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________________________________________________________________________________
________________________________________________________________________________
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-K
[x] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended December 31, 1999
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from to
Commission file number 1-8974
HONEYWELL INTERNATIONAL INC.
(Exact name of registrant as specified in its charter)
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DELAWARE 22-2640650
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(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
101 Columbia Road
P.O. Box 4000
Morristown, New Jersey 07962-2497
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(Address of principal executive (Zip Code)
offices)
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Registrant's telephone number, including area code (973)455-2000
Securities registered pursuant to Section 12(b) of the Act:
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Name of Each Exchange
Title of Each Class on Which Registered
- --------------------------------------- ------------------------------------
Common Stock, par value $1 per share* New York Stock Exchange
Chicago Stock Exchange
Pacific Exchange
Money Multiplier Notes due 2000 New York Stock Exchange
9 7/8% Debentures due June 1, 2002 New York Stock Exchange
9.20% Debentures due New York Stock Exchange
February 15, 2003
Zero Coupon Serial Bonds due 2000-2009 New York Stock Exchange
9 1/2% Debentures due June 1, 2016 New York Stock Exchange
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* The common stock is also listed for trading on the London stock exchange.
Securities registered pursuant to Section 12(g) of the Act: None
Indicate by check mark whether the Registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the Registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days. Yes X No _
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405
of Regulation S-K is not contained herein, and will not be contained, to the
best of Registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K [x]
The aggregate market value of the voting stock held by nonaffiliates of the
Registrant was approximately $45.9 billion at December 31, 1999.
There were 795,133,694 shares of Common Stock outstanding at December 31, 1999.
Documents Incorporated by Reference
Part I and II: Annual Report to Shareowners for the Year Ended December
31, 1999.
Part III: Proxy Statement for Annual Meeting of Shareowners to be held
May 1, 2000.
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HONEYWELL INTERNATIONAL INC.
CROSS REFERENCE SHEET
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Page(s) in
Form 10-K Heading(s) in Annual Report to Shareowners for Annual
Item No. Year Ended December 31, 1999 Report
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1. Business Note 23. Segment Financial Data ............... 59
Note 24. Geographic Areas -- Financial Data.... 60
Management's Discussion and Analysis........... 20, 24, 26,
28 and 31
3. Legal Proceedings Note 21. Commitments and Contingencies......... 55
5. Market for the Regis- Note 26. Unaudited Quarterly Financial
trant's Common Equity Information.................................. 61
and Related Stock- Selected Financial Data........................ 30
holder Matters
6. Selected Financial Data Selected Financial Data........................ 30
7. Management's Management's Discussion and Analysis........... 20, 24, 26,
Discussion and Analysis 28 and 31
of Financial Condition
and Results of
Operations
7A. Quantitative and Management's Discussion and Analysis........... 35
Qualitative Disclosure
About Market Risk
8. Financial Statements and Report of Independent Accountants.............. 39
Supplementary Data
Consolidated Statement of Income............... 40
Consolidated Balance Sheet..................... 41
Consolidated Statement of Cash Flows........... 42
Consolidated Statement of Shareowners'
Equity......................................... 43
Notes to Financial Statements.................. 44
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Heading(s) in Proxy Statement for Page(s) in
Annual Meeting of Shareowners Proxy
to be held May 1, 2000 Statement
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10. Directors and Executive Election of Directors; Voting Securities....... *
Officers of the
Registrant
11. Executive Compensation Election of Directors -- Compensation of
Directors;
Executive Compensation......................... *
12. Security Ownership of Voting Securities.............................. *
Certain Beneficial
Owners and Management
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* To be included in a definitive Proxy Statement to be filed with the
Securities and Exchange Commission not later than 120 days after
December 31, 1999.
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TABLE OF CONTENTS
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ITEM PAGE
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Part I. 1 Business.................................................................................... 4
2 Properties.................................................................................. 14
3 Legal Proceedings........................................................................... 15
4 Submission of Matters to a Vote of Security Holders......................................... 15
Executive Officers of the Registrant........................................................... 15
Part II. 5 Market for the Registrant's Common Equity and Related Stockholder Matters................... 16
6 Selected Financial Data..................................................................... 16
7 Management's Discussion and Analysis of Financial Condition and Results of Operations....... 16
7A Quantitative and Qualitative Disclosure About Market Risk.................................. 17
8 Financial Statements and Supplementary Data................................................. 17
9 Changes in and Disagreements with Accountants on Accounting and Financial Disclosure........ 18
Part III. 10 Directors and Executive Officers of the Registrant......................................... 18(a)
11 Executive Compensation..................................................................... 18(a)
12 Security Ownership of Certain Beneficial Owners and Management............................. 18(a)
13 Certain Relationships and Related Transactions............................................. 18
Part IV. 14 Exhibits, Financial Statement Schedules and Reports on Form 8-K............................ 18
Signatures............................................................................................... 20
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(a) These items are omitted since the Registrant will file with the Securities
and Exchange Commission a definitive Proxy Statement pursuant to Regulation
14A involving the election of directors not later than 120 days after
December 31, 1999. Certain other information relating to the Executive
Officers of the Registrant appears at pages 15 and 16 of this Report.
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PART I.
ITEM 1. BUSINESS
On December 1, 1999, AlliedSignal Inc. (AlliedSignal) and Honeywell Inc.
(former Honeywell) completed a merger under an Agreement and Plan of Merger
(Merger Agreement) dated as of June 4, 1999. Under the Merger Agreement, a
wholly-owned subsidiary of AlliedSignal merged with and into the former
Honeywell. As a result of the merger, the former Honeywell has become a
wholly-owned subsidiary of AlliedSignal. At the effective time of the merger,
AlliedSignal was renamed Honeywell International Inc. (Honeywell).
MAJOR BUSINESSES
Honeywell is a diversified technology and manufacturing company, serving
customers worldwide with aerospace products and services, control technologies
for buildings, homes and industry, automotive products, power generation
systems, specialty chemicals, fibers, plastics and electronic and advanced
materials. Our operations are conducted by strategic business units, which have
been aggregated under four reportable segments: Aerospace Solutions, Automation
& Asset Management, Performance Materials and Power & Transportation Products.
Financial information related to our reportable segments is included in Note 23
(Segment Financial Data) of Notes to Financial Statements in our 1999 Annual
Report to Shareowners which is incorporated by reference.
Following is a description of our strategic business units:
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STRATEGIC
BUSINESS UNITS PRODUCT CLASSES MAJOR PRODUCTS/SERVICES MAJOR CUSTOMERS/USES KEY COMPETITORS
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AEROSPACE SOLUTIONS
Engines & Turbine propulsion TFE731 turbofan Business, regional Pratt & Whitney
Systems engines TPE331 turboprop and military trainer aircraft Canada
TFE1042 turbofan Commercial and military Rolls Royce/
F124 turbofan helicopters Allison
LF502 turbofan Military vehicles Turbomeca
LF507 turbofan Commercial and military
CFE738 turbofan marine craft
AS907 turbofan
T53, T55 turboshaft
LT101 turboshaft
T800 turboshaft
TF40 turboshaft
TF50 turboshaft
AGT1500 turboshaft
Repair, overhaul and
spare parts
----------------------------------------------------------------------------------------------------------
Auxiliary power units Airborne auxiliary Commercial, regional, Pratt & Whitney
(APUs) power units business and Canada
Jet fuel starters military aircraft Sundstrand Power
Secondary power Ground power Systems
systems
Ground power units
Repair, overhaul and
spare parts
----------------------------------------------------------------------------------------------------------
Industrial power ASE 8 turboshaft Ground based European Gas
ASE 40/50 utilities, industrial Turbines
turboshaft or mechanical Rolls Royce/
ASE 120 turboshaft drives Allison
Solar
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Environmental control Air management systems: Commercial, regional Barber Colman
systems Air conditioning and general Hamilton Sundstrand
Bleed air systems aviation aircraft Liebherr
Cabin pressure control Military aircraft Lucas
systems Ground vehicles Parker Hannifin
Air purification and Spacecraft Smiths
treatment TAT
De-icing systems
Electrical power systems:
Power distribution and
control
Emergency power
generation
Repair, overhaul and
spare parts
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STRATEGIC
BUSINESS UNITS PRODUCT CLASSES MAJOR PRODUCTS/SERVICES MAJOR CUSTOMERS/USES KEY COMPETITORS
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Engine systems and Electronic and Commercial air transport, Auxilec
accessories hydromechanical regional and general aviation B.F. Goodrich
fuel controls Military aircraft Chandler-Evans
Engine start systems Hamilton Sundstrand
Electronic engine Lockheed Martin
controls Lucas
Sensors Parker Hannifin
Electric, hydraulic and
pneumatic power
generation systems
Pumps, starters,
converters, controls,
electrical actuation
for flight surfaces
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Aerospace Avionics systems Flight safety systems: Commercial, business Century
Electronic Enhanced Ground and general aviation aircraft Garmin
Systems Proximity Warning Government aviation B.F. Goodrich
Systems (EGPWS) Kaiser
Traffic Alert and Litton
Collision Avoidance Lockheed Martin
Systems (TCAS) Narco
Windshear detection Rockwell Collins
systems Sextant
Flight data and cockpit Smiths
voice recorders S-tec
Communication, navigation Trimble/Terra
and surveillance Universal
systems:
Air-to-ground telephones
Global positioning
systems
Automatic flight control
systems
Surveillance systems
Integrated systems
Flight management systems
Cockpit display systems
Data management and
aircraft performance
monitoring systems
Vehicle management
systems
Inertial sensor systems
for guidance,
stabilization,
navigation
and control
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Automatic test systems Computer-controlled U.S. Government and GDE Systems
automatic test systems international logistics Litton
Functional testers and centers Lockheed Martin
ancillaries Military aviation Northrop Grumman
Portable test and
diagnostic systems
Advanced battery
analyzer/charger
----------------------------------------------------------------------------------------------------------
Inertial sensor Gyroscopes, Military and Astronautics-
accelerometers, inertial commercial vehicles Kearfott
measurement units and Commercial spacecraft Ball
thermal switches and launch vehicles BEI
Energy utility boring GEC
Transportation Litton
Missiles Rockwell Collins
Munitions
----------------------------------------------------------------------------------------------------------
Radar systems Aircraft precision Global and U.S. airspace Hughes
landing agencies Motorola
Ground surveillance Military aviation Raytheon
Target detection devices Military missiles Rockwell Collins
Thomson-CSF
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STRATEGIC
BUSINESS UNITS PRODUCT CLASSES MAJOR PRODUCTS/SERVICES MAJOR CUSTOMERS/USES KEY COMPETITORS
- -------------- --------------- ----------------------- -------------------- ---------------
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Aerospace Management and technical Maintenance/operation U.S. and foreign government Computer Sciences
Services services and provision of space space communications, Dyncorp
systems, services logistics and information Lockheed Martin
and facilities services Raytheon
Systems engineering Commercial space ground SAIC
and integration segment systems and services ITT
Information technology
services
Logistics and sustainment
----------------------------------------------------------------------------------------------------------
Aircraft hardware Consumable hardware, Commercial and military Arrow Pemco
distribution including fasteners, aviation and space programs Avnet
bearings, bolts and Dixie
o-rings EV Roberts
Adhesives, sealants, Jamaica Bearings
lubricants, cleaners M&M Aerospace
and paints National Precision
Electrical connectors, Pentacon
switches, relays and Wesco Aircraft
circuit breakers W.S. Wilson
Value-added services,
repair and overhaul
kitting and point-of-use
replenishment
- -------------------------------------------------------------------------------------------------------------------------------
Aircraft Landing Landing systems Wheels and brakes Commercial and Aircraft Braking
Systems Friction products military aircraft Systems
Brake control systems Dunlop
Wheel and brake B.F. Goodrich
overhaul services Messier-Bugatti
Aircraft landing Messier-Dowty
systems integration
- -------------------------------------------------------------------------------------------------------------------------------
Federal Management services Maintenance/ U.S. government Lockheed Martin
Manufacturing & operation of facilities Westinghouse
Technologies Day and Zimmerman
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AUTOMATION & ASSET MANAGEMENT
Home and Building Products Heating, ventilating and Original equipment Danfoss
Control air conditioning manufacturers Emerson
controls and components Distributors Holmes
for homes and buildings Contractors Invensys
Indoor air quality Retailers Johnson Controls
products including System integrators Siemens
zoning, air cleaners, Commercial customers
humidification, heat and homeowners served
recovery and energy by the distributor,
recovery ventilators wholesaler, contractor,
Controls plus integrated retail and utility channels
electronic systems for
burner, boiler and
furnaces
Security products and
systems
Consumer household
products including
heaters, fans,
humidifiers, air
cleaners and thermostats
Water controls
----------------------------------------------------------------------------------------------------------
Solutions and services HVAC and building control Building managers and owners Carrier
solutions and services Contractors, architects and GroupMac
Energy management developers Invensys
solutions and services Consulting engineers Johnson Controls
Security and asset Security directors Local contractors
management solutions and Plant managers and utilities
services Utilities Siemens
Enterprise building Large, global corporations Simplex
integration solutions Public school systems Trane
Building information Universities
services Local governments
Critical environment
control solutions and
services
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STRATEGIC
BUSINESS UNITS PRODUCT CLASSES MAJOR PRODUCTS/SERVICES MAJOR CUSTOMERS/USES KEY COMPETITORS
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Industrial Control Industrial automation Advanced control software Refining and petrochemical Allen-Bradley
solutions and industrial companies Asea Brown Boveri
automation systems for Chemical manufacturers Aspentech
control and monitoring Oil and gas producers Banner
of continuous, batch and Food and beverage processors Fisher-Rosemount
hybrid operations Pharmaceutical companies Invensys
Process control Utilities Siemens
instrumentation Film and coated producers Yokogawa
Field instrumentation Pulp and paper industry
Web inspection Continuous web producers in
Production management the paper, plastics, metals,
software rubber, non- wovens and
Communications systems printing industries
for Industrial Control
equipment and systems
Consulting, networking
engineering and
installation
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Sensors, electromechanical Sensors, measurement, Package and materials handling Cherry
switches, control control and industrial operations Omron
components components Appliance manufacturers Phillips
Analytical Automotive companies Optek
instrumentation Aviation companies Eaton
Recorders Food and beverage processors Telemecanique
Controllers Medical equipment Turck
Flame safeguard equipment Heat treat processors Yokogawa
Flame safeguard equipment
Computer and business
equipment manufacturers
Data acquisition companies
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PERFORMANCE MATERIALS
Performance Carpet fibers Nylon filament and Commercial, residential and BASF
Polymers staple yarns specialty carpet markets DuPont
Bulk continuous Solutia
filament Rhodia
Nylon polymer
----------------------------------------------------------------------------------------------------------
Performance fibers Industrial nylon and Passenger car and truck tires Akra
polyester yarns Passenger car and light truck Akzo
Extended-chain seatbelts and airbags BASF
polyethylene composites Broad woven fabrics DSM
Fine denier nylon yarns Ropes and mechanical DuPont
rubber goods Hoechst
Luggage Hyosung
Sports gear Kolon
Bullet resistant vests, Nylstar
helmets and heavy armor Rhodia
Cut-resistant industrial
upholstery and workwear
Sailcloth
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Engineering plastics Thermoplastic nylon Food and pharmaceutical BASF
Thermoplastic alloys packaging Bayer
and blends Housings (e.g., electric hand DuPont
Post-consumer tools, chain saws) Hoechst
recycled PET resins Automotive components Monsanto
Recycled nylon resins Office furniture
Electrical and electronics
----------------------------------------------------------------------------------------------------------
Specialty films Cast nylon Food DuPont of Canada
Biaxially oriented nylon Pharmaceuticals Kolon
film Packaging and industrial Rexam Custom
Fluoropolymer film applications Toyobo
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Chemical intermediates Caprolactam Nylon for fibers, BASF
Ammonium sulfate engineered resins and film DSM
Hydroxylamine Fertilizer ingredients DuPont
Cyclohexanol Specialty chemicals Enichem
Cyclohexanone Vitamins Solutia
Rhodia
Ube
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STRATEGIC
BUSINESS UNITS PRODUCT CLASSES MAJOR PRODUCTS/SERVICES MAJOR CUSTOMERS/USES KEY COMPETITORS
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Specialty Chemicals Fluorocarbons Genetron'r' refrigerants, Refrigeration Atochem
aerosol and Air conditioning DuPont
insulation foam blowing Polyurethane foam ICI
agents Precision cleaning
Genesolv'r' solvents Optical
Oxyfume sterilant gases Metalworking
Hospitals
Medical equipment
manufacturers
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Hydrofluoric acid (HF) Anhydrous and aqueous Fluorocarbons Ashland
hydrofluoric acid Steel Atochem
Oil refining DuPont
Chemical intermediates Hashimoto
Merck
Norfluor
Quimaco Fluor
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Fluorine specialties Sulfur hexafluoride (SF6) Electric utilities Air Products
Iodine pentafluoride Magnesium Asahi Glass
(IF5) Gear manufacturers Atochem
Antimony pentafluoride Ausimont
(SbF5) Kanto Denko Kogyo
Solvay Fluor
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Nuclear services UF6 conversion services Nuclear fuel British Nuclear
Electric utilities Fuels
Cameco
Cogema
Tennex
----------------------------------------------------------------------------------------------------------
Pharmaceutical and Active pharmaceutical Agrichemicals Cambrex
agricultural chemicals ingredients Pharmaceuticals DSM
Oxime-based fine Lonza
chemicals Zeneca
Fluoroaromatics
Bromoaromatics
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High purity chemicals Ultra high purity HF Semiconductors LaPorte
Solvents Merck
Inorganic acids Olin
High purity solvents
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Industrial specialties HF derivatives Diverse by product type Varies by product
Imaging Fluoroaromatics line
Luminescence and Photodyes
plastic additives Phosphors
Chemical processing Catalysts
Materials and Oxime silanes
surface treatment
Sealants
----------------------------------------------------------------------------------------------------------
Specialty waxes Polyethylene waxes Coatings BASF
Petroleum waxes and Inks Clariant
blends Candles Eastman
Tire/Rubber Exxon
Personal care IGI
Packaging Leuna
Schumann-Sasol
----------------------------------------------------------------------------------------------------------
Specialty additives Polyethylene waxes PVC Eastman
Petroleum waxes and Plastics Geon
blends Henkel
PVC lubricant systems
Plastic additives
----------------------------------------------------------------------------------------------------------
UOP (joint venture) Processes Petroleum, ABB Lummus
Catalysts petrochemical, gas Criterion
Molecular sieves processing and IFP
Adsorbents chemical industries Mobil
Design of process Procatalyse
plants and equipment Stone & Webster
Customer catalyst Zeochem
manufacturing
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Electronic Wafer Interconnect- Semiconductors Applied Materials
Materials fabrication dielectrics Microelectronics Dow Corning
materials and Interconnect-metals Telecommunications Tokyo-Ohka
services Global services
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STRATEGIC
BUSINESS UNITS PRODUCT CLASSES MAJOR PRODUCTS/SERVICES MAJOR CUSTOMERS/USES KEY COMPETITORS
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Specialty Amorphous metal ribbons Electrical distribution ARMCO/Allegheny
electronic and components transformers CF Lux
materials Advanced polymers High frequency Gould
Copper-foils, aluminum electronics Morgan/VAC
bonded copper Metal joining Nippon
Theft deterrent Toshiba
systems Yates
Printed circuit
boards
Telecommunications
Computers
Consumer electronics
Semiconductors
Microelectronics
Assembly/Packaging
Subcontractors
----------------------------------------------------------------------------------------------------------
Advanced Ball grid arrays for chip Computers Fujitsu
packaging packaging Telecommunications Gore
substrates Consumer electronics Ibiden
Kyocera
Sheldahl
----------------------------------------------------------------------------------------------------------
Advanced Printed circuit boards Computers Hadco
circuits (PCBs); high density Telecommunications JVC
interconnect (HDI) Semiconductors Photocircuits
solutions, sophisticated Original equipment Unicap
rigid PCBs, high-layer manufacturers ViaSystems
count/multilayer PCBs,
standard multilayer PCBs
and laminated multi-chip
modules (MCM-L)
----------------------------------------------------------------------------------------------------------
Electronic Contract electronic Semiconductors Celestica
manufacturing assembly Electronic Flextronics
services manufacturing Jabil Circuits
Telecommunications SCI
Computers Solectron
Fiber-optic networks
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POWER & TRANSPORTATION PRODUCTS
Transportation and Charge-air systems Turbochargers Passenger car, truck Aisin Seiki
Power Systems Superchargers and off-highway Borg-Warner
Remanufactured components original equipment Hitachi
manufacturers (OEMs) Holset
Engine manufacturers IHI
Aftermarket distributors KKK
and dealers MHI
Schwitzer
----------------------------------------------------------------------------------------------------------
Thermal systems Charge-air coolers Passenger car, truck Behr/McCord
Aluminum radiators and off-highway OEMs Modine
Aluminum cooling Engine manufacturers Valeo
modules Aftermarket distributors
and dealers
----------------------------------------------------------------------------------------------------------
Power generation Microturbine generators Users of electricity Capstone
GE/Elliot
General Motors
Williams
International
Electric Utilities
----------------------------------------------------------------------------------------------------------
Air brake systems Anti-lock brake On-highway medium and Eaton
systems (ABS) heavy truck, Midland-Haldex
Air disc brakes bus and trailer OEMs Meritor
Air compressors Off-highway equipment WABCO
Air valves OEMs
Air dryers Aftermarket distributors
Actuators and dealers/original
Truck electronics equipment service (OES)
Competitive
remanufactured
products
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STRATEGIC
BUSINESS UNITS PRODUCT CLASSES MAJOR PRODUCTS/SERVICES MAJOR CUSTOMERS/USES KEY COMPETITORS
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Consumer Products Aftermarket Oil, air, fuel, Automotive and heavy AC Delco
Group filters, electronic transmission and coolant vehicle aftermarket channels STP/ArmorAll/
components and car care filters and OES Clorox
products PCV valves Mass merchandisers Bosch
Spark plugs Champion
Wire and cable Champ Labs
Antifreeze/coolant Havoline/Texaco
Ice-fighter products Mann & Hummel
Windshield washer fluids NGK
Waxes, washes and Peak/Old World
specialty cleaners Industries
Pennzoil-Quaker
State
Purolator/Arvin Ind
Turtle Wax
Various Private
Label
Wix/Dana
Zerex/Valvoline
- -------------------------------------------------------------------------------------------------------------------------------
Friction Materials Friction materials Disc brake pads Automotive and heavy vehicle Akebono
Aftermarket brake hard Drum brake linings OEMs, OES, brake BBA Group
parts Brake blocks manufacturers and aftermarket Dana
Disc and drum brake channels Delphi
components Mass merchandisers Federal-Mogul
Brake hydraulic Installers ITT Automotive
components Railway and commercial/ Italy S.r.l.
Brake fluid military aircraft OEMs JBI
Aircraft brake linings and brake manufacturers Nisshinbo
Railway linings Pagid
Sumitomo
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RECENT DEVELOPMENTS
As previously described on page 4 of this Form 10-K, AlliedSignal and the
former Honeywell completed a merger on December 1, 1999 which was accounted for
under the pooling-of-interests accounting method. On that date, the former
Honeywell shareowners were entitled to receive 1.875 shares of Honeywell
International Inc. common stock for each share of the former Honeywell common
stock, with cash paid in lieu of any fractional shares. As a result, former
Honeywell shareowners were entitled to receive approximately 241 million shares
of Honeywell International Inc. common stock valued at approximately $15 billion
at the merger date.
After completion of the merger in the fourth quarter of 1999, we recognized
a pretax charge of $642 million for the cost of actions designed to improve our
combined competitiveness and productivity and improve future profitability. The
merger-related actions included the elimination of redundant corporate offices
and functional administrative overhead; elimination of redundant and excess
facilities and workforce in our combined aerospace businesses; adoption of six
sigma productivity initiatives at the former Honeywell businesses; and
transition to a global shared services model. The components of the charge
included severance costs of $342 million, asset impairments of $108 million,
other exit costs of $57 million and merger-related transaction and period
expenses of $135 million. Planned global workforce reductions consisted of
approximately 6,500 administrative and manufacturing positions. Asset
impairments principally related to the elimination of redundant or excess
corporate and aerospace facilities and equipment. At year-end, approximately $9
million of redundant assets were not able to be removed from service and are
currently being depreciated over their shortened useful lives. Other exit costs
related to lease terminations and contract cancellation losses negotiated or
subject to reasonable estimation at year-end. Merger-related transaction and
period expenses consisted of investment banking and legal fees, former Honeywell
deferred compensation vested upon change in control and other direct
merger-related expenses incurred in the period the merger was completed. All
merger-related actions are expected to be completed by December 31, 2000.
In 1999, we also recognized a pretax charge of $321 million for the costs of
actions designed to reposition principally the AlliedSignal business units for
improved productivity and future profitability. These repositioning actions
included the organizational realignment of our aerospace businesses to
strengthen market focus and simplify business structure; elimination of an
unprofitable product line and rationalization of manufacturing capacity and
infrastructure in the Performance Polymers business; a
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reduction in infrastructure in the Turbocharging Systems business; closing a wax
refinery and carbon materials plant and rationalization of manufacturing
capacity in the Specialty Chemicals business; elimination of two manufacturing
facilities in our Electronic Materials business; a plant closure and outsourcing
activity in our automotive Consumer Products Group business; and related and
general workforce reductions in all AlliedSignal businesses and our Industrial
Control business. The components of the charge included severance costs of $140
million, asset impairments of $149 million, and other exit costs of $32 million.
Global workforce reductions consisted of approximately 5,100 manufacturing,
administrative, and sales positions. Asset impairments principally related to
manufacturing plant and equipment held for sale and capable of being taken out
of service and actively marketed in the period of impairment. Other exit costs
principally consisted of environmental exit costs associated with chemical plant
shutdowns. All repositioning actions, excluding environmental remediation, are
expected to be completed by December 31, 2000.
Based on our review of the operations and infrastructure of the two
companies and our integration planning to date, we expect that the combined
company will realize annual cost savings of at least $250 million in 2000, $575
million in 2001 and $750 million in 2002. We expect to realize at least $750
million in cost savings in 2002 as follows:
by achieving procurement and purchasing efficiencies by utilizing
AlliedSignal's and the former 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;
by accelerating implementation of our 'Six Sigma' initiative to achieve
defect-free performance in manufacturing and other business processes, and
applying this initiative to the former Honeywell businesses, to further
enhance the quality of our products and services and increase productivity;
by rationalizing corporate overhead costs through the elimination of
redundant corporate functions and facilities;
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;
by integrating the two companies' research and development programs and
achieving research and development efficiencies;
by reducing the combined company's infrastructure costs by integrating
AlliedSignal's and the former Honeywell's international operations and
eliminating infrastructure redundancies; and
by providing to the former 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 the
former 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.
In February 2000, we completed the acquisition of Pittway Corporation
(Pittway) for approximately $2.2 billion, including the assumption of the net
debt of Pittway of approximately $167 million. Pittway had 1999 sales of
approximately $1.6 billion. Pittway designs, manufactures and distributes
security and fire systems for homes and buildings.
In December 1999, we completed the acquisition of TriStar Aerospace Co.
(TriStar) for approximately $300 million, which included the assumption of
approximately $107 million of TriStar debt. TriStar had 1998 annual sales of
approximately $200 million. TriStar distributes fasteners, fastening systems and
related hardware and provides customized inventory management services to
original equipment manufacturers of aircraft and aircraft components, commercial
airlines, and aircraft maintenance, repair and overhaul facilities.
11
<PAGE>
In September 1999, we sold our Laminate Systems business for approximately
$425 million in cash resulting in a pretax gain of $106 million. The Laminate
Systems business had 1998 sales of approximately $400 million.
In August 1999, we completed the acquisition of Johnson Matthey Electronics,
a division of Johnson Matthey Plc, for approximately $655 millon in cash.
Johnson Matthey Electronics supplies wafer fabrication materials and
interconnect products to the electronics and telecommunications industries and
had 1998 annual sales of approximately $670 million.
AEROSPACE SALES
Our 1999 and 1998 sales to aerospace customers were both approximately 42
percent of our total sales. Our 1999 and 1998 sales to aerospace original
equipment manufacturers were 15 percent and 16 percent, respectively, of our
total sales. If there were a large decline in sales of aircraft that use our
components, operating results could be negatively impacted. In addition, our
1999 and 1998 sales to aftermarket customers of aerospace products and services
were 19 percent and 18 percent, respectively, of our total sales. If there were
a large decline in the number of flight hours for aircraft that use our
components or services, operating results could be negatively impacted.
U.S. GOVERNMENT SALES
Sales to the U.S. Government (principally by our Aerospace Solutions
segment), acting through its various departments and agencies and through prime
contractors, amounted to $2,383, $2,693 and $2,655 million in 1999, 1998 and
1997, respectively, which includes sales to the U.S. Department of Defense of
$1,415, $1,658 and $1,618 million in 1999, 1998 and 1997, respectively. We are
affected by U.S. Government budget constraints for defense and space programs.
U.S. defense spending increased slightly in 1999 and is also expected to
increase slightly in 2000.
In addition to normal business risks, companies engaged in supplying
military and other equipment to the U.S. Government are subject to unusual
risks, including dependence on Congressional appropriations and administrative
allotment of funds, changes in governmental procurement legislation and
regulations and other policies that may reflect military and political
developments, significant changes in contract scheduling, complexity of designs
and the rapidity with which they become obsolete, necessity for constant design
improvements, intense competition for U.S. Government business necessitating
increases in time and investment for design and development, difficulty of
forecasting costs and schedules when bidding on developmental and highly
sophisticated technical work and other factors characteristic of the industry.
Changes are customary over the life of U.S. Government contracts, particularly
development contracts, and generally result in adjustments of contract prices.
We, like other government contractors, are subject to government
investigations of business practices and compliance with government procurement
regulations. Although such regulations provide that a contractor may be
suspended or barred from government contracts under certain circumstances, and
the outcome of pending government investigations cannot be predicted with
certainty, we are not currently aware of any such investigations that we expect,
individually or in the aggregate, will have a material adverse effect on us. In
addition, we have a proactive business compliance program designed to ensure
compliance and sound business practices.
BACKLOG
Our total backlog at year-end 1999 and 1998 was $8,736 and $9,400 million,
respectively. We anticipate that approximately $6,400 million of the 1999
backlog will be filled in 2000. We believe that backlog is not a reliable
indicator of our future sales because a substantial portion of the orders
constituting this backlog may be canceled at the customer's option.
12
<PAGE>
COMPETITION
We are subject to active competition in substantially all product and
service areas. Such competition is expected to continue in all geographic
regions. Competitive conditions vary widely among the thousands of products and
services provided by us, and vary country by country. Depending on the
particular customer or market involved, our businesses compete on a variety of
factors, such as price, quality, reliability, delivery, customer service,
performance, applied technology, product innovation and product recognition.
Brand identity, service to customers and quality are generally important
competitive factors for our products and services, and there is considerable
price competition. Other competitive factors for certain products include
breadth of product line, research and development efforts and technical and
managerial capability. While our competitive position varies among our products
and services, we believe we are a significant factor in each of our major
product and service classes. However, certain of our products and services are
sold in competition with those of a large number of other companies, some of
which have substantial financial resources and significant technological
capabilities. In addition, some of our products compete with the captive
component divisions of original equipment manufacturers.
INTERNATIONAL OPERATIONS
We are engaged in manufacturing, sales and/or research and development
mainly in the U.S., Europe, Canada, Asia and Latin America. U.S. exports and
foreign manufactured products are significant to our operations.
Our international operations, including U.S. exports, are potentially
subject to a number of unique risks and limitations, including: fluctuations in
currency value; exchange control regulations; wage and price controls;
employment regulations; foreign investment laws; import and trade restrictions,
including embargoes; and governmental instability. However, we have limited
exposure in high risk countries and have taken action to mitigate such risks.
Financial information related to geographic areas is included in Note 24
(Geographic Areas -- Financial Data) of Notes to Financial Statements in our
1999 Annual Report to Shareowners which is incorporated by reference.
RAW MATERIALS
The principal raw materials used in our operations are generally readily
available. We experienced no significant or unusual problems in the purchase of
key raw materials and commodities in 1999. We are not dependent on any one
supplier for a material amount of our raw materials. However, we are highly
dependent on our suppliers and subcontractors in order to meet commitments to
our customers. In addition, many major components and product equipment items
are procured or subcontracted on a sole-source basis with a number of domestic
and foreign companies. We maintain a qualification and performance surveillance
process to control risk associated with such reliance on third parties. While we
believe that sources of supply for raw materials and components are generally
adequate, it is difficult to predict what effects shortages or price increases
may have in the future. However, at present, we have no reason to believe a
shortage of raw materials will cause any material adverse impact during 2000.
PATENTS, TRADEMARKS, LICENSES AND DISTRIBUTION RIGHTS
Our business as a whole, and that of our strategic business units, are not
dependent upon any single patent or related group of patents, or any licenses or
distribution rights. We own, or are licensed under, a large number of patents,
patent applications and trademarks acquired over a period of many years, which
relate to many of our products or improvements thereon and are of importance to
our business. From time to time, new patents and trademarks are obtained, and
patent and trademark licenses and rights are acquired from others. We also have
distribution rights of varying terms for a number of products and services
produced by other companies. In the judgment of management, such rights are
adequate for the conduct of the business being done by us. We believe that, in
the aggregate, the rights under such patents, trademarks and licenses are
generally important to our operations, but we do not consider that any patent,
trademark or related group of patents, or any licensing or distribution rights
related to a specific process or product are of material importance in
13
<PAGE>
relation to our total business. See Item 3 at page 15 of this Form 10-K for
information concerning litigation relating to patents in which we are involved.
We have registered trademarks for a number of our products, including such
consumer brands as Honeywell, Prestone, FRAM, Anso and Autolite.
RESEARCH AND DEVELOPMENT
Our research activities are directed toward the discovery and development of
new products and processes, improvements in existing products and processes, and
the development of new uses of existing products.
Research and development expense totaled $909, $876 and $796 million in
1999, 1998 and 1997, respectively. Customer-sponsored (principally the U.S.
Government) research and development activities amounted to an additional $682,
$718 and $850 million in 1999, 1998 and 1997, respectively.
ENVIRONMENT
We are subject to various federal, state and local requirements regulating
the discharge of materials into the environment or otherwise relating to the
protection of the environment. It is our policy to comply with these
requirements and we believe that, as a general matter, our policies, practices
and procedures are properly designed to prevent unreasonable risk of
environmental damage, and of resulting financial liability, in connection with
our business. Some risk of environmental damage is, however, inherent in certain
of our operations and products, as it is with other companies engaged in similar
businesses.
We are and have been engaged in the handling, manufacture, use or disposal
of many substances classified as hazardous or toxic by one or more regulatory
agencies. We believe that, as a general matter, our handling, manufacture, use
and disposal of such substances are in accord with environmental laws and
regulations. It is possible, however, that future knowledge or other
developments, such as improved capability to detect substances in the
environment or increasingly strict environmental laws and standards and
enforcement policies thereunder, could bring into question our handling,
manufacture, use or disposal of such substances.
Among other environmental requirements, we are subject to the federal
superfund law, and similar state laws, under which we have been designated as a
potentially responsible party that may be liable for cleanup costs associated
with various hazardous waste sites, some of which are on the U.S. Environmental
Protection Agency's superfund priority list. Although, under some court
interpretations of these laws, there is a possibility that a responsible party
might have to bear more than its proportional share of the cleanup costs if it
is unable to obtain appropriate contribution from other responsible parties, we
have not had to bear significantly more than our proportional share in multi-
party situations taken as a whole.
Capital expenditures for environmental control facilities at existing
operations were $40 million in 1999. In addition to capital expenditures, we
have incurred and will continue to incur operating costs in connection with such
facilities.
Reference is made to Management's Discussion and Analysis at page 35 of our
1999 Annual Report to Shareowners, incorporated herein by reference, for further
information regarding environmental matters.
EMPLOYEES
We have approximately 120,000 employees at December 31, 1999. Approximately
81,500 were located in the United States, and, of these employees, about 20%
were unionized employees represented by various local or national unions.
ITEM 2. PROPERTIES
We have approximately 950 locations consisting of plants, research
laboratories, sales offices and other facilities. The plants are generally
located to serve large marketing areas and to provide accessibility to raw
materials and labor pools. The properties are generally maintained in good
operating condition. Utilization of these plants may vary with government
spending and other business conditions; however, no major operating facility is
significantly idle. The facilities, together with planned
14
<PAGE>
expansions, are expected to meet our needs for the foreseeable future. We own or
lease warehouses, railroad cars, barges, automobiles, trucks, airplanes and
materials handling and data processing equipment. We also lease space for
administrative and sales staffs. Our headquarters and administrative complex is
located at Morris Township, New Jersey.
Our principal plants, which are owned in fee unless otherwise indicated, are
as follows:
<TABLE>
<S> <C> <C>
AEROSPACE SOLUTIONS
-------------------
Anniston, AL Olathe, KS (leased) Redmond, WA
Glendale, AZ Columbia, MD Mississauga, Ontario
Phoenix, AZ Coon Rapids, MN Canada
Tempe, AZ Minneapolis, MN Yeovil, Somerset
Tucson, AZ Teterboro, NJ United Kingdom
Torrance, CA Albuquerque, NM
(partially leased) Rocky Mount, NC
Clearwater, FL Urbana, OH
South Bend, IN
AUTOMATION & ASSET MANAGEMENT
-----------------------------
Phoenix, AZ Freeport, IL Plymouth, MN
San Diego, CA Golden Valley, MN Offenbach, Germany
PERFORMANCE MATERIALS
---------------------
Baton Rouge, LA Sparta, TN Longlaville, France
Geismar, LA Orange, TX Rudolstadt, Germany
Roseville, MN Chesterfield, VA Seelze, Germany
Moncure, NC Churchill, VA
Pottsville, PA Hopewell, VA
Columbia, SC Spokane, WA
POWER & TRANSPORTATION PRODUCTS
-------------------------------
Torrance, CA Greenville, OH Atessa, Italy
Huntington, IN Thaon-Les-Vosges, France Skelmersdale, United
Fostoria, OH Glinde, Germany Kingdom
</TABLE>
ITEM 3. LEGAL PROCEEDINGS
The paragraphs under the headings 'Litton Litigation' and 'Other Matters' of
Note 21 (Commitments and Contingencies) of Notes to Financial Statements at
page 55 of our 1999 Annual Report to Shareowners are incorporated herein by
reference.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
Not Applicable
EXECUTIVE OFFICERS OF THE REGISTRANT
The executive officers of the Registrant, listed as follows, are elected
annually. There are no family relationships among them.
<TABLE>
<CAPTION>
NAME, AGE,
DATE FIRST
ELECTED AN OFFICER BUSINESS EXPERIENCE
------------------ ------------------------------------------------------------
<S> <C>
Lawrence A. Bossidy (a), 64 Chairman of the Board since January 1992. Chief Executive Officer
1991 from July 1991 through November 1999.
Michael R. Bonsignore (a), 58 Chief Executive Officer since December 1999. Chairman of the
1999 Board and Chief Executive Officer of Honeywell Inc. from April
1993 through November 1999.
Giannantonio Ferrari, 60 Chief Operating Officer and Executive Vice President, Performance
1999 Products and Solutions, since December 1999. President and
Chief Operating Officer of Honeywell Inc. from April 1997
through November 1999. President, Honeywell Europe S.A. from
January 1992 to March 1997. Mr. Ferrari is a citizen of Italy.
</TABLE>
15
<PAGE>
<TABLE>
<CAPTION>
NAME, AGE,
DATE FIRST
ELECTED AN OFFICER BUSINESS EXPERIENCE
------------------ ------------------------------------------------------------
<S> <C>
Robert D. Johnson, 52 Chief Operating Officer and Executive Vice President,
1998 Aerospace Businesses, since December 1999. President and
Chief Executive Officer of AlliedSignal Aerospace from
April 1999 through November 1999. President -- Aerospace
Marketing, Sales and Service from January 1999 to March
1999. President -- Electronic & Avionics Systems from
October 1997 to December 1998. Vice President and General
Manager, Aerospace Services from 1994 to 1997.
Peter M. Kreindler, 54 Senior Vice President and General Counsel since March 1992.
1992 Secretary from December 1994 through November 1999.
James J. Porter, 48 Senior Vice President -- Information and Business Services
1999 since December 1999. Vice President and Chief
Administrative Officer of Honeywell Inc. from January 1998
through November 1999. Corporate Vice President, Human
Resources of Honeywell Inc. from May 1993 to December
1997.
Donald J. Redlinger, 55 Senior Vice President -- Human Resources and Communications
1991 since February 1995. Senior Vice President -- Human
Resources from January 1991 to January 1995.
Richard F. Wallman, 48 Senior Vice President and Chief Financial Officer since
1995 March 1995. Vice President and Controller of International
Business Machines Corp. from April 1994 to February 1995.
</TABLE>
- ---------
(a) Also a director.
PART II.
ITEM 5. MARKET FOR THE REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER
MATTERS
Market and dividend information for the Registrant's common stock is
contained in Note 26 (Unaudited Quarterly Financial Information) of Notes to
Financial Statements at page 61 of our 1999 Annual Report to Shareowners, and
such information is incorporated herein by reference.
The number of record holders of our common stock at December 31, 1999 was
81,282.
ITEM 6. SELECTED FINANCIAL DATA
The information included under the captions 'Results of Operations',
'Earnings per Common Share' and 'Financial Position At Year-End' in the
statement 'Selected Financial Data' at page 30 of our 1999 Annual Report to
Shareowners is incorporated herein by reference.
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
'Management's Discussion and Analysis' on pages 20, 24, 26, 28 and 31
through 38 of our 1999 Annual Report to Shareowners is incorporated herein by
reference.
This Report contains, or incorporates by reference, certain statements that
may be deemed 'forward-looking statements' within the meaning of Section 21E of
the Securities Exchange Act of 1934. All statements, other than statements of
historical fact, that address activities, events or developments that we or our
management intends, expects, projects, believes or anticipates will or may occur
in the future are forward-looking statements. Such statements are based upon
certain assumptions and assessments made by our management in light of their
experience and their perception of historical trends, current conditions,
expected future developments and other factors they believe to be appropriate.
The forward-looking statements included in this Report are also subject to a
number of material risks and uncertainties, including but not limited to
economic, competitive,
16
<PAGE>
governmental and technological factors affecting our operations, markets,
products, services and prices. Such forward-looking statements are not
guarantees of future performance and actual results, developments and business
decisions may differ from those envisaged by such forward-looking statements.
ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURE ABOUT MARKET RISK
Information relating to market risk is included under the caption 'Financial
Instruments' in 'Management's Discussion and Analysis' on pages 35 and 36 of our
1999 Annual Report to Shareowners, and such information is incorporated herein
by reference.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
Our consolidated financial statements, together with the report thereon of
PricewaterhouseCoopers LLP dated January 27, except as to Note 25 which is as of
February 4, 2000, appearing on pages 39 through 61 of our 1999 Annual Report to
Shareowners, are incorporated herein by reference. PricewaterhouseCoopers LLP
did not audit the financial statements of Honeywell Inc., a wholly-owned
subsidiary, which statements reflect total assets of $7,170.4 million at
December 31, 1998, and total sales of $8,426.7 and $8,027.5 million for each of
the two years in the period ended December 31, 1998. Such financial statements
were audited by Deloitte & Touche LLP whose audit opinion on such statements was
as follows:
Independent Auditors' Report
----------------------------
To the Shareowners of Honeywell Inc.:
We have audited the statement of financial position of Honeywell Inc. and
subsidiaries as of December 31, 1998, and the related statements of income,
shareowners' equity and cash flows for each of the two years in the period ended
December 31, 1998 (not separately included herein). These financial statements
are the responsibility of the Company's management. Our responsibility is to
express an opinion on the financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, such financial statements present fairly, in all material
respects, the financial position of Honeywell Inc. and subsidiaries at
December 31, 1998 and the results of their operations and their cash flows for
each of the two years in the period ended December 31, 1998, in conformity with
generally accepted accounting principles.
/s/ Deloitte & Touche LLP
Deloitte & Touche LLP
Minneapolis, Minnesota
February 10, 1999
With the exception of the aforementioned information and the information
incorporated by reference in Items 1, 3, 5, 6, 7 and 7A, the 1999 Annual Report
to Shareowners is not to be deemed filed as part of this Form 10-K Annual
Report.
The information provided pursuant to this Item supersedes or modifies the
financial information and pro forma financial information included in our
Current Reports on Form 8-K filed January 21 and February 14, 2000.
17
<PAGE>
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
Not Applicable
PART III.
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
Information relating to directors of the Registrant, as well as information
relating to compliance with Section 16(a) of the Securities Exchange Act of
1934, will be contained in a definitive Proxy Statement involving the election
of directors which the Registrant will file with the Securities and Exchange
Commission pursuant to Regulation 14A not later than 120 days after
December 31, 1999, and such information is incorporated herein by reference.
Certain other information relating to Executive Officers of the Registrant
appears at pages 15 and 16 of this Form 10-K Annual Report.
ITEM 11. EXECUTIVE COMPENSATION
Information relating to executive compensation is contained in the Proxy
Statement referred to above in 'Item 10. Directors and Executive Officers of the
Registrant,' and such information is incorporated herein by reference.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
Information relating to security ownership of certain beneficial owners and
management is contained in the Proxy Statement referred to above in 'Item 10.
Directors and Executive Officers of the Registrant,' and such information is
incorporated herein by reference.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Not Applicable
PART IV.
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K
<TABLE>
<CAPTION>
PAGE IN
ANNUAL REPORT TO
SHAREOWNERS
-----------
<S> <C>
(a)(1.) Index to Consolidated Financial Statements:
Incorporated by reference to the 1999 Annual Report
to Shareowners:
Report of Independent Accountants................... 39
Consolidated Statement of Income for the years ended
December 31, 1999, 1998 and 1997.................. 40
Consolidated Balance Sheet at December 31, 1999 and
1998.............................................. 41
Consolidated Statement of Cash Flows for the years
ended December 31, 1999, 1998 and 1997............ 42
Consolidated Statement of Shareowners' Equity for
the years ended December 31, 1999, 1998 and
1997.............................................. 43
Notes to Financial Statements....................... 44
</TABLE>
(a)(2.) Consolidated Financial Statement Schedules
The two financial statement schedules applicable to us have been omitted
because of the absence of the conditions under which they are required.
