSignal's
special meeting. The summary of J.P. Morgan's opinion provided below is
qualified in its entirety by reference to the full text of the opinion.
In arriving at its opinion, J.P. Morgan reviewed:
the merger agreement;
the audited financial statements of AlliedSignal and Honeywell for the
fiscal year ended December 31, 1998;
the unaudited financial statements of AlliedSignal and Honeywell for the
periods ended March 31, 1999 and April 4, 1999, respectively;
current and historical market prices of AlliedSignal and Honeywell common
stock;
various publicly available information concerning the business of
AlliedSignal and Honeywell and of several other companies engaged in
businesses comparable to those of AlliedSignal and Honeywell, and the
reported market prices for the securities of other companies deemed
comparable;
the terms of various transactions involving companies comparable to
Honeywell and the consideration received for those companies;
the terms of other business combinations that J.P. Morgan deemed relevant;
and
various internal financial analyses and forecasts prepared by AlliedSignal
and Honeywell and their respective managements.
J.P. Morgan also held discussions with several members of the management of
AlliedSignal and Honeywell on numerous aspects of the merger, the past and
current business operations of AlliedSignal and Honeywell, the financial
condition and future prospects and operations of AlliedSignal and Honeywell, the
effects of the merger on the financial condition and future prospects of
AlliedSignal and Honeywell, and other matters that J.P. Morgan believed
necessary or appropriate to its inquiry. In addition, J.P. Morgan reviewed other
financial studies and analyses and considered other information as it deemed
appropriate for the purposes of its opinion.
J.P. Morgan relied upon and assumed, without independent verification, the
accuracy and completeness of all information that was publicly available or that
was furnished to it by AlliedSignal and Honeywell or otherwise reviewed by J.P.
Morgan from third party sources. J.P. Morgan is not responsible or liable for
that information or its accuracy. J.P. Morgan has not conducted any valuation or
appraisal of any assets or liabilities, and no valuations or appraisals have
been provided to J.P. Morgan. In relying on financial analyses and forecasts
provided to it, J.P. Morgan has assumed that they have been reasonably prepared
based on assumptions reflecting the best currently available estimates and
judgments by management as to the expected future results of operations and
financial condition of AlliedSignal and Honeywell to which those analyses
46
<PAGE>
or forecasts relate. In addition, as to certain loss contingencies and potential
exposures, J.P. Morgan has relied on estimates provided by management of
Honeywell. J.P. Morgan has also assumed that the merger will have the tax
consequences described in discussions with, and materials furnished to J.P.
Morgan by, representatives of AlliedSignal, and that the parties will complete
the other transactions contemplated by the merger agreement as described in that
agreement. J.P. Morgan relied as to all legal matters relevant to rendering its
opinion upon the advice of its counsel.
For each of Honeywell and AlliedSignal, J.P. Morgan used forecasts
developed using Institutional Brokerage Estimate System (I/B/E/S) estimates and
other publicly available information, which was considered in addition to
information provided by the management of AlliedSignal and Honeywell. These
projections were based on numerous variables and assumptions that are inherently
uncertain and may be beyond the control of J.P. Morgan, including, but not
limited to, factors related to general economic and competitive conditions and
prevailing interest rates. Accordingly, actual results may vary significantly
from those set forth in the projections.
As is customary in the rendering of fairness opinions, J.P. Morgan based
its opinion on economic, market and other conditions as in effect on, and the
information made available to J.P. Morgan as of May 28, 1999 and June 4, 1999.
Subsequent developments may affect J.P. Morgan's opinion, and J.P. Morgan does
not have any obligation to update, revise, or reaffirm its opinion. J.P. Morgan
expressed no opinion as to the price at which AlliedSignal's or the combined
company's common stock will trade at any future time.
J.P. Morgan was not requested by AlliedSignal to, and did not, provide
advice concerning the structure, the specific amount of the consideration, or
any other aspects of the merger, and did not provide services other than the
delivery of its opinion. J.P. Morgan did not participate in negotiations on the
terms of the merger and related transactions, which were the product of direct
negotiations between AlliedSignal and Honeywell.
In accordance with customary investment banking practice, J.P. Morgan
employed generally accepted valuation methods in reaching its opinion. The
following is a summary of the material financial analyses performed by J.P.
Morgan in connection with its opinion. We have presented some of the summaries
of financial analyses in tabular format. In order to understand the financial
analyses used by J.P. Morgan more fully, you should read the tables together
with the text of each summary. The tables alone do not constitute a complete
description of J.P. Morgan's financial analyses and this summary does not
purport to be a complete description of the analyses underlying J.P. Morgan's
opinion.
Discounted Cash Flow Analysis. J.P. Morgan conducted a discounted cash flow
analysis to determine the fully diluted equity value per share for Honeywell's
common stock by valuing Honeywell based on the present value of its projected
free cash flows, assuming no debt obligations. In conducting this analysis, J.P.
Morgan calculated the debt-free free cash flows that Honeywell was expected to
generate during fiscal years 1999 through 2003 based upon financial projections
consistent with I/B/E/S estimates.
J.P. Morgan also calculated a range of values for Honeywell at the
conclusion of a five-year period ending in 2003, commonly referred to as
terminal values. In calculating this range of terminal values, J.P. Morgan
applied multiples of Honeywell estimates of earnings before interest, tax, and
depreciation and amortization, often known as EBITDA, in 2003, ranging from 9x
to 11x. J.P. Morgan then discounted these free cash flows, assuming no debt
obligations, and the range of these terminal values to present values using a
range of discount rates from 8.5% to 10.5%. J.P. Morgan selected these discount
rates based upon an analysis of the cost of debt and equity capital of Honeywell
appropriately weighted between debt and equity to reflect the assumed optimal
debt and equity capitalizations of the company. J.P. Morgan then adjusted the
present value of these debt-free free cash flows and the range of terminal
values as of May 31, 1999, reflecting Honeywell's debt and cash position as of
its most recent unaudited financial statements of April 4, 1999.
47
<PAGE>
The discounted cash flow analysis indicated a range of equity values of
between $95 and $122 per share for Honeywell's common stock on a stand-alone
basis (i.e., without anticipated cost savings) and a range of equity values of
between $120 and $152 per share for Honeywell's common stock assuming the
present value of $500 million of annual synergies phased in over two years. J.P.
Morgan compared this to an implied offer value of $111 per share as of May 26,
1999.
Public Trading Multiples. Using publicly available information, J.P. Morgan
compared selected financial data of Honeywell with similar data for selected
publicly traded companies engaged in businesses that J.P. Morgan judged to be
reasonably comparable to those of Honeywell. The purpose of this analysis was to
provide information regarding the fairness of the proposed merger consideration
based upon a comparison of specific financial information of Honeywell with
several comparable public companies. These companies were:
<TABLE>
<S> <C>
AlliedSignal Inc. Litton Industries, Inc.
Cooper Industries, Inc. Parker-Hannifin Corporation
Danaher Corporation Raytheon Company
Dover Corporation Rockwell International Corp.
Eaton Corporation Textron Inc.
Emerson Electric Co. TRW Inc.
General Electric Company Tyco International Ltd.
Illinois Tool Works Inc. United Technologies Corporation
Johnson Controls Inc.
</TABLE>
J.P. Morgan selected these companies because they engage in businesses
reasonably comparable to those of Honeywell. For each comparable company, J.P.
Morgan measured publicly available financial performance through the twelve
months ended March 31, 1999, as well as financial projections by the equity
analysts covering each comparable company. An analysis of the comparable
companies showed a multiple of equity value to estimated earnings in 2000
ranging from 29.1x to 8.1x as compared to a multiple of 20.6x for the combined
company. The analysis also showed a multiple of firm value (defined as equity
plus debt) to 1999 EBITDA ranging from 18.6x to 5.7x as compared to a multiple
of 11.2x for the combined company.
J.P. Morgan then selected an appropriate multiple range and applied these
multiples to Honeywell's estimated EBITDA and earnings, yielding an implied
stand-alone trading value for Honeywell of approximately $88 to $110 per share
for Honeywell's common stock. J.P. Morgan compared this to an implied offer
value of $111 per share as of May 26, 1999.
J.P. Morgan also applied a 30% control premium to the implied stand-alone
trading value, yielding an implied value for Honeywell of approximately $114 to
$143 per share. In addition, J.P. Morgan applied a 12x earnings multiple to
AlliedSignal's estimate of $435-$575 million of annual synergies and added the
result to Honeywell's implied stand-alone trading value, yielding an implied
value of approximately $115 to $146 per share. J.P. Morgan compared this to an
implied offer value of $111 per share as of May 26, 1999.
Selected Transaction Analysis. Using publicly available information, J.P.
Morgan examined the following 17 transactions:
<TABLE>
<CAPTION>
ACQUIROR TARGET
- -------- ------
<S> <C>
Emerson Electric Co. Fisher Controls International
Tyco International Ltd. AMP Incorporated
Rockwell International Corp. Reliance Electric Company
Emerson Electric Co. Control Technique Limited
Tyco International Ltd. Raychem Corporation
Siebe Plc Unitech Plc
Siebe Plc Eurotherm Plc
United Technologies Corporation Sundstrand Corporation
Siebe Plc APV U.K. Plc
Honeywell Inc. Measurex Corporation
</TABLE>
(table continued on next page)
48
<PAGE>
(table continued from previous page)
<TABLE>
<CAPTION>
ACQUIROR TARGET
- -------- ------
<S> <C>
Eaton Corporation Aeroquip-Vickers Inc.
Electrowatt Group Landis & Gyr AG
Siebe Plc Unitech Corporation
B.F. Goodrich Co. Coltec Industries Inc.
Siebe Plc BTR Plc
ABB Ltd. Elsag Bailey Process Automation N.V.
Siebe Plc Foxboro Co.
</TABLE>
J.P. Morgan selected these transactions because of their similarity to the
merger. An analysis of these transactions showed a multiple of equity value to
latest twelve month earnings ranging from 32.7x to 6.6x as compared to a
multiple of 23.5x for the merger. The comparable transactions also showed a
ratio of firm value (defined as equity plus debt) to latest twelve month EBITDA
of 16.3x to 4.5x as compared to a multiple of 11.8x for the merger.
In addition, J.P. Morgan reviewed mergers and acquisitions of U.S. public
companies in negotiated stock transactions with values over $1 billion
(excluding banks) to derive the average premiums paid over the public trading
prices per share five days prior to the announcement of such transactions for
each year from 1996 to 1999 (through April 4, 1999). J.P. Morgan noted that the
reasons for, and circumstances surrounding, each of the transactions analyzed
were diverse and that premiums fluctuate among different industry sectors and
based on perceived growth, synergies, strategic value and the type of
consideration utilized in the transaction. The average premiums paid in each
year as compared to the premium paid in this transaction are set forth in the
following table.
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------
YEAR AVERAGE PREMIUM
- ------------------------------------------------------------------------------
<S> <C>
1996 36%
- ------------------------------------------------------------------------------
1997 25%
- ------------------------------------------------------------------------------
1998 28%
- ------------------------------------------------------------------------------
1999 32%
- ------------------------------------------------------------------------------
AlliedSignal/Honeywell 16% (as of May 26, 1999)
- ------------------------------------------------------------------------------
</TABLE>
Contribution Analysis. J.P. Morgan analyzed the AlliedSignal shareowner pro
forma ownership level implied by the pro forma contribution by each of
AlliedSignal and Honeywell to the EBITDA and earnings of the combined company,
adjusted to reflect the companies' respective net debt balances, assuming
completion of the merger. The purpose of this analysis was to assess the
fairness of the proposed merger consideration based on specific historical and
estimated future operating and financial information by comparing the
contribution of AlliedSignal and Honeywell to the combined company with the
percentage of the combined company that each company's shareholders would hold
upon completion of the merger.
The following table sets forth the ownership levels suggested by the
selected financial performance benchmarks, as compared to the pro forma fully
diluted ownership of the AlliedSignal shareowners after the Honeywell merger of
approximately 70%.
MANAGEMENT CASE
<TABLE>
<CAPTION>
ALLIEDSIGNAL HONEYWELL
------------ ---------
<S> <C> <C>
1995 EBITDA................................................. 69% 31%
1996 EBITDA................................................. 69% 31%
1997 EBITDA................................................. 67% 33%
1998 EBITDA................................................. 67% 33%
1999 estimated EBITDA....................................... 68% 32%
1995 Net Income............................................. 72% 28%
1996 Net Income............................................. 72% 28%
1997 Net Income............................................. 71% 29%
1998 Net Income............................................. 70% 30%
1999 estimated Net Income................................... 70% 30%
</TABLE>
49
<PAGE>
Pro Forma Merger Analysis. J.P. Morgan prepared a pro forma analysis of the
potential financial impact of the merger. In conducting the analysis, J.P.
Morgan assumed, among other things:
pooling of interests accounting treatment;
a merger exchange ratio of 1.875;
estimates of cost savings resulting from the merger, as provided by
AlliedSignal's management; and
projected earnings estimated for Honeywell and AlliedSignal based on
I/B/E/S estimates.
J.P. Morgan evaluated the potential pro forma impact of the merger on the
earnings per share of AlliedSignal's common stock. The analysis showed, assuming
$500 million in synergies phased in over 2000 and 2001, that the merger would be
accretive from 2000 to AlliedSignal's shareholders. The results of the pro forma
merger analysis are not necessarily indicative of future operating results or
financial position. The actual results achieved by the combined company may vary
from projected results and the variations may be material.
Exchange Ratio Analysis. J.P. Morgan reviewed the ratios of the closing
prices of AlliedSignal common stock divided by the corresponding prices of the
Honeywell common stock over various periods during the three year period ending
May 26, 1999. The following table presents the average implied exchange ratio
for the periods covered.
<TABLE>
<CAPTION>
LAST LAST LAST LAST
3 MONTHS 6 MONTHS 1 YEAR 3 YEARS
-------- -------- ------ -------
<S> <C> <C> <C> <C>
Exchange Ratio................................... 1.578 1.655 1.802 1.869
Percentage of AlliedSignal Shareowner Ownership
of the Combined Company........................ 74.1% 73.2% 71.4% 70.7%
</TABLE>
This summary does not purport to be a complete description of the analyses
or data presented by J.P. Morgan. The preparation of a fairness opinion is a
complex process and is not necessarily susceptible to partial analysis or
summary description. J.P. Morgan believes that one must consider its opinion,
this summary and its analyses as a whole. Selecting portions of this summary and
these analyses, without considering the analyses as a whole, would create an
incomplete view of the processes underlying the analyses and opinion. In
arriving at its opinion, J.P. Morgan considered the results of all of the
analyses as a whole. No single factor or analysis was determinative of J.P.
Morgan's fairness determination. Rather, the totality of the factors considered
and analyses performed operated collectively to support its determination. J.P.
Morgan based the analyses on assumptions that it deemed reasonable, including
assumptions concerning general business and economic conditions which impact the
companies' growth rates, labor costs and price competition and industry-specific
factors. This summary sets forth under the description of each analysis the
other principal assumptions upon which J.P. Morgan based that analysis. J.P.
Morgan's analyses are not necessarily indicative of actual values or actual
future results that either company or the combined company might achieve, which
values may be higher or lower than those indicated. Analyses based upon
forecasts of future results are inherently uncertain, as they are subject to
numerous factors or events beyond the control of the parties and their advisors.
Accordingly, these forecasts and analyses are not necessarily indicative of
actual future results, which may be significantly more or less favorable than
suggested by those analyses. Therefore, none of AlliedSignal, Honeywell, J.P.
Morgan or any other person assumes responsibility if future results are
materially different from those forecasted. Moreover, J.P. Morgan's analyses are
not and do not purport to be appraisals or otherwise reflective of the prices at
which businesses actually could be bought or sold.
As a part of its investment banking business, J.P. Morgan and its
affiliates are continually engaged in the valuation of businesses and their
securities for mergers and acquisitions, investments for passive and control
purposes, negotiated underwritings, secondary distributions of listed and
unlisted securities, private placements, and valuations for estate, corporate
and other purposes. AlliedSignal selected J.P. Morgan to deliver a fairness
opinion to the AlliedSignal board on the basis of its experience and familiarity
with AlliedSignal.
50
<PAGE>
For delivering its opinion, AlliedSignal has paid J.P. Morgan a fee of
$3,500,000. In addition, AlliedSignal has also agreed to reimburse J.P. Morgan
for the reasonable fees and disbursements of counsel incurred in connection with
delivering its opinion, and will indemnify J.P. Morgan against various
liabilities, including liabilities arising under the federal securities laws.
J.P. Morgan and its affiliates provide commercial banking, investment
banking and asset management services to AlliedSignal, and also provide
commercial banking and asset management services to Honeywell, for which they
receive customary fees. In addition, Mr. Bossidy is a director of J.P. Morgan &
Co. Incorporated, the parent of J.P. Morgan. In the ordinary course of their
businesses, J.P. Morgan and its affiliates may actively trade the debt and
equity securities of AlliedSignal or Honeywell for their own accounts or for the
accounts of customers. Accordingly, they may hold long and/or short positions in
those securities at any given time.
OPINION OF FINANCIAL ADVISOR TO HONEYWELL
Honeywell engaged Bear Stearns as its financial advisor based on Bear
Stearns' experience and expertise. Bear Stearns is an internationally recognized
investment banking firm that has substantial experience in transactions similar
to the merger. Bear Stearns, as part of its investment banking business, is
continuously engaged in the valuation of businesses and securities in connection
with mergers and acquisitions, negotiated underwritings, secondary distributions
of listed and unlisted securities, private placements and valuations for
corporate and other purposes.
At the June 4, 1999 meeting of the Honeywell board of directors, Bear
Stearns delivered its opinion to the effect that, as of the date thereof, and
subject to the assumptions, qualifications and limitations set forth therein,
the exchange ratio was fair, from a financial point of view, to the shareowners
of Honeywell.
We have attached as Annex E to this document the full text of Bear Stearn's
written opinion and urge you to read the opinion in its entirety. This opinion
sets forth the assumptions made, matters considered and qualifications and
limitations on the review undertaken by Bear Stearns and is incorporated herein
by reference. THE SUMMARY OF THE BEAR STEARNS OPINION SET FORTH BELOW IS
QUALIFIED IN ITS ENTIRETY BY REFERENCE TO THE FULL TEXT OF THE OPINION WHICH IS
ATTACHED AS ANNEX E TO THIS JOINT PROXY STATEMENT/PROSPECTUS. In reading the
discussion of the fairness opinion set forth below, Honeywell shareowners should
be aware that Bear Stearns' opinion:
was provided to the Honeywell board of directors for its use and benefit;
did not address Honeywell's underlying business decision to effect the
merger;
did not constitute a recommendation to the Honeywell board of directors
in connection with the merger;
does not constitute a recommendation to any Honeywell shareowner as to
how to vote in connection with the merger proposal; and
was not intended to be relied upon or confer any rights or remedies upon
any creditor or shareowner of Honeywell, or any other third party.
Although Bear Stearns evaluated the fairness, from a financial point of
view, of the exchange ratio to the shareowners of Honeywell, the exchange ratio
itself was determined by AlliedSignal and Honeywell through arm's-length
negotiations. Bear Stearns provided advice to Honeywell during the course of
such negotiations. Honeywell did not provide specific instructions to, or place
any limitations on, Bear Stearns with respect to the procedures to be followed
or factors to be considered by it in performing its analyses or providing its
opinion.
In arriving at its opinion, Bear Stearns, among other things:
reviewed the merger agreement;
reviewed publicly available business and financial information relating
to each of Honeywell and AlliedSignal, including the Annual Report to
Shareholders and Annual Report on Form 10-K for the fiscal year ended
December 31, 1998 and Quarterly Report on Form 10-Q for the quarter ended
April 4, 1999 and March 31, 1999, respectively;
51
<PAGE>
reviewed operating and financial information, including projections,
provided to it by management of Honeywell and AlliedSignal relating to
each company's respective business and prospects;
met with members of Honeywell's and AlliedSignal's senior management to
discuss its operations, historical financial statements, future prospects
and the potential benefits of the merger including the estimated
synergies reasonably obtainable upon the consummation of the merger;
reviewed the historical prices and trading volume of the common shares of
Honeywell and AlliedSignal;
reviewed publicly available financial data, stock market performance data
and valuation parameters of companies which Bear Stearns deemed generally
comparable to Honeywell and AlliedSignal;
reviewed the terms of recent acquisitions of companies which it deemed
generally comparable to the merger; and
conducted other studies, analyses, inquiries and investigations as it
deemed appropriate.
In preparing its opinion, Bear Stearns relied upon and assumed, without
independent verification, the accuracy and completeness of the financial and
other information, including projections and synergies, provided to, discussed
with, or reviewed by or for it by Honeywell and AlliedSignal or otherwise
publicly available. With respect to Honeywell's and AlliedSignal's projected
financial results and the synergies, Bear Stearns assumed that they have been
reasonably prepared on bases reflecting the best currently available estimates
and judgments of the senior managements of Honeywell and AlliedSignal as to the
expected future performance of Honeywell and AlliedSignal, respectively. Bear
Stearns did not assume any responsibility for the independent verification of
any information or of the projections and the synergies, and relied upon the
assurances of the senior managements of Honeywell and AlliedSignal that they
were unaware of any facts that would make the information, projections or
synergies provided to Bear Stearns incomplete or misleading.
Bear Stearns also assumed with the consent of Honeywell that the merger
will (a) qualify as a reorganization for United States federal income tax
purposes, (b) be accounted for under the pooling of interests method of
accounting and (c) otherwise be consummated in accordance with the terms
described in the merger agreement, without the waiver of any material condition
and with all necessary material consents and approvals having been obtained
without any limitations, restrictions, conditions, amendments or modifications
that collectively would be material to Bear Stearns' analysis. In arriving at
its opinion, Bear Stearns did not perform or obtain any independent appraisal of
the assets or liabilities of Honeywell and AlliedSignal, nor was it furnished
with any appraisals. In rendering its opinion, Bear Stearns did not solicit, and
was not authorized to solicit, third party acquisition interest in Honeywell. In
addition, Bear Stearns did not express any opinion as to the price or range of
prices at which Honeywell common stock or AlliedSignal common stock may trade
subsequent to the announcement or consummation of the merger. Bear Stearns'
opinion is necessarily based on economic, market and other conditions, and the
information made available to Bear Stearns, as of the date of its opinion.
The following is a brief summary of the material valuation and financial
and comparative analyses considered by Bear Stearns in connection with the
rendering of the Bear Stearns opinion. This summary does not purport to be a
complete description of the analyses underlying the Bear Stearns opinion and is
qualified in its entirety by reference to the full text of the Bear Stearns
opinion.
In performing its analysis, Bear Stearns made numerous assumptions with
respect to industry performance, general business, economic, market and
financial conditions and other matters, many of which are beyond the control of
Bear Stearns, AlliedSignal and Honeywell. Any estimates contained in the
analysis performed by Bear Stearns is not necessarily indicative of actual
values or future results, which may be significantly more or less favorable than
suggested by this analysis. Additionally, estimates of the value of businesses
or securities do not purport to be appraisals or
52
<PAGE>
to reflect the prices at which such businesses or securities may actually be
sold. Accordingly, these analyses and estimates are inherently subject to
substantial uncertainty. In addition, as described above, Bear Stearns' opinion
was among several factors taken into consideration by the Honeywell board of
directors in making its determination to approve the merger and the merger
agreement.
Relative Contribution Analysis. Bear Stearns reviewed with the Honeywell
board of directors the relative contribution of each of AlliedSignal and
Honeywell to certain income statement categories of the pro forma combined
company, including 1999 estimated and 2000 estimated revenues, EBITDA, EBIT and
net income. Bear Stearns then compared these contribution percentages to the
relative equity ownership percentage implied by the 1.875 exchange ratio. Bear
Stearns observed that Honeywell's share of the combined equity value would be
29.8% at the 1.875 exchange ratio. Set forth below is Honeywell's relative
contribution to certain income statement categories of the pro forma combined
company, including 1999 estimated and 2000 estimated revenues, EBITDA, EBIT and
net income:
<TABLE>
<CAPTION>
1999E 2000E
----- -----
<S> <C> <C>
Revenues.................................................... 36.6% 37.5%
EBITDA...................................................... 31.9% 31.8%
EBIT........................................................ 30.0% 29.7%
Net Income.................................................. 29.5% 29.0%
</TABLE>
Historical Ratio Analysis. Bear Stearns also reviewed the relationship
between the daily closing prices of Honeywell common stock and AlliedSignal
common stock during the period from June 2, 1998 through June 2, 1999 and the
implied historical ratios determined by dividing the price per share of
Honeywell common stock by the price per share of AlliedSignal common stock over
such period. Bear Stearns noted that for the six months prior to June 2, 1999,
the average implied historical exchange ratio was 1.647, and for the twelve
months prior to June 2, 1999, the ratio was 1.793, as compared to the exchange
ratio of 1.875.
Comparable Company Analysis. Bear Stearns compared certain operating,
financial, trading and valuation information for Honeywell and AlliedSignal to
certain publicly available operating, financial, trading and valuation
information for eight selected companies, which, in Bear Stearns' judgment, were
comparable to Honeywell and AlliedSignal for purposes of this analysis. These
companies included:
<TABLE>
<S> <C>
General Electric United Technologies
Tyco Emerson Electric
Siemens Rockwell
Textron Invensys
</TABLE>
Bear Stearns' analysis was based on closing stock prices as of June 2,
1999. A summary of the projected multiples of equity value to net income based
on estimates of net income for calendar years 1999 and 2000 is set forth below:
<TABLE>
<CAPTION>
EQUITY VALUE/NET INCOME
----------------------------------------
CY 1999E CY 2000E
-------- --------
<S> <C> <C>
Honeywell......................................... 19.3x 17.2x
AlliedSignal...................................... 22.5x 19.6x
Range of Multiples for Comparable Companies....... 15.1x-31.9x 13.1x-27.9x
Harmonic Mean for Comparable Companies............ 21.7x 18.9x
Median for Comparable Companies................... 22.2x 19.7x
</TABLE>
Bear Stearns noted that for calendar year 2000, projected multiples of the
equity value to estimated net income of each of Honeywell and AlliedSignal were
below the median for comparable companies. Bear Stearns also noted that none of
the comparable companies is identical to AlliedSignal or Honeywell and that,
accordingly, any analysis of comparable companies necessarily involved complex
consideration and judgments concerning differences in financial and operating
characteristics and other factors that would necessarily affect the relative
trading value of
53
<PAGE>
AlliedSignal and Honeywell versus the companies to which AlliedSignal and
Honeywell was being compared.
Premium Analysis. Bear Stearns conducted (1) an analysis of the implied
premium paid to Honeywell shareowners, (2) a comparison of the implied premium
to certain average implied premiums in a large sample of publicly reported
transactions completed over a five year period and (3) a comparison of the
implied premium to the implied premiums paid in selected stock-for-stock
transactions. Bear Stearns noted that based upon the closing sales prices for
Honeywell and AlliedSignal common stock on June 2, 1999, the exchange ratio of
1.875 resulted in an implied one-day premium to Honeywell shareowners of 18.0%.
Bear Stearns also reviewed the implied one-day premium paid to Honeywell
shareowners over the period from March 1, 1999 through June 2, 1999, and noted
that the implied one-day premium ranged from 10.0% to 28.6% over such period.
Bear Stearns also noted that the implied one-day premium on May 20, 1999, the
day prior to the date on which the exchange ratio was determined, was 22.1%.
The following table presents the one-day premiums contemplated in a large
sample of publicly reported transactions for the period from 1994 through 1998.
<TABLE>
<CAPTION>
YEAR OF ANNOUNCEMENT
-------------------------------------
1994 1995 1996 1997 1998
---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C>
All Transactions Median..................... 29.8% 24.9% 22.2% 20.0% 23.3%
Mean(1)..................................... 29.5% 26.1% 22.9% 21.0% 24.1%
</TABLE>
- ------------
(1) Mean of middle two quartiles of all transactions.
Bear Stearns also compared the implied premium paid to Honeywell
shareowners to the implied one-day and twenty-day premiums/discounts for similar
periods prior to public announcement for certain significant stock-for-stock
transactions since January 1991. These transactions included the following:
General Dynamics/Gulfstream
Firstar/Mercantile Bancorp
Fleet Financial Group/BankBoston
At Home/Excite
Exxon/Mobil
British Petroleum/Amoco
SunTrust Banks/Crestar Financial
Household International/Beneficial
Conseco/Green Tree Financial
Washington Mutual/HF Ahmanson
Halliburton/Dresser Industries
American Electric Power/Central & South West
National City/First of America Bank
First Union/CoreStates Financial
NationsBank/Barnett Banks
BANC ONE/First USA
Boeing Company/McDonnell Douglas
Duke Power/PanEnergy
Ohio Edison/Centerior Energy
SBC Communications/Pacific Telesis Group
Chemical Banking/Chase Manhattan
Kimberly-Clark/Scott Paper
First Union/First Fidelity Bancorporation
First Data/First Financial Management
The implied premium analysis for selected stock-for-stock transactions is
set forth below:
<TABLE>
<CAPTION>
IMPLIED PREMIUM (DISCOUNT)
---------------------------------------
ONE-DAY PRIOR TO
ANNOUNCEMENT PRIOR 20 TRADING DAYS
------------ ---------------------
<S> <C> <C>
Range of Implied Premiums for Selected Transactions....... (9)%-84% (4)%-86%
Median Implied Premium.................................... 26% 30%
Median Implied Premium (excluding financial services)..... 20% 26%
AlliedSignal/Honeywell(1)................................. 18% 18%
</TABLE>
- ------------
(1) Based on closing sales prices for Honeywell and AlliedSignal common stock on
June 2, 1999.
Comparable Acquisitions Analysis. Bear Stearns reviewed and analyzed the
publicly available financial terms of 11 selected merger and acquisition
transactions in the relevant industry segment
54
<PAGE>
which, in Bear Stearns' judgment, were reasonably comparable to the merger, and
compared the financial terms of these transactions to those of the merger. The
11 transactions included:
United Technologies's acquisition of Sundstrand
Siebe's acquisition of BTR
BF Goodrich's acquisition of Coltec
Tyco's acquisition of AMP
ABB's acquisition of Elsag-Bailey
SPX's acquisition of General Signal
Siebe's acquisition of Unitech
Elsag Bailey's acquisition of Hartmann & Braun
Rockwell's acquisition of Reliance Electric
Elsag Bailey's acquisition of Fisher & Porter
Emerson Electric's acquisition of Fisher Controls
Bear Stearns reviewed the prices paid in these transactions and analyzed
various operating and financial information and imputed valuation multiples and
ratios. Bear Stearns' analysis of the comparable acquisitions indicated that the
range of equity value multiples and enterprise value multiples for the latest 12
months as of the date of the acquisition agreements was as indicated below:
<TABLE>
<CAPTION>
ENTERPRISE VALUE/
EQUITY VALUE/ -------------------------------------------------------------
NET INCOME REVENUES EBITDA EBIT
---------- -------- ------ ----
<S> <C> <C> <C> <C>
Range of Multiples for Comparable
Acquisitions........................... 10.4x-38.6x 0.66x-2.30x 6.0x-16.5x 8.4x-25.2x
Harmonic Mean............................ 19.1x 1.26x 9.5x 13.3x
Median................................... 18.2x 1.38x 10.0x 12.1x
AlliedSignal/Honeywell................... 25.0x 1.89x 12.3x 16.5x
</TABLE>
Bear Stearns also noted that none of the comparable acquisitions was
identical to the merger and that, accordingly, any analysis of the comparable
acquisitions necessarily involved complex consideration and judgments concerning
the differences in financial and operating characteristics and other factors
that would necessarily affect the acquisition value of AlliedSignal or Honeywell
versus the acquisition values of the companies in the comparable acquisitions.
Pro Forma EPS Analysis. Bear Stearns analyzed the impact of the merger on
the projected earnings per share of AlliedSignal for the projected fiscal years
1999 and 2000 assuming the realization of various levels of cost savings and
excluding any one-time charges.
<TABLE>
<CAPTION>
1999 $/% ACCRETION 2000 $/% ACCRETION
(DILUTION) (DILUTION)
---------- ----------
<S> <C> <C>
No cost savings................................... ($0.01)/(0.5)% ($0.03)/(1.1)%
$250 million in cost savings...................... $0.18/6.6% $0.16/5.1%
$500 million in cost savings...................... $0.37/13.7% $0.35/11.2%
</TABLE>
55
<PAGE>
Bear Stearns also conducted a similar analysis for Honeywell for 1999 and
2000 estimated earnings and dividends per share comparing estimated amounts on a
standalone basis to estimates for the combined company. For the purpose of this
analysis, Bear Stearns assumed that the dividend of the combined company would
remain the same as AlliedSignal's current dividend, as adjusted by the exchange
ratio. Pro forma for the merger, the implied effect on earnings and dividends
per share to Honeywell shareowners after giving effect to the exchange ratio and
assuming the realization of various levels of cost savings is as follows:
<TABLE>
<CAPTION>
HONEYWELL
----------------------------------
STANDALONE COMBINED
---------- ---------------------
COST SAVINGS (IN MILLIONS) $0 $250 $500
- -------------------------- -- ---- ----
<S> <C> <C> <C> <C>
Earnings Per Share
1999E............................................... $5.00 $5.03 $5.39 $5.75
% Change............................................ 0.6% 7.8% 14.9%
2000E............................................... $5.60 $5.72 $6.07 $6.43
% Change............................................ 2.0% 8.4% 14.8%
Dividends Per Share
Indicated Rate...................................... $1.16 $1.28 $1.28 $1.28
% Change............................................ 9.9% 9.9% 9.9%
</TABLE>
The preparation of a fairness opinion is a complex process and involves
various judgments and determinations as to the most appropriate and relevant
assumptions and financial analyses and the application of these methods to the
particular circumstances involved. The opinions are therefore not readily
susceptible to partial analysis or summary description, and taking portions of
the analyses set out above, without considering the analysis as a whole, would,
in the view of Bear Stearns, create an incomplete and misleading picture of the
processes underlying the analyses considered in rendering its opinion. Bear
Stearns did not form an opinion as to whether any individual analysis or factor
(positive or negative), considered in isolation, supported or failed to support
its opinion. In arriving at its opinion, Bear Stearns considered the results of
its separate analyses and did not attribute particular weight to any one
analysis or factor. The analyses performed by Bear Stearns, particularly those
based on estimates and projections, are not necessarily indicative of actual
values or actual future results, which may be significantly more or less
favorable than suggested by these analyses. These analyses were prepared solely
as part of the Bear Stearns analysis of the fairness, from a financial point of
view, of the exchange ratio to the shareowners of Honeywell.
Pursuant to the terms of its engagement letter with Bear Stearns, Honeywell
has agreed to pay Bear Stearns a total fee of $40 million, $7.5 million of which
was has been paid as a non-refundable advisory fee, $7.5 million of which became
payable to Bear Stearns upon the delivery of its opinion and $25 million of
which will become payable upon consummation of the merger. In addition,
Honeywell has agreed to reimburse Bear Stearns for all reasonable out-of-pocket
expenses incurred by Bear Stearns in connection with the merger, including
reasonable fees and disbursements of its legal counsel. Honeywell has also
agreed to indemnify Bear Stearns against certain liabilities in connection with
its engagement, including certain liabilities under the federal securities laws.
Bear Stearns has previously rendered certain investment banking and
financial advisory services to both Honeywell and AlliedSignal for which Bear
Stearns received customary compensation. Bear Stearns may provide financial
advisory and financing services to the combined company and/or its affiliates
and may receive fees for the rendering of these services. In the ordinary course
of its business, Bear Stearns may actively trade the securities of Honeywell
and/or AlliedSignal for its own account and for the accounts of its customers
and, accordingly, Bear Stearns may at any time hold a long or short position in
these securities.
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MATERIAL TERMS OF THE MERGER AGREEMENT
The following summary of the merger agreement is qualified by reference to
the complete text of the merger agreement, which is incorporated by reference
and attached as Annex A to this document.
STRUCTURE OF THE MERGER
Under the merger agreement, Blossom Acquisition Corp., a wholly owned
subsidiary of AlliedSignal, will merge with and into Honeywell. As a consequence
of the merger, Honeywell will become a wholly owned subsidiary of AlliedSignal,
and AlliedSignal will change its name to Honeywell International Inc. See
' -- Name Change; Company Headquarters; Board of Directors and Related Matters'
below.
TIMING OF CLOSING AND EFFECTIVE TIME
The closing of the merger will occur within three business days after the
conditions to closing provided in the merger agreement are satisfied or waived,
unless AlliedSignal and Honeywell agree to another time or date. See
' -- Conditions to the Completion of the Merger' below.
On the date of the closing of the merger, we will file a certificate of
merger with the Secretary of State of the State of Delaware, at which time the
merger will become effective.
MERGER CONSIDERATION
The merger agreement provides that each share of Honeywell common stock
that is outstanding immediately prior to the effective time of the merger will,
at the effective time, be automatically converted into the right to receive
1.875 validly issued, fully paid and non-assessable shares of the combined
company's common stock.
CANCELLATION OF SHARES
Any shares of Honeywell common stock owned by AlliedSignal, held by
Honeywell as treasury stock or owned by any of their respective subsidiaries
will be automatically canceled, and we will not exchange those shares for any
securities of AlliedSignal, the combined company or other consideration.
PROCEDURES FOR SURRENDER OF CERTIFICATES; FRACTIONAL SHARES
Before the closing of the merger we will appoint an exchange agent to
handle the exchange of Honeywell stock certificates for stock certificates of
the combined company, and the payment of cash for fractional shares. Soon after
the closing of the merger, the exchange agent will send a letter of transmittal,
which is to be used to exchange Honeywell stock certificates for stock
certificates of the combined company, to each former Honeywell shareowner. The
letter of transmittal will contain instructions explaining the procedure for
surrendering Honeywell stock certificates. YOU SHOULD NOT RETURN STOCK
CERTIFICATES WITH THE ENCLOSED PROXY CARD.
Honeywell shareowners who surrender their stock certificates, together with
a properly completed letter of transmittal, will receive stock certificates
representing the shares of the combined company's common stock into which the
shares of Honeywell common stock, which were represented by the Honeywell stock
certificates, have been converted in the merger.
After the merger, each certificate that previously represented shares of
Honeywell common stock will represent only the right to receive the shares of
the combined company's common stock into which those shares of Honeywell common
stock have been converted.
The combined company will not pay dividends to holders of Honeywell stock
certificates in respect of the shares of the combined company's common stock
into which the Honeywell shares represented by those certificates have been
converted until the Honeywell stock certificates are surrendered to the exchange
agent.
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After the merger becomes effective, Honeywell will not register any further
transfers of Honeywell shares. Any certificates for Honeywell shares that you
present for registration after the effective time, we will exchange for shares
of the combined company.
The combined company will not issue fractional shares in the merger.
Instead, the exchange agent will pay to each of those shareowners otherwise
entitled to a fractional share of the combined company's common stock an amount
in cash determined by multiplying the fractional share interest to which the
shareowner would otherwise be entitled by the average of the closing prices for
the shares of AlliedSignal common stock on the NYSE Composite Transaction
Reporting System over the ten trading day period immediately before the closing
date of the merger.
TREATMENT OF HONEYWELL STOCK OPTIONS
At the effective time of the merger each outstanding employee option to
purchase shares of Honeywell common stock granted under any Honeywell option
plan will be converted into an option to acquire shares of the combined company
having the same terms and subject to the same conditions as were applicable to
the Honeywell stock options before the effective time. The number of shares of
the combined company that the converted options will be exercisable for, and the
exercise price of the option, will be adjusted to reflect the exchange ratio.
All outstanding shares of restricted stock, restricted stock units and
other stock-based awards granted by Honeywell that do not become fully vested as
a result of the merger will be converted into a similar award for shares of the
combined company. We have provided additional information on Honeywell
stock-based awards in the section entitled 'Interests of Certain Persons in the
Merger'.
NAME CHANGE; COMPANY HEADQUARTERS; BOARD OF DIRECTORS AND RELATED MATTERS
AlliedSignal Name Change. Immediately prior to the effective time of the
merger, AlliedSignal will change its corporate name so that the name of the
combined company will be 'Honeywell International Inc.' AlliedSignal will change
its corporate name by merging a subsidiary into it. Under Delaware law, in this
type of merger a company may change its corporate name with the approval of its
board of directors. This merger will have no other effect on the common stock of
AlliedSignal or the combined company.
Honeywell International Headquarters. After the completion of the merger,
the headquarters of the combined company will be in Morris Township, New Jersey
at the current location of AlliedSignal's headquarters.
Honeywell International Board of Director and Committees. AlliedSignal has
agreed to take all action necessary so that at the effective time of the merger:
The board of directors of the combined company will have 15 members.
Six of the current directors of Honeywell will become directors of the
combined company. We expect that the six will be Gordon M. Bethune,
Michael R. Bonsignore, James J. Howard, Bruce Karatz, Jaime Chico Pardo
and Michael W. Wright.
Nine of the current directors of AlliedSignal will remain as directors of
the combined company. We expect that the nine will be Hans W. Becherer,
Lawrence A. Bossidy, Marshall N. Carter, Ann M. Fudge, Robert P. Luciano,
Russell E. Palmer, Ivan G. Seidenberg, Andrew C. Sigler and John R.
Stafford.
The board of directors of the combined company will have six committees as
indicated in 'Directors of the Combined Company' on page 69.
Chief Executive Officer; Chairman of the Board of Directors. The merger
agreement provides that, as of the effective time of the merger, Michael R.
Bonsignore, currently the Chairman of the Board and Chief Executive Officer of
Honeywell, will be the Chief Executive Officer of Honeywell International, and
Lawrence A. Bossidy, currently the Chairman of the Board and Chief Executive
Officer of AlliedSignal, will remain as Chairman of the Board of Honeywell
International until
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April 1, 2000, or his earlier retirement, at which time Michael R. Bonsignore
will become Chairman of the Board.
Executive Office. The merger agreement provides that, as of the effective
time of the merger, Honeywell International will have an executive office
consisting of (a) Mr. Bossidy, until his retirement as Chairman of the Board of
Honeywell International, (b) Mr. Bonsignore, as Chief Executive Officer of
Honeywell International and upon Mr. Bossidy's retirement, as Chairman of the
Board, and (c) Robert D. Johnson and Giannantonio Ferrari, each of whom will be
a Chief Operating Officer and Executive Vice President of Honeywell
International. The executive office will be responsible for overseeing the
integration team.
Integration Team. We have jointly appointed an integration team co-chaired
by Raymond C. Stark, presently Vice President -- Six Sigma and Productivity of
AlliedSignal, and William M. Hjerpe, presently President of Honeywell Europe.
The remaining members of the integration teams consisting of industry and
management specialists were appointed by AlliedSignal and Honeywell in equal
proportion. Before the effective time, the integration team will report to
Messrs. Bossidy, Bonsignore, Johnson and Ferrari. After the effective time of
the merger, the integration team will report to the executive office.
By-law Amendment. The merger agreement requires the board of directors of
AlliedSignal to approve an amendment to its by-laws. This amendment has been
approved by AlliedSignal's board of directors to be effective at the completion
of the merger. This amendment is described in 'The Merger Transaction --
Amendment of AlliedSignal's By-laws' above.
COVENANTS
We have each undertaken certain covenants in the merger agreement. The
following summarizes the more significant of these covenants:
No Solicitation. We have each agreed not to, and to use reasonable best
efforts not to permit any of our respective officers, directors, employees or
representatives to:
(1) solicit, initiate, encourage, or facilitate the making of, or inquiries
regarding, any 'acquisition proposal' of the type described below; or
(2) engage in any substantive discussions or negotiations regarding any
acquisition proposal or provide any nonpublic information relating to
ourselves to any person that has made, or they know is considering
making, an acquisition proposal.
However, in the event that either of us receives an unsolicited 'superior
proposal' of the type described below, in response to the proposal that
company's board of directors determines in its good faith judgment, after
receiving the advice of outside counsel, that there is a reasonable possibility
that the board of directors would be in violation of its fiduciary duties under
applicable law if that company failed to do so, that company may after giving
two business days notice to the other:
(1) provide information to the person making a superior proposal if the
person enters into a confidentiality agreement generally no less
restrictive than the terms in the existing confidentiality agreement
between Honeywell and AlliedSignal; and
(2) participate in discussions or negotiations regarding the superior
proposal.
An 'acquisition proposal' of Honeywell or AlliedSignal, as applicable, is
any written proposal or offer of indication of interest from any person relating
to any:
acquisition of a business that constitutes 20% or more of its net
revenues, net income or assets;
acquisition of 20% or more of its outstanding shares;
tender offer that if completed would result in any person owning 20% or
more of its outstanding shares; or
merger, recapitalization, liquidation, or similar transaction involving
it.
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A 'superior proposal' of Honeywell or AlliedSignal is any bona fide written
acquisition proposal for all the outstanding Honeywell shares or AlliedSignal
shares, as the case may be:
on terms which the board of directors of the company receiving the
proposal determines in its good faith judgment, after consulting with a
financial advisor of nationally recognized reputation and taking into
account all the terms and conditions of the acquisition proposal that the
board of directors considers to be relevant, including break-up fees,
expense reimbursement requirements, conditions and the ability of the
party making the acquisition proposal to obtain financing, to be more
favorable, other than immaterially so, from a financial point of view to
that company's shareowners than the merger; and
that in the judgment of the board of directors of the company receiving
the proposal, is reasonably likely to be completed taking into account all
legal, financial and regulatory aspects of the acquisition proposal.
We have each agreed to notify the other promptly, but in any case within 48
hours, of the receipt of any acquisition proposal, any request for nonpublic
information or any awareness that a person is considering making an acquisition
proposal or a request for nonpublic information. This notice must identify the
person making any acquisition proposal and the material terms of the acquisition
proposal.
Board of Directors' Covenant to Recommend. Our respective boards of
directors have agreed to recommend the approval of the merger to their
respective shareowners. However, each board of directors is permitted not to
make and to withdraw or to modify in a manner adverse to the other company this
recommendation, if, after receiving an acquisition proposal that constitutes a
superior proposal:
the board of directors determines in its good faith judgment, after
receiving the advice of outside legal counsel, that in light of this
superior proposal, there is a reasonable possibility that the board would
be in violation of its fiduciary duties under applicable law if it failed
to withdraw or modify its recommendation;
the company receiving the superior proposal gives the other company five
business days notice advising that its board of directors intends to
withdraw or modify its recommendation if the merger agreement is not
modified; and
the acquisition proposal would still constitute a superior proposal if the
merger agreement were amended to reflect all modifications proposed by the
other company.
Operations of AlliedSignal and Honeywell Pending Closing. We have each
undertaken a separate covenant that places restrictions on ourselves and our
respective subsidiaries until either the effective time of the merger or the
termination of the merger agreement. In general, we and our respective
subsidiaries are required to conduct businesses in the ordinary course
consistent with past practices and to use reasonable best efforts to preserve
intact our business organizations and relationships with third parties. Each of
us has agreed to some specific restrictions that prohibit us and each of our
respective subsidiaries from:
amending any organizational documents;
entering into any merger, liquidation or other significant transaction;
issuing or disposing of stock, options or other securities convertible
into or exercisable for stock, except to employees or directors in the
ordinary course of business consistent with past practices;
splitting, combining or reclassifying its stock;
declaring dividends, except for regular quarterly cash dividends
consistent with past practice;
redeeming or repurchasing any stock;
amending the terms of any employee or director stock options or other
awards the value of which is tied to the value of the company's stock;
increasing employee compensation or benefits except for increases in the
ordinary course consistent with past practice;
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acquiring a material amount of assets except in the ordinary course of
business consistent with past practices;
disposing of a material amount of assets, except pursuant to existing
commitments and in the ordinary course of business consistent with past
practices and to satisfy regulatory requirements;
changing any accounting policies;
entering into any material joint venture or partnership;
taking any action that would make any representation or warranty
inaccurate in any material respect;
entering into any standstill agreement or amending or waiving any
provision under any standstill agreement, except for waivers to permit a
person to make a superior proposal if the board of the relevant company
determines in its good faith judgment, after receiving the advice of
outside counsel, that in light of the superior proposal there is a
reasonable possibility that the failure to grant the waiver would cause
the board of directors to be in violation of its fiduciary duties under
applicable law; and
making or changing any material tax election, settling any material audit,
filing any material amended tax returns, except in the ordinary course
consistent with past practice.
We have agreed to exceptions to the covenants described above that permit
each to make acquisitions so long as no single transaction involves the payment
of consideration in excess of $1 billion in the case of AlliedSignal, or $500
million in the case of Honeywell, and so long as all transactions do not involve
payment in the aggregate in excess of $2 billion in the case of AlliedSignal, or
$500 million in the case of Honeywell. We have also agreed to not dispose of
assets having a total value in excess of $1 billion in the case of AlliedSignal,
or $500 million in the case of Honeywell.
Reasonable Best Efforts Covenant. We have agreed to cooperate with each
other and use our reasonable best efforts to take all actions and do all things
necessary or advisable under the merger agreement and applicable laws to
complete the merger and the other transactions contemplated by the merger
agreement. Honeywell has agreed that, if requested by AlliedSignal, Honeywell
will agree to divest, or commit to limit its freedom to operate any business,
product line or assets if the divestiture or the commitment is a condition to
closing the merger and would not have a material adverse effect on the combined
company at and after the effective time of the merger. Both of us will have also
agreed that neither of us would divest, or commit to limit our freedom to
operate any business, product line or assets without the consent of the other,
which may not be unreasonably withheld. Furthermore, neither of us is required
to divest any business, product line or assets if the divestiture would have a
material adverse effect on the combined company.
Employee Matters. In the merger agreement, AlliedSignal and Honeywell
agreed to the following:
approval of the merger by Honeywell shareowners will result in a change in
control of Honeywell under applicable Honeywell employee benefit plans,
other than the Retirement Benefit Plan,
neither approval of the merger by AlliedSignal shareowners nor the
completion of the merger will result in a change in control of
AlliedSignal under its employee benefit plans,
after completion of the merger, Honeywell employees who continue
employment with the combined company will receive salary and benefits,
which, in the aggregate, are substantially equivalent to, either:
(1) what they currently receive as employees of Honeywell, or
(2) what AlliedSignal employees in positions comparable to the positions
held by the Honeywell employees receive;
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with certain exceptions, Honeywell employees who continue employment with
the combined company will receive full credit for eligibility, vesting,
benefit accrual and determination of the level of benefits for their
Honeywell service under the employee benefit plans of the combined company
in which they participate following the merger to the extent that
Honeywell recognized their service for these purposes before the merger.
See 'Interests of Certain Persons in the Merger,' beginning on page 43, for
additional information on employee benefits matters covered in the merger
agreement.
Payment of Dividends Pending the Merger. We have agreed to coordinate
declaring dividends and the related record dates and payment dates so that
Honeywell shareowners do not receive two dividends, or fail to receive one
dividend, for any single calendar quarter.
REPRESENTATIONS AND WARRANTIES
The merger agreement contains substantially reciprocal representations and
warranties made by each of us to the other. The representations and warranties
relate to:
corporate existence, qualification to conduct business and corporate
standing and power;
corporate authorization to enter into and carry out obligations under the
merger agreement and the enforceability of the merger agreement;
governmental consents, approvals, orders and authorizations required in
connection with the merger;
absence of a breach of the certificate of incorporation, by-laws, law or
material agreements as a result of the merger;
capitalization;
ownership of subsidiaries;
filings with the SEC;
financial statements;
information provided for inclusion in this joint proxy
statement/prospectus;
absence of certain material changes or events since a specified balance
sheet date;
litigation;
absence of undisclosed liabilities;
tax matters;
employee benefit matters;
compliance with laws;
payment of fees to finders and financial advisors in connection with the
merger agreement;
environmental matters;
opinions of financial advisors;
treatment of the merger as a pooling of interests for accounting purposes
and as a reorganization under the Internal Revenue Code in which Honeywell
shareowners generally will not recognize any gain or loss, except for any
gain or loss recognized in connection with cash received for a fractional
share of the combined company's common stock;
intellectual property matters; and
'Year 2000' matters.
In addition, Honeywell also represents and warrants to AlliedSignal that
the Honeywell shareholder rights plan is not applicable to the merger, the
merger agreement and the AlliedSignal stock option agreement.
The representations and warranties contained in the merger agreement do not
survive the effective time of the merger.
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ADDITIONAL AGREEMENTS
Insurance and Indemnification. The combined company is obligated, for six
years after the merger, to maintain in effect Honeywell's current directors' and
officers' liability insurance covering acts or omissions occurring prior to the
effective time of the merger. The combined company will not be required to pay,
in total, an annual premium for the insurance described in this paragraph in
excess of 200% of the current annual premium paid by Honeywell for its existing
coverage prior to the merger. However, if the annual premiums of that insurance
coverage exceed that amount, the combined company will be obligated to provide
coverage available for a cost equal to 200% of the current annual premium.
The combined company is obligated, to the fullest extent permitted under
applicable laws, to indemnify and hold harmless each person who is, or has been
an officer, director or employee of Honeywell or any of its subsidiaries with
respect to acts or omissions by them in their capacities as officers, directors
or employees or taken at the request of Honeywell or any of its subsidiaries at
any time on or prior to the effective time of the merger.
Expenses. We have agreed to each pay our own costs and expenses incurred in
connection with the merger and the merger agreement. We will, however, share
equally (a) the filing fees for filings under the Hart-Scott-Rodino Act,
antitrust filings with the European Commission and all similar filings, (b) the
filing fees in connection with the filing with the SEC of this joint proxy
statement/prospectus and the related registration statement, (c) all printing,
mailing and related expenses and (d) all other expenses not directly
attributable to either one of us.
New York Stock Exchange Listing. AlliedSignal is obligated to use its
reasonable best efforts to cause the shares of its common stock to be issued in
the merger to be approved for listing on the New York Stock Exchange, subject to
official notice of issuance.
Tax and Accounting Treatment. We have each agreed not to take any action or
fail to take any action which would prevent the merger from qualifying (a) for
pooling of interests accounting treatment or (b) as a reorganization under the
Internal Revenue Code.
Relationship with the Minneapolis/St. Paul Community. The combined company
intends to continue providing funding to The Honeywell Foundation and to
otherwise maintain Honeywell's charitable and communal endeavors in the
Minneapolis/St. Paul area at levels at least as great as Honeywell provided and
maintained before the merger.
CONDITIONS TO THE COMPLETION OF THE MERGER
Our respective obligations to complete the merger are subject to the
satisfaction or, to the extent legally permissible, the waiver of various
conditions which include, in addition to other customary closing conditions, the
following:
approval of the merger by the shareowners of both AlliedSignal and
Honeywell;
expiration or termination of the relevant waiting period under the
Hart-Scott-Rodino Antitrust Improvements Act;
approval of the merger by the European Commission;
receipt of all other governmental and regulatory approvals necessary to
complete the merger unless not obtaining those approvals would not have a
material adverse effect on the combined company and those approvals are
obtained on terms that would not have a material adverse effect on the
combined company;
the absence of any law or court order prohibiting the completion of the
merger;
the SEC having declared effective the registration statement relating to
the issuance of the shares of the combined company common stock to be
issued in the merger, of which this joint proxy statement/prospectus forms
a part;
the shares of the combined company issuable in the merger having been
approved for listing on the New York Stock Exchange, subject to official
notice of issuance; and
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the receipt of a letter from the independent public accountants of
AlliedSignal confirming that they concur with AlliedSignal's management
that pooling of interests accounting treatment for the merger is
appropriate and a letter from the independent public accountants of
Honeywell confirming that they concur with Honeywell's management that
Honeywell is eligible to participate in a transaction to be accounted for
as a pooling of interests.
In addition, individually, our respective obligations to effect the merger
are subject to the satisfaction or, to the extent legally permissible, the
waiver of the following additional conditions:
the representations and warranties of the other company contained in the
merger agreement being true and correct on the closing date of the merger,
as if they were made on that date (unless they were by their express
provisions made as of a specific date, in which case they need be true and
correct only as of that specific date), unless their failure to be true
and correct would not have a material adverse effect on the other party;
the other company having performed in all material respects all required
obligations to be performed by it prior to the closing of the merger;
with respect to AlliedSignal only, no legal proceeding brought by any
governmental agency is pending in which the governmental agency is seeking
to restrain or otherwise interfere with the combined company's ownership
or conduct of its business or compel the divestiture of assets to an
extent that would reasonably be expected to have a material adverse effect
on the combined company;
with respect to AlliedSignal only, no statute, rule, regulation,
injunction, order or decree applicable to the merger having been issued or
enacted by any court, government or governmental agency or legislative
body that would reasonably be expected to have a material adverse effect
on the combined company at and after the effective time of the merger has
been enacted, entered or issued; and
the receipt of an opinion of counsel to the effect that the merger will
qualify as a reorganization under the Internal Revenue Code and that each
of AlliedSignal, Honeywell and Blossom Acquisition Corp. will be a party
to the reorganization.
TERMINATION OF THE MERGER AGREEMENT
Right to Terminate. The merger agreement may be terminated at any time
prior to the closing in any of the following ways:
(1) by our mutual written consent;
(2) by either one of us;
(a) if the merger is not completed on or before February 4, 2000;
however, that date becomes April 4, 2000 if the merger is not
completed on or before February 4, 2000 only because of the failure
to obtain the necessary regulatory approvals, except that a company
may not terminate the agreement on the dates above if the cause of
the merger not being completed is its failure to fulfill its
obligations;
(b) if either the Honeywell or AlliedSignal shareowners do not approve
the merger at their respective special meetings;
(c) if a law or court order permanently prohibits the completion of the
merger;
(d) if there has been a material breach by the other company of any of
the other company's representations, warranties, covenants or
agreements contained in the merger agreement, and the breach would
result in the failure to satisfy one or more of the conditions to
the merger and the condition(s) are incapable of being cured or,
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if capable of being cured, have not been cured within 30 days after
written notice was received by the company in breach;
(3) by AlliedSignal, if the Honeywell board of directors fails to recommend
the merger to its shareowners, withdraws or modifies its approval or
recommendation of the merger in any manner adverse to AlliedSignal,
fails to call a meeting of the Honeywell shareowners, or recommends a
superior proposal; or
(4) by Honeywell, if the AlliedSignal board of directors fails to recommend
the merger to its shareowners, withdraws or modifies its recommendation
of the merger in any manner adverse to Honeywell, fails to call a
meeting of the AlliedSignal shareowners to approve the merger, or
recommends a superior proposal.
Neither Honeywell nor AlliedSignal may terminate the merger agreement
because it received a superior proposal without first presenting the merger for
a vote of its shareowners.
Termination Fees Payable by Honeywell. Honeywell has agreed to pay
AlliedSignal a termination fee of:
$350 million, if AlliedSignal terminates the merger agreement for the
reasons described in paragraph (3) under ' -- Right to Terminate' above;
$350 million, if:
-- either AlliedSignal or Honeywell terminates the merger agreement for
the reason described in paragraph (2)(a) under ' -- Right to
Terminate' above;
-- prior to the termination an acquisition proposal was made to
Honeywell or its shareowners; and
-- Honeywell enters into a definitive agreement relating to an
acquisition proposal within nine months after the termination of the
merger agreement; and
$200 million, if the merger agreement is terminated for the reason
described in paragraph (2)(b) under ' -- Right to Terminate' above because
Honeywell shareowners fail to approve the merger or for the reason
described in paragraph 2(d) under ' -- Right to Terminate' above because
of a breach by Honeywell and prior to the termination of the merger
agreement an acquisition proposal was made to Honeywell or its
shareowners; an additional $150 million would be payable if, within nine
months after the termination, Honeywell enters into a definitive agreement
relating to an acquisition proposal.
Honeywell has also agreed to reimburse AlliedSignal for up to $20 million
of AlliedSignal's expenses if the merger agreement is terminated because
Honeywell shareowners fail to approve the merger or Honeywell materially
breaches any of its representations, warranties or obligations as set out in the
merger agreement, in each case if no acquisition proposal had been previously
made to Honeywell or its shareowners.
Termination Fees Payable by AlliedSignal. AlliedSignal has agreed to pay
Honeywell a termination fee of:
$350 million, if Honeywell terminates the merger agreement for the reasons
described in paragraph (4) under ' -- Right to Terminate' above;
$350 million if:
-- either AlliedSignal or Honeywell terminates the merger agreement for
the reason described in paragraph (2)(a) under ' -- Right to
Terminate' above;
-- prior to the termination an acquisition proposal was made to
AlliedSignal or its shareowners; and
-- AlliedSignal enters into a definitive agreement relating to an
acquisition proposal within 9 months after the termination of the
merger agreement; and
$200 million, if the merger agreement is terminated for the reason
described in paragraph (2)(c) under ' -- Right to Terminate' above because
AlliedSignal shareowners fail to give the
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necessary approval or for the reason described in paragraph 2(d) under
' -- Right to Terminate' above because of a breach by AlliedSignal and
prior to the termination of the merger agreement an acquisition proposal
was made to AlliedSignal or its shareowners; an additional $150 million
would be payable if, within nine months after the termination,
AlliedSignal enters into a definitive agreement relating to an acquisition
proposal.
AlliedSignal has also agreed to reimburse Honeywell for up to $20 million
of Honeywell's expenses if the merger agreement is terminated because
AlliedSignal shareowners fail to approve the merger or AlliedSignal materially
breaches any of its representations, warranties as set out in the merger
agreement, if no acquisition proposal had been previously made to AlliedSignal
or its shareowners.
AMENDMENTS AND WAIVER
Any provision of the merger agreement may be amended or waived at any time
prior to the effective time of the merger. Any amendment must be signed by
AlliedSignal, Honeywell and Blossom Acquisition Corp. Any waiver must be signed
by the party against whom the waiver is to be effective.
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MATERIAL TERMS OF THE STOCK OPTION AGREEMENTS
The following summary of the stock option agreements is qualified by
reference to the complete text of the stock option agreements, which are
incorporated by reference and attached as Annexes B and C to this document.
THE STOCK OPTIONS
At the same time we entered into the merger agreement, we also entered into
reciprocal stock option agreements. Under the terms of the stock option granted
by Honeywell to AlliedSignal, AlliedSignal may purchase up to 25,241,518 shares
of Honeywell common stock at an exercise price of $109.453 per share. Under the
terms of the stock option granted by AlliedSignal to Honeywell, Honeywell may
purchase up to 109,308,537 shares of AlliedSignal common stock at an exercise
price of $58.375 per share. The terms of these stock option agreements are
substantially identical and are as summarized below:
EXERCISE OF THE STOCK OPTIONS
Each of us can exercise the option granted to it, in whole or in part, at
any time after the occurrence of the events which would entitle it to receive a
full termination fee of $350 million under the merger agreement (see 'Material
Terms of the Merger Agreement -- Termination of the Merger Agreement --
Termination Fees Payable by Honeywell' and ' -- Termination Fees Payable by
AlliedSignal') and prior to the termination of the option.
The options terminate upon the earliest to occur of:
the effective time of the merger;
120 days after the payment in full of the $350 million termination fee;
the date of any termination of the merger agreement but only if no event
which would allow AlliedSignal or Honeywell, as the case may be, to
exercise the stock options granted to it has occurred or could still
occur; or
one year after the date of the termination of the merger agreement.
CASH ELECTION
If a stock option becomes exercisable, the company holding the option may,
as to all or part of the option shares subject to the option, elect to receive a
cash payment. This cash payment would terminate the electing company's right to
purchase those option shares upon the exercise of the option of common stock.
The cash to be paid would be equal to the difference between the exercise price
of the option and the higher of:
the highest price per share proposed to be paid by any person in
connection with an acquisition proposal; or
the average closing price of the stock for the five days preceding the
election to receive cash.
Listing and Registration Rights. We have each agreed that if either
company's option becomes exercisable, the company which granted the exercisable
option will apply to list the option shares subject to that option on the New
York Stock Exchange and will use reasonable best efforts to have those shares
listed as soon as practicable. We each granted the other customary rights to
require registration of option shares purchased under an option to permit a
resale of those shares under the securities laws.
Limitation on Total Profit. Each of the stock option agreements provides
that, notwithstanding any other provision of that agreement or the merger
agreement, the total profit, as defined below, that we are each permitted to
receive will not exceed $400 million in the aggregate. If the total profit of
either of us would otherwise exceed this amount, the company whose total profit
would exceed this amount may, at its sole election (a) pay cash to the other
company, (b) deliver to the other company for the company cancellation option
shares previously acquired or (c) any combination of
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(a) or (b), so that the company's actually realized total profit does not exceed
$400 million after taking into account the foregoing actions.
Total profit means the total amount, before taxes, of the following: (1)(x)
the cash amount actually received by a company in payment of the termination fee
under the merger agreement, less (y) any repayment as described in the preceding
paragraph; (2) the net cash amounts received by the company from the sale of
option shares, less the purchase price for those option shares plus (3) the
aggregate amount received by the company as a result of a cash election
described under ' -- Cash Election' above.
The stock option agreements also provide that neither of us may exercise
any option for a number of option shares that would, as of the date of exercise,
result in a notional total profit, as defined below, exceeding $400 million. For
purposes of the stock option agreement, the notional total profit with respect
to the option shares for which either of us may propose to exercise the option
granted to it means the total profit received by it determined as of the date it
notifies the other company of its intent to exercise the option and assuming
that the applicable option shares, together with all other option shares
previously acquired upon exercise of the option and held by its or its
affiliates as of such date, were sold for cash at the NYSE Composite Transaction
Reporting System closing price on the preceding trading day.
EFFECT OF STOCK OPTION AGREEMENTS
These stock option agreements are intended to increase the likelihood that
the merger will be completed in accordance with the terms of the merger
agreement. The option agreements would have the effect of making an acquisition
or other business combination of either company by or with a third party more
costly because of the need in any transaction to acquire the shares held
pursuant to the option agreement. Moreover, following consultation with our
respective independent public accountants, we believe that, if the option
granted by AlliedSignal or Honeywell becomes exercisable, it is likely to
preclude any other party from using the pooling-of-interests accounting method
in any merger or business combination transaction with that company for the
following two years. Accordingly, the option agreements may discourage a third
party from proposing another transaction, including one that might be more
favorable from a financial point of view to the shareowners of AlliedSignal or
Honeywell, as the case may be, than the merger.
STANDSTILL PROVISION
If either of us holds the option shares of the other obtained through
exercise of the option granted to it, then the company who owns the shares and
its affiliates may not:
make any attempt to acquire ownership of more than 25% of any class of
voting securities of the other company, including any rights or options to
acquire that ownership;
propose a merger or similar transaction involving the other company;
offer or propose to acquire all or a substantial portion of the assets of
the other company;
solicit or participate in the solicitation of any proxies or consents
involving the other company's securities;
enter into any agreement or arrangement with a third party involving any
of the matters described above; or
request permission to take actions described above or make public
announcement regarding any of those actions.
We have promised that, so long as any of us owns any option shares of the
other company, we will be represented at all of the shareowner meetings of the
other company so that all the option holder's voting securities are counted in
determining the presence of a quorum. We have also agreed to vote all our voting
securities proportionately with the votes cast by all other shareowners present
and voting.
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DIRECTORS OF THE COMBINED COMPANY
The AlliedSignal board of directors presently consists of 14 members. As
required by the merger agreement, AlliedSignal will take all action necessary so
that, as of the closing of the merger, the board of directors of the combined
company will consist of 15 members, nine of whom will be current members of
AlliedSignal's board of directors and six of whom will be current members of
Honeywell's board of directors.
In addition, the board of directors of the combined company will have the
following six committees which will be chaired by the following directors:
Audit Committee -- Russell E. Palmer
Corporate Governance Committee -- Bruce Karatz
Corporate Responsibility Committee -- Ann M. Fudge
Management Development
and Compensation Committee -- Robert P. Luciano
Retirement Plans and Finance Committee -- Michael W. Wright
Technology Committee -- Ivan G. Seidenberg
We have listed below biographical information for each of the 15 persons
who are expected to be members of the board of directors of the combined company
as of the closing of the merger. Also, we have indicated below the term of
office to be served by each director.
<TABLE>
<CAPTION>
TERM OF
OFFICE
ALLIEDSIGNAL DESIGNEES EXPIRING IN BIOGRAPHICAL INFORMATION
- ---------------------- ----------- ------------------------
<S> <C> <C>
HANS W. BECHERER, 64 2000 Chairman and Chief Executive Officer of Deere
& Company.
Mr. Becherer began his business career with
Deere & Company, a manufacturer of mobile
power machinery and a supplier of financial
services, in 1962. After serving in a variety
of managerial and executive positions, he
became a director of Deere in 1986 and was
elected President and Chief Operating Officer
in 1987, President and Chief Executive Officer
in 1989 and Chairman and Chief Executive
Officer in 1990. He is also a director of The
Chase Manhattan Corporation and Schering-Plough
Corporation.
Mr. Becherer has been a director of
AlliedSignal since 1991.
</TABLE>
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<TABLE>
<CAPTION>
TERM OF
OFFICE
ALLIEDSIGNAL DESIGNEES EXPIRING IN BIOGRAPHICAL INFORMATION
- ---------------------- ----------- ------------------------
<S> <C> <C>
LAWRENCE A. BOSSIDY, 64 2000 Chairman of the Board and Chief Executive
Board of the combined company until April 1,
2000 or his earlier retirement.
Mr. Bossidy became Chief Executive Officer of
AlliedSignal in July 1991 and Chairman of the
Board in January 1992. He previously served in
a number of executive and financial positions
with General Electric Company, a diversified
services and manufacturing company, which he
joined in 1957. Mr. Bossidy was Chief Operating
Officer of General Electric Credit Corporation
(now General Electric Capital Corporation) from
1979 to 1981, Executive Vice President and Sector
Executive of GE's Services and Materials
Sector from 1981 to 1984, and Vice Chairman and
Executive Officer of GE from 1984 until he
joined the Company. He is a director of
Champion International Corporation, J.P.
Morgan & Co. Incorporated and Merck & Co., Inc.
Mr. Bossidy has been a director of AlliedSignal
since 1991.
ANN M. FUDGE, 48 2000 Executive Vice President of Kraft Foods, Inc.
Ms. Fudge joined General Foods USA in 1986
and held several planning and marketing
positions before being appointed Executive Vice
President and General Manager of the Dinners and
Enhancers Division in 1991. In 1994, she was
named President of Kraft General Foods'
Maxwell House Coffee Company. In 1995, Ms.
Fudge assumed her current position, while
continuing to head the Maxwell House Coffee
Division as General Manager. She became
President of Kraft's Maxwell House and Post
Division in 1997. Kraft is the multinational
food business of Philip Morris Companies Inc. Ms.
Fudge is a director of General Electric Company
and Liz Claiborne, Inc.
Ms. Fudge has been a director of AlliedSignal
since 1993.
</TABLE>
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<TABLE>
<CAPTION>
TERM OF
OFFICE
ALLIEDSIGNAL DESIGNEES EXPIRING IN BIOGRAPHICAL INFORMATION
- ---------------------- ----------- ------------------------
<S> <C> <C>
RUSSELL E. PALMER, 64 2001 Chairman and Chief Executive Officer of the
Palmer Group.
Mr. Palmer established The Palmer Group, a
private investment firm, in 1990, after serving
seven years as Dean of The Wharton School of
the University of Pennsylvania. He previously
served as Managing Director and Chief Executive
Officer of Touche Ross International and
Managing Partner and Chief Executive Officer
of Touche Ross & Co. (USA) (now Deloitte and
Touche). He is a director of Federal Home Loan
Mortgage Corporation, GTE Corporation, The
May Department Stores Company and Safeguard
Scientifics, Inc.
Mr. Palmer has been a director of AlliedSignal
since 1987.
IVAN G. SEIDENBERG, 52 2001 Chairman and Chief Executive Officer of Bell
Atlantic Corporation.
Mr. Seidenberg assumed his current position with
Bell Atlantic Corporation, a telecommunications
and information services provider, in January
1999. He previously served as Vice Chairman,
President and Chief Executive Officer since
June 1998, and Vice Chairman, President and Chief
Operating Officer following the merger of
NYNEX Corporation and Bell Atlantic in 1997.
He had joined NYNEX in 1983 and served in
several senior management positions before
becoming a director and Vice Chairman of the
Board in 1991, President and Chief Operating
Officer in 1994, and Chairman and Chief
Executive Officer in 1995. He is also a
director of American Home Products Corporation,
Boston Properties, Inc., CVS Corporation and
Viacom Inc.
Mr. Seidenberg has been a director of
AlliedSignal since 1995.
</TABLE>
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<TABLE>
<CAPTION>
TERM OF
OFFICE
ALLIEDSIGNAL DESIGNEES EXPIRING IN BIOGRAPHICAL INFORMATION
- ---------------------- ----------- ------------------------
<S> <C> <C>
ANDREW C. SIGLER, 67 2001 Retired Chairman and Chief Executive Officer of
Champion International Corporation.
Mr. Sigler began his career at Champion
International Corporation, a paper and forest
products company, in 1956. He was elected
President and Chief Executive Officer in 1974
and served as Chairman and Chief Executive
Officer from 1979 until his retirement in 1996.
He is a director of The Chase Manhattan
Corporation and General Electric Company.
Mr. Sigler has been a director of AlliedSignal
since 1994.
MARSHALL N. CARTER, 59 2002 Chairman and Chief Executive Officer of State
Street Corporation.
Mr. Carter joined State Street Corporation and
its principal subsidiary, State Street Bank and
Trust Company, as President and Chief Operating
Officer in 1991. He became Chief Executive
Officer in 1992 and Chairman of the Board in
1993. State Street is a provider of services to
institutional investors worldwide. Prior to
joining State Street, Mr. Carter was with Chase
Manhattan Bank for 15 years, and before that he
served as an officer in the U.S. Marine Corps.
Mr. Carter has been a director of AlliedSignal
since 1999.
ROBERT P. LUCIANO, 65 2002 Retired Chairman and Chief Executive Officer of
Schering-Plough Corporation.
Mr. Luciano joined Schering-Plough Corporation,
a manufacturer and marketer of pharmaceuticals
and consumer products, in 1978. He served as
President from 1980 to 1986, Chief Executive
Officer from 1982 through 1995, and Chairman of
the Board from 1984 through October 1998. He
is a director of C.R. Bard, Inc., Merrill Lynch
& Co. and Schering-Plough Corporation.
Mr. Luciano has been a director of AlliedSignal
since 1989.
</TABLE>
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<TABLE>
<CAPTION>
TERM OF
OFFICE
ALLIEDSIGNAL DESIGNEES EXPIRING IN BIOGRAPHICAL INFORMATION
- ---------------------- ----------- ------------------------
<S> <C> <C>
JOHN R. STAFFORD, 61 2002 Chairman, President and Chief Executive Officer
of American Home Products Corporation.
Mr. Stafford has held a number of positions
with American Home Products, a manufacturer of
pharmaceutical, health care, animal health and
agricultural products, since joining that company
in 1970. He served as General Counsel, Vice
President, Senior Vice President and Executive
Vice President before becoming President in
1981, an office he held until 1990 and which he
resumed in early 1994. Mr. Stafford was elected
Chairman of the Board and Chief Executive
Officer in 1996. He is also a director of Bell
Atlantic Corporation, The Chase Manhattan
Corporation and Deere & Company.
Mr. Stafford has been a director of AlliedSignal
since 1993.
<CAPTION>
HONEYWELL DESIGNEES
<S> <C> <C>
GORDON M. BETHUNE, 57 2000 Chairman of the Board and Chief Executive
Officer of Continental Airlines, Inc.
Mr. Bethune joined Continental Airlines, an
international commercial airline company, in
February 1994 as President and Chief Operating
Officer. He was elected President and Chief
Executive Officer in November 1994 and
Chairman of the Board and Chief Executive
Officer in 1996. From 1988 to 1994, Mr.
Bethune served as vice president and general
manager of various divisions of The Boeing
Company, a manufacturer of commercial
jetliners and military aircraft, and he served
most recently as vice president and general
manager of the Renton Division of the
Commercial Airplane Group at Boeing. Prior to
1988, Mr. Bethune was senior vice president of
operations for Piedmont Airlines, and he held
senior management positions as vice president
of engineering and maintenance at Western Air
Lines, Inc. and at Braniff Airlines. Mr.
Bethune is also a director of Sysco Corporation.
Mr. Bethune has been a director of Honeywell
since 1999.
</TABLE>
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<TABLE>
<CAPTION>
TERM OF
OFFICE
HONEYWELL DESIGNEES EXPIRING IN BIOGRAPHICAL INFORMATION
- ------------------- ----------- ------------------------
<S> <C> <C>
JAIME CHICO PARDO, 49 2000 Chief Executive Officer of Telefonos de Mexico,
S.A. de C.V. (TELMEX).
Mr. Chico Pardo joined TELMEX, a
telecommunications company based in Mexico
City, as its Chief Executive Officer in 1995.
From 1993 to 1995, Mr. Chico Pardo was
President and Chief Executive Officer of Grupo
Condumex, S.A. de C.V., a manufacturer of
products for the construction, automobile and
telecommunications industries. Prior to 1993,
Mr. Chico Pardo was President and Chief
Executive Officer of Euzkadi/General Tire de
Mexico, a manufacturer of automotive and truck
tires. Mr. Chico Pardo is also Vice-Chairman of
Carso Global Telecom and a director of Grupo
Carso and Grupo Financiero Inbursa.
Mr. Chico Pardo has been a director of
Honeywell since 1998.
JAMES J. HOWARD, 63 2001 Chairman of the Board, President and Chief
Executive Officer of Northern States Power
Company.
Mr. Howard has been Chairman and Chief
Executive Officer of Northern States Power, an
energy company, since 1988, and President since
1994. Prior to 1987, Mr. Howard was President
and Chief Operating Officer of Ameritech
Corporation. Mr. Howard is also a director of
Ecolab Inc., the Federal Reserve Bank of
Minneapolis, ReliaStar Financial and Walgreen
Company.
Mr. Howard has been a director of Honeywell
since 1990.
BRUCE KARATZ, 53 2001 Chairman of the Board, President and Chief
Executive Officer of Kaufman and Broad Home
Corporation.
Mr. Karatz was elected President and Chief
Executive Officer of Kaufman and Broad Home
Corporation, an international residential and
commercial builder, in 1986, and Chairman of
the Board in 1993. Mr. Karatz is also a
director of Fred Meyer, Inc. and National Golf
Properties, Inc.
Mr. Karatz has been a director of Honeywell
since 1992.
</TABLE>
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<TABLE>
<CAPTION>
TERM OF
OFFICE
HONEYWELL DESIGNEES EXPIRING IN BIOGRAPHICAL INFORMATION
- ------------------- ----------- ------------------------
<S> <C> <C>
MICHAEL R. BONSIGNORE, 58 2002 Chairman of the Board and Chief Executive
Officer of Honeywell. Elected to become Chief
Executive Officer of the combined company upon
completion of the merger and Chairman of the
Board of the combined company on April 1,
2000, or upon Mr. Bossidy's earlier retirement.
Mr. Bonsignore began his business career at
Honeywell in 1969. He held various marketing
and operations management positions and became
Vice President of Marine Systems in 1981. In
1983, Mr. Bonsignore was appointed President of
Honeywell Europe, based in Brussels, Belgium.
In 1987, Mr. Bonsignore returned to Minneapolis
as Executive Vice President, International, and
was elected President of this business in May
1987. In 1990, Mr. Bonsignore was elected
Executive Vice President and Chief Operating
Officer for the International and Home &
Building Control businesses, and was also
elected to the Company's Board of Directors.
Mr. Bonsignore was elected Chairman of the
Board and Chief Executive Officer in 1993. Mr.
Bonsignore is also a director of Cargill, Inc.,
Medtronic, Inc. and The St. Paul Companies, Inc.
Mr. Bonsignore has been a director of Honeywell
since 1990.
MICHAEL W. WRIGHT, 60 2002 Chairman of the Board, President and Chief
Executive Officer, SUPERVALU INC.
Mr Wright was elected President and Chief
Operating Officer of SUPERVALU INC., a major
food distributor and retailer, in 1978, Chief
Executive Officer in 1981, and Chairman of the
Board in 1982. He joined SUPERVALU INC. as
Senior Vice President of Administration and as
a member of the board of directors in 1977.
Prior to 1977, Mr. Wright was a partner in the
law firm of Dorsey & Whitney. Mr. Wright is
also a director of Cargill, Inc., Musicland
Stores Corporation, and Wells Fargo and
Company.
Mr. Wright has been a director of Honeywell
since 1987.
</TABLE>
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MANAGEMENT OF THE COMBINED COMPANY
CHAIRMAN AND CHIEF EXECUTIVE OFFICER
After completion of the merger, Lawrence A. Bossidy, presently Chairman of
the Board and Chief Executive Officer of AlliedSignal, will be Chairman of the
Board of the combined company until April 1, 2000, or his earlier retirement.
Michael R. Bonsignore, presently Chairman of the Board and Chief Executive
Officer of Honeywell, will become Chief Executive Officer of the combined
company. As of April 1, 2000, or upon the earlier retirement of Mr. Bossidy, Mr.
Bonsignore will become the Chairman of the Board of the combined company.
CHIEF OPERATING OFFICERS AND EXECUTIVE VICE PRESIDENTS
The combined company will have two Chief Operating Officers and Executive
Vice Presidents: Robert D. Johnson, presently the President and Chief Executive
Officer of AlliedSignal Aerospace, will be the Chief Operating Officer and
Executive Vice President responsible for the aerospace operations of the
combined company. Giannantonio Ferrari, presently the President and Chief
Operating Officer of Honeywell, will be the Chief Operating Officer and
Executive Vice President responsible for all other businesses of the combined
company.
EXECUTIVE OFFICE
Upon completion of the merger, the combined company will establish an
Executive Office consisting of Lawrence A. Bossidy, until his retirement,
Michael R. Bonsignore, Robert D. Johnson and Giannantonio Ferrari. The members
of the Executive Office currently oversee AlliedSignal's and Honeywell's joint
integration team and the Executive Office will oversee the combined company's
integration team after the closing.
INTEGRATION TEAM
We have established a joint integration team, consisting of 12 designees of
AlliedSignal and 12 designees of Honeywell, responsible for planning and
execution of the integration of the two companies. Raymond C. Stark, currently
Vice President of AlliedSignal responsible for Six Sigma and Productivity, and
William M. Hjerpe, President of Honeywell Europe, have been appointed as
co-chairs of the team. Upon completion of the merger, we will maintain the joint
integration team as the integration team of the combined company.
BIOGRAPHICAL INFORMATION
We have listed below all of the persons expected to be executive officers
of the combined company as of the effective time of the merger. Each of the
executive officers is expected to be elected for an initial term ending on the
day of the 2000 annual meeting of shareowners, except for Mr. Bossidy, who is
expected to retire on or before April 1, 2000.
<TABLE>
<CAPTION>
NAME, AGE AND POSITION IN THE
COMBINED COMPANY RECENT BUSINESS EXPERIENCE
- ----------------------------- --------------------------
<S> <C>
Lawrence A. Bossidy, 64 Chairman of the Board of AlliedSignal since January 1992,
Chairman of the Board Chief Executive Officer of AlliedSignal since July 1991.
Michael R. Bonsignore, 58 Chairman of the Board and Chief Executive Officer of
Chief Executive Officer Honeywell since April 1993.
Giannantonio Ferrari, 59 President and Chief Operating Officer of Honeywell since
Chief Operating Officer and April 1997. President of Honeywell Europe S.A. from January
Executive Vice President with 1992 to March 1997.
responsibility for all non-
aerospace businesses
</TABLE>
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<TABLE>
<CAPTION>
NAME, AGE AND POSITION IN THE
COMBINED COMPANY RECENT BUSINESS EXPERIENCE
- ----------------------------- --------------------------
<S> <C>
Robert D. Johnson, 51 President and Chief Executive Officer of AlliedSignal
Chief Operating Officer and Aerospace since April 1999. President -- Aerospace
Executive Vice President with Marketing, Sales and Service of AlliedSignal from January
responsibility for aerospace 1999 until March 1999. President -- Electronic & Avionics
businesses Systems of AlliedSignal from October 1997 to December 1998.
Vice President and General Manager, Aerospace Services of
AlliedSignal from 1994 to October 1997. Group Vice
President, Manufacturing and Services of AAR Corp. from 1993
to 1994.
Peter M. Kreindler, 54 Senior Vice President, General Counsel and Secretary of
Senior Vice President and AlliedSignal since December 1994. Senior Vice President and
General Counsel General Counsel of AlliedSignal from March 1992 to November
1994.
James T. Porter, 47 Vice President and Chief Administrative Officer of Honeywell
Senior Vice President -- since January 1998. Corporate Vice President, Human
Information and Business Resources of Honeywell from May 1993 to December 1997.
Services
Donald J. Redlinger, 54 Senior Vice President -- Human Resources and Communications
Senior Vice President -- Human of AlliedSignal since February 1995. Senior Vice
Resources and Communications President -- Human Resources of AlliedSignal from January
1991 to January 1995.
Richard F. Wallman, 48 Senior Vice President and Chief Financial Officer of
Senior Vice President and AlliedSignal since March 1995. Vice President and Controller
Chief Financial Officer of International Business Machines Corp. from April 1994 to
February 1995. General Assistant Controller of International
Business Machines from October 1993 to March 1994.
Raymond C. Stark, 56 Vice President -- Six Sigma and Productivity of AlliedSignal
Vice President -- Quality since October 1997. President -- Electronic Systems of
AlliedSignal from January 1996 until October 1997. Vice
President -- Materials Management of AlliedSignal from April
1992 until December 1995.
Krzysztof (Kris) K. Burhardt, Vice President, Honeywell Technology Center, since May 1998.
57 Vice President and Chief Technology Officer of Imation Corp.
Vice President -- Technology from November 1995 to May 1998. Vice President, Research and
Development Information, Imaging, and Electronics Sector of
Minnesota Mining and Manufacturing Company from December
1985 to November 1995.
William M. Hjerpe, 47 President of Honeywell Europe since March 1997. Vice
Vice President -- Integration President and Chief Financial Officer of Honeywell from
October 1994 to January 1997. Vice President and Controller
of Honeywell from February 1992 to October 1994.
</TABLE>
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THE SPECIAL MEETINGS
DATE, TIMES AND PLACES
AlliedSignal. AlliedSignal's special meeting will be held at AlliedSignal's
headquarters, 101 Columbia Road, Morris Township, New Jersey, at 10:00 a.m.,
local time, on Wednesday, September 1, 1999.
Honeywell. Honeywell's special meeting will be held at Honeywell's
headquarters, 2701 Fourth Avenue South, Minneapolis, Minnesota, at 9:00 a.m.,
local time, on Wednesday, September 1, 1999.
MATTERS TO BE CONSIDERED AT THE SPECIAL MEETINGS
AlliedSignal. At AlliedSignal's special meeting, AlliedSignal shareowners
will be asked to vote to:
approve the merger pursuant to the merger agreement, including the related
issuance of shares of common stock; and
approve an amendment to the certificate of incorporation of AlliedSignal
providing for the increase in the number of authorized shares of
AlliedSignal common stock from one billion
to two billion and the number of authorized shares of preferred stock from
20 million to 40 million and the elimination of all of the Series A,
Series C, Series D, Series F, Series G and Series AA preferred stock for
AlliedSignal, none of which is currently outstanding. See 'The Merger
Transaction', 'Material Provisions of the Merger Agreement' and
'Description of AlliedSignal Capital Stock -- Proposed Amendment to
AlliedSignal's Certificate of Incorporation'.
Honeywell. At Honeywell's special meeting, Honeywell shareowners will be
asked to vote to approve and adopt the merger agreement and the merger. See 'The
Merger Transaction' and 'Material Terms of the Merger Agreement'.
RECORD DATE; STOCK ENTITLED TO VOTE; QUORUM
AlliedSignal. Owners of record of shares of AlliedSignal common stock at
the close of business on July 22, 1999, the record date for AlliedSignal's
special meeting, are entitled to receive notice of and to vote at AlliedSignal's
special meeting. On the record date, approximately 552,759,111 shares of
AlliedSignal common stock were issued and outstanding.
A quorum of AlliedSignal shareowners is necessary to have a valid meeting
of shareowners. A majority of the shares of AlliedSignal common stock issued and
outstanding and entitled to vote on the record date must be represented in
person or by proxy at AlliedSignal's special meeting in order for a quorum to be
established. Abstentions and broker 'non-votes' count as present for
establishing a quorum. Shares held by AlliedSignal in its treasury or by any
majority owned subsidiary or AlliedSignal do not count toward a quorum. A broker
non-vote occurs on an item when a broker is not permitted to vote on that item
without instruction from the beneficial owner of the shares and no instruction
is given. We expect, in the event that a quorum is not present at AlliedSignal's
special meeting, the meeting will be adjourned or postponed to solicit
additional proxies.
Owners of record of shares of AlliedSignal common stock on the record date
are each entitled to one vote per share on each matter to be considered at
AlliedSignal's special meeting.
Honeywell. Owners of record of shares of Honeywell common stock at the
close of business on July 22, 1999, the record date for Honeywell's special
meeting, are entitled to receive notice of and to vote at Honeywell's special
meeting. On the record date, approximately 127,597,105 shares of Honeywell
common stock were issued and outstanding.
A quorum of Honeywell shareowners is necessary to have a valid meeting of
shareowners. A majority of the shares of Honeywell common stock issued and
outstanding and entitled to vote on the record date must be represented in
person or by proxy at Honeywell's special meeting in order
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for a quorum to be established. Abstentions and broker 'non-votes' count as
present for establishing a quorum. Shares held by Honeywell in its treasury or
by any majority owned subsidiary of Honeywell do not count toward a quorum. A
broker non-vote occurs on an item when a broker is not permitted to vote on that
item without instructions from the beneficial owner of the shares and no
instruction is given. We expect, in the event that a quorum is not present at
Honeywell's special meeting, the meeting will be adjourned or postponed to
solicit additional proxies.
Owners of record of shares of Honeywell common stock on the record date are
each entitled to one vote per share on the approval and adoption of the merger
agreement and the merger.
Honeywell Plan Participants. If you own Honeywell shares as a participant
in the Honeywell Savings and Stock Ownership Plan, you will receive a single
proxy card that covers both shares credited to your plan account and shares you
own of record that are registered in the same exact name. If your plan account
is not registered in the same name as your shares of record, you will receive
separate proxy cards for your record and plan holdings. Proxies executed by plan
participants or properly voted by telephone will serve as voting instructions to
T. Rowe Price Trust Company, the trustee for the plan.
Under the terms of the plan, voting instructions must be received by
T. Rowe Price by August 27, 1999. Please refer to your proxy card for a more
detailed explanation of the timing requirement for voting plan shares by
telephone or by mail.
If you own Honeywell shares as a participant in the Honeywell Employee
Stock Purchase Plan, you will receive a single proxy card that covers both
shares credited to your plan account, shares you may own as a participant in the
Savings Plan described above, if applicable, and shares you own of record that
are registered in the exact same name. If your plan account is not registered in
the same name as either your Savings Plan shares described above or your shares
of record, you will receive separate proxy cards for your record and plan
holdings. Proxies executed by plan participants or properly voted by telephone
will be voted in accordance with your instructions to First Chicago Trust
Company of New York, the custodian for the plan.
VOTES REQUIRED
AlliedSignal. The approval of the merger, including the related issuance of
shares of common stock, requires the affirmative vote of a majority of the
shares of AlliedSignal common stock outstanding on the record date for which
votes are cast at the special meeting in connection with the vote on the merger,
so long as the total number of votes cast in favor of and against the merger
represents a majority of the shares of AlliedSignal common stock that are
outstanding on the record date. An abstention or a broker 'non-vote' will have
no effect on the vote.
The approval of the proposed certificate of incorporation amendment
requires the affirmative vote of a majority of the shares of AlliedSignal common
stock outstanding on the record date. An abstention or a broker 'non-vote' will
have the same effect as a vote against the proposal.
Honeywell. The approval of the merger agreement and the merger requires the
affirmative vote of a majority of the shares of Honeywell common stock
outstanding on the record date. An abstention or a broker 'non-vote' will have
the same effect as a vote against the proposal to approve and adopt the merger
agreement and the merger.