18
<PAGE>
(a)(3.) Exhibits
See the Exhibit Index to this Form 10-K Annual Report. The following
exhibits listed on the Exhibit Index are filed with this Form 10-K Annual
Report:
<TABLE>
<CAPTION>
EXHIBIT NO. DESCRIPTION
- ----------- -----------
<C> <S>
10.11 364-Day Credit Agreement dated as of December 2, 1999 among
Honeywell International Inc., the initial lenders named
therein, Citibank, N.A., as administrative agent, Morgan
Guaranty Trust Company of New York, as syndication agent,
and Salomon Smith Barney Inc. and J.P. Morgan Securities
Inc., as arrangers
10.12 Five Year Credit Agreement dated as of December 2, 1999
among Honeywell International Inc., the initial lenders
named therein, Citibank, N.A., as administrative agent,
The Chase Manhattan Bank, Deutsche Bank AG and Bank of
America, N.A., as syndication agents, and Salomon Smith
Barney Inc., as lead arranger and book manager
10.15 U.S. $1 Billion Credit Agreement dated as of January 13,
2000 among Honeywell International Inc., the initial
lenders named therein, Citibank, N.A., as administrative
agent, Morgan Guaranty Trust Company of New York, as
syndication agent, and Salomon Smith Barney Inc. and J.P.
Morgan Securities Inc., as arrangers
13 Pages 20, 24, 26, 28 and 30 through 61 (except for the data
included under the captions 'Financial Statistics' and
'Other Information' on page 30) of our 1999 Annual Report
to Shareowners
21 Subsidiaries of the Registrant
23.1 Consent of PricewaterhouseCoopers LLP
23.2 Consent of Deloitte & Touche LLP
24 Powers of Attorney
27 Financial Data Schedule
</TABLE>
(b) Reports on Form 8-K
During the three months ended December 31, 1999, Current Reports on
Form 8-K were filed on December 3, announcing the consummation of the merger
between AlliedSignal Inc. and Honeywell Inc. and on December 17, reporting
selected income statement and segment financial data.
STATEMENT OF DIFFERENCES
The registered trademark symbol shall be expressed as........................'r'
19
<PAGE>
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the Registrant has duly caused this annual report to be
signed on its behalf by the undersigned, thereunto duly authorized.
HONEYWELL INTERNATIONAL INC.
February 22, 2000 By: /s/ RICHARD J. DIEMER, JR.
-------------------------------------
Richard J. Diemer, Jr.
Vice President and Controller
Pursuant to the requirements of the Securities Exchange Act of 1934, this
annual report has been signed below by the following persons on behalf of the
Registrant and in the capacities and on the date indicated:
<TABLE>
<CAPTION>
NAME NAME
---- ----
<S> <C>
* *
- ------------------------------------------- -------------------------------------------
Lawrence A. Bossidy Robert P. Luciano
Chairman of the Board and Director Director
* *
- ------------------------------------------- -------------------------------------------
Michael R. Bonsignore Russell E. Palmer
Chief Executive Officer and Director Director
* *
- ------------------------------------------- -------------------------------------------
Hans W. Becherer Ivan G. Seidenberg
Director Director
* *
- ------------------------------------------- -------------------------------------------
Gordon M. Bethune Andrew C. Sigler
Director Director
* *
- ------------------------------------------- -------------------------------------------
Marshall N. Carter John R. Stafford
Director Director
* *
- ------------------------------------------- -------------------------------------------
Jaime Chico Pardo Michael W. Wright
Director Director
* /s/ RICHARD J. DIEMER, JR.
- ------------------------------------------- -------------------------------------------
Ann M. Fudge Richard J. Diemer, Jr.
Director Vice President and Controller
(Principal Accounting Officer)
*
- -------------------------------------------
James J. Howard
Director
*
- -------------------------------------------
Bruce Karatz
Director
/s/ RICHARD F. WALLMAN
- -------------------------------------------
Richard F. Wallman
Senior Vice President and
Chief Financial Officer
(Principal Financial Officer)
*By: /s/ RICHARD F. WALLMAN
- -------------------------------------------
(Richard F. Wallman
Attorney-in-fact)
</TABLE>
February 22, 2000
20
<PAGE>
EXHIBIT INDEX
<TABLE>
<CAPTION>
EXHIBIT NO. DESCRIPTION
- ----------- -----------
<C> <S>
2 Omitted (Inapplicable)
3(i) Restated Certificate of Incorporation of the Company
(incorporated by reference to Exhibit 3(i) to the
Company's Form 8-K filed December 3, 1999)
3(ii) By-laws of the Company, as amended (incorporated by
reference to Exhibit 3(ii) to the Company's Form 8-K filed
December 3, 1999)
4 The Company is a party to several long-term debt instruments
under which, in each case, the total amount of securities
authorized does not exceed 10% of the total assets of the
Company and its subsidiaries on a consolidated basis.
Pursuant to paragraph 4(iii)(A) of Item 601(b) of
Regulation S-K, the Company agrees to furnish a copy of
such instruments to the Securities and Exchange Commission
upon request.
9 Omitted (Inapplicable)
10.1 Master Support Agreement, dated February 26, 1986, as
amended and restated January 27, 1987, as further amended
July 1, 1987 and as again amended and restated
December 7, 1988, by and among the Company, Wheelabrator
Technologies Inc., certain subsidiaries of Wheelabrator
Technologies Inc., The Henley Group, Inc. and Henley Newco
Inc. (incorporated by reference to Exhibit 10.1 to the
Company's Form 10-K for the year ended December 31, 1988)
10.2* Deferred Compensation Plan for Non-Employee Directors of
AlliedSignal Inc., as amended (incorporated by reference
to Exhibit 10.2 to the Company's Form 10-K for the year
ended December 31, 1996)
10.3* Stock Plan for Non-Employee Directors of AlliedSignal Inc.,
as amended (incorporated by reference to Exhibit C to the
Company's Proxy Statement, dated March 10, 1994, filed
pursuant to Rule 14a-6 of the Securities Exchange Act of
1934)
10.4* 1985 Stock Plan for Employees of Allied-Signal Inc. and its
Subsidiaries, as amended (incorporated by reference to
Exhibit 19.3 to the Company's Form 10-Q for the quarter
ended September 30, 1991)
10.5* AlliedSignal Inc. Incentive Compensation Plan for Executive
Employees, as amended (incorporated by reference to
Exhibit B to the Company's Proxy Statement, dated
March 10, 1994, filed pursuant to Rule 14a-6 of the
Securities Exchange Act of 1934, and to Exhibit 10.5 to
the Company's Form 10-Q for the quarter ended June 30,
1999)
10.6* Supplemental Non-Qualified Savings Plan for Highly
Compensated Employees of AlliedSignal Inc. and its
Subsidiaries, as amended (incorporated by reference to
Exhibit 10.1 to the Company's Form 10-Q for the quarter
ended March 31, 1995)
10.7* AlliedSignal Inc. Severance Plan for Senior Executives, as
amended (incorporated by reference to Exhibit 10.1 to the
Company's Form 10-Q for the quarter ended March 31, 1994)
10.8* Salary Deferral Plan for Selected Employees of AlliedSignal
Inc. and its Affiliates, as amended (incorporated by
reference to Exhibit 10.2 to the Company's Form 10-Q for
the quarter ended March 31, 1995, and to Exhibit 10.9 to
the Company's Form 10-Q for the quarter ended June 30,
1999)
10.9* 1993 Stock Plan for Employees of Honeywell International
Inc. and its Affiliates (incorporated by reference to
Exhibit A to the Company's Proxy Statement, dated
March 10, 1994, filed pursuant to Rule 14a-6 of the
Securities Exchange Act of 1934)
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
EXHIBIT NO. DESCRIPTION
- ----------- -----------
<C> <S>
10.10* Amended and restated Agreement, dated May 6, 1994, as
amended May 12, 1997 between the Company and Lawrence A.
Bossidy (incorporated by reference to Exhibit 10.3 to the
Company's Form 10-Q for the quarter ended June 30, 1994
and to Exhibit 10.15 to the Company's Form 10-Q for the
quarter ended June 30, 1997)
10.11 364-Day Credit Agreement dated as of December 2, 1999 among
Honeywell International Inc., the initial lenders named
therein, Citibank, N.A., as administrative agent, Morgan
Guaranty Trust Company of New York, as syndication agent,
and Salomon Smith Barney Inc. and J.P. Morgan Securities
Inc., as arrangers (filed herewith)
10.12 Five Year Credit Agreement dated as of December 2, 1999
among Honeywell International Inc., the initial lenders
named therein, Citibank, N.A., as administrative agent,
The Chase Manhattan Bank, Deutsche Bank AG and Bank of
America, N.A., as syndication agents, and Salomon Smith
Barney Inc., as lead arranger and book manager (filed
herewith)
10.13* AlliedSignal Inc. Supplemental Pension Plan, as amended
(incorporated by reference to Exhibit 10.13 to the
Company's Form 10-K for the year ended December 31, 1997)
10.14* Employment Agreement dated as of December 1, 1999 between
the Company and Michael R. Bonsignore (incorporated by
reference to Exhibit 10.14 to the Company's Form 8-K filed
December 3, 1999)
10.15 US $1 Billion Credit Agreement dated as of January 13, 2000
among Honeywell International Inc., the initial lenders
named therein, Citibank, N.A., as administrative agent,
Morgan Guaranty Trust Company of New York, as syndication
agent, and Salomon Smith Barney Inc. and J.P. Morgan
Securities Inc., as arrangers (filed herewith)
11 Omitted (Inapplicable)
12 Omitted (Inapplicable)
13 Pages 20, 24, 26, 28 and 30 through 61 (except for the data
included under the captions 'Financial Statistics' and
'Other Information' on page 30) of the Company's 1999
Annual Report to Shareowners (filed herewith)
16 Omitted (Inapplicable)
18 Omitted (Inapplicable)
21 Subsidiaries of the Registrant (filed herewith)
22 Omitted (Inapplicable)
23.1 Consent of PricewaterhouseCoopers LLP (filed herewith)
23.2 Consent of Deloitte & Touche LLP (filed herewith)
24 Powers of Attorney (filed herewith)
27 Financial Data Schedule (filed herewith)
28 Omitted (Inapplicable)
99 Omitted (Inapplicable)
</TABLE>
- ---------
The Exhibits identified above with an asterisk(*) are management contracts
or compensatory plans or arrangements.
<PAGE>
EXECUTION COPY
U.S. $2,000,000,000
364-DAY CREDIT AGREEMENT
Dated as of December 2, 1999
Among
HONEYWELL INTERNATIONAL INC.,
as Borrower,
and
THE INITIAL LENDERS NAMED HEREIN,
as Initial Lenders,
and
CITIBANK, N.A.,
as Administrative Agent
and
THE CHASE MANHATTAN BANK
DEUTSCHE BANK AG
BANK OF AMERICA, N.A.
as Syndication Agents
and
SALOMON SMITH BARNEY INC.
as Lead Arranger and Book Manager
<PAGE>
TABLE OF CONTENTS
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ARTICLE I
DEFINITIONS AND ACCOUNTING TERMS
SECTION 1.01. Certain Defined Terms ..............................................1
SECTION 1.02. Computation of Time Periods .......................................15
SECTION 1.03. Accounting Terms ..................................................15
ARTICLE II
AMOUNTS AND TERMS OF THE ADVANCES
SECTION 2.01. The Revolving Credit Advances .....................................15
SECTION 2.02. Making the Revolving Credit Advances ..............................16
SECTION 2.03. The Competitive Bid Advances ......................................18
SECTION 2.04. Fees ..............................................................23
SECTION 2.05. Termination or Reduction of the Commitments .......................24
SECTION 2.06. Repayment of Advances .............................................26
SECTION 2.07. Interest on Revolving Credit Advances .............................26
SECTION 2.08. Interest Rate Determination .......................................27
SECTION 2.09. Prepayments of Revolving Credit Advances ..........................29
SECTION 2.10. Increased Costs ...................................................30
SECTION 2.11. Illegality ........................................................31
SECTION 2.12. Payments and Computations .........................................31
SECTION 2.13. Taxes .............................................................33
SECTION 2.14. Sharing of Payments, Etc. .........................................36
SECTION 2.15. Use of Proceeds ...................................................36
SECTION 2.16. Extension of Termination Date .....................................36
SECTION 2.17. Evidence of Debt ..................................................38
ARTICLE III
CONDITIONS TO EFFECTIVENESS AND LENDING
SECTION 3.01. Conditions Precedent to Effectiveness of Sections 2.01 and 2.03 ...39
SECTION 3.02. Conditions Precedent to Initial Borrowing .........................41
SECTION 3.03. Initial Loan to Each Designated Subsidiary ........................41
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SECTION 3.04. Conditions Precedent to Each Revolving Credit Borrowing ...........42
SECTION 3.05. Conditions Precedent to Each Competitive Bid Borrowing ............43
SECTION 3.06. Determinations Under Section 3.01 .................................44
ARTICLE IV
REPRESENTATIONS AND WARRANTIES
SECTION 4.01. Representations and Warranties of the Company .....................44
ARTICLE V
COVENANTS OF THE BORROWER
SECTION 5.01. Affirmative Covenants .............................................48
SECTION 5.02. Negative Covenants ................................................51
ARTICLE VI
EVENTS OF DEFAULT
SECTION 6.01. Events of Default .................................................53
ARTICLE VII
GUARANTEE
SECTION 7.01. Unconditional Guarantee ...........................................58
SECTION 7.02. Guarantee Absolute ................................................58
SECTION 7.03. Waivers ...........................................................59
SECTION 7.04. Remedies ..........................................................59
SECTION 7.05. No Stay ...........................................................60
SECTION 7.06. Survival ..........................................................60
ARTICLE VIII
THE AGENT
SECTION 8.01. Authorization and Action ..........................................60
SECTION 8.02. Agent's Reliance, Etc. ............................................60
SECTION 8.03. Citibank and Affiliates ...........................................61
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SECTION 8.04. Lender Credit Decision ............................................61
SECTION 8.05. Indemnification ...................................................61
SECTION 8.06. Successor Agent ...................................................62
SECTION 8.07. Sub-Agent .........................................................62
ARTICLE IX
MISCELLANEOUS
SECTION 9.01. Amendments, Etc. ..................................................63
SECTION 9.02. Notices, Etc. .....................................................63
SECTION 9.03. No Waiver; Remedies ...............................................64
SECTION 9.04. Costs and Expenses ................................................64
SECTION 9.05. Right of Set-off ..................................................65
SECTION 9.06. Binding Effect ....................................................65
SECTION 9.07. Assignments and Participations ....................................65
SECTION 9.08. Designated Subsidiaries ...........................................68
SECTION 9.09. Confidentiality ...................................................69
SECTION 9.10. Mitigation of Yield Protection ....................................69
SECTION 9.11. Governing Law. ....................................................70
SECTION 9.12. Execution in Counterparts .........................................70
SECTION 9.13. Jurisdiction, Etc. ................................................70
SECTION 9.14. Substitution of Currency ..........................................71
SECTION 9.15. Final Agreement ...................................................71
SECTION 9.16. Judgment ..........................................................71
SECTION 9.17. Waiver of Jury Trial ..............................................73
</TABLE>
<PAGE>
SCHEDULES
Schedule I - List of Applicable Lending Offices
Schedule 3.01(b) - Disclosed Litigation
EXHIBITS
Exhibit A-1 - Form of Revolving Credit Note
Exhibit A-2 - Form of Competitive Bid Note
Exhibit B-1 - Form of Notice of Revolving Credit Borrowing
Exhibit B-2 - Form of Notice of Competitive Bid Borrowing
Exhibit C - Form of Assignment and Acceptance
Exhibit D - Form of Assumption Agreement
Exhibit E - Form of Designation Letter
Exhibit F - Form of Acceptance by Process Agent
Exhibit G - Form of Opinion of J. Edward Smith, Assistant General Counsel
of the Company
Exhibit H - Form of Opinion of Counsel to a Designated Subsidiary
Exhibit I - Form of Opinion of Shearman & Sterling, Counsel to the Agent
<PAGE>
364-DAY CREDIT AGREEMENT
Dated as of December 2, 1999
HONEYWELL INTERNATIONAL INC., a Delaware corporation (the "Company"),
the banks, financial institutions and other institutional lenders (the "Initial
Lenders") listed on the signature pages hereof, and CITIBANK, N.A. ("Citibank"),
as administrative agent (the "Agent") for the Lenders (as hereinafter defined),
agree as follows:
ARTICLE I
DEFINITIONS AND ACCOUNTING TERMS
SECTION 1.01. Certain Defined Terms. As used in this Agreement, the
following terms shall have the following meanings (such meanings to be equally
applicable to both the singular and plural forms of the terms defined):
"Advance" means a Revolving Credit Advance or a Competitive
Bid Advance.
"Affiliate" means, as to any Person, any other Person that,
directly or indirectly, controls, is controlled by or is under common
control with such Person or is a director or officer of such Person.
For purposes of this definition, the term "control" (including the
terms "controlling", "controlled by" and "under common control with")
of a Person means the possession, direct or indirect, of the power to
direct or cause the direction of the management and policies of such
Person, whether through the ownership of Voting Stock, by contract or
otherwise.
"Agent's Account" means (a) in the case of Advances
denominated in Dollars, the account of the Agent maintained by the
Agent at Citibank at its office at 399 Park Avenue, New York, New York
10043, Account No. 36852248, Attention: Janet Wallace, (b) in the case
of Advances denominated in any Foreign Currency, the account of the
Sub-Agent designated in writing from time to time by the Agent to the
Company and the Lenders for such purpose and (c) in any such case, such
other account of the Agent as is designated in writing from time to
time by the Agent to the Company and the Lenders for such purpose.
"Alternate Currency" means any lawful currency other than
Dollars and the Major Currencies that is freely transferrable and
convertible into Dollars.
<PAGE>
2
"Applicable Lending Office" means, with respect to each
Lender, such Lender's Domestic Lending Office in the case of a Base
Rate Advance and such Lender's Eurocurrency Lending Office in the case
of a Eurocurrency Rate Advance and, in the case of a Competitive Bid
Advance, the office of such Lender notified by such Lender to the Agent
as its Applicable Lending Office with respect to such Competitive Bid
Advance.
"Applicable Margin" means, as of any date, 0.145% per annum.
"Applicable Percentage" means, as of any date, a 0.055% per
annum.
"Assignment and Acceptance" means an assignment and acceptance
entered into by a Lender and an Eligible Assignee, and accepted by the
Agent, in substantially the form of Exhibit C hereto.
"Assuming Lender" means an Eligible Assignee not previously a
Lender that becomes a Lender hereunder pursuant to Section 2.16.
"Assumption Agreement" means an agreement in substantially the
form of Exhibit D hereto by which an Eligible Assignee agrees to become
a Lender hereunder pursuant to Section 2.16, in each case agreeing to
be bound by all obligations of a Lender hereunder.
"Base Rate" means a fluctuating interest rate per annum in
effect from time to time, which rate per annum shall at all times be
equal to the highest of:
(a) the rate of interest announced publicly by
Citibank in New York, New York, from time to time, as
Citibank's base rate;
(b) the sum (adjusted to the nearest 1/32 of 1% or,
if there is no nearest 1/32 of 1%, to the next higher 1/32 of
1%) of (i) 1/2 of 1% per annum, plus (ii) the rate obtained by
dividing (A) the latest three-week moving average of secondary
market morning offering rates in the United States for
three-month certificates of deposit of major United States
money market banks, such three-week moving average (adjusted
to the basis of a year of 360 days) being determined weekly on
each Monday (or, if such day is not a Business Day, on the
next succeeding Business Day) for the three-week period ending
on the previous Friday by Citibank on the basis of such rates
reported by certificate of deposit dealers to and published by
the Federal Reserve Bank of New York or, if such publication
shall be suspended or terminated, on the basis of quotations
for such rates received by Citibank from three New York
certificate of deposit dealers of recognized standing selected
by Citibank, by (B) a percentage equal to 100% minus the
average of the daily percentages specified during such
three-week period by the Board of Governors of the Federal
<PAGE>
3
Reserve System (or any successor) for determining the maximum
reserve requirement (including, but not limited to, any
emergency, supplemental or other marginal reserve requirement)
for Citibank with respect to liabilities consisting of or
including (among other liabilities) three-month Dollar
non-personal time deposits in the United States, plus (iii)
the average during such three-week period of the annual
assessment rates estimated by Citibank for determining the
then current annual assessment payable by Citibank to the
Federal Deposit Insurance Corporation (or any successor) for
insuring Dollar deposits of Citibank in the United States;
(c) 1/2 of one percent per annum above the Federal
Funds Rate; and
(d) for the period from December 15, 1999 through
January 15, 2000, two percent per annum above the Federal
Funds Rate.
"Base Rate Advance" means a Revolving Credit Advance
denominated in Dollars that bears interest as provided in Section
2.07(a)(i).
"Borrower" means the Company or any Designated Subsidiary, as
the context requires.
"Borrowing" means a Revolving Credit Borrowing or a
Competitive Bid Borrowing.
"Business Day" means a day of the year on which banks are not
required or authorized by law to close in New York City and, if the
applicable Business Day relates to any Eurocurrency Rate Advance or
LIBO Rate Advance, on which dealings are carried on in the London
interbank market and banks are open for business in London and in the
country of issue of the currency of such Eurocurrency Rate Advance or
LIBO Rate Advance (or, in the case of an Advance denominated in the
euro, in Frankfurt, Germany) and, if the applicable Business Day
relates to any Local Rate Advance, on which banks are open for business
in the country of issue of the currency of such Local Rate Advance.
"Change of Control" means that (i) any Person or group of
Persons (within the meaning of Section 13 or 14 of the Securities
Exchange Act of 1934, as amended (the "Act")) (other than the Company,
any Subsidiary of the Company or any savings, pension or other benefit
plan for the benefit of employees of the Company or its Subsidiaries)
which theretofore beneficially owned less than 30% of the Voting Stock
of the Company then outstanding shall have acquired beneficial
ownership (within the meaning of Rule 13d-3 promulgated by the
Securities and Exchange Commission under the Act) of 30% or more in
voting power of the outstanding Voting Stock of the Company or (ii)
during any period of twelve consecutive calendar months commencing at
the effective time of the merger of Honeywell Inc. and a wholly owned
Subsidiary of the Company as contemplated by the
<PAGE>
4
Merger Agreement, individuals who at the beginning of such twelve-month
period were directors of the Company shall cease to constitute a
majority of the Board of Directors of the Company.
"Commitment" means as to any Lender (i) the Dollar amount set
forth opposite its name on the signature pages hereof, (ii) if such
Lender has become a Lender hereunder pursuant to an Assumption
Agreement, the Dollar amount set forth as its Commitment in such
Assumption Agreement or (iii) if such Lender has entered into any
Assignment and Acceptance, the Dollar amount set forth for such Lender
in the Register maintained by the Administrative Agent pursuant to
Section 9.07(d), in each case as the same may be terminated or reduced,
as the case may be, pursuant to Section 2.05.
"Competitive Bid Advance" means an advance by a Lender to any
Borrower as part of a Competitive Bid Borrowing resulting from the
competitive bidding procedure described in Section 2.03 and refers to a
Fixed Rate Advance, a LIBO Rate Advance or a Local Rate Advance (each
of which shall be a "Type" of Competitive Bid Advance).
"Competitive Bid Borrowing" means a borrowing consisting of
simultaneous Competitive Bid Advances from each of the Lenders whose
offer to make one or more Competitive Bid Advances as part of such
borrowing has been accepted under the competitive bidding procedure
described in Section 2.03.
"Competitive Bid Note" means a promissory note of any Borrower
payable to the order of any Lender, in substantially the form of
Exhibit A-2 hereto, evidencing the indebtedness of such Borrower to
such Lender resulting from a Competitive Bid Advance made by such
Lender to such Borrower.
"Competitive Bid Reduction" has the meaning specified in
Section 2.01.
"Consenting Lenders" has the meaning specified in Section
2.16(b).
"Consolidated" refers to the consolidation of accounts in
accordance with GAAP.
"Consolidated Subsidiary" means, at any time, any Subsidiary
the accounts of which are required at that time to be included on a
Consolidated basis in the Consolidated financial statements of the
Company, assuming that such financial statements are prepared in
accordance with GAAP.
"Convert", "Conversion" and "Converted" each refers to a
conversion of Revolving Credit Advances of one Type into Revolving
Credit Advances of the other Type pursuant to Section 2.08 or 2.11.
<PAGE>
5
"Debt" means, with respect to any Person: (i) indebtedness of
such Person, which is not limited as to recourse to such Person, for
borrowed money (whether by loan or the issuance and sale of debt
securities) or for the deferred (for 90 days or more) purchase or
acquisition price of property or services; (ii) indebtedness or
obligations of others which such Person has assumed or guaranteed;
(iii) indebtedness or obligations of others secured by a lien, charge
or encumbrance on property of such Person whether or not such Person
shall have assumed such indebtedness or obligations; (iv) obligations
of such Person in respect of letters of credit (other than performance
letters of credit, except to the extent backing an obligation of any
Person which would be Debt of such Person), acceptance facilities, or
drafts or similar instruments issued or accepted by banks and other
financial institutions for the account of such Person; and (v)
obligations of such Person under leases which are required to be
capitalized on a balance sheet of such Person in accordance with GAAP.
"Default" means any Event of Default or any event that would
constitute an Event of Default but for the requirement that notice be
given or time elapse or both.
"Designated Subsidiary" means any corporate Subsidiary of the
Company designated for borrowing privileges under this Agreement
pursuant to Section 9.08.
"Designation Letter" means, with respect to any Designated
Subsidiary, a letter in the form of Exhibit E hereto signed by such
Designated Subsidiary and the Company.
"Disclosed Litigation" has the meaning specified in Section
3.01(b).
"Dollars" and the "$" sign each mean lawful money of the
United States of America.
"Domestic Lending Office" means, with respect to any Initial
Lender, the office of such Lender specified as its "Domestic Lending
Office" opposite its name on Schedule I hereto and, with respect to any
other Lender, the office of such Lender specified as its "Domestic
Lending Office" in the Assumption Agreement or in the Assignment and
Acceptance pursuant to which it became a Lender, or such other office
of such Lender as such Lender may from time to time specify to the
Company and the Agent.
"Domestic Subsidiary" means any Subsidiary whose operations
are conducted primarily in the United States excluding any Subsidiary
whose assets consist primarily of the stock of Subsidiaries whose
operations are conducted outside the United States of America.
"Effective Date" has the meaning specified in Section 3.01.
<PAGE>
6
"Eligible Assignee" means (i) a Lender; (ii) an Affiliate of a
Lender; (iii) a commercial bank organized under the laws of the United
States, or any State thereof, and having total assets in excess of
$10,000,000,000; (iv) a savings and loan association or savings bank
organized under the laws of the United States, or any State thereof,
and having a net worth of at least $500,000,000, calculated in
accordance with GAAP; (v) a commercial bank organized under the laws of
any other country that is a member of the Organization for Economic
Cooperation and Development or has concluded special lending
arrangements with the International Monetary Fund associated with its
General Arrangements to Borrow, or a political subdivision of any such
country, and having total assets in excess of $10,000,000,000, so long
as such bank is acting through a branch or agency located in the
country in which it is organized or another country that is described
in this clause (v); and (vi) the central bank of any country that is a
member of the Organization for Economic Cooperation and Development.
"Environmental Action" means any action, suit, demand, demand
letter, claim, notice of non-compliance or violation, notice of
liability or potential liability, investigation, proceeding, consent
order or consent agreement relating in any way to any Environmental
Law, Environmental Permit or Hazardous Materials or arising from
alleged injury or threat of injury to health, safety or the
environment, including, without limitation, (a) by any governmental or
regulatory authority for enforcement, cleanup, removal, response,
remedial or other actions or damages and (b) by any governmental or
regulatory authority or any third party for damages, contribution,
indemnification, cost recovery, compensation or injunctive relief.
"Environmental Law" means any federal, state, local or foreign
statute, law, ordinance, rule, regulation, code, order, judgment,
decree or judicial or agency interpretation, policy or guidance
relating to pollution or protection of the environment, health, safety
or natural resources, including, without limitation, those relating to
the use, handling, transportation, treatment, storage, disposal,
release or discharge of Hazardous Materials.
"Environmental Permit" means any permit, approval,
identification number, license or other authorization required under
any Environmental Law.
"Equivalent" in Dollars of any Foreign Currency on any date
means the equivalent in Dollars of such Foreign Currency determined by
using the quoted spot rate at which the Sub-Agent's principal office in
London offers to exchange Dollars for such Foreign Currency in London
prior to 4:00 P.M. (London time) (unless otherwise indicated by the
terms of this Agreement) on such date as is required pursuant to the
terms of this Agreement, and the "Equivalent" in any Foreign Currency
of Dollars means the equivalent in such Foreign Currency of Dollars
determined by using the quoted spot rate at which the Sub-Agent's
principal office in London offers to exchange such Foreign Currency for
Dollars in London
<PAGE>
7
prior to 4:00 P.M. (London time) (unless otherwise indicated by the
terms of this Agreement) on such date as is required pursuant to the
terms of this Agreement.
"ERISA" means the Employee Retirement Income Security Act of
1974, as amended from time to time, and the regulations promulgated and
rulings issued thereunder.
"ERISA Affiliate" of any Person means any other Person that
for purposes of Title IV of ERISA is a member of such Person's
controlled group, or under common control with such Person, within the
meaning of Section 414 of the Internal Revenue Code.
"ERISA Event" with respect to any Person means (a) (i) the
occurrence of a reportable event, within the meaning of Section 4043 of
ERISA, with respect to any Plan of such Person or any of its ERISA
Affiliates unless the 30-day notice requirement with respect to such
event has been waived by the PBGC, or (ii) the requirements of
subsection (1) of Section 4043(b) of ERISA (without regard to
subsection (2) of such Section) are met with a contributing sponsor, as
defined in Section 4001(a)(13) of ERISA, of a Plan of such Person or
any of its ERISA Affiliates, and an event described in paragraph (9),
(10), (11), (12) or (13) of Section 4043(c) of ERISA is reasonably
expected to occur with respect to such Plan within the following 30
days; (b) the application for a minimum funding waiver with respect to
a Plan of such Person or any of its ERISA Affiliates; (c) the provision
by the administrator of any Plan of such Person or any of its ERISA
Affiliates of a notice of intent to terminate such Plan in a distress
termination pursuant to Section 4041(a)(2) of ERISA (including any such
notice with respect to a plan amendment referred to in Section 4041(e)
of ERISA); (d) the cessation of operations at a facility of such Person
or any of its ERISA Affiliates in the circumstances described in
Section 4062(e) of ERISA; (e) the withdrawal by such Person or any of
its ERISA Affiliates from a Multiple Employer Plan during a plan year
for which it was a substantial employer, as defined in Section
4001(a)(2) of ERISA; (f) the conditions for the imposition of a lien
under Section 302(f) of ERISA shall have been met with respect to any
Plan of such Person or any of its ERISA Affiliates; (g) the adoption of
an amendment to a Plan of such Person or any of its ERISA Affiliates
requiring the provision of security to such Plan pursuant to Section
307 of ERISA; or (h) the institution by the PBGC of proceedings to
terminate a Plan of such Person or any of its ERISA Affiliates pursuant
to Section 4042 of ERISA, or the occurrence of any event or condition
described in Section 4042 of ERISA that constitutes grounds for the
termination of, or the appointment of a trustee to administer, such
Plan.
"Escrow" means an escrow established with an independent
escrow agent pursuant to an escrow agreement reasonably satisfactory in
form and substance to the Person or Persons asserting the obligation of
one or more Borrowers to make a payment to it or them hereunder.
<PAGE>
8
"Eurocurrency Lending Office" means, with respect to any
Initial Lender, the office of such Lender specified as its
"Eurocurrency Lending Office" opposite its name on Schedule I hereto
and, with respect to any other Lender, the office of such Lender
specified as its "Eurocurrency Lending Office" in the Assumption
Agreement or in the Assignment and Acceptance pursuant to which it
became a Lender (or, if no such office is specified, its Domestic
Lending Office), or such other office of such Lender as such Lender may
from time to time specify to the Company and the Agent.
"Eurocurrency Liabilities" has the meaning assigned to that
term in Regulation D of the Board of Governors of the Federal Reserve
System, as in effect from time to time.
"Eurocurrency Rate" means, for any Interest Period for each
Eurocurrency Rate Advance comprising part of the same Revolving Credit
Borrowing, an interest rate per annum equal to the rate per annum
obtained by dividing (a) the rate per annum (rounded upwards, if
necessary, to the nearest 1/100 of 1%) appearing on the applicable
Telerate Page as the London interbank offered rate for deposits in
Dollars or in the relevant Major Currency at approximately 11:00 A.M.
(London time) two Business Days prior to the first day of such Interest
Period for a term comparable to such Interest Period or, if for any
reason such rate is not available, the average (rounded upward to the
nearest whole multiple of 1/32 of 1% per annum, if such average is not
such a multiple) of the rate per annum at which deposits in Dollars or
in the relevant Major Currency are offered by the principal office of
each of the Reference Banks in London, England to prime banks in the
London interbank market at 11:00 A.M. (London time) two Business Days
before the first day of such Interest Period in an amount substantially
equal to such Reference Bank's Eurocurrency Rate Advance comprising
part of such Revolving Credit Borrowing to be outstanding during such
Interest Period and for a period equal to such Interest Period by (b) a
percentage equal to 100% minus the Eurocurrency Rate Reserve Percentage
for such Interest Period. If the Telerate Page is unavailable, the
Eurocurrency Rate for any Interest Period for each Eurocurrency Rate
Advance comprising part of the same Revolving Credit Borrowing shall be
determined by the Agent on the basis of applicable rates furnished to
and received by the Agent from the Reference Banks two Business Days
before the first day of such Interest Period, subject, however, to the
provisions of Section 2.08.
"Eurocurrency Rate Advance" means a Revolving Credit Advance
denominated in Dollars or in a Major Currency that bears interest as
provided in Section 2.07(a)(ii).
"Eurocurrency Rate Reserve Percentage" for any Interest Period
for all Eurocurrency Rate Advances or LIBO Rate Advances comprising
part of the same Borrowing means the reserve percentage applicable two
Business Days before the first day of such Interest Period under
regulations issued from time to time by the Board of Governors of the
Federal Reserve System (or any successor) for determining the maximum
reserve requirement (including,
<PAGE>
9
without limitation, any emergency, supplemental or other marginal
reserve requirement) for a member bank of the Federal Reserve System in
New York City with respect to liabilities or assets consisting of or
including Eurocurrency Liabilities (or with respect to any other
category of liabilities that includes deposits by reference to which
the interest rate on Eurocurrency Rate Advances or LIBO Rate Advances
is determined) having a term equal to such Interest Period.
"Events of Default" has the meaning specified in Section 6.01.
"Extension Date" has the meaning specified in Section 2.16(a).
"Federal Funds Rate" means, for any period, a fluctuating
interest rate per annum equal for each day during such period to the
weighted average of the rates on overnight Federal funds transactions
with members of the Federal Reserve System arranged by Federal funds
brokers, as published for such day (or, if such day is not a Business
Day, for the next preceding Business Day) by the Federal Reserve Bank
of New York, or, if such rate is not so published for any day that is a
Business Day, the average of the quotations for such day on such
transactions received by the Agent from three Federal funds brokers of
recognized standing selected by it.
"Fixed Rate Advance" has the meaning specified in Section
2.03(a)(i), which Advance shall be denominated in Dollars or in any
Foreign Currency.
"Foreign Currency" means any Major Currency or any Alternate
Currency.
"GAAP" has the meaning specified in Section 1.03.
"Hazardous Materials" means (a) petroleum and petroleum
products, byproducts or breakdown products, radioactive materials,
asbestos-containing materials, polychlorinated biphenyls and radon gas
and (b) any other chemicals, materials or substances designated,
classified or regulated as hazardous or toxic or as a pollutant or
contaminant under any Environmental Law.
"Insufficiency" means, with respect to any Plan, the amount,
if any, of its unfunded benefit liabilities, as defined in Section
4001(a)(18) of ERISA.
"Interest Period" means, for each Eurocurrency Rate Advance
comprising part of the same Revolving Credit Borrowing and each LIBO
Rate Advance comprising part of the same Competitive Bid Borrowing, the
period commencing on the date of such Eurocurrency Rate Advance or LIBO
Rate Advance or the date of the Conversion of any Base Rate Advance
into such Eurocurrency Rate Advance and ending on the last day of the
period
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10
selected by the Borrower requesting such Borrowing pursuant to the
provisions below and, thereafter, with respect to Eurocurrency Rate
Advances, each subsequent period commencing on the last day of the
immediately preceding Interest Period and ending on the last day of the
period selected by such Borrower pursuant to the provisions below. The
duration of each such Interest Period shall be one, two, three or six
months and, if available to all Lenders, nine months, as the Borrower
requesting the Borrowing may, upon notice received by the Agent not
later than 11:00 A.M. (New York City time) on the third Business Day
prior to the first day of such Interest Period, select; provided,
however, that:
(i) such Borrower may not select any Interest Period
that ends after the scheduled Termination Date;
(ii) Interest Periods commencing on the same date for
Eurocurrency Rate Advances comprising part of the same
Revolving Credit Borrowing or for LIBO Rate Advances
comprising part of the same Competitive Bid Borrowing shall be
of the same duration;
(iii) whenever the last day of any Interest Period
would otherwise occur on a day other than a Business Day, the
last day of such Interest Period shall be extended to occur on
the next succeeding Business Day, provided, however, that, if
such extension would cause the last day of such Interest
Period to occur in the next following calendar month, the last
day of such Interest Period shall occur on the next preceding
Business Day; and
(iv) whenever the first day of any Interest Period
occurs on a day of an initial calendar month for which there
is no numerically corresponding day in the calendar month that
succeeds such initial calendar month by the number of months
equal to the number of months in such Interest Period, such
Interest Period shall end on the last Business Day of such
succeeding calendar month.
"Internal Revenue Code" means the Internal Revenue Code of
1986, as amended from time to time, and the regulations promulgated and
rulings issued thereunder.
"Lenders" means, collectively, (i) Initial Lenders, (ii) each
Assuming Lender that shall become a party hereto pursuant to Section
2.16 and (iii) each Eligible Assignee that shall become a party hereto
pursuant to Section 9.07(a), (b) and (c).
"LIBO Rate" means, for any Interest Period for all LIBO Rate
Advances comprising part of the same Competitive Bid Borrowing, an
interest rate per annum equal to the rate per annum obtained by
dividing (a) the rate per annum (rounded upwards, if necessary, to the
nearest 1/100 of 1%) appearing on the applicable Telerate Page as the
London interbank
<PAGE>
11
offered rate for deposits in Dollars or in the relevant Foreign
Currency at approximately 11:00 A.M. (London time) two Business Days
prior to the first day of such Interest Period or, if for any reason
such rate is not available, the average (rounded upward to the nearest
whole multiple of 1/32 of 1% per annum, if such average is not such a
multiple) of the rate per annum at which deposits in Dollars or in the
relevant Foreign Currency are offered by the principal office of each
of the Reference Banks in London, England to prime banks in the London
interbank market at 11:00 A.M. (London time) two Business Days before
the first day of such Interest Period in an amount substantially equal
to the amount that would be the Reference Banks' respective ratable
shares of such Borrowing if such Borrowing were to be a Revolving
Credit Borrowing to be outstanding during such Interest Period and for
a period equal to such Interest Period by (b) a percentage equal to
100% minus the Eurocurrency Rate Reserve Percentage for such Interest
Period. If the Telerate Page is unavailable, the LIBO Rate for any
Interest Period for each LIBO Rate Advance comprising part of the same
Competitive Bid Borrowing shall be determined by the Agent on the basis
of applicable rates furnished to and received by the Agent from the
Reference Banks two Business Days before the first day of such Interest
Period, subject, however, to the provisions of Section 2.08.
"LIBO Rate Advance" means a Competitive Bid Advance
denominated in Dollars or in any Foreign Currency and bearing interest
based on the LIBO Rate.
"Lien" means any lien, mortgage, pledge, security interest or
other charge or encumbrance of any kind.
"Local Rate Advance" means a Competitive Bid Advance
denominated in any Foreign Currency sourced from the jurisdiction of
issuance of such Foreign Currency and bearing interest at a fixed rate.
"Major Currencies" means lawful currency of the United Kingdom
of Great Britain and Northern Ireland, lawful currency of the Federal
Republic of Germany, lawful currency of Japan, lawful currency of the
Republic of France and lawful currency of the European Economic and
Monetary Union.
"Majority Lenders" means at any time Lenders holding at least
51% of the then aggregate principal amount (based on the Equivalent in
Dollars at such time) of the Revolving Credit Advances owing to
Lenders, or, if no such principal amount is then outstanding, Lenders
having at least 51% of the Commitments.
"Material Adverse Change" means any material adverse change in
the financial condition or results of operations of the Company and its
Consolidated Subsidiaries taken as a whole.
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12
"Material Adverse Effect" means a material adverse effect on
(a) the financial condition or results of operations of the Company and
its Consolidated Subsidiaries taken as a whole, (b) the rights and
remedies of the Agent or any Lender under this Agreement or any Note or
(c) the ability of the Borrowers to perform their obligations under
this Agreement or any Note.
"Merger Agreement" means the Agreement and Plan of Merger
dated as of June 4, 1999 among Honeywell Inc., the Company and Blossom
Acquisition Corp, a wholly owned Subsidiary of the Company.
"Moody's" means Moody's Investors Service, Inc.
"Multiemployer Plan" of any Person means a multiemployer plan,
as defined in Section 4001(a)(3) of ERISA, to which such Person or any
of its ERISA Affiliates is making or accruing an obligation to make
contributions, or has within any of the preceding five plan years made
or accrued an obligation to make contributions.
"Multiple Employer Plan" of any Person means a single employer
plan, as defined in Section 4001(a)(15) of ERISA, that (a) is
maintained for employees of such Person or any of its ERISA Affiliates
and at least one Person other than such Person or any of its ERISA
Affiliates or (b) was so maintained and in respect of which such Person
or any of its ERISA Affiliates could have liability under Section 4064
or 4069 of ERISA in the event such plan has been or were to be
terminated.
"Net Tangible Assets of the Company and its Consolidated
Subsidiaries", as at any particular date of determination, means the
total amount of assets (less applicable reserves and other properly
deductible items) after deducting therefrom (a) all current liabilities
(excluding any thereof which are by their terms extendible or renewable
at the option of the obligor thereon to a time more than 12 months
after the time as of which the amount thereof is being computed) and
(b) all goodwill, trade names, trademarks, patents, unamortized debt
discount and expense and other like intangible assets, as set forth in
the most recent balance sheet of the Company and its Consolidated
Subsidiaries and computed in accordance with GAAP.
"Non-Consenting Lender" has the meaning specified in Section
2.16(b).
"Note" means a Revolving Credit Note or a Competitive Bid
Note.
"Notice of Competitive Bid Borrowing" has the meaning
specified in Section 2.03(a).
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13
"Notice of Revolving Credit Borrowing" has the meaning
specified in Section 2.02(a).
"Obligations" has the meaning specified in Section 7.01(b).
"Payment Office" means, for any Foreign Currency, such office
of Citibank as shall be from time to time selected by the Agent and
notified by the Agent to the Borrowers and the Lenders.
"PBGC" means the Pension Benefit Guaranty Corporation (or any
successor).
"Person" means an individual, partnership, corporation
(including a business trust), joint stock company, trust,
unincorporated association, joint venture, limited liability company or
other entity, or a government or any political subdivision or agency
thereof.
"Plan" means a Single Employer Plan or a Multiple Employer
Plan.
"Process Agent" has the meaning specified in Section 9.13(a).
"Rating Condition" has the meaning specified in Section
2.05(c)(ii).
"Rating Condition Notice" has the meaning specified in Section
2.05(c)(ii).
"Reference Banks" means Citibank, Bank of America, N.A., The
Chase Manhattan Bank and Deutsche Bank AG.
"Register" has the meaning specified in Section 9.07(d).
"Restricted Property" means (a) any property of the Company
located within the United States of America that, in the opinion of the
Company's Board of Directors, is a principal manufacturing property or
(b) any shares of capital stock or Debt of any Subsidiary owning any
such property.
"Revolving Credit Advance" means an advance by a Lender to any
Borrower as part of a Revolving Credit Borrowing and refers to a Base
Rate Advance or a Eurocurrency Rate Advance (each of which shall be a
"Type" of Revolving Credit Advance).
"Revolving Credit Borrowing" means a borrowing consisting of
simultaneous Revolving Credit Advances of the same Type made by each of
the Lenders pursuant to Section 2.01.
<PAGE>
14
"Revolving Credit Note" means a promissory note of any
Borrower payable to the order of any Lender, delivered pursuant to a
request made under Section 2.17 in substantially the form of Exhibit
A-1 hereto, evidencing the aggregate indebtedness of such Borrower to
such Lender resulting from the Revolving Credit Advances made by such
Lender to such Borrower.
"Sale and Leaseback Transaction" means any arrangement with
any Person (other than the Company or a Subsidiary of the Company), or
to which any such Person is a party, providing for the leasing to the
Company or to a Subsidiary of the Company owning Restricted Property
for a period of more than three years of any Restricted Property that
has been or is to be sold or transferred by the Company or such
Subsidiary to such Person, or to any other Person (other than the
Company or a Subsidiary of the Company) to which funds have been or are
to be advanced by such Person on the security of the leased property.
It is understood that arrangements pursuant to Section 168(f)(8) of the
Internal Revenue Code of 1954, as amended, or any successor provision
having similar effect, are not included within this definition of "Sale
and Leaseback Transaction".
"Single Employer Plan" of any Person means a single employer
plan, as defined in Section 4001(a)(15) of ERISA, that (a) is
maintained for employees of such Person or any of its ERISA Affiliates
and no Person other than such Person and its ERISA Affiliates or (b)
was so maintained and in respect of which such Person or any of its
ERISA Affiliates could have liability under Section 4069 of ERISA in
the event such plan has been or were to be terminated.
"S&P" means Standard & Poor's Ratings Group, a division of The
McGraw Hill Companies, Inc.
"Sub-Agent" means Citibank International plc.
"Subsidiary" of any Person means any corporation, partnership,
joint venture, limited liability company, trust or estate of which (or
in which) more than 50% of (a) the issued and outstanding capital stock
having ordinary voting power to elect a majority of the Board of
Directors of such corporation (irrespective of whether at the time
capital stock of any other class or classes of such corporation shall
or might have voting power upon the occurrence of any contingency), (b)
the interest in the capital or profits of such limited liability
company, partnership or joint venture or (c) the beneficial interest in
such trust or estate is at the time directly or indirectly owned or
controlled by such Person, by such Person and one or more of its other
Subsidiaries or by one or more of such Person's other Subsidiaries.
"Telerate Page" means, as applicable, page 3740 or 3750 (or
any successor pages, respectively) of Telerate Service of Bridge
Information Services.
<PAGE>
15
"Termination Date" means the earlier of (a) November 30, 2000,
or such later date to which it may be extended pursuant to Section
2.16, and (b) the date of termination in whole of the Commitments
pursuant to Section 2.05(a) or Section 6.01 or, if all Lenders elect to
terminate their Commitments as provided therein, Section 2.05(d).
"Threatened" means, with respect to any action, suit,
investigation, litigation or proceeding, a written communication to the
Company or a Designated Subsidiary, as the case may be, expressing an
intention to immediately bring such action, suit, investigation,
litigation or proceeding.
"Voting Stock" means capital stock issued by a corporation, or
equivalent interests in any other Person, the holders of which are
ordinarily, in the absence of contingencies, entitled to vote for the
election of directors (or persons performing similar functions) of such
Person, even if the right so to vote has been suspended by the
happening of such a contingency.
"Withdrawal Liability" has the meaning specified in Part I of
Subtitle E of Title IV of ERISA.
SECTION 1.02. Computation of Time Periods. In this Agreement
in the computation of periods of time from a specified date to a later specified
date, the word "from" means "from and including" and the words "to" and "until"
each mean "to but excluding".
SECTION 1.03. Accounting Terms. All accounting terms not
specifically defined herein shall be construed, and all financial computations
and determinations pursuant hereto shall be made, in accordance with generally
accepted accounting principles consistent with those applied in the preparation
of the financial statements referred to in Section 4.01(e) ("GAAP"); provided,
however, that, if any changes in accounting principles from those used in the
preparation of such financial statements have been required by the rules,
regulations, pronouncements or opinions of the Financial Accounting Standards
Board or the American Institute of Certified Public Accountants (or successors
thereto or agencies with similar functions) and have been adopted by the Company
with the agreement of its independent certified public accountants, the Lenders
agree to consider a request by the Company to amend this Agreement to take
account of such changes.
ARTICLE II
AMOUNTS AND TERMS OF THE ADVANCES
SECTION 2.01. The Revolving Credit Advances. Each Lender
severally agrees, on the terms and conditions hereinafter set forth, to make
Revolving Credit Advances to any Borrower
<PAGE>
16
from time to time on any Business Day during the period from the Effective Date
until the Termination Date in an aggregate amount (based in respect of any
Revolving Credit Advance denominated in a Major Currency on the Equivalent in
Dollars determined on the date of delivery of the applicable Notice of Revolving
Credit Borrowing), not to exceed at any time outstanding such Lender's
Commitment, provided that the aggregate amount of the Commitments of the Lenders
shall be deemed used from time to time to the extent of the aggregate amount
(based in respect of any Competitive Bid Advance denominated in a Foreign
Currency on the Equivalent in Dollars at such time) of the Competitive Bid
Advances then outstanding and such deemed use of the aggregate amount of the
Commitments shall be allocated among the Lenders ratably according to their
respective Commitments (such deemed use of the aggregate amount of the
Commitments being a "Competitive Bid Reduction"). Each Revolving Credit
Borrowing shall be in an aggregate amount not less than $10,000,000 (or the
Equivalent thereof in any Major Currency determined on the date of delivery of
the applicable Notice of Revolving Credit Borrowing) or an integral multiple of
$1,000,000 (or the Equivalent thereof in any Major Currency determined on the
date of delivery of the applicable Notice of Revolving Credit Borrowing) in
excess thereof and shall consist of Revolving Credit Advances of the same Type
made on the same day by the Lenders ratably according to their respective
Commitments; provided, however, that if there is no unused portion of the
Commitment of one or more Lenders at the time of any requested Revolving Credit
Borrowing such Borrowing shall consist of Revolving Credit Advances of the same
Type made on the same day by the Lender or Lenders who do then have an unused
portion of their Commitments ratably according to the unused portion of such
Commitments. Notwithstanding anything herein to the contrary, no Revolving
Credit Borrowing may be made in a Major Currency if, after giving effect to the
making of such Revolving Credit Borrowing, the Equivalent in Dollars of the
aggregate amount of outstanding Revolving Credit Advances denominated in Major
Currencies, together with the Equivalent in Dollars of the aggregate amount of
outstanding Competitive Bid Advances denominated in Foreign Currencies, would
exceed $500,000,000. Within the limits of each Lender's Commitment, any Borrower
may borrow under this Section 2.01, prepay pursuant to Section 2.09 and reborrow
under this Section 2.01.
SECTION 2.02. Making the Revolving Credit Advances. (a) Each
Revolving Credit Borrowing shall be made on notice, given not later than (x)
10:00 A.M. (New York City time) on the third Business Day prior to the date of
the proposed Revolving Credit Borrowing in the case of a Revolving Credit
Borrowing consisting of Eurocurrency Rate Advances denominated in any Major
Currency, (y) 11:00 A.M. (New York City time) on the third Business Day prior to
the date of the proposed Revolving Credit Borrowing in the case of a Revolving
Credit Borrowing consisting of Eurocurrency Rate Advances denominated in Dollars
or (z) 9:00 A.M. (New York City time) on the day of the proposed Revolving
Credit Borrowing in the case of a Revolving Credit Borrowing consisting of Base
Rate Advances, by any Borrower to the Agent (and the Agent shall, in the case of
a Revolving Credit Borrowing consisting of Eurocurrency Rate Advances,
immediately relay such notice to the Sub-Agent), which shall give to each Lender
prompt notice thereof by telecopier or telex. Each such notice of a Revolving
Credit Borrowing (a "Notice of Revolving Credit
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17
Borrowing") shall be by telephone, confirmed immediately in writing, or
telecopier or telex in substantially the form of Exhibit B-1 hereto, specifying
therein the requested (i) date of such Revolving Credit Borrowing, (ii) Type of
Advances comprising such Revolving Credit Borrowing, (iii) aggregate amount of
such Revolving Credit Borrowing, and (iv) in the case of a Revolving Credit
Borrowing consisting of Eurocurrency Rate Advances, initial Interest Period and
currency for each such Revolving Credit Advance. Each Lender shall, before 11:00
A.M. (New York City time) on the date of such Revolving Credit Borrowing, in the
case of a Revolving Credit Borrowing consisting of Advances denominated in
Dollars, and before 11:00 A.M. (London time) on the date of such Revolving
Credit Borrowing, in the case of a Revolving Credit Borrowing consisting of
Eurocurrency Rate Advances denominated in any Major Currency, make available for
the account of its Applicable Lending Office to the Agent at the applicable
Agent's account, in same day funds, such Lender's ratable portion (as determined
in accordance with Section 2.01) of such Revolving Credit Borrowing. After the
Agent's receipt of such funds and upon fulfillment of the applicable conditions
set forth in Article III, the Agent will make such funds available to the
Borrower requesting the Revolving Credit Borrowing at the Agent's aforesaid
address or at the applicable Payment Office, as the case may be.
(b) Anything in subsection (a) above to the contrary
notwithstanding, a Borrower may not select Eurocurrency Rate Advances for any
proposed Revolving Credit Borrowing if the obligation of the Lenders to make
Eurocurrency Rate Advances shall then be suspended pursuant to Section 2.08 or
2.11.
(c) Each Notice of Revolving Credit Borrowing of any Borrower
shall be irrevocable and binding on such Borrower. In the case of any Revolving
Credit Borrowing that the related Notice of Revolving Credit Borrowing specifies
is to be comprised of Eurocurrency Rate Advances, the Borrower requesting such
Revolving Credit Borrowing shall indemnify each Lender against any loss, cost or
expense incurred by such Lender as a result of any failure by such Borrower to
fulfill on or before the date specified in such Notice of Revolving Credit
Borrowing for such Revolving Credit Borrowing the applicable conditions set
forth in Article III, including, without limitation, any loss (including loss of
anticipated profits), cost or expense incurred by reason of the liquidation or
reemployment of deposits or other funds acquired by such Lender to fund the
Revolving Credit Advance to be made by such Lender as part of such Revolving
Credit Borrowing when such Revolving Credit Advance, as a result of such
failure, is not made on such date.
(d) Unless the Agent shall have received notice from a Lender
prior to the date of any Revolving Credit Borrowing that such Lender will not
make available to the Agent such Lender's ratable portion of such Revolving
Credit Borrowing, the Agent may assume that such Lender has made such portion
available to the Agent on the date of such Revolving Credit Borrowing in
accordance with subsection (a) of this Section 2.02 and the Agent may, in
reliance upon such assumption, make available to the Borrower proposing such
Revolving Credit Borrowing on such date a corresponding amount. If and to the
extent that such Lender shall not have so made
<PAGE>
18
such ratable portion available to the Agent, such Lender and such Borrower
severally agree to repay to the Agent forthwith on demand such corresponding
amount together with interest thereon, for each day from the date such amount is
made available to such Borrower until the date such amount is repaid to the
Agent, at (i) in the case of such Borrower, the higher of (A) the interest rate
applicable at the time to Revolving Credit Advances comprising such Revolving
Credit Borrowing and (B) the cost of funds incurred by the Agent in respect of
such amount and (ii) in the case of such Lender, (A) the Federal Funds Rate in
the case of Advances denominated in Dollars or (B) the cost of funds incurred by
the Agent in respect of such amount in the case of Advances denominated in any
Major Currency. If such Lender shall repay to the Agent such corresponding
amount, such amount so repaid shall constitute such Lender's Revolving Credit
Advance as part of such Revolving Credit Borrowing for purposes of this
Agreement.
(e) The failure of any Lender to make the Revolving Credit
Advance to be made by it as part of any Revolving Credit Borrowing shall not
relieve any other Lender of its obligation, if any, hereunder to make its
Revolving Credit Advance on the date of such Revolving Credit Borrowing, but no
Lender shall be responsible for the failure of any other Lender to make the
Revolving Credit Advance to be made by such other Lender on the date of any
Revolving Credit Borrowing.
SECTION 2.03. The Competitive Bid Advances. (a) Each Lender
severally agrees that any Borrower may request Competitive Bid Borrowings under
this Section 2.03 from time to time on any Business Day during the period from
the date hereof until the date occurring seven days prior to the Termination
Date in the manner set forth below; provided that, following the making of each
Competitive Bid Borrowing, the aggregate amount (based in respect of any Advance
denominated in a Foreign Currency on the Equivalent in Dollars on such Business
Day) of the Advances then outstanding shall not exceed the aggregate amount of
the Commitments of the Lenders (computed without regard to any Competitive Bid
Reduction). Notwithstanding anything herein to the contrary, no Competitive Bid
Borrowing may be made in a Foreign Currency if, after giving effect to the
making of such Revolving Credit Borrowing, the Equivalent in Dollars of the
aggregate amount of outstanding Competitive Bid Advances denominated in Foreign
Currencies, together with the Equivalent in Dollars of the aggregate amount of
outstanding Revolving Credit Advances denominated in Major Currencies, would
exceed $500,000,000.
(i) Any Borrower may request a Competitive Bid Borrowing under
this Section 2.03 by delivering to the Agent (and the Agent shall, in
the case of a Competitive Bid Borrowing not consisting of Fixed Rate
Advances or LIBO Rate Advances to be denominated in Dollars,
immediately notify the Sub-Agent), by telecopier or telex, a notice of
a Competitive Bid Borrowing (a "Notice of Competitive Bid Borrowing"),
in substantially the form of Exhibit B-2 hereto, specifying therein the
requested (A) date of such proposed Competitive Bid Borrowing, (B)
aggregate amount of such proposed Competitive Bid Borrowing, (C)
interest rate basis and day count convention to be offered by the
Lenders,
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19
(D) currency of such proposed Competitive Bid Borrowing, (E) in the
case of a Competitive Bid Borrowing consisting of LIBO Rate Advances,
Interest Period of each Competitive Bid Advance to be made as part of
such Competitive Bid Borrowing, or in the case of a Competitive Bid
Borrowing consisting of Fixed Rate Advances or Local Rate Advances,
maturity date for repayment of each Fixed Rate Advance or Local Rate
Advance to be made as part of such Competitive Bid Borrowing (which
maturity date may not be earlier than the date occurring five days
after the date of such Competitive Bid Borrowing or later than the
Termination Date), (F) interest payment date or dates relating thereto,
(G) location of such Borrower's account to which funds are to be
advanced, and (H) other terms (if any) to be applicable to such
Competitive Bid Borrowing, not later than (w) 10:00 A.M. (New York City
time) at least one Business Day prior to the date of the proposed
Competitive Bid Borrowing, if such Borrower shall specify in its Notice
of Competitive Bid Borrowing that the rates of interest to be offered
by the Lenders shall be fixed rates per annum (each Advance comprising
any such Competitive Bid Borrowing being referred to herein as a "Fixed
Rate Advance") and that the Advances comprising such proposed
Competitive Bid Borrowing shall be denominated in Dollars, (x) 10:00
A.M. (New York City time) at least four Business Days prior to the date
of the proposed Competitive Bid Borrowing, if such Borrower shall
instead specify in its Notice of Competitive Bid Borrowing that the
Advances comprising such Competitive Bid Borrowing shall be LIBO Rate
Advances denominated in Dollars, (y) 3:00 P.M. (New York City time) at
least three Business Days prior to the date of the proposed Competitive
Bid Borrowing, if such Borrower shall specify in the Notice of
Competitive Bid Borrowing that the Advances comprising such proposed
Competitive Bid Borrowing shall be either Fixed Rate Advances
denominated in any Foreign Currency or Local Rate Advances denominated
in any Foreign Currency and (z) 3:00 P.M. (New York City time) at least
five Business Days prior to the date of the proposed Competitive Bid
Borrowing, if such Borrower shall instead specify in its Notice of
Competitive Bid Borrowing that the Advances comprising such Competitive
Bid Borrowing shall be LIBO Rate Advances denominated in any Foreign
Currency. Each Notice of Competitive Bid Borrowing shall be irrevocable
and binding on such Borrower. Any Notice of Competitive Bid Borrowing
by a Designated Subsidiary shall be given to the Agent in accordance
with the preceding sentence through the Company on behalf of such
Designated Subsidiary. The Agent shall in turn promptly notify each
Lender of each request for a Competitive Bid Borrowing received by it
from such Borrower by sending such Lender a copy of the related Notice
of Competitive Bid Borrowing.
(ii) Each Lender may, if, in its sole discretion, it elects to
do so, irrevocably offer to make one or more Competitive Bid Advances
to the Borrower proposing the Competitive Bid Borrowing as part of such
proposed Competitive Bid Borrowing at a rate or rates of interest
specified by such Lender in its sole discretion, by notifying the Agent
(which shall give prompt notice thereof to such Borrower and to the
Sub-Agent, if applicable), (A) before 9:30 A.M. (New York City time) on
the date of such proposed Competitive Bid Borrowing, in the case of a
Competitive Bid Borrowing consisting of Fixed Rate Advances denominated
in Dollars, (B) before 10:00 A.M. (New York City time) three Business
Days before the date of such proposed Competitive Bid Borrowing, in the
case of a Competitive Bid Borrowing consisting of LIBO Rate Advances
denominated in Dollars, (C) before 10:00 A.M. (New York City time) on
the second Business Day prior to the date of such proposed Competitive
Bid Borrowing,
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20
in the case of a Competitive Bid Borrowing consisting of either Fixed
Rate Advances denominated in any Foreign Currency or Local Rate
Advances denominated in any Foreign Currency and (D) before 10:00 A.M.
(New York City time) four Business Days before the date of such
proposed Competitive Bid Borrowing, in the case of a Competitive Bid
Borrowing consisting of LIBO Rate Advances denominated in any Foreign
Currency, of the minimum amount and maximum amount of each Competitive
Bid Advance which such Lender would be willing to make as part of such
proposed Competitive Bid Borrowing (which amounts, or the Equivalent
thereof in Dollars, as the case may be, may, subject to the proviso to
the first sentence of this Section 2.03(a), exceed such Lender's
Commitment, if any), the rate or rates of interest therefor and such
Lender's Applicable Lending Office with respect to such Competitive Bid
Advance; provided that if the Agent in its capacity as a Lender shall,
in its sole discretion, elect to make any such offer, it shall notify
such Borrower of such offer at least 30 minutes before the time and on
the date on which notice of such election is to be given to the Agent,
by the other Lenders. If any Lender shall elect not to make such an
offer, such Lender shall so notify the Agent, before 10:00 A.M. (New
York City time) (and the Agent shall notify the Sub-Agent, if
applicable) on the date on which notice of such election is to be given
to the Agent by the other Lenders, and such Lender shall not be
obligated to, and shall not, make any Competitive Bid Advance as part
of such Competitive Bid Borrowing; provided that the failure by any
Lender to give such notice shall not cause such Lender to be obligated
to make any Competitive Bid Advance as part of such proposed
Competitive Bid Borrowing.
(iii) The Borrower proposing the Competitive Bid Advance
shall, in turn, (A) before 10:30 A.M. (New York City time) on the date
of such proposed Competitive Bid Borrowing, in the case of a
Competitive Bid Borrowing consisting of Fixed Rate Advances denominated
in Dollars, (B) before 11:00 A.M. (New York City time) three Business
Days before the date of such proposed Competitive Bid Borrowing, in the
case of a Competitive Bid Borrowing consisting of LIBO Rate Advances
denominated in Dollars, (C) before 10:00 A.M. (New York City time) on
the Business Day prior to the date of such Competitive Bid Borrowing,
in the case of a Competitive Bid Borrowing consisting of either Fixed
Rate Advances denominated in any Foreign Currency or Local Rate
Advances denominated in any Foreign Currency and (D) before 10:00 A.M.
(New York City time) three Business Days before the date of such
proposed Competitive Bid Borrowing, in the case of a Competitive Bid
Borrowing consisting of LIBO Rate Advances denominated in any Foreign
Currency, either:
<PAGE>
21
(x) cancel such Competitive Bid Borrowing by giving
the Agent notice to that effect, or
(y) accept one or more of the offers made by any
Lender or Lenders pursuant to paragraph (ii) above, in its
sole discretion, by giving notice to the Agent (and the Agent
shall give notice to the Sub-Agent, if applicable) of the
amount of each Competitive Bid Advance (which amount shall be
equal to or greater than the minimum amount, and equal to or
less than the maximum amount, notified to such Borrower by the
Agent on behalf of such Lender for such Competitive Bid
Advance pursuant to paragraph (ii) above) to be made by each
Lender as part of such Competitive Bid Borrowing, and reject
any remaining offers made by Lenders pursuant to paragraph
(ii) above by giving the Agent notice to that effect;
provided, however, that such Borrower shall not accept any
offer in excess of the requested bid amount for any maturity.
Such Borrower shall accept the offers made by any Lender or
Lenders to make Competitive Bid Advances in order of the
lowest to the highest rates of interest offered by such
Lenders. If two or more Lenders have offered the same interest
rate, the amount to be borrowed at such interest rate will be
allocated among such Lenders in proportion to the amount that
each such Lender offered at such interest rate.
(iv) If the Borrower proposing the Competitive Bid Borrowing
notifies the Agent that such Competitive Bid Borrowing is canceled
pursuant to paragraph (iii)(x) above, the Agent shall give prompt
notice thereof to the Lenders and such Competitive Bid Borrowing shall
not be made.
(v) If the Borrower proposing the Competitive Bid Borrowing
accepts one or more of the offers made by any Lender or Lenders
pursuant to paragraph (iii)(y) above, the Agent shall in turn promptly
notify (A) each Lender that has made an offer as described in paragraph
(ii) above, of the date and aggregate amount of such Competitive Bid
Borrowing and whether or not any offer or offers made by such Lender
pursuant to paragraph (ii) above have been accepted by the Borrower,
(B) each Lender that is to make a Competitive Bid Advance as part of
such Competitive Bid Borrowing, of the amount of each Competitive Bid
Advance to be made by such Lender as part of such Competitive Bid
Borrowing, and (C) each Lender that is to make a Competitive Bid
Advance as part of such Competitive Bid Borrowing, upon receipt, that
the Agent has received forms of documents appearing to fulfill the
applicable conditions set forth in Article III. Each Lender that is to
make a Competitive Bid Advance as part of such Competitive Bid
Borrowing shall, before 11:00 A.M. (New York City time), in the case of
Competitive Bid Advances to be denominated in Dollars or 11:00 A.M.
(London time), in the case of Competitive Bid Advances to be
denominated in any Foreign Currency, on the date of such Competitive
Bid Borrowing specified in the notice received from the Agent pursuant
to clause (A) of the preceding sentence or any later time
<PAGE>
22
when such Lender shall have received notice from the Agent pursuant to
clause (C) of the preceding sentence, make available for the account of
its Applicable Lending Office to the Agent (x) in the case of a
Competitive Bid Borrowing denominated in Dollars, at its address
referred to in Section 9.02, in same day funds, such Lender's portion
of such Competitive Bid Borrowing in Dollars, and (y) in the case of a
Competitive Bid Borrowing in a Foreign Currency, at the Payment Office
for such Foreign Currency as shall have been notified by the Agent to
the Lenders prior thereto, in same day funds, such Lender's portion of
such Competitive Bid Borrowing in such Foreign Currency. Upon
fulfillment of the applicable conditions set forth in Article III and
after receipt by the Agent of such funds, the Agent will make such
funds available to such Borrower's account at the location specified by
such Borrower in its Notice of Competitive Bid Borrowing. Promptly
after each Competitive Bid Borrowing the Agent will notify each Lender
of the amount of such Competitive Bid Borrowing, the consequent
Competitive Bid Reduction and the dates upon which such Competitive Bid
Reduction commenced and will terminate.
(vi) If the Borrower proposing the Competitive Bid Borrowing
notifies the Agent that it accepts one or more of the offers made by
any Lender or Lenders pursuant to paragraph (iii)(y) above, such notice
of acceptance shall be irrevocable and binding on such Borrower. Such
Borrower shall indemnify each Lender against any loss, cost or expense
incurred by such Lender as a result of any failure by such Borrower to
fulfill on or before the date specified in the related Notice of
Competitive Bid Borrowing for such Competitive Bid Borrowing the
applicable conditions set forth in Article III, including, without
limitation, any loss (including loss of anticipated profits), cost or
expense incurred by reason of the liquidation or reemployment of
deposits or other funds acquired by such Lender to fund the Competitive
Bid Advance to be made by such Lender as part of such Competitive Bid
Borrowing when such Competitive Bid Advance, as a result of such
failure, is not made on such date.
(b) Each Competitive Bid Borrowing shall be in an aggregate
amount not less than $10,000,000 (or the Equivalent thereof in any Foreign
Currency, determined as of the time of the applicable Notice of Competitive Bid
Borrowing) or an integral multiple of $1,000,000 (or the Equivalent thereof in
any Foreign Currency, determined as of the time of the applicable Notice of
Competitive Bid Borrowing) in excess thereof and, following the making of each
Competitive Bid Borrowing, the Borrower that has borrowed such Competitive Bid
Borrowing shall be in compliance with the limitation set forth in the proviso to
the first sentence of subsection (a) above.
(c) Within the limits and on the conditions set forth in this
Section 2.03, any Borrower may from time to time borrow under this Section 2.03,
repay or prepay pursuant to subsection (d) below, and reborrow under this
Section 2.03, provided that a Competitive Bid Borrowing shall not be made within
three Business Days of the date of any other Competitive Bid Borrowing.
<PAGE>
23
(d) Any Borrower that has borrowed through a Competitive Bid
Borrowing shall repay to the Agent for the account of each Lender that has made
a Competitive Bid Advance, on the maturity date of such Competitive Bid Advance
(such maturity date being that specified by such Borrower for repayment of such
Competitive Bid Advance in the related Notice of Competitive Bid Borrowing
delivered pursuant to subsection (a)(i) above and provided in the Competitive
Bid Note evidencing such Competitive Bid Advance), the then unpaid principal
amount of such Competitive Bid Advance. Such Borrower shall have no right to
prepay any principal amount of any Competitive Bid Advance unless, and then only
on the terms, specified by such Borrower for such Competitive Bid Advance in the
related Notice of Competitive Bid Borrowing delivered pursuant to subsection
(a)(i) above and set forth in the Competitive Bid Note evidencing such
Competitive Bid Advance.
(e) Each Borrower that has borrowed through a Competitive Bid
Borrowing shall pay interest on the unpaid principal amount of each Competitive
Bid Advance comprising such Competitive Bid Borrowing from the date of such
Competitive Bid Advance to the date the principal amount of such Competitive Bid
Advance is repaid in full, at the rate of interest for such Competitive Bid
Advance specified by the Lender making such Competitive Bid Advance in its
notice with respect thereto delivered pursuant to subsection (a)(ii) above,
payable on the interest payment date or dates specified by such Borrower for
such Competitive Bid Advance in the related Notice of Competitive Bid Borrowing
delivered pursuant to subsection (a)(i) above, as provided in the Competitive
Bid Note evidencing such Competitive Bid Advance. Upon the occurrence and during
the continuance of an Event of Default under Section 6.01(a), such Borrower
shall pay interest on the amount of unpaid principal of and interest on each
Competitive Bid Advance owing to a Lender, payable in arrears on the date or
dates interest is payable thereon, at a rate per annum equal at all times to 1%
per annum above the rate per annum required to be paid on such Competitive Bid
Advance under the terms of the Competitive Bid Note evidencing such Competitive
Bid Advance unless otherwise agreed in such Competitive Bid Note.
(f) The indebtedness of any Borrower resulting from each
Competitive Bid Advance made to such Borrower as part of a Competitive Bid
Borrowing shall be evidenced by a separate Competitive Bid Note of the Borrower
payable to the order of the Lender making such Competitive Bid Advance.
SECTION 2.04. Fees. (a) Facility Fee. The Company agrees to
pay to the Agent for the account of each Lender a facility fee on the aggregate
amount of such Lender's Commitment from the date hereof in the case of each
Initial Lender and from the effective date specified in the Assumption Agreement
or the Assignment and Acceptance, as the case may be, pursuant to which it
became a Lender in the case of each other Lender until the Termination Date at a
rate per annum equal to the Applicable Percentage in effect from time to time,
payable in arrears quarterly on the last day of each March, June, September and
December, commencing December 31, 1999, and on the Termination Date.
<PAGE>
24
(b) Agent's Fees. The Company shall pay to the Agent for its
own account such fees, and at such times, as the Company and the Agent may
separately agree.
SECTION 2.05. Termination or Reduction of the Commitments. (a)
Optional Ratable Termination or Reduction. The Company shall have the right,
upon at least three Business Days' notice to the Agent, to terminate in whole or
reduce ratably in part the unused portions of the respective Commitments of the
Lenders, provided that each partial reduction shall be in an aggregate amount
not less than $10,000,000 or an integral multiple of $1,000,000 in excess
thereof and provided further that the aggregate amount of the Commitments of the
Lenders shall not be reduced to an amount that is less than the sum of the
aggregate principal amount of the Competitive Bid Advances denominated in
Dollars then outstanding plus the Equivalent in Dollars (determined as of the
date of the notice of prepayment) of the aggregate principal amount of the
Competitive Bid Advances denominated in Foreign Currencies then outstanding. The
aggregate amount of the Commitments, once reduced as provided in this Section
2.05(a), may not be reinstated.
(b) Non-Ratable Termination by Assignment. The Company shall
have the right, upon at least ten Business Days' written notice to the Agent
(which shall then give prompt notice thereof to the relevant Lender), to require
any Lender to assign, pursuant to and in accordance with the provisions of
Section 9.07, all of its rights and obligations under this Agreement and under
the Notes to an Eligible Assignee selected by the Company; provided, however,
that (i) no Event of Default shall have occurred and be continuing at the time
of such request and at the time of such assignment; (ii) the assignee shall have
paid to the assigning Lender the aggregate principal amount of, and any interest
accrued and unpaid to the date of such assignment on, the Note or Notes of such
Lender; (iii) the Company shall have paid to the assigning Lender any and all
facility fees and other fees payable to such Lender and all other accrued and
unpaid amounts owing to such Lender under any provision of this Agreement
(including, but not limited to, any increased costs or other additional amounts
owing under Section 2.10 and any indemnification for Taxes under Section 2.13)
as of the effective date of such assignment; and (iv) if the assignee selected
by the Company is not an existing Lender, such assignee or the Company shall
have paid the processing and recordation fee required under Section 9.07(a) for
such assignment; provided further that the Company shall have no right to
replace more than three Lenders in any calendar year pursuant to this Section
2.05(b); and provided further that the assigning Lender's rights under Sections
2.10, 2.13 and 9.04, and its obligations under Section 8.05, shall survive such
assignment as to matters occurring prior to the date of assignment.
(c) Non-Ratable Reduction. (i) The Company shall have the
right, at any time other than during any Rating Condition, upon at least ten
Business Days' notice to a Lender (with a copy to the Agent), to terminate in
whole such Lender's Commitment (determined without giving effect to any
Competitive Bid Reduction). Such termination shall be effective, (i) with
respect to such Lender's unused Commitment, on the date set forth in such
notice, provided, however, that such date shall be no earlier than ten Business
Days after receipt of such notice and (ii) with respect to
<PAGE>
25
each Advance outstanding to such Lender, on the last day of the then current
Interest Period relating to such Advance; provided further, however, that such
termination shall not be effective, if, after giving effect to such termination,
the Company would, under this Section 2.05(c), reduce the Lenders' Commitments
in any calendar year by an amount in excess of the Commitments of any three
Lenders or $480,000,000, whichever is greater on the date of such termination.
Notwithstanding the preceding proviso, the Company may terminate in whole the
Commitment of any Lender in accordance with the terms and conditions set forth
in Section 2.05(b) or 2.16(b). Upon termination of a Lender's Commitment under
this Section 2.05(c), the Company will pay or cause to be paid all principal of,
and interest accrued to the date of such payment on, Advances owing to such
Lender and pay any facility fees or other fees payable to such Lender pursuant
to the provisions of Section 2.04, and all other amounts payable to such Lender
hereunder (including, but not limited to, any increased costs or other amounts
owing under Section 2.10 and any indemnification for Taxes under Section 2.13);
and upon such payments, the obligations of such Lender hereunder shall, by the
provisions hereof, be released and discharged; provided, however, that such
Lender's rights under Sections 2.10, 2.13 and 9.04, and its obligations under
Section 8.05 shall survive such release and discharge as to matters occurring
prior to such date. The aggregate amount of the Commitments of the Lenders once
reduced pursuant to this Section 2.05(c) may not be reinstated.
(ii) For purposes of this Section 2.05(c) only, the term
"Rating Condition" shall mean a period commencing with notice (a "Rating
Condition Notice") by the Agent to the Company and the Lenders to the effect
that the Agent has been informed that the rating of the senior public Debt of
the Company is unsatisfactory under the standard set forth in the next sentence,
and ending with notice by the Agent to the Company and the Lenders to the effect
that such condition no longer exists. The Agent shall give a Rating Condition
Notice promptly upon receipt from the Company or any Lender of notice stating,
in effect, that both of S&P and Moody's (or any successor by merger or
consolidation to the business of either thereof), respectively, then rate the
senior public Debt of the Company lower than BBB- and Baa3. The Company agrees
to give notice to the Agent forthwith upon any change in a rating by either such
organization of the senior public Debt of the Company; the Agent shall have no
duty whatsoever to verify the accuracy of any such notice from the Company or
any Lender or to monitor independently the ratings of the senior public Debt of
the Company and no Lender shall have any duty to give any such notice. The Agent
shall give notice to the Lenders and the Company as to the termination of a
Rating Condition promptly upon receiving a notice from the Company to the Agent
(which notice the Agent shall promptly notify to the Lenders) stating that the
rating of the senior public Debt of the Company does not meet the standard set
forth in the second sentence of this clause (ii), and requesting that the Agent
notify the Lenders of the termination of the Rating Condition. The Rating
Condition shall terminate upon the giving of such notice by the Agent.
(d) Termination by a Lender. In the event that a Change of
Control occurs, each Lender may, by notice to the Company and the Agent given
not later than 50 calendar days after
<PAGE>
26
such Change of Control, terminate its Commitment, which Commitment shall be
terminated effective as of the later of (i) the date that is 60 calendar days
after such Change of Control or (ii) the end of the Interest Period for any
Advance outstanding at the time of such Change of Control or for any Advance
made pursuant to the next sentence of this Section 2.05(d). Upon the occurrence
of a Change of Control, each Borrower's right to make a Borrowing under this
Agreement shall be suspended for a period of 60 calendar days, except for
Advances having an interest period ending not later than 90 calendar days after
such Change of Control. A notice of termination pursuant to this Section 2.05(d)
shall not have the effect of accelerating any outstanding Advance of such Lender
and the Notes of such Lender.
(e) Mandatory Reduction. To the extent that the Company has
not on or prior to March 31, 2000 reduced the aggregate Commitments to
$1,000,000,000 or less, on March 31, 2000 the aggregate Commitments shall be
reduced to $1,000,000,000 and the Commitment of each Lender shall be reduced
ratably.
SECTION 2.06. Repayment of Advances. (a) Revolving Credit
Advances. Each Borrower shall repay to the Administrative Agent, for the ratable
account of the Lenders, on the Termination Date the aggregate principal amount
of all Revolving Credit Advances made to it outstanding on such date.
(b) Competitive Bid Advances. Each Borrower shall repay to the
Administrative Agent, for the account of each Lender that has made a Competitive
Bid Advance, the aggregate outstanding principal amount of each Competitive Bid
Advance made to such Borrower and owing to such Lender on the earlier of (i) the
maturity date therefor, specified in the related Notice of Competitive Bid
Borrowing delivered pursuant to Section 2.03(a)(i) and (ii) the Termination
Date.
SECTION 2.07. Interest on Revolving Credit Advances. (a)
Scheduled Interest. Each Borrower shall pay interest on the unpaid principal
amount of each Revolving Credit Advance owing by such Borrower to each Lender
from the date of such Revolving Credit Advance until such principal amount shall
be paid in full, at the following rates per annum:
(i) Base Rate Advances. During such periods as such Revolving
Credit Advance is a Base Rate Advance, a rate per annum equal at all
times to the Base Rate in effect from time to time, payable in arrears
quarterly on the last day of each March, June, September and December
during such periods and on the date such Base Rate Advance shall be
paid in full.
(ii) Eurocurrency Rate Advances. During such periods as such
Revolving Credit Advance is a Eurocurrency Rate Advance, a rate per
annum equal at all times during each Interest Period for such Revolving
Credit Advance to the sum of (x) the Eurocurrency Rate for such
Interest Period for such Revolving Credit Advance plus (y) the
Applicable Margin in effect from time to time, payable in arrears on
the last day of such Interest Period and, if
<PAGE>
27
such Interest Period has a duration of more than three months, on each
day that occurs during such Interest Period every three months from the
first day of such Interest Period and on the date such Eurocurrency
Rate Advance shall be Converted or paid in full.
(b) Default Interest. Upon the occurrence and during the
continuance of an Event of Default under Section 6.01(a), each Borrower shall
pay interest on (i) the unpaid principal amount of each Revolving Credit Advance
owing by such Borrower to each Lender, payable in arrears on the dates referred
to in clause (a)(i) or (a)(ii) above, at a rate per annum equal at all times to
1% per annum above the rate per annum required to be paid on such Revolving
Credit Advance pursuant to clause (a)(i) or (a)(ii) above and (ii) to the
fullest extent permitted by law, the amount of any interest, fee or other amount
payable hereunder by such Borrower that is not paid when due, from the date such
amount shall be due until such amount shall be paid in full, payable in arrears
on the date such amount shall be paid in full and on demand, at a rate per annum
equal at all times to 1% per annum above the rate per annum required to be paid
on such Revolving Credit Advance pursuant to clause (a)(i) or (a)(ii) above.
SECTION 2.08. Interest Rate Determination. (a) Each Reference
Bank agrees to furnish to the Agent timely information for the purpose of
determining each Eurocurrency Rate and each LIBO Rate if the applicable Telerate
Page is unavailable. If any one or more of the Reference Banks shall not furnish
such timely information to the Agent for the purpose of determining any such
interest rate, the Agent shall determine such interest rate on the basis of
timely information furnished by the remaining Reference Banks. The Agent shall
give prompt notice to the Company and the Lenders of the applicable interest
rate determined by the Agent for purposes of Section 2.07(a)(i) or (ii), and the
rate, if any, furnished by each Reference Bank for the purpose of determining
the interest rate under Section 2.07(a)(ii).
(b) If, with respect to any Eurocurrency Rate Advances, the
Majority Lenders notify the Agent that (i) they are unable to obtain matching
deposits in the London interbank market at or about 11:00 A.M. (London time) on
the second Business Day before the making of a Borrowing in sufficient amounts
to fund their respective Revolving Credit Advances as part of such Borrowing
during its Interest Period or (ii) the Eurocurrency Rate for any Interest Period
for such Advances will not adequately reflect the cost to such Majority Lenders
of making, funding or maintaining their respective Eurocurrency Rate Advances
for such Interest Period, the Agent shall forthwith so notify each Borrower and
the Lenders, whereupon (A) the Borrower will, on the last day of the then
existing Interest Period therefor, (1) if such Eurocurrency Rate Advances are
denominated in Dollars, either (x) prepay such Advances or (y) Convert such
Advances into Base Rate Advances and (2) if such Eurocurrency Rate Advances are
denominated in any Major Currency, either (x) prepay such Advances or (y)
redenominate such Advances into an Equivalent amount of Dollars and Convert such
Advances into Base Rate Advances, and (B) the obligation of the Lenders to make
Eurocurrency Rate Advances in the same currency as such Eurocurrency Rate
Advances
<PAGE>
28
shall be suspended until the Agent shall notify each Borrower and the Lenders
that the circumstances causing such suspension no longer exist.
(c) If any Borrower, in requesting a Revolving Credit
Borrowing comprised of Eurocurrency Rate Advances, shall fail to select the
duration of the Interest Period for such Eurocurrency Rate Advances in
accordance with the provisions contained in the definition of "Interest Period"
in Section 1.01, the Agent will forthwith so notify the Borrower and the Lenders
and such Advances will (to the extent such Eurocurrency Rate Advances remain
outstanding on such day) automatically, on the last day of the then existing
Interest Period therefor, (i) if such Eurocurrency Rate Advances are denominated
in Dollars, Convert into Base Rate Advances and (ii) if such Eurocurrency Rate
Advances are denominated in any Major Currency, be redenominated into an
Equivalent amount of Dollars and be Converted into Base Rate Advances.
(d) Upon the occurrence and during the continuance of any
Event of Default under Section 6.01(a), (i) each Eurocurrency Rate Advance will
(to the extent such Eurocurrency Rate Advance remains outstanding on such day)
automatically, on the last day of the then existing Interest Period therefor,
(A) if such Eurocurrency Rate Advance is denominated in Dollars, be Converted
into a Base Rate Advance and (B) if such Eurocurrency Rate Advance is
denominated in any Major Currency, be redenominated into an Equivalent amount of
Dollars and Converted into a Base Rate Advance and (ii) the obligation of the
Lenders to make Eurocurrency Rate Advances shall be suspended.
(e) If the applicable Telerate Page is unavailable and fewer
than two Reference Banks furnish timely information to the Agent for determining
the Eurocurrency Rate or LIBO Rate for any Eurocurrency Rate Advances or LIBO
Rate Advances, as the case may be,
(i) the Agent shall forthwith notify the relevant Borrower and
the Lenders that the interest rate cannot be determined for such
Eurocurrency Rate Advances or LIBO Rate Advances, as the case may be,
(ii) with respect to Eurocurrency Rate Advances, each such
Advance will (to the extent such Eurocurrency Rate Advance remains
outstanding on such day) automatically, on the last day of the then
existing Interest Period therefor, (A) if such Eurocurrency Rate
Advance is denominated in Dollars, be prepaid by the applicable
Borrower or be automatically Converted into a Base Rate Advance and (B)
if such Eurocurrency Rate Advance is denominated in any Major Currency,
be prepaid by the applicable Borrower or be automatically redenominated
into an Equivalent amount of Dollars and Converted into a Base Rate
Advance (or if such Advance is then a Base Rate Advance, will continue
as a Base Rate Advance), and
<PAGE>
29
(iii) the obligation of the Lenders to make Eurocurrency Rate
Advances or LIBO Rate Advances shall be suspended until the Agent shall
notify the Borrowers and the Lenders that the circumstances causing
such suspension no longer exist.
SECTION 2.09. Prepayments of Revolving Credit Advances. (a)
Optional Prepayments. Each Borrower may, upon notice to the Agent stating the
proposed date and aggregate principal amount of the prepayment, given not later
than 11:00 A.M. (New York City time) on the second Business Day prior to the
date of such proposed prepayment, in the case of Eurocurrency Rate Advances, and
not later than 11:00 A.M. (New York City time) on the day of such proposed
prepayment, in the case of Base Rate Advances, and, if such notice is given,
such Borrower shall, prepay the outstanding principal amount of the Revolving
Credit Advances comprising part of the same Revolving Credit Borrowing in whole
or ratably in part, together with accrued interest to the date of such
prepayment on the principal amount prepaid; provided, however, that (x) each
partial prepayment shall be in an aggregate principal amount not less than
$10,000,000 or the Equivalent thereof in a Major Currency (determined on the
date notice of prepayment is given) or an integral multiple of $1,000,000 or the
Equivalent thereof in a Major Currency (determined on the date notice of
prepayment is given) in excess thereof and (y) in the event of any such
prepayment of a Eurocurrency Rate Advance other than on the last day of the
Interest Period therefor, such Borrower shall be obligated to reimburse the
Lenders in respect thereof pursuant to Section 9.04(c). Each notice of
prepayment by a Designated Subsidiary shall be given to the Administrative Agent
through the Company.
(b) Mandatory Prepayments. (i) If, on any date, the sum of (A)
the aggregate principal amount of all Advances denominated in Dollars then
outstanding plus (B) the Equivalent in Dollars (determined on the third Business
Day prior to such date) of the aggregate principal amount of all Advances
denominated in Foreign Currencies then outstanding exceeds 103% of the aggregate
Commitments of the Lenders on such date, the Company and each other Borrower, if
any, shall thereupon promptly prepay the outstanding principal amount of any
Advances owing by such Borrower in an aggregate amount sufficient to reduce such
sum to an amount not to exceed 100% of the aggregate Commitments of the Lenders
on such date, together with any interest accrued to the date of such prepayment
on the principal amounts prepaid and, in the case of any prepayment of a
Eurocurrency Rate Advance, a LIBO Rate Advance or a Local Rate Advance on a date
other than the last day of an Interest Period or at its maturity, any additional
amounts which such Borrower shall be obligated to reimburse to the Lenders in
respect thereof pursuant to Section 9.04(c). The Agent shall give prompt notice
of any prepayment required under this Section 2.09(b)(i) to the Borrowers and
the Lenders.
(ii) If, on any date, the sum of (A) the Equivalent in Dollars
of the aggregate principal amount of all Eurocurrency Rate Advances denominated
in Major Currencies then outstanding plus (B) the Equivalent in Dollars of the
aggregate principal amount of all Competitive Bid Advances denominated in
Foreign Currencies then outstanding, shall exceed 110% of
<PAGE>
30
$500,000,000, the Company and each other Borrower shall prepay the outstanding
principal amount of any such Eurocurrency Rate Advances or any such LIBO Rate
Advances owing by such Borrower, on the last day of the Interest Periods
relating to such Advances, in an aggregate amount sufficient to reduce such sum
to an amount not to exceed $500,000,000, together with any interest accrued to
the date of such prepayment on the principal amounts prepaid. The Agent shall
give prompt notice of any prepayment required under this Section 2.09(b)(ii) to
the Borrowers and the Lenders.
SECTION 2.10. Increased Costs. (a) If, due to either (i) the
introduction of or any change in or in the interpretation of any law or
regulation or (ii) the compliance with any guideline or request from any central
bank or other governmental authority including, without limitation, any agency
of the European Union or similar monetary or multinational authority (whether or
not having the force of law), there shall be any increase in the cost to any
Lender of agreeing to make or making, funding or maintaining Eurocurrency Rate
Advances or LIBO Rate Advances (excluding for purposes of this Section 2.10 any
such increased costs resulting from (i) Taxes or Other Taxes (as to which
Section 2.13 shall govern) and (ii) changes in the basis of taxation of overall
net income or overall gross income by the United States or by the foreign
jurisdiction or state under the laws of which such Lender is organized or has
its Applicable Lending Office or any political subdivision thereof), then the
Borrower of such Advances shall from time to time, upon demand by such Lender
(with a copy of such demand to the Agent), pay to the Agent for the account of
such Lender additional amounts sufficient to compensate such Lender for such
increased cost. A certificate as to the amount of such increased cost, submitted
to such Borrower and the Agent by such Lender, shall be conclusive and binding
for all purposes, absent manifest error.
(b) If any Lender determines that compliance with any law or
regulation or any guideline or request from any central bank or other
governmental authority including, without limitation, any agency of the European
Union or similar monetary or multinational authority (whether or not having the
force of law) affects or would affect the amount of capital required or expected
to be maintained by such Lender or any corporation controlling such Lender and
that the amount of such capital is increased by or based upon the existence of
such Lender's commitment to lend hereunder and other commitments of this type,
then, upon demand by such Lender (with a copy of such demand to the Agent), the
Company shall pay to the Agent for the account of such Lender, from time to time
as specified by such Lender, additional amounts sufficient to compensate such
Lender or such corporation in the light of such circumstances, to the extent
that such Lender reasonably determines such increase in capital to be allocable
to the existence of such Lender's commitment to lend hereunder. A certificate as
to such amounts submitted to the Company and the Agent by such Lender shall be
conclusive and binding for all purposes, absent manifest error.
(c) Any Lender claiming any additional amounts payable
pursuant to this Section 2.10 shall, upon the written request of the Company
delivered to such Lender and the Agent, assign, pursuant to and in accordance
with the provisions of Section 9.07, all of its rights and obligations
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31
under this Agreement and under the Notes to an Eligible Assignee selected by the
Company; provided, however, that (i) no Default shall have occurred and be
continuing at the time of such request and at the time of such assignment; (ii)
the assignee shall have paid to the assigning Lender the aggregate principal
amount of, and any interest accrued and unpaid to the date of such assignment
on, the Note or Notes of such Lender; (iii) the Company shall have paid to the
assigning Lender any and all facility fees and other fees payable to such Lender
and all other accrued and unpaid amounts owing to such Lender under any
provision of this Agreement (including, but not limited to, any increased costs
or other additional amounts owing under this Section 2.10, and any
indemnification for Taxes under Section 2.13) as of the effective date of such
assignment and (iv) if the assignee selected by the Company is not an existing
Lender, such assignee or the Company shall have paid the processing and
recordation fee required under Section 9.07(a) for such assignment; provided
further that the assigning Lender's rights under Sections 2.10, 2.13 and 9.04,
and its obligations under Section 8.05, shall survive such assignment as to
matters occurring prior to the date of assignment.