SHARE OWNERSHIP OF MANAGEMENT
AlliedSignal. At the close of business on the record date, directors and
executive officers of AlliedSignal and their affiliates beneficially owned and
were entitled to vote approximately 1,045,493 shares of AlliedSignal common
stock, which represented approximately 0.2% of the shares of AlliedSignal common
stock outstanding on that date. Each of those directors and executive officers
has indicated his or her present intention to vote, or cause to be voted, the
shares of AlliedSignal common stock owned by him or her FOR the proposal to
approve the merger, including the related issuance of shares of common stock,
and FOR the proposal to amend the certificate of incorporation of AlliedSignal.
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Honeywell. At the close of business on the record date, directors and
executive officers of Honeywell and their affiliates beneficially owned and were
entitled to vote approximately 415,600 shares of Honeywell common stock, which
represented approximately 0.3% of the shares of Honeywell common stock
outstanding on that date. Each of those directors and executive officers has
indicated his or her present intention to vote, or cause to be voted, the shares
of Honeywell common stock owned by him or her FOR the approval and adoption of
the merger and the merger agreement.
SHARES HELD IN STREET NAME; VOTING OF PROXIES
Shares Held in 'Street Name'. Under the applicable rules of the New York
Stock Exchange, brokers who hold shares in street names for customers who are
the beneficial owners of those shares are prohibited from giving a proxy to vote
those customers' shares with respect to the proposal(s) to be voted on at the
special meetings in the absence of specific instructions from the customer.
Broker 'non-votes' are those shares held by a broker which are not voted because
the customer has not provided instructions to the broker.
Submitting Proxies
AlliedSignal and Honeywell shareowners may vote their shares by attending
their respective special meeting and voting their shares in person at the
meeting, or by completing the enclosed proxy card, signing and dating it and
mailing it in the enclosed postage pre-paid envelope. If a proxy card is signed
by a shareowner and returned without specific voting instructions, the shares
represented by the proxy will be voted for each of the proposals presented at
AlliedSignal's special meeting or for the proposal presented at Honeywell's
special meeting, as applicable.
AlliedSignal and Honeywell shareowners may also submit their proxies by
telephone. The telephone voting procedures are designed to authenticate votes
cast by use of a personal identification number. These procedures allow
shareowners to appoint a proxy to vote their shares and to confirm that their
instructions have been properly recorded. Instructions for voting by telephone
are printed on the proxy card for shareowners of record of AlliedSignal and
Honeywell.
AlliedSignal and Honeywell shareowners whose shares are held in 'street
name' (i.e., in the name of a broker, bank or other record holder) must either
direct the record holder of their shares as to how to vote their shares or
obtain a proxy from the record holder to vote at their respective special
meeting.
Revoking Proxies
AlliedSignal and Honeywell shareowners of record may revoke their proxies
at any time prior to the time their proxies are voted at AlliedSignal's special
meeting or Honeywell's special meeting, respectively. Proxies may be revoked by
written notice, including by telegram or telecopy, to the Secretary of
AlliedSignal or Honeywell, as applicable, by a later-dated proxy signed and
returned by mail or by attending AlliedSignal's special meeting or Honeywell's
special meeting, as applicable, and by voting in person. Attendance at
AlliedSignal's special meeting or Honeywell's special meeting will not in and of
itself constitute a revocation of a proxy. AlliedSignal and Honeywell
shareowners of record may also revoke proxies by a later-dated proxy using the
telephone voting procedures. Any written notice of a revocation of a proxy must
be sent so as to be delivered before the taking of the vote at the applicable
special meeting as follows:
FOR ALLIEDSIGNAL SHAREOWNERS, TO:
AlliedSignal Inc.
101 Columbia Road, P.O. Box 4000
Morristown, NJ 07962-2497
Telecopy: (973) 455-4413
Attention: Secretary
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FOR HONEYWELL SHAREOWNERS, TO:
Honeywell Inc.
2701 Fourth Avenue South
Minneapolis, MN 55408
Telecopy: (612) 951-0097
Attention: Corporate Secretary
AlliedSignal and Honeywell shareowners who require assistance in changing
or revoking a proxy should call 1-800-390-9338.
Other Business; Adjournments
We are not aware of any other business to be acted upon at either meeting.
If, however, other matters are properly brought before either meeting, or any
adjourned meeting, your proxies will have discretion to act on those matters or
to adjourn the meeting, according to their best judgment.
Adjournments of the special meeting may be made for the purpose of, among
other things, soliciting additional proxies. Any adjournment may be made at any
time by shareowners representing a majority of the votes present in person or by
proxy at the applicable special meeting, whether or not a quorum exists, without
further notice other than by an announcement made at the meeting. Neither
company currently intends to seek an adjournment of its special meeting.
Proxy Solicitation
The cost of solicitation of proxies will be paid by AlliedSignal for
solicitation of proxies from AlliedSignal shareowners and by Honeywell for
solicitation of proxies from Honeywell shareowners. In addition to solicitation
by mail, the directors, officers and employees of AlliedSignal and Honeywell may
also solicit proxies from shareowners by telephone, telecopy, telegram or in
person. We will also make arrangements with brokerage houses and other
custodians, nominees and fiduciaries to send the proxy materials to beneficial
owners. Upon request, we will reimburse those brokerage houses and custodians
for their reasonable expenses in so doing.
AlliedSignal and Honeywell have each retained Georgeson & Company Inc. to
aid in the solicitation of proxies and to verify certain records related to the
solicitations. Georgeson will receive a fee of $43,000 as compensation for its
services and reimbursement for its related out-of-pocket expenses. AlliedSignal
and Honeywell have agreed to indemnify Georgeson against certain liabilities
arising out of or in connection with its engagement.
DO NOT SEND IN ANY STOCK CERTIFICATES WITH YOUR PROXY CARDS. THE EXCHANGE
AGENT WILL SEND TRANSMITTAL FORMS WITH INSTRUCTIONS FOR THE SURRENDER OF
CERTIFICATES REPRESENTING SHARES OF HONEYWELL COMMON STOCK TO FORMER HONEYWELL
SHAREOWNERS SHORTLY AFTER THE MERGER IS COMPLETED.
Confidential Voting for AlliedSignal Shareowners
It is the policy of AlliedSignal that any proxy, ballot or other voting
material that identifies the particular vote of a shareowner and contains the
shareowner's request for confidential treatment will be kept confidential,
except in the event of a contested proxy solicitation or as may be required by
law. AlliedSignal may be informed whether or not a particular shareowner has
voted and will have access to any comment written on a proxy, ballot or other
material and to the identity of the commenting shareowner. Under the policy, the
inspectors of election at any meeting will be independent parties unaffiliated
with AlliedSignal.
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FEDERAL SECURITIES LAWS CONSEQUENCES; STOCK TRANSFER RESTRICTIONS
This joint proxy statement/prospectus does not cover any resales of shares
of the combined company common stock to be received by Honeywell shareowners in
the merger, and no person is authorized to make any use of this joint proxy
statement/prospectus in connection with any such resale.
All shares of common stock of the combined company received by Honeywell
shareowners in the merger will be freely transferable, except that shares of
common stock of the combined company received by persons who are deemed to be
'affiliates' of Honeywell under the Securities Act of 1933, as amended, at the
time of Honeywell's special shareowners' meeting may resell those shares only in
transactions permitted by Rule 145 under the Securities Act or as otherwise
permitted under the Securities Act. Persons who may be affiliates of Honeywell
for those purposes generally include individuals or entities that control, are
controlled by, or are under common control with, Honeywell, and would not
include shareowners who are not officers, directors or principal shareowners of
Honeywell.
The merger agreement requires Honeywell not less than 30 days prior to
completion of the merger to deliver to AlliedSignal a letter identifying all
persons who may be, as of the date the merger is submitted for approval by
Honeywell shareowners, an affiliate of Honeywell and use reasonable best efforts
to cause each person who is identified as an affiliate in the letter described
above to deliver to AlliedSignal, at least 20 days prior to completion of the
merger, an executed letter agreement from each affiliate to the effect that the
affiliate will not offer, sell or otherwise dispose of any of the shares of
common stock of the combined company issued to that affiliate in the merger or
otherwise owned or acquired by that affiliate:
(1) for a period beginning 30 days prior to the merger and continuing until
results covering at least 30 days of post-merger combined operations of
AlliedSignal and Honeywell have been publicly filed by the combined
company; or
(2) in violation of the Securities Act.
The merger agreement also requires AlliedSignal not less than 30 days prior
to completion of the merger to deliver to Honeywell a letter identifying all
persons who may be, as of the date the issuance of AlliedSignal common stock in
connection with the merger is submitted for approval by AlliedSignal's
shareowners, an affiliate of AlliedSignal and use reasonable best efforts to
cause each person who is identified as an affiliate in the letter described
above to deliver to AlliedSignal, at least 20 days prior to completion of the
merger, an executed letter agreement from each affiliate of AlliedSignal to the
effect that the affiliate will not offer, sell or otherwise dispose of any
shares of common stock of the combined company owned or acquired by that
affiliate during the period described in clause (1) of the prior sentence.
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COMPARISON OF SHAREOWNER RIGHTS
Both Honeywell and AlliedSignal are Delaware corporations governed by
Delaware law. In addition, the rights of Honeywell shareowners are currently
governed by Honeywell's certificate of incorporation and by-laws, and the rights
of AlliedSignal shareowners are governed by AlliedSignal's certificate of
incorporation and by-laws. After the effective time of the merger, the rights of
holders of shares of Honeywell common stock who become holders of shares of
AlliedSignal (to be known as Honeywell International) common stock will be
governed by the current certificate of incorporation and by-laws of AlliedSignal
and Delaware law. In most respects, the rights of holders of shares of Honeywell
common stock are similar to the rights of holders of shares of AlliedSignal
common stock. The following is a summary of the material differences between
these rights. This summary does not purport to be a complete discussion of, and
is qualified in its entirety by reference to, Delaware law as well as to
Honeywell's certificate of incorporation and by-laws and to AlliedSignal's
certificate of incorporation and by-laws, copies of which are on file with the
SEC.
SUMMARY OF MATERIAL DIFFERENCES BETWEEN CURRENT RIGHTS OF HONEYWELL
SHAREOWNERS AND RIGHTS OF SHAREOWNERS OF THE COMBINED COMPANY
FOLLOWING THE MERGER
<TABLE>
<CAPTION>
AlliedSignal/Combined Company
Honeywell Shareowners Rights Shareowners Rights
----------------------------------- -----------------------------------
<S> <C> <C>
Authorized Capital The authorized capital stock of The authorized capital stock of
Stock: Honeywell consists of 375 million AlliedSignal and the capital stock
shares of common stock and 25 proposed to be authorized for the
million shares of preferred stock. combined company are described
under 'Description of AlliedSignal
Capital Stock -- Authorized Capital
Stock' below.
Number of Directors: Honeywell's certificate of AlliedSignal's by-laws provide that
incorporation provides that the the number of directors may not be
number of directors may not be less less than 13 nor more than 23. The
than three. Honeywell's by-laws board of directors of the combined
provide that the number of company will consist of 15
directors shall be 13. Honeywell's directors.
board of directors currently
consists of 13 directors.
Classification of Honeywell does not have a The board of directors of the
Board of Directors: classified board. All directors of combined company will be divided
Honeywell are elected for a term of into three classes of five
one year at each annual meeting of directors, with each class serving
Honeywell shareowners. a three-year term.
Quorum for Board Honeywell's by-laws provide that AlliedSignal's by-laws provide that
Action: one- third of the board constitutes a majority of the board constitutes
a quorum. a quorum.
Removal of Directors: Shareowners of Honeywell may remove Shareowners of AlliedSignal may
any director, with or without remove directors only for cause by
cause, by the affirmative vote of the affirmative vote of the owners
the owners of a majority of of at least 80% of the outstanding
outstanding shares entitled to shares entitled to vote.
vote.
Shareowner Action by Honeywell shareowners may act by AlliedSignal shareowners may not
Written Consent: written consent. take action by written consent.
</TABLE>
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<TABLE>
<CAPTION>
AlliedSignal/Combined Company
Honeywell Shareowners Rights Shareowners Rights
----------------------------------- -----------------------------------
<S> <C> <C>
Amendment of Corporate Honeywell's certificate of AlliedSignal's certificate of
Charter: incorporation may be amended by a incorporation may be amended by a
board resolution and the board resolution and the
affirmative vote of owners of a affirmative vote of owners of a
majority of the Honeywell shares. majority of AlliedSignal shares,
except with respect to amending the
provisions of the certificate of
incorporation relating to (a) the
classified board, (b) the
prohibition on shareowner action by
written consent, (c) the calling of
special meetings of shareowners and
(d) the removal of directors, each
of which require the affirmative
vote of owners of at least 80% of
the outstanding AlliedSignal
shares.
Special Meetings of Special meetings of Honeywell Special meetings of AlliedSignal
Shareowners: shareowners may be called at any shareowners may be called at any
time by the board, the Chairman or time by the board or the Chief
the President. Executive Officer.
Amendment of By-laws: Honeywell's by-laws may be altered AlliedSignal's by-laws may be
or repealed by the affirmative vote amended by the affirmative vote of
of a majority of the board or by a majority of the board or by the
the affirmative vote of owners of a affirmative vote of owners of a
majority of the outstanding majority of the outstanding
Honeywell shares. AlliedSignal shares, except with
respect to amending the by-laws
relating to (a) calling special
meetings of the shareowners, (b)
the number, election and terms of
the members of the board, and (c)
the removal of directors, which
require the affirmative vote of
owners of at least 80% of the
outstanding AlliedSignal shares
entitled to vote. See 'The Merger
Transaction -- Amendment of
AlliedSignal's By-laws' on page 27
for a description of by-law
amendments that will be made at the
effective time of the merger.
</TABLE>
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<TABLE>
<CAPTION>
AlliedSignal/Combined Company
Honeywell Shareowners Rights Shareowners Rights
----------------------------------- -----------------------------------
<S> <C> <C>
Business Honeywell's certificate of AlliedSignal has no similar
Combination with incorporation provides that the provision in its certificate of
10% Shareowners: affirmative vote of the owners of a incorporation.
majority of all outstanding
Honeywell shares, excluding all
shares owned by any 10% shareowner,
is necessary to approve a business
combination transaction with the
10% shareowner. This requirement
does not apply if the business
combination transaction with the
10% shareowner is approved by a
majority of 'continuing directors',
which are those directors not
affiliated or associated with the
10% shareowner and who were members
of the board before the 10%
shareowner became a 10% shareowner
or were recommended for election to
the board by a majority of the
continuing directors.
This requirement also does not
apply if the consideration offered
to shareowners of Honeywell in the
business combination meets minimum
price requirements set forth in
Honeywell's certificate of
incorporation.
Shareholder Rights Honeywell has entered into the AlliedSignal does not have a
Plan: rights agreement under which shareholder rights plan. While
Honeywell has issued rights to AlliedSignal has no present
purchase shares of Honeywell common intention to adopt a shareholder
stock. The rights agreement is rights plan, the AlliedSignal board
inapplicable to the merger and the or the combined company board could
related agreements and do so without shareowner approval
transactions. at any future time.
</TABLE>
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<TABLE>
<CAPTION>
AlliedSignal/Combined Company
Honeywell Shareowners Rights Shareowners Rights
----------------------------------- -----------------------------------
<S> <C> <C>
Advance Notice: Honeywell's by-laws permit any AlliedSignal's by-laws permit any
shareowner of record to nominate shareowner of record to nominate
candidates for election to the candidates for election to
Honeywell board, and to introduce AlliedSignal's board in connection
other business that is a proper with any meeting of the
matter for shareowner action, in AlliedSignal shareowners at which
connection with any annual meeting directors are to be elected if the
of Honeywell's shareowners if the shareowner gives notice of his or
shareowner gives notice of his or her nomination to AlliedSignal's
her proposal to Honeywell's Secretary no earlier than 60 days,
Secretary no later than the end of and no later than 30 days, before
the 90th day, and no earlier than the meeting. If AlliedSignal
the end of the 120th day, before announces its meeting date less
the anniversary of the prior year's than 40 days before the meeting, a
annual meeting. If in any year the shareowner must give notice of his
date of the annual meeting is more or her nomination before the end of
than 30 days before, or 60 days the 10th day after the
after, the anniversary of the prior announcement. AlliedSignal's by-
year's meeting, a shareowner must laws do not contain procedures for
give notice of his or her proposal introducing business, other than
after the 120th day prior to the director nominations, at meetings
meeting, and before the later of of AlliedSignal shareowners.
the end of the 90th day before the
meeting and the end of the tenth
day after Honeywell first announces
the date for that year's annual
meeting.
Honeywell's by-laws also permit any
shareowner to nominate candidates
for election to the Honeywell board
in connection with any special
meeting of Honeywell's shareowners
at which directors are to be
elected if the shareowner gives a
notice of his or her nomination to
Honeywell's Secretary after the
120th day prior to the meeting, and
before the later of the end of the
90th day prior to the meeting and
the end of the tenth day after
Honeywell first announces the date
of the special meeting.
</TABLE>
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DESCRIPTION OF ALLIEDSIGNAL CAPITAL STOCK
The following summary of the current terms of the capital stock of
AlliedSignal and the terms of the capital stock of the combined company to be in
effect after completion of the merger is not meant to be complete and is
qualified by reference to the certificate of incorporation and by-laws of
AlliedSignal. Copies of the AlliedSignal charter and AlliedSignal by-laws are
incorporated by reference. To obtain copies of these documents see, 'Where You
Can Find More Information' on page 90.
AUTHORIZED CAPITAL STOCK
Prior to Completion of the Merger and Amendment of AlliedSignal's Charter.
Under AlliedSignal's certificate of incorporation, AlliedSignal's authorized
capital stock consists of one billion shares of AlliedSignal common stock, par
value $1.00, and 20 million shares of preferred stock, without par value, of
which 51,250 are designated $91.25 Series A Cumulative Preferred Shares,
3,593,281 are designated $6.74 Series C Cumulative Convertible Preferred Shares,
984,089 are designated $12 Series D Cumulative Convertible Preferred Shares,
2,755,173 are designated Adjustable Rate Series F Cumulative Preferred Shares,
24,929 are designated $86.25 Series G Cumulative Preferred Shares, 968,754 are
designated 8.25% Senior AA Cumulative Convertible Preferred Shares. The
remaining authorized shares of preferred stock are not subject to any
designation.
Following Completion of the Merger and Amendment of AlliedSignal's Charter.
If the amendment to the certificate of incorporation of AlliedSignal described
below is approved by AlliedSignal's shareowners, the Honeywell International
certificate of incorporation will be amended to increase the number of
authorized shares of Honeywell International common stock to two billion shares,
increase the number of authorized shares of Honeywell International preferred
stock to 40 million shares and eliminate all of the Series A, Series C,
Series D, Series F, Series G and Series AA shares of AlliedSignal preferred
stock, none of which is outstanding. See 'The Merger Transaction', 'Material
Provisions of the Merger Agreement' and 'Description of AlliedSignal Capital
Stock -- Proposed Amendment to AlliedSignal's Certificate of Incorporation'.
ALLIEDSIGNAL COMMON STOCK
AlliedSignal Common Stock Outstanding. The outstanding shares of
AlliedSignal common stock are, and the shares of common stock of the combined
company issued pursuant to the merger will be, duly authorized, validly issued,
fully paid and nonassessable.
The Bank of New York is the transfer agent and registrar for the
AlliedSignal common stock. Shares of AlliedSignal common stock are listed on the
New York, Chicago and Pacific stock exchanges and trade under the symbol 'ALD'
and are listed on the London stock exchange. After the merger, the shares of the
combined company, Honeywell International, will trade under the symbol 'HON'.
Dividends. Owners of shares of AlliedSignal common stock are entitled to
receive dividends when, as and if declared by the AlliedSignal board of
directors, out of funds legally available for their payment (subject to the
rights of holders of any outstanding shares of preferred stock).
Voting Rights. Owners of shares of AlliedSignal common stock are entitled
to one vote per share. Subject to the rights of the holders of any preferred
stock pursuant to applicable law or the provision of any future certificate of
designations creating a specific series of preferred stock, all voting rights
are vested in the owners of shares of AlliedSignal common stock. Owners of
shares of AlliedSignal common stock have noncumulative voting rights, which
means that the holders of more than 50% of the shares voting for the election of
directors can elect 100% of the directors.
Rights Upon Liquidation. In the event of AlliedSignal's voluntary or
involuntary liquidation, dissolution or winding up, the owners of shares of
AlliedSignal common stock will be entitled to share equally in any assets
available for distribution after the payment in full of all debts and
distributions and after the owners of any outstanding AlliedSignal preferred
stock have received their liquidation preferences in full.
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Other Rights. Owners of shares of AlliedSignal common stock are not
entitled to preemptive rights. Shares of AlliedSignal common stock are not
convertible into shares of any other class of capital stock. If AlliedSignal
merges or consolidates with or into another company and as a result the shares
of AlliedSignal common stock are converted into or exchangeable for other
securities or property (including cash), all owners of shares of AlliedSignal
common stock will be entitled to receive the same kind and amount of such
consideration for each share of common stock.
ALLIEDSIGNAL PREFERRED STOCK
AlliedSignal Preferred Stock Outstanding. No shares of preferred stock are
outstanding. The board of directors of AlliedSignal may, without further action
by the shareowners of AlliedSignal, issue a series of AlliedSignal preferred
stock and fix the rights and preferences of those shares, including the dividend
rights, dividend rates, conversion rights, exchange rights, voting rights, terms
of redemption, redemption price or prices, liquidation preferences, the number
of shares constituting any series and the designation of such series.
POSSIBLE ANTI-TAKEOVER PROVISIONS
AlliedSignal's certificate of incorporation and by-laws provide that:
(1) the board of directors be divided into three classes as nearly equal in
number as is possible, with the term of one class expiring at the
annual meeting in each year;
(2) the board of directors may establish the authorized number of directors
between 13 and 23, subject to the right of preferred shareowners to
elect directors in certain circumstances and shareowners' rights to set
the authorized number of directors upon the vote of holders of 80% of
the outstanding shares of common stock;
(3) vacancies on the board of directors other than at the annual meeting
may be filled by a vote of the remaining directors;
(4) special meetings of shareowners generally may be called only by the
Chief Executive Officer or by a majority of the authorized number of
directors;
(5) action may be taken by shareowners only at annual or special meetings
and not by written consent;
(6) advance notice must be given to AlliedSignal for a shareowner to
nominate directors for election at a shareowners' meeting; and
(7) the following actions require approval by owners of at least 80% of the
outstanding shares entitled to vote:
the removal for cause of directors other than at the expiration of
their terms; and
the amendment or repeal of the provisions of AlliedSignal's
certificate of incorporation and by-laws relating to its classified
board of directors, the authorized number of directors, the filling of
board vacancies, removal of directors for cause, calling of special
meetings of shareowners, prohibition of shareowner action by written
consent and amendment or repeal of provisions requiring at least an
80% vote of shareowners.
AlliedSignal's certificate of incorporation currently authorizes the
issuance of up to 20 million shares of preferred stock with terms set by
AlliedSignal's board of directors or a committee of the board of directors. If
the amendment to the certificate of incorporation described below is approved by
AlliedSignal shareowners, 40 million shares of preferred stock will be
authorized. This preferred stock could have terms that could delay, deter or
prevent a tender offer or takeover attempt of AlliedSignal.
Moreover, under Delaware law, an acquirer of 15% or more of AlliedSignal
shares must wait three years before a business combination with AlliedSignal
unless one of the following exceptions is available:
approval by AlliedSignal's board of directors prior to the time the
acquiror became a 15% shareowner of AlliedSignal;
achieving an ownership level of at least 85% of AlliedSignal shares in the
transaction in which the acquiror became a 15% shareowner of AlliedSignal;
or
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approval of the business combination by AlliedSignal's board of directors
and at least two-thirds of AlliedSignal's disinterested shareowners.
Any of these provisions could delay, deter or prevent a tender offer or
takeover attempt with respect to AlliedSignal.
PROPOSED AMENDMENT TO ALLIEDSIGNAL'S CERTIFICATE OF INCORPORATION (ITEM 2 ON
ALLIEDSIGNAL'S PROXY CARD)
At the AlliedSignal special meeting, AlliedSignal shareowners will be asked
to approve an amendment to AlliedSignal's certificate of incorporation. The
amendment will increase the number of authorized shares of AlliedSignal common
stock, increase the number of authorized shares of AlliedSignal preferred stock
and eliminate certain series of AlliedSignal preferred stock.
Approval by AlliedSignal shareowners of this amendment is NOT a condition
to completing the merger.
Increase of Authorized Common Stock. AlliedSignal's certificate of
incorporation currently authorizes AlliedSignal to issue one billion shares of
common stock. The amendment to the certificate of incorporation would increase
the number of authorized shares of AlliedSignal common stock to two billion
shares. On June 30, 1999, 550,220,660 shares of AlliedSignal common stock were
issued and outstanding, not counting shares held in AlliedSignal's treasury.
AlliedSignal expects that the combined company will issue approximately 240
million shares to Honeywell shareowners in the merger and that approximately 70
million shares of the combined company will be required to be reserved for
issuance under AlliedSignal employee stock options, and Honeywell employee stock
options converted into AlliedSignal employee stock options in connection with
the merger and other stock-based awards and for similar purposes. While the one
billion shares of AlliedSignal common stock currently authorized to be issued
under AlliedSignal's certificate of incorporation are sufficient to complete the
merger, after the merger is completed, the combined company would have only
approximately 140 million shares available for future issuance if the proposed
amendment to AlliedSignal's certificate of incorporation were not approved by
AlliedSignal shareowners.
Increase of Authorized Preferred Stock. AlliedSignal's certificate of
incorporation currently authorizes 20 million shares of preferred stock to be
issued. The amendment to the certificate of incorporation would increase the
number of authorized shares of AlliedSignal preferred stock to 40 million
shares. No shares of AlliedSignal preferred stock are issued or outstanding. The
AlliedSignal preferred stock may be issued in one or more series. The board of
directors will have the right to set the terms of each series, including
dividend rates, convertibility features and prices, voting rights, redemption
rights, maturity dates and similar matters.
Reason for Increase in Common and Preferred Stock. At present we have no
plans to issue shares for any purpose other than common stock to be issued in
connection with the merger and to meet obligations to deliver shares under
employee stock options and similar arrangements. We believe, however, it is
desirable to have additional shares available for other corporate reasons that
might arise in the future, such as for acquisitions, for a stock split or to
raise capital. Under some circumstances, it is possible for a company to use
unissued shares for antitakeover purposes, but we have no present intention of
taking these actions. Whether or not any future issuance of shares unrelated to
the merger would be submitted for shareowner vote depends upon the nature of the
issuance, legal and stock exchange requirements and the judgment of the combined
company's board of directors at that time.
Elimination of Series of AlliedSignal Preferred Stock. AlliedSignal's
certificate of incorporation currently designates shares of Series A, Series C,
Series D, Series F, Series G and Series AA preferred stock. No shares of
AlliedSignal preferred stock designated as Series A, Series C, Series D,
Series F, Series G or Series AA are outstanding. The amendment to the
certificate of incorporation would eliminate each of these preferred stock
series designations.
The AlliedSignal board of directors recommends that AlliedSignal
shareowners vote FOR the proposed amendment to the certificate of incorporation
even though approving the amendment is not a condition to completing the merger.
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WHERE YOU CAN FIND MORE INFORMATION
AlliedSignal has filed with the SEC a registration statement under the
Securities Act that registers the distribution of shares of common stock of the
combined company to Honeywell shareowners. The registration statement, including
the attached exhibits and schedules, contains additional relevant information
about AlliedSignal and Honeywell. The rules and regulations of the SEC allow us
to omit some information included in the registration statement from this
document.
In addition, we file reports, proxy statements and other information with
the SEC under the Exchange Act. Please call the SEC at 1-800-SEC-0330 for
further information on the public reference rooms. You may read and copy this
information at the following locations of the SEC:
<TABLE>
<S> <C> <C>
Public Reference Room New York Regional Office Chicago Regional Office
450 Fifth Street, N.W. 7 World Trade Center Citicorp Center
Room 1024 Suite 1300 500 West Madison Street
Washington, D.C. 20549 New York, New York 10048 Suite 1400
Chicago, Illinois 60661-2511
</TABLE>
You may also obtain copies of this information by mail from the Public
Reference Section of the SEC, 450 Fifth Street, N.W., Room 1024, Washington,
D.C. 20549, at prescribed rates. The SEC also maintains an Internet World Wide
Web site that contains reports, proxy statements and other information about
issuers, including AlliedSignal and Honeywell, who file electronically with the
SEC. The address of that site is http://www.sec.gov. You can also inspect
reports, proxy statements and other information about each of us at the offices
of the New York Stock Exchange, 20 Broad Street, New York, New York 10005.
The SEC allows us to 'incorporate by reference' information into this
document. This means that the companies can disclose important information to
you by referring you to another document filed separately with the SEC. The
information incorporated by reference is considered to be a part of this
document, except for any information that is superseded by information that is
included directly in this document.
This document incorporates by reference the documents listed below that we
have previously filed with the SEC. They contain important information about our
companies and their financial condition. Some of these filings have been amended
by later filings, which are also listed.
<TABLE>
<CAPTION>
ALLIEDSIGNAL'S SEC FILINGS (FILE NO. 1-8974) DESCRIPTION, PERIOD OR DATE
- -------------------------------------------- --------------------------------------------
<S> <C>
Annual Report on Form 10-K Year ended December 31, 1998
Quarterly Report on Form 10-Q Quarter ended March 31, 1999
Current Report on Form 8-K, filed June 8, Discloses the entering into of the merger
1999 agreement and related matters
Current Report on Form 8-K/A, filed Discloses assumptions upon which the
July 16, 1999 expected cost savings relating to the merger
were based
Current Report on Form 8-K, filed July 16, Discloses AlliedSignal's financial results
1999 for the three- and six-month periods ended
June 30, 1999
Registration Statement on Form 8-B, filed Contains a description of the AlliedSignal
August 16, 1985 common stock
Definitive Proxy Statement on Schedule 14A Definitive proxy statement relating to the
1999 annual meeting of AlliedSignal's
shareowners (filed on March 9, 1999)
</TABLE>
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<CAPTION>
HONEYWELL'S SEC FILINGS (FILE NO. 1-971)
- --------------------------------------------
<S> <C>
Annual Report on Form 10-K Year ended December 31, 1998
Quarterly Report on Form 10-Q Quarter ended April 4, 1999
Current Report on Form 8-K, filed June 7, Discloses the entering into of the merger
1999 agreement and related matters
Current Report on Form 8-K, filed Attaches as an exhibit the form of
June 16, 1999 employment agreement to be entered into by
the combined company and Michael R.
Bonsignore
Current Report on Form 8-K, filed July 22, Discloses Honeywell's financial results for
1999 the second quarter and first half of 1999
Definitive Proxy Statement on Schedule 14A Definitive proxy statement relating to 1999
annual meeting of Honeywell's shareowners
(filed on March 9, 1999)
</TABLE>
We incorporate by reference additional documents that either company may
file with the SEC between the date of this document and the date of our special
meetings. These documents include periodic reports, which may include Annual
Reports on Form 10-K, Quarterly Reports on Form 10-Q and Current Reports on Form
8-K, as well as proxy statements.
You can obtain any of the documents incorporated by reference in this
document through AlliedSignal or Honeywell, as the case may be, or from the SEC
through the SEC's web site at the address provided above. Documents incorporated
by reference are available from the companies without charge, excluding any
exhibits to those documents unless the exhibit is specifically incorporated by
reference as an exhibit in this document. You can obtain documents incorporated
by reference in this document by requesting them in writing or by telephone from
the appropriate company at the following addresses:
<TABLE>
<S> <C>
AlliedSignal Inc. Honeywell Inc.
101 Columbia Road 2701 Fourth Avenue South
P.O. Box 2245 Minneapolis, Minnesota 55408
Morris Township, New Jersey 07962-2245 Attention: Office of Investor Relations
Attention: Corporate Publication Telephone No.: (612) 951-2122
Telephone No.: (973) 455-5402
</TABLE>
If you would like to request documents, please do so by August 25, 1999 to
receive them before the special meetings. If you request any incorporated
documents from us, we will mail them to you by first class mail, or another
equally prompt means, within one business day after we receive your request.
We have not authorized anyone to give any information or make any
representation about the merger of our companies that differs from, or adds to,
the information in this document or in our documents that are publicly filed
with the SEC. Therefore, if anyone does give you different or additional
information, you should not rely on it.
If you are in a jurisdiction where it is unlawful to offer to exchange or
sell, or to ask for offers to exchange or buy, the securities offered by this
document or to ask for proxies, or if you are a person to whom it is unlawful to
direct these activities, then the offer presented by this document does not
extend to you.
The information contained in this document speaks only as of its date
unless the information specifically indicates that another date applies.
Information in this document about AlliedSignal has been supplied by
AlliedSignal, and information about Honeywell has been supplied by Honeywell.
EXPERTS
The consolidated financial statements of AlliedSignal incorporated in this
joint proxy statement/prospectus by reference to AlliedSignal's Annual Report on
Form 10-K for the year ended December 31, 1998 have been so incorporated in
reliance on the report of
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PricewaterhouseCoopers LLP, independent accountants, given upon their authority
as experts in auditing and accounting.
The consolidated financial statements and the related financial statement
schedules of Honeywell incorporated in this joint proxy statement/prospectus by
reference from Honeywell's Annual Report on Form 10-K for the years ended
December 31, 1998, 1997 and 1996 have been audited by Deloitte & Touche LLP,
independent auditors, as stated in their reports, which are incorporated herein
by reference, and have been so incorporated in reliance upon the reports of such
firm given upon their authority as experts in accounting and auditing.
With respect to the unaudited consolidated financial information of
AlliedSignal for the three-month periods ended March 31, 1999 and 1998,
incorporated by reference in this joint proxy statement/prospectus,
PricewaterhouseCoopers LLP reported that they have applied limited procedures in
accordance with professional standards for a review of such information.
However, their separate report dated May 13, 1999 incorporated by reference in
this joint proxy statement/prospectus, states that they did not audit and they
do not express an opinion on that unaudited consolidated financial information.
Accordingly, the degree of reliance on their report on such information should
be restricted in light of the limited nature of the review procedures applied.
PricewaterhouseCoopers LLP is not subject to the liability provisions of
Section 11 of the Securities Act for their report on the unaudited consolidated
financial information because that report is not a 'report' or a 'part' of the
registration statement prepared or certified by PricewaterhouseCoopers LLP
within the meaning of Sections 7 and 11 of the Securities Act.
LEGAL MATTERS
Certain legal matters relating to the validity of the common stock offered
by this joint proxy statement/prospectus will be passed upon for AlliedSignal by
J. Edward Smith, Assistant General Counsel, Corporate and Finance, of
AlliedSignal. Certain legal matters relating to federal income tax matters
relating to the merger will be passed upon for AlliedSignal by Fried, Frank,
Harris, Shriver & Jacobson (a partnership including professional corporations),
New York, New York. Certain legal matters relating to federal income tax matters
relating to the merger will be passed upon for Honeywell by Skadden, Arps,
Slate, Meagher & Flom LLP, New York, New York.
SUBMISSION OF SHAREOWNER PROPOSALS
ALLIEDSIGNAL OR THE COMBINED COMPANY
Shareowners may submit proposals on matters appropriate for shareowner
action at annual meetings of AlliedSignal and after completion of the merger,
the combined company, consistent with regulations adopted by the SEC. Proposals
submitted for inclusion in AlliedSignal's, or if the merger is complete, the
combined company's, proxy statement and form of proxy for the 2000 annual
meeting of AlliedSignal, or if the merger is complete, the combined company, are
subject to the requirements of Rule 14a-8 of the proxy rules adopted by the SEC,
and must be received by AlliedSignal, or the combined company, as the case may
be, not later than November 9, 1999. If a shareowner of AlliedSignal, or the
combined company, as the case may be, intends to present a proposal for
consideration at the 2000 annual shareowner's meeting of AlliedSignal or the
combined company, as the case may be, outside the processes of Rule 14a-8,
AlliedSignal or the combined company, as the case may be, must receive notice of
such proposal on or before January 24, 2000, or such notice will be considered
untimely under Rule 14a-4(c)(1) of the SEC's proxy rules, and AlliedSignal's or
the combined company's, as the case may be, proxies will have discretionary
voting authority with respect to the proposal, if presented at the meeting,
without including information regarding the proposal in its proxy materials.
Proposals should be directed to the attention of the Secretary, AlliedSignal
Inc. or Honeywell International Inc. (as the case may be), P.O. Box 4000, Morris
Township, New Jersey 07962.
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HONEYWELL
Honeywell will hold an annual meeting in the year 2000 only if the merger
has not already been completed. If the annual meeting is held, shareowners'
proposals will be eligible for consideration for inclusion in the proxy
statement for the 2000 annual meeting under Rule 14a-8 if the proposals are
received by Honeywell no later than November 9, 1999. If a Honeywell shareowner
intends to present a proposal for consideration, or make a nomination for
director, at the 2000 annual shareowners' meeting outside the processes of
Rule 14a-8, the shareowner, in accordance with Honeywell's by-laws, must notify
Honeywell not earlier than December 22, 1999 and not later than January 21,
2000, and that notice must meet other requirements contained in Honeywell's
by-laws.
Any Honeywell shareowner who wishes to submit a shareowner proposal or a
nomination for directors, or who would like to receive a copy of the relevant
section of the by-laws, should contact the Vice President and Corporate
Secretary, Honeywell Inc., 2701 Fourth Avenue South, Minneapolis,
Minnesota 55408.
93
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ANNEXES
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<PAGE>
ANNEX A
AGREEMENT AND PLAN OF MERGER
dated as of
June 4, 1999
among
HONEYWELL INC.,
ALLIEDSIGNAL INC.
and
BLOSSOM ACQUISITION CORP.
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<PAGE>
TABLE OF CONTENTS
<TABLE>
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ARTICLE I
THE MERGER
SECTION 1.1 The Merger.................................................. A-1
SECTION 1.2 Conversion Of Shares........................................ A-2
SECTION 1.3 Surrender And Payment....................................... A-2
SECTION 1.4 Stock Options and Equity Awards............................. A-3
SECTION 1.5 Adjustments................................................. A-4
SECTION 1.6 Fractional Shares........................................... A-4
SECTION 1.7 Withholding Rights.......................................... A-4
SECTION 1.8 Lost Certificates........................................... A-5
SECTION 1.9 Shares Held by Company Affiliates........................... A-5
SECTION 1.10 Appraisal Rights............................................ A-5
ARTICLE II
CERTAIN GOVERNANCE MATTERS
SECTION 2.1 Parent Name Change.......................................... A-5
SECTION 2.2 Parent Board of Directors; CEO.............................. A-5
SECTION 2.3 Certificate of Incorporation of the Surviving Corporation... A-6
SECTION 2.4 By-laws of the Surviving Corporation........................ A-6
SECTION 2.5 Directors and Officers of the Surviving Corporation......... A-6
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
SECTION 3.1 Corporate Existence and Power............................... A-6
SECTION 3.2 Corporate Authorization..................................... A-6
SECTION 3.3 Governmental Authorization.................................. A-7
SECTION 3.4 Non-Contravention........................................... A-7
SECTION 3.5 Capitalization.............................................. A-8
SECTION 3.6 Subsidiaries................................................ A-8
SECTION 3.7 Commission Filings.......................................... A-9
SECTION 3.8 Financial Statements........................................ A-9
SECTION 3.9 Disclosure Documents........................................ A-10
SECTION 3.10 Absence of Certain Changes.................................. A-10
SECTION 3.11 No Undisclosed Material Liabilities......................... A-11
SECTION 3.12 Litigation.................................................. A-11
SECTION 3.13 Taxes....................................................... A-11
SECTION 3.14 Employee Benefit Plans...................................... A-12
SECTION 3.15 Compliance with Laws........................................ A-13
SECTION 3.16 Finders' or Advisors' Fees.................................. A-13
SECTION 3.17 Environmental Matters....................................... A-13
SECTION 3.18 Opinion of Financial Advisor................................ A-14
SECTION 3.19 Pooling; Tax Treatment...................................... A-14
SECTION 3.20 Takeover Statutes and Charter Provisions.................... A-14
SECTION 3.21 Rights Agreement............................................ A-14
SECTION 3.22 Intellectual Property Matters............................... A-14
SECTION 3.23 Year 2000 Compliance Matters................................ A-15
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF PARENT
SECTION 4.1 Corporate Existence and Power............................... A-15
SECTION 4.2 Corporate Authorization..................................... A-15
SECTION 4.3 Governmental Authorization.................................. A-16
</TABLE>
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SECTION 4.4 Non-Contravention........................................... A-16
SECTION 4.5 Capitalization.............................................. A-17
SECTION 4.6 Subsidiaries................................................ A-17
SECTION 4.7 Commission Filings.......................................... A-18
SECTION 4.8 Financial Statements........................................ A-18
SECTION 4.9 Disclosure Documents........................................ A-18
SECTION 4.10 Absence of Certain Changes.................................. A-19
SECTION 4.11 No Undisclosed Material Liabilities......................... A-20
SECTION 4.12 Litigation.................................................. A-20
SECTION 4.13 Taxes....................................................... A-20
SECTION 4.14 Employee Benefit Plans...................................... A-20
SECTION 4.15 Compliance with Laws........................................ A-21
SECTION 4.16 Finders' or Advisors' Fees.................................. A-21
SECTION 4.17 Environmental Matters....................................... A-22
SECTION 4.18 Opinion of Financial Advisor................................ A-22
SECTION 4.19 Pooling; Tax Treatment...................................... A-22
SECTION 4.20 Takeover Statutes........................................... A-22
SECTION 4.21 Intellectual Property Matters............................... A-22
SECTION 4.22 Year 2000 Compliance Matters................................ A-22
ARTICLE V
COVENANTS OF THE COMPANY
SECTION 5.1 Conduct of the Company...................................... A-23
SECTION 5.2 Company Stockholder Meeting; Proxy Material................. A-24
ARTICLE VI
COVENANTS OF PARENT
SECTION 6.1 Conduct of Parent........................................... A-25
SECTION 6.2 Obligations of Merger Subsidiary............................ A-27
SECTION 6.3 Director and Officer Liability.............................. A-27
SECTION 6.4 Parent Stockholder Meeting; Form S-4........................ A-28
SECTION 6.5 Stock Exchange Listing...................................... A-28
SECTION 6.6 Employee Benefits........................................... A-28
SECTION 6.7 Employment Agreement........................................ A-30
ARTICLE VII
COVENANTS OF PARENT AND THE COMPANY
SECTION 7.1 Reasonable Best Efforts..................................... A-30
SECTION 7.2 Certain Filings............................................. A-31
SECTION 7.3 Access to Information....................................... A-32
SECTION 7.4 Tax and Accounting Treatment................................ A-32
SECTION 7.5 Public Announcements........................................ A-32
SECTION 7.6 Further Assurances.......................................... A-32
SECTION 7.7 Notices of Certain Events................................... A-32
SECTION 7.8 Affiliates.................................................. A-33
SECTION 7.9 Payment of Dividends........................................ A-33
SECTION 7.10 No Solicitation............................................. A-33
SECTION 7.11 Letters from Accountants.................................... A-35
SECTION 7.12 Takeover Statutes........................................... A-36
SECTION 7.13 Headquarters................................................ A-36
SECTION 7.14 Integration................................................. A-36
SECTION 7.15 Transfer Statutes........................................... A-36
SECTION 7.16 Section 16(b)............................................... A-36
</TABLE>
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ARTICLE VIII
CONDITIONS TO THE MERGER
SECTION 8.1 Conditions to the Obligations of Each Party................. A-37
SECTION 8.2 Conditions to the Obligations of Parent and Merger
Subsidiary.................................................. A-37
SECTION 8.3 Conditions to the Obligations of the Company................ A-38
ARTICLE IX
TERMINATION
SECTION 9.1 Termination................................................. A-39
SECTION 9.2 Effect of Termination....................................... A-40
ARTICLE X
MISCELLANEOUS
SECTION 10.1 Notices..................................................... A-40
SECTION 10.2 Non-Survival of Representations and Warranties.............. A-41
SECTION 10.3 Amendments; No Waivers...................................... A-41
SECTION 10.4 Expenses.................................................... A-41
SECTION 10.5 Company Termination Fee..................................... A-41
SECTION 10.6 Parent Termination Fee...................................... A-42
SECTION 10.7 Successors and Assigns...................................... A-43
SECTION 10.8 Governing Law............................................... A-43
SECTION 10.9 Jurisdiction................................................ A-43
SECTION 10.10Waiver of Jury Trial........................................ A-44
SECTION 10.11Counterparts; Effectiveness................................. A-44
SECTION 10.12Entire Agreement............................................ A-44
SECTION 10.13Captions.................................................... A-44
SECTION 10.14Severability................................................ A-44
</TABLE>
EXHIBITS (Omitted)
Exhibit A -- Form of By-laws Amendment
Exhibit B -- Form of Employment Agreement
Exhibit C -- Form of Parent Affiliate's Letter
Exhibit D -- Form of Company Affiliate's Letter
iii
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DEFINITIONS
<TABLE>
<CAPTION>
Section
<S> <C>
368 Reorganization.......................................... SECTION 3.19(b)
Acquisition Proposal........................................ SECTION 7.10(b)
Affected Employees.......................................... SECTION 6.6(b)
Agreement................................................... Preamble
Canadian Act................................................ SECTION 4.3
Certificate................................................. SECTION 1.2(c)
Change in Control........................................... SECTION 6.6(a)
Closing..................................................... SECTION 1.1(d)
Closing Date................................................ SECTION 1.1(d)
Code........................................................ Recitals
Common Stock Issuance....................................... SECTION 4.2(a)
Common Stock Issuance Approval.............................. SECTION 4.2(a)
Commission.................................................. Recitals
Company..................................................... Preamble
Company 10-K................................................ SECTION 3.6(b)
Company 10-Q................................................ SECTION 3.7(a)
Company Balance Sheet....................................... SECTION 3.8
Company Balance Sheet Date.................................. SECTION 3.8
Company Commission Documents................................ SECTION 3.7(a)
Company Common Stock........................................ Recitals
Company Convertible Security................................ SECTION 3.5
Company Employee Plans...................................... SECTION 3.14(a)
Company Disclosure Schedules................................ Article III
Company Option Agreement.................................... Recitals
Company Preferred Stock..................................... SECTION 3.5
Company Proxy Statement..................................... SECTION 3.9(a)
Company Rights.............................................. SECTION 3.5
Company Rights Agreement.................................... SECTION 3.5
Company Stock Option........................................ SECTION 1.4(a)
Company Stock Plans......................................... SECTION 1.4(a)
Company Stockholder Approval................................ SECTION 3.2
Company Stockholder Meeting................................. SECTION 5.2
Company Subsidiary Convertible Security..................... SECTION 3.6(b)
Confidentiality Agreement................................... SECTION 7.3
Delaware Law................................................ SECTION 1.1(b)
EC Merger Regulation........................................ SECTION 3.3
Effective Time.............................................. SECTION 1.1(a)
End Date.................................................... SECTION 9.1(b)(i)
Environmental Laws.......................................... SECTION 3.17(b)
ERISA....................................................... SECTION 3.14(a)
Exchange Act................................................ SECTION 3.3(f)
Exchange Agent.............................................. SECTION 1.3(a)
Exchange Ratio.............................................. SECTION 1.2(a)(iii)
Form S-4.................................................... SECTION 4.9(a)
GAAP........................................................ Recitals
Hazardous Materials......................................... SECTION 3.17(b)
HSR Act..................................................... SECTION 3.3
Indemnitees................................................. SECTION 6.3(a)
Intellectual Property....................................... SECTION 3.23(b)
Lien........................................................ SECTION 3.4
Material Adverse Effect..................................... SECTION 3.1
Merger...................................................... Recitals
</TABLE>
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<S> <C>
Merger Consideration........................................ SECTION 1.2(b)
Merger Subsidiary........................................... Preamble
NYSE........................................................ SECTION 1.6
Option Agreements........................................... Recitals
Parent...................................................... Preamble
Parent 10-K................................................. SECTION 4.6(b)
Parent 10-Q................................................. SECTION 4.7(a)
Parent Balance Sheet........................................ SECTION 4.8
Parent Balance Sheet Date................................... SECTION 4.8
Parent Commission Documents................................. SECTION 4.7(a)
Parent Common Stock......................................... Recitals
Parent Convertible Security................................. SECTION 4.5
Parent Disclosure Schedules................................. Article IV
Parent Employee Plans....................................... SECTION 4.14(a)
Parent Option Agreement..................................... Recitals
Parent Preferred Stock...................................... SECTION 4.5
Parent Proxy Statement...................................... SECTION 4.9(a)
Parent Stockholder Approval................................. SECTION 4.2(a)
Parent Stockholder Meeting.................................. SECTION 6.4(a)
Parent Subsidiary Convertible Security...................... SECTION 4.6(b)
Person...................................................... SECTION 1.3(c)
Securities Act.............................................. SECTION 1.4(c)
Shares...................................................... Recitals
Subsidiary.................................................. SECTION 3.6(a)
Superior Proposal........................................... SECTION 7.10(b)
Surviving Corporation....................................... SECTION 1.1(b)
Tax Returns................................................. SECTION 3.13
Taxes....................................................... SECTION 3.13
</TABLE>
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<PAGE>
AGREEMENT AND PLAN OF MERGER
THIS AGREEMENT AND PLAN OF MERGER (this 'Agreement') dated as of June 4,
1999 by and among HONEYWELL INC., a Delaware corporation (the 'Company'),
ALLIEDSIGNAL INC., a Delaware corporation ('Parent'), and BLOSSOM ACQUISITION
CORP., a newly formed Delaware corporation and a wholly owned subsidiary of
Parent ('Merger Subsidiary').
W I T N E S S E T H:
WHEREAS, the respective Boards of Directors of Parent, Merger Subsidiary
and the Company have approved this Agreement, and deem it advisable and in the
best interests of their respective stockholders to consummate the merger of
Merger Subsidiary with and into the Company on the terms and conditions set
forth in this Agreement (the 'Merger');
WHEREAS, for United States federal income tax purposes, it is intended that
the Merger qualify as a 'reorganization' within the meaning of Section 368 of
the Internal Revenue Code of 1986, as amended, and the rules and regulations
promulgated thereunder (the 'Code');
WHEREAS, for accounting purposes, it is intended that the Merger be
accounted for as a 'pooling of interests' under United States generally accepted
accounting principles ('GAAP') and the rules and regulations of the Securities
and Exchange Commission (the 'Commission'); and
WHEREAS, as a condition and inducement to each of Parent's and the
Company's willingness to enter into this Agreement, concurrently with the
execution and delivery of this Agreement, Parent and the Company are entering
into (i) a Stock Option Agreement dated as of the date of this Agreement (the
'Parent Option Agreement'), pursuant to which the Company is granting to Parent
an option to purchase shares of common stock, par value $1.50 per share, of the
Company ('Company Common Stock') at $109.453 per share, under certain
circumstances, and (ii) a Stock Option Agreement dated as of the date of this
Agreement (the 'Company Option Agreement' and, together with the Parent Option
Agreement, the 'Option Agreements'), pursuant to which Parent is granting to the
Company an option to purchase shares of the common stock, par value $1.00 per
share, of Parent ('Parent Common Stock') at $58.375 per share, under certain
circumstances.
NOW, THEREFORE, in consideration of the promises and the respective
representations, warranties, covenants, and agreements set forth herein, the
parties agree as follows:
ARTICLE I
THE MERGER
SECTION 1.1 The Merger.
(a) As soon as practicable after satisfaction or, to the extent permitted
hereunder, waiver of all conditions to the Merger, the Company and Merger
Subsidiary will file a certificate of merger with the Secretary of State of the
State of Delaware and make all other filings or recordings required by Delaware
Law to be made in connection with the Merger. The Merger shall become effective
at such time as the certificate of merger is duly filed with the Secretary of
State of the State of Delaware or, if agreed to by the Company and Parent, at
such later time as is specified in the certificate of merger (the 'Effective
Time').
(b) At the Effective Time, Merger Subsidiary shall be merged with and into
the Company in accordance with the requirements of the General Corporation Law
of the State of Delaware (the 'Delaware Law'), whereupon the separate existence
of Merger Subsidiary shall cease, and the Company shall be the surviving
corporation in the Merger (the 'Surviving Corporation').
(c) From and after the Effective Time, the Surviving Corporation shall
possess all the rights, privileges, powers and franchises and be subject to all
of the restrictions, disabilities and duties of the Company and Merger
Subsidiary, all as provided under Delaware Law.
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(d) The closing of the Merger (the 'Closing') shall take place (i) at the
offices of Fried, Frank, Harris, Shriver & Jacobson, One New York Plaza, New
York, New York, as soon as practicable, but in any event within three business
days, after the day on which the last to be fulfilled or waived of the
conditions set forth in Article VIII (other than those conditions that by their
nature are to be fulfilled at the Closing, but subject to the fulfillment or
waiver of such conditions) shall be fulfilled or waived in accordance with this
Agreement or (ii) at such other place and time or on such other date as the
Company and Parent may agree in writing (the 'Closing Date').
SECTION 1.2 Conversion Of Shares.
(a) At the Effective Time by virtue of the Merger and without any action on
the part of the holder thereof:
(i) each share of the Company Common Stock held by the Company as
treasury stock or owned by Parent or any subsidiary of Parent or the
Company immediately prior to the Effective Time shall be canceled, and no
payment shall be made with respect thereto;
(ii) each share of common stock of Merger Subsidiary outstanding
immediately prior to the Effective Time shall be converted into and become
one share of common stock of the Surviving Corporation with the same
rights, powers and privileges as the shares so converted and shall
constitute the only outstanding shares of capital stock of the Surviving
Corporation; and
(iii) each share of Company Common Stock outstanding immediately prior
to the Effective Time shall, except as otherwise provided in
Section 1.2(a)(i), be converted into the right to receive 1.875 shares of
Parent Common Stock (the 'Exchange Ratio').
(b) All Parent Common Stock issued as provided in Section 1.2(a)(iii) shall
be of the same class and shall have the same terms as the currently outstanding
Parent Common Stock. The shares of Parent Common Stock to be received as
consideration pursuant to the Merger with respect to shares of Company Common
Stock (together with cash in lieu of fractional shares of Parent Common Stock as
specified below) is referred to herein as the 'Merger Consideration.'
(c) From and after the Effective Time, all shares of Company Common Stock
converted in accordance with Section 1.2(a)(iii) shall no longer be outstanding
and shall automatically be canceled and retired and shall cease to exist, and
each holder of a certificate representing any such shares (a 'Certificate')
shall cease to have any rights with respect thereto, except the right to receive
the Merger Consideration and any dividends payable pursuant to Section 1.3(f).
From and after the Effective Time, all certificates representing the common
stock of Merger Subsidiary shall be deemed for all purposes to represent the
number of shares of common stock of the Surviving Corporation into which they
were converted in accordance with Section 1.2(a)(ii).
SECTION 1.3 Surrender And Payment.
(a) Prior to the Effective Time, Parent shall appoint The Bank of New York
or such other exchange agent reasonably acceptable to the Company (the 'Exchange
Agent') for the purpose of exchanging Certificates for the Merger Consideration.
Parent will make available to the Exchange Agent, as needed, the Merger
Consideration to be delivered in respect of the shares of Company Common Stock.
Promptly after the Effective Time, Parent will send, or will cause the Exchange
Agent to send, to each holder of record of shares of Company Common Stock as of
the Effective Time, a letter of transmittal for use in such exchange (which
shall specify that the delivery shall be effected, and risk of loss and title
shall pass, only upon proper delivery of the Certificates to the Exchange Agent)
in such form as the Company and Parent may reasonably agree, for use in
effecting delivery of shares of Company Common Stock to the Exchange Agent.
(b) Each holder of shares of Company Common Stock that have been converted
into a right to receive the Merger Consideration, upon surrender to the Exchange
Agent of a Certificate, together with a properly completed letter of
transmittal, will be entitled to receive the Merger Consideration in respect of
the shares of Company Common Stock represented by such Certificate.
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Until so surrendered, each such Certificate shall, after the Effective Time,
represent for all purposes only the right to receive such Merger Consideration.
(c) If any portion of the Merger Consideration is to be registered in the
name of a Person other than the Person in whose name the applicable surrendered
Certificate is registered, it shall be a condition to the registration of the
Merger Consideration that the surrendered Certificate shall be properly endorsed
or otherwise be in proper form for transfer and that the Person requesting such
delivery of the Merger Consideration shall pay to the Exchange Agent any
transfer or other taxes required as a result of such registration in the name of
a Person other than the registered holder of such Certificate or establish to
the reasonable satisfaction of the Exchange Agent that such tax has been paid or
is not payable. For purposes of this Agreement, 'Person' means an individual, a
corporation, a limited liability company, a partnership, an association, a trust
or any other entity or organization, including a government or political
subdivision or any agency or instrumentality thereof.
(d) After the Effective Time, there shall be no further registration of
transfers of shares of Company Common Stock. If, after the Effective Time,
Certificates are presented to the Exchange Agent, the Surviving Corporation or
Parent, they shall be canceled and exchanged for the Merger Consideration
provided for, and in accordance with the procedures set forth, in this
Article I.
(e) Any portion of the Merger Consideration made available to the Exchange
Agent pursuant to Section 1.3(a) that remains unclaimed by the holders of shares
of Company Common Stock one year after the Effective Time shall be returned to
Parent, upon demand, and any such holder who has not exchanged his shares of
Company Common Stock for the Merger Consideration in accordance with this
Section 1.3 prior to that time shall thereafter look only to Parent for delivery
of the Merger Consideration in respect of such holder's shares. Notwithstanding
the foregoing, Parent shall not be liable to any holder of shares for any Merger
Consideration delivered to a public official pursuant to applicable abandoned
property laws.
(f) No dividends or other distributions with respect to shares of Parent
Common Stock shall be paid to the holder of any unsurrendered Certificates until
such Certificates are surrendered as provided in this Section 1.3. Subject to
the effect of applicable laws, following such surrender, there shall be paid,
without interest, to the record holder of the shares of Parent Common Stock
issued in exchange therefor (i) at the time of such surrender, all dividends and
other distributions payable in respect of such Parent Common Stock with a record
date after the Effective Time and a payment date on or prior to the date of such
surrender and not previously paid and (ii) at the appropriate payment date, the
dividends or other distributions payable with respect to such Parent Common
Stock with a record date after the Effective Time but with a payment date
subsequent to such surrender. For purposes of dividends or other distributions
in respect of Parent Common Stock, all shares of Parent Common Stock to be
issued pursuant to the Merger shall be entitled to dividends pursuant to the
immediately preceding sentence as if issued and outstanding as of the Effective
Time.
SECTION 1.4 Stock Options and Equity Awards.
(a) At the Effective Time, each outstanding employee or director option to
purchase shares of Company Common Stock (a 'Company Stock Option') granted under
the Company's plans or agreements pursuant to which Company Stock Options or
other stock-based awards of the Company have been or may be granted
(collectively, the 'Company Stock Plans'), whether vested or not vested, shall
be deemed assumed by Parent. At and after the Effective Time (1) each Company
Stock Option then outstanding shall entitle the holder thereof to acquire the
number (rounded down to the nearest whole number) of shares of Parent Common
Stock determined by multiplying (x) the number of shares of Company Common Stock
subject to such Company Stock Option immediately prior to the Effective Time by
(y) the Exchange Ratio, and (2) the exercise price per share of Parent Common
Stock subject to any such Company Stock Option at and after the Effective Time
shall be an amount (rounded down to the nearest one-hundredth of a cent) equal
to (x) the exercise price per share of Company Common Stock subject to such
Company Stock Option prior to the Effective Time, divided by (y) the Exchange
Ratio. Other than as provided above, as of and after the Effective Time, each
Company Stock Option shall be subject
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to the same terms and conditions as in effect immediately prior to the Effective
Time (including, but not limited to, the acceleration of exercisability as of
the date of approval of the Merger by the shareholders of the Company), but
giving effect to the Merger. Prior to the approval of the Merger by the
shareholders of the Company, the Company shall take all actions necessary to
cause all restricted shares, restricted stock units and any other stock-based
awards outstanding under the Company Stock Plans and the Honeywell Non-Employee
Directors Fee and Stock Unit Plan which would otherwise be settled in cash to be
settled in shares of Parent Common Stock (with, in the case of restricted stock
units, each such unit representing one share of Company Common Stock and with
the number of shares of Parent Common Stock to be issued reflecting the Exchange
Ratio). To the extent that any such award of restricted shares, restricted stock
units or other stock-based award does not become fully vested and free of
restrictions in connection with the transactions contemplated hereby, such award
shall be converted into a similar award for that number of shares of Parent
Common Stock equal to the product of (1) the number of shares of Company Common
Stock subject to the portion of such award which had not become fully vested and
free of restrictions and (2) the Exchange Ratio, and shall otherwise remain
subject to the terms and conditions in effect immediately prior to the Effective
Time (it being understood that any performance criteria to which such award
remains subject may be equitably adjusted by the Management Development and
Compensation Committee of Parent Board (taking into account the recommendation
of the Personnel Committee of the Company Board) to reflect the consummation of
the Merger).
(b) Parent shall take all corporate action necessary to reserve for
issuance a sufficient number of shares of Parent Common Stock for delivery upon
exercise of Company Stock Options and settlement of other stock-based awards of
the Company at and after the Effective Time.
(c) On or as soon as practicable after the Effective Time, Parent shall
file with the Commission a registration statement on an appropriate form or a
post-effective amendment to a previously filed registration statement under the
Securities Act of 1933, as amended (the 'Securities Act'), with respect to the
Parent Common Stock subject to Company Stock Options and other stock-based
awards of the Company, and shall use its reasonable best efforts to maintain the
current status of the prospectus contained therein, as well as comply with any
applicable state securities or 'blue sky' laws, for so long as such options or
other stock-based awards remain outstanding.
SECTION 1.5 Adjustments. If at any time during the period between the date
of this Agreement and the Effective Time, any change in the outstanding shares
of capital stock of Parent or the Company shall occur by reason of any
reclassification, recapitalization, stock split or combination, exchange or
readjustment of shares, or any similar transaction, or any stock dividend
thereon with a record date during such period, the Merger Consideration shall be
appropriately adjusted to provide the holders of shares of Company Common Stock
the same economic effect as contemplated by this Agreement prior to such event.
SECTION 1.6 Fractional Shares. No fractional shares of Parent Common Stock
shall be issued in the Merger, but in lieu thereof, each holder of shares of
Company Common Stock otherwise entitled to a fractional share of Parent Common
Stock will be entitled to receive, from the Exchange Agent in accordance with
the provisions of this Section 1.6, an amount of cash, without interest thereon
(rounded to the nearest whole cent), equal to the product of (i) such fraction
of a share of Parent Common Stock, multiplied by (ii) the average of the closing
prices of the shares of Parent Common Stock on the New York Stock Exchange (the
'NYSE') Composite Transaction Reporting System as reported in The Wall Street
Journal (but subject to correction for typographical or other manifest errors in
such reporting) over the ten trading-day period immediately preceding the
Closing Date.
SECTION 1.7 Withholding Rights. Each of the Surviving Corporation and
Parent shall be entitled to deduct and withhold from the consideration otherwise
payable to any person pursuant to this Article 1 such amounts as it is required
to deduct and withhold with respect to the making of such payment under any
provision of federal, state, local or foreign tax law. To the extent that
amounts are so withheld by the Surviving Corporation or Parent, as the case may
be, such
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withheld amounts shall be treated for all purposes of this Agreement as having
been paid to the holder of the shares of Company Common Stock in respect of
which such deduction and withholding was made by the Surviving Corporation or
Parent, as the case may be.
SECTION 1.8 Lost Certificates. If any Certificate shall have been lost,
stolen or destroyed, upon the making of an affidavit of that fact by the Person
claiming the Certificate to be lost, stolen or destroyed and, if required by
Parent or the Surviving Corporation, the posting by that Person of a bond, in
such reasonable amount as the Surviving Corporation may direct (which shall not
exceed amounts generally required by Parent from holders of Parent Common Stock
under similar circumstances), as indemnity against any claim that may be made
against it with respect to such Certificate, the Exchange Agent will issue in
exchange for such lost, stolen or destroyed Certificate the Merger Consideration
to be paid in respect of the Shares represented by such Certificates as
contemplated by this Article I.
SECTION 1.9 Shares Held by Company Affiliates. Anything to the contrary in
this Agreement notwithstanding, no shares of Parent Common Stock (or
certificates therefor) shall be issued in exchange for any Certificate to any
Person who may be an 'affiliate' of the Company (identified pursuant to
Section 7.8) until the Person shall have delivered to Parent and the Company a
duly executed letter as contemplated by Section 7.8.
SECTION 1.10 Appraisal Rights. In accordance with Section 262 of the
Delaware Law, no appraisal rights shall be available to holders of shares of
Company Common Stock in connection with the Merger.
ARTICLE II
CERTAIN GOVERNANCE MATTERS
SECTION 2.1 Parent Name Change. At the Effective Time, Parent shall cause
its certificate of incorporation to be amended to change its name to 'Honeywell
International Inc.' by causing a Subsidiary of Parent to be merged with and into
Parent and having the terms of such merger provide for such name change.
SECTION 2.2 Parent Board of Directors; CEO; By-law Amendment.
(a) Prior to the Effective Time, the Board of Directors of Parent shall
take all action necessary to cause the Board of Directors of Parent to consist,
as of the Effective Time, of fifteen directors, (x) nine of whom shall be
persons designated by Parent who were directors of Parent prior to the Effective
Time and (y) six of whom shall be persons designated by the Company who were
directors of the Company prior to the Effective Time. No more than one person
who is an officer of Parent shall be designated by Parent, and no more than one
person who is an officer of the Company shall be designated by the Company, in
each case pursuant to the prior sentence. If any such persons are not able to
serve, the party on whose Board such person presently sits shall select a
replacement. The persons designated to serve as directors by each party shall be
apportioned proportionately among each of the three classes of directors; it
being understood, however, that Michael R. Bonsignore shall be elected to serve
as a member of the class with the longest tenure as of the Effective Time.
(b) Prior to the Effective Time, the Board of Directors of Parent shall
take all necessary actions to cause (x) the following committees of the Board of
Directors of Parent to exist as of the Effective Time: Audit Committee,
Corporate Governance Committee, Corporate Responsibility Committee, Management
Development and Compensation Committee, Retirement Plans and Finance Committee
and Technology Committee; and (y) the Chairpersons of four of those committees
to be persons designated by Parent and the Chairpersons of two of those
committees to be persons designated by the Company.
(c) Prior to the Effective Time, the Board of Directors of Parent shall
take all action necessary (x) to cause Michael R. Bonsignore to be elected as
Chief Executive Officer of Parent as of the Effective Time, (y) to cause Michael
R. Bonsignore to be elected as Chairman of the Board of Directors of Parent
effective as of April 1, 2000 or such earlier date as Lawrence A. Bossidy shall
retire as Chairman of the Board of Directors of Parent, and (z) to create an
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Executive Office (the 'Executive Office') as of the Effective Time consisting of
Lawrence A. Bossidy until his retirement as Chairman of the Board of Directors
of Parent, Michael R. Bonsignore as the Chief Executive Officer of Parent and,
after the retirement of Lawrence A. Bossidy, as Chairman of the Board of
Directors of Parent, and Robert D. Johnson and Giannantonio Ferrari, each of
whom shall be elected as a Chief Operating Officer and an Executive Vice
President of Parent.
(d) At the Effective Time, Parent shall cause its By-laws to be amended to
incorporate the provisions set forth in Exhibit A hereto (such amendment of the
By-laws of Parent being referred to herein as the 'By-laws Amendment').
SECTION 2.3 Certificate of Incorporation of the Surviving Corporation. The
certificate of incorporation of the Company in effect at the Effective Time
shall be the certificate of incorporation of the Surviving Corporation (until
amended in accordance with applicable law), except that the first sentence of
Article FOURTH thereof shall be amended as of the Effective Time to read in its
entirety as follows: 'The Corporation shall have the authority to issue 1,000
shares of par value $1.50 per share designated as Common Stock.'
SECTION 2.4 By-laws of the Surviving Corporation. The by-laws of the
Company in effect at the Effective Time shall be the by-laws of the Surviving
Corporation (until amended in accordance with applicable law).
SECTION 2.5 Directors and Officers of the Surviving Corporation. From and
after the Effective Time, until successors are duly elected or appointed and
qualified in accordance with applicable law, (a) the directors of Merger
Subsidiary at the Effective Time shall be the directors of the Surviving
Corporation, who shall consist as of the Effective Time of those people mutually
agreed upon by the chief executive officers of the Company and Parent, and (b)
the officers of the Company at the Effective Time shall be the officers of the
Surviving Corporation.
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
The Company represents and warrants to Parent that except as set forth in
the disclosure schedules delivered by the Company to Parent simultaneously with
the execution of this Agreement (the 'Company Disclosure Schedules') or the
Company Commission Documents (as defined in Section 3.7(a)) filed prior to the
date of this Agreement:
SECTION 3.1 Corporate Existence and Power. The Company is a corporation
duly incorporated, validly existing and in good standing under the laws of the
State of Delaware, and has all corporate powers and all governmental licenses,
authorizations, consents and approvals required to carry on its business as now
conducted, except for those the absence of which would not, individually or in
the aggregate, have a Material Adverse Effect on the Company. The Company is
duly qualified to do business as a foreign corporation and is in good standing
in each jurisdiction where the character of the property owned or leased by it
or the nature of its activities makes such qualification necessary, except for
those jurisdictions where the failure to be so qualified would not, individually
or in the aggregate, have a Material Adverse Effect on the Company. For purposes
of this Agreement, a 'Material Adverse Effect' with respect to any Person means
a material adverse effect on the financial condition, business, liabilities,
properties, assets or results of operations, taken as a whole, of this Person
and its Subsidiaries, taken as a whole, except to the extent resulting from any
changes in general United States or global economic conditions or general
economic conditions in industries in which the Person competes or resulting from
the announcement of the transaction or any action required to be taken by the
terms hereof. The Company has heretofore made available to Parent true and
complete copies of the Company's certificate of incorporation and by-laws as
currently in effect.
SECTION 3.2 Corporate Authorization.
(a) The execution, delivery and performance by the Company of this
Agreement and the Option Agreements and the consummation by the Company of the
transactions contemplated hereby and thereby are within the Company's corporate
powers and, except for any required
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approval by the Company's stockholders in accordance with Delaware Law (the
'Company Stockholder Approval') in connection with the consummation of the
Merger, have been duly authorized by all necessary corporate action. The
affirmative vote of holders of the outstanding shares of Company Common Stock
having votes representing a majority of the votes of all such outstanding
capital stock, voting together as a single class, in favor of the approval and
adoption of this Agreement and the Merger is the only vote of the holders of any
of the Company's capital stock necessary in connection with consummation of the
Merger. Assuming due authorization, execution and delivery of this Agreement and
the Option Agreements by Parent and/or Merger Subsidiary, as applicable, each of
this Agreement and the Option Agreements constitutes a valid and binding
agreement of the Company enforceable against the Company in accordance with its
terms, subject to bankruptcy, insolvency, fraudulent transfer, reorganization,
moratorium and similar laws of general applicability relating to or affecting
creditors' rights, and to general equity principles.
(b) The Company's Board of Directors, at a meeting duly called and held,
has (i) determined that this Agreement and the Option Agreements and the
transactions contemplated hereby and thereby (including the Merger) are fair to
and in the best interests of the Company's stockholders, (ii) approved and
adopted this Agreement and the Option Agreements and the transactions
contemplated hereby and thereby (including the Merger), and (iii) resolved
(subject to Section 5.2) to recommend that the Company stockholders vote for the
approval and adoption of this Agreement and the Merger.
SECTION 3.3 Governmental Authorization. The execution, delivery and
performance by the Company of this Agreement and the Option Agreements and the
consummation by the Company of the transactions contemplated hereby and thereby
require no action by or in respect of, or filing with, any governmental body,
agency, official or authority other than (a) the filing of a certificate of
merger in connection with the Merger in accordance with Delaware Law, (b)
compliance with any applicable requirements of the Hart-Scott-Rodino Antitrust
Improvements Act of 1976 (the 'HSR Act'), (c) compliance with any applicable
requirements of Council Regulation No. 4064/89 of the European Community, as
amended (the 'EC Merger Regulation'), (d) compliance with any other applicable
requirements of foreign anti-trust or investment laws, (e) compliance with any
applicable environmental transfer statutes, (f) compliance with any applicable
requirements of the Securities Exchange Act of 1934, as amended, and the rules
and regulations promulgated thereunder (the 'Exchange Act'), (g) compliance with
any applicable requirements of the Securities Act and (h) other actions or
filings which if not taken or made would not, individually or in the aggregate,
have a Material Adverse Effect on the Company or prevent or materially delay the
Company's consummation of the Merger.
SECTION 3.4 Non-Contravention. The execution, delivery and performance by
the Company of this Agreement and the Option Agreements and the consummation by
the Company of the transactions contemplated hereby and thereby do not and will
not (a) contravene or conflict with the certificate of incorporation or by-laws
of the Company, (b) assuming compliance with the matters referred to in
Section 3.3 and subject to receipt of the Company Stockholder Approval,
contravene or conflict with or constitute a violation of any provision of any
law, regulation, judgment, injunction, order or decree binding upon or
applicable to the Company or any of its Subsidiaries (as defined in
Section 3.6), (c) subject to receipt of the Company Stockholder Approval,
constitute a default under or give rise to any right of termination,
cancellation or acceleration of any right or obligation of the Company or any of
its Subsidiaries or to a loss of any benefit to which the Company or any of its
Subsidiaries is entitled under any provision of any agreement, contract or other
instrument binding upon the Company or any of its Subsidiaries or any license,
franchise, permit or other similar authorization held by the Company or any of
its Subsidiaries, or (d) result in the creation or imposition of any Lien on any
asset of the Company or any of its Subsidiaries, except for such contraventions,
conflicts or violations referred to in clause (b) or defaults, rights of
termination, cancellation or acceleration, or losses or Liens referred to in
clause (c) or (d) that would not, individually or in the aggregate, have a
Material Adverse Effect on the Company. For purposes of this Agreement, 'Lien'
means, with respect to any asset, any mortgage, lien, pledge, charge, security
interest or encumbrance of any kind in respect of such
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asset other than any such mortgage, lien, pledge, charge, security interest or
encumbrance (i) for Taxes (as defined in Section 3.13) not yet due or being
contested in good faith or (ii) which is a carriers', warehousemen's,
mechanics', materialmen's, repairmen's or other like lien arising in the
ordinary course of business. Neither the Company nor any Subsidiary of the
Company is a party to any agreement that expressly limits the ability of the
Company or any Subsidiary of the Company to compete in or conduct any line of
business or compete with any Person or in any geographic area or during any
period of time except to the extent that any such limitation, individually or in
the aggregate, would not have a Material Adverse Effect on Parent or the
Surviving Corporation immediately after the Effective Time.
SECTION 3.5 Capitalization. The authorized capital stock of the Company
consists of 375,000,000 shares of Company Common Stock and 25,000,000 shares of
preferred stock, par value $1.00 per share (of which 2,000,000 are designated
'Series B Junior Participating Preferred Stock' and the remaining shares of such
preferred stock are not subject to any designation) (the 'Company Preferred
Stock'). As of the close of business on June 1, 1999, there were outstanding (i)
126,841,802 shares of Company Common Stock and (ii) no shares of Company
Preferred Stock (all of the Series B Junior Participating Preferred Stock being
reserved for issuance in accordance with the Rights Agreement (the 'Company
Rights Agreement'), dated as of January 16, 1996, by and between the Company and
Chase Mellon Shareholder Services, L.L.C., as Rights Agent, pursuant to which
the Company has issued rights to purchase the Series B Junior Participating
Preferred Stock ('Company Rights')) and no other shares of capital stock or
other voting securities of the Company were then outstanding. All outstanding
shares of capital stock of the Company have been duly authorized and validly
issued and are fully paid and nonassessable. Except for (a) Company Stock
Options to acquire no more than 6,491,358 shares of Company Common Stock issued
pursuant to the Company Stock Plans, (b) Company Rights none of which are
exercisable, (c) the option granted pursuant to the Parent Option Agreement, (d)
stock units for no more than 231,954 shares of Company Common Stock and (e)
shares issuable under the Company's employee stock purchase plans in the
ordinary course of business consistent with past practice, as of the close of
business on June 1, 1999, there were no outstanding options, warrants or other
rights to acquire from the Company, and no preemptive or similar rights,
subscription or other rights, convertible or exchangeable securities,
agreements, arrangements or commitments of any character, relating to the
capital stock of the Company, obligating the Company to issue, transfer or sell,
any capital stock, voting securities or securities convertible into or
exchangeable for capital stock or voting securities of the Company or obligating
the Company to grant, extend or enter into any such option, warrant,
subscription or other right, convertible or exchangeable security, agreement,
arrangement or commitment (each of the foregoing, a 'Company Convertible
Security'). Since the close of business on June 1, 1999, the Company has not
issued any shares of capital stock or any Company Convertible Securities other
than the issuance of Company Common Stock in connection with the exercise of the
Company Stock Options described in clause (a) above and/or as permitted by
Section 5.1 hereof. Except as required by the terms of any Company Stock
Options, the Blossom Non-Employee Directors Fee and Stock Unit Plan and/or as
permitted by Section 5.1, there are no outstanding obligations of the Company or
any of its Subsidiaries to repurchase, redeem or otherwise acquire any shares of
capital stock of the Company or any Company Convertible Securities.
SECTION 3.6 Subsidiaries.
(a) Each Subsidiary of the Company is duly organized, validly existing and
in good standing under the laws of its jurisdiction of organization, has all
powers and all governmental licenses, authorizations, consents and approvals
required to carry on its business as now conducted, except for those the absence
of which would not, individually or in the aggregate, reasonably be expected to
have a Material Adverse Effect on the Company. For purposes of this Agreement,
the word 'Subsidiary' when used with respect to any Person means any other
Person, whether incorporated or unincorporated, of which (i) more than fifty
percent of the securities or other ownership interests or (ii) securities or
other interests having by their terms ordinary voting power to elect more than
fifty percent of the board of directors or others performing similar functions
with respect to such corporation or other organization, is directly owned or
controlled by such Person
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or by any one or more of its Subsidiaries. Each Subsidiary of the Company is
duly qualified to do business and is in good standing in each jurisdiction where
the character of the property owned or leased by it or the nature of its
activities makes such qualification necessary, except for those jurisdictions
where failure to be so qualified would not, individually or in the aggregate,
have a Material Adverse Effect on the Company.
(b) Except for directors' qualifying shares and except as set forth in the
Company's annual report on Form 10-K for the fiscal year ended December 31, 1998
(the 'Company 10-K'), all of the outstanding capital stock of, or other
ownership interests in, each Significant Subsidiary (as such term is defined in
rule 12b-2 under the Exchange Act) of the Company is, directly or indirectly,
owned by the Company. All shares of capital stock of, or other ownership
interests in, Subsidiaries of the Company, directly or indirectly, owned by the
Company are owned free and clear of any Lien and free of any other limitation or
restriction (including any restriction on the right to vote, sell or otherwise
dispose of such capital stock or other ownership interests), except as would
not, individually or in the aggregate, have a Material Adverse Effect on the
Company. There are no outstanding options, warrants or other rights to acquire
from the Company or any of its Subsidiaries, and, except as may be required by
applicable foreign corporate laws, no preemptive or similar rights,
subscriptions or other rights, convertible or exchangeable securities,
agreements, arrangements or commitments of any character, relating to the
capital stock of any Subsidiary of the Company, obligating the Company or any of
its Subsidiaries to issue, transfer or sell, any capital stock, voting
securities or other ownership interests in, or any securities convertible into
or exchangeable for any capital stock, voting securities or ownership interests
in, any Subsidiary of the Company or obligating the Company or any Subsidiary of
the Company to grant, extend or enter into any such option, warrant,
subscription or other right, convertible or exchangeable security, agreement,
arrangement or commitment (each of the foregoing, a 'Company Subsidiary
Convertible Security'). There are no outstanding obligations of the Company or
any of its Subsidiaries to repurchase, redeem or otherwise acquire from any
Person (other than the Company or a wholly owned Subsidiary of the Company) any
outstanding shares of capital stock of any Subsidiary of the Company or any
Company Subsidiary Convertible Securities.
SECTION 3.7 Commission Filings.
(a) The Company has made available to Parent (i) its annual reports on
Form 10-K for its fiscal years ended December 31, 1996, 1997 and 1998, (ii) its
quarterly reports on Form 10-Q for its fiscal quarters ended after December 31,
1998, (iii) its proxy or information statements relating to meetings of, or
actions taken without a meeting by, the stockholders of the Company held since
December 31, 1998, and (iv) all of its other reports, statements, schedules and
registration statements filed with the Commission since December 31, 1998 (the
documents referred to in this Section 3.7(a) being referred to collectively as
the 'Company Commission Documents'). The Company's quarterly report on
Form 10-Q for its fiscal quarter ended April 4, 1999 is referred to as the
'Company 10-Q'.
(b) As of its filing date, each Company Commission Document complied as to
form in all material respects with the applicable requirements of the Exchange
Act and the Securities Act.
(c) As of its filing date, each Company Commission Document filed pursuant
to the Exchange Act did not contain any untrue statement of a material fact or
omit to state any material fact necessary in order to make the statements made
therein, in the light of the circumstances under which they were made, not
misleading.
(d) Each registration statement, as amended or supplemented, if applicable,
filed by the Company pursuant to the Securities Act since December 31, 1996, as
of the date such statement or amendment became effective did not contain any
untrue statement of a material fact or omit to state any material fact required
to be stated therein or necessary to make the statements therein not misleading.
SECTION 3.8 Financial Statements. The audited consolidated financial
statements and unaudited consolidated interim financial statements of the
Company (including any related notes and schedules) included in its annual
reports on Form 10-K and the quarterly reports on
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Form 10-Q referred to in Section 3.7 present fairly, in all material respects,
the financial position of the Company and its subsidiaries as of the dates
thereof and their results of operations and cash flows for the periods then
ended (subject to normal year-end adjustments and the absence of notes in the
case of any unaudited interim financial statements), in each case in conformity
GAAP applied on a consistent basis (except as may be indicated in the notes
thereto). For purposes of this Agreement, 'Company Balance Sheet' means the
consolidated balance sheet of the Company as of April 4, 1999 set forth in the
Company 10-Q and 'Company Balance Sheet Date' means April 4, 1999.
SECTION 3.9 Disclosure Documents.
(a) Neither the proxy statement of the Company (the 'Company Proxy
Statement') to be filed with the Commission in connection with the Merger, nor
any amendment or supplement thereto, will, at the date the Company Proxy
Statement or any such amendment or supplement is first mailed to stockholders of
the Company or at the time such stockholders vote on the adoption and approval
of this Agreement and the transactions contemplated hereby, contain any untrue
statement of a material fact or omit to state any material fact necessary in
order to make the statements therein, in light of the circumstances under which
they were made, not misleading. The Company Proxy Statement will, when filed,
comply as to form in all material respects with the requirements of the Exchange
Act. No representation or warranty is made by the Company in this Section 3.9
with respect to statements made or incorporated by reference therein based on
information supplied by Parent or Merger Subsidiary for inclusion or
incorporation by reference in the Company Proxy Statement.
(b) None of the information supplied or to be supplied by the Company for
inclusion or incorporation by reference in the Parent Proxy Statement (as
defined in Section 4.9) or in the Form S-4 (as defined in Section 4.9) or any
amendment or supplement thereto will, at the time the Parent Proxy Statement or
any such supplement or amendment thereto is first mailed to the stockholders of
Parent or at the time the stockholders vote on the matters constituting the
Parent Stockholder Approval (as defined in Section 4.2) or at the time the Form
S-4 or any such amendment or supplement becomes effective under the Securities
Act or at the Effective Time, as the case may be, contain any untrue statement
of a material fact or omit to state a material fact necessary in order to make
the statements therein, in light of the circumstances under which they were
made, not misleading.
SECTION 3.10 Absence of Certain Changes. Since the Company Balance Sheet
Date and, other than with respect to clause (a) below, prior to the date hereof,
the Company and its Subsidiaries have conducted their respective businesses in
the ordinary course, consistent with past practice, and there has not been:
(a) any event, occurrence or development which, individually or in the
aggregate, would have a Material Adverse Effect on the Company;
(b) any declaration, setting aside or payment of any dividend or other
distribution with respect to any shares of capital stock of the Company (other
than regular quarterly cash dividends payable by the Company in respect of the
shares of Company Common Stock consistent with past practice), or any repurchase
(other than repurchases of Company Common Stock which occurred subsequent to the
Company Balance Sheet Date and prior to the date hereof), redemption or other
acquisition by the Company or any of its Significant Subsidiaries of any
outstanding shares of their capital stock or any Company Convertible Securities
or Company Subsidiary Convertible Securities (except (x) as required by the
terms of any Company Stock Option, (y) in accordance with any dividend
reinvestment plan as in effect on the date of this Agreement in the ordinary
course of the operation of such plan consistent with past practice and/or (z) as
otherwise permitted by Section 5.1);
(c) any amendment of any material term of any outstanding security of the
Company or any of its Significant Subsidiaries;
(d) any transaction or commitment made, or any contract, agreement or
settlement entered into, by (or judgment, order or decree affecting) the Company
or any of its Subsidiaries relating
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to its assets or business (including the acquisition or disposition of any
material amount of assets) or any relinquishment by the Company or any of its
Subsidiaries of any contract or other right, in either case, material to the
Company and its Subsidiaries taken as a whole, other than transactions,
commitments, contracts, agreements or settlements (including without limitation
settlements of litigation and tax proceedings) in the ordinary course of
business consistent with past practice and those contemplated by this Agreement;
(e) any change in any method of accounting or accounting practice (other
than any change for tax purposes) by the Company or any of its Subsidiaries,
except for any such change which is not material or which is required by reason
of a concurrent change in GAAP;
(f) any (i) grant of any severance or termination pay to (or amendment to
any such existing arrangement with) any director, officer or employee of the
Company or any of its Subsidiaries, (ii) entering into of any employment,
deferred compensation, supplemental retirement or other similar agreement (or
any amendment to any such existing agreement) with any director, officer or
employee of the Company or any of its Subsidiaries, (iii) increase in, or
accelerated vesting and/or payment of, benefits under any existing severance or
termination pay policies or employment agreements or (iv) increase in or
enhancement of any rights or features related to compensation, bonus or other
benefits payable to directors, officers or employees of the Company or any of
its Subsidiaries, in each case, other than in the ordinary course of business
consistent with past practice or as permitted by this Agreement; or
(g) any material Tax election made or changed, any material audit settled
or any material amended Tax Returns filed.
SECTION 3.11 No Undisclosed Material Liabilities. There are no liabilities
of the Company or any Subsidiary of the Company of any kind whatsoever, whether
accrued, contingent, absolute, determined, determinable or otherwise, other
than:
(a) liabilities disclosed or provided for in the Company Balance Sheet or
in the notes thereto;
(b) liabilities incurred since such date in the ordinary course of
business;
(c) liabilities which, individually or in the aggregate, would not have a
Material Adverse Effect on the Company;
(d) liabilities disclosed in the Company Commission Documents filed prior
to the date of this Agreement; and
(e) liabilities under this Agreement.
SECTION 3.12 Litigation. There is no action, suit, investigation or
proceeding pending against, or to the knowledge of the Company threatened
against or affecting, the Company or any of its Subsidiaries or any of their
respective properties or any of their respective officers or directors before
any court or arbitrator or any governmental body, agency or official except as
would not, individually or in the aggregate, have a Material Adverse Effect on
the Company or prevent or materially delay the consummation of the Merger.
SECTION 3.13 Taxes. Except as provided for in the Company Balance Sheet
(including the notes thereto) or as would not, individually or in the aggregate,
have a Material Adverse Effect on the Company, (i) all Company Tax Returns
required to be filed with any taxing authority by, or with respect to, the
Company and its Subsidiaries have been filed in accordance with all applicable
laws; (ii) the Company and its Subsidiaries have timely paid all Taxes shown as
due and payable on the Company Tax Returns that have been so filed, and, as of
the time of filing, the Company Tax Returns correctly reflected the facts
regarding the income, business, assets, operations, activities and the status of
the Company and its Subsidiaries (other than Taxes which are being contested in
good faith and for which adequate reserves are reflected on the Company Balance
Sheet); (iii) the Company and its Subsidiaries have made provision for all Taxes
payable by the Company and its Subsidiaries for which no Company Tax Return has
yet been filed; (iv) the charges, accruals and reserves for Taxes with respect
to the Company and its Subsidiaries reflected on the Company Balance Sheet are
adequate under GAAP to cover the Tax liabilities accruing through the date
thereof; (v) there is no action, suit, proceeding, audit or claim now
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proposed or pending against or with respect to the Company or any of its
Subsidiaries in respect of any Tax where there is a reasonable possibility of an
adverse determination; and (vi) to the best of the Company's knowledge and
belief, neither the Company nor any of its Subsidiaries is liable for any Tax
imposed on any entity other than such Person, except as the result of the
application of Treas. Reg. Sections 1.1502-6 (and any comparable provision of
the tax laws of any state, local or foreign jurisdiction) to the affiliated
group of which the Company is the common parent. For purposes of this Agreement,
'Taxes' shall mean any and all taxes, charges, fees, levies or other
assessments, including, without limitation, all net income, gross income, gross
receipts, excise, stamp, real or personal property, ad valorem, withholding,
social security (or similar), unemployment, occupation, use, production,
service, service use, license, net worth, payroll, franchise, severance,
transfer, recording, employment, premium, windfall profits, environmental
(including taxes under Section 59A of the Code), customs duties, capital stock,
profits, disability, sales, registration, value added, alternative or add-on
minimum, estimated or other taxes, assessments or charges imposed by any
federal, state, local or foreign governmental entity and any interest,
penalties, or additions to tax attributable thereto. For purposes of this
Agreement, 'Tax Returns' shall mean any return, report, form or similar
statement required to be filed with respect to any Tax (including any attached
schedules), including, without limitation, any information return, claim for
refund, amended return or declaration of estimated Tax.
SECTION 3.14 Employee Benefit Plans.
(a) For purposes of this Agreement, the term 'Company Employee Plans' shall
mean and include: each material management, consulting, non-compete, employment,
severance or similar contract, plan, including, without limitation, all Company
Stock Plans, arrangement or policy applicable to any director, former director,
employee or former employee of the Company and each material plan, program,
policy, agreement or arrangement (written or oral), providing for compensation,
bonuses, profit-sharing, stock option or other stock related rights or other
forms of incentive or deferred compensation, vacation benefits, insurance
coverage (including any self-insured arrangements), health or medical benefits,
disability benefits, workers' compensation, supplemental unemployment benefits,
severance benefits and post-employment or retirement benefits (including
compensation, pension, health, medical or life insurance benefits) or other
employee benefits of any kind, whether funded or unfunded, which is maintained,
administered or contributed to by the Company or any Subsidiary and covers any
employee or director or former employee or director of the Company or any
Subsidiary, or under which the Company has any liability contingent or otherwise
(including but not limited to each material 'employee benefit plan,' as defined
in Section 3(3) of the Employee Retirement Income Security Act of 1974, as
amended ('ERISA'), but excluding any such plan that is a 'multiemployer plan,'
as defined in Section 3(37) of ERISA).
(b) Each Company Employee Plan has been established and maintained in
compliance with its terms and with the requirements prescribed by any and all
statutes, orders, rules and regulations (including but not limited to ERISA and
the Code) which are applicable to such Plan, except where failure to so comply
would not, individually or in the aggregate, have a Material Adverse Effect on
the Company.
(c) Neither the Company nor any affiliate of the Company has incurred a
liability under Title IV of ERISA that has not been satisfied in full, and no
condition exists that presents a material risk to the Company or any affiliate
of the Company of incurring any such liability other than liability for premiums
due the Pension Benefit Guaranty Corporation (which premiums have been paid when
due). All contributions required to be made under the terms of any Company
Employee Plan maintained in the United States have been made, and, where
applicable to a Company Employee Plan, the Company and its affiliates have
complied with the minimum funding requirements under Section 412 of the Code and
Section 302 of ERISA with respect to each such Company Employee Plan.
(d) Each Company Employee Plan which is intended to be qualified under
section 401(a) of the Code is so qualified and has been so qualified during the
period from its adoption to date, and each trust forming a part thereof is
exempt from federal income tax pursuant to section
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501(a) of the Code and, to the Company's knowledge, no circumstances exist which
will adversely affect such qualification or exemption.