SECTION 2.11. Illegality. Notwithstanding any other provision
of this Agreement, if any Lender shall notify the Agent that the introduction of
or any change in or in the interpretation of any law or regulation makes it
unlawful, or any central bank or other governmental authority asserts that it is
unlawful, for any Lender or its Eurocurrency Lending Office to perform its
obligations hereunder to make Eurocurrency Rate Advances in Dollars or any Major
Currency or LIBO Rate Advances in Dollars or in any Foreign Currency or to fund
or maintain Eurocurrency Rate Advances in Dollars or in any Major Currency or
LIBO Rate Advances in Dollars or in any Foreign Currency hereunder, (a) each
such Eurocurrency Rate Advance or such LIBO Rate Advance, as the case may be,
will automatically, upon such demand, (i) if such Eurocurrency Rate Advance or
LIBO Rate Advance is denominated in Dollars, be Converted into a Base Rate
Advance or an Advance that bears interest at the rate set forth in Section
2.07(a)(i), as the case may be, and (ii) if such Eurocurrency Rate Advance or
LIBO Rate Advance is denominated in any Foreign Currency, be redenominated into
an Equivalent amount of Dollars and Converted into a Base Rate Advance or an
Advance that bears interest at the rate set forth in Section 2.07(a)(i), as the
case may be, and (b) the obligation of the Lenders to make such Eurocurrency
Rate Advances or such LIBO Rate Advances shall be suspended until the Agent
shall notify the Borrower and the Lenders that the circumstances causing such
suspension no longer exist.
SECTION 2.12. Payments and Computations. (a) Each Borrower
shall make each payment hereunder and under any Notes, except with respect to
principal of, interest on, and other amounts relating to, Advances denominated
in a Foreign Currency, not later than 11:00 A.M. (New York City time) on the day
when due in Dollars to the Agent at the applicable Agent's Account in same day
funds. Each Borrower shall make each payment hereunder and under any Notes with
respect to principal of, interest on, and other amounts relating to Advances
denominated in a Foreign Currency not later than 12:00 Noon (at the Payment
Office for such Foreign Currency) on the day when due in such Foreign Currency
to the Agent in same day funds by deposit of such funds to the
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32
applicable Agent's Account. The Agent will promptly thereafter cause to be
distributed like funds relating to the payment of principal or interest or
facility fees ratably (other than amounts payable pursuant to Section 2.03,
2.05(b), 2.05(c), 2.10, 2.13, 2.16 or 9.04(c)) to the Lenders for the account of
their respective Applicable Lending Offices, and like funds relating to the
payment of any other amount payable to any Lender to such Lender for the account
of its Applicable Lending Office, in each case to be applied in accordance with
the terms of this Agreement. Upon its acceptance of an Assignment and Acceptance
and recording of the information contained therein in the Register pursuant to
Section 9.07(c), from and after the effective date specified in such Assignment
and Acceptance, the Agent shall make all payments hereunder and under any Notes
in respect of the interest assigned thereby to the Lender assignee thereunder,
and the parties to such Assignment and Acceptance shall make all appropriate
adjustments in such payments for periods prior to such effective date directly
between themselves. Upon any Assuming Lender becoming a Lender hereunder as a
result of the effectiveness of an extension of the Termination Date pursuant to
Section 2.16, and upon the Agent's receipt of such Lender's Assumption Agreement
and recording the information contained therein in the Register, from and after
the Increase Date or the Extension Date, as the case may be, the Agent shall
make all payments hereunder and under any Notes in respect of the interest
assumed thereby to the Assuming Lender.
(b) All computations of interest based on the Base Rate and of
facility fees shall be made by the Agent on the basis of a year of 365 or 366
days, as the case may be, all computations of interest based on the Eurocurrency
Rate or the Federal Funds Rate shall be made by the Agent on the basis of a year
of 360 days and all computations in respect of Competitive Bid Advances shall be
made by the Agent or the Sub-Agent, as the case may be, as specified in the
applicable Notice of Competitive Bid Borrowing (or, in each case of Advances
denominated in Foreign Currencies where market practice differs, in accordance
with market practice), in each case for the actual number of days (including the
first day but excluding the last day) occurring in the period for which such
interest or facility fees are payable. Each determination by the Agent of an
interest rate hereunder shall be conclusive and binding for all purposes, absent
manifest error.
(c) Whenever any payment hereunder or under the Notes shall be
stated to be due on a day other than a Business Day, such payment shall be made
on the next succeeding Business Day, and such extension of time shall in such
case be included in the computation of payment of interest or facility fee, as
the case may be; provided, however, that, if such extension would cause payment
of interest on or principal of Eurocurrency Rate Advances or LIBO Rate Advances
to be made in the next following calendar month, such payment shall be made on
the next preceding Business Day.
(d) Unless the Agent shall have received notice from any
Borrower prior to the date on which any payment is due to the Lenders hereunder
that such Borrower will not make such payment in full, the Agent may assume that
such Borrower has made such payment in full to the Agent on such date and the
Agent may, in reliance upon such assumption, cause to be distributed
<PAGE>
33
to each Lender on such due date an amount equal to the amount then due such
Lender. If and to the extent such Borrower shall not have so made such payment
in full to the Agent, each Lender shall repay to the Agent forthwith on demand
such amount distributed to such Lender together with interest thereon, for each
day from the date such amount is distributed to such Lender until the date such
Lender repays such amount to the Agent, at (i) the Federal Funds Rate in the
case of Advances denominated in Dollars or (ii) the cost of funds incurred by
the Agent in respect of such amount in the case of Advances denominated in
Foreign Currencies.
SECTION 2.13. Taxes. (a) Any and all payments by any Borrower
(including the Company in its capacity as a guarantor under Article VII hereof)
hereunder or under the Notes shall be made, in accordance with Section 2.12,
free and clear of and without deduction for any and all present or future taxes,
levies, imposts, deductions, charges or withholdings, and all liabilities with
respect thereto, excluding, in the case of each Lender and the Agent, net income
taxes imposed by the United States and taxes imposed on its overall net income,
and franchise taxes imposed on it in lieu of net income taxes, by the
jurisdiction under the laws of which such Lender or the Agent (as the case may
be) is organized or any political subdivision thereof and, in the case of each
Lender, taxes imposed on its overall net income, and franchise taxes imposed on
it in lieu of net income taxes, by the jurisdiction of such Lender's Applicable
Lending Office or any political subdivision thereof (all such non-excluded
taxes, levies, imposts, deductions, charges, withholdings and liabilities in
respect of payments hereunder or under the Notes being hereinafter referred to
as "Taxes"). If any Borrower (including the Company in its capacity as a
guarantor under Article VII hereof) shall be required by law to deduct any Taxes
from or in respect of any sum payable hereunder or under any Note to any Lender
or the Agent, (i) the sum payable shall be increased as may be necessary so that
after making all required deductions (including deductions applicable to
additional sums payable under this Section 2.13) such Lender or the Agent (as
the case may be) receives an amount equal to the sum it would have received had
no such deductions been made, (ii) such Borrower shall make such deductions and
(iii) such Borrower shall pay the full amount deducted to the relevant taxation
authority or other authority in accordance with applicable law.
(b) In addition, each Borrower agrees to pay any present or
future stamp or documentary taxes or any other excise or property taxes, charges
or similar levies that arise from any payment made hereunder or under the Notes
or from the execution, delivery or registration of, performing under, or
otherwise with respect to, this Agreement or the Notes (hereinafter referred to
as "Other Taxes").
(c) Each Borrower shall indemnify each Lender and the Agent
for the full amount of Taxes or Other Taxes (including, without limitation, any
taxes imposed by any jurisdiction on amounts payable under this Section 2.13)
imposed on or paid by such Lender or the Agent (as the case may be) and any
liability (including penalties, interest and expenses) arising therefrom or with
respect thereto; provided, however, that a Borrower shall not be obligated to
pay any amounts in respect of penalties, interest or expenses pursuant to this
paragraph that are payable solely as a result
<PAGE>
34
of (i) the failure on the part of the pertinent Lender or the Agent to pay over
those amounts received from the Borrowers under this clause (c) or (ii) the
gross negligence or willful misconduct on the part of the pertinent Lender or
the Agent. This indemnification shall be made within 30 days from the date such
Lender or the Agent (as the case may be) makes written demand therefor. Each
Lender agrees to provide reasonably prompt notice to the Agent, the Company and
any Borrower of any imposition of Taxes or Other Taxes against such Lender;
provided that failure to give such notice shall not affect such Lender's rights
to indemnification hereunder. Each Lender agrees that it will, promptly upon a
request by the Company or a Borrower having made an indemnification payment
hereunder, furnish to the Company or such Borrower, as the case may be, such
evidence as is reasonably available to such Lender as to the payment of the
relevant Taxes or Other Taxes, and that it will, if requested by the Company or
such Borrower, cooperate with the Company or such Borrower, as the case may be,
in its efforts to obtain a refund or similar relief in respect of such payment.
(d) Within 30 days after the date of any payment of Taxes,
each Borrower shall furnish to the Agent, at its address referred to in Section
9.02, the original or a certified copy of a receipt evidencing payment thereof.
In the case of any payment hereunder or under the Notes by or on behalf of any
Borrower through an account or branch outside the United States or by or on
behalf of any Borrower by a payor that is not a United States person, if such
Borrower determines that no Taxes are payable in respect thereof, such Borrower
shall furnish, or shall cause such payor to furnish, to the Agent, at such
address, an opinion of counsel acceptable to the Agent stating that such payment
is exempt from Taxes. For purposes of this subsection (d) and subsection (e),
the terms "United States" and "United States person" shall have the meanings
specified in Section 7701 of the Internal Revenue Code.
(e) Each Lender organized under the laws of a jurisdiction
outside the United States, on or prior to the date of its execution and delivery
of this Agreement in the case of each Initial Lender and on the date of the
Assignment and Acceptance or the Assumption Agreement, as the case may be,
pursuant to which it becomes a Lender in the case of each other Lender, and from
time to time thereafter as requested in writing by any Borrower (but only so
long as such Lender remains lawfully able to do so), shall provide the Agent and
each Borrower with two original Internal Revenue Service forms 1001 or 4224, as
appropriate, or any successor or other form prescribed by the Internal Revenue
Service, certifying that such Lender is exempt from or entitled to a reduced
rate of United States withholding tax on payments pursuant to this Agreement or
the Notes. In addition, each Lender further agrees to provide any Borrower with
any form or document as any Borrower may request which is required by any taxing
authority outside the United States in order to secure an exemption from, or
reduction in the rate of, withholding tax. If the forms provided by a Lender at
the time such Lender first becomes a party to this Agreement indicates a United
States interest withholding tax rate in excess of zero, withholding tax at such
rate shall be considered excluded from Taxes unless and until such Lender
provides the appropriate forms certifying that a lesser rate applies, whereupon
withholding tax at such lesser rate only shall be considered excluded
<PAGE>
35
from Taxes for periods governed by such form; provided, however, that, if at the
date of the Assignment and Acceptance or the Assumption Agreement, as the case
may be, pursuant to which a Lender becomes a party to this Agreement, such
Lender was entitled to payments under subsection (a) in respect of United States
withholding tax with respect to interest paid at such date, then, to such
extent, the term Taxes shall include (in addition to withholding taxes that may
be imposed in the future or other amounts otherwise includable in Taxes) United
States withholding tax, if any, applicable with respect to such Lender on such
date. If any form or document referred to in this subsection (e) requires the
disclosure of information, other than information necessary to compute the tax
payable and information required on the date hereof by Internal Revenue Service
form 1001 or 4224, that a Lender reasonably considers to be confidential, such
Lender shall give notice thereof to each Borrower and shall not be obligated to
include in such form or document such confidential information.
(f) For any period with respect to which a Lender has failed
to provide each Borrower with the appropriate form described in Section 2.13(e)
(other than if such failure is due to a change in law occurring subsequent to
the date on which a form originally was required to be provided, or if such form
otherwise is not required under the first sentence of subsection (e) above),
such Lender shall not be entitled to indemnification under Section 2.13(a) or
(c) with respect to Taxes imposed by the United States by reason of such
failure; provided, however, that should a Lender become subject to Taxes because
of its failure to deliver a form required hereunder, each Borrower shall take
such steps as such Lender shall reasonably request to assist such Lender to
recover such Taxes.
(g) If any Borrower is required to pay any additional amount
to any Lender or to the Agent or on behalf of any of them to any taxing
authority pursuant to this Section 2.13, such Lender shall, upon the written
request of the Company delivered to such Lender and the Agent, assign, pursuant
to and in accordance with the provisions of Section 9.07, all of its rights and
obligations under this Agreement and under the Notes to an Eligible Assignee
selected by the Company; provided, however, that (i) no Default shall have
occurred and be continuing at the time of such request and at the time of such
assignment; (ii) the assignee shall have paid to the assigning Lender the
aggregate principal amount of, and any interest accrued and unpaid to the date
of such assignment on, the Note or Notes of such Lender; (iii) the Company shall
have paid to the assigning Lender any and all facility fees and other fees
payable to such Lender and all other accrued and unpaid amounts owing to such
Lender under any provision of this Agreement (including, but not limited to, any
increased costs or other additional amounts owing under Section 2.10, and any
indemnification for Taxes under this Section 2.13) as of the effective date of
such assignment; and (iv) if the assignee selected by the Company is not an
existing Lender, such assignee or the Company shall have paid the processing and
recordation fee required under Section 9.07(a) for such assignment; provided
further that the assigning Lender's rights under Sections 2.10, 2.13 and 9.04,
and its obligations under Section 8.05, shall survive such assignment as to
matters occurring prior to the date of assignment.
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36
SECTION 2.14. Sharing of Payments, Etc. If any Lender shall
obtain any payment (whether voluntary, involuntary, through the exercise of any
right of setoff, or otherwise) on account of the Revolving Credit Advances owing
to it (other than pursuant to Section 2.03, 2.05(b), 2.05(c), 2.10, 2.13, 2.16
or 9.04(c)) in excess of its ratable share of payments on account of the
Revolving Credit Advances obtained by all the Lenders, such Lender shall
forthwith purchase from the other Lenders such participations in the Revolving
Credit Advances owing to them as shall be necessary to cause such purchasing
Lender to share the excess payment ratably with each of them; provided, however,
that if all or any portion of such excess payment is thereafter recovered from
such purchasing Lender, such purchase from each Lender shall be rescinded and
such Lender shall repay to the purchasing Lender the purchase price to the
extent of such recovery together with an amount equal to such Lender's ratable
share (according to the proportion of (i) the amount of such Lender's required
repayment to (ii) the total amount so recovered from the purchasing Lender) of
any interest or other amount paid or payable by the purchasing Lender in respect
of the total amount so recovered. Each Borrower agrees that any Lender so
purchasing a participation from another Lender pursuant to this Section 2.14
may, to the fullest extent permitted by law, exercise all its rights of payment
(including the right of setoff) with respect to such participation as fully as
if such Lender were the direct creditor of such Borrower in the amount of such
participation.
SECTION 2.15. Use of Proceeds. The proceeds of the Advances
shall be available (and each Borrower agrees that it shall use such proceeds)
for general corporate purposes of such Borrower and its Subsidiaries, including,
without limitation, backstop of commercial paper.
SECTION 2.16. Extension of Termination Date. (a) At least 45
(but no earlier than 60) days prior to the Termination Date then in effect and
provided all representations and warranties are true and correct in all material
respects and no Event of Default has occurred and is continuing, the Company
may, at its option, by written notice to the Agent, request that the Lenders
extend the Termination Date for an additional 364 days from the Termination Date
then in effect. Each Lender, in its sole discretion, shall consent or not
consent to such extension and shall notify the Agent of its consent or
nonconsent to such extension within 20 Business Days of notice of such request
from the Agent. If all of the Lenders consent in writing, the then applicable
Termination Date shall, effective as at such Termination Date (the "Extension
Date"), be extended for a period of 364 days from such Extension Date.
(b) If not all of the Lenders consent, pursuant to subsection
(a) of this Section 2.16, to an extension of the Termination Date then in effect
(the Lenders so consenting in writing being the "Consenting Lenders", and any
Lender not so consenting being a "Non-Consenting Lender"), the Company may:
(i) arrange for one or more Consenting Lenders or other
Eligible Assignees as Assuming Lenders to assume, effective on the
Extension Date, any Non-Consenting Lender's Commitment and all of the
obligations of such Lender under this Agreement thereafter
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37
arising, and effective on such Extension Date, each such Consenting
Lender or such Assuming Lender will be substituted for such
Non-Consenting Lender under this Agreement; provided, however, that the
amount of the Commitment of any such Assuming Lender as a result of
such substitution shall in no event be less than $10,000,000; provided
further that (i) any such Consenting Lender or Assuming Lender shall
have paid to such Non-Consenting Lender the aggregate principal amount
of, and any interest accrued and unpaid to the date of the assignment
on, the Advances of such Non-Consenting Lender; (ii) the Company shall
have paid to such Non-Consenting Lender any and all facility fees and
other fees payable to such Non-Consenting Lender and all other accrued
and unpaid amounts owing to such Non-Consenting Lender under any
provision of this Agreement (including, but not limited to, any
increased costs or other additional amounts owing under Section 2.10,
and any indemnification for Taxes under this Section 2.13) as of the
effective date of such assignment; and (iii) with respect to any such
Assuming Lender, such Assuming Lender or the Company shall have paid
the applicable processing and recordation fee required under Section
9.07(a) for such assignment; provided further that such Non-Consenting
Lender's rights under Sections 2.10, 2.13 and 9.04, and its obligations
under Section 8.05, shall survive such substitution as to matters
occurring prior to the date of substitution; provided further that, on
or prior to the tenth day prior to the Extension Date, (x) any such
Assuming Lender shall have delivered to the Company and the Agent an
Assumption Agreement in substantially the form of Exhibit D hereto,
duly executed by such Assuming Lender, such Non-Consenting Lender and
the Company, (y) any such Consenting Bank shall have delivered
confirmation in writing satisfactory to the Agent as to its increased
Commitment and (z) each Non-Consenting Lender being replaced pursuant
to this clause (i) shall have delivered to the Agent any Revolving
Credit Note or Notes held by such Non-Consenting Lender; and provided
further that, if requested by any Assuming Lender, each Borrower, at
its own expense, shall have executed and delivered to the Agent no
later than 10:00 A.M. (New York City time) on the Extension Date,
Revolving Credit Notes payable to the order of each such Assuming
Lender, if any, dated as of the Extension Date and substantially in the
form of Exhibit A-1 hereto; or
(ii) subject to the giving of notice to such Non-Consenting
Lender at least four days prior to the Extension Date, pay, prepay or
cause to be prepaid, on and effective as of the Extension Date, all
principal of, and interest accrued to the date of such payment on,
Advances and all other amounts owing to such Non-Consenting Lender
hereunder (including, but not limited to, any increased costs or other
additional amounts owing under Section 2.10 and any indemnification for
Taxes under Section 2.13) and terminate in whole any Non-Consenting
Lender's Commitment, notwithstanding the provisions of Section 2.05;
and, upon such payment or prepayment, the obligations of such
Non-Consenting Lender hereunder shall, by the provisions hereof, be
released and discharged; provided, however, that such Non-Consenting
Lender's rights under Sections 2.10, 2.13 and 9.04, and its
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38
obligations under Section 8.05 shall survive such release and discharge
as to matters occurring prior to the Extension Date.
(c) In the event that, on or prior to the then applicable
Extension Date, all NonConsenting Lenders shall have been superseded by
Consenting Lenders or Assuming Lenders or shall have had their Commitments
terminated pursuant to subsection (b)(i) or (b)(ii) above, the Termination Date
then in effect shall be extended for the additional one-year period as described
in subsection (a) above, each Non-Consenting Lender shall have no further
Commitment hereunder, and each Assuming Lender, if any, shall thereafter be
substituted as a party to this Agreement and be a Lender for the purposes of
this Agreement, without any further acknowledgment by or the consent of the
Lenders. The Agent shall thereupon promptly deliver the new Revolving Credit
Notes to the respective Assuming Lenders requesting such Notes and record in the
Register the relevant information with respect to each Consenting Lender and
each such Assuming Lender.
(d) In the event that (x) as to a Non-Consenting Lender,
neither procedure contemplated by subsection (b)(i) or (b)(ii) above is
implemented in a timely basis or (y) the Company shall, by written notice to the
Agent at least four days prior to the Extension Date, withdraw its request for
the extension of the Termination Date then in effect, such request by the
Company shall be deemed not to have been made, all actions theretofore taken
under subsection (b)(i) or (b)(ii) above shall be deemed to be of no effect, the
Agent shall return any Revolving Credit Notes received from any Non-Consenting
Lender to such Non-Consenting Lender and all the rights and obligations of the
parties shall continue as if no such request had been made.
SECTION 2.17. Evidence of Debt. (a) Each Lender shall maintain
in accordance with its usual practice an account or accounts evidencing the
indebtedness of each Borrower to such Lender resulting from each Revolving
Credit Advance owing to such Lender from time to time, including the amounts of
principal and interest payable and paid to such Lender from time to time
hereunder in respect of Revolving Credit Advances. Each Borrower agrees that
upon request of any Lender to such Borrower (with a copy of such notice to the
Agent) that such Lender receive a Revolving Credit Note to evidence (whether for
purposes of pledge, enforcement or otherwise) the Revolving Credit Advances
owing to, or to be made by, such Lender, such Borrower shall promptly execute
and deliver to such Lender a Revolving Credit Note payable to the order of such
Lender in a principal amount up to the Commitment of such Lender.
(b) The Register maintained by the Agent pursuant to Section
9.07(d) shall include a control account, and a subsidiary account for each
Lender, in which accounts (taken together) shall be recorded (i) the date and
amount of each Borrowing made hereunder, the Type of Advances comprising such
Borrowing and, if appropriate, the Interest Period applicable thereto, (ii) the
terms of each Assumption Agreement and each Assignment and Acceptance delivered
to and accepted by it, (iii) the amount of any principal or interest due and
payable or to become due and
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39
payable from each Borrower to each Lender hereunder and (iv) the amount of any
sum received by the Agent from each Borrower hereunder and each Lender's share
thereof.
(c) Entries made in good faith by the Agent in the Register
pursuant to subsection (b) above, and by each Lender in its account or accounts
pursuant to subsection (a) above, shall be prima facie evidence of the amount of
principal and interest due and payable or to become due and payable from the
Borrowers to, in the case of the Register, each Lender and, in the case of such
account or accounts, such Lender, under this Agreement, absent manifest error;
provided, however, that the failure of the Agent or such Lender to make an
entry, or any finding that an entry is incorrect, in the Register or such
account or accounts shall not limit or otherwise affect the obligations of any
Borrower under this Agreement.
ARTICLE III
CONDITIONS TO EFFECTIVENESS AND LENDING
SECTION 3.01. Conditions Precedent to Effectiveness of
Sections 2.01 and 2.03. Sections 2.01 and 2.03 of this Agreement shall become
effective on and as of the first date (the "Effective Date") on which the
following conditions precedent have been satisfied:
(a) There shall have occurred no Material Adverse Change since
December 31, 1998.
(b) There shall exist no action, suit, investigation,
litigation or proceeding affecting the Company or any of its
Subsidiaries pending or to the knowledge of the Company Threatened
before any court, governmental agency or arbitrator that (i) is
reasonably likely to have a Material Adverse Effect, other than the
matters described on Schedule 3.01(b) hereto (the "Disclosed
Litigation") or (ii) purports to affect the legality, validity or
enforceability of this Agreement or any Note of the Company or the
consummation of the transactions contemplated hereby, and there shall
have been no adverse change in the status, or financial effect on the
Company or any of its Subsidiaries, of the Disclosed Litigation from
that described on Schedule 3.01(b) hereto.
(c) The Company shall have paid all accrued fees and expenses
of the Agent and the Lenders in respect of this Agreement.
(d) On the Effective Date, the following statements shall be
true and the Agent shall have received a certificate signed by a duly
authorized officer of the Company, dated the Effective Date, stating
that:
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40
(i) The representations and warranties contained in
Section 4.01 are correct on and as of the Effective Date, and
(ii) No event has occurred and is continuing that
constitutes a Default.
(e) The Agent shall have received on or before the Effective
Date the following, each dated such day, in form and substance
satisfactory to the Agent:
(i) The Revolving Credit Notes of the Company to the
order of the Lenders to the extent requested by any Lender
pursuant to Section 2.17.
(ii) Certified copies of the resolutions of the Board
of Directors of the Company approving this Agreement and the
Notes of the Company, and of all documents evidencing other
necessary corporate action and governmental approvals, if any,
with respect to this Agreement and such Notes.
(iii) A certificate of the Secretary or an Assistant
Secretary of the Company certifying the names and true
signatures of the officers of the Company authorized to sign
this Agreement and the Notes of the Company and the other
documents to be delivered hereunder.
(iv) A favorable opinion of J. Edward Smith,
Assistant General Counsel of the Company, substantially in the
form of Exhibit G hereto and as to such other matters as any
Lender through the Agent may reasonably request.
(v) A favorable opinion of Shearman & Sterling,
counsel for the Agent, substantially in the form of Exhibit I
hereto.
(vi) Such other approvals, opinions or documents as
any Lender, through the Agent, may reasonably request.
(f) The Company shall have terminated the commitments, and
paid in full all Debt, interest, fees and other amounts outstanding,
under (i) the $750,000,000 Credit Agreement dated as of June 30, 1995
(the "$750,000,000 Credit Agreement") among the Company, the lenders
and arrangers parties thereto and Citibank, as administrative agent,
(ii) the $900,000,000 364 Day Backstop Credit Agreement dated as of
October 9, 1998 (the "Backstop Credit Agreement") among the Borrower,
as borrower, the lenders and arrangers parties thereto and Citibank, as
administrative agent, and (iii) the $1,325,000,000 Credit Agreement
dated as of April 15, 1997 (the "Honeywell Credit Agreement") among
Honeywell Inc., as borrower, Morgan Guaranty Trust Company of New York,
as documentation agent, Citicorp USA, Inc., as syndication agent, Chase
Securities Inc. and J.P.
<PAGE>
41
Morgan Securities Inc., as co-arrangers, and The Chase Manhattan Bank,
as administrative agent, and each of the Lenders that is a party to
each such credit facility hereby waives, upon execution of this
Agreement, the three Business Days' notice required by Section 2.05 of
the $750,000,000 Credit Agreement, Section 2.05 of the Backstop Credit
Agreement and Section 2.12 of the Honeywell Credit Agreement,
respectively, relating to the termination of commitments thereunder.
(g) All of the conditions precedent to the Merger Agreement
(or as amended in a manner satisfactory to the Lenders) shall have been
satisfied, including, without limitation, expiration or termination of
the applicable waiting period under the Hart-Scott-Rodino Act and
receipt of all applicable approvals, and the merger contemplated
thereby shall have been effected.
SECTION 3.02. Conditions Precedent to Initial Borrowing. The
obligation of each Lender to make an Advance on the occasion of the initial
Borrowing hereunder is subject to the following conditions precedent:
(a) The Effective Date shall have occurred.
(b) The Company shall have terminated all outstanding
commitments of lenders (and paid in full all outstanding debt under the
related credit agreements) which backstop commercial paper issuance,
other than commitments made by parties which are not Lenders hereunder.
(c) The Company shall have paid all accrued fees and expenses
of the Agent (including the billed fees and expenses of counsel to the
Agent).
SECTION 3.03. Initial Loan to Each Designated Subsidiary. The
obligation of each Lender to make an initial Advance to each Designated
Subsidiary following any designation of such Designated Subsidiary as a Borrower
hereunder pursuant to Section 9.08 is subject to the Agent's receipt on or
before the date of such initial Advance of each of the following, in form and
substance satisfactory to the Agent and dated such date, and (except for the
Revolving Credit Notes) in sufficient copies for each Lender:
(a) The Revolving Credit Notes of such Borrower to the order
of the Lenders to the extent requested by any Lender pursuant to
Section 2.17.
(b) Certified copies of the resolutions of the Board of
Directors of such Borrower (with a certified English translation if the
original thereof is not in English) approving this Agreement and the
Notes of such Borrower, and of all documents evidencing other necessary
<PAGE>
42
corporate action and governmental approvals, if any, with respect to
this Agreement and such Notes.
(c) A certificate of the Secretary or an Assistant Secretary
of such Borrower certifying the names and true signatures of the
officers of such Borrower authorized to sign this Agreement and the
Notes of such Borrower and the other documents to be delivered
hereunder.
(d) A certificate signed by a duly authorized officer of the
Company, dated as of the date of such initial Advance, certifying that
such Borrower shall have obtained all governmental and third party
authorizations, consents, approvals (including exchange control
approvals) and licenses required under applicable laws and regulations
necessary for such Borrower to execute and deliver this Agreement and
the Notes and to perform its obligations thereunder.
(e) The Designation Letter of such Designated Subsidiary,
substantially in the form of Exhibit E hereto.
(f) Evidence of the Process Agent's acceptance of its
appointment pursuant to Section 9.13(a) as the agent of such Borrower,
substantially in the form of Exhibit F hereto.
(g) A favorable opinion of counsel to such Designated
Subsidiary, dated the date of such initial Advance, substantially in
the form of Exhibit H hereto.
(h) Such other approvals, opinions or documents as any Lender,
through the Agent, may reasonably request.
SECTION 3.04. Conditions Precedent to Each Revolving Credit
Borrowing. The obligation of each Lender to make a Revolving Credit Advance on
the occasion of each Revolving Credit Borrowing shall be subject to the
conditions precedent that the Effective Date shall have occurred and on the date
of such Revolving Credit Borrowing (a) the following statements shall be true
(and each of the giving of the applicable Notice of Revolving Credit Borrowing
and the acceptance by the Borrower requesting such Revolving Credit Borrowing of
the proceeds of such Revolving Credit Borrowing shall constitute a
representation and warranty by such Borrower that on the date of such Borrowing
such statements are true):
(i) the representations and warranties of the Company
contained in Section 4.01 (except the representations set forth in the
last sentence of subsection (e) thereof and in subsections (f), (h)-(l)
and (n) thereof) are correct on and as of the date of such Revolving
Credit Borrowing, before and after giving effect to such Revolving
Credit Borrowing and to the application of the proceeds therefrom, as
though made on and as of such date, and
<PAGE>
43
additionally, if such Revolving Credit Borrowing shall have been
requested by a Designated Subsidiary, the representations and
warranties of such Designated Subsidiary contained in its Designation
Letter are correct on and as of the date of such Revolving Credit
Borrowing, before and after giving effect to such Revolving Credit
Borrowing and to the application of the proceeds therefrom, as though
made on and as of such date, and
(ii) no event has occurred and is continuing, or would result
from such Revolving Credit Borrowing or from the application of the
proceeds therefrom, that constitutes a Default;
and (b) the Agent shall have received such other approvals, opinions or
documents as any Lender through the Agent may reasonably request.
SECTION 3.05. Conditions Precedent to Each Competitive Bid
Borrowing. The obligation of each Lender that is to make a Competitive Bid
Advance on the occasion of a Competitive Bid Borrowing to make such Competitive
Bid Advance as part of such Competitive Bid Borrowing is subject to the
conditions precedent that (i) the Agent shall have received the written
confirmatory Notice of Competitive Bid Borrowing with respect thereto, (ii) on
or before the date of such Competitive Bid Borrowing, but prior to such
Competitive Bid Borrowing, the Agent shall have received a Competitive Bid Note
payable to the order of such Lender and substantially in the form of Exhibit A-2
hereto for each of the one or more Competitive Bid Advances to be made by such
Lender as part of such Competitive Bid Borrowing, in a principal amount equal to
the principal amount of the Competitive Bid Advance to be evidenced thereby and
otherwise on such terms as were agreed to for such Competitive Bid Advance in
accordance with Section 2.03, and (iii) on the date of such Competitive Bid
Borrowing the following statements shall be true (and each of the giving of the
applicable Notice of Competitive Bid Borrowing and the acceptance by the
Borrower requesting such Competitive Bid Borrowing of the proceeds of such
Competitive Bid Borrowing shall constitute a representation and warranty by such
Borrower that on the date of such Competitive Bid Borrowing such statements are
true):
(a) the representations and warranties of the Company
contained in Section 4.01 (except the representations set forth in the
last sentence of subsection (e) thereof and in subsections (f), (h)-(l)
and (n) thereof) are correct on and as of the date of such Competitive
Bid Borrowing, before and after giving effect to such Competitive Bid
Borrowing and to the application of the proceeds therefrom, as though
made on and as of such date, and, if such Competitive Bid Borrowing
shall have been requested by a Designated Subsidiary, the
representations and warranties of such Designated Subsidiary contained
in its Designation Letter are correct on and as of the date of such
Competitive Bid Borrowing, before and after giving effect to such
Competitive Bid Borrowing and to the application of the proceeds
therefrom, as though made on and as of such date,
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44
(b) no event has occurred and is continuing, or would result
from such Competitive Bid Borrowing or from the application of the
proceeds therefrom, that constitutes a Default, and
(c) no event has occurred and no circumstance exists as a
result of which the information concerning such Borrower that has been
provided to the Agent and each Lender by such Borrower in connection
herewith would include an untrue statement of a material fact or omit
to state any material fact necessary to make the statements contained
therein, in the light of the circumstances under which they were made,
not misleading,
and (iv) the Agent shall have received such other approvals, opinions or
documents as any Lender through the Agent may reasonably request.
SECTION 3.06. Determinations Under Section 3.01. For purposes
of determining compliance with the conditions specified in Section 3.01, each
Lender shall be deemed to have consented to, approved or accepted or to be
satisfied with each document or other matter required thereunder to be consented
to or approved by or acceptable or satisfactory to the Lenders unless an officer
of the Agent responsible for the transactions contemplated by this Agreement
shall have received notice from such Lender prior to the date that the Company,
by notice to the Lenders, designates as the proposed Effective Date, specifying
its objection thereto. The Agent shall promptly notify the Lenders of the
occurrence of the Effective Date.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES
SECTION 4.01. Representations and Warranties of the Company. The
Company represents and warrants as follows:
(a) The Company is a corporation duly organized, validly
existing and in good standing under the laws of the State of Delaware.
(b) The execution, delivery and performance by the Company of
this Agreement and the Notes of the Company, and the consummation of
the transactions contemplated hereby, are within the Company's
corporate powers, have been duly authorized by all necessary corporate
action, and do not and will not cause or constitute a violation of any
provision of law or regulation or any provision of the Certificate of
Incorporation or By-Laws of the Company or result in the breach of, or
constitute a default or require any consent under, or result in the
creation of any lien, charge or encumbrance upon any of the properties,
revenues, or assets of the Company pursuant to, any indenture or other
agreement or
<PAGE>
45
instrument to which the Company is a party or by which the Company or
its property may be bound or affected.
(c) No authorization, consent, approval (including any
exchange control approval), license or other action by, and no notice
to or filing or registration with, any governmental authority,
administrative agency or regulatory body or any other third party is
required for the due execution, delivery and performance by the Company
of this Agreement or the Notes of the Company.
(d) This Agreement has been, and each of the Notes when
delivered hereunder will have been, duly executed and delivered by the
Company. This Agreement is, and each of the Notes of the Company when
delivered hereunder will be, the legal, valid and binding obligation of
the Company enforceable against the Company in accordance with their
respective terms, except to the extent that such enforcement may be
limited by applicable bankruptcy, insolvency and other similar laws
affecting creditors' rights generally.
(e) The Consolidated balance sheet of the Company and its
Consolidated Subsidiaries as at December 31, 1998, and the related
Consolidated statements of income and cash flows of the Company and its
Consolidated Subsidiaries for the fiscal year then ended (together with
the notes to the financial statements of the Company and its
Consolidated Subsidiaries and the Consolidated statements of cash flows
of the Company and its Consolidated Subsidiaries), accompanied by an
opinion of one or more nationally recognized firms of independent
public accountants, and the Consolidated balance sheet of the Company
and its Consolidated Subsidiaries as at June 30, 1999, and the related
Consolidated statements of income and cash flows of the Company and its
Consolidated Subsidiaries for the six months then ended, duly certified
by the principal financial officer of the Company, copies of which have
been furnished to each Lender, are materially complete and correct, and
fairly present, subject, in the case of said balance sheet as at June
30, 1999, and said statements of income and cash flows for the six
months then ended, to year-end audit adjustments, the Consolidated
financial condition of the Company and its Consolidated Subsidiaries as
at such dates and the Consolidated results of the operations of the
Company and its Consolidated Subsidiaries for the periods ended on such
dates, all in accordance with GAAP consistently applied, except as
otherwise noted therein; the Company and its Consolidated Subsidiaries
do not have on such date any material contingent liabilities,
liabilities for taxes, unusual forward or long-term commitments or
unrealized or anticipated losses from any unfavorable commitments,
except as referred to or reflected or provided for in such balance
sheet or the notes thereto as at such date. Since December 31, 1998,
there has been no Material Adverse Change.
(f) There is no action, suit, investigation, litigation or
proceeding, including, without limitation, any Environmental Action,
pending or to the knowledge of the Company
<PAGE>
46
Threatened affecting the Company or any of its Subsidiaries before any
court, governmental agency or arbitrator that (i) is reasonably likely
to have a Material Adverse Effect (other than the Disclosed
Litigation), or (ii) purports to affect the legality, validity or
enforceability of this Agreement or any Note or the consummation of the
transactions contemplated hereby, and there has been no adverse change
in the status, or financial effect on the Company or any of its
Subsidiaries, of the Disclosed Litigation from that described on
Schedule 3.01(b) hereto.
(g) Following application of the proceeds of each Advance, not
more than 25 percent of the value of the assets (either of the Borrower
of such Advance or of such Borrower and its Subsidiaries on a
Consolidated basis) subject to the provisions of Section 5.02(a) or
subject to any restriction contained in any agreement or instrument
between such Borrower and any Lender or any Affiliate of any Lender
relating to Debt and within the scope of Section 6.01(e) will be margin
stock (within the meaning of Regulation U issued by the Board of
Governors of the Federal Reserve System).
(h) The Company and each wholly-owned direct Subsidiary of the
Company have, in the aggregate, met their minimum funding requirements
under ERISA with respect to their Plans in all material respects and
have not incurred any material liability to the PBGC, other than for
the payment of premiums, in connection with such Plans.
(i) No ERISA Event has occurred or is reasonably expected to
occur with respect to any Plan of the Company or any of its ERISA
Affiliates that has resulted in or is reasonably likely to result in a
material liability of the Company or any of its ERISA Affiliates.
(j) The Schedules B (Actuarial Information) to the 1998 annual
reports (Form 5500 Series) with respect to each Plan of the Company or
any of its ERISA Affiliates, copies of which have been filed with the
Internal Revenue Service (and which will be furnished to any Bank
through the Administrative Agent upon the request of such Bank through
the Administrative Agent to the Company), are complete and accurate in
all material respects and fairly present in all material respects the
funding status of such Plans at such date, and since the date of each
such Schedule B there has been no material adverse change in funding
status.
(k) Neither the Company nor any of its ERISA Affiliates has
incurred or reasonably expects to incur any Withdrawal Liability to any
Multiemployer Plan in an annual amount exceeding 6% of Net Tangible
Assets of the Company and its Consolidated Subsidiaries.
<PAGE>
47
(l) Neither the Company nor any of its ERISA Affiliates has
been notified by the sponsor of a Multiemployer Plan that such
Multiemployer Plan is in reorganization or has been terminated, within
the meaning of Title IV of ERISA. No such Multiemployer Plan is
reasonably expected to be in reorganization or to be terminated, within
the meaning of Title IV of ERISA, in a reorganization or termination
which might reasonably be expected to result in a liability of the
Company in an amount in excess of $5,000,000.
(m) The Company is not, and immediately after the application
by the Company of the proceeds of each Loan will not be, (a) an
"investment company" within the meaning of the Investment Company Act
of 1940, as amended, or (b) a "holding company" within the meaning of
the Public Utility Holding Company Act of 1935, as amended.
(n) To the best of the Company's knowledge, the operations and
properties of the Company and its Subsidiaries taken as a whole comply
in all material respects with all Environmental Laws, all necessary
Environmental Permits have been applied for or have been obtained and
are in effect for the operations and properties of the Company and its
Subsidiaries and the Company and its Subsidiaries are in compliance in
all material respects with all such Environmental Permits. To the best
of the Company's knowledge no circumstances exist that would be
reasonably likely to form the basis of an Environmental Action against
the Company or any of its Subsidiaries or any of their properties that
could have a Material Adverse Effect.
(i) The Company has (i) initiated a review and assessment of
all areas within its and each of its Subsidiaries' business and
operations (including those affected by suppliers, vendors and
customers) that could be adversely affected by the risk that computer
applications used by the Company or any of its Subsidiaries (or
suppliers, vendors and customers) may be unable to recognize and
perform properly date sensitive functions involving certain dates prior
to and any date after December 31, 1999 (the "Year 2000 Problem"), (ii)
developed a plan and timetable for addressing the Year 2000 Problem on
a timely basis and (iii) to date, implemented that plan in accordance
with such timetable. Based on the foregoing, the Company believes that
all computer applications (including those of its suppliers, vendors
and customers) that are material to its or any of its Subsidiaries'
business and operations are reasonably expected on a timely basis to be
able to perform properly date-sensitive functions for all dates before,
on and after January 1, 2000, except to the extent that a failure to do
so could not reasonably be expected to have a Material Adverse Effect.
<PAGE>
48
ARTICLE V
COVENANTS OF THE BORROWER
SECTION 5.01. Affirmative Covenants. So long as any Advance shall
remain unpaid or any Lender shall have any Commitment hereunder, the Company
will:
(a) Compliance with Laws, Etc. Comply, and cause each
Designated Subsidiary to comply with all applicable laws, rules,
regulations and orders, such compliance to include, without limitation,
compliance with ERISA and Environmental Laws as provided in Section
5.01(j), if failure to comply with such requirements would have a
Material Adverse Effect.
(b) Payment of Taxes, Etc. Pay and discharge, and cause each
Designated Subsidiary to pay and discharge, all taxes, assessments and
governmental charges or levies imposed upon it or on its income or
profits or upon any of its property; provided, however, that neither
the Company nor any of its Subsidiaries shall be required to pay or
discharge any such tax, assessment, charge or claim that is being
contested in good faith and by proper proceedings and as to which
appropriate reserves are being maintained.
(c) Maintenance of Insurance. Maintain, and cause each
Designated Subsidiary to maintain, insurance with responsible and
reputable insurance companies or associations in such amounts and
covering such risks as is usually carried by companies engaged in
similar businesses and owning similar properties in the same general
areas in which the Company or such Subsidiary operates.
(d) Preservation of Corporate Existence, Etc. Preserve and
maintain, and cause each Designated Subsidiary to preserve and
maintain, its corporate existence and all its material rights (charter
and statutory) privileges and franchises; provided, however, that the
Company and each Designated Subsidiary may consummate any merger,
consolidation or sale of assets permitted under Section 5.02(b).
(e) Visitation Rights. At any reasonable time and from time to
time, permit the Agent or any of the Lenders or any agents or
representatives thereof, to examine and make copies of and abstracts
from the records and books of account of, and visit the properties of,
the Company and any Designated Subsidiary, and to discuss the affairs,
finances and accounts of the Company and any Designated Subsidiary with
any of their officers or directors and with their independent certified
public accountants.
(f) Keeping of Books. Keep, and cause each Designated
Subsidiary to keep, proper books of record and account, in which full
and correct entries shall be made of all
<PAGE>
49
financial transactions and the assets and business of the Company and
each Designated Subsidiary in accordance with generally accepted
accounting principles in effect from time to time.
(g) Maintenance of Properties, Etc. Maintain and preserve, and
cause each Designated Subsidiary to maintain and preserve, all of its
properties that are used or useful in the conduct of its business in
good working order and condition, ordinary wear and tear excepted;
provided, however, that neither the Company nor any of its Designated
Subsidiaries shall be required to maintain or preserve any property if
the failure to maintain or preserve such property shall not have a
Material Adverse Effect.
(h) Reporting Requirements. Furnish to the Agent (with a copy
for each Lender) and the Agent shall promptly forward the same to the
Lenders:
(i) as soon as available and in any event within 60
days after the end of each of the first three quarters of each
fiscal year of the Company, a Consolidated balance sheet of
the Company and its Consolidated Subsidiaries as of the end of
such quarter and a Consolidated statement of income and cash
flows of the Company and its Consolidated Subsidiaries for the
period commencing at the end of the previous fiscal year and
ending with the end of such quarter, setting forth in each
case in comparative form the corresponding figures as of the
corresponding date and for the corresponding period of the
preceding fiscal year, all in reasonable detail and certified
by the principal financial officer, principal accounting
officer, the Vice-President and Treasurer or an Assistant
Treasurer of the Company, subject, however, to year-end
auditing adjustments, which certificate shall include a
statement that such officer has no knowledge, except as
specifically stated, of any condition, event or act which
constitutes a Default;
(ii) as soon as available and in any event within 120
days after the end of each fiscal year of the Company, a
Consolidated balance sheet of the Company and its Consolidated
Subsidiaries as of the end of such fiscal year and the related
Consolidated statements of income and cash flows of the
Company and its Consolidated Subsidiaries for such fiscal year
setting forth in each case in comparative form the
corresponding figures as of the close of and for the preceding
fiscal year, all in reasonable detail and accompanied by an
opinion of independent public accountants of nationally
recognized standing, as to said financial statements and a
certificate of the principal financial officer, principal
accounting officer, the Vice-President and Treasurer or an
Assistant Treasurer of the Company stating that such officer
has no knowledge, except as specifically stated, of any
condition, event or act which constitutes a Default;
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50
(iii) copies of the Forms 8-K and 10-K reports (or
similar reports) which the Company is required to file with
the Securities and Exchange Commission of the United States of
America, promptly after the filing thereof;
(iv) copies of each annual report, quarterly report,
special report or proxy statement mailed to substantially all
of the stockholders of the Company, promptly after the mailing
thereof to the stockholders;
(v) immediate notice of the occurrence of any Default
of which the principal financial officer, principal accounting
officer, the Vice-President and Treasurer or an Assistant
Treasurer of the Company shall have knowledge;
(vi) as soon as available and in any event within 15
days after the Company or any of its ERISA Affiliates knows or
has reason to know that any ERISA Event has occurred, a
statement of a senior officer of the Company with
responsibility for compliance with the requirements of ERISA
describing such ERISA Event and the action, if any, which the
Company or such ERISA Affiliate proposes to take with respect
thereto;
(vii) at the request of any Lender, promptly after
the filing thereof with the Internal Revenue Service, copies
of Schedule B (Actuarial Information) to each annual report
(Form 5500 series) filed by the Company or any of its ERISA
Affiliates with respect to each Plan;
(viii) promptly after receipt thereof by the Company
or any of its ERISA Affiliates, copies of each notice from the
PBGC stating its intention to terminate any Plan or to have a
trustee appointed to administer any Plan;
(ix) promptly after such request, such other
documents and information relating to any Plan as any Lender
may reasonably request from time to time;
(x) promptly and in any event within five Business
Days after receipt thereof by the Company or any of its ERISA
Affiliates from the sponsor of a Multiemployer Plan, copies of
each notice concerning (A) (x) the imposition of Withdrawal
Liability in an amount in excess of $5,000,000 with respect to
any one Multiemployer Plan or in an aggregate amount in excess
of $25,000,000 with respect to all such Multiemployer Plans
within any one calendar year or (y) the reorganization or
termination, within the meaning of Title IV of ERISA, of any
Multiemployer Plan that has resulted or might reasonably be
expected to result in Withdrawal Liability in an amount in
excess of $5,000,000 or of all such Multiemployer Plans that
has resulted or might reasonably be expected to result in
<PAGE>
51
Withdrawal Liability in an aggregate amount in excess of
$25,000,000 within any one calendar year and (B) the amount of
liability incurred, or that may be incurred, by the Company or
any of its ERISA Affiliates in connection with any event
described in such subclause (x) or (y);
(xi) promptly after the commencement thereof, notice
of all actions and proceedings before any court, governmental
agency or arbitrator affecting the Borrower or any Designated
Subsidiary of the type described in Section 4.01(f); and
(xii) from time to time such further information
respecting the financial condition and operations of the
Company and its Subsidiaries as any Lender may from time to
time reasonably request.
(i) Authorizations. Obtain, and cause each Designated
Subsidiary to obtain, at any time and from time to time all
authorizations, licenses, consents or approvals (including exchange
control approvals) as shall now or hereafter be necessary or desirable
under applicable law or regulations in connection with its making and
performance of this Agreement and, upon the request of any Lender,
promptly furnish to such Lender copies thereof.
(j) Compliance with Environmental Laws. Comply, and cause each
of its Subsidiaries and all lessees and other Persons operating or
occupying its properties to comply, in all material respects, with all
applicable Environmental Laws and Environmental Permits; obtain and
renew and cause each of its Subsidiaries to obtain and renew all
Environmental Permits necessary for its operations and properties; and
conduct, and cause each of its Subsidiaries to conduct, any
investigation, study, sampling and testing, and undertake any cleanup,
removal, remedial or other action necessary to remove and clean up all
Hazardous Materials from any of its properties, in accordance with the
requirements of all Environmental Laws; provided, however, that neither
the Company nor any of its Subsidiaries shall be required to undertake
any such cleanup, removal, remedial or other action to the extent that
its obligation to do so is being contested in good faith and by proper
proceedings and appropriate reserves are being maintained with respect
to such circumstances.
(k) Change of Control. If a Change of Control shall occur,
within ten calendar days after the occurrence thereof, provide the
Agent with notice thereof, describing therein in reasonable detail the
facts and circumstances giving rise to such Change in Control.
SECTION 5.02. Negative Covenants. So long as any Advance shall remain
unpaid or any Lender shall have any Commitment hereunder, the Company will not:
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52
(a) Liens, Etc. Issue, assume or guarantee, or permit any of
its Subsidiaries owning Restricted Property to issue, assume or
guarantee, any Debt secured by Liens on or with respect to any
Restricted Property without effectively providing that its obligations
to the Lenders under this Agreement and any of the Notes shall be
secured equally and ratably with such Debt so long as such Debt shall
be so secured, except that the foregoing shall not apply to:
(i) Liens affecting property of the Company or any of
its Subsidiaries existing on the Effective Date in effect as
of the date hereof or of any corporation existing at the time
it becomes a Subsidiary of the Company or at the time it is
merged into or consolidated with the Company or a Subsidiary
of the Company;
(ii) Liens on property of the Company or its
Subsidiaries existing at the time of acquisition thereof or
incurred to secure the payment of all or part of the purchase
price thereof or to secure Debt incurred prior to, at the time
of or within 24 months after acquisition thereof for the
purpose of financing all or part of the purchase price
thereof;
(iii) Liens on property of the Company or its
Subsidiaries (in the case of property that is, in the opinion
of the Board of Directors of the Company, substantially
unimproved for the use intended by the Company) to secure all
or part of the cost of improvement thereof, or to secure Debt
incurred to provide funds for any such purpose;
(iv) Liens which secure only Debt owing by a
Subsidiary of the Company to the Company or to another
Subsidiary of the Company;
(v) Liens in favor of the United States of America,
any State, any foreign country, or any department, agency,
instrumentality, or political subdivisions of any such
jurisdiction, to secure partial, progress, advance or other
payments pursuant to any contract or statute or to secure any
Debt incurred for the purpose of financing all or any part of
the purchase price or cost of constructing or improving the
property subject thereto, including, without limitation, Liens
to secure Debt of the pollution control or industrial revenue
bond type; or
(vi) any extension, renewal or replacement (or
successive extensions, renewals or replacements), in whole or
in part, of any Lien referred to in the foregoing clauses (i)
to (v) inclusive of any Debt secured thereby, provided that
the principal amount of Debt secured thereby shall not exceed
the principal amount of Debt so secured at the time of such
extension, renewal or replacement, and that such extension,
renewal or replacement Lien shall be limited to all or part of
the property
<PAGE>
53
which secured the Lien extended, renewed or replaced (plus
improvements on such property);
provided, however, that, the Company and any one or more Subsidiaries
owning Restricted Property may issue, assume or guarantee Debt secured
by Liens which would otherwise be subject to the foregoing restrictions
in an aggregate principal amount which, together with the aggregate
outstanding principal amount of all other Debt of the Company and its
Subsidiaries owning Restricted Property that would otherwise be subject
to the foregoing restrictions (not including Debt permitted to be
secured under clause (i) through (vi) above) and the aggregate value of
the Sale and Leaseback Transactions in existence at such time, does not
at any one time exceed 10% of the Net Tangible Assets of the Company
and its Consolidated Subsidiaries; and provided further that the
following type of transaction, among others, shall not be deemed to
create Debt secured by Liens: Liens required by any contract or statute
in order to permit the Company or any of its Subsidiaries to perform
any contract or subcontract made by it with or at the request of the
United States of America, any foreign country or any department, agency
or instrumentality of any of the foregoing jurisdictions.
(b) Mergers, Etc. Merge or consolidate with or into, or
convey, transfer, lease or otherwise dispose of (whether in one
transaction or in a series of transactions) all or substantially all of
its assets (whether now owned or hereafter acquired) to, any Person;
provided, however, that the Company may merge or consolidate with any
other Person so long as the Company is the surviving corporation and so
long as no Default shall have occurred and be continuing at the time of
such proposed transaction or would result therefrom.
ARTICLE VI
EVENTS OF DEFAULT
SECTION 6.01. Events of Default. If any of the following events
("Events of Default") shall occur and be continuing:
(a) Any Borrower shall fail to pay: (i) any principal of any
Advance when the same becomes due and payable; (ii) any facility fees
or any interest on any Advance payable under this Agreement or any Note
within three Business Days after the same becomes due and payable; or
(iii) any other fees or other amounts payable under this Agreement or
any Notes within 30 days after the same becomes due and payable other
than those fees and amounts the liabilities for which are being
contested in good faith by such Borrower and which have been placed in
Escrow by such Borrower; or
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54
(b) Any representation or warranty made (or deemed made) by
any Borrower (or any of its officers) in connection with this Agreement
or by any Designated Subsidiary in the Designation Letter pursuant to
which such Designated Subsidiary became a Borrower hereunder shall
prove to have been incorrect in any material respect when made (or
deemed made); or
(c) The Company shall repudiate its obligations under, or
shall default in the due performance or observance of, any term,
covenant or agreement contained in Article VII of this Agreement; or
(d) (i) The Company shall fail to perform or observe any other
term, covenant or agreement contained in Section 5.02(a) and such
failure shall remain unremedied for a period of 30 days after any
Lender shall have given notice thereof to the Company (through the
Agent), or (ii) the Company or any other Borrower shall fail to perform
or to observe any other term, covenant or agreement contained in this
Agreement on its part to be performed or observed and such failure
shall remain unremedied for a period of 30 days after any Lender shall
have given notice thereof to the relevant Borrower or, in the case of
the Company, any of the principal financial officer, the principal
accounting officer, the Vice-President and Treasurer or an Assistant
Treasurer of the Company, and in the case of any other Borrower, a
responsible officer of such Borrower, first has knowledge of such
failure; or
(e) (i) The Company or any of its Consolidated or Designated
Subsidiaries shall fail to pay any principal of or premium or interest
on any Debt (other than Debt owed to the Company or its Subsidiaries or
Affiliates) that is outstanding in a principal amount of at least
$150,000,000 in the aggregate (but excluding Debt outstanding hereunder
and Debt owed by such party to any bank, financial institution or other
institutional lender to the extent the Borrower or any Subsidiary has
deposits with such bank, financial institution or other institutional
lender sufficient to repay such Debt) of the Company or such Subsidiary
(as the case may be), when the same becomes due and payable (whether by
scheduled maturity, required prepayment, acceleration, demand or
otherwise), and such failure shall continue after the applicable grace
period, if any, specified in the agreement or instrument relating to
such Debt, or (ii) any other event shall occur or condition shall exist
under any agreement or instrument relating to any such Debt and shall
continue after the applicable grace period, if any, specified in such
agreement or instrument, if the effect of such event or condition is to
accelerate, or to permit the acceleration of, the maturity of such
Debt, or (iii) any such Debt shall be declared to be due and payable,
or required to be prepaid or redeemed (other than by a regularly
scheduled required prepayment or redemption), purchased or defeased, or
an offer to prepay, redeem, purchase or defease such Debt shall be
required to be made, in each case prior to the stated maturity thereof;
provided, however, that, for purposes of this Section 6.0l(e), in the
case of (x) Debt of any Person (other than the Company or one of its
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55
Consolidated Subsidiaries) which the Company has guaranteed and (y)
Debt of Persons (other than the Company or one of its Consolidated
Subsidiaries) the payment of which is secured by a Lien on property of
the Company or such Subsidiary, such Debt shall be deemed to have not
been paid when due or to have been declared to be due and payable only
when the Company or such Subsidiary, as the case may be, shall have
failed to pay when due any amount which it shall be obligated to pay
with respect to such Debt; provided further, however, that any event or
occurrence described in this subsection (e) shall not be an Event of
Default if (A) such event or occurrence relates to the Debt of any
Subsidiary of the Company located in China, India, the Commonwealth of
Independent States or Turkey (collectively, the "Exempt Countries"),
(B) such Debt is not guaranteed or supported in any legally enforceable
manner by any Borrower or by any Subsidiary or Affiliate of the Company
located outside the Exempt Countries, (C) such event or occurrence is
due to the direct or indirect action of any government entity or agency
in any Exempt Country and (D) as of the last day of the calendar
quarter immediately preceding such event or occurrence, the book value
of the assets of such Subsidiary does not exceed $150,000,000 and the
aggregate book value of the assets of all Subsidiaries of the Company
located in Exempt Countries the Debt of which would cause an Event of
Default to occur but for the effect of this proviso does not exceed
$500,000,000; or
(f) The Company or any of its Designated or Consolidated
Subsidiaries shall generally not pay its debts as such debts become
due, or shall admit in writing its inability to pay its debts
generally, or shall make a general assignment for the benefit of
creditors; or any proceeding shall be instituted by or against the
Company or any such Subsidiaries seeking to adjudicate it a bankrupt or
insolvent, or seeking liquidation, winding up, reorganization,
arrangement, adjustment, protection, relief, or composition of it or
its debts under any law relating to bankruptcy, insolvency or
reorganization or relief of debtors, or seeking the entry of an order
for relief or the appointment of a receiver, trustee, custodian or
other similar official for it or for any substantial part of its
property and, in the case of any such proceeding instituted against it
(but not instituted by it), either such proceeding shall remain
undismissed or unstayed for a period of 30 days, or any of the actions
sought in such proceeding (including, without limitation, the entry of
an order for relief against, or the appointment of a receiver, trustee,
custodian or other similar official for, it or for any substantial part
of its property) shall occur; or the Company or any such Subsidiaries
shall take any corporate action to authorize any of the actions set
forth above in this subsection (f); provided, however, that any event
or occurrence described in this subsection (f) shall not be an Event of
Default if (A) such event or occurrence relates to any Subsidiary of
the Company located in an Exempt Country, (B) the Debt of such
Subsidiary is not guaranteed or supported in any legally enforceable
manner by any Borrower or by any Subsidiary or Affiliate of the Company
located outside the Exempt Countries, (C) such event or occurrence is
due to the direct or indirect action of any government entity or agency
in any Exempt Country and (D) as of the last day of the calendar
quarter immediately preceding such event
<PAGE>
56
or occurrence, the book value of the assets of such Subsidiary does not
exceed $150,000,000 and the aggregate book value of the assets of all
Subsidiaries of the Company located in Exempt Countries with respect to
which the happening of the events or occurrences described in this
subsection (f) would cause an Event of Default to occur but for the
effect of this proviso does not exceed $500,000,000; or
(g) Any judgment or order for the payment of money in excess
of $150,000,000 shall be rendered against the Company or any of its
Subsidiaries and enforcement proceedings shall have been commenced by
any creditor upon such judgment or order and there shall be any period
of 10 consecutive days during which a stay of enforcement of such
judgment or order, by reason of a pending appeal or otherwise, shall
not be in effect; provided, however, that any such judgment or order
shall not be an Event of Default under this Section 6.01(g) if (A) such
judgment or order is rendered against any Subsidiary of the Company
located in an Exempt Country, (B) the Debt of such Subsidiary is not
guaranteed or supported in any legally enforceable manner by any
Borrower or by any Subsidiary or Affiliate of the Company located
outside the Exempt Countries, (C) such judgment or order is due to the
direct or indirect action of any government entity or agency in any
Exempt Country and (D) as of the last day of the calendar quarter
immediately preceding the tenth consecutive day of the stay period
referred to above, the book value of the assets of such Subsidiary does
not exceed $150,000,000 and the aggregate book value of the assets of
all Subsidiaries of the Company located in Exempt Countries the
judgments and orders against which would cause an Event of Default to
occur but for the effect of this proviso does not exceed $500,000,000;
or
(h) Any non-monetary judgment or order shall be rendered
against the Company or any of its Subsidiaries that is reasonably
likely to have a Material Adverse Effect, and enforcement proceedings
shall have been commenced by any Person upon such judgment or order and
there shall be any period of 10 consecutive days during which a stay of
enforcement of such judgment or order, by reason of a pending appeal or
otherwise, shall not be in effect; or
(i) Any license, consent, authorization or approval (including
exchange control approvals) now or hereafter necessary to enable the
Company or any Designated Subsidiary to comply with its obligations
herein or under any Notes of such Borrower shall be modified, revoked,
withdrawn, withheld or suspended; or
(j) (i) Any ERISA Event shall have occurred with respect to a
Plan of any Borrower or any of its ERISA Affiliates and the sum
(determined as of the date of occurrence of such ERISA Event) of the
Insufficiency of such Plan and the Insufficiency of any and all other
Plans of the Borrowers and their ERISA Affiliates with respect to which
an ERISA Event shall have occurred and then exist (or the liability of
the Borrowers and
<PAGE>
57
their ERISA Affiliates related to such ERISA Event) exceeds
$150,000,000; or (ii) any Borrower or any of its ERISA Affiliates shall
be in default, as defined in Section 4219(c)(5) of ERISA, with respect
to any payment of Withdrawal Liability and the sum of the outstanding
balance of such Withdrawal Liability and the outstanding balance of any
other Withdrawal Liability that any Borrower or any of its ERISA
Affiliates has incurred exceeds 6% of Net Tangible Assets of the
Company and its Consolidated Subsidiaries; or (iii) any Borrower or any
of its ERISA Affiliates shall have been notified by the sponsor of a
Multiemployer Plan of such Borrower or any of its ERISA Affiliates that
such Multiemployer Plan is in reorganization or is being terminated,
within the meaning of Title IV of ERISA, and as a result of such
reorganization or termination the aggregate annual contributions of the
Borrowers and their ERISA Affiliates to all Multiemployer Plans that
are then in reorganization or being terminated have been or will be
increased over the amounts contributed to such Multiemployer Plans for
the plan years of such Multiemployer Plans immediately preceding the
plan year in which such reorganization or termination occurs by an
amount exceeding $150,000,000; or
then, and (i) in any such event (except as provided in clause (ii) below), the
Agent (A) shall at the request, or may with the consent, of the Majority
Lenders, by notice to the Company, declare the obligation of each Lender to make
Advances to be terminated, whereupon the same shall forthwith terminate, and (B)
shall at the request, or may with the consent, of the Majority Lenders, by
notice to the Company, declare the Advances, all interest thereon and all other
amounts payable under this Agreement to be forthwith due and payable, whereupon
the Advances, all such interest and all such amounts shall become and be
forthwith due and payable, without presentment, demand, protest or further
notice of any kind, all of which are hereby expressly waived by the Borrowers
and (ii) in the case of the occurrence of any Event of Default described in
clause (i) or (ii) of Section 6.01(a), the Agent shall, at the request, or may
with the consent, of the Lenders which have made or assumed under this Agreement
at least 66-2/3% of the aggregate principal amount (based in respect of
Competitive Bid Advances denominated in Foreign Currencies on the Equivalent in
Dollars on the date of such request) of Competitive Bid Advances then
outstanding and to whom such Advances are owed, by notice to the Company,
declare the full unpaid principal of and accrued interest on all Competitive Bid
Advances hereunder and all other obligations of the Borrowers hereunder to be
immediately due and payable, whereupon such Advances and such obligations shall
be immediately due and payable, without presentment, demand, protest or other
further notice of any kind, all of which are hereby expressly waived by the
Borrowers; provided, however, that in the event of an actual or deemed entry of
an order for relief with respect to any Borrower under the United States
Bankruptcy Code of 1978, as amended, (x) the obligation of each Lender to make
Advances shall automatically be terminated and (y) the Advances, all such
interest and all such amounts shall automatically become and be due and payable,
without presentment, demand, protest or any notice of any kind, all of which are
hereby expressly waived by the Borrowers.
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58
ARTICLE VII
GUARANTEE
SECTION 7.01. Unconditional Guarantee. For valuable
consideration, receipt whereof is hereby acknowledged, and to induce each Lender
to make Advances to the Designated Subsidiaries and to induce the Agent to act
hereunder, the Company hereby unconditionally and irrevocably guarantees to each
Lender and the Agent that:
(a) the principal of and interest on each Advance to each
Designated Subsidiary shall be promptly paid in full when due (whether
at stated maturity, by acceleration or otherwise) in accordance with
the terms hereof, and, in case of any extension of time of payment, in
whole or in part, of such Advance, that all such sums shall be promptly
paid when due (whether at stated maturity, by acceleration or
otherwise) in accordance with the terms of such extension; and
(b) all other amounts payable hereunder by any Designated
Subsidiary to any Lender or the Agent or the Sub-Agent, as the case may
be, shall be promptly paid in full when due in accordance with the
terms hereof (the obligations of the Designated Subsidiaries under
these subsections (a) and (b) of this Section 7.01 being the
"Obligations").
In addition, the Company hereby unconditionally and irrevocably agrees that upon
default in the payment when due (whether at stated maturity, by acceleration or
otherwise) of any principal of, or interest on, any Advance to any Designated
Subsidiary or such other amounts payable by any Designated Subsidiary to any
Lender or the Agent, the Company will forthwith pay the same, without further
notice or demand.
SECTION 7.02. Guarantee Absolute. The Company guarantees that
the Obligations will be paid strictly in accordance with the terms of this
Agreement, regardless of any law, regulation or order now or hereafter in effect
in any jurisdiction affecting any of such terms or the rights of any Lender or
the Agent with respect thereto. The liability of the Company under this
guarantee shall be absolute and unconditional irrespective of:
(a) any lack of validity or enforceability of this Agreement
or any other agreement or instrument relating thereto;
(b) any change in the time, manner or place of payment of, or
in any other term of, all or any of the Obligations, or any other
amendment or waiver of or any consent to departure from this Agreement
(including, without limitation, any extension of the Termination Date
pursuant to Section 2.16);
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59
(c) any exchange, release or non-perfection of any collateral,
or any release or amendment or waiver of or consent to departure from
any other guaranty, for all or any of the Obligations; or
(d) any other circumstance which might otherwise constitute a
defense available to, or a discharge of, the Company, any Borrower or a
guarantor.
This guarantee shall continue to be effective or be reinstated, as the case may
be, if at any time any payment of any of the Obligations is rescinded or must
otherwise be returned by any of the Lenders or the Agent upon the insolvency,
bankruptcy or reorganization of the Company or any Borrower or otherwise, all as
though such payment had not been made.
SECTION 7.03. Waivers. The Company hereby expressly waives
diligence, presentment, demand for payment, protest, any requirement that any
right or power be exhausted or any action be taken against any Designated
Subsidiary or against any other guarantor of all or any portion of the Advances,
and all other notices and demands whatsoever.
SECTION 7.04. Remedies. Each of the Lenders and the Agent may
pursue its respective rights and remedies under this Article VII and shall be
entitled to payment hereunder notwithstanding any other guarantee of all or any
part of the Advances to the Designated Subsidiaries, and notwithstanding any
action taken by any such Lender or the Agent to enforce any of its rights or
remedies under such other guarantee, or any payment received thereunder. The
Company hereby irrevocably waives any claim or other right that it may now or
hereafter acquire against any Designated Subsidiary that arises from the
existence, payment, performance or enforcement of the Company's obligations
under this Article VII, including, without limitation, any right of subrogation,
reimbursement, exoneration, contribution or indemnification and any right to
participate in any claim or remedy of the Agent or the Lenders against any
Designated Subsidiary, whether or not such claim, remedy or right arises in
equity or under contract, statute or common law, including, without limitation,
the right to take or receive from the Designated Subsidiary, directly or
indirectly, in cash or other property or by set-off or in any other manner,
payment or security on account of such claim, remedy or right. If any amount
shall be paid to the Company in violation of the preceding sentence at any time
when all the Obligations shall not have been paid in full, such amount shall be
held in trust for the benefit of the Lenders and the Agent and shall forthwith
be paid to the Agent for its own account and the accounts of the respective
Lenders to be credited and applied to the Obligations, whether matured or
unmatured, in accordance with the terms of this Agreement, or to be held as
collateral for any Obligations or other amounts payable under this Agreement
thereafter arising. The Company acknowledges that it will receive direct and
indirect benefits from the financing arrangements contemplated by this Agreement
and that the waiver set forth in this section is knowingly made in contemplation
of such benefits.
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60
SECTION 7.05. No Stay. The Company agrees that, as between (a)
the Company and (b) the Lenders and the Agent, the Obligations of any Designated
Subsidiary guaranteed by the Company hereunder may be declared to be forthwith
due and payable as provided in Article VI hereof for purposes of this Article
VII by declaration to the Company as guarantor notwithstanding any stay,
injunction or other prohibition preventing such declaration as against such
Designated Subsidiary and that, in the event of such declaration to the Company
as guarantor, such Obligations (whether or not due and payable by such
Designated Subsidiary), shall forthwith become due and payable by the Company
for purposes of this Article VII.
SECTION 7.06. Survival. This guarantee is a continuing
guarantee and shall (a) remain in full force and effect until payment in full
(after the Termination Date) of the Obligations and all other amounts payable
under this guaranty, (b) be binding upon the Company, its successors and
assigns, (c) inure to the benefit of and be enforceable by each Lender
(including each Assuming Lender and each assignee Lender pursuant to Section
9.07) and the Agent and their respective successors, transferees and assigns and
(d) shall be reinstated if at any time any payment to a Lender or the Agent
hereunder is required to be restored by such Lender or the Agent. Without
limiting the generality of the foregoing clause (c), each Lender may assign or
otherwise transfer its interest in any Advance to any other person or entity,
and such other person or entity shall thereupon become vested with all the
rights in respect thereof granted to such Lender herein or otherwise.
ARTICLE VIII
THE AGENT
SECTION 8.01. Authorization and Action. Each Lender hereby
appoints and authorizes the Agent to take such action as agent on its behalf and
to exercise such powers and discretion under this Agreement as are delegated to
the Agent by the terms hereof, together with such powers and discretion as are
reasonably incidental thereto. As to any matters not expressly provided for by
this Agreement (including, without limitation, enforcement or collection of the
Notes), the Agent shall not be required to exercise any discretion or take any
action, but shall be required to act or to refrain from acting (and shall be
fully protected in so acting or refraining from acting) upon the instructions of
the Majority Lenders, and such instructions shall be binding upon all Lenders
and all holders of Notes; provided, however, that the Agent shall not be
required to take any action that exposes the Agent to personal liability or that
is contrary to this Agreement or applicable law. The Agent agrees to give to
each Lender prompt notice of each notice given to it by any Borrower pursuant to
the terms of this Agreement.
SECTION 8.02. Agent's Reliance, Etc. Neither the Agent nor any
of its directors, officers, agents or employees shall be liable for any action
taken or omitted to be taken by it or them under or in connection with this
Agreement, except for its or their own gross negligence or willful
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61
misconduct. Without limitation of the generality of the foregoing, the Agent:
(a) may treat the Lender that made any Advance as the holder of the Debt
resulting therefrom until the Agent receives and accepts an Assignment and
Acceptance entered into by such Lender, as assignor, and an Eligible Assignee,
as assignee, as provided in Section 9.07; (b) may consult with legal counsel
(including counsel for the Company), independent public accountants and other
experts selected by it and shall not be liable for any action taken or omitted
to be taken in good faith by it in accordance with the advice of such counsel,
accountants or experts; (c) makes no warranty or representation to any Lender
and shall not be responsible to any Lender for any statements, warranties or
representations (whether written or oral) made in or in connection with this
Agreement; (d) shall not have any duty to ascertain or to inquire as to the
performance or observance of any of the terms, covenants or conditions of this
Agreement on the part of any Borrower or to inspect the property (including the
books and records) of any Borrower; (e) shall not be responsible to any Lender
for the due execution, legality, validity, enforceability, genuineness,
sufficiency or value of this Agreement or any other instrument or document
furnished pursuant hereto; and (f) shall incur no liability under or in respect
of this Agreement by acting upon any notice, consent, certificate or other
instrument or writing (which may be by telecopier, telegram or telex) believed
by it to be genuine and signed or sent by the proper party or parties.
SECTION 8.03. Citibank and Affiliates. With respect to its
Commitment, the Advances made by it and the Note issued to it, Citibank shall
have the same rights and powers under this Agreement as any other Lender and may
exercise the same as though it were not the Agent; and the term "Lender" or
"Lenders" shall, unless otherwise expressly indicated, include Citibank in its
individual capacity. Citibank and its Affiliates may accept deposits from, lend
money to, act as trustee under indentures of, accept investment banking
engagements from and generally engage in any kind of business with, the Company,
any of its Subsidiaries and any Person who may do business with or own
securities of the Company or any such Subsidiary, all as if Citibank were not
the Agent and without any duty to account therefor to the Lenders.
SECTION 8.04. Lender Credit Decision. Each Lender acknowledges
that it has, independently and without reliance upon the Agent or any other
Lender and based on the financial statements referred to in Section 4.01 and
such other documents and information as it has deemed appropriate, made its own
credit analysis and decision to enter into this Agreement. Each Lender also
acknowledges that it will, independently and without reliance upon the Agent or
any other Lender and based on such documents and information as it shall deem
appropriate at the time, continue to make its own credit decisions in taking or
not taking action under this Agreement.
SECTION 8.05. Indemnification. The Lenders agree to indemnify
the Agent (to the extent not reimbursed by a Borrower), ratably according to the
respective principal amounts of the Revolving Credit Advances then owed to each
of them (or if no Revolving Credit Advances are at the time outstanding, ratably
according to the respective amounts of their Commitments), from and against any
and all liabilities, obligations, losses, damages, penalties, actions,
judgments, suits, costs,
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62
expenses or disbursements of any kind or nature whatsoever that may be imposed
on, incurred by, or asserted against the Agent in any way relating to or arising
out of this Agreement or any action taken or omitted by the Agent under this
Agreement, provided that no Lender shall be liable for any portion of such
liabilities, obligations, losses, damages, penalties, actions, judgments, suits,
costs, expenses or disbursements resulting from the Agent's gross negligence or
willful misconduct. Without limitation of the foregoing, each Lender agrees to
reimburse the Agent promptly upon demand for its ratable share of any
out-of-pocket expenses (including counsel fees) incurred by the Agent in
connection with the preparation, execution, delivery, administration,
modification, amendment or enforcement (whether through negotiations, legal
proceedings or otherwise) of, or legal advice in respect of rights or
responsibilities under, this Agreement, to the extent that the Agent is not
reimbursed for such expenses by a Borrower.
SECTION 8.06. Successor Agent. The Agent may resign at any
time by giving written notice thereof to the Lenders and the Company and may be
removed at any time with or without cause by the Majority Lenders. The Company
may at any time, by notice to the Agent, propose a successor Agent (which shall
meet the criteria described below) specified in such notice and request that the
Lenders be notified thereof by the Agent with a view to their removal of the
Agent and their appointment of such successor Agent; the Agent agrees to forward
any such notice to the Lenders promptly upon its receipt by the Agent. Upon any
such resignation or removal, the Majority Lenders shall have the right to
appoint a successor Agent. If no successor Agent shall have been so appointed by
the Majority Lenders, and shall have accepted such appointment, within 30 days
after the retiring Agent's giving of notice of resignation or the Majority
Lenders' removal of the retiring Agent, then the retiring Agent may, on behalf
of the Lenders, appoint a successor Agent, which shall be a commercial bank
organized under the laws of the United States of America or of any State thereof
and having a combined capital and surplus of at least $500,000,000. Upon the
acceptance of any appointment as Agent hereunder by a successor Agent, such
successor Agent shall thereupon succeed to and become vested with all the
rights, powers, discretion, privileges and duties of the retiring Agent, and the
retiring Agent shall be discharged from its duties and obligations under this
Agreement. After any retiring Agent's resignation or removal hereunder as Agent,
the provisions of this Article VIII shall inure to its benefit as to any actions
taken or omitted to be taken by it while it was Agent under this Agreement.
SECTION 8.07. Sub-Agent. The Sub-Agent has been designated
under this Agreement to carry out duties of the Agent. The Sub-Agent shall be
subject to each of the obligations in this Agreement to be performed by the
Sub-Agent, and each of the Borrowers and the Lenders agrees that the Sub-Agent
shall be entitled to exercise each of the rights and shall be entitled to each
of the benefits of the Agent under this Agreement as relate to the performance
of its obligations hereunder.
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ARTICLE IX
MISCELLANEOUS
SECTION 9.01. Amendments, Etc. No amendment or waiver of any
provision of this Agreement or the Revolving Credit Notes, nor consent to any
departure by any Borrower therefrom, shall in any event be effective unless the
same shall be in writing and signed by the Majority Lenders, and then such
waiver or consent shall be effective only in the specific instance and for the
specific purpose for which given; provided, however, that no amendment, waiver
or consent shall, unless in writing and signed by all the Lenders, do any of the
following: (a) increase the Commitments of the Lenders or subject the Lenders to
any additional obligations, (b) reduce the principal of, or interest on, the
Revolving Credit Advances or any fees or other amounts payable hereunder, (c)
postpone any date fixed for any payment of principal of, or interest on, the
Revolving Credit Advances or any fees or other amounts payable hereunder (other
than as permitted by Section 2.16 to the extent any Lender consents thereunder),
(d) release the Company from any of its obligations under Article VII, (e)
require the duration of an Interest Period to be nine months if such period is
not available to all Lenders or (f) amend this section 9.01; and provided
further that no amendment, waiver or consent shall, unless in writing and signed
by the Agent in addition to the Lenders required above to take such action,
affect the rights or duties of the Agent under this Agreement or any Note.
SECTION 9.02. Notices, Etc. All notices and other
communications provided for hereunder shall be in writing (including telecopier,
telegraphic or telex communication) and mailed (return receipt requested),
telecopied, telegraphed, telexed or delivered, if to the Company or to any
Designated Subsidiary, at the Company's address at 101 Columbia Road,
Morristown, New Jersey 07962-1219, Attention: Assistant Treasurer; if to any
Initial Lender, at its Domestic Lending Office specified opposite its name on
Schedule I hereto; if to any other Lender, at its Domestic Lending Office
specified in the Assumption Agreement or the Assignment and Acceptance pursuant
to which it became a Lender; and if to the Agent, at its address at Two Penns
Way, New Castle, Delaware 19720, Attention: Bank Loan Syndications Department,
with a copy to 399 Park Avenue, New York, New York 10043, Attention: Carolyn
Sheridan; or, as to any Borrower or the Agent, at such other address as shall be
designated by such party in a written notice to the other parties and, as to
each other party, at such other address as shall be designated by such party in
a written notice to the Company and the Agent. All such notices and
communications shall, when mailed, telecopied, telegraphed or telexed, be
effective when deposited in the mails, telecopied, delivered to the telegraph
company or confirmed by telex answerback, respectively, except that notices and
communications to the Agent pursuant to Article II, III or VIII shall not be
effective until received by the Agent. Delivery by telecopier of an executed
counterpart of any amendment or waiver of any provision of this Agreement or the
Notes or of any Exhibit hereto to be executed and delivered hereunder shall be
effective as delivery of a manually executed counterpart thereof.
<PAGE>
64
SECTION 9.03. No Waiver; Remedies. No failure on the part of
any Lender or the Agent to exercise, and no delay in exercising, any right
hereunder or under any Note shall operate as a waiver thereof; nor shall any
single or partial exercise of any such right preclude any other or further
exercise thereof or the exercise of any other right. The remedies herein
provided are cumulative and not exclusive of any remedies provided by law.
SECTION 9.04. Costs and Expenses. (a) The Company agrees to
pay on demand all costs and expenses of the Agent in connection with the
administration, modification and amendment of this Agreement, the Notes and the
other documents to be delivered hereunder, including, without limitation, (i)
all due diligence, syndication (including printing, distribution and bank
meetings), transportation, computer, duplication, appraisal, consultant, and
audit expenses and (ii) the reasonable fees and expenses of counsel for the
Agent with respect thereto. The Company further agrees to pay on demand all
costs and expenses of the Agent and the Lenders, if any (including, without
limitation, reasonable counsel fees and expenses), in connection with the
enforcement (whether through negotiations, legal proceedings or otherwise) of
this Agreement, the Notes and the other documents to be delivered hereunder,
including, without limitation, reasonable fees and expenses of counsel for the
Agent and each Lender in connection with the enforcement of rights under this
Section 9.04(a).
(b) Each Borrower agrees to indemnify and hold harmless the
Agent and each Lender and each of their Affiliates and their officers,
directors, employees, agents and advisors (each, an "Indemnified Party") from
and against any and all claims, damages, losses, liabilities and expenses
(including, without limitation, reasonable fees and expenses of counsel) that
may be incurred by or asserted or awarded against any Indemnified Party, in each
case arising out of or in connection with or by reason of, or in connection with
the preparation for a defense of, any investigation, litigation or proceeding
arising out of, related to or in connection with the Notes, this Agreement, any
of the transactions contemplated herein or the actual or proposed use of the
proceeds of the Advances whether or not such investigation, litigation or
proceeding is brought by the Company, its directors, shareholders or creditors
or an Indemnified Party or any other Person or any Indemnified Party is
otherwise a party thereto and whether or not the transactions contemplated
hereby are consummated, except to the extent any such claim, damage, loss,
liability or expense has resulted from such Indemnified Party's gross negligence
or willful misconduct. The Company also agrees not to assert any claim against
any Indemnified Party on any theory of liability for special, indirect,
consequential or punitive damages arising out of or otherwise relating to the
Notes, this Agreement, any of the transactions contemplated herein or the actual
or proposed use of the proceeds of the Advances.
(c) If any payment of principal of, or Conversion of, any
Eurocurrency Rate Advance or LIBO Rate Advance is made by the Borrower to or for
the account of a Lender other than on the last day of the Interest Period for
such Advance, as a result of a payment or Conversion pursuant to Section
2.03(d), 2.05(b), 2.09(a) or (b), 2.11 or 2.16, acceleration of the maturity of
the
<PAGE>
65
Notes pursuant to Section 6.01 or for any other reason, the Borrower shall, upon
demand by such Lender (with a copy of such demand to the Agent), pay to the
Agent for the account of such Lender any amounts required to compensate such
Lender for any additional losses, costs or expenses that it may reasonably incur
as a result of such payment or Conversion, including, without limitation, any
loss (including loss of anticipated profits), cost or expense incurred by reason
of the liquidation or reemployment of deposits or other funds acquired by any
Lender to fund or maintain such Advance.
(d) Without prejudice to the survival of any other agreement
of the Borrower hereunder, the agreements and obligations of the Borrower
contained in Sections 2.10, 2.13 and 9.04 shall survive the payment in full of
principal, interest and all other amounts payable hereunder and under the Notes
and the termination in whole of any Commitment hereunder.
SECTION 9.05. Right of Set-off. Upon (a) the occurrence and
during the continuance of any Event of Default and (b) the making of the request
or the granting of the consent specified by Section 6.01 to authorize the Agent
to declare the Notes due and payable pursuant to the provisions of Section 6.01,
each Lender and each of its Affiliates is hereby authorized at any time and from
time to time, to the fullest extent permitted by law, to set off and apply any
and all deposits (general or special, time or demand, provisional or final) at
any time held and other indebtedness at any time owing by such Lender or such
Affiliate to or for the credit or the account of any Borrower against any and
all of the obligations of such Borrower now or hereafter existing under this
Agreement and the Note of such Borrower held by such Lender, whether or not such
Lender shall have made any demand under this Agreement or such Note and although
such obligations may be unmatured. Each Lender agrees promptly to notify the
relevant Borrower after any such set-off and application, provided that the
failure to give such notice shall not affect the validity of such set-off and
application. The rights of each Lender and its Affiliates under this Section are
in addition to other rights and remedies (including, without limitation, other
rights of set-off) that such Lender and its Affiliates may have.
SECTION 9.06. Binding Effect. This Agreement shall become
effective (other than Sections 2.01 and 2.03, which shall only become effective
upon satisfaction of the conditions precedent set forth in Section 3.01) when it
shall have been executed by the Company and the Agent and when the Agent shall
have been notified by each Initial Lender that such Initial Lender has executed
it and thereafter shall be binding upon and inure to the benefit of each
Borrower, the Agent and each Lender and their respective successors and assigns,
except that no Borrower shall not have the right to assign its rights hereunder
or any interest herein without the prior written consent of the Lenders.
SECTION 9.07. Assignments and Participations. (a) Each Lender
may at any time, with notice to the Company prior to making any proposal to any
potential assignee and with the consent of the Company, which consent shall not
be unreasonably withheld (and shall at any time, if requested to do so by the
Company pursuant to Section 2.05(b), 2.10 or 2.13) assign to one or
<PAGE>
66
more Persons all or a portion of its rights and obligations under this Agreement
(including, without limitation, all or a portion of its Commitment, the
Revolving Credit Advances owing to it and the Revolving Credit Note or Notes
held by it); provided, however, that (i) the Company's consent shall not be
required (A) in the case of an assignment to an Affiliate of such Lender,
provided that notice thereof shall have been given to the Company and the Agent,
or (B) in the case of an assignment of the type described in subsection (g)
below; (ii) each such assignment shall be of a constant, and not a varying,
percentage of all rights and obligations under this Agreement (other than any
right to make Competitive Bid Advances, Competitive Bid Advances owing to it and
Competitive Bid Notes); (iii) except in the case of an assignment to a Person
that, immediately prior to such assignment, was a Lender or an assignment of all
of a Lender's rights and obligations under this Agreement, the amount of the
Commitment of the assigning Lender being assigned pursuant to each such
assignment (determined as of the date of the Assignment and Acceptance with
respect to such assignment) shall in no event be less than $10,000,000 or an
integral multiple of $1,000,000 in excess thereof; (iv) each such assignment
shall be to an Eligible Assignee, (v) each such assignment made as a result of a
demand by the Company pursuant to this Section 9.07(a) shall be arranged by the
Company after consultation with, and subject to the approval of, the Agent, and
shall be either an assignment of all of the rights and obligations of the
assigning Lender under this Agreement or an assignment of a portion of such
rights and obligations made concurrently with another such assignment or other
such assignments that together cover all of the rights and obligations of the
assigning Lender under this Agreement, (vi) no Lender shall be obligated to make
any such assignment as a result of a demand by the Borrower pursuant to this
Section 9.07(a) unless and until such Lender shall have received one or more
payments from either the Borrower or one or more Eligible Assignees in an
aggregate amount at least equal to the aggregate outstanding principal amount of
the Advances owing to such Lender, together with accrued interest thereon to the
date of payment of such principal amount and all other amounts payable to such
Lender under this Agreement and all of the obligations of the Borrower to such
Lender shall have been satisfied; and (vii) the parties to each such assignment
shall execute and deliver to the Agent, for its acceptance and recording in the
Register, an Assignment and Acceptance, together with a processing and
recordation fee of $3,500 and, if the assigning Lender is not retaining a
Commitment hereunder, any Revolving Credit Note subject to such assignment. Upon
such execution, delivery, acceptance and recording, from and after the effective
date specified in each Assignment and Acceptance, (x) the assignee thereunder
shall be a party hereto and, to the extent that rights and obligations hereunder
have been assigned to it pursuant to such Assignment and Acceptance, have the
rights and obligations of a Lender hereunder and (y) the Lender assignor
thereunder shall, to the extent that rights and obligations hereunder have been
assigned by it pursuant to such Assignment and Acceptance, relinquish its rights
and be released from its obligations under this Agreement (and, in the case of
an Assignment and Acceptance covering all or the remaining portion of an
assigning Lender's rights and obligations under this Agreement, such Lender
shall cease to be a party hereto, provided, however, that such assigning
Lender's rights under Sections 2.10, 2.13 and 9.04, and its obligations under
Section 8.05, shall survive such assignment as to matters occurring prior to the
effective date of such assignment).
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67
(b) By executing and delivering an Assignment and Acceptance,
the Lender assignor thereunder and the assignee thereunder confirm to and agree
with each other and the other parties hereto as follows: (i) other than as
provided in such Assignment and Acceptance, such assigning Lender makes no
representation or warranty and assumes no responsibility with respect to any
statements, warranties or representations made in or in connection with this
Agreement or any other instrument or document furnished pursuant hereto or the
execution, legality, validity, enforceability, genuineness, sufficiency or value
of this Agreement or any other instrument or document furnished pursuant hereto;
(ii) such assigning Lender makes no representation or warranty and assumes no
responsibility with respect to the financial condition of any Borrower or the
performance or observance by such Borrower of any of its obligations under this
Agreement or any other instrument or document furnished pursuant hereto; (iii)
such assignee confirms that it has received a copy of this Agreement, together
with copies of the financial statements referred to in Section 4.01 and such
other documents and information as it has deemed appropriate to make its own
credit analysis and decision to enter into such Assignment and Acceptance; (iv)
such assignee will, independently and without reliance upon the Agent, such
assigning Lender or any other Lender and based on such documents and information
as it shall deem appropriate at the time, continue to make its own credit
decisions in taking or not taking action under this Agreement; (v) such assignee
confirms that it is an Eligible Assignee; (vi) such assignee appoints and
authorizes the Agent to take such action as agent on its behalf and to exercise
such powers and discretion under this Agreement as are delegated to the Agent by
the terms hereof, together with such powers and discretion as are reasonably
incidental thereto; and (vii) such assignee agrees that it will perform in
accordance with their terms all of the obligations that by the terms of this
Agreement are required to be performed by it as a Lender.
(c) Upon its receipt of an Assignment and Acceptance executed
by an assigning Lender and an assignee representing that it is an Eligible
Assignee, together with any Revolving Credit Note or Notes subject to such
assignment, the Agent shall, if such Assignment and Acceptance has been
completed and is in substantially the form of Exhibit C hereto, (i) accept such
Assignment and Acceptance, (ii) record the information contained therein in the
Register and (iii) give prompt notice thereof to the Company and to each other
Borrower.
(d) The Agent shall maintain at its address referred to in
Section 9.02 a copy of each Assumption Agreement and each Assignment and
Acceptance delivered to and accepted by it and a register for the recordation of
the names and addresses of the Lenders and the Commitment of, and principal
amount of the Advances owing to, each Lender from time to time (the "Register").
The entries in the Register shall be conclusive and binding for all purposes,
absent manifest error, and the Company, each other Borrower, the Agent and the
Lenders may treat each Person whose name is recorded in the Register as a Lender
hereunder for all purposes of this Agreement. The Register shall be available
for inspection by the Company, any other Borrower or any Lender at any
reasonable time and from time to time upon reasonable prior notice.
<PAGE>
68
(e) Each Lender may sell participations to one or more banks
or other entities (other than the Company or any of its Affiliates) in or to all
or a portion of its rights and obligations under this Agreement (including,
without limitation, all or a portion of its Commitment, the Advances owing to it
and any Note or Notes held by it); provided, however, that (i) such Lender's
obligations under this Agreement (including, without limitation, its Commitment
to the Company and the other Borrowers hereunder) shall remain unchanged, (ii)
such Lender shall remain solely responsible to the other parties hereto for the
performance of such obligations, (iii) such Lender shall remain the holder of
any such Note for all purposes of this Agreement, (iv) the Company, any other
Borrower, the Agent and the other Lenders shall continue to deal solely and
directly with such Lender in connection with such Lender's rights and
obligations under this Agreement, (v) no participant under any such
participation shall have any right to approve any amendment or waiver of any
provision of this Agreement or any Note, or any consent to any departure by any
Borrower therefrom, except to the extent that such amendment, waiver or consent
would reduce the principal of, or interest on, the Notes or any fees or other
amounts payable hereunder, in each case to the extent subject to such
participation, or postpone any date fixed for any payment of principal of, or
interest on, the Notes or any fees or other amounts payable hereunder, in each
case to the extent subject to such participation and (vi) within 30 days of the
effective date of such participation, such Lender shall provide notice of such
participation to the Company.
(f) Any Lender may, in connection with any assignment or
participation or proposed assignment or participation pursuant to this Section
9.07, disclose to the assignee or participant or proposed assignee or
participant, any information relating to the Company or any Borrower furnished
to such Lender by or on behalf of such Borrower; provided that, prior to any
such disclosure, the assignee or participant or proposed assignee or participant
shall agree to preserve the confidentiality of any confidential information
relating to such Borrower received by it from such Lender.
(g) Notwithstanding any other provision set forth in this
Agreement, any Lender may at any time assign or create a security interest in
all or any portion of its rights under this Agreement (including, without
limitation, the Advances owing to it and any Note or Notes held by it) in favor
of any Federal Reserve Bank in accordance with Regulation A of the Board of
Governors of the Federal Reserve System.
SECTION 9.08. Designated Subsidiaries. (a) Designation. The
Company may at any time, and from time to time, by delivery to the Agent of a
Designation Letter duly executed by the Company and the respective Subsidiary
and substantially in the form of Exhibit E hereto, designate such Subsidiary as
a "Designated Subsidiary" for purposes of this Agreement and such Subsidiary
shall thereupon become a "Designated Subsidiary" for purposes of this Agreement
and, as such, shall have all of the rights and obligations of a Borrower
hereunder. The Agent shall promptly notify each Lender of each such designation
by the Company and the identity of the respective Subsidiary.