(e) No director or officer or other employee of the Company or any of its
Subsidiaries will become entitled to any retirement, severance or similar
benefit or enhanced or accelerated benefit (including any acceleration of
vesting or lapse of repurchase rights or obligations with respect to any Company
Stock Plans or other benefit under any compensation plan or arrangement of the
Company) solely as a result of the transactions contemplated hereby; and (ii) no
payment made or to be made to any current or former employee or director of the
Company or any of its affiliates by reason of the transactions contemplated
hereby (whether alone or in connection with any other event) will constitute an
'excess parachute payment' within the meaning of Section 280G of the Code.
(f) Since the Company Balance Sheet Date, there has been no amendment to,
or change in employee participation or coverage under, any Company Employee Plan
which would increase materially the expense of maintaining such Company Employee
Plan above the level of the expense incurred in respect thereof for the 12
months ended on the Company Balance Sheet Date.
(g) The Company and its Subsidiaries are in compliance with all applicable
federal, state, local and foreign statutes, laws, (including without limitation,
common law), judicial decisions, regulations, ordinances, rules, judgments,
orders and codes respecting employment, employment practices, labor, terms and
conditions of employment and wages and hours, and no work stoppage or labor
strike against the Company and its Subsidiaries are pending or threatened, nor
are the Company and its Subsidiaries involved in or threatened with any labor
dispute, grievance, or litigation relating to labor matters involving any
employees, in each case except as would not, individually or in the aggregate,
have a Material Adverse Effect on the Company. There are no suits, actions,
disputes, claims (other than routine claims for benefits), investigations or
audits pending or, to the knowledge of the Company, threatened in connection
with any Company Employee Plan, but excluding any of the foregoing which would
not have a Material Adverse Effect on the Company.
SECTION 3.15 Compliance with Laws. Neither the Company nor any of its
Subsidiaries is in violation of, or has since January 1, 1997 violated, any
applicable provisions of any laws, statutes, ordinances or regulations except
for any violations that, individually or in the aggregate, would not have a
Material Adverse Effect on the Company.
SECTION 3.16 Finders' or Advisors' Fees. Except for Bear, Stearns & Co.
Inc., a copy of whose engagement agreement has been provided to Parent, there is
no investment banker, broker, finder or other intermediary which has been
retained by or is authorized to act on behalf of the Company or any of its
Subsidiaries who might be entitled to any fee or commission in connection with
the transactions contemplated by this Agreement.
SECTION 3.17 Environmental Matters.
(a) Except for matters which, individually or in the aggregate, would not
have a Material Adverse Effect on the Company, (i) no written notice,
notification, demand, request for information, citation, summons, complaint or
order has been received by, and no investigation, action, claim, suit,
proceeding or review is pending or, to the knowledge of the Company or any of
its Subsidiaries, threatened by any Person against, the Company or any of its
Subsidiaries, and no penalty has been assessed within the past three years
against the Company or any of its Subsidiaries, in each case, with respect to
any matters relating to or arising out of any Environmental Law; (ii) the
Company and its Subsidiaries are in compliance with all Environmental Laws; and
(iii) to the knowledge of the Company, there are no liabilities of or relating
to the Company or any of its Subsidiaries relating to or arising out of any
Environmental Law and, to the knowledge of the Company, there is no existing
condition, situation or set of circumstances which could reasonably be expected
to result in such a liability.
(b) For purposes of this Section 3.17 and Section 4.17, the term
'Environmental Laws' means federal, state, local and foreign statutes, laws,
judicial decisions, regulations, ordinances, rules, judgments, orders, codes,
injunctions, permits and governmental agreements relating to human
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health and the environment, including, but not limited to, Hazardous Materials;
and the term 'Hazardous Material' means all substances or materials regulated as
hazardous, toxic, explosive, dangerous, flammable or radioactive under any
Environmental Law including, but not limited to: (i) petroleum, asbestos, or
polychlorinated biphenyls and (ii) in the United States, all substances defined
as Hazardous Substances, Oils, Pollutants or Contaminants in the National Oil
and Hazardous Substances Pollution Contingency Plan, 40 C.F.R. 'SS' 300.5.
SECTION 3.18 Opinion of Financial Advisor. The Company has received the
opinion of Bear, Stearns & Co. Inc. to the effect that, as of the date of its
opinion, the Exchange Ratio is fair from a financial point of view to the
holders of shares of Company Common Stock.
SECTION 3.19 Pooling; Tax Treatment.
(a) The Company intends that the Merger be accounted for under the 'pooling
of interests' method under the requirements of Opinion No. 16 (Business
Combinations) of the Accounting Principles Board of the American Institute of
Certified Public Accountants and the rules and regulations of the SEC.
(b) Neither the Company nor any of its affiliates has taken or agreed to
take any action or is aware of any fact or circumstance with respect to the
Company or its affiliates that would prevent the Merger from qualifying (i) for
'pooling of interests' accounting treatment as described in (a) above or (ii) as
a reorganization within the meaning of Section 368 of the Code (a '368
Reorganization').
SECTION 3.20 Takeover Statutes and Charter Provisions. The Board of
Directors of the Company has taken the necessary action to render Section 203 of
the Delaware Law, any other potentially applicable anti-takeover or similar
statute or regulation and the provisions of Sections A and B.2 of Article EIGHTH
of the Company's certificate of incorporation inapplicable to this Agreement and
the Parent Option Agreement and the transactions contemplated hereby and
thereby.
SECTION 3.21 Rights Agreement. The Board of Directors of the Company has
resolved to, and the Company promptly after the execution hereof will, take all
action necessary to render the rights issued pursuant to the terms of the
Company Rights Agreement inapplicable to the Merger, this Agreement, the Parent
Option Agreement and the other transactions contemplated hereby and thereby and
for the rights to expire as of the Effective Time.
SECTION 3.22 Intellectual Property Matters.
(a) The Company and its Subsidiaries own, free and clear of all Liens, or
have the right to use pursuant to valid license, sublicense, agreement or
permission all items of Intellectual Property (as defined in Section 3.23(b))
necessary for their operations as presently conducted or as contemplated to be
conducted, except where the failure to have such rights, individually or in the
aggregate, would not have a Material Adverse Effect on the Company. The conduct
of the Company's and its Subsidiaries' businesses as currently conducted or
contemplated to be conducted does not interfere, infringe, misappropriate or
violate any of the Intellectual Property rights of any third party, except for
interferences, infringements, misappropriations and violations which,
individually or in the aggregate, would not have a Material Adverse Effect on
the Company. To the best of the Company's knowledge, no third party has
interfered with, infringed upon, misappropriated, diluted, violated or otherwise
come into conflict with any Intellectual Property rights of the Company or any
of its Subsidiaries, except for misappropriations and violations which,
individually or in the aggregate, would not have a Material Adverse Effect on
the Company.
(b) The term 'Intellectual Property' as used in this Agreement means,
collectively, patents, trademarks, service marks, trade dress, logos, trade
names, Internet domain names, designs, slogans and general intangibles of like
nature, copyrights and all registrations, applications, reissuances,
continuations, continuations-in-part, revisions, extensions, reexaminations and
associated good will with respect to each of the foregoing, computer software
(including source and object codes), computer programs, computer data bases and
related documentation and materials, data, documentation, technology, trade
secrets, confidential business information (including ideas,
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formulae, algorithms, models, methodologies, compositions, know-how,
manufacturing and production processes and techniques, research and development
information, drawings, designs, plans, proposals and technical data, financial,
marketing and business data and pricing and cost information) and other
intellectual property rights (in whatever form or medium).
SECTION 3.23 Year 2000 Compliance Matters. Except for matters which,
individually and in the aggregate, would not have a Material Adverse Effect on
the Company, all proprietary and third-party licensed computer systems including
computer hardware and software owned, leased or licensed by the Company and
computer software incorporated in products manufactured by the Company and its
Subsidiaries (a) will, prior to December 31, 1999, accurately and without
interruption recognize the advent of the year 2000 without any adverse change in
operation associated with such recognition, (b) can accurately and without
interruption recognize and manipulate date information relating to dates prior
to, on and after January 1, 2000 and (c) can accurately and without interruption
interact with other year 2000 compliant computer systems and computer software
in a way that does not compromise their ability to correctly recognize the
advent of the year 2000 or to accurately and without interruption recognize and
manipulate date information relating to dates prior to, on or after January 1,
2000. The costs of the adaptations to such computer systems, hardware and
software being made by the Company and its Subsidiaries in order to achieve year
2000 compliance are not expected to have a Material Adverse Effect on the
Company.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF PARENT
Parent represents and warrants to the Company that except as set forth in
the disclosure schedules delivered by Parent to the Company simultaneously with
the execution of this Agreement (the 'Parent Disclosure Schedules') and Parent
Commission Documents (as defined in Section 4.7) filed prior to the date hereof:
SECTION 4.1 Corporate Existence and Power. Each of Parent and Merger
Subsidiary is a corporation duly incorporated, validly existing and in good
standing under the laws of its jurisdiction of incorporation and has all
corporate powers and all governmental licenses, authorizations, consents and
approvals required to carry on its business as now conducted, except for those
the absence of which would not, individually or in the aggregate, have a
Material Adverse Effect on Parent. Parent is duly qualified to do business as a
foreign corporation and is in good standing in each jurisdiction where the
character of the property owned or leased by it or the nature of its activities
makes such qualification necessary, except for those jurisdictions where the
failure to be so qualified would not, individually or in the aggregate, have a
Material Adverse Effect on Parent. Since the date of its incorporation, Merger
Subsidiary has not engaged in any activities other than in connection with or as
contemplated by this Agreement. Parent has heretofore made available to the
Company true and complete copies of Parent's and Merger Subsidiary's certificate
of incorporation and by-laws as currently in effect. As of the date hereof,
neither Parent nor any of its Subsidiaries owns any shares of Company Common
Stock.
SECTION 4.2 Corporate Authorization.
(a) The execution, delivery and performance by Parent and Merger Subsidiary
of this Agreement, and by Parent of the Option Agreements, and the consummation
by Parent and Merger Subsidiary of the transactions contemplated hereby and
thereby are within the corporate powers of Parent and Merger Subsidiary and have
been duly authorized by all necessary corporate action, and, except for the
required approval of Parent's stockholders, for the issuance of Parent Common
Stock (the 'Common Stock Issuance') in connection with the Merger (the 'Common
Stock Issuance Approval' or the 'Parent Stockholders Approval'), the Common
Stock Issuance is in accordance with the rules and regulations of the NYSE. The
affirmative vote of the holders of shares of Parent Common Stock having votes
representing a majority of the votes cast with respect to the Common Stock
Issuance, voting together as a single class, in favor of the Common Stock
Issuance (provided that the total number of the votes cast in favor and against
the Common Stock Issuance represents over 50% of all of votes eligible to be
cast by all holders of Parent
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Common Stock) is the only vote of the holders of any of Parent's capital stock
necessary in connection with obtaining the Common Stock Issuance Approval.
Assuming due authorization, execution and delivery of this Agreement and the
Option Agreements by the Company, this Agreement constitutes a valid and binding
agreement of each of Parent and Merger Subsidiary and the Option Agreements
constitute valid and binding agreements of Parent, in each case enforceable
against such party in accordance with its terms, subject to bankruptcy,
insolvency, fraudulent transfer, reorganization, moratorium and similar laws of
general applicability relating to or affecting creditors' rights and to general
equity principles. The shares of Parent Common Stock issued pursuant to the
Merger, when issued in accordance with the terms hereof, will be duly
authorized, validly issued, fully paid and nonassessable and not subject to
preemptive rights.
(b) Parent's Board of Directors, at a meeting duly called and held, has (i)
determined that this Agreement and the Option Agreements and the transactions
contemplated hereby and thereby (including the Merger) are fair to and in the
best interests of Parent's stockholders, (ii) approved this Agreement and the
Option Agreements and the transactions contemplated hereby and thereby
(including the Merger, the Common Stock Issuance and the By-laws Amendment), and
(iii) resolved (subject to Section 6.4) to recommend that Parent's stockholders
vote in favor of the Common Stock Issuance.
SECTION 4.3 Governmental Authorization. The execution, delivery and
performance by Parent and Merger Subsidiary of this Agreement, and by Parent of
the Option Agreements, and the consummation by Parent and Merger Subsidiary of
the transactions contemplated hereby and thereby require no action by or in
respect of, or filing with, any governmental body, agency, official or authority
other than (a) the filing of a certificate of merger in connection with the
Merger, and a certificate of merger in connection with the merger contemplated
by Section 2.1, in each case in accordance with Delaware Law, (b) compliance
with any applicable requirements of the HSR Act, (c) compliance with any
applicable requirements of the EC Merger Regulation, (d) compliance with any
other applicable requirements of foreign anti-trust or investments laws, (e)
compliance with any applicable environmental transfer statutes, (f) compliance
with any applicable requirements of the Exchange Act, (g) compliance with any
applicable requirements of the Securities Act, and (h) other actions or filings
which if not taken or made would not, individually or in the aggregate, have a
Material Adverse Effect on Parent or prevent or materially delay Parent's and/or
Merger Subsidiary's consummation of the Merger.
SECTION 4.4 Non-Contravention. The execution, delivery and performance by
Parent and Merger Subsidiary of this Agreement, and by Parent of the Option
Agreements, and the consummation by Parent and Merger Subsidiary of the
transactions contemplated hereby and thereby do not and will not (a) contravene
or conflict with the certificate of incorporation or by-laws of Parent or Merger
Subsidiary, (b) assuming compliance with the matters referred to in Section 4.3
and subject to receipt of the Parent Stockholder Approval, contravene or
conflict with or constitute a violation of any provision of any law, regulation,
judgment, injunction, order or decree binding upon or applicable to Parent or
any of its Subsidiaries, (c) subject to receipt of the Parent Stockholder
Approval, constitute a default under or give rise to any right of termination,
cancellation or acceleration of any right or obligation of Parent or any of its
Subsidiaries or to a loss of any benefit to which Parent or any of its
Subsidiaries is entitled under any provision of any agreement, contract or other
instrument binding upon Parent or any of its Subsidiaries or any license,
franchise, permit or other similar authorization held by Parent or any of its
Subsidiaries or (d) result in the creation or imposition of any Lien on any
asset of Parent or any of its Subsidiaries, except for such contraventions,
conflicts or violations referred to in clause (b) or defaults, rights of
termination, cancellation or acceleration, or losses or Liens referred to in
clause (c) or (d) that would not, individually or in the aggregate, have a
Material Adverse Effect on Parent. Neither Parent nor any Subsidiary of Parent
is a party to any agreement that expressly limits the ability of Parent or any
Subsidiary of Parent to compete in or conduct any line of business or compete
with any Person or in any geographic area or during any period of time except to
the extent that any such limitation, individually or in the aggregate, would not
have a Material Adverse Effect on Parent immediately after the Effective Time.
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SECTION 4.5 Capitalization. The authorized capital stock of Parent consists
of 1,000,000,000 shares of Parent Common Stock and 20,000,000 shares of
preferred stock, without par value (of which 51,250 are designated '$91.25
Series A Cumulative Preferred Shares', 3,593,281 are designated '$6.74 Series C
Cumulative Convertible Preferred Shares', 984,089 are designated '$12 Series D
Cumulative Convertible Preferred Shares', 2,755,173 are designated 'Adjustable
Rate Series F Cumulative Preferred Shares,' 24,929 are designated '$86.25
Series G Cumulative Preferred Shares', 968,754 are designated '8.25% Series AA
Cumulative Convertible Preferred Shares,' and the remaining shares of such
preferred stock are not subject to any designation) ('Parent Preferred Stock').
As of the close of business on June 3, 1999, there were outstanding 549,289,134
shares of Parent Common Stock, no shares of Parent Preferred Stock and no other
shares of capital stock or other voting securities of Parent were outstanding.
All outstanding shares of capital stock of Parent have been duly authorized and
validly issued and are fully paid and nonassessable. Except for (a) employee or
director stock options to acquire no more than 38,472,492 shares of Parent
Common Stock, (b) shares of Parent Common Stock to be issued in connection with
the Merger, (c) the option granted pursuant to the Company Option Agreement and
(d) 1,458,867 shares issuable pursuant to Parent's employee stock purchase plans
in the ordinary course of business consistent with past practice, as of the
close of business on June 3, 1999, there were no outstanding options, warrants
or other rights to acquire from Parent, and no preemptive or similar rights,
subscription or other rights, convertible or exchangeable securities,
agreements, arrangements, or commitments of any character, relating to the
capital stock of Parent, obligating Parent to issue, transfer or sell any
capital stock, voting securities or securities convertible into or exchangeable
for capital stock or voting securities of Parent or obligating Parent to grant,
extend or enter into any such option, warrant, subscription or other right,
convertible or exchangeable security, agreement, arrangement or commitment (each
of the foregoing, a 'Parent Convertible Security'). Since the close of business
on June 3, 1999, Parent has not issued any shares of capital stock or Parent
Convertible Securities, other than in connection with the exercise of employee
stock options described in clause (a) above and/or as permitted by Section 6.1
hereof. Except as required by the terms of any employee or director stock
options and/or as permitted by 6.1, there are no outstanding obligations of
Parent or any of its Subsidiaries to repurchase, redeem or otherwise acquire any
shares of capital stock of Parent and of any Parent Convertible Securities.
SECTION 4.6 Subsidiaries.
(a) Each Subsidiary of Parent is duly organized, validly existing and in
good standing under the laws of its jurisdiction of organization, has all powers
and all governmental licenses, authorizations, permits, consents and approvals
required to carry on its business as now conducted, except for those the absence
of which would not, individually or in the aggregate, reasonably be expected to
have a Material Adverse Effect on Parent. Each Subsidiary of Parent is duly
qualified to do business and is in good standing in each jurisdiction where the
character of the property owned or leased by it or the nature of its activities
makes such qualifications necessary, except for those jurisdictions where
failure to be so qualified would not, individually or in the aggregate, have a
Material Adverse Effect on Parent.
(b) Except for directors' qualifying shares and except as set forth in
Parent's annual report on Form 10-K for the fiscal year ended December 31, 1998
('Parent 10-K'), all of the outstanding capital stock of, or other ownership
interests in, each Significant Subsidiary of Parent is owned, directly or
indirectly, by Parent. All shares of capital stock of, or other ownership
interests in, Subsidiaries of the Parent owned, directly or indirectly, by
Parent are owned free and clear of any Lien and free of any other limitation or
restriction (including any restriction on the right to vote, sell or otherwise
dispose of such capital stock or other ownership interests), except as would
not, individually or in the aggregate, have a Material Adverse Effect on the
Parent. There are no outstanding options, warrants or other rights to acquire,
and, except as may be required by applicable foreign corporate laws, no
preemptive or similar rights, subscriptions or other rights, convertible or
exchangeable securities, agreements, arrangements or commitments of any
character, relating to the capital stock of any Subsidiary of Parent, obligating
Parent or any of its Subsidiaries to issue, transfer or sell, any capital stock,
voting securities or other ownership
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interests in, or any securities convertible into or exchangeable for any capital
stock, voting securities or ownership interests in, any Subsidiary of Parent or
obligating Parent or any Subsidiary of Parent to grant, extend or enter into any
such option, warrant, subscription or other right, convertible or exchangeable
security, agreement, arrangement or commitment (each of the foregoing, a 'Parent
Subsidiary Convertible Security'). There are no outstanding obligations of
Parent or any of its Subsidiaries to repurchase, redeem or otherwise acquire
from any Person (other than Parent or a wholly owned Subsidiary of Parent) any
outstanding shares of capital stock of any Subsidiary of Parent or any Parent
Subsidiary Convertible Securities.
SECTION 4.7 Commission Filings.
(a) Parent has made available to the Company (i) its annual reports on
Form 10-K for its fiscal years ended December 31, 1996, 1997 and 1998, (ii) its
quarterly reports on Form 10-Q for its fiscal quarters ended after December 31,
1998, (iii) its proxy or information statements relating to meetings, of, or
actions taken without a meeting by, the stockholders of Parent held since
December 31, 1998, and (iv) all of its other reports, statements, schedules and
registration statements filed with the Commission since December 31, 1998 (the
documents referred to in this Section 4.7(a) being referred to collectively as
the 'Parent Commission Documents'). Parent's quarterly report on Form 10-Q for
its fiscal quarter ended March 31, 1999 is referred to as the 'Parent 10-Q'.
(b) As of its filing date, each Parent Commission Document complied as to
form in all material respects with the applicable requirements of the Exchange
Act and the Securities Act.
(c) As of its filing date, each Parent Commission Document filed pursuant
to the Exchange Act did not contain any untrue statement of a material fact or
omit to state any material fact necessary in order to make the statements made
therein, in the light of the circumstances under which they were made, not
misleading.
(d) Each registration statement, as amended or supplemented, if applicable,
filed by Parent pursuant to the Securities Act since December 31, 1996, as of
the date such statement or amendment became effective did not contain any untrue
statement of a material fact or omit to state any material fact required to be
stated therein or necessary to make the statements therein not misleading.
SECTION 4.8 Financial Statements. The audited consolidated financial
statements and unaudited consolidated interim financial statements of Parent
(including any related notes and schedules) included in the annual reports on
Form 10-K and the quarterly reports on Form 10-Q referred to in Section 4.7
present fairly, in all material respects, the financial position of Parent and
its subsidiaries as of the dates thereof and their results of operations and
cash flows for the periods then ended (subject to normal year-end adjustments
and the absence of notes in the case of any unaudited interim financial
statements), in each case in conformity with GAAP applied on a consistent basis
(except as may be indicated in the notes thereto). For purposes of this
Agreement, 'Parent Balance Sheet' means the consolidated balance sheet of Parent
as of March 31, 1999 set forth in the Parent 10-Q and 'Parent Balance Sheet
Date' means March 31, 1999.
SECTION 4.9 Disclosure Documents.
(a) The proxy statement of Parent (the 'Parent Proxy Statement') to be
filed with the Commission in connection with the Merger and the Registration
Statement on Form S-4 of Parent (the 'Form S-4') to be filed under the
Securities Act relating to the issuance of Parent Common Stock in the Merger,
and any amendments or supplements thereto, will, when filed, subject to the last
sentence of Section 4.9(b), comply as to form in all material respects with the
applicable requirements of the Securities Act.
(b) Neither the Parent Proxy Statement nor any amendment or supplement
thereto, will, at the date the Parent Proxy Statement or any such amendment or
supplement is first mailed to stockholders of Parent or at the time such
stockholders vote on the matters constituting the Parent Stockholder Approval,
contain any untrue statement of a material fact or omit to state any material
fact necessary in order to make the statements therein, in light of the
circumstances under
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which they were made, not misleading. Neither the Form S-4 nor any amendment or
supplement thereto will at the time it becomes effective under the Securities
Act or at the Effective Time contain any untrue statement of a material fact or
omit to state a material fact required to be stated therein or necessary to make
the statements therein not misleading. No representation or warranty is made by
Parent in this Section 4.9 with respect to statements made or incorporated by
reference therein based on information supplied by the Company for inclusion or
incorporation by reference in the Parent Proxy Statement or the Form S-4.
(c) None of the information supplied or to be supplied by Parent for
inclusion or incorporation by reference in the Company Proxy Statement or any
amendment or supplement thereto will, at the date the Company Proxy Statement or
any amendment or supplement thereto is first mailed to the stockholders of the
Company or at the time the stockholders vote on the adoption and approval of
this Agreement and the transactions contemplated hereby, contain any untrue
statement of a material fact or omit to state any material fact necessary in
order to make the statements therein, in light of the circumstances under which
they were made, not misleading.
SECTION 4.10 Absence of Certain Changes. Since the Parent Balance Sheet
Date, and, other than with respect to clause (a) below, prior to the date
hereof, Parent and its Subsidiaries have conducted their respective businesses
in the ordinary course, consistent with past practice and there has not been:
(a) any event, occurrence or development which, individually or in the
aggregate, would have a Material Adverse Effect on Parent;
(b) any declaration, setting aside or payment of any dividend or other
distribution with respect to any shares of capital stock of Parent (other than
regular quarterly cash dividends payable by Parent in respect of shares of
Parent Common Stock consistent with past practice) or any repurchase (other than
repurchases of Parent Common Stock which occurred subsequent to the Parent
Balance Sheet Date and prior to the date hereof), redemption or other
acquisition by Parent or any of its Significant Subsidiaries of any outstanding
shares of its capital stock or any Parent Convertible Securities (except (x) as
required by the terms of any employee or stock option plan or compensation plan
or arrangement, (y) in accordance with any dividend reinvestment plan as in
effect as of the date of this Agreement in the ordinary course of operation of
such plan consistent with past practice, and/or (z) as otherwise permitted by
Section 6.1); or
(c) any amendment of any material term of any outstanding security of
Parent or any of its Significant Subsidiaries;
(d) any transaction or commitment made, or any contract, agreement or
settlement entered into, by (or judgment, order or decree affecting) Parent or
any of its Subsidiaries relating to its assets or business (including the
acquisition or disposition of any material amount of assets) or any
relinquishment by Parent or any of its Subsidiaries of any contract or other
right, in either case, material to Parent and its Subsidiaries taken as a whole,
other than transactions, commitments, contracts, agreements or settlements
(including without limitation settlements of litigation and tax proceedings) in
the ordinary course of business consistent with past practice and those
contemplated by this Agreement;
(e) any change prior to the date hereof in any method of accounting or
accounting practice (other than any change for tax purposes) by Parent or any of
its Subsidiaries, except for any such change which is not material or which is
required by reason of a concurrent change in GAAP; or
(f) any (i) grant of any severance or termination pay to (or amendment to
any such existing arrangement with) any director, officer or employee of Parent
or any of its Subsidiaries, (ii) entering into of any employment, deferred
compensation, supplemental retirement or other similar agreement (or any
amendment to any such existing agreement) with any director, officer or employee
of Parent or any of its Subsidiaries, (iii) increase in, or accelerated vesting
and/or payment of, benefits under any existing severance or termination pay
policies or employment agreements or (iv) increase in or enhancement of any
rights or features related to compensation, bonus or other benefits payable to
directors, officers or employees of Parent or any of its
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Subsidiaries, in each case, other than in the ordinary course of business
consistent with past practice or as permitted by this Agreement; or
(g) any material Tax election made or changed, any material audit settled
or any material amended Tax Returns filed.
SECTION 4.11 No Undisclosed Material Liabilities. There are no liabilities
of Parent or any Subsidiary of Parent of any kind whatsoever, whether accrued,
contingent, absolute, determined, determinable or otherwise, other than:
(a) liabilities disclosed or provided for in the Parent Balance Sheet or in
the notes thereto;
(b) liabilities incurred since such date in the ordinary course of
business;
(c) liabilities which, individually or in the aggregate, would not have a
Material Adverse Effect on Parent;
(d) liabilities disclosed in the Parent Commission Documents filed prior to
the date of this Agreement; and
(e) liabilities under this Agreement.
SECTION 4.12 Litigation. There is no action, suit, investigation or
proceeding pending against, or to the knowledge of Parent threatened against or
affecting, Parent or any of its Subsidiaries or any of their respective
properties or any of their respective officers or directors before any court or
arbitrator or any governmental body, agency or official except as would not,
individually or in the aggregate, have a Material Adverse Effect on Parent or
prevent or materially delay the consummation of the Merger.
SECTION 4.13 Taxes. Except as provided for in the Parent Balance Sheet
(including the notes thereto) or as would not, individually or in the aggregate,
have a Material Adverse Effect on Parent, (i) all Parent Tax Returns required to
be filed with any taxing authority by, or with respect to, Parent and its
Subsidiaries have been filed in accordance with all applicable laws; (ii) Parent
and its Subsidiaries have timely paid all Taxes shown as due and payable on
Parent Tax Returns that have been so filed, and, as of the time of filing, the
Parent Tax Returns correctly reflected the facts regarding the income, business,
assets, operations, activities and the status of Parent and its Subsidiaries
(other than Taxes which are being contested in good faith and for which adequate
reserves are reflected on the Parent Balance Sheet); (iii) Parent and its
Subsidiaries have made provision for all Taxes payable by Parent and its
Subsidiaries for which no Parent Tax Return has yet been filed; (iv) the
charges, accruals and reserves for Taxes with respect to Parent and its
Subsidiaries reflected on the Parent Balance Sheet are adequate under GAAP to
cover the Tax liabilities accruing through the date thereof; (v) there is no
action, suit, proceeding, audit or claim now proposed or pending against or with
respect to Parent or any of its Subsidiaries in respect of any Tax where there
is a reasonable possibility of an adverse determination; and (vi) to the best of
Parent's knowledge and belief, neither Parent nor any of its Subsidiaries is
liable for any Tax imposed on any entity other than such Person, except as the
result of the application of Treas. Reg. Sections 1.1502-6 (and any comparable
provision of the tax laws of any state, local or foreign jurisdiction) to the
affiliated group of which Parent is the common parent.
SECTION 4.14 Employee Benefit Plans.
(a) For purposes of this Agreement, the term 'Parent Employee Plans' shall
mean and include: each material management, consulting, non-compete, employment,
severance or similar contract, plan, arrangement or policy applicable to any
director, former director, employee or former employee of Parent and each
material plan, program, policy, agreement or arrangement (written or oral),
providing for compensation, bonuses, profit-sharing, stock option or other stock
related rights or other forms of incentive or deferred compensation, vacation
benefits, insurance coverage (including any self-insured arrangements), health
or medical benefits, disability benefits, workers' compensation, supplemental
unemployment benefits, severance benefits and post-employment or retirement
benefits (including compensation, pension, health, medical or life insurance
benefits) or other employee benefits of any kind, whether funded or unfunded,
which is maintained, administered or contributed to by Parent or any Subsidiary
and covers any employee
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or director or former employee or director of Parent, or under which Parent or
any Subsidiary has any liability, contingent or otherwise (including but not
limited to each material 'employee benefit plan,' as defined in Section 3(3) of
ERISA, but excluding any such plan that is a 'multiemployer plan,' as defined in
Section 3(37) of ERISA).
(b) Each Parent Employee Plan has been established and maintained in
compliance with its terms and with the requirements prescribed by any and all
statutes, orders, rules and regulations (including but not limited to ERISA and
the Code) which are applicable to such Plan, except where failure to so comply
would not, individually or in the aggregate, have a Material Adverse Effect on
Parent.
(c) Neither Parent nor any affiliate of Parent has incurred a liability
under Title IV of ERISA that has not been satisfied in full, and no condition
exists that presents a material risk to Parent or any affiliate of Parent of
incurring any such liability other than liability for premiums due the Pension
Benefit Guaranty Corporation (which premiums have been paid when due). All
contributions required to be made under the terms of any Parent Employee Plan
maintained in the United States have been made, and, where applicable to a
Parent Employee Plan, Parent and its affiliates have complied with the minimum
funding requirements under Section 412 of the Code and Section 302 of ERISA with
respect to each such Parent Employee Plan.
(d) Each Parent Employee Plan which is intended to be qualified under
section 401(a) of the Code is so qualified and has been so qualified during the
period from its adoption to date, and each trust forming a part thereof is
exempt from federal income tax pursuant to section 501(a) of the Code and, to
Parent's knowledge, no circumstances exist which will adversely affect such
qualification or exception.
(e) No director or officer or other employee of Parent or any of its
Subsidiaries will become entitled to any retirement, severance or similar
benefit or enhanced or accelerated benefit (including any acceleration of
vesting or lapse of repurchase rights or obligations with respect to any Parent
Stock Plans or other benefit under any compensation plan or arrangement of
Parent) solely as a result of the transactions contemplated in this Agreement.
(f) Since the Parent Balance Sheet Date, there has been no amendment to, or
change in employee participation or coverage under, any Parent Employee Plan
which would increase materially the expense of maintaining such Employee Plan
above the level of the expense incurred in respect thereof for the 12 months
ended on the Parent Balance Sheet Date.
(g) Parent and its Subsidiaries are in compliance with all applicable
federal, state, local and foreign statutes, laws (including, without limitation,
common law), judicial decisions, regulations, ordinances, rules, judgments,
orders and codes respecting employment, employment practices, labor, terms and
conditions of employment and wages and hours, and no work stoppage or labor
strike against Parent and its Subsidiaries is pending or threatened, nor is
Parent or its Subsidiaries involved in or threatened with any labor dispute,
grievance or litigation relating to labor matters involving any employees, in
each case except as would not, individually or in the aggregate, have a Material
Adverse Effect on Parent. There are no suits, actions, disputes, claims (other
than routine claims for benefits), investigations or audits pending or, to the
knowledge of the Company, threatened in connection with any Parent Employee
Plan, but excluding any of the foregoing which would not have a Material Adverse
Effect on Parent.
SECTION 4.15 Compliance with Laws. Neither Parent nor any of its
Subsidiaries is in violation of, or has since January 1, 1997 violated, any
applicable provisions of any laws, statutes, ordinances or regulations except
for any violations that, individually or in the aggregate, would not have a
Material Adverse Effect on Parent.
SECTION 4.16 Finders' or Advisors' Fees. Except for J.P. Morgan & Co.
Incorporated whose fees will be paid by Parent, there is no investment banker,
broker, finder or other intermediary which has been retained by or is authorized
to act on behalf of Parent or any of its Subsidiaries who might be entitled to
any fee or commission in connection with the transactions contemplated by this
Agreement.
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SECTION 4.17 Environmental Matters. Except for matters which, individually
or in the aggregate, would not have a Material Adverse Effect on Parent, (i) no
written notice, notification, demand, request for information, citation,
summons, complaint or order has been received by, and no investigation, action,
claim, suit, proceeding or review is pending or, to the knowledge of Parent or
any of its Subsidiaries, threatened by any Person against, Parent or any of its
Subsidiaries, and no penalty has been assessed within the past three years
against Parent or any of its Subsidiaries, in each case, with respect to any
matters relating to or arising out of any Environmental Law; (ii) Parent and its
Subsidiaries are in compliance with all Environmental Laws; and (iii) to the
knowledge of Parent, there are no liabilities of or relating to Parent or any of
its Subsidiaries relating to or arising out of any Environmental Law, and, to
the knowledge of Parent, there is no existing condition, situation or set of
circumstances which could reasonably be expected to result in such a liability.
SECTION 4.18 Opinion of Financial Advisor. Parent has received the opinion
of J.P. Morgan & Co. Incorporated to the effect that, as of the date of this
Agreement, the consideration to be paid by Parent in the Merger is fair, from a
financial point of view, to Parent.
SECTION 4.19 Pooling; Tax Treatment.
(a) Parent intends that the Merger be accounted for as a 'pooling of
interests' as described in Section 3.19(a).
(b) Neither Parent nor any of its affiliates has taken or agreed to take
any action or is aware of any fact or circumstance with respect to Parent or its
affiliates that would prevent the Merger from qualifying (i) for 'pooling of
interests' accounting treatment as described in Section 3.19(a) or (ii) as a 368
Reorganization.
SECTION 4.20 Takeover Statutes. The Board of Directors of Parent has taken
the necessary action to render Section 203 of the Delaware Law, and any other
potentially applicable anti-takeover or similar statute or regulation
inapplicable to this Agreement and the Company Option Agreement and the
transactions contemplated hereby and thereby.
SECTION 4.21 Intellectual Property Matters. Parent and its Subsidiaries
own, free and clear of all Liens, or have the right to use pursuant to valid
license, sublicense, agreement or permission all items of Intellectual Property
necessary for their operations as presently conducted or as contemplated to be
conducted, except where the failure to have such rights, individually or in the
aggregate, would not have a Material Adverse Effect on Parent. The conduct of
Parent's and its Subsidiaries' businesses as currently conducted or as
contemplated to be conducted does not interfere, infringe, misappropriate or
violate any of the Intellectual Property rights of any third party, except for
interferences, infringements, misappropriations and violations which,
individually or in the aggregate, would not have a Material Adverse Effect on
Parent. To the best of Parent's knowledge, no third party has interfered with,
infringed upon, misappropriated, diluted, violated or otherwise come into
conflict with any Intellectual Property rights of Parent or any of its
Subsidiaries, except for misappropriations and violations which, individually or
in the aggregate, would not have a Material Adverse Effect on Parent.
SECTION 4.22 Year 2000 Compliance Matters. Except for matters which,
individually and in the aggregate, would not have a Material Adverse Effect on
Parent, all proprietary and third-party licensed computer systems including
computer hardware and software owned, leased or licensed by Parent and computer
software incorporated in products manufactured by Parent and its Subsidiaries
(a) will, prior to December 31, 1999, accurately and without interruption
recognize, the advent of the year 2000 without any adverse change in operation
associated with such recognition, (b) can accurately and without interruption
recognize and manipulate date information relating to dates prior to, on and
after January 1, 2000 and (c) can accurately and without interruption interact
with other year 2000 compliant computer systems and computer software in a way
that does not compromise their ability to correctly recognize the advent of the
year 2000 or to accurately and without interruption recognize and manipulate
date information relating to dates prior to, on or after January 1, 2000. The
costs of the adaptations to such computer systems, hardware and software being
made by Parent and its Subsidiaries in order to achieve year 2000 compliance are
not expected to have a Material Adverse Effect on Parent.
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ARTICLE V
COVENANTS OF THE COMPANY
The Company agrees that:
SECTION 5.1 Conduct of the Company. From the date of this Agreement until
the Effective Time, the Company and its Subsidiaries shall, subject to the last
sentence of this Section 5.1, conduct their business in the ordinary course
consistent with past practice and shall use their reasonable best efforts to
preserve intact their business organizations and relationships with third
parties. Without limiting the generality of the foregoing and subject to the
last sentence of this Section 5.1, with the prior written consent of Parent
(which shall not be unreasonably withheld) or as contemplated by this Agreement
or the Option Agreements, from the date of this Agreement until the Effective
Time:
(a) the Company will not, and will not permit any of its Subsidiaries to,
adopt or propose any change in its certificate of incorporation or by-laws;
(b) the Company will not, and will not permit any Subsidiary of the Company
to, adopt a plan or agreement of complete or partial liquidation, dissolution,
merger, consolidation, restructuring, recapitalization or other reorganization
of the Company or any of its Subsidiaries (other than transactions between
direct and/or indirect wholly owned Subsidiaries of the Company);
(c) the Company will not, and will not permit any Subsidiary of the Company
to, issue, sell, transfer, pledge, dispose of or encumber any shares of, or
securities convertible into or exchangeable for, or options, warrants, calls,
commitments or rights of any kind to acquire, any shares of capital stock of any
class or series of the Company or its any of its Subsidiaries other than (i)
issuances of Company Common Stock pursuant to the exercise of Company Stock
Options that are outstanding on the date of this Agreement, or pursuant to
Company Stock Options or other stock based awards granted in accordance with
clause (ii) below and (ii) additional Company Stock Options or other stock-based
awards to acquire shares of Company Common Stock granted under the terms of any
employee or director stock option or compensation plan or arrangement of the
Company as in effect on the date of this Agreement in the ordinary course of
business consistent with past practice;
(d) the Company will not (i) split, combine, subdivide or reclassify its
outstanding shares of capital stock, or (ii) declare, set aside or pay any
dividend or other distribution payable in cash, stock or property with respect
to its capital stock other than, subject to Sections 7.4 and 7.9, regular
quarterly cash dividends payable by the Company in respect of shares of Company
Stock consistent with past practice;
(e) the Company will not, and will not permit any Subsidiary of the Company
to, redeem, purchase or otherwise acquire directly or indirectly any of the
Company's capital stock, Company Convertible Securities or Company Subsidiary
Convertible Securities, except for repurchases, redemptions or acquisitions (x)
required by or in connection with the terms of any Company Stock Plan or (y) in
accordance with any dividend reinvestment plan as in effect on the date of this
Agreement in the ordinary course of the operations of such plan consistent with
past practice and, in the case of each of (x) and (y) above, only to the extent
consistent with Section 7.4;
(f) the Company will not amend the terms (including the terms relating to
accelerating the vesting or lapse of repurchase rights or obligations) of any
employee or director stock options or other stock based awards;
(g) the Company will not, and will not permit any Subsidiary of the Company
to, (i) grant any severance or termination pay to (or amend any such existing
arrangement with) any director, officer or employee of the Company or any of its
Subsidiaries, (ii) enter into any employment, deferred compensation or other
similar agreement (or any amendment to any such existing agreement) with any
director, officer or employee of the Company or any of its Subsidiaries, (iii)
increase any benefits payable under any existing severance or termination pay
policies or employment agreements, (iv) increase (or amend the terms of) any
compensation, bonus or other benefits payable to directors, officers or
employees of the Company or any of its Subsidiaries or
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(v) permit any director, officer or employee who is not already a party to an
agreement or a participant in a plan providing benefits upon or following a
'change in control' to become a party to any such agreement or a participant in
any such plan, in the case of each of clauses (i) through (iv), other than in
the ordinary course of business consistent with past practice but subject to
Sections 7.4 and 7.9 and, in the case of the establishment of any retention
and/or pay-to-stay plans or individual severance arrangements that the Company
reasonably believes to be appropriate, after notice to Parent and the Company's
good-faith effort to obtain Parent's approval;
(h) the Company will not, and will not permit any of its Subsidiaries to,
acquire a material amount of assets or property of any other Person except in
the ordinary course of business consistent with past practice;
(i) other than as contemplated by Section 7.1, the Company will not, and
will not permit any of its Subsidiaries to, sell, lease, license or otherwise
dispose of any material amount of assets or property except pursuant to existing
contracts or commitments and except in the ordinary course of business
consistent with past practice;
(j) except for any such change which is not material or which is required
by reason of a concurrent change in GAAP, the Company will not, and will not
permit any Subsidiary of the Company to, change any method of accounting or
accounting practice (other than any change for tax purposes) used by it;
(k) the Company will not, and will not permit any Subsidiary of the Company
to, enter into any material joint venture, partnership or other similar
arrangement;
(l) the Company will not, and will not permit any of its Subsidiaries to,
take any action that would make any representation or warranty of the Company
hereunder inaccurate in any material respect at, or as of any time prior to, the
Effective Time;
(m) the Company will not enter into any standstill agreement, or amend or
waive any provisions of, or grant any approval under, any standstill agreement;
provided that the Board of Directors of the Company may grant a waiver of
provisions of, or approval under, a standstill agreement with any Person solely
to permit such Person to make a Superior Proposal if the Board of Directors of
the Company determines in its good faith judgment, after receiving the advice of
outside legal counsel, that, in light of the Superior Proposal, there is a
reasonable possibility that the Board of Directors would be in violation of its
fiduciary duties under applicable law if it failed to grant such waiver;
(n) the Company will not make or change any material Tax election, settle
any material audit or file any material amended Tax Returns, except in the
ordinary course of business consistent with past practice; and
(o) the Company will not, and will not permit any of its Subsidiaries to,
agree or commit to do any of the foregoing.
Notwithstanding the foregoing but subject to Section 7.4, from the date hereof
until the Effective Time, the Company and its Subsidiaries may (x) make
acquisitions of property, assets or any business (other than pursuant to a
merger or consolidation with or into the Company) solely for cash so long as no
one acquisition or series of related acquisitions involves the payment of
consideration in an amount in excess of $ 500 million, and all acquisitions
pursuant to this clause (x) do not involve the payment of consideration in
excess of $ 500 million, in the aggregate, and (y) sell, transfer or otherwise
dispose of assets or property so long as the Company and its Subsidiaries do not
sell, transfer and otherwise dispose of assets and property pursuant to this
clause (y) having a fair market value in excess of $ 500 million, in the
aggregate.
SECTION 5.2 Company Stockholder Meeting; Proxy Material.
(a) The Company shall cause a meeting of its stockholders (the 'Company
Stockholder Meeting') to be duly called and noticed, and, to the extent
practicable, held on the same date as the Parent Stockholder Meeting (as defined
below) for the purpose of obtaining the Company Stockholder Approval. In
connection with the Company Stockholder Meeting, the Company (x) will promptly
prepare and file with the Commission, will use its reasonable best efforts to
have
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cleared by the Commission and will thereafter mail to its stockholders as
promptly as practicable, the Company Proxy Statement and all other proxy
materials for the Company Stockholder Meeting, (y) will use its reasonable best
efforts, subject to paragraph (b) of this Section 5.2, to obtain the Company
Stockholder Approval and (z) will otherwise comply with all legal requirements
applicable to the Company Stockholder Meeting.
(b) Except as provided in the next sentence, the Board of Directors of the
Company shall recommend approval and adoption of this Agreement and the Merger
by the Company's stockholders. The Board of Directors of the Company shall be
permitted (i) not to recommend to the Company's stockholders that they give the
Company Stockholder Approval or (ii) to withdraw or modify in a manner adverse
to Parent its recommendation to the Company's stockholders that they give the
Company Stockholder Approval, only (w) if after receiving an Acquisition
Proposal that constitutes a Superior Proposal (each as defined in Section 7.10
below), the Board of Directors of the Company determines in its good faith
judgment, after receiving the advice of outside legal counsel, that, in light of
this Superior Proposal, there is a reasonable possibility that the Board of
Directors would be in violation of its fiduciary duties under applicable law if
it failed to withdraw or modify its recommendation, (x) after the fifth business
day following delivery by the Company to Parent of written notice advising
Parent that the Board of Directors of the Company intends to resolve to so
withdraw or modify its recommendation absent modification of the terms and
conditions of this Agreement, (y) if, assuming this Agreement was amended to
reflect all adjustments to the terms and conditions hereof proposed by Parent
during such five business day period, such Acquisition Proposal would
nonetheless constitute a Superior Proposal (it being understood that Parent
shall be permitted to propose adjustments to the terms and conditions hereof,
notwithstanding anything contained in the Confidentiality Agreement (as defined
in Section 7.3)); and (z) if the Company has complied, in all material respects,
with its obligations set forth in Section 7.10; provided, however, that nothing
in this paragraph (b) shall be interpreted to excuse the Company from complying
with its obligations under paragraph (a) of this Section 5.2.