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69
(b) Termination. Upon the payment and performance in full of
all of the indebtedness, liabilities and obligations under this Agreement and
the Notes of any Designated Subsidiary then, so long as at the time no Notice of
Revolving Credit Borrowing or Notice of Competitive Bid Borrowing in respect of
such Designated Subsidiary is outstanding, such Subsidiary's status as a
"Designated Subsidiary" shall terminate upon notice to such effect from the
Agent to the Lenders (which notice the Agent shall give promptly upon its
receipt of a request therefor from the Company). Thereafter, the Lenders shall
be under no further obligation to make any Advance hereunder to such Designated
Subsidiary.
SECTION 9.09. Confidentiality. Each of the Lenders and the
Agent hereby agrees that it will use reasonable efforts (e.g., procedures
substantially comparable to those applied by such Lender or the Agent in respect
of non-public information as to the business of such Lender or the Agent) to
keep confidential any financial reports and other information from time to time
supplied to it by the Company hereunder to the extent that such information is
not and does not become publicly available and which the Company indicates at
the time is to be treated confidentially, provided, however, that nothing herein
shall affect the disclosure of any such information (i) by the Agent to any
Lender, (ii) to the extent required by law (including statute, rule, regulation
or judicial process), (iii) to counsel for any Lender or the Agent or to their
respective independent public accountants, (iv) to bank examiners and auditors
and appropriate government examining authorities, (v) to the Agent or any other
Lender, (vi) in connection with any litigation to which any Lender or the Agent
is a party, (vii) to actual or prospective assignees and participants as
contemplated by Section 9.07(f) or (viii) to any Affiliate of the Agent or any
Lender or to such Affiliate's officers, directors, employees, agents and
advisors, provided that, prior to any such disclosure, such Affiliate or such
Affiliate's officers, directors, employees, agents or advisors, as the case may
be, shall agree to preserve the confidentiality of any confidential information
relating to the Company received by it; a determination by a Lender or the Agent
as to the application of the circumstances described in the foregoing clauses
(i)-(viii) being conclusive if made in good faith; and each of the Lenders and
the Agent agrees that it will follow procedures which are intended to put any
transferee of such confidential information on notice that such information is
confidential.
SECTION 9.10. Mitigation of Yield Protection. Each Lender
hereby agrees that, commencing as promptly as practicable after it becomes aware
of the occurrence of any event giving rise to the operation of Section 2.10(a),
2.11 or 2.13 with respect to such Lender, such Lender will give notice thereof
through the Agent to the respective Borrower. A Borrower may at any time, by
notice through the Agent to any Lender, request that such Lender change its
Applicable Lending Office as to any Advance or Type of Advance or that it
specify a new Applicable Lending Office with respect to its Commitment and any
Advance held by it or that it rebook any such Advance with a view to avoiding or
mitigating the consequences of an occurrence such as described in the preceding
sentence, and such Lender will use reasonable efforts to comply with such
request unless, in the opinion of such Lender, such change or specification or
rebooking is inadvisable or might have an adverse effect, economic or otherwise,
upon it, including its reputation. In addition, each Lender
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70
agrees that, except for changes or specifications or rebookings required by law
or effected pursuant to the preceding sentence, if the result of any change or
change of specification of Applicable Lending Office or rebooking would, but for
this sentence, be to impose additional costs or requirements upon the respective
Borrower pursuant to Section 2.10(a), Section 2.11 or Section 2.13 (which would
not be imposed absent such change or change of specification or rebooking) by
reason of legal or regulatory requirements in effect at the time thereof and of
which such Lender is aware at such time, then such costs or requirements shall
not be imposed upon such Borrower but shall be borne by such Lender. All
expenses incurred by any Bank in changing an Applicable Lending Office or
specifying another Applicable Lending Office of such Lender or rebooking any
Advance in response to a request from a Borrower shall be paid by such Borrower.
Nothing in this Section 9.10 (including, without limitation, any failure by a
Lender to give any notice contemplated in the first sentence hereof) shall
limit, reduce or postpone any obligations of the respective Borrower under
Section 2.10(a), Section 2.11 or Section 2.13, including any obligations payable
in respect of any period prior to the date of any change or specification of a
new Applicable Lending Office or any rebooking of any Advance.
SECTION 9.11. Governing Law. This Agreement and the Notes
shall be governed by, and construed in accordance with, the laws of the State of
New York.
SECTION 9.12. Execution in Counterparts. This Agreement may be
executed in any number of counterparts and by different parties hereto in
separate counterparts, each of which when so executed shall be deemed to be an
original and all of which taken together shall constitute one and the same
agreement. Delivery of an executed counterpart of a signature page to this
Agreement by telecopier shall be effective as delivery of a manually executed
counterpart of this Agreement.
SECTION 9.13. Jurisdiction, Etc. (a) Each of the parties
hereto hereby irrevocably and unconditionally submits, for itself and its
property, to the nonexclusive jurisdiction of any New York State court or
federal court of the United States of America sitting in New York City, and any
appellate court from any thereof, in any action or proceeding arising out of or
relating to this Agreement or the Notes, or for recognition or enforcement of
any judgment, and each of the parties hereto hereby irrevocably and
unconditionally agrees that all claims in respect of any such action or
proceeding may be heard and determined in any such New York State court or, to
the extent permitted by law, in such federal court. Each Designated Subsidiary
hereby agrees that service of process in any such action or proceeding brought
in the any such New York State court or in such federal court may be made upon
CT Corporation System at its offices at 1633 Broadway, New York, New York 10019
(the "Process Agent") and each Designated Subsidiary hereby irrevocably appoints
the Process Agent its authorized agent to accept such service of process, and
agrees that the failure of the Process Agent to give any notice of any such
service shall not impair or affect the validity of such service or of any
judgment rendered in any action or proceeding based thereon. Each Borrower
hereby further irrevocably consents to the service of process in any action or
proceeding in such courts by the mailing thereof by any parties hereto by
registered or certified mail, postage prepaid,
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71
to such Borrower at its address specified pursuant to Section 9.02. Each of the
parties hereto agrees that a final judgment in any such action or proceeding
shall be conclusive and may be enforced in other jurisdictions by suit on the
judgment or in any other manner provided by law. Nothing in this Agreement shall
affect any right that any party may otherwise have to serve legal process in any
other manner permitted by law or to bring any action or proceeding relating to
this Agreement or the Notes in the courts of any jurisdiction. To the extent
that each Designated Subsidiary has or hereafter may acquire any immunity from
jurisdiction of any court or from any legal process (whether through service or
notice, attachment prior to judgment, attachment in aid of execution, execution
or otherwise) with respect to itself or its property, each Designated Subsidiary
hereby irrevocably waives such immunity in respect of its obligations under this
Agreement.
(b) Each of the parties hereto irrevocably and unconditionally
waives, to the fullest extent it may legally and effectively do so, any
objection that it may now or hereafter have to the laying of venue of any suit,
action or proceeding arising out of or relating to this Agreement or the Notes
in any New York State or federal court. Each of the parties hereto hereby
irrevocably waives, to the fullest extent permitted by law, the defense of an
inconvenient forum to the maintenance of such action or proceeding in any such
court.
SECTION 9.14. Substitution of Currency. If a change in any
Foreign Currency occurs pursuant to any applicable law, rule or regulation of
any governmental, monetary or multi-national authority, this Agreement
(including, without limitation, the definitions of Eurocurrency Rate and LIBO
Rate) will be amended to the extent determined by the Agent (acting reasonably
and in consultation with the Company) to be necessary to reflect the change in
currency and to put the Lenders and the Borrowers in the same position, so far
as possible, that they would have been in if no change in such Foreign Currency
had occurred.
SECTION 9.15. Final Agreement. This written agreement
represents the full and final agreement between the parties with respect to the
matters addressed herein and supercedes all prior communications, written or
oral, with respect thereto. There are no unwritten agreements between the
parties.
SECTION 9.16. Judgment. (a) If for the purposes of obtaining
judgment in any court it is necessary to convert a sum due hereunder or under
the Notes in any currency (the "Original Currency") into another currency (the
"Other Currency"), the parties hereto agree, to the fullest extent that they may
effectively do so, that the rate of exchange used shall be that at which in
accordance with normal banking procedures the Agent could purchase the Original
Currency with the Other Currency at 9:00 A.M. (New York City time) on the first
Business Day preceding that on which final judgment is given.
(b) The obligation of each Borrower in respect of any sum due
in the Original Currency from it to any Lender or the Agent hereunder or under
the Revolving Credit Note or
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72
Revolving Credit Notes held by such Lender shall, notwithstanding any judgment
in any Other Currency, be discharged only to the extent that on the Business Day
following receipt by such Lender or the Agent (as the case may be) of any sum
adjudged to be so due in such Other Currency, such Lender or the Agent (as the
case may be) may in accordance with normal banking procedures purchase Dollars
with such Other Currency; if the amount of Dollars so purchased is less than the
sum originally due to such Lender or the Agent (as the case may be) in the
Original Currency, such Borrower agrees, as a separate obligation and
notwithstanding any such judgment, to indemnify such Lender or the Agent (as the
case may be) against such loss, and if the amount of Dollars so purchased
exceeds the sum originally due to any Lender or the Agent (as the case may be)
in the Original Currency, such Lender or the Agent (as the case may be) agrees
to remit to such Borrower such excess.
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73
SECTION 9.17. Waiver of Jury Trial. Each Borrower, the Agent
and each Lender hereby irrevocably waive all right to trial by jury in any
action, proceeding or counterclaim (whether based on contract, tort or
otherwise) arising out of or relating to this Agreement or the Notes or the
actions of the Agent or any Lender in the negotiation, administration,
performance or enforcement thereof.
IN WITNESS WHEREOF, the parties hereto have caused this
Agreement to be executed by their respective officers thereunto duly authorized,
as of the date first above written.
HONEYWELL INTERNATIONAL INC.
By: /s/ James V. Gelly
-------------------------------
Name: James V. Gelly
Title: Vice President and Treasurer
CITIBANK, N.A., as Agent
By: /s/ Carolyn A. Kee
-------------------------------
Name: Carolyn A. Kee
Title: Vice President
COMMITMENT ARRANGER AND ADMINISTRATIVE AGENT
- ---------- ---------------------------------
$213,333,333.33 CITIBANK, N.A.
By: /s/ Carolyn A. Kee
-------------------------------
Name: Carolyn A. Kee
Title: Vice President
<PAGE>
74
CO-SYNDICATION AGENTS
---------------------
$160,000,000.00 BANK OF AMERICA, N.A.
By: /s/ John W. Pocalyko
-------------------------------
Name: John W. Pocalyko
Title: Managing Director
$160,000,000.00 THE CHASE MANHATTAN BANK
By: /s/ John C. Riordan
-------------------------------
Name: John C. Riordan
Title: Vice President
$160,000,000.00 DEUTSCHE BANK AG, NEW YORK AND/OR
CAYMAN ISLANDS BRANCH
By: /s/ Jean M. Hannigan
-------------------------------
Name: Jean M. Hannigan
Title: Vice President
By: /s/ Iain Stewart
-------------------------------
Name: Iain Stewart
Title: Vice President
AGENT
$160,000,000.00 BARCLAYS BANK PLC
By: /s/ Paul Kavanagh
-------------------------------
Name: Paul Kavanagh
Title: Director
<PAGE>
75
SENIOR MANAGING AGENTS
----------------------
$100,000,000.00 BANCA NAZIONALE DE LAVORO S.p.A.-NEW
YORK BRANCH
By: /s/ Miguel J. Medida
-------------------------------
Name: Miguel J. Medida
Title: Vice President
By: /s/ Leonardo Valentini
-------------------------------
Name: Leonardo Valentini
Title: First Vice President
$100,000,000.00 THE BANK OF NEW YORK
By: /s/ Ernest Fung
-------------------------------
Name: Ernest Fung
Title: Vice President
$100,000,000.00 BANK OF TOKYO-MITSUBISHI TRUST
COMPANY
By: /s/ W. A. DiNicola
-------------------------------
Name: W. A. DiNicola
Title: Vice President
$100,000,000.00 BANK ONE, NA
By: /s/ Stephen E. McDonald
-------------------------------
Name: Stephen E. McDonald
Title: Senior Vice President
$100,000,000.00 HSBC BANK USA
By: /s/ Rochelle Forster
-------------------------------
Name: Rochelle Forster
Title: Vice President
<PAGE>
76
$100,000,000.00 MELLON BANK, N.A.
By: /s/ Donald G. Cassidy
-------------------------------
Name: Donald G. Cassidy
Title: First Vice President
$100,000,000.00 MORGAN GUARANTY TRUST COMPANY OF
NEW YORK
By: /s/ Dennis Wilczek
-------------------------------
Name: Dennis Wilczek
Title: Associate
CO-AGENTS
---------
$43,333,333.33 ABN AMRO BANK N.V.
By: /s/ Peter L. Eaton
-------------------------------
Name: Peter L. Eaton
Title: Group Vice President
By: /s/ John P. Richardson
-------------------------------
Name: John P. Richardson
Title: Vice President
$43,333,333.33 BANCA DI ROMA
By: /s/ Steven Paley
-------------------------------
Name: Steven Paley
Title: Vice President
By: /s/ Alessandro Paoli
-------------------------------
Name: Alessandro Paoli
Title: Asst. Treasurer
<PAGE>
77
$43,333,333.33 BANQUE NATIONALE DE PARIS
By: /s/ Richard L. Sted
-------------------------------
Name: Richard L. Sted
Title: Senior Vice President
By: /s/ Thomas George
-------------------------------
Name: Thomas George
Title: Vice President,
Corp. Banking Division
$43,333,333.33 NORTHERN TRUST COMPANY
By: /s/ Eric Strickland
-------------------------------
Name: Eric Strickland
Title: Vice President
$43,333,333.33 THE SUMITOMO BANK, LIMITED
By: /s/ P.R.C. Knight
-------------------------------
Name: P.R.C. Knight
Title: Sr. Vice President
$43,333,333.33 WELLS FARGO BANK, NATIONAL
ASSOCIATION
By: /s/ Molly S. Van Metre
-------------------------------
Name: Molly S. Van Metre
Title: Vice President
<PAGE>
78
LENDERS
-------
$26,666,666.6 BANCO BILBAO VIZCAYA
By: /s/ John Martini
-------------------------------
Name: John Martini
Title: Vice President, Corporate Banking
By: /s/ Alejandro Lorca
-------------------------------
Name: Alejandro Lorca
Title: Vice President, Corporate Banking
$26,666,666.67 BANK OF MONTREAL
By: /s/ Brian L. Banke
-------------------------------
Name: Brian L. Banke
Title: Director
$26,666,666.67 FUJI BANK
By: /s/ Raymond Ventura
-------------------------------
Name: Raymond Venture
Title: Vice President & Manager
$26,666,666.67 THE INDUSTRIAL BANK OF JAPAN
By: /s/ J. Kenneth Biegen
-------------------------------
Name: J. Kenneth Biegen
Title: Senior Vice President
$26,666,666.67 ROYAL BANK OF CANADA
By: /s/ Lynne M. Letterini
-------------------------------
Name: Lynne M. Letterini
Title: Manager
<PAGE>
79
$26,666,666.67 STANDARD CHARTERED
By: /s/ Jacob H. Yahiayan
-------------------------------
Name: Jacob H. Yahiayan
Title: Vice President
By: /s/ Lalita Vadhri
-------------------------------
Name: Lalita Vadhri
Title: Assistant Vice President
$26,666,666.67 UNICREDITO ITALIANO
By: /s/ Christopher J. Eldin
-------------------------------
Name: Christopher J. Eldin
Title: First Vice President &
Deputy Manager
By: /s/ Saiyed A. Abbas
-------------------------------
Name: Saiyed A. Abbas
Title: Vice President
$2,000,000,000 TOTAL OF COMMITMENTS
<PAGE>
EXECUTION COPY
U.S. $1,000,000,000
FIVE YEAR CREDIT AGREEMENT
Dated as of December 2, 1999
Among
HONEYWELL INTERNATIONAL INC.,
as Borrower,
and
THE INITIAL LENDERS NAMED HEREIN,
as Initial Lenders,
and
CITIBANK, N.A.,
as Administrative Agent
and
THE CHASE MANHATTAN BANK
DEUTSCHE BANK AG
BANK OF AMERICA, N.A.
as Syndication Agents
and
SALOMON SMITH BARNEY INC.
as Lead Arranger and Book Manager
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
<S> <C> <C>
ARTICLE I
DEFINITIONS AND ACCOUNTING TERMS
SECTION 1.01. Certain Defined Terms ...............................................1
SECTION 1.02. Computation of Time Periods ........................................16
SECTION 1.03. Accounting Terms ...................................................16
ARTICLE II
AMOUNTS AND TERMS OF THE ADVANCES
SECTION 2.01. The Revolving Credit Advances ......................................17
SECTION 2.02. Making the Revolving Credit Advances ...............................18
SECTION 2.03. The Competitive Bid Advances .......................................19
SECTION 2.04. Fees ...............................................................25
SECTION 2.05. Termination or Reduction of the Commitments ........................25
SECTION 2.06. Repayment of Advances ..............................................27
SECTION 2.07. Interest on Revolving Credit Advances ..............................27
SECTION 2.08. Interest Rate Determination ........................................28
SECTION 2.09. Prepayments of Revolving Credit Advances ...........................30
SECTION 2.10. Increased Costs ....................................................31
SECTION 2.11. Illegality .........................................................32
SECTION 2.12. Payments and Computations ..........................................33
SECTION 2.13. Taxes ..............................................................34
SECTION 2.14. Sharing of Payments, Etc. ..........................................37
SECTION 2.15. Use of Proceeds ....................................................37
SECTION 2.16. Evidence of Debt ...................................................37
ARTICLE III
CONDITIONS TO EFFECTIVENESS AND LENDING
SECTION 3.01. Conditions Precedent to Effectiveness of Sections 2.01 and 2.03 ....38
SECTION 3.02. Conditions Precedent to Initial Borrowing ..........................40
SECTION 3.03. Initial Loan to Each Designated Subsidiary .........................40
SECTION 3.04. Conditions Precedent to Each Revolving Credit Borrowing ............41
SECTION 3.05. Conditions Precedent to Each Competitive Bid Borrowing .............42
SECTION 3.06. Determinations Under Section 3.01 ..................................43
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
PAGE
<S> <C> <C>
ARTICLE IV
REPRESENTATIONS AND WARRANTIES
SECTION 4.01. Representations and Warranties of the Company ......................43
ARTICLE V
COVENANTS OF THE BORROWER
SECTION 5.01. Affirmative Covenants ..............................................46
SECTION 5.02. Negative Covenants .................................................50
ARTICLE VI
EVENTS OF DEFAULT
SECTION 6.01. Events of Default ..................................................52
ARTICLE VII
GUARANTEE
SECTION 7.01. Unconditional Guarantee ............................................56
SECTION 7.02. Guarantee Absolute .................................................57
SECTION 7.03. Waivers ............................................................57
SECTION 7.04. Remedies ...........................................................58
SECTION 7.05. No Stay ............................................................58
SECTION 7.06. Survival ...........................................................58
ARTICLE VIII
THE AGENT
SECTION 8.01. Authorization and Action ...........................................59
SECTION 8.02. Agent's Reliance, Etc. .............................................59
SECTION 8.03. Citibank and Affiliates ............................................60
SECTION 8.04. Lender Credit Decision .............................................60
SECTION 8.05. Indemnification ....................................................60
SECTION 8.06. Successor Agent ....................................................60
SECTION 8.07. Sub-Agent ..........................................................61
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
PAGE
<S> <C> <C>
ARTICLE IX
MISCELLANEOUS
SECTION 9.01. Amendments, Etc. ...................................................61
SECTION 9.02. Notices, Etc. ......................................................62
SECTION 9.03. No Waiver; Remedies ................................................62
SECTION 9.04. Costs and Expenses .................................................62
SECTION 9.05. Right of Set-off ...................................................63
SECTION 9.06. Binding Effect .....................................................64
SECTION 9.07. Assignments and Participations .....................................64
SECTION 9.08. Designated Subsidiaries ............................................67
SECTION 9.09. Confidentiality ....................................................67
SECTION 9.10. Mitigation of Yield Protection .....................................68
SECTION 9.11. Governing Law. .....................................................68
SECTION 9.12. Execution in Counterparts ..........................................68
SECTION 9.13. Jurisdiction, Etc. .................................................69
SECTION 9.14. Substitution of Currency ...........................................69
SECTION 9.15. Final Agreement ....................................................70
SECTION 9.16. Judgment ...........................................................70
SECTION 9.17. Waiver of Jury Trial ...............................................70
</TABLE>
<PAGE>
SCHEDULES
Schedule I - List of Applicable Lending Offices
Schedule 3.01(b) - Disclosed Litigation
EXHIBITS
Exhibit A-1 - Form of Revolving Credit Note
Exhibit A-2 - Form of Competitive Bid Note
Exhibit B-1 - Form of Notice of Revolving Credit Borrowing
Exhibit B-2 - Form of Notice of Competitive Bid Borrowing
Exhibit C - Form of Assignment and Acceptance
Exhibit D - Form of Designation Letter
Exhibit E - Form of Acceptance by Process Agent
Exhibit F - Form of Opinion of J. Edward Smith, Assistant General Counsel
of the Company
Exhibit G - Form of Opinion of Counsel to a Designated Subsidiary
Exhibit H - Form of Opinion of Shearman & Sterling, Counsel to the Agent
<PAGE>
FIVE YEAR CREDIT AGREEMENT
Dated as of December 2, 1999
HONEYWELL INTERNATIONAL INC., a Delaware corporation (the "Company"),
the banks, financial institutions and other institutional lenders (the "Initial
Lenders") listed on the signature pages hereof, and CITIBANK, N.A. ("Citibank"),
as administrative agent (the "Agent") for the Lenders (as hereinafter defined),
agree as follows:
ARTICLE I
DEFINITIONS AND ACCOUNTING TERMS
SECTION 1.01. Certain Defined Terms. As used in this Agreement, the
following terms shall have the following meanings (such meanings to be equally
applicable to both the singular and plural forms of the terms defined):
"Advance" means a Revolving Credit Advance or a Competitive
Bid Advance.
"Affiliate" means, as to any Person, any other Person that,
directly or indirectly, controls, is controlled by or is under common
control with such Person or is a director or officer of such Person.
For purposes of this definition, the term "control" (including the
terms "controlling", "controlled by" and "under common control with")
of a Person means the possession, direct or indirect, of the power to
direct or cause the direction of the management and policies of such
Person, whether through the ownership of Voting Stock, by contract or
otherwise.
"Agent's Account" means (a) in the case of Advances
denominated in Dollars, the account of the Agent maintained by the
Agent at Citibank at its office at 399 Park Avenue, New York, New York
10043, Account No. 36852248, Attention: Janet Wallace, (b) in the case
of Advances denominated in any Foreign Currency, the account of the
Sub-Agent designated in writing from time to time by the Agent to the
Company and the Lenders for such purpose and (c) in any such case, such
other account of the Agent as is designated in writing from time to
time by the Agent to the Company and the Lenders for such purpose.
"Alternate Currency" means any lawful currency other than
Dollars and the Major Currencies that is freely transferrable and
convertible into Dollars.
<PAGE>
2
"Applicable Lending Office" means, with respect to each
Lender, such Lender's Domestic Lending Office in the case of a Base
Rate Advance and such Lender's Eurocurrency Lending Office in the case
of a Eurocurrency Rate Advance and, in the case of a Competitive Bid
Advance, the office of such Lender notified by such Lender to the Agent
as its Applicable Lending Office with respect to such Competitive Bid
Advance.
"Applicable Margin" means, as of any date, a percentage per
annum determined by reference to the Public Debt Rating in effect on
such date as set forth below:
<TABLE>
<CAPTION>
Applicable Margin for
Public Debt Rating Eurocurrency Rate
S&P/Moody's Advances
----------- --------
<S> <C>
Level 1
AA-/Aa3 0.095%
---------------------------------------------------------
Level 2
Lower than AA-/Aa3 but at
least A/A2 0.135%
---------------------------------------------------------
Level 3
Lower than A/A2 but at least
A-/A3 0.220%
---------------------------------------------------------
Level 4
Lower than A-/A3 but at least
BBB+/Baa1 0.300%
---------------------------------------------------------
Level 5
Lower than BBB+/Baa1 or
unrated 0.600%
---------------------------------------------------------
</TABLE>
"Applicable Percentage" means, as of any date, a percentage
per annum determined by reference to the Public Debt Rating in effect
on such date as set forth below:
<TABLE>
<CAPTION>
Public Debt Rating Applicable
S&P/Moody's Percentage
----------- ----------
<S> <C>
Level 1
AA-/Aa3 0.055%
---------------------------------------------------------
Level 2
Lower than AA-/Aa3 but at
least A/A2 0.065%
---------------------------------------------------------
Level 3
Lower than A/A2 but at least
A-/A3 0.080%
---------------------------------------------------------
Level 4
Lower than A-/A3 but at least
BBB+/Baa1 0.100%
---------------------------------------------------------
</TABLE>
<PAGE>
3
<TABLE>
<S> <C>
-----------------------------------------------------------
Level 5
Lower than BBB+/Baa1 or
unrated 0.150%
---------------------------------------------------------
</TABLE>
"Applicable Utilization Fee" means, as of any date on which
the Utilization in effect is greater than or equal to 50%, a percentage
per annum determined by reference to the Public Debt Rating in effect
on such date as set forth:
<TABLE>
<CAPTION>
Public Debt Rating
S&P/Moody's Applicable Utilization Fee
----------- --------------------------
<S> <C>
Level 1
AA-/Aa3 0.000%
---------------------------------------------------------
Level 2
Lower than AA-/Aa3 but at
least A/A2 0.000%
---------------------------------------------------------
Level 3
Lower than A/A2 but at least
A-/A3 0.050%
---------------------------------------------------------
Level 4
Lower than A-/A3 but at least
BBB+/Baa1 0.100%
---------------------------------------------------------
Level 5
Lower than BBB+/Baa1 or
unrated 0.125%
---------------------------------------------------------
</TABLE>
"Assignment and Acceptance" means an assignment and acceptance
entered into by a Lender and an Eligible Assignee, and accepted by the
Agent, in substantially the form of Exhibit C hereto.
"Base Rate" means a fluctuating interest rate per annum in
effect from time to time, which rate per annum shall at all times be
equal to the highest of:
(a) the rate of interest announced publicly by
Citibank in New York, New York, from time to time, as
Citibank's base rate;
(b) the sum (adjusted to the nearest 1/32 of 1% or,
if there is no nearest 1/32 of 1%, to the next higher 1/32 of
1%) of (i) 1/2 of 1% per annum, plus (ii) the rate obtained by
dividing (A) the latest three-week moving average of secondary
market morning offering rates in the United States for
three-month certificates of deposit of major United States
money market banks, such three-week moving average (adjusted
to the basis of a year of 360 days) being determined weekly on
each Monday (or, if such day is not a Business Day, on the
next succeeding Business Day) for the three-week period ending
on the previous Friday by Citibank on the basis of such rates
reported by certificate of deposit
<PAGE>
4
dealers to and published by the Federal Reserve Bank of New
York or, if such publication shall be suspended or terminated,
on the basis of quotations for such rates received by Citibank
from three New York certificate of deposit dealers of
recognized standing selected by Citibank, by (B) a percentage
equal to 100% minus the average of the daily percentages
specified during such three-week period by the Board of
Governors of the Federal Reserve System (or any successor) for
determining the maximum reserve requirement (including, but
not limited to, any emergency, supplemental or other marginal
reserve requirement) for Citibank with respect to liabilities
consisting of or including (among other liabilities)
three-month Dollar non-personal time deposits in the United
States, plus (iii) the average during such three-week period
of the annual assessment rates estimated by Citibank for
determining the then current annual assessment payable by
Citibank to the Federal Deposit Insurance Corporation (or any
successor) for insuring Dollar deposits of Citibank in the
United States;
(c) 1/2 of one percent per annum above the Federal
Funds Rate; and
(d) for the period from December 15, 1999 through
January 15, 2000, two percent per annum above the Federal
Funds Rate.
"Base Rate Advance" means a Revolving Credit Advance
denominated in Dollars that bears interest as provided in Section
2.07(a)(i).
"Borrower" means the Company or any Designated Subsidiary, as
the context requires.
"Borrowing" means a Revolving Credit Borrowing or a
Competitive Bid Borrowing.
"Business Day" means a day of the year on which banks are not
required or authorized by law to close in New York City and, if the
applicable Business Day relates to any Eurocurrency Rate Advance or
LIBO Rate Advance, on which dealings are carried on in the London
interbank market and banks are open for business in London and in the
country of issue of the currency of such Eurocurrency Rate Advance or
LIBO Rate Advance (or, in the case of an Advance denominated in the
euro, in Frankfurt, Germany) and, if the applicable Business Day
relates to any Local Rate Advance, on which banks are open for business
in the country of issue of the currency of such Local Rate Advance.
"Change of Control" means that (i) any Person or group of
Persons (within the meaning of Section 13 or 14 of the Securities
Exchange Act of 1934, as amended (the "Act")) (other than the Company,
any Subsidiary of the Company or any savings, pension
<PAGE>
5
or other benefit plan for the benefit of employees of the Company or
its Subsidiaries) which theretofore beneficially owned less than 30% of
the Voting Stock of the Company then outstanding shall have acquired
beneficial ownership (within the meaning of Rule 13d-3 promulgated by
the Securities and Exchange Commission under the Act) of 30% or more in
voting power of the outstanding Voting Stock of the Company or (ii)
during any period of twelve consecutive calendar months commencing at
the effective time of the merger of Honeywell Inc. and a wholly owned
Subsidiary of the Company as contemplated by the Merger Agreement,
individuals who at the beginning of such twelve- month period were
directors of the Company shall cease to constitute a majority of the
Board of Directors of the Company.
"Commitment" means as to any Lender (i) the Dollar amount set
forth opposite its name on the signature pages hereof or (ii) if such
Lender has entered into any Assignment and Acceptance, the Dollar
amount set forth for such Lender in the Register maintained by the
Administrative Agent pursuant to Section 9.07(d), in each case as the
same may be terminated or reduced, as the case may be, pursuant to
Section 2.05.
"Competitive Bid Advance" means an advance by a Lender to any
Borrower as part of a Competitive Bid Borrowing resulting from the
competitive bidding procedure described in Section 2.03 and refers to a
Fixed Rate Advance, a LIBO Rate Advance or a Local Rate Advance (each
of which shall be a "Type" of Competitive Bid Advance).
"Competitive Bid Borrowing" means a borrowing consisting of
simultaneous Competitive Bid Advances from each of the Lenders whose
offer to make one or more Competitive Bid Advances as part of such
borrowing has been accepted under the competitive bidding procedure
described in Section 2.03.
"Competitive Bid Note" means a promissory note of any Borrower
payable to the order of any Lender, in substantially the form of
Exhibit A-2 hereto, evidencing the indebtedness of such Borrower to
such Lender resulting from a Competitive Bid Advance made by such
Lender to such Borrower.
"Competitive Bid Reduction" has the meaning specified in
Section 2.01.
"Consolidated" refers to the consolidation of accounts in
accordance with GAAP.
"Consolidated Subsidiary" means, at any time, any Subsidiary
the accounts of which are required at that time to be included on a
Consolidated basis in the Consolidated financial statements of the
Company, assuming that such financial statements are prepared in
accordance with GAAP.
<PAGE>
6
"Convert", "Conversion" and "Converted" each refers to a
conversion of Revolving Credit Advances of one Type into Revolving
Credit Advances of the other Type pursuant to Section 2.08 or 2.11.
"Debt" means, with respect to any Person: (i) indebtedness of
such Person, which is not limited as to recourse to such Person, for
borrowed money (whether by loan or the issuance and sale of debt
securities) or for the deferred (for 90 days or more) purchase or
acquisition price of property or services; (ii) indebtedness or
obligations of others which such Person has assumed or guaranteed;
(iii) indebtedness or obligations of others secured by a lien, charge
or encumbrance on property of such Person whether or not such Person
shall have assumed such indebtedness or obligations; (iv) obligations
of such Person in respect of letters of credit (other than performance
letters of credit, except to the extent backing an obligation of any
Person which would be Debt of such Person), acceptance facilities, or
drafts or similar instruments issued or accepted by banks and other
financial institutions for the account of such Person; and (v)
obligations of such Person under leases which are required to be
capitalized on a balance sheet of such Person in accordance with GAAP.
"Default" means any Event of Default or any event that would
constitute an Event of Default but for the requirement that notice be
given or time elapse or both.
"Designated Subsidiary" means any corporate Subsidiary of the
Company designated for borrowing privileges under this Agreement
pursuant to Section 9.08.
"Designation Letter" means, with respect to any Designated
Subsidiary, a letter in the form of Exhibit D hereto signed by such
Designated Subsidiary and the Company.
"Disclosed Litigation" has the meaning specified in Section
3.01(b).
"Dollars" and the "$" sign each mean lawful money of the
United States of America.
"Domestic Lending Office" means, with respect to any Initial
Lender, the office of such Lender specified as its "Domestic Lending
Office" opposite its name on Schedule I hereto and, with respect to any
other Lender, the office of such Lender specified as its "Domestic
Lending Office" in the Assignment and Acceptance pursuant to which it
became a Lender, or such other office of such Lender as such Lender may
from time to time specify to the Company and the Agent.
"Domestic Subsidiary" means any Subsidiary whose operations
are conducted primarily in the United States excluding any Subsidiary
whose assets consist primarily of
<PAGE>
7
the stock of Subsidiaries whose operations are conducted outside the
United States of America.
"Effective Date" has the meaning specified in Section 3.01.
"Eligible Assignee" means (i) a Lender; (ii) an Affiliate of a
Lender; (iii) a commercial bank organized under the laws of the United
States, or any State thereof, and having total assets in excess of
$10,000,000,000; (iv) a savings and loan association or savings bank
organized under the laws of the United States, or any State thereof,
and having a net worth of at least $500,000,000, calculated in
accordance with GAAP; (v) a commercial bank organized under the laws of
any other country that is a member of the Organization for Economic
Cooperation and Development or has concluded special lending
arrangements with the International Monetary Fund associated with its
General Arrangements to Borrow, or a political subdivision of any such
country, and having total assets in excess of $10,000,000,000, so long
as such bank is acting through a branch or agency located in the
country in which it is organized or another country that is described
in this clause (v); and (vi) the central bank of any country that is a
member of the Organization for Economic Cooperation and Development.
"Environmental Action" means any action, suit, demand, demand
letter, claim, notice of non-compliance or violation, notice of
liability or potential liability, investigation, proceeding, consent
order or consent agreement relating in any way to any Environmental
Law, Environmental Permit or Hazardous Materials or arising from
alleged injury or threat of injury to health, safety or the
environment, including, without limitation, (a) by any governmental or
regulatory authority for enforcement, cleanup, removal, response,
remedial or other actions or damages and (b) by any governmental or
regulatory authority or any third party for damages, contribution,
indemnification, cost recovery, compensation or injunctive relief.
"Environmental Law" means any federal, state, local or foreign
statute, law, ordinance, rule, regulation, code, order, judgment,
decree or judicial or agency interpretation, policy or guidance
relating to pollution or protection of the environment, health, safety
or natural resources, including, without limitation, those relating to
the use, handling, transportation, treatment, storage, disposal,
release or discharge of Hazardous Materials.
"Environmental Permit" means any permit, approval,
identification number, license or other authorization required under
any Environmental Law.
"Equivalent" in Dollars of any Foreign Currency on any date
means the equivalent in Dollars of such Foreign Currency determined by
using the quoted spot rate at which
<PAGE>
8
the Sub-Agent's principal office in London offers to exchange Dollars
for such Foreign Currency in London prior to 4:00 P.M. (London time)
(unless otherwise indicated by the terms of this Agreement) on such
date as is required pursuant to the terms of this Agreement, and the
"Equivalent" in any Foreign Currency of Dollars means the equivalent in
such Foreign Currency of Dollars determined by using the quoted spot
rate at which the Sub-Agent's principal office in London offers to
exchange such Foreign Currency for Dollars in London prior to 4:00 P.M.
(London time) (unless otherwise indicated by the terms of this
Agreement) on such date as is required pursuant to the terms of this
Agreement.
"ERISA" means the Employee Retirement Income Security Act of
1974, as amended from time to time, and the regulations promulgated and
rulings issued thereunder.
"ERISA Affiliate" of any Person means any other Person that
for purposes of Title IV of ERISA is a member of such Person's
controlled group, or under common control with such Person, within the
meaning of Section 414 of the Internal Revenue Code.
"ERISA Event" with respect to any Person means (a) (i) the
occurrence of a reportable event, within the meaning of Section 4043 of
ERISA, with respect to any Plan of such Person or any of its ERISA
Affiliates unless the 30-day notice requirement with respect to such
event has been waived by the PBGC, or (ii) the requirements of
subsection (1) of Section 4043(b) of ERISA (without regard to
subsection (2) of such Section) are met with a contributing sponsor, as
defined in Section 4001(a)(13) of ERISA, of a Plan of such Person or
any of its ERISA Affiliates, and an event described in paragraph (9),
(10), (11), (12) or (13) of Section 4043(c) of ERISA is reasonably
expected to occur with respect to such Plan within the following 30
days; (b) the application for a minimum funding waiver with respect to
a Plan of such Person or any of its ERISA Affiliates; (c) the provision
by the administrator of any Plan of such Person or any of its ERISA
Affiliates of a notice of intent to terminate such Plan in a distress
termination pursuant to Section 4041(a)(2) of ERISA (including any such
notice with respect to a plan amendment referred to in Section 4041(e)
of ERISA); (d) the cessation of operations at a facility of such Person
or any of its ERISA Affiliates in the circumstances described in
Section 4062(e) of ERISA; (e) the withdrawal by such Person or any of
its ERISA Affiliates from a Multiple Employer Plan during a plan year
for which it was a substantial employer, as defined in Section
4001(a)(2) of ERISA; (f) the conditions for the imposition of a lien
under Section 302(f) of ERISA shall have been met with respect to any
Plan of such Person or any of its ERISA Affiliates; (g) the adoption of
an amendment to a Plan of such Person or any of its ERISA Affiliates
requiring the provision of security to such Plan pursuant to Section
307 of ERISA; or (h) the institution
<PAGE>
9
by the PBGC of proceedings to terminate a Plan of such Person or any of
its ERISA Affiliates pursuant to Section 4042 of ERISA, or the
occurrence of any event or condition described in Section 4042 of ERISA
that constitutes grounds for the termination of, or the appointment of
a trustee to administer, such Plan.
"Escrow" means an escrow established with an independent
escrow agent pursuant to an escrow agreement reasonably satisfactory in
form and substance to the Person or Persons asserting the obligation of
one or more Borrowers to make a payment to it or them hereunder.
"Eurocurrency Lending Office" means, with respect to any
Initial Lender, the office of such Lender specified as its
"Eurocurrency Lending Office" opposite its name on Schedule I hereto
and, with respect to any other Lender, the office of such Lender
specified as its "Eurocurrency Lending Office" in the Assignment and
Acceptance pursuant to which it became a Lender (or, if no such office
is specified, its Domestic Lending Office), or such other office of
such Lender as such Lender may from time to time specify to the Company
and the Agent.
"Eurocurrency Liabilities" has the meaning assigned to that
term in Regulation D of the Board of Governors of the Federal Reserve
System, as in effect from time to time.
"Eurocurrency Rate" means, for any Interest Period for each
Eurocurrency Rate Advance comprising part of the same Revolving Credit
Borrowing, an interest rate per annum equal to the rate per annum
obtained by dividing (a) the rate per annum (rounded upwards, if
necessary, to the nearest 1/100 of 1%) appearing on the applicable
Telerate Page as the London interbank offered rate for deposits in
Dollars or in the relevant Major Currency at approximately 11:00 A.M.
(London time) two Business Days prior to the first day of such Interest
Period for a term comparable to such Interest Period or, if for any
reason such rate is not available, the average (rounded upward to the
nearest whole multiple of 1/32 of 1% per annum, if such average is not
such a multiple) of the rate per annum at which deposits in Dollars or
in the relevant Major Currency are offered by the principal office of
each of the Reference Banks in London, England to prime banks in the
London interbank market at 11:00 A.M. (London time) two Business Days
before the first day of such Interest Period in an amount substantially
equal to such Reference Bank's Eurocurrency Rate Advance comprising
part of such Revolving Credit Borrowing to be outstanding during such
Interest Period and for a period equal to such Interest Period by (b) a
percentage equal to 100% minus the Eurocurrency Rate Reserve Percentage
for such Interest Period. If the Telerate Page is unavailable, the
Eurocurrency Rate for any Interest Period for each Eurocurrency Rate
Advance comprising part of the same Revolving Credit Borrowing shall be
determined by the Agent on the basis of applicable rates furnished to
and received by the Agent from the Reference Banks two
<PAGE>
10
Business Days before the first day of such Interest Period, subject,
however, to the provisions of Section 2.08.
"Eurocurrency Rate Advance" means a Revolving Credit Advance
denominated in Dollars or in a Major Currency that bears interest as
provided in Section 2.07(a)(ii).
"Eurocurrency Rate Reserve Percentage" for any Interest Period
for all Eurocurrency Rate Advances or LIBO Rate Advances comprising
part of the same Borrowing means the reserve percentage applicable two
Business Days before the first day of such Interest Period under
regulations issued from time to time by the Board of Governors of the
Federal Reserve System (or any successor) for determining the maximum
reserve requirement (including, without limitation, any emergency,
supplemental or other marginal reserve requirement) for a member bank
of the Federal Reserve System in New York City with respect to
liabilities or assets consisting of or including Eurocurrency
Liabilities (or with respect to any other category of liabilities that
includes deposits by reference to which the interest rate on
Eurocurrency Rate Advances or LIBO Rate Advances is determined) having
a term equal to such Interest Period.
"Events of Default" has the meaning specified in Section 6.01.
"Federal Funds Rate" means, for any period, a fluctuating
interest rate per annum equal for each day during such period to the
weighted average of the rates on overnight Federal funds transactions
with members of the Federal Reserve System arranged by Federal funds
brokers, as published for such day (or, if such day is not a Business
Day, for the next preceding Business Day) by the Federal Reserve Bank
of New York, or, if such rate is not so published for any day that is a
Business Day, the average of the quotations for such day on such
transactions received by the Agent from three Federal funds brokers of
recognized standing selected by it.
"Fixed Rate Advance" has the meaning specified in Section
2.03(a)(i), which Advance shall be denominated in Dollars or in any
Foreign Currency.
"Foreign Currency" means any Major Currency or any Alternate
Currency.
"GAAP" has the meaning specified in Section 1.03.
"Hazardous Materials" means (a) petroleum and petroleum
products, byproducts or breakdown products, radioactive materials,
asbestos-containing materials, polychlorinated biphenyls and radon gas
and (b) any other chemicals, materials or substances designated,
classified or regulated as hazardous or toxic or as a pollutant or
contaminant under any Environmental Law.
<PAGE>
11
"Insufficiency" means, with respect to any Plan, the amount,
if any, of its unfunded benefit liabilities, as defined in Section
4001(a)(18) of ERISA.
"Interest Period" means, for each Eurocurrency Rate Advance
comprising part of the same Revolving Credit Borrowing and each LIBO
Rate Advance comprising part of the same Competitive Bid Borrowing, the
period commencing on the date of such Eurocurrency Rate Advance or LIBO
Rate Advance or the date of the Conversion of any Base Rate Advance
into such Eurocurrency Rate Advance and ending on the last day of the
period selected by the Borrower requesting such Borrowing pursuant to
the provisions below and, thereafter, with respect to Eurocurrency Rate
Advances, each subsequent period commencing on the last day of the
immediately preceding Interest Period and ending on the last day of the
period selected by such Borrower pursuant to the provisions below. The
duration of each such Interest Period shall be one, two, three or six
months and, if available to all Lenders, nine months, as the Borrower
requesting the Borrowing may, upon notice received by the Agent not
later than 11:00 A.M. (New York City time) on the third Business Day
prior to the first day of such Interest Period, select; provided,
however, that:
(i) such Borrower may not select any Interest Period
that ends after the scheduled Termination Date;
(ii) Interest Periods commencing on the same date for
Eurocurrency Rate Advances comprising part of the same
Revolving Credit Borrowing or for LIBO Rate Advances
comprising part of the same Competitive Bid Borrowing shall be
of the same duration;
(iii) whenever the last day of any Interest Period
would otherwise occur on a day other than a Business Day, the
last day of such Interest Period shall be extended to occur on
the next succeeding Business Day, provided, however, that, if
such extension would cause the last day of such Interest
Period to occur in the next following calendar month, the last
day of such Interest Period shall occur on the next preceding
Business Day; and
(iv) whenever the first day of any Interest Period
occurs on a day of an initial calendar month for which there
is no numerically corresponding day in the calendar month that
succeeds such initial calendar month by the number of months
equal to the number of months in such Interest Period, such
Interest Period shall end on the last Business Day of such
succeeding calendar month.
"Internal Revenue Code" means the Internal Revenue Code of
1986, as amended from time to time, and the regulations promulgated and
rulings issued thereunder.
<PAGE>
12
"Lenders" means, collectively, (i) Initial Lenders and (ii)
each Eligible Assignee that shall become a party hereto pursuant to
Section 9.07(a), (b) and (c).
"LIBO Rate" means, for any Interest Period for all LIBO Rate
Advances comprising part of the same Competitive Bid Borrowing, an
interest rate per annum equal to the rate per annum obtained by
dividing (a) the rate per annum (rounded upwards, if necessary, to the
nearest 1/100 of 1%) appearing on the applicable Telerate Page as the
London interbank offered rate for deposits in Dollars or in the
relevant Foreign Currency at approximately 11:00 A.M. (London time) two
Business Days prior to the first day of such Interest Period or, if for
any reason such rate is not available, the average (rounded upward to
the nearest whole multiple of 1/32 of 1% per annum, if such average is
not such a multiple) of the rate per annum at which deposits in Dollars
or in the relevant Foreign Currency are offered by the principal office
of each of the Reference Banks in London, England to prime banks in the
London interbank market at 11:00 A.M. (London time) two Business Days
before the first day of such Interest Period in an amount substantially
equal to the amount that would be the Reference Banks' respective
ratable shares of such Borrowing if such Borrowing were to be a
Revolving Credit Borrowing to be outstanding during such Interest
Period and for a period equal to such Interest Period by (b) a
percentage equal to 100% minus the Eurocurrency Rate Reserve Percentage
for such Interest Period. If the Telerate Page is unavailable, the LIBO
Rate for any Interest Period for each LIBO Rate Advance comprising part
of the same Competitive Bid Borrowing shall be determined by the Agent
on the basis of applicable rates furnished to and received by the Agent
from the Reference Banks two Business Days before the first day of such
Interest Period, subject, however, to the provisions of Section 2.08.
"LIBO Rate Advance" means a Competitive Bid Advance
denominated in Dollars or in any Foreign Currency and bearing interest
based on the LIBO Rate.
"Lien" means any lien, mortgage, pledge, security interest or
other charge or encumbrance of any kind.