ARTICLE VI
COVENANTS OF PARENT
Parent agrees that:
SECTION 6.1 Conduct of Parent. From the date of this Agreement until the
Effective Time, Parent and its Subsidiaries shall, subject to the last sentence
of this Section 6.1 and except as set forth on the Parent Disclosure Schedules,
conduct their business in the ordinary course consistent with past practice and
shall use their reasonable best efforts to preserve intact their business
organizations and relationships with third parties. Without limiting the
generality of the foregoing and subject to the last sentence of this
Section 6.1 and except as set forth on the Parent Disclosure Schedules, with the
prior written consent of the Company (which shall not be unreasonably withheld)
or as contemplated by this Agreement or the Option Agreements, from the date of
this Agreement until the Effective Time:
(a) Parent will not, and will not permit any of its Subsidiaries to, adopt
or propose any change in its certificate of incorporation or by-laws, except as
contemplated by Sections 2.1 and 2.2, and except for such changes to increase
the number of authorized shares of Parent Common Stock to no more than 2 billion
shares and the number of authorized shares of Parent Preferred Stock to no more
than 40 million shares and to delete the provisions currently contained in such
certificate of incorporation setting forth the terms of series of Parent
Preferred Stock designated therein;
(b) Parent will not, and will not permit any of its Subsidiaries to, adopt
a plan or agreement of complete or partial liquidation, dissolution, merger,
consolidation, restructuring, recapitalization or other reorganization of Parent
or any of its Subsidiaries (other than transactions between direct and/or
indirect wholly owned Subsidiaries of Parent);
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(c) Parent will not, and will not permit any Subsidiary of Parent to,
issue, sell, transfer, pledge, dispose of or encumber any shares of, or
securities convertible into or exchangeable for, or options, warrants, calls,
commitments or rights of any kind to acquire, any shares of capital stock of any
class or series of Parent or any of its Subsidiaries, other than (i) issuances
of Parent Common Stock pursuant to the exercise of employee or director stock
options outstanding on the date of this Agreement or that are granted in
accordance with clause (ii) below, or (ii) additional options or stock-based
awards to acquire Parent Common Stock granted under the terms of any employee or
director stock option or compensation plan or arrangement of Parent as in effect
as of the of this Agreement in the ordinary course consistent with past
practice;
(d) Parent will not (i) split, combine, subdivide or reclassify its
outstanding shares of capital stock or (ii) declare, set aside or pay any
dividend or other distribution payable in cash, stock or property with respect
to its capital stock other than, subject to Sections 7.4 and 7.9, regular
quarterly cash dividends payable by Parent in respect of the shares of Parent
Common Stock consistent with past practice;
(e) Parent will not, and will not permit any Subsidiary of Parent to,
redeem, purchase or otherwise acquire directly or indirectly any of Parent's
capital stock, Parent Convertible Securities or Parent Subsidiary Convertible
Securities, except for repurchases, redemptions or acquisitions (x) required by
or in connection with the respective terms of any employee stock option plan or
compensation plan or arrangement of Parent, or (y) in accordance with any
dividend reinvestment plan as in effect as of the date of this Agreement in the
ordinary course of the operation of such plan consistent with past practice and,
in the case of each of (x) and (y) above, only to the extent consistent with
Section 7.4;
(f) Parent will not amend the terms (including the terms relating to
accelerating the vesting or lapse of repurchase rights or obligations) of any
employee or director stock options or other stock based awards;
(g) Parent will not, and will not permit any Subsidiary of Parent to, (i)
grant any severance or termination pay to (or amend any such existing
arrangement with) any director, officer or employee of Parent or any of its
Subsidiaries, (ii) enter into any employment, deferred compensation or other
similar agreement (or any amendment to any such existing agreement) with any
director, officer or employee of Parent or any of its Subsidiaries, (iii)
increase any benefits payable under any existing severance or termination pay
policies or employment agreements, (iv) increase (or amend the terms of) any
compensation, bonus or other benefits payable to directors, officers or
employees of Parent or any of its Subsidiaries or (v) permit any director,
officer or employee who is not already a party to an agreement or a participant
in a plan providing benefits upon or following a 'change in control' to become a
party to any such agreement or a participant in any such plan, in the case of
each of clauses (i) through (iv), other than in the ordinary course of business
consistent with past practice but subject to Sections 7.4 and 7.9 and, in the
case of the establishment of any retention and/or pay-to-stay plans or
individual severance arrangements that Parent reasonably believes to be
appropriate, after notice to the Company and Parent's good-faith effort to
obtain the Company's approval;
(h) Parent will not, and will not permit any of its Subsidiaries to,
acquire a material amount of assets or property of any other Person except in
the ordinary course of business consistent with past practice;
(i) Other than as contemplated by Section 7.1, Parent will not, and will
not permit any of its Subsidiaries to, sell, lease, license or otherwise dispose
of any material amount of assets or property except pursuant to existing
contracts or commitments and except in the ordinary course of business
consistent with past practice;
(j) except for any such change which is not material or which is required
by reason of a concurrent change in GAAP, Parent will not, and will not permit
any Subsidiary of Parent to, change any method of accounting or accounting
practice (other than any change for tax purposes) used by it;
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(k) Parent will not, and will not permit any Subsidiary of Parent to, enter
into any material joint venture, partnership or other similar arrangement;
(l) Parent will not, and will not permit any of its Subsidiaries to, take
any action that would make any representation or warranty of Parent hereunder
inaccurate in any material respect at, or as of any time prior to, the Effective
Time;
(m) Parent will not enter into any standstill agreement, or amend or waive
any provisions of, or grant any approval under, any standstill agreement;
provided that the Board of Directors of Parent may grant a waiver of provisions
of, or approval under, a standstill agreement with any Person solely to permit
such Person to make a Superior Proposal if the Board of Directors of Parent
determines in its good faith judgment, after receiving the advice of outside
legal counsel that, in light of the Superior Proposal, there is a reasonable
possibility that the Board of Directors would be in violation of its fiduciary
duties under applicable law if it failed to grant such waiver;
(n) Parent will not make or change any material Tax election, settle any
material audit or file any material amended Tax Returns, except in the ordinary
course of business, consistent with past practice; and
(o) Parent will not, and will not permit any of its Subsidiaries to, agree
or commit to do any of the foregoing.
Notwithstanding the foregoing but subject to Section 7.4, from the date hereof
until the Effective Time, Parent and its Subsidiaries may (x) make acquisitions
of property, assets or any business for cash, securities (including equity
securities) or other consideration, pursuant to a merger, consolidation,
reorganization or otherwise, so long as no one acquisition or series of related
acquisitions involves the payment of consideration having a fair market value in
excess of $1 billion and all acquisitions pursuant to this clause (x) do not
involve the payment of consideration having a fair market value in excess of $2
billion, in the aggregate, and (y) sell, transfer or otherwise dispose of assets
or property of Parent and its Subsidiaries so long as Parent and its
Subsidiaries do not sell, transfer or otherwise dispose of assets and property
pursuant to this clause (y) having a fair market value in excess of $1 billion,
in the aggregate.
SECTION 6.2 Obligations of Merger Subsidiary. Parent will take all action
necessary to cause Merger Subsidiary to perform its obligations under this
Agreement and to consummate the Merger on the terms and conditions set forth in
this Agreement.
SECTION 6.3 Director and Officer Liability.
(a) Parent shall indemnify and hold harmless, to the fullest extent
permitted under applicable law, the individuals who on or prior to the Effective
Time were officers, directors and employees of the Company or its Subsidiaries
(collectively, the 'Indemnitees') with respect to all acts or omissions by them
in their capacities as such or taken at the request of the Company or any of its
Subsidiaries at any time on or prior to the Effective Time. Following the
Effective Time, Parent shall cause the Surviving Corporation to honor all
indemnification obligations presently provided under the Company's certificate
of incorporation and by-laws in effect on the date hereof. Parent shall cause
the Surviving Corporation to honor all indemnification agreements with
Indemnitees (including under the Company's by-laws) in effect as of the date of
this Agreement in accordance with the terms thereof. The Company has disclosed
to Parent all such indemnification agreements prior to the date of this
Agreement.
(b) For six years after the Effective Time, Parent shall procure the
provision of officers' and directors' liability insurance in respect of acts or
omissions occurring prior to the Effective Time covering each such Person
currently covered by the Company's officers' and directors' liability insurance
policy on terms with respect to coverage and in amounts no less favorable than
those of such policy in effect on the date hereof; provided, that if the
aggregate annual premiums for such insurance at any time during such period
shall exceed 200% of the per annum rate of premium paid by the Company and its
Subsidiaries as of the date hereof for such insurance, then Parent shall, or
shall cause its Subsidiaries to, provide only such coverage as shall then be
available at an annual premium equal to 200% of such rate.
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(c) The obligations of Parent under this Section 6.3 shall not be
terminated or modified in such a manner as to adversely affect any Indemnitee to
whom this Section 6.3 applies without the consent of the affected Indemnitee (it
being expressly agreed that the Indemnitees to whom this Section 6.3 applies
shall be third party beneficiaries of this Section 6.3).
SECTION 6.4 Parent Stockholder Meeting; Form S-4.
(a) Parent shall cause a meeting of its stockholders (the 'Parent
Stockholder Meeting') to be duly called and noticed, and, to the extent
practicable, held on the same day as the Company Stockholder Meeting for the
purpose of obtaining the Parent Stockholders Approval. In connection with the
Parent Stockholder Meeting, Parent (x) will promptly prepare and file with the
Commission, will use its reasonable best efforts to have cleared by the
Commission and will thereafter mail to its stockholders as promptly as
practicable, the Parent Proxy Statement and all other proxy materials for such
meeting, (y) will use its reasonable best efforts, subject to paragraph (b) of
this Section 6.4, to obtain the Parent Stockholder Approval and (z) will
otherwise comply with all legal requirements applicable to the Parent
Stockholder Meeting. Subject to the terms and conditions of this Agreement,
Parent shall prepare and file with the Commission under the Securities Act the
Form S-4, and shall use its reasonable best efforts to cause the Form S-4 to be
declared effective by the Commission as promptly as practicable. Parent shall
promptly take any action required to be taken under foreign or state securities
or Blue Sky laws in connection with the issuance of Parent Common Stock in
connection with the Merger.
(b) Except as provided in the next sentence, the Board of Directors of
Parent shall recommend approval of the Common Stock Issuance. The Board of
Directors of Parent shall be permitted (i) not to recommend to Parent's
stockholders that they give the Parent Stockholder Approval or (ii) to withdraw
or modify in a manner adverse to the Company its recommendation to the Parent's
stockholders that they give the Parent Stockholder Approval, only (w) if after
receiving an Acquisition Proposal that constitutes a Superior Proposal, the
Board of Directors of Parent determines in its good faith judgment, after
receiving the advice of outside legal counsel, that, in light of this Superior
Proposal, there is a reasonable possibility that the Board of Directors would be
in violation of its fiduciary duties under applicable law if it failed to
withdraw or modify its recommendation, (x) after the fifth business day
following delivery by Parent to the Company of written notice advising the
Company that the Board of Directors of Parent intends to resolve to so withdraw
or modify its recommendation absent modification to the terms and conditions of
this Agreement (y) if, assuming this Agreement was amended to reflect all
adjustments to the terms and conditions hereof proposed by the Company during
such five business day period, such Acquisition Proposal would nonetheless
constitute a Superior Proposal (it being understood that the Company shall be
permitted to propose adjustments to the terms and conditions hereof,
notwithstanding anything contained in the Confidentiality Agreement); and (z) if
Parent has complied, in all material respects, with it obligations set forth in
Section 7.10; provided, however, that nothing in this paragraph (b) shall be
interpreted to excuse Parent from complying with its obligations contained in
paragraph (a) of this Section 6.4.
SECTION 6.5 Stock Exchange Listing. Parent shall use its reasonable best
efforts to cause the shares of Parent Common Stock to be issued in connection
with the Merger to be approved for listing on the NYSE, subject to official
notice of issuance.
SECTION 6.6 Employee Benefits.
(a) From and after the Effective Time, Parent shall cause the Surviving
Corporation to honor in accordance with their terms all benefits and obligations
under the Company Employee Plans, each as in effect on the date of this
Agreement (or as amended as contemplated hereby or with the prior written
consent of Parent). Subject to the previous sentence, no provision of this
Agreement shall be construed as a limitation on the right of Parent or the
Surviving Corporation to amend or terminate any Company Employee Plan to the
extent permitted by the terms thereof (as in effect on the date hereof) and
applicable law, and no provision of this Agreement shall be construed to create
a right in any employee or beneficiary of such employee under a Company Employee
Plan that such employee or beneficiary would not otherwise have under the terms
of that Company Employee Plan. Parent and the Company hereby agree that (i)
except as
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contemplated by clause (i) of Section 6.6(e), approval of the Merger by the
Company's shareholders shall constitute a 'Change in Control' for purposes of
all Company Employee Plans and other employee plans or arrangements of the
Company which contain 'change in control' provisions, pursuant to the terms of
such plans in effect on the date hereof, and (ii) neither the execution of this
Agreement nor the consummation of the transactions contemplated hereby shall
constitute an 'Acceleration Event' or a 'Change in Control' for purposes of any
Parent Employee Plan or other employee plan or arrangement of Parent which
contains an 'acceleration event' or 'change in control' provision, pursuant to
the terms of such plan in effect on the date hereof.
(b) Following the Effective Time, Parent shall provide to individuals who
are employed by the Company and its Subsidiaries as of the Effective Time
('Affected Employees'), for so long as such Affected Employees remain so
employed, employee benefits (including salary, incentive compensation and
stock-based benefits) which, in the aggregate, are substantially equivalent to
the benefits provided, at Parent's option, either (i) pursuant to the Company's
or its Subsidiaries' employee benefit plans, programs, policies and arrangements
immediately prior to the Effective Time, or (ii) pursuant to employee benefit
plans, programs, policies or arrangements maintained by Parent or any Subsidiary
of Parent to employees of Parent and its Subsidiaries in positions comparable to
positions held by Affected Employees with Parent or its Subsidiaries from time
to time after the Effective Time; provided, however, that neither of the
foregoing clauses (i) or (ii) shall be construed to limit Parent's flexibility
in determining the design of any benefit plan or program.
(c) Parent will, or will cause the Surviving Corporation to, give Affected
Employees full credit for purposes of eligibility, vesting, benefit accrual and
determination of the level of benefits under any employee benefit plans or
arrangements maintained by Parent or any Subsidiary of Parent for such Affected
Employees' service with the Company or any Subsidiary of the Company to the same
extent recognized by the Company immediately prior to the Effective Time;
provided, however, that (i) in the case of a qualified or non-qualified defined
benefit plan of Parent or any of its Subsidiaries, Parent need not recognize the
pre-Effective Time service of an Affected Employee with the Company or any of
its Subsidiaries for benefit accrual purposes so long as the failure to
recognize such service does not adversely affect the accrued benefits of such
Affected Employee as of the Effective Time under the qualified and non-qualified
defined benefit plans of the Company or any of its Subsidiaries in which such
Affected Employee then participated, and (ii) in the case of a qualified or
non-qualified defined contribution plan of Parent or any of its Subsidiaries,
Parent shall be required only to recognize pre-Effective Time participation of
an Affected Employee in a qualified or non-qualified defined contribution plan
of the Company or any of its Subsidiaries for purposes of determining
eligibility for matching or other contributions and the level of such
contributions.
(d) Prior to the date hereof, the Company has taken or has caused to be
taken all action necessary such that neither the execution of this Agreement nor
any of the transactions contemplated in this Agreement (including but not
limited to approval of the Merger by the stockholders of the Company) shall
constitute an event that requires the funding of any rabbi trust or similar
trust; provided, however, that any such trust may be required to be funded
following the Effective Time should any participant in any plan covered by any
such trust fail, promptly after written notice has been given Parent, to be paid
any benefit required to be paid under such covered plan.
(e) Prior to approval of the Merger by the stockholders of the Company, (i)
the Company shall take or shall cause to be taken all action (including but not
limited to the adoption of amendments to applicable plans and trusts) necessary
such that neither approval of the Merger by the stockholders of the Company nor
consummation of the transactions contemplated hereby shall constitute a 'Change
in Control' for purposes of Section 11.4 of the Company's Retirement Benefit
Plan (the 'RBP') or any similar provision in any other defined benefit plan
maintained by the Company or any of its Subsidiaries, in any case as in effect
on the date hereof (provided, however, that in the event the RBP or such other
plan is terminated within three years following
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the approval of the Merger by the shareholders of the Company or if, within such
three-year period, a tax-qualified plan of Parent or any of its Subsidiaries
with which the RBP or such other plan has been merged or consolidated or to
which any assets or liabilities of the RBP or such other plan has been
transferred (a 'Successor Plan') is terminated, the provisions of Section 11.4
of the RBP or the applicable provision of such other plan shall be applied to
the RBP or such other plan or any Successor Plan, as the case may be, as if such
approval of the Merger had constituted a 'Change in Control'), and (ii) the
Company may take or cause to be taken such action as may be necessary such that
participants in the Company's Corporate Executive Compensation Plan,
Supplemental Defined Benefit Retirement Plan and other plans providing for the
deferral of cash payments or the accelerated payment of lump sum benefits may
continue to defer the payment of awards or benefits thereunder until termination
of employment following the Effective Time or otherwise in accordance with the
terms of such plan.
(f) For purposes of the Company's Tier 1-A severance agreements, the amount
of the 'on-plan' bonus under the Corporate Executive Compensation Plan referred
to under such an agreement for each executive who is a party thereto has been
disclosed to Parent prior to the date hereof.
(g) Parent will, or will cause the Surviving Corporation to, (i) waive all
limitations as to preexisting conditions, exclusions and waiting periods with
respect to participation and coverage requirements applicable to the Affected
Employees under any welfare benefit plans that such employees may be eligible to
participate in after the Effective Time, other than limitations or waiting
periods that are already in effect with respect to such employees and that have
not been satisfied as of the Effective Time under any welfare plan maintained
for the Affected Employees immediately prior to the Effective Time, and (ii)
provide each Affected Employee with credit for any co-payments and deductibles
paid prior to the Effective Time in satisfying any applicable deductible or
out-of-pocket requirements under any welfare plans that such employees are
eligible to participate in after the Effective Time.
SECTION 6.7 Employment Agreement. At the Effective Time, Parent shall enter
into an agreement with Michael R. Bonsignore substantially in the form of
Exhibit B attached hereto.
ARTICLE VII
COVENANTS OF PARENT AND THE COMPANY
The parties hereto agree that:
SECTION 7.1 Reasonable Best Efforts.
(a) Subject to Sections 7.1(b) and 7.1(c), the Company and Parent shall
each cooperate with the other and use (and shall cause their respective
Subsidiaries to use) their respective reasonable best efforts to promptly (i)
take or cause to be taken all necessary actions, and do or cause to be done all
things, necessary, proper or advisable under this Agreement and applicable laws
to consummate and make effective the Merger and the other transactions
contemplated by this Agreement as soon as practicable, including, without
limitation, preparing and filing promptly and fully all documentation to effect
all necessary filings, notices, petitions, statements, registrations,
submissions of information, applications and other documents and (ii) obtain all
approvals, consents, registrations, permits, authorizations and other
confirmations required to be obtained from any third party necessary, proper or
advisable to consummate the Merger and the other transactions contemplated by
this Agreement. Subject to applicable laws relating to the exchange of
information, the Company and Parent shall have the right to review in advance,
and to the extent practicable each will consult the other on, all the
information relating to the Company and its Subsidiaries or Parent and its
Subsidiaries, as the case may be, that appears in any filing made with, or
written materials submitted to, any third party and/or any governmental
authority in connection with the Merger and the other transactions contemplated
by this Agreement.
(b) Without limiting Section 7.1(a), Parent and the Company shall, subject
to Section 7.1(c):
(i) each use its reasonable best efforts to avoid the entry of, or to
have vacated or terminated, any decree, order, or judgment that would
restrain, prevent or delay the Closing,
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on or before the End Date (as defined in Section 9.1(b)(i)), including
without limitation defending through litigation on the merits any claim
asserted in any court by any Person; and
(ii) each use its reasonable best efforts to avoid or eliminate each
and every impediment under any antitrust, competition or trade regulation
law that may be asserted by any governmental authority with respect to the
Merger so as to enable the Closing to occur as soon as reasonably possible
(and in any event no later than the End Date), including, without
limitation (x) proposing, negotiating, committing to and effecting, by
consent decree, hold separate order, or otherwise, the sale, divestiture or
disposition of such assets or businesses of Parent or the Company (or any
of their respective Subsidiaries) and (y) otherwise taking or committing to
take actions that limit its or its Subsidiaries' freedom of action with
respect to, or its ability to retain, one or more of its or its
Subsidiaries' businesses, product lines or assets, in each case as may be
required in order to avoid the entry of, or to effect the dissolution of,
any injunction, temporary restraining order, or other order in any suit or
proceeding, which would otherwise have the effect of preventing or
materially delaying the Closing. At the request of Parent, the Company
shall agree to divest, sell, dispose or, hold separate, or otherwise take
or commit to take any action that limits its freedom of action with respect
to, its or its Subsidiaries' ability to retain, any of the businesses,
product lines or assets of the Company or any of its Subsidiaries, provided
that any such action is conditioned upon the consummation of the Merger and
such action when taken together with any similar action by Parent would not
have a Material Adverse Effect on Parent at and after the Effective Time.
The Company agrees and acknowledges that, notwithstanding anything to the
contrary in this Section 7.1, in connection with any filing or submission
required, action to be taken or commitment to be made by Parent, the
Company or any of their respective Subsidiaries to consummate the Merger or
other transactions contemplated in this Agreement, neither the Company nor
any of its Subsidiaries shall, without Parent's prior written consent
(which shall not be unreasonably withheld), sell, divest or dispose of any
assets, commit to any sale, divestiture or disposal of assets or businesses
of the Company and its Subsidiaries or take any other action or commit to
take any action that would limit the Company's, Parent's or any of their
Subsidiaries' freedom of action with respect to, or their ability to retain
any of, their businesses, product lines or assets. Parent also agrees and
acknowledges that notwithstanding anything to the contrary in this
Section 7.1, in connection with any filing or submission required, action
to be taken or commitment to be made by Parent, the Company or any of their
respective Subsidiaries to consummate the Merger or other transactions
contemplated in this Agreement, neither Parent nor any of its Subsidiaries
shall, without the Company's prior written consent (which shall not be
unreasonably withheld), sell, divest or dispose of any assets, commit to
any sale, divestiture or disposal of assets or businesses of Parent and its
Subsidiaries or take any other action or commit to take any action that
would limit the Company's, Parent's or any of their Subsidiaries' freedom
of action with respect to, or their ability to retain any of, their
businesses, product lines or assets.
(c) The provisions of this Section 7.1 shall not be construed to require
Parent to agree to the sale, transfer, divestiture or other disposition of any
businesses, product lines or assets of Parent, the Company or any of their
respective subsidiaries if the action would, or would reasonably be expected to,
have a Material Adverse Effect on Parent at and after the Effective Time. The
provisions of this Section 7.1 shall not be construed to require the Company to
agree to the sale, transfer, divestiture or other disposition of any businesses,
product lines or assets of the Company or any of its subsidiaries unless any
such action, if such action would reasonably be expected to have a Material
Adverse Effect on the Company, is subject to consummation of the Merger and such
action would not have a Material Adverse Effect on Parent at and after the
Effective Time. Any actions taken by Parent or the Company to comply with their
respective obligations under Section 7.1(b), including a decision by Parent or
the Company to waive any of the provisions of Section 7.1(b), shall be deemed
not to have or be reasonably expected not to have a Material Adverse Effect on
Parent at and after the Effective Time.
SECTION 7.2 Certain Filings. The Company and Parent shall cooperate with
one another (a) in connection with the preparation of the Company Proxy
Statement, the Parent Proxy Statement
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and the Form S-4, (b) in determining whether any action by or in respect of, or
filing with, any governmental body, agency or official, or authority is
required, or any actions, consents, approvals or waivers are required to be
obtained from parties to any material contracts, in connection with the
consummation of the transactions contemplated by this Agreement and (c) in
seeking any such actions, consents, approvals or waivers or making any such
filings, furnishing information required in connection therewith or with the
Company Proxy Statement, the Parent Proxy Statement or the Form S-4 and seeking
timely to obtain any such actions, consents, approvals or waivers.
SECTION 7.3 Access to Information. From the date hereof until the Effective
Time, to the extent permitted by applicable law, the Company and Parent will
upon reasonable request give the other party, its counsel, financial advisors,
auditors and other authorized representatives access to the offices, properties,
books and records of such party and its Subsidiaries during normal business
hours, furnish to the other party, its counsel, financial advisors, auditors and
other authorized representatives such financial and operating data and other
information as such Persons may reasonably request and will instruct its own
employees, counsel and financial advisors to cooperate with the other party in
its investigation of the business of the Company or Parent, as the case may be;
provided that no investigation of the other party's business shall affect any
representation or warranty given by either party hereunder, and neither party
shall be required to provide any such information if the provision of such
information may cause a waiver of an attorney-client privilege. All information
obtained by Parent or the Company pursuant to this Section 7.3 shall be kept
confidential in accordance with, and shall otherwise be subject to the terms of,
the Confidentiality Agreement dated May 5, 1999 between Parent and the Company
(the 'Confidentiality Agreement').
SECTION 7.4 Tax and Accounting Treatment.
(a) Neither Parent nor the Company shall, nor shall they permit their
Subsidiaries to, take any action or fail to take any action which action or
failure to act would prevent, or would be reasonably likely to prevent, the
Merger from qualifying (a) for 'pooling of interests' accounting treatment under
GAAP and the rules and regulations of the Commission or (b) as a 368
Reorganization.
(b) Parent shall use its reasonable best efforts to provide to Fried,
Frank, Harris, Shriver and Jacobson and Skadden, Arps, Slate, Meagher and Flom
LLP a certificate substantially in the form agreed to by the Company and Parent
prior to the date of this Agreement. The Company shall use its reasonable best
efforts to provide to Fried, Frank, Harris, Shriver and Jacobson and Skadden,
Arps, Slate, Meagher and Flom LLP a certificate substantially in the form agreed
to by the Company and Parent prior to the date of this Agreement.
SECTION 7.5 Public Announcements. Parent and the Company will consult with
each other before issuing any press release or making any public statement with
respect to this Agreement and the transactions contemplated hereby and shall not
issue any press release or make any public statement without the prior consent
of the other party, which consent shall not be unreasonably withheld.
Notwithstanding the foregoing, any such press release or public statement as may
be required by applicable law or any listing agreement with any national
securities exchange may be issued prior to such consultation, if the party
making the release or statement has used its reasonable efforts to consult with
the other party.
SECTION 7.6 Further Assurances. At and after the Effective Time, the
officers and directors of the Surviving Corporation will be authorized to
execute and deliver, in the name and on behalf of the Company or Merger
Subsidiary, any deeds, bills of sale, assignments or assurances and to take any
other actions and do any other things, in the name and on behalf of the Company
or Merger Subsidiary, reasonably necessary to vest, perfect or confirm of record
or otherwise in the Surviving Corporation any and all right, title and interest
in, to and under any of the rights, properties or assets of the Company acquired
or to be acquired by the Surviving Corporation as a result of, or in connection
with, the Merger.
SECTION 7.7 Notices of Certain Events.
(a) Each of the Company and Parent shall promptly notify the other party
of:
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(i) any notice or other communication from any Person alleging that
the consent of such Person is or may be required in connection with the
transactions contemplated by this Agreement if the failure of the Company
or Parent, as the case may be, to obtain such consent would be material to
the Company or Parent as applicable; and
(ii) any notice or other communication from any governmental or
regulatory agency or authority in connection with the transactions
contemplated by this Agreement.
(b) The Company and Parent shall promptly notify the other party of any
actions, suits, claims, investigations or proceedings commenced or, to the best
of its knowledge threatened against, relating to or involving or otherwise
affecting such party or any of its Subsidiaries which relate to the consummation
of the transactions contemplated by this Agreement.
SECTION 7.8 Affiliates.
(a) Not less than 30 days prior to the Effective Time, each of Parent and
the Company (i) shall have delivered to the other party a letter identifying all
Persons who, in the opinion of the party delivering the letter, may be, as of
the date of the Company Stockholder Meeting or Parent Stockholder Meeting, as
applicable, its 'affiliates' for purposes of SEC Accounting Series Releases 130
and 135 and/or, in the case of the Company, for purposes of Rule 145 under the
Securities Act, and (ii) shall use its reasonable best efforts to cause each
Person who is identified as an 'affiliate' of it in such letter to deliver, as
promptly as practicable but in no event later than 20 days prior to the Closing
(or after such later date as the Parent and the Company may agree), a signed
agreement to Parent in the case of affiliates of Parent, substantially in the
form attached as Exhibit C, and in the case of affiliates of the Company,
substantially in the form attached as Exhibit D. Each of Parent and the Company
shall notify the other party from time to time after the delivery of the letter
described in Section 7.8(a)(i) of any Person not identified on such letter who
then is, or may be, such an 'affiliate' and use its reasonable best efforts to
cause each additional Person who is identified as an 'affiliate' to execute a
signed agreement as set forth in this Section 7.8(a).
(b) Shares of Parent Common Stock and shares of Company Common Stock
beneficially owned by each such 'affiliate' of Parent or Company who has not
provided a signed agreement in accordance with Section 7.8(a) shall not be
transferable during any period prior to and after the Effective Time if, as a
result of this transfer during any such period, taking into account the nature,
extent and timing of this transfer and similar transfers by all other
'affiliates' of Parent and the Company, this transfer will, in the reasonable
judgment of accountants of Parent, interfere with, or prevent the Merger from
being accounted for, as a 'pooling of interests' under GAAP and/or the rules and
regulations of the SEC. Neither Parent nor the Company shall register, or allow
its transfer agent to register, on its books any transfer of any shares of
Parent Common Stock or Company Common Stock of any affiliate of Parent or the
Company who has not provided a signed agreement in accordance with
Section 7.8(a). The restrictions on the transferability of shares held by
Persons who execute an agreement pursuant to Section 7.8(a) shall be as provided
in those agreements.
SECTION 7.9 Payment of Dividends. From the date of the Agreement until the
Effective Time, Parent and the Company will coordinate with each other regarding
the declaration of dividends in respect of the shares of Parent Common Stock and
the shares of Company Common Stock and the record dates and payment dates
relating thereto, it being the intention of the parties that holders of shares
of Company Common Stock will not receive two dividends, or fail to receive one
dividend, for any single calendar quarter with respect to their shares of
Company Common Stock and the shares of Parent Common Stock any holder of shares
of Company Common Stock receives in exchange therefor in connection with the
Merger.
SECTION 7.10 No Solicitation.
(a) Each of Parent and the Company and their respective Subsidiaries will
not, and will use their reasonable best efforts to cause their respective
officers, directors, employees, investment bankers, consultants, attorneys,
accountants, agents and other representatives not to, directly or indirectly,
take any action to solicit, initiate, encourage or facilitate the making of any
Acquisition
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Proposal (including without limitation, in the case of the Company, by amending,
or granting any waiver under, the Company Rights Agreement) or any inquiry with
respect thereto or engage in substantive discussions or negotiations with any
Person with respect thereto, or in connection with any Acquisition Proposal or
potential Acquisition Proposal, disclose any nonpublic information relating to
it or its Subsidiaries or afford access to the properties, books or records of
it or its Subsidiaries to, any Person that has made, or to such party's
knowledge, is considering making, any Acquisition Proposal; provided, however,
that, in the event that (x) Parent or the Company shall receive a Superior
Proposal that was not solicited by it and did not otherwise result from a breach
of this Section 7.10, (y) prior to receipt of the Parent Stockholder Approval
(in the case of Parent) or the Company Stockholder Approval (in the case of the
Company), the Board of Directors of either Parent or the Company, as applicable,
determines in its good faith judgment, after receiving the advice of outside
counsel that, in light of this Superior Proposal, if Parent or the Company, as
applicable, fails to participate in such discussions or negotiations with, or
provide such information to, the party making the Superior Proposal, there is a
reasonable possibility that such Board of Directors would be in violation of its
fiduciary duties under applicable law, and (z) after giving the other party two
business days' notice of its intention to do so, the party receiving such
Superior Proposal may (i) furnish information with respect to it and its
subsidiaries to the Person making such Superior Proposal pursuant to a customary
confidentiality agreement containing terms generally no less restrictive than
the terms contained in the Confidentiality Agreement (but not containing any
exclusivity provision and permitting the Person to submit to the Board of
Directors of the Company or Parent, as applicable, Acquisition Proposals with
respect to the Company or Parent, as applicable, provided that any such
Acquisition Proposal is subject to the approval of the Board of Directors of the
Company or Parent, as applicable, (which approval may be granted solely in
accordance with the terms of Sections 5.1(m) or 6.1(m) hereof)), provided that a
copy of all such written information is simultaneously provided to the other
party hereto and (ii) participate in discussions and negotiations regarding such
Superior Proposal.
(b) Nothing contained in this Agreement shall prevent the Board of
Directors of Parent or the Company from complying with Rule 14e-2 under the
Exchange Act with regard to an Acquisition Proposal; provided that the Board of
Directors of that party shall not recommend that the stockholders of that party
tender their shares in connection with a tender offer except to the extent,
after receiving a Superior Proposal, the Board of Directors of that party
determines in its good faith judgment, after receiving the advice of outside
legal counsel, that, in light of the Superior Proposal, there is a reasonable
possibility that the Board of Directors would be in violation of its fiduciary
duties under applicable law if it fails to make such a recommendation.
(c) Any party receiving an Acquisition Proposal will (A) promptly (and in
no event later than 48 hours after receipt of any Acquisition Proposal) notify
(which notice shall be provided orally and in writing and shall identify the
Person making the Acquisition Proposal and set forth the material terms thereof)
the other party to this Agreement after receipt of any Acquisition Proposal, or
any request for nonpublic information relating to such party or any Subsidiary
of such party or for access to the properties, books or records of such party or
any Subsidiary of such party by any Person that has made, or to such party's
knowledge may be considering making, an Acquisition Proposal, and (B) will keep
the other party to this Agreement reasonably informed of any changes to the
material terms of any such Acquisition Proposal or request. Each of Parent and
the Company shall, and shall cause their respective Subsidiaries to, immediately
cease and cause to be terminated, and use reasonable best efforts to cause its
officers, directors, employees, investment bankers, consultants, attorneys,
accountants, agents and other representatives to, immediately cease and cause to
be terminated, all discussions and negotiations, if any, that have taken place
prior to the date hereof with any Persons with respect to any Acquisition
Proposal.
For purposes of this Agreement, 'Acquisition Proposal' means any written
offer or proposal for, or any written indication of interest in, any (i) direct
or indirect acquisition or purchase of a business or asset of Parent or the
Company or any of their respective Subsidiaries that constitutes 20% or more of
the net revenues, net income or assets of such party and its Subsidiaries, taken
as a whole; (ii) direct or indirect acquisition or purchase of 20% or more of
any class of equity
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securities of Parent or the Company or any of their respective Subsidiaries
whose business constitutes 20% or more of the net revenues, net income or assets
of such party and its Subsidiaries, taken as a whole; (iii) tender offer or
exchange offer that, if consummated, would result in any Person beneficially
owning 20% or more of any class of equity securities of Parent or the Company or
any of their respective Subsidiaries whose business constitutes 20% or more the
net revenues, net income or assets of such party and its Subsidiaries, taken as
a whole; or (iv) merger, consolidation, business combination, recapitalization,
liquidation, dissolution or similar transaction involving Parent or the Company
or any of their respective Subsidiaries whose business constitutes 20% or more
of the net revenue, net income or assets of such party and its Subsidiaries,
taken as a whole, other than the transactions contemplated by this Agreement.
For purposes of this Agreement, 'Superior Proposal' means any bona fide written
Acquisition Proposal for or in respect of all of the outstanding shares of
Company Common Stock, or Parent Common Stock, as applicable, (i) on terms that
the Board of Directors of Parent or the Company, as applicable, determines in
its good faith judgment (after consultation with a financial advisor of
nationally recognized reputation and taking into account all the terms and
conditions of the Acquisition Proposal deemed relevant by such Board of
Directors, including any break-up fees, expense reimbursement provisions,
conditions to consummation, and the ability of the party making such proposal to
obtain financing for such Acquisition Proposal) are more favorable (other than
in immaterial respects) from a financial point of view to its stockholders than
the Merger; and (ii) that constitutes a transaction that, in such Board of
Directors' judgment, is reasonably likely to be consummated on the terms set
forth, taking into account all legal, financial, regulatory and other aspects of
such proposal.
(d) Nothing contained in this Agreement shall prohibit a deferral of the
distribution of rights issued pursuant to the Company Rights Agreement following
the commencement of a tender offer or an exchange offer for Company Common
Stock.
(e) Each of the Company and Parent agrees that it will take the necessary
steps promptly to inform its officers, directors, investment bankers,
consultants, attorneys, accountants, agents and other representatives of the
obligations undertaken in this Section 7.10.
SECTION 7.11 Letters from Accountants.
(a) Parent shall use reasonable best efforts to cause to be delivered to
Parent and the Company two letters from PricewaterhouseCoopers LLP, one dated no
earlier than three business days prior to the date on which the Form S-4 shall
become effective and one dated no earlier than three business days prior to the
Closing Date, each addressed to the Boards of Directors of Parent and the
Company, in form reasonably satisfactory to the Company and customary in scope
for comfort letters delivered by independent public accountants in connection
with registration statements similar to the Form S-4.
(b) Parent shall use reasonable best efforts to cause to be delivered to
Parent and the Company a letter from PricewaterhouseCoopers LLP, dated as of the
Closing Date, addressed to the Boards of Directors of Parent and the Company,
stating that PricewaterhouseCoopers LLP concurs with Parent's management's
conclusion that accounting for the Merger as a 'pooling of interests' under
Opinion No. 16 (Business Combination) of the Accounting Principles Board of the
American Institute of Certified Public Accountants and the rules and regulations
of the Commission is appropriate if the Merger is closed and consummated in
accordance with the terms hereof.
(c) The Company shall use reasonable best efforts to cause to be delivered
to the Company and Parent two letters from Deloitte & Touche LLP, one dated no
earlier than three business days prior to the date on which the Form S-4 shall
become effective and one dated no earlier than three business days prior to the
Closing Date, each addressed to the Boards of Directors of the Company and
Parent, in form reasonably satisfactory to Parent and customary in scope for
comfort letters delivered by independent public accountants in connection with
registration statements similar to the Form S-4.
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(d) The Company shall use reasonable best efforts to cause to be delivered
to Parent a letter from Deloitte & Touche LLP, dated as of the Closing Date,
addressed to the Boards of Directors of the Company and Parent, stating that
Deloitte & Touche LLP concurs with the Company's management's conclusion that
the Company is eligible to participate in a transaction accounted for as a
'pooling of interests' under Opinion No. 16 (Business Combination) of the
Accounting Principles Board of the American Institute of Certified Public
Accountants and the rules and regulations of the Commission.
SECTION 7.12 Takeover Statutes. If any anti-takeover or similar statute or
regulation is or may become applicable to the transactions contemplated hereby,
each of the parties and its Board of Directors shall grant such approvals and
take all such actions as are legally permissible so that the transactions
contemplated hereby may be consummated as promptly as practicable on the terms
contemplated hereby and otherwise act to eliminate or minimize the effects of
any such statute or regulation on the transactions contemplated hereby.
SECTION 7.13 Headquarters.
(a) After the Effective Time, the headquarters of Parent shall continue to
be located in Morristown, N.J.
(b) Both Parent and the Company acknowledge the long-standing, mutually
beneficial relationship between the Company and the Greater Twin City community.
In recognition of this, Parent and the Company hereby confirm their intention to
maintain this relationship subsequent to the Effective Time, including, by
continuing, following the Effective Time, to provide funding to The Honeywell
Foundation and to otherwise maintain the Company's charitable and communal
endeavors in the Twin City community, in either instance at levels at least as
great as the Company provided or maintained prior to the Effective Time. Parent
and the Company also confirm their intention, following the Effective Time, to
explore opportunities to minimize the effects, if any, on the local communities
served by the Company that the provisions of Section 7.13(a) may have.
SECTION 7.14 Integration. Prior to the Effective Time, Parent and the
Company shall appoint an integration team (the 'Integration Team') half the
members of which shall be persons designated by Parent and half the members of
which shall be persons designated by the Company. The Integration Team shall
have two co-chairpersons, one designated by Parent and one designated by the
Company. Prior to the Effective Time, the Integration Team shall report to the
persons contemplated by Section 2.2(c) to constitute the Executive Office as of
the Effective Time. As of and after the Effective Time, the Integration Team
shall report to the Executive Office.
SECTION 7.15 Transfer Statutes. Each of Parent and the Company agrees to
use its commercially reasonable efforts to comply promptly with all requirements
of the New Jersey, Connecticut and other state property transfer statutes to the
extent applicable to the transactions contemplated hereby, and to take all
actions necessary to cause the transactions contemplated hereby to be effected
in compliance with such statutes. Parent and the Company agree that they will
consult with each other to determine what, if any, actions must be taken prior
to or after the Effective time to ensure compliance with such statutes. Each of
Parent and the Company agrees to provide the other with any documents to be
submitted to the relevant state agencies prior to submission. For purposes of
this section, the New Jersey and Connecticut Property Transfer Statutes means
the New Jersey Industrial Site Recovery Act, 1993 N.J. Laws 139, and the
Connecticut Transfer Act, Conn. Gen. Stat. Ann. 'SS'22a.-134(b).
SECTION 7.16 Section 16(b). Parent and the Company shall take all such
steps reasonably necessary to cause the transactions contemplated hereby and any
other dispositions of equity securities of the Company (including derivative
securities) or acquisitions of Parent equity securities (including derivative
securities) in connection with this Agreement by each individual who (a) is a
director or officer of the Company or (b) at the Effective Time, will become a
director or officer of Parent, to be exempt under Rule 16b-3 promulgated under
the Exchange Act.
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ARTICLE VIII
CONDITIONS TO THE MERGER
SECTION 8.1 Conditions to the Obligations of Each Party. The obligations of
the Company, Parent and Merger Subsidiary to consummate the Merger are subject
to the satisfaction (or, to the extent legally permissible, waiver) of the
following conditions:
(a) this Agreement and the Merger shall have been approved and adopted by
the stockholders of the Company in accordance with Delaware Law;
(b) the Common Stock Issuance shall have been approved by the stockholders
of Parent in accordance with the rules and regulations of the NYSE;
(c) any applicable waiting period (including any extension thereof) under
the HSR Act relating to the Merger shall have expired or been terminated;
(d) the approval by the European Commission of the transactions
contemplated by this Agreement shall have been obtained pursuant to the EC
Merger Regulation;
(e) no provision of any applicable law or regulation and no judgment,
injunction, order or decree shall prohibit or enjoin the consummation of the
Merger;
(f) the Form S-4 shall have been declared effective under the Securities
Act and no stop order suspending the effectiveness of the Form S-4 shall be in
effect and no proceedings for such purpose shall be pending before or threatened
by the SEC;
(g) the shares of Parent Common Stock to be issued in the Merger shall have
been approved for listing on the NYSE, subject to official notice of issuance;
(h) the letters of PricewaterhouseCoopers LLP and Deloitte & Touche LLP
contemplated by paragraphs (b) and (d) of Section 7.11 shall have been delivered
as contemplated thereby; and
(i) (i) all required approvals or consents of any governmental authority
(whether domestic, foreign or supranational) in connection with the Merger and
the consummation of the other transactions contemplated hereby shall have been
obtained (and all relevant statutory, regulatory or other governmental waiting
periods, whether domestic, foreign or supranational, shall have expired) unless
the failure to receive any such approval or consent would not, and would not be
reasonably expected to, have a Material Adverse Effect on Parent at or after the
Effective Time and (ii) all such approvals and consents which have been obtained
shall be on terms that would not, and would not reasonably be expected to, have
a Material Adverse Effect on Parent at or after the Effective Time.
SECTION 8.2 Conditions to the Obligations of Parent and Merger Subsidiary.
The obligations of Parent and Merger Subsidiary to consummate the Merger are
subject to the satisfaction (or, to the extent legally permissible, waiver) of
the following further conditions:
(a) (i) the Company shall have performed in all material respects all of
its obligations hereunder required to be performed by it at or prior to the
Effective Time, (ii) the representations and warranties of the Company contained
in this Agreement and in any certificate or other writing delivered by the
Company pursuant hereto shall be true and correct (without giving effect to any
limitation as to 'materiality' or 'Material Adverse Effect' set forth therein)
at and as of the Effective Time as if made at and as of such time (except to the
extent expressly made as of an earlier date, in which case as of such earlier
date), except where the failure of such representations and warranties to be
true and correct (without giving effect to any limitation as to 'materiality' or
'Material Adverse Effect' set forth therein) would not, individually or in the
aggregate, have a Material Adverse Effect on the Company, and (iii) Parent shall
have received a certificate signed by an executive officer of the Company to the
foregoing effect;
(b) there shall not be instituted or pending any action or proceeding by
any governmental authority (whether domestic, foreign or supranational) before
any court or governmental authority or agency, domestic, foreign or
supranational, seeking to (i) restrain, prohibit or otherwise interfere with the
ownership or operation by Parent or any Subsidiary of Parent of all or any
portion of the business of the Company or any of its Subsidiaries or of Parent
or any of its Subsidiaries or to
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compel Parent or any Subsidiary of Parent to dispose of or hold separate all or
any portion of the business or assets of the Company or any of its Subsidiaries
or of Parent or any of its Subsidiaries; (ii) to impose or confirm limitations
on the ability of Parent or any Subsidiary of Parent effectively to exercise
full rights of ownership of the shares of Company Common Stock (or shares of
stock of the Surviving Corporation) including, without limitation, the right to
vote any shares of Company Common Stock (or shares of stock of the Surviving
Corporation) on any matters properly presented to stockholders; or (iii) seeking
to require divestiture by Parent or any Subsidiary of Parent of any shares of
Company Common Stock (or shares of stock of the Surviving Corporation), if any
such matter referred in subclauses (i), (ii) and (iii) would, or would
reasonably be expected to, have a Material Adverse Effect on Parent at or after
the Effective Time.
(c) there shall not be any statute, rule, regulation, injunction, order or
decree, enacted, enforced, promulgated, entered, issued or deemed applicable to
the Merger and the other transactions contemplated hereby (or in the case of any
statute, rule or regulation, awaiting signature or reasonably expected to become
law), by any court, government or governmental authority or agency or
legislative body, domestic, foreign or supranational, that would, or would
reasonably be expected to, have a Material Adverse Effect on Parent at or after
the Effective Time.
(d) Parent shall have received an opinion of Fried, Frank, Harris, Shriver
& Jacobson (or other counsel reasonably acceptable to Parent) in form and
substance reasonably satisfactory to Parent, on the basis of customary
representations and assumptions set forth in such opinion, dated the Effective
Time, to the effect that the Merger will be treated for federal income tax
purposes as a reorganization qualifying under the provisions of Section 368(a)
of the Code and that each of Parent, Merger Subsidiary and the Company will be a
party to the reorganization within the meaning of Section 368(b) of the Code. In
rendering its opinion, counsel shall be entitled to rely upon customary
representations of officers of Parent and the Company reasonably requested by
counsel, including, without limitation, those contained in certificates
substantially in the form agreed to by the Company and Parent prior to the date
of this Agreement.
SECTION 8.3 Conditions to the Obligations of the Company. The obligation of
the Company to consummate the Merger is subject to the satisfaction (or, to the
extent legally permissible, waiver) of the following further conditions:
(a) (i) Parent shall have performed in all material respects all of its
obligations hereunder required to be performed by it at or prior to the
Effective Time, (ii) the representations and warranties of Parent and Merger Sub
contained in this Agreement and in any certificate or other writing delivered by
Parent pursuant hereto shall be true and correct (without giving effect to any
limitation as to 'materiality' or 'Material Adverse Effect' set forth herein) at
and as of the Effective Time as if made at and as of such time (except to the
extent expressly made as of an earlier date, in which case as of such earlier
date, except where the failure of such representations to be true and correct
(without giving effect to any limitation as to 'materiality' or 'Material
Adverse Effect' set forth herein) would not, individually as in the aggregate,
have a Material Adverse Effect on Parent and (iii) the Company shall have
received a certificate signed by a vice-president of Parent to the foregoing
effect; and
(b) the Company shall have received an opinion of Skadden, Arps, Slate,
Meagher & Flom LLP (or other counsel reasonably acceptable to the Company) in
form and substance reasonably satisfactory to the Company, on the basis of
customary representations and assumptions set forth in such opinion, dated the
Effective Time, to the effect that the Merger will be treated for federal income
tax purposes as a reorganization qualifying under the provisions of
Section 368(a) of the Code and that each of Parent, Merger Subsidiary and the
Company will be a party to the reorganization within the meaning of
Section 368(b) of the Code. In rendering this opinion, counsel shall be entitled
to rely upon customary representations of officers of Parent and the Company
reasonably requested by counsel, including, without limitation, those contained
in certificates substantially in the form agreed to by the Company and Parent
prior to the date of this Agreement.
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(c) Parent shall have taken all such actions as shall be necessary so that
the By-laws Amendment shall become effective not later than the Effective Time.
ARTICLE IX
TERMINATION
SECTION 9.1 Termination. This Agreement may be terminated and the Merger
may be abandoned at any time prior to the Effective Time (notwithstanding any
approval of this Agreement by the stockholders of the Company or any approval of
the Common Stock Issuance by the stockholders of Parent):
(a) by mutual written consent of the Company and Parent;
(b) by either the Company or Parent,
(i) if the Merger has not been consummated as of the eight month
anniversary hereof (the 'End Date'); provided, however, that if (x) the
Effective Time has not occurred by such date by reason of nonsatisfaction
of any of the conditions set forth in Section 8.1(c), 8.1(d), 8.1(e),
8.1(i), 8.2(b) and 8.2(c) and (y) all other conditions set forth in Article
8 have heretofore been satisfied or waived or are then capable of being
satisfied, 60 days after such eight month anniversary (which shall then be
the 'End Date'); provided, further that at the End Date the right to
terminate this Agreement under this Section 9.1(b)(i) shall not be
available to any party whose failure to fulfill in any material respect any
obligation under this Agreement has caused or resulted in the failure of
the Effective Time to occur on or before the End Date;
(ii) if the Company Stockholder Approval shall not have been obtained
by reason of the failure to obtain the required vote at a duly held meeting
of stockholders or any adjournment thereof; or
(iii) if the Common Stock Issuance Approval shall not have been
obtained by reason of the failure to obtain the required vote at a duly
held meeting of stockholders or any adjournment thereof;
(c) by either the Company or Parent, if there shall be any law or
regulation that makes consummation of the Merger illegal or otherwise prohibited
or if any judgment, injunction, order or decree enjoining Parent or the Company
from consummating the Merger is entered and such judgment, injunction, order or
decree shall become final and nonappealable; provided that the terminating party
has fulfilled its obligations under Section 7.1;
(d) by Parent, if the Board of Directors of the Company shall have failed
to recommend or withdrawn or modified or changed in a manner adverse to Parent
its approval or recommendation of this Agreement or the Merger, whether or not
permitted by the terms hereof, or shall have failed to call the Company
Stockholder Meeting in accordance with Section 5.2, or shall have recommended a
Superior Proposal (or the Board of Directors of the Company shall resolve to do
any of the foregoing);
(e) by the Company, if the Board of Directors of Parent shall have failed
to recommend or shall have withdrawn or modified or changed in a manner adverse
to the Company its approval and recommendation of this agreement or the Common
Stock Issuance, whether or not permitted by the terms hereof, or shall have
failed to call the Parent Stockholder Meeting in accordance with Section 6.4 or
shall have recommended a Superior Proposal (or the Board of Directors of Parent
resolves to do any of the foregoing); or
(f) by either Parent or the Company, if there shall have been a breach by
the other of any of its representations, warranties, covenants or obligations
contained in this Agreement, which breach would result in the failure to satisfy
one or more of the conditions set forth in Section 8.2(a) (in the case of a
breach by the Company) or Section 8.3(a) (in the case of a breach by Parent),
and in any such case such breach shall be incapable of being cured or, if
capable of being cured, shall not have been cured within 30 days after written
notice thereof shall have been received by the party alleged to be in breach.
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The party desiring to terminate this Agreement pursuant to clause (b), (c),
(d), (e) or (f) of this Section 9.1 shall give written notice of such
termination to the other party in accordance with Section 10.1, specifying the
provision hereof pursuant to which such termination is effected.
SECTION 9.2 Effect of Termination. If this Agreement is terminated pursuant
to Section 9.1, this Agreement shall become void and of no effect with no
liability on the part of any party hereto, except that (a) the agreements
contained in this Section 9.2, in Section 10.4, Section 10.5, in the Option
Agreements and in the Confidentiality Agreement, and the representations and
warranties with respect to the Option Agreements shall survive the termination
hereof and (b) no such termination shall relieve any party of any liability or
damages resulting from any willful breach by that party of this Agreement.
ARTICLE X
MISCELLANEOUS
SECTION 10.1 Notices. All notices, requests and other communications to any
party hereunder shall be in writing (including facsimile or similar writing) and
shall be given,
if to Parent or Merger Subsidiary, to:
AlliedSignal Inc.
101 Columbia Road
P.O. Box 3000
Morristown, NJ 07962-2496
Attention: Peter M. Kreindler
Senior Vice President, General Counsel
and Secretary
Facsimile No.: (973) 455-4217
with a copy to:
Fried, Frank, Harris, Shriver & Jacobson
One New York Plaza
New York, NY 10004-1980
Attention: Arthur Fleischer, Jr., Esq.
Charles M. Nathan, Esq.
Facsimile No.: (212) 859-4000
if to the Company, to:
Honeywell Inc.
Honeywell Plaza
Minneapolis, MN 55408
Attention: Edward D. Grayson
Vice President and General Counsel
Facsimile No.: (612) 951-3859
with a copy to:
Skadden, Arps, Slate, Meagher & Flom LLP
919 Third Avenue
New York, N.Y. 10022-3897
Attention: Peter Allan Atkins, Esq.
David J. Friedman, Esq.
Facsimile No.: (212) 735-2000
or such other address or facsimile number as such party may hereafter specify
for the purpose by notice to the other parties. Each such notice, request or
other communication shall be effective (a) if given by facsimile, when such
facsimile is transmitted to the facsimile number specified in this Section and
the appropriate facsimile confirmation is received or (b) if given by any other
means, when delivered at the address specified in this Section.
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<PAGE>
SECTION 10.2 Non-Survival of Representations and Warranties. The
representations and warranties contained herein and in any certificate or other
writing delivered pursuant hereto shall not survive the Effective Time.
SECTION 10.3 Amendments; No Waivers.
(a) Any provision of this Agreement (including the Exhibits and Schedules
hereto) may be amended or waived prior to the Effective Time at any time prior
to or after the receipt of the Parent Stockholder Approval and/or the Company
Stockholder Approval, if, and only if, such amendment or waiver is in writing
and signed, in the case of an amendment, by the Company, Parent and Merger
Subsidiary, or in the case of a waiver, by the party against whom the waiver is
to be effective; provided that after the receipt of any such approval, if any
such amendment or waiver shall by law or in accordance with the rules and
regulations of any relevant securities exchange requires further approval of
stockholders, the effectiveness of such amendment or waiver shall be subject to
the necessary stockholder approval.
(b) No failure or delay by any party in exercising any right, power or
privilege hereunder shall operate as a waiver thereof nor shall any single or
partial exercise thereof preclude any other or further exercise thereof or the
exercise of any other right, power or privilege. The rights and remedies herein
provided shall be cumulative and not exclusive of any rights or remedies
provided by law.
SECTION 10.4 Expenses.
(a) Except as otherwise specified in Sections 10.5 or 10.6, the Option
Agreements or as otherwise agreed to in writing by the parties, all costs and
expenses incurred in connection with this Agreement and the transactions
contemplated by this Agreement shall be paid by the party incurring such cost or
expense, except that (a) the filing fees in respect to filings made pursuant to
the HSR Act, the EC Merger Regulation and all similar filings in other
jurisdictions, (b) filing fees in connection with the filing with the SEC of the
Form S-4, the Parent Proxy Statement and the Company Proxy Statement, (c) all
printing, mailing and related expenses incurred in connection with printing and
mailing of the Form S-4, the Parent Proxy Statement and the Company Proxy
Statement and (d) all other expenses not directly attributable to any one of the
parties, shall be shared equally by Parent and the Company.
SECTION 10.5 Company Termination Fee.
(a) If:
(i) Parent shall terminate this Agreement pursuant to Section 9.1(d),
unless at the time of such failure to recommend, withdrawal or adverse
modification or change, failure to call the Company Stockholder Meeting or
recommendation of a Superior Proposal, any of the conditions set forth in
Section 8.3(a) would not have been satisfied as of such date and would not
be reasonably capable of being satisfied; or
(ii) either the Company or Parent shall terminate this Agreement
pursuant to Section 9.1(b)(ii) and prior to the Company Stockholder Meeting
any Person shall have made to the Company or to the stockholders of the
Company an Acquisition Proposal relating to the Company; or
(iii) either the Company or Parent shall terminate this Agreement
pursuant to Section 9.1(b)(i) and (x) prior to such termination any Person
shall have made to the Company or to the stockholders of the Company an
Acquisition Proposal relating to the Company and (y) within nine months
after such termination, the Company enters into a definitive agreement with
respect to any Acquisition Proposal made prior to, as of or after such
termination; or
(iv) Parent shall terminate this Agreement pursuant to Section 9.1(f)
and prior to such termination any Person shall have made to the Company or
to the stockholders of the Company an Acquisition Proposal relating to the
Company;
then, (x) in the case of clause (i), the Company shall pay to Parent, not later
than the date of termination of this Agreement, an amount equal to $350 million,
(y) in the case of clause (iii), the
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<PAGE>
Company shall pay to Parent, not later than the date the Company enters into a
definitive agreement with respect to any Acquisition Proposal, $350 million, and
(z) in the case of clauses (ii) or (iv), (a) the Company shall pay to Parent,
not later than the date of termination of this Agreement, an amount equal to
$200 million, and (b) if within nine months after the termination of this
Agreement, the Company enters into a definitive agreement in respect of an
Acquisition Proposal, the Company shall pay to Parent, not later than the date
such agreement is entered into, an additional amount equal to $150 million.
Acceptance by Parent of the final payment to which Parent is entitled in
connection with the events described in clauses (i), (ii), (iii) or (iv) (other
than in the case of the events described in clause (iv), if the breach involved
constitutes a willful breach), as applicable, referred to in the foregoing
sentence shall constitute conclusive evidence that this Agreement has been
validly terminated and upon acceptance of payment of such amount, the Company
shall be fully released and discharged from any liability or obligation
resulting from or under this Agreement (except for its obligations under the
Company Option Agreement). For purposes of clause (ii) of this Section 10.5(a),
the term 'Acquisition Proposal' shall have the meaning set forth in
Section 7.10, except that all references to '20%' shall be replaced with '40%,'
and for purposes of clauses (iii) and (iv) of this Section 10.5(a), such term
shall have the meaning set forth in Section 7.10, except that all references to
'20%' shall be replaced with '50%'.
(b) If:
(i) either the Company or Parent shall terminate this Agreement
pursuant to Section 9.1(b)(ii) and no Acquisition Proposal relating to the
Company has been made to the Company or the stockholders of the Company
prior to the Company Stockholder Meeting; or
(ii) Parent shall terminate this Agreement pursuant to Section 9.1(f)
and no Acquisition Proposal relating to the Company has been made prior
thereto to the Company or the stockholders of the Company,
then, in any such case, the Company shall, upon request of Parent, reimburse
Parent for all of its out-of-pocket expenses incurred by Parent in connection
with this Agreement and the transactions contemplated hereof, including, without
limitation, reasonable fees and expenses of accountants, attorneys and financial
advisors, and costs and expenses otherwise allocated to Parent pursuant to
Section 10.4, up to an aggregate of $20 million.
(c) All payments and reimbursements made under this Section 10.5 shall be
made by wire transfer of immediately available funds to an account specified by
Parent.
SECTION 10.6 Parent Termination Fee.
(a) If:
(i) The Company shall terminate this Agreement pursuant to
Section 9.1(e), unless at the time of such failure to recommend, withdrawal
or adverse modification or change, failure to call the Parent Stockholder
Meeting or recommendation of a Superior Proposal, any of the conditions set
forth in Section 8.2(a) would not have been satisfied as of such date and
would not be reasonably capable of being satisfied; or
(ii) either the Company or Parent shall terminate this Agreement
pursuant to Section 9.1(b)(iii), and prior to the Parent Stockholder
Meeting any Person shall have made to Parent or to the stockholders of
Parent an Acquisition Proposal relating to Parent; or
(iii) either the Company or Parent shall terminate this Agreement
pursuant to Section 9.1(b)(i) and (x) prior to such termination any Person
shall have made to Parent or to the stockholders of Parent an Acquisition
Proposal relating to Parent and (y) within nine months after such
termination, Parent enters into a definitive agreement with respect to any
Acquisition Proposal made prior to, as of or after such termination; or
(iv) the Company shall terminate this Agreement pursuant to
Section 9.1(f) and prior to such termination any Person shall have made to
Parent or to the stockholders of Parent an Acquisition Proposal relating to
Parent;
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<PAGE>
then, (x) in the case of clause (i), Parent shall pay to the Company not later
than the date of termination of this Agreement an amount equal to $350 million,
(y) in the case of clause (iii), Parent shall pay to the Company, not later than
the date Parent enters into a definitive agreement with respect to any
Acquisition Proposal, $350 million, and (z) in the case of clauses (ii) or (iv),
(a) Parent shall pay to the Company, not later than the date of termination of
this Agreement, $200 million, and (b) if within nine months after the
termination of this Agreement, Parent enters into a definitive agreement in
respect of an Acquisition Proposal, Parent shall pay to the Company, no later
than the date such agreement is entered into, an additional amount equal to $150
million. Acceptance by the Company of the final payment to which the Company is
entitled in connection with the events described in clauses (i), (ii), (iii) or
(iv) (other than in the case of the events described in clause (iv), if the
breach involved constitutes a willful breach), as applicable, referred to in the
foregoing sentence shall constitute conclusive evidence that this Agreement has
been validly terminated and upon acceptance of payment of such amount, Parent
shall be fully released and discharged from any liability or obligation
resulting from or under this Agreement (except for its obligations under Parent
Option Agreement). For purposes of clause (ii) of this Section 10.6(a), the term
'Acquisition Proposal' shall have the meaning set forth in Section 7.10, except
that all references to '20%' shall be replaced with '40%,' and for purposes of
clauses (iii) and (iv) of this Section 10.6(a), such term shall have the meaning
set forth in Section 7.10, except that all references to '20%' shall be replaced
with '50%'.
(b) If:
(i) either the Company or Parent shall terminate this Agreement
pursuant to Section 9.1(b)(iii) and no Acquisition Proposal relating to
Parent has been made to Parent or the stockholders of Parent prior to the
Parent Stockholder Meeting; or
(ii) the Company shall terminate this Agreement pursuant to
Section 9.1(f) and no Acquisition Proposal relating to Parent has been made
prior thereto to Parent or the stockholders of Parent,
then, in any such case, Parent shall upon request of the Company, reimburse the
Company for all of its out-of-pocket expenses incurred by the Company in
connection with this Agreement and the transaction contemplated hereof,
including, without limitation, reasonable fees and expenses of accountants,
attorneys and financial advisors, and costs and expenses otherwise allocated to
the Company pursuant to Section 10.4, up to an aggregate of $20 million.
(c) All payments and reimbursements made under this Section 10.6 shall be
made by wire transfer of immediately available funds to an account specified by
the Company.
SECTION 10.7 Successors and Assigns. The provisions of this Agreement shall
be binding upon and inure to the benefit of the parties hereto and their
respective successors and assigns; provided that no party may assign, delegate
or otherwise transfer any of its rights or obligations under this Agreement
without the consent of the other parties hereto except that Merger Subsidiary
may transfer or assign, in whole or from time to time in part, to one or more of
its affiliates, its rights under this Agreement, but any such transfer or
assignment will not relieve Merger Subsidiary of its obligations hereunder.
SECTION 10.8 Governing Law. This Agreement shall be construed in accordance
with and governed by the law of the State of Delaware, without regard to
principles of conflicts of law.
SECTION 10.9 Jurisdiction. Any suit, action or proceeding seeking to
enforce any provision of, or based on any matter arising out of or in connection
with, this Agreement, the Option Agreements or the transactions contemplated
hereby or thereby may be brought in any federal or state court located in the
State of Delaware, and each of the parties hereby consents to the jurisdiction
of such courts (and of the appropriate appellate courts therefrom) in any such
suit, action or proceeding and irrevocably waives, to the fullest extent
permitted by law, any objection which it may now or hereafter have to the laying
of the venue of any such suit, action or proceeding in any such court or that
any such suit, action or proceeding which is brought in any such court has been
brought in an inconvenient forum. Process in any such suit, action or proceeding
may be served on any party anywhere in the world, whether within or without the
jurisdiction of any such court. Without limiting the foregoing, each party
agrees that service of
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<PAGE>
process on such party as provided in Section 10.1 shall be deemed effective
service of process on such party.
SECTION 10.10 Waiver of Jury Trial. EACH OF THE PARTIES HERETO HEREBY
IRREVOCABLY WAIVES ANY AND ALL RIGHT TO TRIAL BY JURY IN ANY LEGAL PROCEEDING
ARISING OUT OF OR RELATED TO THIS AGREEMENT OR THE TRANSACTIONS CONTEMPLATED
HEREBY.
SECTION 10.11 Counterparts; Effectiveness. This Agreement may be signed in
any number of counterparts, each of which shall be an original, with the same
effect as if the signatures thereto and hereto were upon the same instrument.
This Agreement shall become effective when each party hereto shall have received
counterparts hereof signed by all of the other parties hereto.
SECTION 10.12 Entire Agreement. This Agreement (including the Exhibits and
Schedules), the Option Agreements and the Confidentiality Agreement constitute
the entire agreement between the parties with respect to the subject matter of
this Agreement and supersede all prior agreements and understandings, both oral
and written, between the parties with respect to the subject matter hereof and
thereof. Except as provided in Section 6.3(c), no provision of this Agreement or
any other agreement contemplated hereby is intended to confer on any Person
other than the parties hereto any rights or remedies.
SECTION 10.13 Captions. The captions herein are included for convenience of
reference only and shall be ignored in the construction or interpretation
hereof.
SECTION 10.14 Severability. If any term, provision, covenant or restriction
of this Agreement is held by a court of competent jurisdiction or other
authority to be invalid, void or unenforceable, the remainder of the terms,
provisions, covenants and restrictions of this Agreement shall remain in full
force and effect and shall in no way be affected, impaired or invalidated so
long as the economic or legal substance of the transactions contemplated hereby
is not affected in any manner materially adverse to any party. Upon such a
determination, the parties shall negotiate in good faith to modify this
Agreement so as to effect the original intent of the parties as closely as
possible in an acceptable manner in order that the transactions contemplated
hereby be consummated as originally contemplated to the fullest extent possible.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
duly executed by their respective authorized officers as of the day and year
first above written.
ALLIEDSIGNAL INC.
By: /s/ Lawrence A. Bossidy
-------------------------------
Name: Lawrence A. Bossidy
Title: Chairman and Chief Executive
Officer
HONEYWELL INC.
By: /s/ Michael R. Bonsignore
-------------------------------
Name: Michael R. Bonsignore
Title: Chairman and Chief Executive
Officer
BLOSSOM ACQUISITION CORP.
By: /s/ Peter M. Kreindler
-------------------------------
Name: Peter M. Kreindler
Title: Senior Vice President and
Secretary
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<PAGE>
ANNEX B
STOCK OPTION AGREEMENT
THIS STOCK OPTION AGREEMENT (this 'Agreement'), dated as of June 4, 1999,
between ALLIEDSIGNAL INC., a Delaware corporation ('Parent'), and HONEYWELL
INC., a Delaware corporation (the 'Company').
W I T N E S S E T H:
WHEREAS, Parent and the Company are concurrently with the execution and
delivery of this Agreement entering into an Agreement and Plan of Merger (the
'Merger Agreement') pursuant to which, among other things, Merger Subsidiary
will merge with and into the Company on the terms and subject to the conditions
stated therein; and
WHEREAS, in order to induce Parent to enter into the Merger Agreement and
as a condition for Parent's agreeing so to do, the Company has granted to Parent
the Stock Option (as hereinafter defined), on the terms and conditions set forth
herein;
NOW, THEREFORE, in consideration of the mutual covenants and agreements set
forth herein and in the Merger Agreement, and for other good and valuable
consideration, the adequacy of which is hereby acknowledged, the parties hereto
agree as follows:
SECTION 1. Definitions. Capitalized terms used and not defined herein have
the respective meanings assigned to them in the Merger Agreement.
SECTION 2. Grant of Stock Option. The Company hereby grants to Parent an
irrevocable option (the 'Stock Option') to purchase, on the terms and subject to
the conditions hereof, for $109.453 per share (the 'Exercise Price') in cash, up
to 25,241,518 fully paid and non-assessable shares (the 'Option Shares') of the
Company's common stock, par value $1.50 per share (the 'Common Stock'). The
Exercise Price and number of Option Shares shall be subject to adjustment as
provided in Section 5 below.
SECTION 3. Exercise of Stock Option.
(a) Parent may, subject to the provisions of this Section 3, exercise the
Stock Option, in whole or in part, at any time or from time to time, after the
occurrence of a Company Trigger Event (defined below) and prior to the
Termination Date. 'Termination Date' shall mean, subject to Section 9(a), the
earliest of (i) the Effective Time of the Merger, (ii) 120 days after the date
full payment contemplated by Section 10.5(a) of the Merger Agreement is made by
the Company to Parent thereunder, (iii) the date of the termination of the
Merger Agreement so long as, in the case of this clause (iii), no Company
Trigger Event has occurred or could still occur pursuant to Section 10.5(a) of
the Merger Agreement or (iv) the first anniversary of the date of termination of
the Merger Agreement. Notwithstanding the occurrence of the Termination Date,
Parent shall be entitled to purchase Option Shares pursuant to any exercise of
the Stock Option, on the terms and subject to the conditions hereof, to the
extent Parent exercised the Stock Option prior to the occurrence of the
Termination Date. A 'Company Trigger Event' shall mean an event the result of
which is that the total fee or fees required to be paid by the Company to Parent
pursuant to Section 10.5(a) of the Merger Agreement is equal to $350 million.
(b) Parent may purchase Option Shares pursuant to the Stock Option only if
all of the following conditions are satisfied: (i) no preliminary or permanent
injunction or other order issued by any federal or state court of competent
jurisdiction in the United States shall be in effect prohibiting delivery of the
Option Shares, (ii) any waiting period applicable to the purchase of the Option
Shares under the HSR Act shall have expired or been terminated, and (iii) any
prior notification to or approval of any other regulatory authority in the
United States or elsewhere required in connection with such purchase shall have
been made or obtained, other than those which if not made or obtained would not
reasonably be expected to result in a significant detriment to the Company and
its Subsidiaries, taken as a whole.
(c) If Parent shall be entitled to and wishes to exercise the Stock Option,
it shall do so by giving the Company written notice (the 'Stock Exercise
Notice') to such effect, specifying the
<PAGE>
number of Option Shares to be purchased and a place and closing date not earlier
than three business days nor later than 10 business days from the date of such
Stock Exercise Notice. If the closing cannot be consummated on such date because
any condition to the purchase of Option Shares set forth in Section 3(b) has not
been satisfied or as a result of any restriction arising under any applicable
law or regulation, the closing shall occur five days (or such earlier time as
Parent may specify) after satisfaction of all such conditions and the cessation
of all such restrictions.
(d) So long as the Stock Option is exercisable pursuant to the terms of
Section 3(a), Parent may elect to send a written notice to the Company (the
'Cash Exercise Notice') specifying a date not later than 20 business days and
not earlier than 5 business days following the date such notice is given on
which date the Company shall pay to Parent in exchange for the cancellation of
the relevant portion of the Stock Option an amount in cash equal to the Spread
(as hereinafter defined) multiplied by all or such relevant portion of the
Option Shares subject to the Stock Option as Parent shall specify. As used
herein, 'Spread' shall mean the excess, if any, over the Exercise Price of the
higher of (x) if applicable, the highest price per share of Common Stock paid or
proposed to be paid by any Person pursuant to any Acquisition Proposal relating
to Parent (the 'Proposed Alternative Transaction Price') or (y) the average of
the closing prices of the shares of Common Stock on the principal securities
exchange or quotation system on which the Common Stock is then listed or traded
as reported in The Wall Street Journal (but subject to correction for
typographical or other manifest errors in such reporting) for the five
consecutive trading days immediately preceding the date on which the Cash
Exercise Notice is given (the 'Average Market Price'). If the Proposed
Alternative Transaction Price includes any property other than cash, the
Proposed Alternative Transaction Price shall be the sum of (i) the fixed cash
amount, if any, included in the Proposed Alternative Transaction Price plus (ii)
the fair market value of such other property. If such other property consists of
securities with an existing public trading market, the average of the closing
prices (or the average of the closing bid and asked prices if closing prices are
unavailable) for such securities in their principal public trading market on the
five trading days ending five days prior to the date on which the Cash Exercise
Notice is given shall be deemed to equal the fair market value of such property.
If such other property includes anything other than cash or securities with an
existing public trading market, the Proposed Alternative Transaction Price shall
be deemed to equal the Average Market Price. Upon exercise of its right pursuant
to this Section 3(d) and the receipt by Parent of the applicable cash amount
with respect to the Option Shares or the applicable portion thereof, the
obligations of the Company to deliver Option Shares pursuant to Section 3(e)
shall be terminated with respect to the number of Option Shares specified in the
Cash Exercise Notice. The Spread shall be appropriately adjusted, if applicable,
to give effect to Section 5.
(e) (i) At any closing pursuant to Section 3(c) hereof, Parent shall make
payment to the Company of the aggregate purchase price for the Option Shares to
be purchased and the Company shall deliver to Parent a certificate representing
the purchased Option Shares, registered in the name of Parent or its designee
and (ii) at any closing pursuant to Section 3(d) hereof, the Company will
deliver to Parent cash in an amount determined pursuant to Section 3(d) hereof.
Any payment made by Parent to the Company, or by the Company to Parent, pursuant
to this Agreement shall be made by wire transfer of immediately available funds
to a bank designated by the party receiving such funds, provided that the
failure or refusal by the Company to designate such a bank account shall not
preclude Parent from exercising the Stock Option. If at the time of the issuance
of Options Shares pursuant to the exercise of the Stock Option, Company Rights
or any similar securities are outstanding, then the Option Shares issued
pursuant to such exercise shall be accompanied by corresponding Company Rights
or such similar securities.
(f) Certificates for Common Stock delivered at the closing described in
Section 3(c) hereof shall be endorsed with a restrictive legend which shall read
substantially as follows:
'The transfer of the shares represented by this certificate is subject to
resale restrictions arising under the Securities Act of 1933, as amended.'
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<PAGE>
It is understood and agreed that the above legend shall be removed by
delivery of substitute certificate(s) without this reference (i) if Parent shall
have delivered to the Company a copy of a no-action letter from the staff of the
Securities and Exchange Commission, or a written opinion of counsel, in form and
substance reasonably satisfactory to the Company, to the effect that such legend
is not required for purposes of, or resale may be effected pursuant to an
exemption from registration under, the Securities Act or (ii) in connection with
any sale registered under the Securities Act. In addition, these certificates
shall bear any other legend as may be required by applicable law.
SECTION 4. Representations of Parent. Parent hereby represents and warrants
to the Company that any Option Shares acquired by Parent upon the exercise of
the Stock Option will not be, and the Stock Option is not being, acquired by
Parent with the intention of making a public distribution thereof, other than
pursuant to an effective registration statement under the Securities Act or
otherwise in compliance with the Securities Act.
SECTION 5. Adjustment upon Changes in Capitalization or Merger.
(a) In the event of any change in the outstanding shares of Common Stock by
reason of a stock dividend, stock split, reverse stock split, split-up, merger,
consolidation, recapitalization, combination, conversion, exchange of shares,
extraordinary or liquidating dividend or similar transaction which would effect
Parent's rights hereunder, the type and number of shares or securities
purchasable upon the exercise of the Stock Option and the Exercise Price shall
be adjusted appropriately, and proper provision will be made in the agreements
governing such transaction, so that Parent will receive upon exercise of the
Stock Option a number and class of shares or amount of other securities or
property that Parent would have received in respect of the Option Shares had the
Stock Option been exercised immediately prior to such event or the record date
therefor, as applicable. In no event shall the number of shares of Common Stock
subject to the Stock Option exceed 19.9% of the number of shares of Common Stock
issued and outstanding at the time of exercise (without giving effect any shares
subject or issued pursuant to the Stock Option).
(b) Without limiting the foregoing, whenever the number of Option Shares
purchasable upon exercise of the Stock Option is adjusted as provided in this
Section 5, the Exercise Price shall be adjusted by multiplying the Exercise
Price by a fraction, the numerator of which is equal to the number of Option
Shares purchasable prior to the adjustment and the denominator of which is equal
to the number of Option Shares purchasable after the adjustment.
(c) Without limiting or altering the parties' rights and obligations under
the Merger Agreement, in the event that the Company enters into an agreement (i)
to consolidate with or merge into any Person, other than Parent or one of its
Subsidiaries, and the Company will not be the continuing or surviving
corporation in such consolidation or merger, (ii) to permit any Person, other
than Parent or one of its Subsidiaries, to merge into the Company and the
Company will be the continuing or surviving corporation, but in connection with
this merger, the shares of Common Stock outstanding immediately prior to the
consummation of this merger will be changed into or exchanged for stock or other
securities of the Company or any other Person or cash or any other property, or
the shares of Common Stock outstanding immediately prior to the consummation of
such merger will, after such merger, represent less than 50% of the outstanding
voting securities of the merged company, or (iii) to sell or otherwise transfer
all or substantially all of its assets to any Person, other than Parent or one
of its Subsidiaries, then, and in each such case, the agreement governing this
transaction shall make proper provision so that the Stock Option will, upon the
consummation of any such transaction and upon the terms and conditions set forth
herein, be converted into, or exchanged for, an option with identical terms
appropriately adjusted to acquire the number and class of shares or other
securities or property that Parent would have received in respect of Option
Shares had the Stock Option been exercised immediately prior to such
consolidation, merger, sale or transfer or the record date therefor, as
applicable, and will make any other necessary adjustments. The Company shall
take such steps in connection with such consolidation, merger, liquidation or
other transaction as may be reasonably necessary to assure
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<PAGE>
that the provisions hereof shall thereafter apply as nearly as possible to any
securities or property thereafter deliverable upon exercise of the Stock Option.
SECTION 6. Further Assurances; Remedies.
(a) The Company agrees to maintain, free from preemptive rights, sufficient
authorized but unissued or treasury shares of Common Stock so that the Stock
Option may be fully exercised without additional authorization of Common Stock
after giving effect to all other options, warrants, convertible securities and
other rights of third parties to purchase shares of Common Stock from the
Company, and to issue the appropriate number of shares of Common Stock pursuant
to the terms of this Agreement. All of the Option Shares to be issued pursuant
to the Stock Option, upon issuance and delivery thereof pursuant to this
Agreement, will be duly authorized, validly issued, fully paid and
nonassessable, and will be delivered free and clear of all claims, liens,
charges, encumbrances and security interests (other than those created by this
Agreement).
(b) The Company agrees not to avoid or seek to avoid (whether by charter
amendment or through reorganization, consolidation, merger, issuance of rights,
dissolution or sale of assets, or by any other voluntary act) the observance or
performance of any of the covenants, agreements or conditions to be observed or
performed hereunder by the Company.
(c) The Company agrees that promptly after the occurrence of a Company
Trigger Event it shall take all actions as may from time to time be required
(including (i) complying with all applicable premerger notification, reporting
and waiting period requirements under the HSR Act and (ii) in the event that
prior notification to or approval of any other regulatory authority in the
United States or elsewhere is necessary before the Stock Option may be
exercised, complying with its obligations thereunder and cooperating with Parent
in Parent's preparing and processing the required notices or applications) in
order to permit Parent to exercise the Stock Option and purchase Option Shares
pursuant to such exercise.
(d) The parties agree that Parent would be irreparably damaged if for any
reason the Company failed, in breach of its obligations hereunder, to issue any
of the Option Shares (or other securities or property deliverable pursuant to
Section 5 hereof) upon exercise of the Stock Option or to perform any of its
other obligations under this Agreement, and that Parent would not have an
adequate remedy at law for money damages in such event. Accordingly, Parent
shall be entitled to specific performance and injunctive and other equitable
relief to enforce the performance of this Agreement by the Company. Accordingly,
if Parent should institute an action or proceeding seeking specific enforcement
of the provisions hereof, the Company hereby waives the claim or defense that
Parent has an adequate remedy at law and hereby agrees not to assert in any such
action or proceeding the claim or defense that such a remedy at law exists. The
Company further agrees to waive any requirements for the securing or posting of
any bond in connection with obtaining any such equitable relief. This provision
is without prejudice to any other rights that Parent may have against the
Company for any failure to perform its obligations under this Agreement.
SECTION 7. Listing of Option Shares. Promptly after the occurrence of a
Company Trigger Event and from time to time thereafter if necessary, the Company
will apply to list all of the Option Shares subject to the Stock Option on the
NYSE and will use its reasonable best efforts to obtain approval of such listing
as soon as practicable.
SECTION 8. Registration of the Option Shares.
(a) If, within two years of the exercise of the Stock Option, Parent
requests the Company in writing to register under the Securities Act any of the
Option Shares received by Parent hereunder, the Company will use its reasonable
best efforts to cause the offering of the Option Shares so specified in such
request to be registered as soon as practicable so as to permit the sale or
other distribution by Parent of the Option Shares specified in its request (and
to keep such registration in effect for a period of at least 90 days), and in
connection therewith the Company shall prepare and file as promptly as
reasonably possible (but in no event later than 60 days from receipt of Parent's
request) a registration statement under the Securities Act to effect such
registration on an appropriate form, which would permit the sale of the Option
Shares by Parent
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in accordance with the plan of disposition specified by Parent in its request.
The Company shall not be obligated to make effective more than two registration
statements pursuant to the foregoing sentence; provided, however, that the
Company may postpone the filing of a registration statement relating to a
registration request by Parent under this Section 8 for a period of time (not in
excess of 90 days) if in the Company's reasonable, good faith judgment such
filing would require the disclosure of material information that the Company has
a bona fide business purpose for preserving as confidential (but in no event
shall the Company exercise such postponement right more than once in any twelve
month period).
(b) The Company shall notify Parent in writing not less than 10 days prior
to filing a registration statement under the Securities Act (other than a filing
on Form S-4 or S-8 or any successor form) with respect to any shares of Common
Stock. If Parent wishes to have any portion of its Option Shares included in
such registration statement, it shall advise the Company in writing to that
effect within two business days following receipt of such notice, and the
Company will thereupon include the number of Option Shares indicated by Parent
under such Registration Statement; provided that if the managing underwriter(s)
of the offering pursuant to such registration statement advise the Company that
in their opinion the number of shares of Common Stock requested to be included
in such registration exceeds the number which can be sold in such offering on a
commercially reasonable basis, priority shall be given to securities intended to
be registered by the Company for its own account and, thereafter, the Company
shall include in such registration Option Shares requested by Parent to be
included therein pro rata with the shares of Common Stock intended to be
included therein by other stockholders of the Company.
(c) All expenses relating to or in connection with any registration
contemplated under this Section 8 and the transactions contemplated thereby
(including all filing, printing, reasonable professional, roadshow and other
fees and expenses relating thereto) will be at the Company's expense except for
underwriting discounts or commissions and brokers' fees. The Company and Parent
agree to enter into a customary underwriting agreement with underwriters upon
such terms and conditions as are customarily contained in underwriting
agreements with respect to secondary distributions. The Company shall indemnify
Parent, its officers, directors, agents, other controlling persons and any
underwriters retained by Parent in connection with such sale of such Option
Shares in the customary way, and shall agree to customary contribution
provisions with such persons, with respect to claims, damages, losses and
liabilities (and any expenses relating thereto) arising (or to which Parent, its
officers, directors, agents, other controlling persons or underwriters may be
subject) in connection with any such offer or sale under the federal securities
laws or otherwise, except for information furnished in writing by Parent or its
underwriters to the Company. Parent and its underwriters, respectively, shall
indemnify the Company to the same extent with respect to information furnished
in writing to the Company by Parent and such underwriters, respectively.
SECTION 9. Miscellaneous.
(a) Extension of Exercise Periods. The periods during which Parent may
exercise its rights under Sections 2 and 3 hereof shall be extended in each such
case at the request of Parent to the extent necessary to avoid liability by
Parent under Section 16(b) of the Exchange Act by reason of such exercise.
(b) Amendments; Entire Agreement. This Agreement may not be modified,
amended, altered or supplemented, except upon the execution and delivery of a
written agreement executed by the parties hereto. This Agreement, together with
the Merger Agreement (including any exhibits and schedules thereto), contains
the entire agreement between the parties hereto with respect to the subject
matter hereof and supersedes all prior and contemporaneous agreements and
understandings, oral or written, with respect to such transactions.
(c) Notices. All notices, requests and other communications to either party
hereunder shall be in writing (including facsimile or similar writing) and shall
be given,
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if to Parent, to:
AlliedSignal Inc.
101 Columbia Road
P.O. Box 3000
Morristown, NJ 07962-2496
Attention: Peter M. Kreindler
Senior Vice President, General Counsel
and Secretary
Facsimile No.: (973) 455-4217
with a copy to:
Fried, Frank, Harris, Shriver & Jacobson
One New York Plaza
New York, NY 10004-1980
Attention: Arthur Fleischer, Jr., Esq.
Charles M. Nathan, Esq.
Facsimile No.: (212) 859-4000
if to the Company, to:
Honeywell Inc.
Honeywell Plaza
Minneapolis, MN 55408
Attention: Edward D. Grayson
Vice President and General Counsel
Facsimile No.: (612) 951-3859
with a copy to:
Skadden, Arps, Slate, Meagher & Flom LLP
919 Third Avenue
New York, NY 10022-3897
Attention: Peter Allan Atkins, Esq.
David J. Friedman, Esq.
Facsimile No.: (212) 735-2000
or to such other address or facsimile number as either party may hereafter
specify for the purpose by notice to the other party hereto. Each such notice,
request or other communication shall be effective (i) if given by facsimile,
when such facsimile is transmitted to the facsimile number specified in this
Section 9 and the appropriate facsimile confirmation is received or (ii) if
given by any other means, when delivered at the address specified in this
Section 9.
(d) Expenses. Each party hereto shall pay its own expenses incurred in
connection with this Agreement, except as otherwise specifically provided herein
and without limiting anything contained in the Merger Agreement.
(e) Severability. If any term, provision, covenant or restriction of this
Agreement is held to be invalid, void or unenforceable, the remainder of the
terms, provisions, covenants and restrictions of this Agreement shall remain in
full force and effect and shall in no way be affected, impaired or invalidated.
(f) Governing Law. This Agreement shall be governed by and construed in
accordance with the laws of the State of Delaware without regard to principles
of conflicts of law.
(g) Jurisdiction. Any suit, action or proceeding seeking to enforce any
provision of, or based on any matter arising out of or in connection with, this
Agreement or the transactions contemplated hereby or thereby may be brought in
any federal or state court located in the State of Delaware, and each of the
parties hereby consents to the jurisdiction of such courts (and of the
appropriate appellate courts therefrom) in any such suit, action or proceeding
and irrevocably waives, to the fullest extent permitted by law, any objection
which it may now or hereafter have
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to the laying of the venue of any such suit, action or proceeding in any such
court or that any such suit, action or proceeding which is brought in any such
court has been brought in an inconvenient forum. Process in any such suit,
action or proceeding may be served on any party anywhere in the world, whether
within or without the jurisdiction of any such court. Without limiting the
foregoing, each party agrees that service of process on such party as provided
in Section 9(c) shall be deemed effective service of process on such party.
(h) Counterparts. This Agreement may be executed in two or more
counterparts, each of which shall be an original, but all of which together
shall constitute one and the same Agreement.
(i) Headings. The section headings herein are for convenience only and
shall not affect the construction hereof.
(j) Assignment. This Agreement shall be binding upon each party hereto and
such party's successors and assigns. This Agreement shall not be assignable by
the Company, but may be assigned by Parent in whole or in part to any direct or
indirect wholly-owned subsidiary of Parent, provided that Parent shall remain
liable for any obligations so assigned.
(k) Survival. All representations, warranties and covenants contained
herein shall survive the execution and delivery of this Agreement and the
consummation of the transactions contemplated hereby.
(l) Time of the Essence. The parties agree that time shall be of the
essence in the performance of obligations hereunder.
(m) Public Announcement. Parent and the Company will consult with each
other before issuing any press release or making any public statement with
respect to this Agreement and the transactions contemplated hereby and shall not
issue any press release or make any public statement without the prior consent
of the other party, which shall not be unreasonably withheld. Notwithstanding
the foregoing, any such press release or public statement as may be required by
applicable law or any listing Agreement with any national securities exchange,
may be issued prior to such consultation, if the party making the release or
statement has used its reasonable efforts to consult with the other party.
SECTION 10. Profit Limitation.
(a) Notwithstanding any other provision of this Agreement or the Merger
Agreement, in no event shall Parent's Total Profit (as defined below) exceed
$400 million (the 'Maximum Amount') and, if it otherwise would exceed such
Maximum Amount, Parent at its sole election may (i) pay cash to the Company,
(ii) deliver to the Company for cancellation Option Shares previously purchased
by Parent, or (iii) any combination thereof, so that Parent's actually realized
Total Profit (as defined below) shall not exceed the Maximum Amount after taking
into account the foregoing actions.
(b) Notwithstanding any other provision of this Agreement, the Stock Option
may not be exercised for a number of Option Shares as would, as of the date of
the Stock Exercise Notice or Cash Exercise Notice, as applicable, result in a
Notional Total Profit (as defined below) of more than the Maximum Amount and, if
exercise of the Stock Option otherwise would result in the Notional Total Profit
exceeding such amount, Parent, at its discretion, may (in addition to any of the
actions specified in Section 10(a) above) increase the Exercise Price for that
number of Option Shares set forth in the Stock Exercise Notice or Cash Exercise
Notice, as applicable, so that the Notional Total Profit shall not exceed the
Maximum Amount; provided, that nothing in this sentence shall restrict any
exercise of the Stock Option permitted hereby on any subsequent date at the
Exercise Price set forth in Section 2 hereof.
(c) As used herein, the term 'Total Profit' shall mean the aggregate amount
(before taxes) of the following: (i) the cash amount actually received by Parent
pursuant to Section 10.5(a) of the Merger Agreement less any repayment by Parent
to the Company pursuant to Section 10(a)(i) hereof, (ii) (x) the net cash
amounts or the fair market value of any property received by Parent pursuant to
the sale of Option Shares (or of any other securities into or for which such
Option
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<PAGE>
Shares are converted or exchanged), less (y) Parent's purchase price for such
Option Shares (or other securities) plus (iii) the aggregate amounts received by
Parent pursuant to Section 3(d).
(d) As used herein, the term 'Notional Total Profit' with respect to any
number of Option Shares as to which Parent may propose to exercise the Stock
Option shall mean the Total Profit determined as of the date of the Stock
Exercise Notice or Cash Exercise Notice, as applicable, assuming that the Stock
Option was exercised on such date for such number of Option Shares and assuming
that such Option Shares, together with all other Option Shares previously
acquired upon exercise of the Stock Option and held by Parent and its affiliates
as of such date, were sold for cash at the closing price on the NYSE for the
Common Stock as of the close of business on the preceding trading day (less
customary brokerage commissions).
SECTION 11. Restrictions on Certain Actions; Covenants of Parent. From and
after the date of exercise of the Stock Option (other than an exercise
contemplated by Section 3(d) hereof), in whole or part, and for as long as
Parent owns shares of Common Stock acquired pursuant to the exercise of the
Stock Option:
(a) Without the prior consent of the Board of Directors of the Company,
Parent will not, and will not permit any of its affiliates to:
(i) acquire or agree, offer or propose to acquire, ownership
(including, but not limited to, beneficial ownership as defined in Rule
13d-3 under the Exchange Act) of more than 25% of any class of Voting
Securities (as defined in below), or any rights or options to acquire such
ownership (including from a third party);
(ii) propose a merger, consolidation or similar transaction involving
the Company;
(iii) offer or propose to purchase, lease or otherwise acquire all or
a substantial portion of the assets of the Company;
(iv) solicit or participate in the solicitation of any proxies or
consents with respect to the securities of the Company;
(v) enter into any agreements or arrangements with any third party
with respect to any of the foregoing; or
(vi) request permission to do any of the foregoing or any permission
to make any public announcement with respect to any of the foregoing; and
(b) (i) Parent agrees to be present in person or to be represented by
proxy at all stockholder meetings of the Company so that all shares of Voting
Securities beneficially owned by it or its affiliates may be counted for the
purpose of determining the presence of a quorum at such meetings.