"Local Rate Advance" means a Competitive Bid Advance
denominated in any Foreign Currency sourced from the jurisdiction of
issuance of such Foreign Currency and bearing interest at a fixed rate.
"Major Currencies" means lawful currency of the United Kingdom
of Great Britain and Northern Ireland, lawful currency of the Federal
Republic of Germany, lawful currency of Japan, lawful currency of the
Republic of France and lawful currency of the European Economic and
Monetary Union.
<PAGE>
13
"Majority Lenders" means at any time Lenders holding at least
51% of the then aggregate principal amount (based on the Equivalent in
Dollars at such time) of the Revolving Credit Advances owing to
Lenders, or, if no such principal amount is then outstanding, Lenders
having at least 51% of the Commitments.
"Material Adverse Change" means any material adverse change in
the financial condition or results of operations of the Company and its
Consolidated Subsidiaries taken as a whole.
"Material Adverse Effect" means a material adverse effect on
(a) the financial condition or results of operations of the Company and
its Consolidated Subsidiaries taken as a whole, (b) the rights and
remedies of the Agent or any Lender under this Agreement or any Note or
(c) the ability of the Borrowers to perform their obligations under
this Agreement or any Note.
"Merger Agreement" means the Agreement and Plan of Merger
dated as of June 4, 1999 among Honeywell Inc., the Company and Blossom
Acquisition Corp, a wholly owned Subsidiary of the Company.
"Moody's" means Moody's Investors Service, Inc.
"Multiemployer Plan" of any Person means a multiemployer plan,
as defined in Section 4001(a)(3) of ERISA, to which such Person or any
of its ERISA Affiliates is making or accruing an obligation to make
contributions, or has within any of the preceding five plan years made
or accrued an obligation to make contributions.
"Multiple Employer Plan" of any Person means a single employer
plan, as defined in Section 4001(a)(15) of ERISA, that (a) is
maintained for employees of such Person or any of its ERISA Affiliates
and at least one Person other than such Person or any of its ERISA
Affiliates or (b) was so maintained and in respect of which such Person
or any of its ERISA Affiliates could have liability under Section 4064
or 4069 of ERISA in the event such plan has been or were to be
terminated.
"Net Tangible Assets of the Company and its Consolidated
Subsidiaries", as at any particular date of determination, means the
total amount of assets (less applicable reserves and other properly
deductible items) after deducting therefrom (a) all current liabilities
(excluding any thereof which are by their terms extendible or renewable
at the option of the obligor thereon to a time more than 12 months
after the time as of which the amount thereof is being computed) and
(b) all goodwill, trade names, trademarks, patents, unamortized debt
discount and expense and other like intangible assets, as set forth in
the
<PAGE>
14
most recent balance sheet of the Company and its Consolidated
Subsidiaries and computed in accordance with GAAP.
"Note" means a Revolving Credit Note or a Competitive Bid
Note.
"Notice of Competitive Bid Borrowing" has the meaning
specified in Section 2.03(a).
"Notice of Revolving Credit Borrowing" has the meaning
specified in Section 2.02(a).
"Obligations" has the meaning specified in Section 7.01(b).
"Payment Office" means, for any Foreign Currency, such office
of Citibank as shall be from time to time selected by the Agent and
notified by the Agent to the Borrowers and the Lenders.
"PBGC" means the Pension Benefit Guaranty Corporation (or any
successor).
"Person" means an individual, partnership, corporation
(including a business trust), joint stock company, trust,
unincorporated association, joint venture, limited liability company or
other entity, or a government or any political subdivision or agency
thereof.
"Plan" means a Single Employer Plan or a Multiple Employer
Plan.
"Process Agent" has the meaning specified in Section 9.13(a).
"Public Debt Rating" means, as of any date, the highest rating
that has been most recently announced by either S&P or Moody's, as the
case may be, for any class of non-credit enhanced long-term senior
unsecured debt issued by the Company. For purposes of the foregoing,
(a) if only one of S&P and Moody's shall have in effect a Public Debt
Rating, the Applicable Margin, the Applicable Utilization Fee and the
Applicable Percentage shall be determined by reference to the available
rating; (b) if neither S&P nor Moody's shall have in effect a Public
Debt Rating, the Applicable Margin, the Applicable Utilization Fee and
the Applicable Percentage will be set in accordance with Level 5 under
the definition of "Applicable Margin", "Applicable Utilization Fee" or
"Applicable Percentage", as the case may be; (c) if the ratings
established by S&P and Moody's shall fall within different levels, the
Applicable Margin, the Applicable Utilization Fee and the Applicable
Percentage shall be based upon the higher rating, provided that if the
lower of such ratings is more than one level below the higher of such
ratings, the Applicable
<PAGE>
15
Margin, the Applicable Utilization Fee and the Applicable Percentage
shall be determined by reference to the level that is one level above
such lower rating; (d) if any rating established by S&P or Moody's
shall be changed, such change shall be effective as of the date on
which such change is first announced publicly by the rating agency
making such change; and (e) if S&P or Moody's shall change the basis on
which ratings are established, each reference to the Public Debt Rating
announced by S&P or Moody's, as the case may be, shall refer to the
then equivalent rating by S&P or Moody's, as the case may be.
"Rating Condition" has the meaning specified in Section
2.05(c)(ii).
"Rating Condition Notice" has the meaning specified in Section
2.05(c)(ii).
"Reference Banks" means Citibank, Bank of America, N.A., The
Chase Manhattan Bank and Deutsche Bank AG.
"Register" has the meaning specified in Section 9.07(d).
"Restricted Property" means (a) any property of the Company
located within the United States of America that, in the opinion of the
Company's Board of Directors, is a principal manufacturing property or
(b) any shares of capital stock or Debt of any Subsidiary owning any
such property.
"Revolving Credit Advance" means an advance by a Lender to any
Borrower as part of a Revolving Credit Borrowing and refers to a Base
Rate Advance or a Eurocurrency Rate Advance (each of which shall be a
"Type" of Revolving Credit Advance).
"Revolving Credit Borrowing" means a borrowing consisting of
simultaneous Revolving Credit Advances of the same Type made by each of
the Lenders pursuant to Section 2.01.
"Revolving Credit Note" means a promissory note of any
Borrower payable to the order of any Lender, delivered pursuant to a
request made under Section 2.16 in substantially the form of Exhibit
A-1 hereto, evidencing the aggregate indebtedness of such Borrower to
such Lender resulting from the Revolving Credit Advances made by such
Lender to such Borrower.
"Sale and Leaseback Transaction" means any arrangement with
any Person (other than the Company or a Subsidiary of the Company), or
to which any such Person is a party, providing for the leasing to the
Company or to a Subsidiary of the Company
<PAGE>
16
owning Restricted Property for a period of more than three years of any
Restricted Property that has been or is to be sold or transferred by
the Company or such Subsidiary to such Person, or to any other Person
(other than the Company or a Subsidiary of the Company) to which funds
have been or are to be advanced by such Person on the security of the
leased property. It is understood that arrangements pursuant to Section
168(f)(8) of the Internal Revenue Code of 1954, as amended, or any
successor provision having similar effect, are not included within this
definition of "Sale and Leaseback Transaction".
"S&P" means Standard & Poor's Ratings Group, a division of The
McGraw-Hill Companies, Inc.
"Single Employer Plan" of any Person means a single employer
plan, as defined in Section 4001(a)(15) of ERISA, that (a) is
maintained for employees of such Person or any of its ERISA Affiliates
and no Person other than such Person and its ERISA Affiliates or (b)
was so maintained and in respect of which such Person or any of its
ERISA Affiliates could have liability under Section 4069 of ERISA in
the event such plan has been or were to be terminated.
"Sub-Agent" means Citibank International plc.
"Subsidiary" of any Person means any corporation, partnership,
joint venture, limited liability company, trust or estate of which (or
in which) more than 50% of (a) the issued and outstanding capital stock
having ordinary voting power to elect a majority of the Board of
Directors of such corporation (irrespective of whether at the time
capital stock of any other class or classes of such corporation shall
or might have voting power upon the occurrence of any contingency), (b)
the interest in the capital or profits of such limited liability
company, partnership or joint venture or (c) the beneficial interest in
such trust or estate is at the time directly or indirectly owned or
controlled by such Person, by such Person and one or more of its other
Subsidiaries or by one or more of such Person's other Subsidiaries.
"Telerate Page" means, as applicable, page 3740 or 3750 (or
any successor pages, respectively) of Telerate Service of Bridge
Information Services.
"Termination Date" means the earlier of (a) December 2, 2004
and (b) the date of termination in whole of the Commitments pursuant to
Section 2.05(a) or Section 6.01 or, if all Lenders elect to terminate
their Commitments as provided therein, Section 2.05(d).
"Threatened" means, with respect to any action, suit,
investigation, litigation or proceeding, a written communication to the
Company or a Designated Subsidiary, as the
<PAGE>
17
case may be, expressing an intention to immediately bring such action,
suit, investigation, litigation or proceeding.
"Utilization" means the decimal fraction equal to the
aggregate principal amount of the Advances then outstanding divided by
the aggregate amount of the Lenders' Commitments at such time.
"Voting Stock" means capital stock issued by a corporation, or
equivalent interests in any other Person, the holders of which are
ordinarily, in the absence of contingencies, entitled to vote for the
election of directors (or persons performing similar functions) of such
Person, even if the right so to vote has been suspended by the
happening of such a contingency.
"Withdrawal Liability" has the meaning specified in Part I of
Subtitle E of Title IV of ERISA.
SECTION 1.02. Computation of Time Periods. In this Agreement
in the computation of periods of time from a specified date to a later specified
date, the word "from" means "from and including" and the words "to" and "until"
each mean "to but excluding".
SECTION 1.03. Accounting Terms. All accounting terms not
specifically defined herein shall be construed, and all financial computations
and determinations pursuant hereto shall be made, in accordance with generally
accepted accounting principles consistent with those applied in the preparation
of the financial statements referred to in Section 4.01(e) ("GAAP"); provided,
however, that, if any changes in accounting principles from those used in the
preparation of such financial statements have been required by the rules,
regulations, pronouncements or opinions of the Financial Accounting Standards
Board or the American Institute of Certified Public Accountants (or successors
thereto or agencies with similar functions) and have been adopted by the Company
with the agreement of its independent certified public accountants, the Lenders
agree to consider a request by the Company to amend this Agreement to take
account of such changes.
ARTICLE II
AMOUNTS AND TERMS OF THE ADVANCES
SECTION 2.01. The Revolving Credit Advances. Each Lender
severally agrees, on the terms and conditions hereinafter set forth, to make
Revolving Credit Advances to any Borrower from time to time on any Business Day
during the period from the Effective Date until the Termination Date in an
aggregate amount (based in respect of any Revolving Credit Advance
<PAGE>
18
denominated in a Major Currency on the Equivalent in Dollars determined on the
date of delivery of the applicable Notice of Revolving Credit Borrowing), not to
exceed at any time outstanding such Lender's Commitment, provided that the
aggregate amount of the Commitments of the Lenders shall be deemed used from
time to time to the extent of the aggregate amount (based in respect of any
Competitive Bid Advance denominated in a Foreign Currency on the Equivalent in
Dollars at such time) of the Competitive Bid Advances then outstanding and such
deemed use of the aggregate amount of the Commitments shall be allocated among
the Lenders ratably according to their respective Commitments (such deemed use
of the aggregate amount of the Commitments being a "Competitive Bid Reduction").
Each Revolving Credit Borrowing shall be in an aggregate amount not less than
$10,000,000 (or the Equivalent thereof in any Major Currency determined on the
date of delivery of the applicable Notice of Revolving Credit Borrowing) or an
integral multiple of $1,000,000 (or the Equivalent thereof in any Major Currency
determined on the date of delivery of the applicable Notice of Revolving Credit
Borrowing) in excess thereof and shall consist of Revolving Credit Advances of
the same Type made on the same day by the Lenders ratably according to their
respective Commitments; provided, however, that if there is no unused portion of
the Commitment of one or more Lenders at the time of any requested Revolving
Credit Borrowing such Borrowing shall consist of Revolving Credit Advances of
the same Type made on the same day by the Lender or Lenders who do then have an
unused portion of their Commitments ratably according to the unused portion of
such Commitments. Notwithstanding anything herein to the contrary, no Revolving
Credit Borrowing may be made in a Major Currency if, after giving effect to the
making of such Revolving Credit Borrowing, the Equivalent in Dollars of the
aggregate amount of outstanding Revolving Credit Advances denominated in Major
Currencies, together with the Equivalent in Dollars of the aggregate amount of
outstanding Competitive Bid Advances denominated in Foreign Currencies, would
exceed $500,000,000. Within the limits of each Lender's Commitment, any Borrower
may borrow under this Section 2.01, prepay pursuant to Section 2.09 and reborrow
under this Section 2.01.
SECTION 2.02. Making the Revolving Credit Advances. (a) Each
Revolving Credit Borrowing shall be made on notice, given not later than (x)
10:00 A.M. (New York City time) on the third Business Day prior to the date of
the proposed Revolving Credit Borrowing in the case of a Revolving Credit
Borrowing consisting of Eurocurrency Rate Advances denominated in any Major
Currency, (y) 11:00 A.M. (New York City time) on the third Business Day prior to
the date of the proposed Revolving Credit Borrowing in the case of a Revolving
Credit Borrowing consisting of Eurocurrency Rate Advances denominated in Dollars
or (z) 9:00 A.M. (New York City time) on the day of the proposed Revolving
Credit Borrowing in the case of a Revolving Credit Borrowing consisting of Base
Rate Advances, by any Borrower to the Agent (and the Agent shall, in the case of
a Revolving Credit Borrowing consisting of Eurocurrency Rate Advances,
immediately relay such notice to the Sub-Agent), which shall give to each Lender
prompt notice thereof by telecopier or telex. Each such notice of a Revolving
Credit Borrowing (a "Notice of Revolving Credit Borrowing") shall be by
telephone, confirmed
<PAGE>
19
immediately in writing, or telecopier or telex in substantially the form of
Exhibit B-1 hereto, specifying therein the requested (i) date of such Revolving
Credit Borrowing, (ii) Type of Advances comprising such Revolving Credit
Borrowing, (iii) aggregate amount of such Revolving Credit Borrowing, and (iv)
in the case of a Revolving Credit Borrowing consisting of Eurocurrency Rate
Advances, initial Interest Period and currency for each such Revolving Credit
Advance. Each Lender shall, before 11:00 A.M. (New York City time) on the date
of such Revolving Credit Borrowing, in the case of a Revolving Credit Borrowing
consisting of Advances denominated in Dollars, and before 11:00 A.M. (London
time) on the date of such Revolving Credit Borrowing, in the case of a Revolving
Credit Borrowing consisting of Eurocurrency Rate Advances denominated in any
Major Currency, make available for the account of its Applicable Lending Office
to the Agent at the applicable Agent's account, in same day funds, such Lender's
ratable portion (as determined in accordance with Section 2.01) of such
Revolving Credit Borrowing. After the Agent's receipt of such funds and upon
fulfillment of the applicable conditions set forth in Article III, the Agent
will make such funds available to the Borrower requesting the Revolving Credit
Borrowing at the Agent's aforesaid address or at the applicable Payment Office,
as the case may be.
(b) Anything in subsection (a) above to the contrary
notwithstanding, a Borrower may not select Eurocurrency Rate Advances for any
proposed Revolving Credit Borrowing if the obligation of the Lenders to make
Eurocurrency Rate Advances shall then be suspended pursuant to Section 2.08 or
2.11.
(c) Each Notice of Revolving Credit Borrowing of any Borrower
shall be irrevocable and binding on such Borrower. In the case of any Revolving
Credit Borrowing that the related Notice of Revolving Credit Borrowing specifies
is to be comprised of Eurocurrency Rate Advances, the Borrower requesting such
Revolving Credit Borrowing shall indemnify each Lender against any loss, cost or
expense incurred by such Lender as a result of any failure by such Borrower to
fulfill on or before the date specified in such Notice of Revolving Credit
Borrowing for such Revolving Credit Borrowing the applicable conditions set
forth in Article III, including, without limitation, any loss (including loss of
anticipated profits), cost or expense incurred by reason of the liquidation or
reemployment of deposits or other funds acquired by such Lender to fund the
Revolving Credit Advance to be made by such Lender as part of such Revolving
Credit Borrowing when such Revolving Credit Advance, as a result of such
failure, is not made on such date.
(d) Unless the Agent shall have received notice from a Lender
prior to the date of any Revolving Credit Borrowing that such Lender will not
make available to the Agent such Lender's ratable portion of such Revolving
Credit Borrowing, the Agent may assume that such Lender has made such portion
available to the Agent on the date of such Revolving Credit Borrowing in
accordance with subsection (a) of this Section 2.02 and the Agent may, in
reliance upon such assumption, make available to the Borrower proposing such
Revolving Credit Borrowing on such date a corresponding amount. If and to the
extent that such Lender shall not have so made such ratable portion available to
the Agent, such Lender and such Borrower severally agree to repay to the Agent
forthwith on demand such corresponding amount together with interest thereon,
for each day from the date such amount is made available to such Borrower until
the date such amount is repaid to the Agent, at (i) in the case of such
Borrower, the higher of (A) the interest rate applicable at the time to
Revolving Credit Advances comprising such Revolving Credit
<PAGE>
20
Borrowing and (B) the cost of funds incurred by the Agent in respect of such
amount and (ii) in the case of such Lender, (A) the Federal Funds Rate in the
case of Advances denominated in Dollars or (B) the cost of funds incurred by the
Agent in respect of such amount in the case of Advances denominated in any Major
Currency. If such Lender shall repay to the Agent such corresponding amount,
such amount so repaid shall constitute such Lender's Revolving Credit Advance as
part of such Revolving Credit Borrowing for purposes of this Agreement.
(e) The failure of any Lender to make the Revolving Credit
Advance to be made by it as part of any Revolving Credit Borrowing shall not
relieve any other Lender of its obligation, if any, hereunder to make its
Revolving Credit Advance on the date of such Revolving Credit Borrowing, but no
Lender shall be responsible for the failure of any other Lender to make the
Revolving Credit Advance to be made by such other Lender on the date of any
Revolving Credit Borrowing.
SECTION 2.03. The Competitive Bid Advances. (a) Each Lender
severally agrees that any Borrower may request Competitive Bid Borrowings under
this Section 2.03 from time to time on any Business Day during the period from
the date hereof until the date occurring seven days prior to the Termination
Date in the manner set forth below; provided that, following the making of each
Competitive Bid Borrowing, the aggregate amount (based in respect of any Advance
denominated in a Foreign Currency on the Equivalent in Dollars on such Business
Day) of the Advances then outstanding shall not exceed the aggregate amount of
the Commitments of the Lenders (computed without regard to any Competitive Bid
Reduction). Notwithstanding anything herein to the contrary, no Competitive Bid
Borrowing may be made in a Foreign Currency if, after giving effect to the
making of such Revolving Credit Borrowing, the Equivalent in Dollars of the
aggregate amount of outstanding Competitive Bid Advances denominated in Foreign
Currencies, together with the Equivalent in Dollars of the aggregate amount of
outstanding Revolving Credit Advances denominated in Major Currencies, would
exceed $500,000,000.
(i) Any Borrower may request a Competitive Bid Borrowing under
this Section 2.03 by delivering to the Agent (and the Agent shall, in
the case of a Competitive Bid Borrowing not consisting of Fixed Rate
Advances or LIBO Rate Advances to be denominated in Dollars,
immediately notify the Sub-Agent), by telecopier or telex, a notice of
a Competitive Bid Borrowing (a "Notice of Competitive Bid Borrowing"),
in
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21
substantially the form of Exhibit B-2 hereto, specifying therein the
requested (A) date of such proposed Competitive Bid Borrowing, (B)
aggregate amount of such proposed Competitive Bid Borrowing, (C)
interest rate basis and day count convention to be offered by the
Lenders, (D) currency of such proposed Competitive Bid Borrowing, (E)
in the case of a Competitive Bid Borrowing consisting of LIBO Rate
Advances, Interest Period of each Competitive Bid Advance to be made as
part of such Competitive Bid Borrowing, or in the case of a Competitive
Bid Borrowing consisting of Fixed Rate Advances or Local Rate Advances,
maturity date for repayment of each Fixed Rate Advance or Local Rate
Advance to be made as part of such Competitive Bid Borrowing (which
maturity date may not be earlier than the date occurring five days
after the date of such Competitive Bid Borrowing or later than the
Termination Date), (F) interest payment date or dates relating thereto,
(G) location of such Borrower's account to which funds are to be
advanced, and (H) other terms (if any) to be applicable to such
Competitive Bid Borrowing, not later than (w) 10:00 A.M. (New York City
time) at least one Business Day prior to the date of the proposed
Competitive Bid Borrowing, if such Borrower shall specify in its Notice
of Competitive Bid Borrowing that the rates of interest to be offered
by the Lenders shall be fixed rates per annum (each Advance comprising
any such Competitive Bid Borrowing being referred to herein as a "Fixed
Rate Advance") and that the Advances comprising such proposed
Competitive Bid Borrowing shall be denominated in Dollars, (x) 10:00
A.M. (New York City time) at least four Business Days prior to the date
of the proposed Competitive Bid Borrowing, if such Borrower shall
instead specify in its Notice of Competitive Bid Borrowing that the
Advances comprising such Competitive Bid Borrowing shall be LIBO Rate
Advances denominated in Dollars, (y) 3:00 P.M. (New York City time) at
least three Business Days prior to the date of the proposed Competitive
Bid Borrowing, if such Borrower shall specify in the Notice of
Competitive Bid Borrowing that the Advances comprising such proposed
Competitive Bid Borrowing shall be either Fixed Rate Advances
denominated in any Foreign Currency or Local Rate Advances denominated
in any Foreign Currency and (z) 3:00 P.M. (New York City time) at least
five Business Days prior to the date of the proposed Competitive Bid
Borrowing, if such Borrower shall instead specify in its Notice of
Competitive Bid Borrowing that the Advances comprising such Competitive
Bid Borrowing shall be LIBO Rate Advances denominated in any Foreign
Currency. Each Notice of Competitive Bid Borrowing shall be irrevocable
and binding on such Borrower. Any Notice of Competitive Bid Borrowing
by a Designated Subsidiary shall be given to the Agent in accordance
with the preceding sentence through the Company on behalf of such
Designated Subsidiary. The Agent shall in turn promptly notify each
Lender of each request for a Competitive Bid Borrowing received by it
from such Borrower by sending such Lender a copy of the related Notice
of Competitive Bid Borrowing.
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22
(ii) Each Lender may, if, in its sole discretion, it elects to
do so, irrevocably offer to make one or more Competitive Bid Advances
to the Borrower proposing the Competitive Bid Borrowing as part of such
proposed Competitive Bid Borrowing at a rate or rates of interest
specified by such Lender in its sole discretion, by notifying the Agent
(which shall give prompt notice thereof to such Borrower and to the
Sub-Agent, if applicable), (A) before 9:30 A.M. (New York City time) on
the date of such proposed Competitive Bid Borrowing, in the case of a
Competitive Bid Borrowing consisting of Fixed Rate Advances denominated
in Dollars, (B) before 10:00 A.M. (New York City time) three Business
Days before the date of such proposed Competitive Bid Borrowing, in the
case of a Competitive Bid Borrowing consisting of LIBO Rate Advances
denominated in Dollars, (C) before 10:00 A.M. (New York City time) on
the second Business Day prior to the date of such proposed Competitive
Bid Borrowing, in the case of a Competitive Bid Borrowing consisting of
either Fixed Rate Advances denominated in any Foreign Currency or Local
Rate Advances denominated in any Foreign Currency and (D) before 10:00
A.M. (New York City time) four Business Days before the date of such
proposed Competitive Bid Borrowing, in the case of a Competitive Bid
Borrowing consisting of LIBO Rate Advances denominated in any Foreign
Currency, of the minimum amount and maximum amount of each Competitive
Bid Advance which such Lender would be willing to make as part of such
proposed Competitive Bid Borrowing (which amounts, or the Equivalent
thereof in Dollars, as the case may be, may, subject to the proviso to
the first sentence of this Section 2.03(a), exceed such Lender's
Commitment, if any), the rate or rates of interest therefor and such
Lender's Applicable Lending Office with respect to such Competitive Bid
Advance; provided that if the Agent in its capacity as a Lender shall,
in its sole discretion, elect to make any such offer, it shall notify
such Borrower of such offer at least 30 minutes before the time and on
the date on which notice of such election is to be given to the Agent,
by the other Lenders. If any Lender shall elect not to make such an
offer, such Lender shall so notify the Agent, before 10:00 A.M. (New
York City time) (and the Agent shall notify the Sub-Agent, if
applicable) on the date on which notice of such election is to be given
to the Agent by the other Lenders, and such Lender shall not be
obligated to, and shall not, make any Competitive Bid Advance as part
of such Competitive Bid Borrowing; provided that the failure by any
Lender to give such notice shall not cause such Lender to be obligated
to make any Competitive Bid Advance as part of such proposed
Competitive Bid Borrowing.
(iii) The Borrower proposing the Competitive Bid Advance
shall, in turn, (A) before 10:30 A.M. (New York City time) on the date
of such proposed Competitive Bid Borrowing, in the case of a
Competitive Bid Borrowing consisting of Fixed Rate Advances denominated
in Dollars, (B) before 11:00 A.M. (New York City time) three Business
Days before the date of such proposed Competitive Bid Borrowing, in the
case of a Competitive Bid Borrowing consisting of LIBO Rate Advances
denominated in
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23
Dollars, (C) before 10:00 A.M. (New York City time) on the Business Day
prior to the date of such Competitive Bid Borrowing, in the case of a
Competitive Bid Borrowing consisting of either Fixed Rate Advances
denominated in any Foreign Currency or Local Rate Advances denominated
in any Foreign Currency and (D) before 10:00 A.M. (New York City time)
three Business Days before the date of such proposed Competitive Bid
Borrowing, in the case of a Competitive Bid Borrowing consisting of
LIBO Rate Advances denominated in any Foreign Currency, either:
(x) cancel such Competitive Bid Borrowing by giving
the Agent notice to that effect, or
(y) accept one or more of the offers made by any
Lender or Lenders pursuant to paragraph (ii) above, in its
sole discretion, by giving notice to the Agent (and the Agent
shall give notice to the Sub-Agent, if applicable) of the
amount of each Competitive Bid Advance (which amount shall be
equal to or greater than the minimum amount, and equal to or
less than the maximum amount, notified to such Borrower by the
Agent on behalf of such Lender for such Competitive Bid
Advance pursuant to paragraph (ii) above) to be made by each
Lender as part of such Competitive Bid Borrowing, and reject
any remaining offers made by Lenders pursuant to paragraph
(ii) above by giving the Agent notice to that effect;
provided, however, that such Borrower shall not accept any
offer in excess of the requested bid amount for any maturity.
Such Borrower shall accept the offers made by any Lender or
Lenders to make Competitive Bid Advances in order of the
lowest to the highest rates of interest offered by such
Lenders. If two or more Lenders have offered the same interest
rate, the amount to be borrowed at such interest rate will be
allocated among such Lenders in proportion to the amount that
each such Lender offered at such interest rate.
(iv) If the Borrower proposing the Competitive Bid Borrowing
notifies the Agent that such Competitive Bid Borrowing is canceled
pursuant to paragraph (iii)(x) above, the Agent shall give prompt
notice thereof to the Lenders and such Competitive Bid Borrowing shall
not be made.
(v) If the Borrower proposing the Competitive Bid Borrowing
accepts one or more of the offers made by any Lender or Lenders
pursuant to paragraph (iii)(y) above, the Agent shall in turn promptly
notify (A) each Lender that has made an offer as described in paragraph
(ii) above, of the date and aggregate amount of such Competitive Bid
Borrowing and whether or not any offer or offers made by such Lender
pursuant to paragraph (ii) above have been accepted by the Borrower,
(B) each Lender that is to make a Competitive Bid Advance as part of
such Competitive Bid Borrowing, of the amount of each Competitive Bid
Advance to be made by such Lender as part of such Competitive
<PAGE>
24
Bid Borrowing, and (C) each Lender that is to make a Competitive Bid
Advance as part of such Competitive Bid Borrowing, upon receipt, that
the Agent has received forms of documents appearing to fulfill the
applicable conditions set forth in Article III. Each Lender that is to
make a Competitive Bid Advance as part of such Competitive Bid
Borrowing shall, before 11:00 A.M. (New York City time), in the case of
Competitive Bid Advances to be denominated in Dollars or 11:00 A.M.
(London time), in the case of Competitive Bid Advances to be
denominated in any Foreign Currency, on the date of such Competitive
Bid Borrowing specified in the notice received from the Agent pursuant
to clause (A) of the preceding sentence or any later time when such
Lender shall have received notice from the Agent pursuant to clause (C)
of the preceding sentence, make available for the account of its
Applicable Lending Office to the Agent (x) in the case of a Competitive
Bid Borrowing denominated in Dollars, at its address referred to in
Section 9.02, in same day funds, such Lender's portion of such
Competitive Bid Borrowing in Dollars, and (y) in the case of a
Competitive Bid Borrowing in a Foreign Currency, at the Payment Office
for such Foreign Currency as shall have been notified by the Agent to
the Lenders prior thereto, in same day funds, such Lender's portion of
such Competitive Bid Borrowing in such Foreign Currency. Upon
fulfillment of the applicable conditions set forth in Article III and
after receipt by the Agent of such funds, the Agent will make such
funds available to such Borrower's account at the location specified by
such Borrower in its Notice of Competitive Bid Borrowing. Promptly
after each Competitive Bid Borrowing the Agent will notify each Lender
of the amount of such Competitive Bid Borrowing, the consequent
Competitive Bid Reduction and the dates upon which such Competitive Bid
Reduction commenced and will terminate.
(vi) If the Borrower proposing the Competitive Bid Borrowing
notifies the Agent that it accepts one or more of the offers made by
any Lender or Lenders pursuant to paragraph (iii)(y) above, such notice
of acceptance shall be irrevocable and binding on such Borrower. Such
Borrower shall indemnify each Lender against any loss, cost or expense
incurred by such Lender as a result of any failure by such Borrower to
fulfill on or before the date specified in the related Notice of
Competitive Bid Borrowing for such Competitive Bid Borrowing the
applicable conditions set forth in Article III, including, without
limitation, any loss (including loss of anticipated profits), cost or
expense incurred by reason of the liquidation or reemployment of
deposits or other funds acquired by such Lender to fund the Competitive
Bid Advance to be made by such Lender as part of such Competitive Bid
Borrowing when such Competitive Bid Advance, as a result of such
failure, is not made on such date.
(b) Each Competitive Bid Borrowing shall be in an aggregate
amount not less than $10,000,000 (or the Equivalent thereof in any Foreign
Currency, determined as of the time of the applicable
<PAGE>
25
Notice of Competitive Bid Borrowing) or an integral multiple of $1,000,000 (or
the Equivalent thereof in any Foreign Currency, determined as of the time of the
applicable Notice of Competitive Bid Borrowing) in excess thereof and, following
the making of each Competitive Bid Borrowing, the Borrower that has borrowed
such Competitive Bid Borrowing shall be in compliance with the limitation set
forth in the proviso to the first sentence of subsection (a) above.
(c) Within the limits and on the conditions set forth in this
Section 2.03, any Borrower may from time to time borrow under this Section 2.03,
repay or prepay pursuant to subsection (d) below, and reborrow under this
Section 2.03, provided that a Competitive Bid Borrowing shall not be made within
three Business Days of the date of any other Competitive Bid Borrowing.
(d) Any Borrower that has borrowed through a Competitive Bid
Borrowing shall repay to the Agent for the account of each Lender that has made
a Competitive Bid Advance, on the maturity date of such Competitive Bid Advance
(such maturity date being that specified by such Borrower for repayment of such
Competitive Bid Advance in the related Notice of Competitive Bid Borrowing
delivered pursuant to subsection (a)(i) above and provided in the Competitive
Bid Note evidencing such Competitive Bid Advance), the then unpaid principal
amount of such Competitive Bid Advance. Such Borrower shall have no right to
prepay any principal amount of any Competitive Bid Advance unless, and then only
on the terms, specified by such Borrower for such Competitive Bid Advance in the
related Notice of Competitive Bid Borrowing delivered pursuant to subsection
(a)(i) above and set forth in the Competitive Bid Note evidencing such
Competitive Bid Advance.
(e) Each Borrower that has borrowed through a Competitive Bid
Borrowing shall pay interest on the unpaid principal amount of each Competitive
Bid Advance comprising such Competitive Bid Borrowing from the date of such
Competitive Bid Advance to the date the principal amount of such Competitive Bid
Advance is repaid in full, at the rate of interest for such Competitive Bid
Advance specified by the Lender making such Competitive Bid Advance in its
notice with respect thereto delivered pursuant to subsection (a)(ii) above,
payable on the interest payment date or dates specified by such Borrower for
such Competitive Bid Advance in the related Notice of Competitive Bid Borrowing
delivered pursuant to subsection (a)(i) above, as provided in the Competitive
Bid Note evidencing such Competitive Bid Advance. Upon the occurrence and during
the continuance of an Event of Default under Section 6.01(a), such Borrower
shall pay interest on the amount of unpaid principal of and interest on each
Competitive Bid Advance owing to a Lender, payable in arrears on the date or
dates interest is payable thereon, at a rate per annum equal at all times to 1%
per annum above the rate per annum required to be paid on such Competitive Bid
Advance under the terms of the Competitive Bid Note evidencing such Competitive
Bid Advance unless otherwise agreed in such Competitive Bid Note.
<PAGE>
26
(f) The indebtedness of any Borrower resulting from each
Competitive Bid Advance made to such Borrower as part of a Competitive Bid
Borrowing shall be evidenced by a separate Competitive Bid Note of the Borrower
payable to the order of the Lender making such Competitive Bid Advance.
SECTION 2.04. Fees. (a) Facility Fee. The Company agrees to
pay to the Agent for the account of each Lender a facility fee on the aggregate
amount of such Lender's Commitment from the date hereof in the case of each
Initial Lender and from the effective date specified in the Assignment and
Acceptance pursuant to which it became a Lender in the case of each other Lender
until the Termination Date at a rate per annum equal to the Applicable
Percentage in effect from time to time, payable in arrears quarterly on the last
day of each March, June, September and December, commencing December 31, 1999,
and on the Termination Date.
(b) Agent's Fees. The Company shall pay to the Agent for its
own account such fees, and at such times, as the Company and the Agent may
separately agree.
SECTION 2.05. Termination or Reduction of the Commitments. (a)
Optional Ratable Termination or Reduction. The Company shall have the right,
upon at least three Business Days' notice to the Agent, to terminate in whole or
reduce ratably in part the unused portions of the respective Commitments of the
Lenders, provided that each partial reduction shall be in an aggregate amount
not less than $10,000,000 or an integral multiple of $1,000,000 in excess
thereof and provided further that the aggregate amount of the Commitments of the
Lenders shall not be reduced to an amount that is less than the sum of the
aggregate principal amount of the Competitive Bid Advances denominated in
Dollars then outstanding plus the Equivalent in Dollars (determined as of the
date of the notice of prepayment) of the aggregate principal amount of the
Competitive Bid Advances denominated in Foreign Currencies then outstanding. The
aggregate amount of the Commitments, once reduced as provided in this Section
2.05(a), may not be reinstated.
(b) Non-Ratable Termination by Assignment. The Company shall
have the right, upon at least ten Business Days' written notice to the Agent
(which shall then give prompt notice thereof to the relevant Lender), to require
any Lender to assign, pursuant to and in accordance with the provisions of
Section 9.07, all of its rights and obligations under this Agreement and under
the Notes to an Eligible Assignee selected by the Company; provided, however,
that (i) no Event of Default shall have occurred and be continuing at the time
of such request and at the time of such assignment; (ii) the assignee shall have
paid to the assigning Lender the aggregate principal amount of, and any interest
accrued and unpaid to the date of such assignment on, the Note or Notes of such
Lender; (iii) the Company shall have paid to the assigning Lender any and all
facility fees and other fees payable to such Lender and all other accrued and
unpaid amounts owing to such Lender under any provision of this Agreement
(including, but not limited to, any increased costs or other additional amounts
owing under
<PAGE>
27
Section 2.10 and any indemnification for Taxes under Section 2.13) as of the
effective date of such assignment; and (iv) if the assignee selected by the
Company is not an existing Lender, such assignee or the Company shall have paid
the processing and recordation fee required under Section 9.07(a) for such
assignment; provided further that the Company shall have no right to replace
more than three Lenders in any calendar year pursuant to this Section 2.05(b);
and provided further that the assigning Lender's rights under Sections 2.10,
2.13 and 9.04, and its obligations under Section 8.05, shall survive such
assignment as to matters occurring prior to the date of assignment.
(c) Non-Ratable Reduction. (i) The Company shall have the
right, at any time other than during any Rating Condition, upon at least ten
Business Days' notice to a Lender (with a copy to the Agent), to terminate in
whole such Lender's Commitment (determined without giving effect to any
Competitive Bid Reduction). Such termination shall be effective, (i) with
respect to such Lender's unused Commitment, on the date set forth in such
notice, provided, however, that such date shall be no earlier than ten Business
Days after receipt of such notice and (ii) with respect to each Advance
outstanding to such Lender, on the last day of the then current Interest Period
relating to such Advance; provided further, however, that such termination shall
not be effective, if, after giving effect to such termination, the Company
would, under this Section 2.05(c), reduce the Lenders' Commitments in any
calendar year by an amount in excess of the Commitments of any three Lenders or
$240,000,000, whichever is greater on the date of such termination.
Notwithstanding the preceding proviso, the Company may terminate in whole the
Commitment of any Lender in accordance with the terms and conditions set forth
in Section 2.05(b). Upon termination of a Lender's Commitment under this Section
2.05(c), the Company will pay or cause to be paid all principal of, and interest
accrued to the date of such payment on, Advances owing to such Lender and pay
any facility fees or other fees payable to such Lender pursuant to the
provisions of Section 2.04, and all other amounts payable to such Lender
hereunder (including, but not limited to, any increased costs or other amounts
owing under Section 2.10 and any indemnification for Taxes under Section 2.13);
and upon such payments, the obligations of such Lender hereunder shall, by the
provisions hereof, be released and discharged; provided, however, that such
Lender's rights under Sections 2.10, 2.13 and 9.04, and its obligations under
Section 8.05 shall survive such release and discharge as to matters occurring
prior to such date. The aggregate amount of the Commitments of the Lenders once
reduced pursuant to this Section 2.05(c) may not be reinstated.
(ii) For purposes of this Section 2.05(c) only, the term
"Rating Condition" shall mean a period commencing with notice (a "Rating
Condition Notice") by the Agent to the Company and the Lenders to the effect
that the Agent has been informed that the rating of the senior public Debt of
the Company is unsatisfactory under the standard set forth in the next sentence,
and ending with notice by the Agent to the Company and the Lenders to the effect
that such condition no longer exists. The Agent shall give a Rating Condition
Notice promptly upon receipt from the Company or any Lender of notice stating,
in effect, that both of S&P and
<PAGE>
28
Moody's (or any successor by merger or consolidation to the business of either
thereof), respectively, then rate the senior public Debt of the Company lower
than BBB- and Baa3. The Company agrees to give notice to the Agent forthwith
upon any change in a rating by either such organization of the senior public
Debt of the Company; the Agent shall have no duty whatsoever to verify the
accuracy of any such notice from the Company or any Lender or to monitor
independently the ratings of the senior public Debt of the Company and no Lender
shall have any duty to give any such notice. The Agent shall give notice to the
Lenders and the Company as to the termination of a Rating Condition promptly
upon receiving a notice from the Company to the Agent (which notice the Agent
shall promptly notify to the Lenders) stating that the rating of the senior
public Debt of the Company does not meet the standard set forth in the second
sentence of this clause (ii), and requesting that the Agent notify the Lenders
of the termination of the Rating Condition. The Rating Condition shall terminate
upon the giving of such notice by the Agent.
(d) Termination by a Lender. In the event that a Change of
Control occurs, each Lender may, by notice to the Company and the Agent given
not later than 50 calendar days after such Change of Control, terminate its
Commitment, which Commitment shall be terminated effective as of the later of
(i) the date that is 60 calendar days after such Change of Control or (ii) the
end of the Interest Period for any Advance outstanding at the time of such
Change of Control or for any Advance made pursuant to the next sentence of this
Section 2.05(d). Upon the occurrence of a Change of Control, each Borrower's
right to make a Borrowing under this Agreement shall be suspended for a period
of 60 calendar days, except for Advances having an interest period ending not
later than 90 calendar days after such Change of Control. A notice of
termination pursuant to this Section 2.05(d) shall not have the effect of
accelerating any outstanding Advance of such Lender and the Notes of such
Lender.
SECTION 2.06. Repayment of Advances. (a) Revolving Credit
Advances. Each Borrower shall repay to the Administrative Agent, for the ratable
account of the Lenders, on the Termination Date the aggregate principal amount
of all Revolving Credit Advances made to it outstanding on such date.
(b) Competitive Bid Advances. Each Borrower shall repay to the
Administrative Agent, for the account of each Lender that has made a Competitive
Bid Advance, the aggregate outstanding principal amount of each Competitive Bid
Advance made to such Borrower and owing to such Lender on the earlier of (i) the
maturity date therefor, specified in the related Notice of Competitive Bid
Borrowing delivered pursuant to Section 2.03(a)(i) and (ii) the Termination
Date.
SECTION 2.07. Interest on Revolving Credit Advances. (a)
Scheduled Interest. Each Borrower shall pay interest on the unpaid principal
amount of each Revolving Credit Advance owing by such Borrower to each Lender
from the date of such Revolving Credit Advance until such principal amount shall
be paid in full, at the following rates per annum:
<PAGE>
29
(i) Base Rate Advances. During such periods as such Revolving
Credit Advance is a Base Rate Advance, a rate per annum equal at all
times to the sum of (x) the Base Rate in effect from time to time plus
(y) the Applicable Utilization Fee in effect from time to time, payable
in arrears quarterly on the last day of each March, June, September and
December during such periods and on the date such Base Rate Advance
shall be paid in full.
(ii) Eurocurrency Rate Advances. During such periods as such
Revolving Credit Advance is a Eurocurrency Rate Advance, a rate per
annum equal at all times during each Interest Period for such Revolving
Credit Advance to the sum of (x) the Eurocurrency Rate for such
Interest Period for such Revolving Credit Advance plus (y) the
Applicable Margin in effect from time to time plus (z) the Applicable
Utilization Fee in effect from time to time, payable in arrears on the
last day of such Interest Period and, if such Interest Period has a
duration of more than three months, on each day that occurs during such
Interest Period every three months from the first day of such Interest
Period and on the date such Eurocurrency Rate Advance shall be
Converted or paid in full.
(b) Default Interest. Upon the occurrence and during the
continuance of an Event of Default under Section 6.01(a), each Borrower shall
pay interest on (i) the unpaid principal amount of each Revolving Credit Advance
owing by such Borrower to each Lender, payable in arrears on the dates referred
to in clause (a)(i) or (a)(ii) above, at a rate per annum equal at all times to
1% per annum above the rate per annum required to be paid on such Revolving
Credit Advance pursuant to clause (a)(i) or (a)(ii) above and (ii) to the
fullest extent permitted by law, the amount of any interest, fee or other amount
payable hereunder by such Borrower that is not paid when due, from the date such
amount shall be due until such amount shall be paid in full, payable in arrears
on the date such amount shall be paid in full and on demand, at a rate per annum
equal at all times to 1% per annum above the rate per annum required to be paid
on such Revolving Credit Advance pursuant to clause (a)(i) or (a)(ii) above.
SECTION 2.08. Interest Rate Determination. (a) Each Reference
Bank agrees to furnish to the Agent timely information for the purpose of
determining each Eurocurrency Rate and each LIBO Rate if the applicable Telerate
Page is unavailable. If any one or more of the Reference Banks shall not furnish
such timely information to the Agent for the purpose of determining any such
interest rate, the Agent shall determine such interest rate on the basis of
timely information furnished by the remaining Reference Banks. The Agent shall
give prompt notice to the Company and the Lenders of the applicable interest
rate determined by the Agent for purposes of Section 2.07(a)(i) or (ii), and the
rate, if any, furnished by each Reference Bank for the purpose of determining
the interest rate under Section 2.07(a)(ii).
<PAGE>
30
(b) If, with respect to any Eurocurrency Rate Advances, the
Majority Lenders notify the Agent that (i) they are unable to obtain matching
deposits in the London interbank market at or about 11:00 A.M. (London time) on
the second Business Day before the making of a Borrowing in sufficient amounts
to fund their respective Revolving Credit Advances as part of such Borrowing
during its Interest Period or (ii) the Eurocurrency Rate for any Interest Period
for such Advances will not adequately reflect the cost to such Majority Lenders
of making, funding or maintaining their respective Eurocurrency Rate Advances
for such Interest Period, the Agent shall forthwith so notify each Borrower and
the Lenders, whereupon (A) the Borrower will, on the last day of the then
existing Interest Period therefor, (1) if such Eurocurrency Rate Advances are
denominated in Dollars, either (x) prepay such Advances or (y) Convert such
Advances into Base Rate Advances and (2) if such Eurocurrency Rate Advances are
denominated in any Major Currency, either (x) prepay such Advances or (y)
redenominate such Advances into an Equivalent amount of Dollars and Convert such
Advances into Base Rate Advances, and (B) the obligation of the Lenders to make
Eurocurrency Rate Advances in the same currency as such Eurocurrency Rate
Advances shall be suspended until the Agent shall notify each Borrower and the
Lenders that the circumstances causing such suspension no longer exist.
(c) If any Borrower, in requesting a Revolving Credit
Borrowing comprised of Eurocurrency Rate Advances, shall fail to select the
duration of the Interest Period for such Eurocurrency Rate Advances in
accordance with the provisions contained in the definition of "Interest Period"
in Section 1.01, the Agent will forthwith so notify the Borrower and the Lenders
and such Advances will (to the extent such Eurocurrency Rate Advances remain
outstanding on such day) automatically, on the last day of the then existing
Interest Period therefor, (i) if such Eurocurrency Rate Advances are denominated
in Dollars, Convert into Base Rate Advances and (ii) if such Eurocurrency Rate
Advances are denominated in any Major Currency, be redenominated into an
Equivalent amount of Dollars and be Converted into Base Rate Advances.
(d) Upon the occurrence and during the continuance of any
Event of Default under Section 6.01(a), (i) each Eurocurrency Rate Advance will
(to the extent such Eurocurrency Rate Advance remains outstanding on such day)
automatically, on the last day of the then existing Interest Period therefor,
(A) if such Eurocurrency Rate Advance is denominated in Dollars, be Converted
into a Base Rate Advance and (B) if such Eurocurrency Rate Advance is
denominated in any Major Currency, be redenominated into an Equivalent amount of
Dollars and Converted into a Base Rate Advance and (ii) the obligation of the
Lenders to make Eurocurrency Rate Advances shall be suspended.