(ii) Parent agrees to vote or cause to be voted all Voting Securities
beneficially owned by it or its affiliates proportionately with the votes
cast by all other stockholders present and voting.
(iii) The provisions of this Section 11 shall terminate at such time
as the Stock Option granted hereby expires without having been exercised in
whole or part. The provisions of this Section 11 shall not apply to actions
taken pursuant to the Merger Agreement. 'Voting Securities' means the
shares of Common Stock, preferred stock and any other securities of the
Company entitled to vote generally for the election of directors or any
other securities (including, without limitation, rights and options),
convertible into, exchangeable into or exercisable for, any of the
foregoing (whether or not presently exercisable, convertible or
exchangeable).
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<PAGE>
IN WITNESS WHEREOF, the Company and Parent have caused this Agreement to be
duly executed as of the day and year first above written.
ALLIEDSIGNAL INC.
By: /s/ Lawrence A. Bossidy
-------------------------------
Name: Lawrence A. Bossidy
Title: Chairman and Chief Executive
Officer
HONEYWELL INC.
By: /s/ Michael R. Bonsignore
-------------------------------
Name: Michael R. Bonsignore
Title: Chairman and Chief Executive
Officer
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<PAGE>
ANNEX C
STOCK OPTION AGREEMENT
THIS STOCK OPTION AGREEMENT (this 'Agreement'), dated as of June 4, 1999,
between ALLIEDSIGNAL INC., a Delaware corporation ('Parent'), and HONEYWELL
INC., a Delaware corporation (the 'Company').
W I T N E S S E T H :
WHEREAS, Parent and the Company are concurrently with the execution and
delivery of this Agreement entering into an Agreement and Plan of Merger (the
'Merger Agreement') pursuant to which, among other things, Merger Subsidiary
will merge with and into the Company on the terms and subject to the conditions
stated therein; and
WHEREAS, in order to induce the Company to enter into the Merger Agreement
and as a condition for the Company's agreeing so to do, Parent has granted to
the Company the Stock Option (as hereinafter defined), on the terms and
conditions set forth herein;
NOW, THEREFORE, in consideration of the mutual covenants and agreements set
forth herein and in the Merger Agreement, and for other good and valuable
consideration, the adequacy of which is hereby acknowledged, the parties hereto
agree as follows:
SECTION 1. Definitions. Capitalized terms used and not defined herein have
the respective meanings assigned to them in the Merger Agreement.
SECTION 2. Grant of Stock Option. Parent hereby grants to the Company an
irrevocable option (the 'Stock Option') to purchase, on the terms and subject to
the conditions hereof, for $58.375 per share (the 'Exercise Price') in cash, up
to 109,308,537 fully paid and non-assessable shares (the 'Option Shares') of
Parent's common stock, par value $1.00 per share (the 'Common Stock'). The
Exercise Price and number of Option Shares shall be subject to adjustment as
provided in Section 5 below.
SECTION 3. Exercise of Stock Option.
(a) The Company may, subject to the provisions of this Section 3, exercise
the Stock Option, in whole or in part, at any time or from time to time, after
the occurrence of a Parent Trigger Event (defined below) and prior to the
Termination Date. 'Termination Date' shall mean, subject to Section 9(a), the
earliest of (i) the Effective Time of the Merger, (ii) 120 days after the date
full payment contemplated by Section 10.6(a) of the Merger Agreement is made by
Parent to the Company thereunder, (iii) the date of the termination of the
Merger Agreement so long as, in the case of this clause (iii), no Parent Trigger
Event has occurred or could still occur pursuant to Section 10.6(a) of the
Merger Agreement or (iv) the first anniversary of the date of termination of the
Merger Agreement. Notwithstanding the occurrence of the Termination Date, the
Company shall be entitled to purchase Option Shares pursuant to any exercise of
the Stock Option, on the terms and subject to the conditions hereof, to the
extent the Company exercised the Stock Option prior to the occurrence of the
Termination Date. A 'Parent Trigger Event' shall mean an event the result of
which is that the total fee or fees required to be paid by Parent to the Company
pursuant to Section 10.6(a) of the Merger Agreement is equal to $350 million.
(b) The Company may purchase Option Shares pursuant to the Stock Option
only if all of the following conditions are satisfied: (i) no preliminary or
permanent injunction or other order issued by any federal or state court of
competent jurisdiction in the United States shall be in effect prohibiting
delivery of the Option Shares, (ii) any waiting period applicable to the
purchase of the Option Shares under the HSR Act shall have expired or been
terminated, and (iii) any prior notification to or approval of any other
regulatory authority in the United States or elsewhere required in connection
with such purchase shall have been made or obtained, other than those which if
not made or obtained would not reasonably be expected to result in a significant
detriment to Parent and its Subsidiaries, taken as a whole.
<PAGE>
(c) If the Company shall be entitled to and wishes to exercise the Stock
Option, it shall do so by giving Parent written notice (the 'Stock Exercise
Notice') to such effect, specifying the number of Option Shares to be purchased
and a place and closing date not earlier than three business days nor later than
10 business days from the date of such Stock Exercise Notice. If the closing
cannot be consummated on such date because any condition to the purchase of
Option Shares set forth in Section 3(b) has not been satisfied or as a result of
any restriction arising under any applicable law or regulation, the closing
shall occur five days (or such earlier time as the Company may specify) after
satisfaction of all such conditions and the cessation of all such restrictions.
(d) So long as the Stock Option is exercisable pursuant to the terms of
Section 3(a), the Company may elect to send a written notice to Parent (the
'Cash Exercise Notice') specifying a date not later than 20 business days and
not earlier than 5 business days following the date such notice is given on
which date Parent shall pay to the Company in exchange for the cancellation of
the relevant portion of the Stock Option an amount in cash equal to the Spread
(as hereinafter defined) multiplied by all or such relevant portion of the
Option Shares subject to the Stock Option as the Company shall specify. As used
herein, 'Spread' shall mean the excess, if any, over the Exercise Price of the
higher of (x) if applicable, the highest price per share of Common Stock paid or
proposed to be paid by any Person pursuant to any Acquisition Proposal relating
to Parent (the 'Proposed Alternative Transaction Price') or (y) the average of
the closing prices of the shares of Common Stock on the principal securities
exchange or quotation system on which the Common Stock is then listed or traded
as reported in The Wall Street Journal (but subject to correction for
typographical or other manifest errors in such reporting) for the five
consecutive trading days immediately preceding the date on which the Cash
Exercise Notice is given (the 'Average Market Price'). If the Proposed
Alternative Transaction Price includes any property other than cash, the
Proposed Alternative Transaction Price shall be the sum of (i) the fixed cash
amount, if any, included in the Proposed Alternative Transaction Price plus
(ii) the fair market value of such other property. If such other property
consists of securities with an existing public trading market, the average of
the closing prices (or the average of the closing bid and asked prices if
closing prices are unavailable) for such securities in their principal public
trading market on the five trading days ending five days prior to the date on
which the Cash Exercise Notice is given shall be deemed to equal the fair market
value of such property. If such other property includes anything other than cash
or securities with an existing public trading market, the Proposed Alternative
Transaction Price shall be deemed to equal the Average Market Price. Upon
exercise of its right pursuant to this Section 3(d) and the receipt by the
Company of the applicable cash amount with respect to the Option Shares or the
applicable portion thereof, the obligations of Parent to deliver Option Shares
pursuant to Section 3(e) shall be terminated with respect to the number of
Option Shares specified in the Cash Exercise Notice. The Spread shall be
appropriately adjusted, if applicable, to give effect to Section 5.
(e) (i) At any closing pursuant to Section 3(c) hereof, the Company shall
make payment to Parent of the aggregate purchase price for the Option Shares to
be purchased and Parent shall deliver to the Company a certificate representing
the purchased Option Shares, registered in the name of the Company or its
designee and (ii) at any closing pursuant to Section 3(d) hereof, Parent will
deliver to the Company cash in an amount determined pursuant to Section 3(d)
hereof. Any payment made by the Company to Parent, or by Parent to the Company,
pursuant to this Agreement shall be made by wire transfer of immediately
available funds to a bank designated by the party receiving such funds, provided
that the failure or refusal by Parent to designate such a bank account shall not
preclude the Company from exercising the Stock Option.
(f) Certificates for Common Stock delivered at the closing described in
Section 3(c) hereof shall be endorsed with a restrictive legend which shall read
substantially as follows:
'The transfer of the shares represented by this certificate is subject
to resale restrictions arising under the Securities Act of 1933, as
amended.'
It is understood and agreed that the above legend shall be removed by
delivery of substitute certificate(s) without this reference (i) if the Company
shall have delivered to Parent a copy of a no-action letter from the staff of
the Securities and Exchange Commission, or a written opinion of
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<PAGE>
counsel, in form and substance reasonably satisfactory to Parent, to the effect
that such legend is not required for purposes of, or resale may be effected
pursuant to an exemption from registration under, the Securities Act or (ii) in
connection with any sale registered under the Securities Act. In addition, these
certificates shall bear any other legend as may be required by applicable law.
SECTION 4. Representations of the Company. The Company hereby represents
and warrants to Parent that any Option Shares acquired by the Company upon the
exercise of the Stock Option will not be, and the Stock Option is not being,
acquired by the Company with the intention of making a public distribution
thereof, other than pursuant to an effective registration statement under the
Securities Act or otherwise in compliance with the Securities Act.
SECTION 5. Adjustment upon Changes in Capitalization or Merger.
(a) In the event of any change in the outstanding shares of Common Stock by
reason of a stock dividend, stock split, reverse stock split, split-up, merger,
consolidation, recapitalization, combination, conversion, exchange of shares,
extraordinary or liquidating dividend or similar transaction which would effect
the Company's rights hereunder, the type and number of shares or securities
purchasable upon the exercise of the Stock Option and the Exercise Price shall
be adjusted appropriately, and proper provision will be made in the agreements
governing such transaction, so that the Company will receive upon exercise of
the Stock Option a number and class of shares or amount of other securities or
property that the Company would have received in respect of the Option Shares
had the Stock Option been exercised immediately prior to such event or the
record date therefor, as applicable. In no event shall the number of shares of
Common Stock subject to the Stock Option exceed 19.9% of the number of shares of
Common Stock issued and outstanding at the time of exercise (without giving
effect any shares subject or issued pursuant to the Stock Option).
(b) Without limiting the foregoing, whenever the number of Option Shares
purchasable upon exercise of the Stock Option is adjusted as provided in this
Section 5, the Exercise Price shall be adjusted by multiplying the Exercise
Price by a fraction, the numerator of which is equal to the number of Option
Shares purchasable prior to the adjustment and the denominator of which is equal
to the number of Option Shares purchasable after the adjustment.
(c) Without limiting or altering the parties' rights and obligations under
the Merger Agreement, in the event that Parent enters into an agreement (i) to
consolidate with or merge into any Person, other than the Company or one of its
Subsidiaries, and Parent will not be the continuing or surviving corporation in
such consolidation or merger, (ii) to permit any Person, other than the Company
or one of its Subsidiaries, to merge into Parent and Parent will be the
continuing or surviving corporation, but in connection with this merger, the
shares of Common Stock outstanding immediately prior to the consummation of this
merger will be changed into or exchanged for stock or other securities of Parent
or any other Person or cash or any other property, or the shares of Common Stock
outstanding immediately prior to the consummation of such merger will, after
such merger, represent less than 50% of the outstanding voting securities of the
merged company, or (iii) to sell or otherwise transfer all or substantially all
of its assets to any Person, other than the Company or one of its Subsidiaries,
then, and in each such case, the agreement governing this transaction shall make
proper provision so that the Stock Option will, upon the consummation of any
such transaction and upon the terms and conditions set forth herein, be
converted into, or exchanged for, an option with identical terms appropriately
adjusted to acquire the number and class of shares or other securities or
property that the Company would have received in respect of Option Shares had
the Stock Option been exercised immediately prior to such consolidation, merger,
sale or transfer or the record date therefor, as applicable, and will make any
other necessary adjustments. Parent shall take such steps in connection with
such consolidation, merger, liquidation or other transaction as may be
reasonably necessary to assure that the provisions hereof shall thereafter apply
as nearly as possible to any securities or property thereafter deliverable upon
exercise of the Stock Option.
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SECTION 6. Further Assurances; Remedies.
(a) Parent agrees to maintain, free from preemptive rights, sufficient
authorized but unissued or treasury shares of Common Stock so that the Stock
Option may be fully exercised without additional authorization of Common Stock
after giving effect to all other options, warrants, convertible securities and
other rights of third parties to purchase shares of Common Stock from Parent,
and to issue the appropriate number of shares of Common Stock pursuant to the
terms of this Agreement. All of the Option Shares to be issued pursuant to the
Stock Option, upon issuance and delivery thereof pursuant to this Agreement,
will be duly authorized, validly issued, fully paid and nonassessable, and will
be delivered free and clear of all claims, liens, charges, encumbrances and
security interests (other than those created by this Agreement).
(b) Parent agrees not to avoid or seek to avoid (whether by charter
amendment or through reorganization, consolidation, merger, issuance of rights,
dissolution or sale of assets, or by any other voluntary act) the observance or
performance of any of the covenants, agreements or conditions to be observed or
performed hereunder by Parent.
(c) Parent agrees that promptly after the occurrence of a Parent Trigger
Event it shall take all actions as may from time to time be required (including
(i) complying with all applicable premerger notification, reporting and waiting
period requirements under the HSR Act and (ii) in the event that prior
notification to or approval of any other regulatory authority in the United
States or elsewhere is necessary before the Stock Option may be exercised,
complying with its obligations thereunder and cooperating with the Company in
the Company's preparing and processing the required notices or applications) in
order to permit the Company to exercise the Stock Option and purchase Option
Shares pursuant to such exercise.
(d) The parties agree that the Company would be irreparably damaged if for
any reason Parent failed, in breach of its obligations hereunder, to issue any
of the Option Shares (or other securities or property deliverable pursuant to
Section 5 hereof) upon exercise of the Stock Option or to perform any of its
other obligations under this Agreement, and that the Company would not have an
adequate remedy at law for money damages in such event. Accordingly, the Company
shall be entitled to specific performance and injunctive and other equitable
relief to enforce the performance of this Agreement by Parent. Accordingly, if
the Company should institute an action or proceeding seeking specific
enforcement of the provisions hereof, Parent hereby waives the claim or defense
that the Company has an adequate remedy at law and hereby agrees not to assert
in any such action or proceeding the claim or defense that such a remedy at law
exists. Parent further agrees to waive any requirements for the securing or
posting of any bond in connection with obtaining any such equitable relief. This
provision is without prejudice to any other rights that the Company may have
against Parent for any failure to perform its obligations under this Agreement.
SECTION 7. Listing of Option Shares. Promptly after the occurrence of a
Parent Trigger Event and from time to time thereafter if necessary, Parent will
apply to list all of the Option Shares subject to the Stock Option on the NYSE
and will use its reasonable best efforts to obtain approval of such listing as
soon as practicable.
SECTION 8. Registration of the Option Shares.
(a) If, within two years of the exercise of the Stock Option, the Company
requests Parent in writing to register under the Securities Act any of the
Option Shares received by the Company hereunder, Parent will use its reasonable
best efforts to cause the offering of the Option Shares so specified in such
request to be registered as soon as practicable so as to permit the sale or
other distribution by the Company of the Option Shares specified in its request
(and to keep such registration in effect for a period of at least 90 days), and
in connection therewith Parent shall prepare and file as promptly as reasonably
possible (but in no event later than 60 days from receipt of the Company's
request) a registration statement under the Securities Act to effect such
registration on an appropriate form, which would permit the sale of the Option
Shares by the Company in accordance with the plan of disposition specified by
the Company in its request. Parent shall not be obligated to make effective more
than two registration statements pursuant to
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the foregoing sentence; provided, however, that Parent may postpone the filing
of a registration statement relating to a registration request by the Company
under this Section 8 for a period of time (not in excess of 90 days) if in
Parent's reasonable, good faith judgment such filing would require the
disclosure of material information that Parent has a bona fide business purpose
for preserving as confidential (but in no event shall Parent exercise such
postponement right more than once in any twelve month period).
(b) Parent shall notify the Company in writing not less than 10 days prior
to filing a registration statement under the Securities Act (other than a filing
on Form S-4 or S-8 or any successor form) with respect to any shares of Common
Stock. If the Company wishes to have any portion of its Option Shares included
in such registration statement, it shall advise Parent in writing to that effect
within two business days following receipt of such notice, and Parent will
thereupon include the number of Option Shares indicated by the Company under
such Registration Statement; provided that if the managing underwriter(s) of the
offering pursuant to such registration statement advise Parent that in their
opinion the number of shares of Common Stock requested to be included in such
registration exceeds the number which can be sold in such offering on a
commercially reasonable basis, priority shall be given to securities intended to
be registered by Parent for its own account and, thereafter, Parent shall
include in such registration Option Shares requested by the Company to be
included therein pro rata with the shares of Common Stock intended to be
included therein by other stockholders of Parent.
(c) All expenses relating to or in connection with any registration
contemplated under this Section 8 and the transactions contemplated thereby
(including all filing, printing, reasonable professional, roadshow and other
fees and expenses relating thereto) will be at Parent's expense except for
underwriting discounts or commissions and brokers' fees. Parent and the Company
agree to enter into a customary underwriting agreement with underwriters upon
such terms and conditions as are customarily contained in underwriting
agreements with respect to secondary distributions. Parent shall indemnify the
Company, its officers, directors, agents, other controlling persons and any
underwriters retained by the Company in connection with such sale of such Option
Shares in the customary way, and shall agree to customary contribution
provisions with such persons, with respect to claims, damages, losses and
liabilities (and any expenses relating thereto) arising (or to which the
Company, its officers, directors, agents, other controlling persons or
underwriters may be subject) in connection with any such offer or sale under the
federal securities laws or otherwise, except for information furnished in
writing by the Company or its underwriters to Parent. The Company and its
underwriters, respectively, shall indemnify Parent to the same extent with
respect to information furnished in writing to Parent by the Company and such
underwriters, respectively.
SECTION 9. Miscellaneous.
(a) Extension of Exercise Periods. The periods during which the Company may
exercise its rights under Sections 2 and 3 hereof shall be extended in each such
case at the request of the Company to the extent necessary to avoid liability by
the Company under Section 16(b) of the Exchange Act by reason of such exercise.
(b) Amendments; Entire Agreement. This Agreement may not be modified,
amended, altered or supplemented, except upon the execution and delivery of a
written agreement executed by the parties hereto. This Agreement, together with
the Merger Agreement (including any exhibits and schedules thereto), contains
the entire agreement between the parties hereto with respect to the subject
matter hereof and supersedes all prior and contemporaneous agreements and
understandings, oral or written, with respect to such transactions.
(c) Notices. All notices, requests and other communications to either party
hereunder shall be in writing (including facsimile or similar writing) and shall
be given,
C-5
<PAGE>
if to Parent, to:
AlliedSignal Inc.
101 Columbia Road
P.O. Box 3000
Morristown, NJ 07962-2496
Attention: Peter M. Kreindler
Senior Vice President,
General Counsel
and Secretary
Facsimile No.: (973) 455-4217
with a copy to:
Fried, Frank, Harris, Shriver & Jacobson
One New York Plaza
New York, NY 10004-1980
Attention: Arthur Fleischer, Jr., Esq.
Charles M. Nathan, Esq.
Facsimile No.: (212) 859-4000
if to the Company, to:
Honeywell Inc.
Honeywell Plaza
Minneapolis, MN 55408
Attention: Edward D. Grayson
Vice President and General Counsel
Facsimile No.: (612) 951-3859
with a copy to:
Skadden, Arps, Slate, Meagher & Flom LLP
919 Third Avenue
New York, NY 10022-3897
Attention: Peter Allan Atkins, Esq.
David J. Friedman, Esq.
Facsimile No.: (212) 735-2000
or to such other address or facsimile number as either party may hereafter
specify for the purpose by notice to the other party hereto. Each such notice,
request or other communication shall be effective (i) if given by facsimile,
when such facsimile is transmitted to the facsimile number specified in this
Section 9 and the appropriate facsimile confirmation is received or (ii) if
given by any other means, when delivered at the address specified in this
Section 9.
(d) Expenses. Each party hereto shall pay its own expenses incurred in
connection with this Agreement, except as otherwise specifically provided herein
and without limiting anything contained in the Merger Agreement.
(e) Severability. If any term, provision, covenant or restriction of this
Agreement is held to be invalid, void or unenforceable, the remainder of the
terms, provisions, covenants and restrictions of this Agreement shall remain in
full force and effect and shall in no way be affected, impaired or invalidated.
(f) Governing Law. This Agreement shall be governed by and construed in
accordance with the laws of the State of Delaware without regard to principles
of conflicts of law.
(g) Jurisdiction. Any suit, action or proceeding seeking to enforce any
provision of, or based on any matter arising out of or in connection with, this
Agreement or the transactions contemplated hereby or thereby may be brought in
any federal or state court located in the State of Delaware, and each of the
parties hereby consents to the jurisdiction of such courts (and of the
appropriate appellate courts therefrom) in any such suit, action or proceeding
and irrevocably
C-6
<PAGE>
waives, to the fullest extent permitted by law, any objection which it may now
or hereafter have to the laying of the venue of any such suit, action or
proceeding in any such court or that any such suit, action or proceeding which
is brought in any such court has been brought in an inconvenient forum. Process
in any such suit, action or proceeding may be served on any party anywhere in
the world, whether within or without the jurisdiction of any such court. Without
limiting the foregoing, each party agrees that service of process on such party
as provided in Section 9(c) shall be deemed effective service of process on such
party.
(h) Counterparts. This Agreement may be executed in two or more
counterparts, each of which shall be an original, but all of which together
shall constitute one and the same Agreement.
(i) Headings. The section headings herein are for convenience only and
shall not affect the construction hereof.
(j) Assignment. This Agreement shall be binding upon each party hereto and
such party's successors and assigns. This Agreement shall not be assignable by
Parent, but may be assigned by the Company in whole or in part to any direct or
indirect wholly-owned subsidiary of the Company, provided that the Company shall
remain liable for any obligations so assigned.
(k) Survival. All representations, warranties and covenants contained
herein shall survive the execution and delivery of this Agreement and the
consummation of the transactions contemplated hereby.
(l) Time of the Essence. The parties agree that time shall be of the
essence in the performance of obligations hereunder.
(m) Public Announcement. The Company and Parent will consult with each
other before issuing any press release or making any public statement with
respect to this Agreement and the transactions contemplated hereby and shall not
issue any press release or make any public statement without the prior consent
of the other party, which shall not be unreasonably withheld. Notwithstanding
the foregoing, any such press release or public statement as may be required by
applicable law or any listing Agreement with any national securities exchange,
may be issued prior to such consultation, if the party making the release or
statement has used its reasonable efforts to consult with the other party.
SECTION 10. Profit Limitation.
(a) Notwithstanding any other provision of this Agreement or the Merger
Agreement, in no event shall the Company's Total Profit (as defined below)
exceed $400 million (the 'Maximum Amount') and, if it otherwise would exceed
such Maximum Amount, the Company at its sole election may (i) pay cash to
Parent, (ii) deliver to Parent for cancellation Option Shares previously
purchased by the Company, or (iii) any combination thereof, so that the
Company's actually realized Total Profit (as defined below) shall not exceed the
Maximum Amount after taking into account the foregoing actions.
(b) Notwithstanding any other provision of this Agreement, the Stock Option
may not be exercised for a number of Option Shares as would, as of the date of
the Stock Exercise Notice or Cash Exercise Notice, as applicable, result in a
Notional Total Profit (as defined below) of more than the Maximum Amount and, if
exercise of the Stock Option otherwise would result in the Notional Total Profit
exceeding such amount, the Company, at its discretion, may (in addition to any
of the actions specified in Section 10(a) above) increase the Exercise Price for
that number of Option Shares set forth in the Stock Exercise Notice or Cash
Exercise Notice, as applicable, so that the Notional Total Profit shall not
exceed the Maximum Amount; provided, that nothing in this sentence shall
restrict any exercise of the Stock Option permitted hereby on any subsequent
date at the Exercise Price set forth in Section 2 hereof.
(c) As used herein, the term 'Total Profit' shall mean the aggregate amount
(before taxes) of the following: (i) the cash amount actually received by the
Company pursuant to Section 10.6(a) of the Merger Agreement less any repayment
by the Company to Parent pursuant to Section 10(a)(i) hereof, (ii) (x) the net
cash amounts or the fair market value of any property received by the Company
pursuant to the sale of Option Shares (or of any other securities into or for
which such
C-7
<PAGE>
Option Shares are converted or exchanged), less (y) the Company's purchase price
for such Option Shares (or other securities) plus (iii) the aggregate amounts
received by the Company pursuant to Section 3(d).
(d) As used herein, the term 'Notional Total Profit' with respect to any
number of Option Shares as to which the Company may propose to exercise the
Stock Option shall mean the Total Profit determined as of the date of the Stock
Exercise Notice or Cash Exercise Notice, as applicable, assuming that the Stock
Option was exercised on such date for such number of Option Shares and assuming
that such Option Shares, together with all other Option Shares previously
acquired upon exercise of the Stock Option and held by the Company and its
affiliates as of such date, were sold for cash at the closing price on the NYSE
for the Common Stock as of the close of business on the preceding trading day
(less customary brokerage commissions).
SECTION 11. Restrictions on Certain Actions; Covenants of the Company. From
and after the date of exercise of the Stock Option (other than an exercise
contemplated by Section 3(d) hereof), in whole or part, and for as long as the
Company owns shares of Common Stock acquired pursuant to the exercise of the
Stock Option:
(a) Without the prior consent of the Board of Directors of Parent, the
Company will not, and will not permit any of its affiliates to:
(i) acquire or agree, offer or propose to acquire, ownership
(including, but not limited to, beneficial ownership as defined in Rule
13d-3 under the Exchange Act) of more than 25% of any class of Voting
Securities (as defined in below), or any rights or options to acquire such
ownership (including from a third party);
(ii) propose a merger, consolidation or similar transaction involving
Parent;
(iii) offer or propose to purchase, lease or otherwise acquire all or
a substantial portion of the assets of Parent;
(iv) solicit or participate in the solicitation of any proxies or
consents with respect to the securities of Parent;
(v) enter into any agreements or arrangements with any third party
with respect to any of the foregoing; or
(vi) request permission to do any of the foregoing or any permission
to make any public announcement with respect to any of the foregoing; and
(b) (i) The Company agrees to be present in person or to be represented by
proxy at all stockholder meetings of Parent so that all shares of Voting
Securities beneficially owned by it or its affiliates may be counted for the
purpose of determining the presence of a quorum at such meetings.
(ii) The Company agrees to vote or cause to be voted all Voting
Securities beneficially owned by it or its affiliates proportionately with
the votes cast by all other stockholders present and voting.
(iii) The provisions of this Section 11 shall terminate at such time
as the Stock Option granted hereby expires without having been exercised in
whole or part. The provisions of this Section 11 shall not apply to actions
taken pursuant to the Merger Agreement. 'Voting Securities' means the
shares of Common Stock, preferred stock and any other securities of Parent
entitled to vote generally for the election of directors or any other
securities (including, without limitation, rights and options), convertible
into, exchangeable into or exercisable for, any of the foregoing (whether
or not presently exercisable, convertible or exchangeable).
C-8
<PAGE>
IN WITNESS WHEREOF, Parent and the Company have caused this Agreement to be
duly executed as of the day and year first above written.
ALLIEDSIGNAL INC.
By: /s/ Lawrence A. Bossidy
--------------------------------
Name: Lawrence A. Bossidy
Title: Chairman and Chief Executive
Officer
HONEYWELL INC.
By: /s/ Michael R. Bonsignore
--------------------------------
Name: Michael R. Bonsignore
Title: Chairman and Chief Executive
Officer
C-9
<PAGE>
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<PAGE>
ANNEX D
[LOGO]
J.P. Morgan Securities Inc.
60 Wall Street
New York NY
10260-0060
June 4, 1999
The Board of Directors
AlliedSignal Inc.
101 Columbia Road
Morristown, New Jersey 07962
Attention: Mr. Lawrence A. Bossidy
Chairman of the Board and Chief Executive Officer
Ladies and Gentlemen:
You have requested our opinion as to the fairness, from a financial point of
view, to AlliedSignal Inc. (the 'Company') of the consideration to be paid by
the Company in connection with the proposed merger (the 'Merger') of Blossom
Acquisition Corp., a wholly owned subsidiary of the Company (the 'Merger
Subsidiary'), with and into Honeywell Inc. ('Honeywell'). Pursuant to the
Agreement and Plan of Merger, dated as of June 4, 1999 (the 'Agreement'), by and
among the Company, Honeywell and the Merger Subsidiary, the Merger Subsidiary
will merge with and into Honeywell, Honeywell will be the surviving corporation
in the Merger, and each share of common stock, par value $1.50 per share, of
Honeywell outstanding immediately prior to the effective time of the Merger
(other than certain shares which are to be canceled pursuant to the Agreement)
will be converted into the right to receive 1.875 shares of common stock, par
value $1.00 per share (the 'Company Common Stock'), of the Company.
In arriving at our opinion, we have reviewed (i) the Agreement; (ii) certain
publicly available information concerning the business of the Company and
Honeywell and of certain other companies engaged in businesses comparable to
those of the Company and Honeywell, and the reported market prices for certain
other companies' securities deemed comparable; (iii) publicly available terms of
certain transactions involving companies comparable to Honeywell and the
consideration received for such companies; (iv) current and historical market
prices of the common stock of the Company and Honeywell; (v) the audited
financial statements of the Company and Honeywell for the fiscal year ended
December 31, 1998, and the unaudited financial statements of the Company and
Honeywell for the period ended March 31, 1999 and April 4, 1999, respectively;
(vi) certain internal financial analyses and forecasts prepared by the Company
and Honeywell and their respective managements; and (vii) the terms of other
business combinations that we deemed relevant.
In addition, we have held discussions with certain members of the management of
the Company and Honeywell with respect to certain aspects of the Merger, the
past and current business operations of the Company and Honeywell, the financial
condition and future prospects and operations of the Company and Honeywell, the
effects of the Merger on the financial condition and future prospects of the
Company and Honeywell, and certain other matters we believed necessary or
appropriate to our inquiry. We have reviewed such other financial studies and
<PAGE>
analyses and considered such other information as we deemed appropriate for the
purposes of this opinion.
In giving our opinion, we have relied upon and assumed, without independent
verification, the accuracy and completeness of all information that was publicly
available or was furnished to us by the Company and Honeywell or otherwise
obtained by us from third party sources, and we have not assumed any
responsibility or liability therefor. We have not conducted any valuation or
appraisal of any assets or liabilities, nor have any such valuations or
appraisals been provided to us. In relying on financial analyses and forecasts
provided to us, we have assumed that they have been reasonably prepared based on
assumptions reflecting the best currently available estimates and judgments by
management as to the expected future results of operations and financial
condition of the Company and Honeywell to which such analyses or forecasts
relate. In addition, as to certain loss contingencies, we have relied on
estimates provided by management of Honeywell as to the probable amount thereof.
We have also assumed that the Merger will have the tax consequences described in
discussions with, and materials furnished to us by, representatives of the
Company, and that the other transactions contemplated by the Agreement will be
consummated as described in the Agreement. We have relied as to all legal
matters relevant to rendering our opinion upon the advice of counsel.
Our opinion is necessarily based on economic, market and other conditions as in
effect on, and the information made available to us as of, the date hereof. It
should be understood that subsequent developments may affect this opinion and
that we do not have any obligation to update, revise, or reaffirm this opinion.
We are expressing no opinion herein as to the price at which the Company Common
Stock or the combined company's common stock will trade at any future time.
In addition, we were not requested to and did not provide advice concerning the
structure, the specific amount of the consideration or any other aspects of the
Merger, or to provide services other than the delivery of this opinion. We did
not participate in negotiations with respect to the terms of the Merger and
related transactions.
We will receive a fee from the Company for the delivery of this opinion. As you
are aware, we and our affiliates provide commercial banking, investment banking
and asset management services to the Company, and we and our affiliates also
provide commercial banking and asset management services to Honeywell. In
addition, Mr. Lawrence A. Bossidy is a director of J.P. Morgan & Co.
Incorporated. In the ordinary course of their businesses, J.P. Morgan Securities
Inc. and its affiliates may actively trade the debt and equity securities of the
Company or Honeywell for their own account or for the accounts of customers and,
accordingly, they may at any time hold long or short positions in such
securities.
On the basis of and subject to the foregoing, it is our opinion as of the date
hereof that the consideration to be paid by the Company in the proposed Merger
is fair, from a financial point of view, to the Company.
This letter is provided to the Board of Directors of the Company in connection
with and for the purposes of its evaluation of the Merger. This opinion does not
constitute a recommendation to any stockholder of the Company as to how such
stockholder should vote with respect to the Merger.
Very truly yours,
J.P. MORGAN SECURITIES INC.
By: /s/ JACQUES AIGRAIN
-----------------------------
Name: Jacques Aigrain
Title: Managing Director
D-2
<PAGE>
ANNEX E
[Logo] BEAR, STEARNS & CO. INC.
245 PARK AVENUE
NEW YORK, NEW YORK 10167
(212) 272-2000
ATLANTA BOSTON
CHICAGO DALLAS LOS ANGELES
NEW YORK SAN FRANCISCO
GENEVA HONG KONG
LONDON PARIS TOKYO
June 4, 1999
Board of Directors
Honeywell Inc.
2701 Fourth Avenue South
Minneapolis, MN 55408
Attention: Michael R. Bonsignore
Chairman and Chief Executive Officer
Ladies and Gentlemen:
We understand that Honeywell Inc. ('Honeywell') and AlliedSignal Inc.
('AlliedSignal') have entered into an Agreement and Plan of Merger dated
June 4, 1999 (the 'Merger Agreement') pursuant to which a newly-formed
acquisition subsidiary of AlliedSignal will be merged with and into Honeywell
(the 'Merger') and Honeywell will continue as the surviving entity as a wholly-
owned subsidiary of AlliedSignal (the 'Transaction'). Pursuant to the terms of
the Merger Agreement, each outstanding share of common stock, par value $1.50
per share, of Honeywell ('Honeywell Common Stock') will be converted into 1.875
shares of common stock, par value $1.00 per share, of AlliedSignal
('AlliedSignal Common Stock') in accordance with the terms of the Merger
Agreement. Such ratio of AlliedSignal Common Stock to Honeywell Common Stock is
hereinafter referred to as the 'Exchange Ratio'.
You have asked us to render our opinion as to whether the Exchange Ratio is
fair, from a financial point of view to the holders of Honeywell Common Stock.
In the course of our analyses for rendering this opinion, we have:
1. reviewed the Merger Agreement;
2. reviewed certain publicly-available business and financial information
relating to Honeywell including Honeywell's Annual Report to
Shareholders and Annual Report on Form 10-K for the fiscal year ended
December 31, 1998 and Honeywell's quarterly report on Form 10-Q for the
quarter ended April 4, 1999;
3. reviewed certain operating and financial information, including
projections, provided to us by management of Honeywell relating to
Honeywell's business and prospects;
4. met with certain members of Honeywell's senior management to discuss
its operations, historical financial statements, future prospects and
the potential benefits of the Transaction including the estimated
synergies reasonably obtainable upon the consummation of the
Transaction (the 'Synergies');
5. reviewed the historical prices and trading volume of the common shares
of Honeywell;
6. reviewed certain publicly-available business and financial information
relating to AlliedSignal including AlliedSignal's Annual Report to
Shareholders and Annual Report
<PAGE>
Honeywell Inc.
June 4, 1999
Page 2
on Form 10-K for the fiscal year ended December 31, 1998 and
AlliedSignal's quarterly report on Form 10-Q for the quarter ended
March 31, 1999;
7. reviewed certain operating and financial information, including
projections, provided to us by management of AlliedSignal relating to
AlliedSignal's business and prospects;
8. met with certain members of AlliedSignal's senior management to discuss
its operations, historical financial statements, future prospects and
the potential benefits of the Transaction including the Synergies;
9. reviewed the historical prices and trading volume of the common shares
of AlliedSignal;
10. reviewed publicly available financial data, stock market performance
data and valuation parameters of companies which we deemed generally
comparable to Honeywell and AlliedSignal;
11. reviewed the terms of recent acquisitions of companies which we deemed
generally comparable to the Transaction; and
12. conducted such other studies, analyses, inquiries and investigations as
we deemed appropriate.
In the course of our review, we have relied upon and assumed, without
independent verification, the accuracy and completeness of the financial and
other information, including projections and the Synergies, provided to,
discussed with, or reviewed by or for us by Honeywell and AlliedSignal or
otherwise publicly available. With respect to Honeywell's and AlliedSignal's
projected financial results and the Synergies, we have assumed that they have
been reasonably prepared on bases reflecting the best currently available
estimates and judgments of the senior managements of Honeywell and AlliedSignal
as to the expected future performance of Honeywell and AlliedSignal,
respectively. We have not assumed any responsibility for the independent
verification of any such information or of the projections and the Synergies and
we have further relied upon the assurances of the senior managements of
Honeywell and AlliedSignal that they are unaware of any facts that would make
such information, projections or Synergies provided to us incomplete or
misleading. We have also assumed with your consent that the Merger will
(i) qualify as a tax-free reorganization for U.S. federal income tax purposes,
(ii) be accounted for under the pooling-of-interests method of accounting and
(iii) otherwise be consummated in accordance with the terms described in the
Merger Agreement, without the waiver of any material condition and with all
necessary material consents and approvals having been obtained without any
limitations, restrictions, conditions, amendments or modifications that
collectively would be material to our analysis. In arriving at our opinion, we
have not performed or obtained any independent appraisal of the assets or
liabilities of Honeywell and AlliedSignal, nor have we been furnished with any
such appraisals. In rendering our opinion, we have not solicited, and have not
been authorized to solicit, third party acquisition interest in Honeywell. In
addition, we are not expressing any opinion as to the price or range of prices
at which Honeywell Common Stock or AlliedSignal Common Stock may trade
subsequent to the announcement or consummation of the Transaction. Our opinion
is necessarily based on economic, market and other conditions, and the
information made available to us, as of the date hereof.
We have acted as financial advisor to Honeywell in connection with the
Transaction and will receive a fee for such services, including the rendering of
this opinion, a significant portion of which is contingent upon the consummation
of the Transaction. We have previously rendered certain investment banking and
financial advisory services to both Honeywell and AlliedSignal for which we
received customary compensation. In the ordinary course of our business, we may
actively trade the securities of Honeywell and/or AlliedSignal for our own
account and for the
E-2
<PAGE>
Honeywell Inc.
June 4, 1999
Page 3
accounts of customers and, accordingly, may at any time hold a long or short
position in such securities.
It is understood that this letter is intended for the benefit and use of the
Board of Directors of Honeywell, does not address Honeywell's underlying
business decision to effect the Transaction nor constitute a recommendation to
the Board of Directors of Honeywell in connection with the Merger, and does not
constitute a recommendation to any holder of Honeywell Common Stock as to how to
vote shares in connection with the Merger. This opinion is not intended to be
relied upon or confer any rights or remedies upon any creditor or shareholder of
Honeywell, or any other third party. This letter is not to be used for any other
purpose, or reproduced, disseminated, quoted or referred to at any time, in
whole or in part, without our prior written consent; provided, however, that
this letter may be included in its entirety in any joint proxy
statement/prospectus to be distributed to the holders of Honeywell Common Stock
in connection with the Transaction.
Based on and subject to the foregoing, it is our opinion that the Exchange Ratio
is fair, from a financial point of view, to the holders of Honeywell Common
Stock as of the date hereof.
Very truly yours,
BEAR, STEARNS & CO. INC.
By: /s/ Michael J. Urfirer
----------------------------------
Name: Michael J. Urfirer
Title: Senior Managing Director
E-3
<PAGE>
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<PAGE>
ANNEX F
Certificate of Amendment
of
Restated Certificate of Incorporation
of
AlliedSignal Inc.
AlliedSignal Inc., a Delaware corporation (the 'Corporation'), hereby
certifies as follows:
1. The Board of Directors of the Corporation has duly adopted a resolution
setting forth a proposed amendment to the Restated Certificate of Incorporation
of the Corporation, declaring the proposed amendment to be advisable and
directing that the proposed amendment be presented to a special meeting of the
Corporation's shareowners, such amendment to replace existing Article FOURTH of
the Restated Certificate of Incorporation in its entirety with a new Article
FOURTH, to read as follows:
FOURTH: The total number of shares of stock which the corporation
shall have authority to issue is 2,040,000,000 shares of which
2,000,000,000 shares shall be Common Stock, par value $1.00 per share
('Common Shares'), and 40,000,000 shares shall be Preferred Stock, without
par value ('Preferred Stock').
2. The amendment of the Restated Certificate of Incorporation as set forth
above has been duly adopted in accordance with the provisions of Section 242 of
the Delaware General Corporation Law.
AlliedSignal Inc.
By:
--------------------------------
Name:
Title:
Attest:
- -----------------------------------
Name:
Title:
Dated: , 1999
<PAGE>
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<PAGE>
APPENDIX 1
HONEYWELL INC.
PROXY
PROXY SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS FOR
SPECIAL MEETING OF SHAREOWNERS ON SEPTEMBER 1, 1999
(I) (We) hereby appoint M.R. Bonsignore, E.D. Grayson and K.M. Gibson,
and each of them, proxies (each with power of substitution) to attend
the above special meeting of shareowners of Honeywell Inc. and any
adjournment, to vote all shares of Honeywell stock that (I) (we) hold of
record, including any shares held under the Dividend Reinvestment Plan
administered by ChaseMellon Shareholder Services, L.L.C., for all
matters described on the reverse side of this card, and on any other
matter that may properly come before the meeting.
The Honeywell Savings and Stock Ownership Plan requires that the Trustee
receive voting instructions for shares held under the plan by
August 27, 1999. To meet this requirement, either complete, sign and
date this card and mail it to be received no later than August 27, or
vote by telephone by August 27. After August 27, 1999, your voting
instructions for Plan shares cannot be revoked. Also, you may not vote
Plan shares in person at the meeting. The Trustee is authorized to vote
the Plan shares for which instructions have been given on any other
business that may come before the meeting. ChaseMellon Shareholder
Services, L.L.C. will tally the vote on behalf of the Trustee.
THIS PROXY IS CONTINUED ON THE REVERSE SIDE.
PLEASE VOTE VIA TELEPHONE OR SIGN AND DATE ON THE REVERSE SIDE
AND MAIL PROMPTLY.
------------------------------------------------------------------------
Comments:
------------------------------------------------------------------------
SEE REVERSE SIDE
- - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - -
^ FOLD AND DETACH HERE ^
IF VOTING BY MAIL, RETURN PROXY CARD IN THE ENCLOSED ENVELOPE. PLEASE BE SURE TO
SIGN AND DATE THE CARD.
ADMISSION TICKET MAP TO HONEYWELL'S CORPORATE OFFICES
HONEYWELL INC.
SPECIAL MEETING OF SHAREOWNERS
[MAP]
WEDNESDAY, SEPTEMBER 1, 1999
HONEYWELL CORPORATE OFFICES
2701 FOURTH AVENUE SOUTH
MINNEAPOLIS, MINNESOTA 55408
The meeting will be held in the
Corporate Auditorium. Shareowners
should enter at the main entrance on
Fourth Avenue. Security personnel will
be available to direct shareowners to
parking and handicapped access.
<PAGE>
<TABLE>
<S> <C>
Please mark
your vote as
indicated in [X]
this example
BOARD OF DIRECTORS RECOMMENDS A VOTE FOR
---------------------------------------------------------------
FOR AGAINST ABSTAIN
APPROVAL OF THE AGREEMENT AND
PLAN OF MERGER, DATED AS OF JUNE [ ] [ ] [ ] Will attend meeting [ ]
4, 1999, AMONG ALLIEDSIGNAL
INC., HONEYWELL INC. AND A
SUBSIDIARY OF ALLIEDSIGNAL, AND
THE MERGER PURSUANT THERETO.
THIS PROXY WILL BE VOTED FOR THE
PROPOSAL IF NO CHOICE IS
SPECIFIED.
--------------------------------------------------------------- Change of Address [ ]
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IF VOTING BY TELEPHONE, PLEASE FOLLOW INSTRUCTIONS BELOW
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Signature(s)__________________________________________________________ Date____________________
NOTE: Please sign as name appears hereon. Joint owners should each sign. When signing as attorney,
executor, administrator, trustee or guardian, please give the title as such.
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^ FOLD AND DETACH HERE ^
YOU CAN VOTE YOUR SHARES BY TELEPHONE
Your electronic vote authorizes the named proxies to vote in the same
manner as if you marked, signed, and returned your proxy card.
TO VOTE BY TELEPHONE:
1. If you have a touch-tone telephone, call 1-800-840-1208. This is a
TOLL-FREE number. You may call 24 hours a day through 4:00 p.m.
Eastern Standard Time on August 31, 1999.
2. Enter your Control Number, which is located in the box at the lower
right hand corner of this instruction form.
To vote as the Board of Directors recommends on the
proposal, press 1. If you wish to vote no on the proposal,
press 0. (When you press 1 or 0 here, your vote will be
confirmed and cast as you directed, or follow the recorded
instructions.)
3. Following voting, also confirm if you plan to attend the meeting in
Minneapolis.
Your vote on the proposal will be repeated and you will have an
opportunity to confirm it.
IF YOU VOTE BY TELEPHONE, DO NOT RETURN YOUR
PROXY CARD BY MAIL. THANK YOU FOR VOTING.
STATEMENT OF DIFFERENCES
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The registered trademark symbol shall be expressed as ................... 'r'
The section symbol shall be expressed as ................................ 'SS'