(e) If the applicable Telerate Page is unavailable and fewer
than two Reference Banks furnish timely information to the Agent for determining
the Eurocurrency Rate or LIBO Rate for any Eurocurrency Rate Advances or LIBO
Rate Advances, as the case may be,
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31
(i) the Agent shall forthwith notify the relevant Borrower and
the Lenders that the interest rate cannot be determined for such
Eurocurrency Rate Advances or LIBO Rate Advances, as the case may be,
(ii) with respect to Eurocurrency Rate Advances, each such
Advance will (to the extent such Eurocurrency Rate Advance remains
outstanding on such day) automatically, on the last day of the then
existing Interest Period therefor, (A) if such Eurocurrency Rate
Advance is denominated in Dollars, be prepaid by the applicable
Borrower or be automatically Converted into a Base Rate Advance and (B)
if such Eurocurrency Rate Advance is denominated in any Major Currency,
be prepaid by the applicable Borrower or be automatically redenominated
into an Equivalent amount of Dollars and Converted into a Base Rate
Advance (or if such Advance is then a Base Rate Advance, will continue
as a Base Rate Advance), and
(iii) the obligation of the Lenders to make Eurocurrency Rate
Advances or LIBO Rate Advances shall be suspended until the Agent shall
notify the Borrowers and the Lenders that the circumstances causing
such suspension no longer exist.
SECTION 2.09. Prepayments of Revolving Credit Advances. (a)
Optional Prepayments. Each Borrower may, upon notice to the Agent stating the
proposed date and aggregate principal amount of the prepayment, given not later
than 11:00 A.M. (New York City time) on the second Business Day prior to the
date of such proposed prepayment, in the case of Eurocurrency Rate Advances, and
not later than 11:00 A.M. (New York City time) on the day of such proposed
prepayment, in the case of Base Rate Advances, and, if such notice is given,
such Borrower shall, prepay the outstanding principal amount of the Revolving
Credit Advances comprising part of the same Revolving Credit Borrowing in whole
or ratably in part, together with accrued interest to the date of such
prepayment on the principal amount prepaid; provided, however, that (x) each
partial prepayment shall be in an aggregate principal amount not less than
$10,000,000 or the Equivalent thereof in a Major Currency (determined on the
date notice of prepayment is given) or an integral multiple of $1,000,000 or the
Equivalent thereof in a Major Currency (determined on the date notice of
prepayment is given) in excess thereof and (y) in the event of any such
prepayment of a Eurocurrency Rate Advance other than on the last day of the
Interest Period therefor, such Borrower shall be obligated to reimburse the
Lenders in respect thereof pursuant to Section 9.04(c). Each notice of
prepayment by a Designated Subsidiary shall be given to the Administrative Agent
through the Company.
(b) Mandatory Prepayments. (i) If, on any date, the sum of (A)
the aggregate principal amount of all Advances denominated in Dollars then
outstanding plus (B) the Equivalent in Dollars (determined on the third Business
Day prior to such date) of the aggregate principal amount of all Advances
denominated in Foreign Currencies then outstanding exceeds 103% of the aggregate
Commitments of the Lenders on such date, the Company and each other
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32
Borrower, if any, shall thereupon promptly prepay the outstanding principal
amount of any Advances owing by such Borrower in an aggregate amount sufficient
to reduce such sum to an amount not to exceed 100% of the aggregate Commitments
of the Lenders on such date, together with any interest accrued to the date of
such prepayment on the principal amounts prepaid and, in the case of any
prepayment of a Eurocurrency Rate Advance, a LIBO Rate Advance or a Local Rate
Advance on a date other than the last day of an Interest Period or at its
maturity, any additional amounts which such Borrower shall be obligated to
reimburse to the Lenders in respect thereof pursuant to Section 9.04(c). The
Agent shall give prompt notice of any prepayment required under this Section
2.09(b)(i) to the Borrowers and the Lenders.
(ii) If, on any date, the sum of (A) the Equivalent in Dollars
of the aggregate principal amount of all Eurocurrency Rate Advances denominated
in Major Currencies then outstanding plus (B) the Equivalent in Dollars of the
aggregate principal amount of all Competitive Bid Advances denominated in
Foreign Currencies then outstanding, shall exceed 110% of $500,000,000, the
Company and each other Borrower shall prepay the outstanding principal amount of
any such Eurocurrency Rate Advances or any such LIBO Rate Advances owing by such
Borrower, on the last day of the Interest Periods relating to such Advances, in
an aggregate amount sufficient to reduce such sum to an amount not to exceed
$500,000,000, together with any interest accrued to the date of such prepayment
on the principal amounts prepaid. The Agent shall give prompt notice of any
prepayment required under this Section 2.09(b)(ii) to the Borrowers and the
Lenders.
SECTION 2.10. Increased Costs. (a) If, due to either (i) the
introduction of or any change in or in the interpretation of any law or
regulation or (ii) the compliance with any guideline or request from any central
bank or other governmental authority including, without limitation, any agency
of the European Union or similar monetary or multinational authority (whether or
not having the force of law), there shall be any increase in the cost to any
Lender of agreeing to make or making, funding or maintaining Eurocurrency Rate
Advances or LIBO Rate Advances (excluding for purposes of this Section 2.10 any
such increased costs resulting from (i) Taxes or Other Taxes (as to which
Section 2.13 shall govern) and (ii) changes in the basis of taxation of overall
net income or overall gross income by the United States or by the foreign
jurisdiction or state under the laws of which such Lender is organized or has
its Applicable Lending Office or any political subdivision thereof), then the
Borrower of such Advances shall from time to time, upon demand by such Lender
(with a copy of such demand to the Agent), pay to the Agent for the account of
such Lender additional amounts sufficient to compensate such Lender for such
increased cost. A certificate as to the amount of such increased cost, submitted
to such Borrower and the Agent by such Lender, shall be conclusive and binding
for all purposes, absent manifest error.
(b) If any Lender determines that compliance with any law or
regulation or any guideline or request from any central bank or other
governmental authority including,
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33
without limitation, any agency of the European Union or similar monetary or
multinational authority (whether or not having the force of law) affects or
would affect the amount of capital required or expected to be maintained by such
Lender or any corporation controlling such Lender and that the amount of such
capital is increased by or based upon the existence of such Lender's commitment
to lend hereunder and other commitments of this type, then, upon demand by such
Lender (with a copy of such demand to the Agent), the Company shall pay to the
Agent for the account of such Lender, from time to time as specified by such
Lender, additional amounts sufficient to compensate such Lender or such
corporation in the light of such circumstances, to the extent that such Lender
reasonably determines such increase in capital to be allocable to the existence
of such Lender's commitment to lend hereunder. A certificate as to such amounts
submitted to the Company and the Agent by such Lender shall be conclusive and
binding for all purposes, absent manifest error.
(c) Any Lender claiming any additional amounts payable
pursuant to this Section 2.10 shall, upon the written request of the Company
delivered to such Lender and the Agent, assign, pursuant to and in accordance
with the provisions of Section 9.07, all of its rights and obligations under
this Agreement and under the Notes to an Eligible Assignee selected by the
Company; provided, however, that (i) no Default shall have occurred and be
continuing at the time of such request and at the time of such assignment; (ii)
the assignee shall have paid to the assigning Lender the aggregate principal
amount of, and any interest accrued and unpaid to the date of such assignment
on, the Note or Notes of such Lender; (iii) the Company shall have paid to the
assigning Lender any and all facility fees and other fees payable to such Lender
and all other accrued and unpaid amounts owing to such Lender under any
provision of this Agreement (including, but not limited to, any increased costs
or other additional amounts owing under this Section 2.10, and any
indemnification for Taxes under Section 2.13) as of the effective date of such
assignment and (iv) if the assignee selected by the Company is not an existing
Lender, such assignee or the Company shall have paid the processing and
recordation fee required under Section 9.07(a) for such assignment; provided
further that the assigning Lender's rights under Sections 2.10, 2.13 and 9.04,
and its obligations under Section 8.05, shall survive such assignment as to
matters occurring prior to the date of assignment.
SECTION 2.11. Illegality. Notwithstanding any other provision
of this Agreement, if any Lender shall notify the Agent that the introduction of
or any change in or in the interpretation of any law or regulation makes it
unlawful, or any central bank or other governmental authority asserts that it is
unlawful, for any Lender or its Eurocurrency Lending Office to perform its
obligations hereunder to make Eurocurrency Rate Advances in Dollars or any Major
Currency or LIBO Rate Advances in Dollars or in any Foreign Currency or to fund
or maintain Eurocurrency Rate Advances in Dollars or in any Major Currency or
LIBO Rate Advances in Dollars or in any Foreign Currency hereunder, (a) each
such Eurocurrency Rate Advance or such LIBO Rate Advance, as the case may be,
will automatically, upon such demand, (i) if such Eurocurrency Rate Advance or
LIBO Rate Advance is denominated in
<PAGE>
34
Dollars, be Converted into a Base Rate Advance or an Advance that bears interest
at the rate set forth in Section 2.07(a)(i), as the case may be, and (ii) if
such Eurocurrency Rate Advance or LIBO Rate Advance is denominated in any
Foreign Currency, be redenominated into an Equivalent amount of Dollars and
Converted into a Base Rate Advance or an Advance that bears interest at the rate
set forth in Section 2.07(a)(i), as the case may be, and (b) the obligation of
the Lenders to make such Eurocurrency Rate Advances or such LIBO Rate Advances
shall be suspended until the Agent shall notify the Borrower and the Lenders
that the circumstances causing such suspension no longer exist.
SECTION 2.12. Payments and Computations. (a) Each Borrower
shall make each payment hereunder and under any Notes, except with respect to
principal of, interest on, and other amounts relating to, Advances denominated
in a Foreign Currency, not later than 11:00 A.M. (New York City time) on the day
when due in Dollars to the Agent at the applicable Agent's Account in same day
funds. Each Borrower shall make each payment hereunder and under any Notes with
respect to principal of, interest on, and other amounts relating to Advances
denominated in a Foreign Currency not later than 12:00 Noon (at the Payment
Office for such Foreign Currency) on the day when due in such Foreign Currency
to the Agent in same day funds by deposit of such funds to the applicable
Agent's Account. The Agent will promptly thereafter cause to be distributed like
funds relating to the payment of principal or interest or facility fees ratably
(other than amounts payable pursuant to Section 2.03, 2.05(b), 2.05(c), 2.10,
2.13 or 9.04(c)) to the Lenders for the account of their respective Applicable
Lending Offices, and like funds relating to the payment of any other amount
payable to any Lender to such Lender for the account of its Applicable Lending
Office, in each case to be applied in accordance with the terms of this
Agreement. Upon its acceptance of an Assignment and Acceptance and recording of
the information contained therein in the Register pursuant to Section 9.07(c),
from and after the effective date specified in such Assignment and Acceptance,
the Agent shall make all payments hereunder and under any Notes in respect of
the interest assigned thereby to the Lender assignee thereunder, and the parties
to such Assignment and Acceptance shall make all appropriate adjustments in such
payments for periods prior to such effective date directly between themselves.
(b) All computations of interest based on the Base Rate and of
facility fees shall be made by the Agent on the basis of a year of 365 or 366
days, as the case may be, all computations of interest based on the Eurocurrency
Rate or the Federal Funds Rate shall be made by the Agent on the basis of a year
of 360 days and all computations in respect of Competitive Bid Advances shall be
made by the Agent or the Sub-Agent, as the case may be, as specified in the
applicable Notice of Competitive Bid Borrowing (or, in each case of Advances
denominated in Foreign Currencies where market practice differs, in accordance
with market practice), in each case for the actual number of days (including the
first day but excluding the last day) occurring in the period for which such
interest or facility fees are payable. Each determination by the
<PAGE>
35
Agent of an interest rate hereunder shall be conclusive and binding for all
purposes, absent manifest error.
(c) Whenever any payment hereunder or under the Notes shall be
stated to be due on a day other than a Business Day, such payment shall be made
on the next succeeding Business Day, and such extension of time shall in such
case be included in the computation of payment of interest or facility fee, as
the case may be; provided, however, that, if such extension would cause payment
of interest on or principal of Eurocurrency Rate Advances or LIBO Rate Advances
to be made in the next following calendar month, such payment shall be made on
the next preceding Business Day.
(d) Unless the Agent shall have received notice from any
Borrower prior to the date on which any payment is due to the Lenders hereunder
that such Borrower will not make such payment in full, the Agent may assume that
such Borrower has made such payment in full to the Agent on such date and the
Agent may, in reliance upon such assumption, cause to be distributed to each
Lender on such due date an amount equal to the amount then due such Lender. If
and to the extent such Borrower shall not have so made such payment in full to
the Agent, each Lender shall repay to the Agent forthwith on demand such amount
distributed to such Lender together with interest thereon, for each day from the
date such amount is distributed to such Lender until the date such Lender repays
such amount to the Agent, at (i) the Federal Funds Rate in the case of Advances
denominated in Dollars or (ii) the cost of funds incurred by the Agent in
respect of such amount in the case of Advances denominated in Foreign
Currencies.
SECTION 2.13. Taxes. (a) Any and all payments by any Borrower
(including the Company in its capacity as a guarantor under Article VII hereof)
hereunder or under the Notes shall be made, in accordance with Section 2.12,
free and clear of and without deduction for any and all present or future taxes,
levies, imposts, deductions, charges or withholdings, and all liabilities with
respect thereto, excluding, in the case of each Lender and the Agent, net income
taxes imposed by the United States and taxes imposed on its overall net income,
and franchise taxes imposed on it in lieu of net income taxes, by the
jurisdiction under the laws of which such Lender or the Agent (as the case may
be) is organized or any political subdivision thereof and, in the case of each
Lender, taxes imposed on its overall net income, and franchise taxes imposed on
it in lieu of net income taxes, by the jurisdiction of such Lender's Applicable
Lending Office or any political subdivision thereof (all such non-excluded
taxes, levies, imposts, deductions, charges, withholdings and liabilities in
respect of payments hereunder or under the Notes being hereinafter referred to
as "Taxes"). If any Borrower (including the Company in its capacity as a
guarantor under Article VII hereof) shall be required by law to deduct any Taxes
from or in respect of any sum payable hereunder or under any Note to any Lender
or the Agent, (i) the sum payable shall be increased as may be necessary so that
after making all required deductions (including deductions applicable to
additional sums payable under this Section 2.13) such Lender or the Agent (as
the case may be) receives an amount equal to the sum it would have received
<PAGE>
36
had no such deductions been made, (ii) such Borrower shall make such deductions
and (iii) such Borrower shall pay the full amount deducted to the relevant
taxation authority or other authority in accordance with applicable law.
(b) In addition, each Borrower agrees to pay any present or
future stamp or documentary taxes or any other excise or property taxes, charges
or similar levies that arise from any payment made hereunder or under the Notes
or from the execution, delivery or registration of, performing under, or
otherwise with respect to, this Agreement or the Notes (hereinafter referred to
as "Other Taxes").
(c) Each Borrower shall indemnify each Lender and the Agent
for the full amount of Taxes or Other Taxes (including, without limitation, any
taxes imposed by any jurisdiction on amounts payable under this Section 2.13)
imposed on or paid by such Lender or the Agent (as the case may be) and any
liability (including penalties, interest and expenses) arising therefrom or with
respect thereto; provided, however, that a Borrower shall not be obligated to
pay any amounts in respect of penalties, interest or expenses pursuant to this
paragraph that are payable solely as a result of (i) the failure on the part of
the pertinent Lender or the Agent to pay over those amounts received from the
Borrowers under this clause (c) or (ii) the gross negligence or willful
misconduct on the part of the pertinent Lender or the Agent. This
indemnification shall be made within 30 days from the date such Lender or the
Agent (as the case may be) makes written demand therefor. Each Lender agrees to
provide reasonably prompt notice to the Agent, the Company and any Borrower of
any imposition of Taxes or Other Taxes against such Lender; provided that
failure to give such notice shall not affect such Lender's rights to
indemnification hereunder. Each Lender agrees that it will, promptly upon a
request by the Company or a Borrower having made an indemnification payment
hereunder, furnish to the Company or such Borrower, as the case may be, such
evidence as is reasonably available to such Lender as to the payment of the
relevant Taxes or Other Taxes, and that it will, if requested by the Company or
such Borrower, cooperate with the Company or such Borrower, as the case may be,
in its efforts to obtain a refund or similar relief in respect of such payment.
(d) Within 30 days after the date of any payment of Taxes,
each Borrower shall furnish to the Agent, at its address referred to in Section
9.02, the original or a certified copy of a receipt evidencing payment thereof.
In the case of any payment hereunder or under the Notes by or on behalf of any
Borrower through an account or branch outside the United States or by or on
behalf of any Borrower by a payor that is not a United States person, if such
Borrower determines that no Taxes are payable in respect thereof, such Borrower
shall furnish, or shall cause such payor to furnish, to the Agent, at such
address, an opinion of counsel acceptable to the Agent stating that such payment
is exempt from Taxes. For purposes of this subsection (d) and subsection (e),
the terms "United States" and "United States person" shall have the meanings
specified in Section 7701 of the Internal Revenue Code.
<PAGE>
37
(e) Each Lender organized under the laws of a jurisdiction
outside the United States, on or prior to the date of its execution and delivery
of this Agreement in the case of each Initial Lender and on the date of the
Assignment and Acceptance pursuant to which it becomes a Lender in the case of
each other Lender, and from time to time thereafter as requested in writing by
any Borrower (but only so long as such Lender remains lawfully able to do so),
shall provide the Agent and each Borrower with two original Internal Revenue
Service forms 1001 or 4224, as appropriate, or any successor or other form
prescribed by the Internal Revenue Service, certifying that such Lender is
exempt from or entitled to a reduced rate of United States withholding tax on
payments pursuant to this Agreement or the Notes. In addition, each Lender
further agrees to provide any Borrower with any form or document as any Borrower
may request which is required by any taxing authority outside the United States
in order to secure an exemption from, or reduction in the rate of, withholding
tax. If the forms provided by a Lender at the time such Lender first becomes a
party to this Agreement indicates a United States interest withholding tax rate
in excess of zero, withholding tax at such rate shall be considered excluded
from Taxes unless and until such Lender provides the appropriate forms
certifying that a lesser rate applies, whereupon withholding tax at such lesser
rate only shall be considered excluded from Taxes for periods governed by such
form; provided, however, that, if at the date of the Assignment and Acceptance
pursuant to which a Lender becomes a party to this Agreement, such Lender was
entitled to payments under subsection (a) in respect of United States
withholding tax with respect to interest paid at such date, then, to such
extent, the term Taxes shall include (in addition to withholding taxes that may
be imposed in the future or other amounts otherwise includable in Taxes) United
States withholding tax, if any, applicable with respect to such Lender on such
date. If any form or document referred to in this subsection (e) requires the
disclosure of information, other than information necessary to compute the tax
payable and information required on the date hereof by Internal Revenue Service
form 1001 or 4224, that a Lender reasonably considers to be confidential, such
Lender shall give notice thereof to each Borrower and shall not be obligated to
include in such form or document such confidential information.
(f) For any period with respect to which a Lender has failed
to provide each Borrower with the appropriate form described in Section 2.13(e)
(other than if such failure is due to a change in law occurring subsequent to
the date on which a form originally was required to be provided, or if such form
otherwise is not required under the first sentence of subsection (e) above),
such Lender shall not be entitled to indemnification under Section 2.13(a) or
(c) with respect to Taxes imposed by the United States by reason of such
failure; provided, however, that should a Lender become subject to Taxes because
of its failure to deliver a form required hereunder, each Borrower shall take
such steps as such Lender shall reasonably request to assist such Lender to
recover such Taxes.
(g) If any Borrower is required to pay any additional amount
to any Lender or to the Agent or on behalf of any of them to any taxing
authority pursuant to this Section 2.13, such Lender shall, upon the written
request of the Company delivered to such Lender and the
<PAGE>
38
Agent, assign, pursuant to and in accordance with the provisions of Section
9.07, all of its rights and obligations under this Agreement and under the Notes
to an Eligible Assignee selected by the Company; provided, however, that (i) no
Default shall have occurred and be continuing at the time of such request and at
the time of such assignment; (ii) the assignee shall have paid to the assigning
Lender the aggregate principal amount of, and any interest accrued and unpaid to
the date of such assignment on, the Note or Notes of such Lender; (iii) the
Company shall have paid to the assigning Lender any and all facility fees and
other fees payable to such Lender and all other accrued and unpaid amounts owing
to such Lender under any provision of this Agreement (including, but not limited
to, any increased costs or other additional amounts owing under Section 2.10,
and any indemnification for Taxes under this Section 2.13) as of the effective
date of such assignment; and (iv) if the assignee selected by the Company is not
an existing Lender, such assignee or the Company shall have paid the processing
and recordation fee required under Section 9.07(a) for such assignment; provided
further that the assigning Lender's rights under Sections 2.10, 2.13 and 9.04,
and its obligations under Section 8.05, shall survive such assignment as to
matters occurring prior to the date of assignment.
SECTION 2.14. Sharing of Payments, Etc. If any Lender shall
obtain any payment (whether voluntary, involuntary, through the exercise of any
right of setoff, or otherwise) on account of the Revolving Credit Advances owing
to it (other than pursuant to Section 2.03, 2.05(b), 2.05(c), 2.10, 2.13 or
9.04(c)) in excess of its ratable share of payments on account of the Revolving
Credit Advances obtained by all the Lenders, such Lender shall forthwith
purchase from the other Lenders such participations in the Revolving Credit
Advances owing to them as shall be necessary to cause such purchasing Lender to
share the excess payment ratably with each of them; provided, however, that if
all or any portion of such excess payment is thereafter recovered from such
purchasing Lender, such purchase from each Lender shall be rescinded and such
Lender shall repay to the purchasing Lender the purchase price to the extent of
such recovery together with an amount equal to such Lender's ratable share
(according to the proportion of (i) the amount of such Lender's required
repayment to (ii) the total amount so recovered from the purchasing Lender) of
any interest or other amount paid or payable by the purchasing Lender in respect
of the total amount so recovered. Each Borrower agrees that any Lender so
purchasing a participation from another Lender pursuant to this Section 2.14
may, to the fullest extent permitted by law, exercise all its rights of payment
(including the right of setoff) with respect to such participation as fully as
if such Lender were the direct creditor of such Borrower in the amount of such
participation.
SECTION 2.15. Use of Proceeds. The proceeds of the Advances
shall be available (and each Borrower agrees that it shall use such proceeds)
for general corporate purposes of such Borrower and its Subsidiaries, including,
without limitation, backstop of commercial paper.
<PAGE>
39
SECTION 2.16. Evidence of Debt. (a) Each Lender shall maintain
in accordance with its usual practice an account or accounts evidencing the
indebtedness of each Borrower to such Lender resulting from each Revolving
Credit Advance owing to such Lender from time to time, including the amounts of
principal and interest payable and paid to such Lender from time to time
hereunder in respect of Revolving Credit Advances. Each Borrower agrees that
upon request of any Lender to such Borrower (with a copy of such notice to the
Agent) that such Lender receive a Revolving Credit Note to evidence (whether for
purposes of pledge, enforcement or otherwise) the Revolving Credit Advances
owing to, or to be made by, such Lender, such Borrower shall promptly execute
and deliver to such Lender a Revolving Credit Note payable to the order of such
Lender in a principal amount up to the Commitment of such Lender.
(b) The Register maintained by the Agent pursuant to Section
9.07(d) shall include a control account, and a subsidiary account for each
Lender, in which accounts (taken together) shall be recorded (i) the date and
amount of each Borrowing made hereunder, the Type of Advances comprising such
Borrowing and, if appropriate, the Interest Period applicable thereto, (ii) the
terms of each Assignment and Acceptance delivered to and accepted by it, (iii)
the amount of any principal or interest due and payable or to become due and
payable from each Borrower to each Lender hereunder and (iv) the amount of any
sum received by the Agent from each Borrower hereunder and each Lender's share
thereof.
(c) Entries made in good faith by the Agent in the Register
pursuant to subsection (b) above, and by each Lender in its account or accounts
pursuant to subsection (a) above, shall be prima facie evidence of the amount of
principal and interest due and payable or to become due and payable from the
Borrowers to, in the case of the Register, each Lender and, in the case of such
account or accounts, such Lender, under this Agreement, absent manifest error;
provided, however, that the failure of the Agent or such Lender to make an
entry, or any finding that an entry is incorrect, in the Register or such
account or accounts shall not limit or otherwise affect the obligations of any
Borrower under this Agreement.
ARTICLE III
CONDITIONS TO EFFECTIVENESS AND LENDING
SECTION 3.01. Conditions Precedent to Effectiveness of
Sections 2.01 and 2.03. Sections 2.01 and 2.03 of this Agreement shall become
effective on and as of the first date (the "Effective Date") on which the
following conditions precedent have been satisfied:
(a) There shall have occurred no Material Adverse Change since
December 31, 1998.
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40
(b) There shall exist no action, suit, investigation,
litigation or proceeding affecting the Company or any of its
Subsidiaries pending or to the knowledge of the Company Threatened
before any court, governmental agency or arbitrator that (i) is
reasonably likely to have a Material Adverse Effect, other than the
matters described on Schedule 3.01(b) hereto (the "Disclosed
Litigation") or (ii) purports to affect the legality, validity or
enforceability of this Agreement or any Note of the Company or the
consummation of the transactions contemplated hereby, and there shall
have been no adverse change in the status, or financial effect on the
Company or any of its Subsidiaries, of the Disclosed Litigation from
that described on Schedule 3.01(b) hereto.
(c) The Company shall have paid all accrued fees and expenses
of the Agent and the Lenders in respect of this Agreement.
(d) On the Effective Date, the following statements shall be
true and the Agent shall have received a certificate signed by a duly
authorized officer of the Company, dated the Effective Date, stating
that:
(i) The representations and warranties contained in
Section 4.01 are correct on and as of the Effective Date, and
(ii) No event has occurred and is continuing that
constitutes a Default.
(e) The Agent shall have received on or before the Effective
Date the following, each dated such day, in form and substance
satisfactory to the Agent:
(i) The Revolving Credit Notes of the Company to the
order of the Lenders to the extent requested by any Lender
pursuant to Section 2.16.
(ii) Certified copies of the resolutions of the Board
of Directors of the Company approving this Agreement and the
Notes of the Company, and of all documents evidencing other
necessary corporate action and governmental approvals, if any,
with respect to this Agreement and such Notes.
(iii) A certificate of the Secretary or an Assistant
Secretary of the Company certifying the names and true
signatures of the officers of the Company authorized to sign
this Agreement and the Notes of the Company and the other
documents to be delivered hereunder.
(iv) A favorable opinion of J. Edward Smith,
Assistant General Counsel of the Company, substantially in the
form of Exhibit F hereto and as to such other matters as any
Lender through the Agent may reasonably request.
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41
(v) A favorable opinion of Shearman & Sterling,
counsel for the Agent, substantially in the form of Exhibit H
hereto.
(vi) Such other approvals, opinions or documents as
any Lender, through the Agent, may reasonably request.
(f) The Company shall have terminated the commitments, and
paid in full all Debt, interest, fees and other amounts outstanding,
under (i) the $750,000,000 Credit Agreement dated as of June 30, 1995
(the "$750,000,000 Credit Agreement") among the Company, the lenders
and arrangers parties thereto and Citibank, as administrative agent,
(ii) the $900,000,000 364 Day Backstop Credit Agreement dated as of
October 9, 1998 (the "Backstop Credit Agreement") among the Borrower,
as borrower, the lenders and arrangers parties thereto and Citibank, as
administrative agent, and (iii) the $1,325,000,000 Credit Agreement
dated as of April 15, 1997 (the "Honeywell Credit Agreement") among
Honeywell Inc., as borrower, Morgan Guaranty Trust Company of New York,
as documentation agent, Citicorp USA, Inc., as syndication agent, Chase
Securities Inc. and J.P. Morgan Securities Inc., as co-arrangers, and
The Chase Manhattan Bank, as administrative agent, and each of the
Lenders that is a party to each such credit facility hereby waives,
upon execution of this Agreement, the three Business Days' notice
required by Section 2.05 of the $750,000,000 Credit Agreement, Section
2.05 of the Backstop Credit Agreement and Section 2.12 of the Honeywell
Credit Agreement, respectively, relating to the termination of
commitments thereunder.
(g) All of the conditions precedent to the Merger Agreement
(or as amended in a manner satisfactory to the Lenders) shall have been
satisfied, including, without limitation, expiration or termination of
the applicable waiting period under the Hart-Scott-Rodino Act and
receipt of all applicable approvals, and the merger contemplated
thereby shall have been effected.
SECTION 3.02. Conditions Precedent to Initial Borrowing. The
obligation of each Lender to make an Advance on the occasion of the initial
Borrowing hereunder is subject to the following conditions precedent:
(a) The Effective Date shall have occurred.
(b) The Company shall have terminated all outstanding
commitments of lenders (and paid in full all outstanding debt under the
related credit agreements) which backstop commercial paper issuance,
other than commitments made by parties which are not Lenders hereunder.
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42
(c) The Company shall have paid (i) to the Agent for the
account of each Lender the upfront fees as agreed prior to the
Effective Date by the Borrower and the Lenders and (ii) all accrued
fees and expenses of the Agent (including the billed fees and expenses
of counsel to the Agent).
SECTION 3.03. Initial Loan to Each Designated Subsidiary. The
obligation of each Lender to make an initial Advance to each Designated
Subsidiary following any designation of such Designated Subsidiary as a Borrower
hereunder pursuant to Section 9.08 is subject to the Agent's receipt on or
before the date of such initial Advance of each of the following, in form and
substance satisfactory to the Agent and dated such date, and (except for the
Revolving Credit Notes) in sufficient copies for each Lender:
(a) The Revolving Credit Notes of such Borrower to the order
of the Lenders to the extent requested by any Lender pursuant to
Section 2.16.
(b) Certified copies of the resolutions of the Board of
Directors of such Borrower (with a certified English translation if the
original thereof is not in English) approving this Agreement and the
Notes of such Borrower, and of all documents evidencing other necessary
corporate action and governmental approvals, if any, with respect to
this Agreement and such Notes.
(c) A certificate of the Secretary or an Assistant Secretary
of such Borrower certifying the names and true signatures of the
officers of such Borrower authorized to sign this Agreement and the
Notes of such Borrower and the other documents to be delivered
hereunder.
(d) A certificate signed by a duly authorized officer of the
Company, dated as of the date of such initial Advance, certifying that
such Borrower shall have obtained all governmental and third party
authorizations, consents, approvals (including exchange control
approvals) and licenses required under applicable laws and regulations
necessary for such Borrower to execute and deliver this Agreement and
the Notes and to perform its obligations thereunder.
(e) The Designation Letter of such Designated Subsidiary,
substantially in the form of Exhibit D hereto.
(f) Evidence of the Process Agent's acceptance of its
appointment pursuant to Section 9.13(a) as the agent of such Borrower,
substantially in the form of Exhibit E hereto.
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43
(g) A favorable opinion of counsel to such Designated
Subsidiary, dated the date of such initial Advance, substantially in
the form of Exhibit G hereto.
(h) Such other approvals, opinions or documents as any Lender,
through the Agent, may reasonably request.
SECTION 3.04. Conditions Precedent to Each Revolving Credit
Borrowing. The obligation of each Lender to make a Revolving Credit Advance on
the occasion of each Revolving Credit Borrowing shall be subject to the
conditions precedent that the Effective Date shall have occurred and on the date
of such Revolving Credit Borrowing (a) the following statements shall be true
(and each of the giving of the applicable Notice of Revolving Credit Borrowing
and the acceptance by the Borrower requesting such Revolving Credit Borrowing of
the proceeds of such Revolving Credit Borrowing shall constitute a
representation and warranty by such Borrower that on the date of such Borrowing
such statements are true):
(i) the representations and warranties of the Company
contained in Section 4.01 (except the representations set forth in the
last sentence of subsection (e) thereof and in subsections (f), (h)-(l)
and (n) thereof) are correct on and as of the date of such Revolving
Credit Borrowing, before and after giving effect to such Revolving
Credit Borrowing and to the application of the proceeds therefrom, as
though made on and as of such date, and additionally, if such Revolving
Credit Borrowing shall have been requested by a Designated Subsidiary,
the representations and warranties of such Designated Subsidiary
contained in its Designation Letter are correct on and as of the date
of such Revolving Credit Borrowing, before and after giving effect to
such Revolving Credit Borrowing and to the application of the proceeds
therefrom, as though made on and as of such date, and
(ii) no event has occurred and is continuing, or would result
from such Revolving Credit Borrowing or from the application of the
proceeds therefrom, that constitutes a Default;
and (b) the Agent shall have received such other approvals, opinions or
documents as any Lender through the Agent may reasonably request.
SECTION 3.05. Conditions Precedent to Each Competitive Bid
Borrowing. The obligation of each Lender that is to make a Competitive Bid
Advance on the occasion of a Competitive Bid Borrowing to make such Competitive
Bid Advance as part of such Competitive Bid Borrowing is subject to the
conditions precedent that (i) the Agent shall have received the written
confirmatory Notice of Competitive Bid Borrowing with respect thereto, (ii) on
or before the date of such Competitive Bid Borrowing, but prior to such
Competitive Bid Borrowing, the Agent shall have received a Competitive Bid Note
payable to the order of such Lender and
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44
substantially in the form of Exhibit A-2 hereto for each of the one or more
Competitive Bid Advances to be made by such Lender as part of such Competitive
Bid Borrowing, in a principal amount equal to the principal amount of the
Competitive Bid Advance to be evidenced thereby and otherwise on such terms as
were agreed to for such Competitive Bid Advance in accordance with Section 2.03,
and (iii) on the date of such Competitive Bid Borrowing the following statements
shall be true (and each of the giving of the applicable Notice of Competitive
Bid Borrowing and the acceptance by the Borrower requesting such Competitive Bid
Borrowing of the proceeds of such Competitive Bid Borrowing shall constitute a
representation and warranty by such Borrower that on the date of such
Competitive Bid Borrowing such statements are true):
(a) the representations and warranties of the Company
contained in Section 4.01 (except the representations set forth in the
last sentence of subsection (e) thereof and in subsections (f), (h)-(l)
and (n) thereof) are correct on and as of the date of such Competitive
Bid Borrowing, before and after giving effect to such Competitive Bid
Borrowing and to the application of the proceeds therefrom, as though
made on and as of such date, and, if such Competitive Bid Borrowing
shall have been requested by a Designated Subsidiary, the
representations and warranties of such Designated Subsidiary contained
in its Designation Letter are correct on and as of the date of such
Competitive Bid Borrowing, before and after giving effect to such
Competitive Bid Borrowing and to the application of the proceeds
therefrom, as though made on and as of such date,
(b) no event has occurred and is continuing, or would result
from such Competitive Bid Borrowing or from the application of the
proceeds therefrom, that constitutes a Default, and
(c) no event has occurred and no circumstance exists as a
result of which the information concerning such Borrower that has been
provided to the Agent and each Lender by such Borrower in connection
herewith would include an untrue statement of a material fact or omit
to state any material fact necessary to make the statements contained
therein, in the light of the circumstances under which they were made,
not misleading,
and (iv) the Agent shall have received such other approvals, opinions or
documents as any Lender through the Agent may reasonably request.
SECTION 3.06. Determinations Under Section 3.01. For purposes
of determining compliance with the conditions specified in Section 3.01, each
Lender shall be deemed to have consented to, approved or accepted or to be
satisfied with each document or other matter required thereunder to be consented
to or approved by or acceptable or satisfactory to the Lenders unless an officer
of the Agent responsible for the transactions contemplated by this Agreement
shall have received notice from such Lender prior to the date that the Company,
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45
by notice to the Lenders, designates as the proposed Effective Date, specifying
its objection thereto. The Agent shall promptly notify the Lenders of the
occurrence of the Effective Date.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES
SECTION 4.01. Representations and Warranties of the Company. The
Company represents and warrants as follows:
(a) The Company is a corporation duly organized, validly
existing and in good standing under the laws of the State of Delaware.
(b) The execution, delivery and performance by the Company of
this Agreement and the Notes of the Company, and the consummation of
the transactions contemplated hereby, are within the Company's
corporate powers, have been duly authorized by all necessary corporate
action, and do not and will not cause or constitute a violation of any
provision of law or regulation or any provision of the Certificate of
Incorporation or By-Laws of the Company or result in the breach of, or
constitute a default or require any consent under, or result in the
creation of any lien, charge or encumbrance upon any of the properties,
revenues, or assets of the Company pursuant to, any indenture or other
agreement or instrument to which the Company is a party or by which the
Company or its property may be bound or affected.
(c) No authorization, consent, approval (including any
exchange control approval), license or other action by, and no notice
to or filing or registration with, any governmental authority,
administrative agency or regulatory body or any other third party is
required for the due execution, delivery and performance by the Company
of this Agreement or the Notes of the Company.
(d) This Agreement has been, and each of the Notes when
delivered hereunder will have been, duly executed and delivered by the
Company. This Agreement is, and each of the Notes of the Company when
delivered hereunder will be, the legal, valid and binding obligation of
the Company enforceable against the Company in accordance with their
respective terms, except to the extent that such enforcement may be
limited by applicable bankruptcy, insolvency and other similar laws
affecting creditors' rights generally.
(e) The Consolidated balance sheet of the Company and its
Consolidated Subsidiaries as at December 31, 1998, and the related
Consolidated statements of income
<PAGE>
46
and cash flows of the Company and its Consolidated Subsidiaries for the
fiscal year then ended (together with the notes to the financial
statements of the Company and its Consolidated Subsidiaries and the
Consolidated statements of cash flows of the Company and its
Consolidated Subsidiaries), accompanied by an opinion of one or more
nationally recognized firms of independent public accountants, and the
Consolidated balance sheet of the Company and its Consolidated
Subsidiaries as at June 30, 1999, and the related Consolidated
statements of income and cash flows of the Company and its Consolidated
Subsidiaries for the six months then ended, duly certified by the
principal financial officer of the Company, copies of which have been
furnished to each Lender, are materially complete and correct, and
fairly present, subject, in the case of said balance sheet as at June
30, 1999, and said statements of income and cash flows for the six
months then ended, to year-end audit adjustments, the Consolidated
financial condition of the Company and its Consolidated Subsidiaries as
at such dates and the Consolidated results of the operations of the
Company and its Consolidated Subsidiaries for the periods ended on such
dates, all in accordance with GAAP consistently applied, except as
otherwise noted therein; the Company and its Consolidated Subsidiaries
do not have on such date any material contingent liabilities,
liabilities for taxes, unusual forward or long-term commitments or
unrealized or anticipated losses from any unfavorable commitments,
except as referred to or reflected or provided for in such balance
sheet or the notes thereto as at such date. Since December 31, 1998,
there has been no Material Adverse Change.
(f) There is no action, suit, investigation, litigation or
proceeding, including, without limitation, any Environmental Action,
pending or to the knowledge of the Company Threatened affecting the
Company or any of its Subsidiaries before any court, governmental
agency or arbitrator that (i) is reasonably likely to have a Material
Adverse Effect (other than the Disclosed Litigation), or (ii) purports
to affect the legality, validity or enforceability of this Agreement or
any Note or the consummation of the transactions contemplated hereby,
and there has been no adverse change in the status, or financial effect
on the Company or any of its Subsidiaries, of the Disclosed Litigation
from that described on Schedule 3.01(b) hereto.
(g) Following application of the proceeds of each Advance, not
more than 25 percent of the value of the assets (either of the Borrower
of such Advance or of such Borrower and its Subsidiaries on a
Consolidated basis) subject to the provisions of Section 5.02(a) or
subject to any restriction contained in any agreement or instrument
between such Borrower and any Lender or any Affiliate of any Lender
relating to Debt and within the scope of Section 6.01(e) will be margin
stock (within the meaning of Regulation U issued by the Board of
Governors of the Federal Reserve System).
(h) The Company and each wholly-owned direct Subsidiary of the
Company have, in the aggregate, met their minimum funding requirements
under ERISA with
<PAGE>
47
respect to their Plans in all material respects and have not incurred
any material liability to the PBGC, other than for the payment of
premiums, in connection with such Plans.
(i) No ERISA Event has occurred or is reasonably expected to
occur with respect to any Plan of the Company or any of its ERISA
Affiliates that has resulted in or is reasonably likely to result in a
material liability of the Company or any of its ERISA Affiliates.
(j) The Schedules B (Actuarial Information) to the 1998 annual
reports (Form 5500 Series) with respect to each Plan of the Company or
any of its ERISA Affiliates, copies of which have been filed with the
Internal Revenue Service (and which will be furnished to any Bank
through the Administrative Agent upon the request of such Bank through
the Administrative Agent to the Company), are complete and accurate in
all material respects and fairly present in all material respects the
funding status of such Plans at such date, and since the date of each
such Schedule B there has been no material adverse change in funding
status.
(k) Neither the Company nor any of its ERISA Affiliates has
incurred or reasonably expects to incur any Withdrawal Liability to any
Multiemployer Plan in an annual amount exceeding 6% of Net Tangible
Assets of the Company and its Consolidated Subsidiaries.
(l) Neither the Company nor any of its ERISA Affiliates has
been notified by the sponsor of a Multiemployer Plan that such
Multiemployer Plan is in reorganization or has been terminated, within
the meaning of Title IV of ERISA. No such Multiemployer Plan is
reasonably expected to be in reorganization or to be terminated, within
the meaning of Title IV of ERISA, in a reorganization or termination
which might reasonably be expected to result in a liability of the
Company in an amount in excess of $5,000,000.
(m) The Company is not, and immediately after the application
by the Company of the proceeds of each Loan will not be, (a) an
"investment company" within the meaning of the Investment Company Act
of 1940, as amended, or (b) a "holding company" within the meaning of
the Public Utility Holding Company Act of 1935, as amended.
(n) To the best of the Company's knowledge, the operations and
properties of the Company and its Subsidiaries taken as a whole comply
in all material respects with all Environmental Laws, all necessary
Environmental Permits have been applied for or have been obtained and
are in effect for the operations and properties of the Company and its
Subsidiaries and the Company and its Subsidiaries are in compliance in
all material
<PAGE>
48
respects with all such Environmental Permits. To the best of the
Company's knowledge no circumstances exist that would be reasonably
likely to form the basis of an Environmental Action against the Company
or any of its Subsidiaries or any of their properties that could have a
Material Adverse Effect.
(o) The Company has (i) initiated a review and assessment of
all areas within its and each of its Subsidiaries' business and
operations (including those affected by suppliers, vendors and
customers) that could be adversely affected by the risk that computer
applications used by the Company or any of its Subsidiaries (or
suppliers, vendors and customers) may be unable to recognize and
perform properly date sensitive functions involving certain dates prior
to and any date after December 31, 1999 (the "Year 2000 Problem"), (ii)
developed a plan and timetable for addressing the Year 2000 Problem on
a timely basis and (iii) to date, implemented that plan in accordance
with such timetable. Based on the foregoing, the Company believes that
all computer applications (including those of its suppliers, vendors
and customers) that are material to its or any of its Subsidiaries'
business and operations are reasonably expected on a timely basis to be
able to perform properly date-sensitive functions for all dates before,
on and after January 1, 2000, except to the extent that a failure to do
so could not reasonably be expected to have a Material Adverse Effect.
ARTICLE V
COVENANTS OF THE BORROWER
SECTION 5.01. Affirmative Covenants. So long as any Advance shall
remain unpaid or any Lender shall have any Commitment hereunder, the Company
will:
(a) Compliance with Laws, Etc. Comply, and cause each
Designated Subsidiary to comply with all applicable laws, rules,
regulations and orders, such compliance to include, without limitation,
compliance with ERISA and Environmental Laws as provided in Section
5.01(j), if failure to comply with such requirements would have a
Material Adverse Effect.
(b) Payment of Taxes, Etc. Pay and discharge, and cause each
Designated Subsidiary to pay and discharge, all taxes, assessments and
governmental charges or levies imposed upon it or on its income or
profits or upon any of its property; provided, however, that neither
the Company nor any of its Subsidiaries shall be required to pay or
discharge any such tax, assessment, charge or claim that is being
contested in good faith and by proper proceedings and as to which
appropriate reserves are being maintained.
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49
(c) Maintenance of Insurance. Maintain, and cause each
Designated Subsidiary to maintain, insurance with responsible and
reputable insurance companies or associations in such amounts and
covering such risks as is usually carried by companies engaged in
similar businesses and owning similar properties in the same general
areas in which the Company or such Subsidiary operates.
(d) Preservation of Corporate Existence, Etc. Preserve and
maintain, and cause each Designated Subsidiary to preserve and
maintain, its corporate existence and all its material rights (charter
and statutory) privileges and franchises; provided, however, that the
Company and each Designated Subsidiary may consummate any merger,
consolidation or sale of assets permitted under Section 5.02(b).
(e) Visitation Rights. At any reasonable time and from time to
time, permit the Agent or any of the Lenders or any agents or
representatives thereof, to examine and make copies of and abstracts
from the records and books of account of, and visit the properties of,
the Company and any Designated Subsidiary, and to discuss the affairs,
finances and accounts of the Company and any Designated Subsidiary with
any of their officers or directors and with their independent certified
public accountants.
(f) Keeping of Books. Keep, and cause each Designated
Subsidiary to keep, proper books of record and account, in which full
and correct entries shall be made of all financial transactions and the
assets and business of the Company and each Designated Subsidiary in
accordance with generally accepted accounting principles in effect from
time to time.
(g) Maintenance of Properties, Etc. Maintain and preserve, and
cause each Designated Subsidiary to maintain and preserve, all of its
properties that are used or useful in the conduct of its business in
good working order and condition, ordinary wear and tear excepted;
provided, however, that neither the Company nor any of its Designated
Subsidiaries shall be required to maintain or preserve any property if
the failure to maintain or preserve such property shall not have a
Material Adverse Effect.
(h) Reporting Requirements. Furnish to the Agent (with a copy
for each Lender) and the Agent shall promptly forward the same to the
Lenders:
(i) as soon as available and in any event within 60
days after the end of each of the first three quarters of each
fiscal year of the Company, a Consolidated balance sheet of
the Company and its Consolidated Subsidiaries as of the end of
such quarter and a Consolidated statement of income and cash
flows of the Company and its Consolidated Subsidiaries for the
period commencing at the end of the previous fiscal year and
ending with the end of such quarter, setting forth in each
case in comparative form the corresponding figures as of the
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50
corresponding date and for the corresponding period of the
preceding fiscal year, all in reasonable detail and certified
by the principal financial officer, principal accounting
officer, the Vice-President and Treasurer or an Assistant
Treasurer of the Company, subject, however, to year-end
auditing adjustments, which certificate shall include a
statement that such officer has no knowledge, except as
specifically stated, of any condition, event or act which
constitutes a Default;
(ii) as soon as available and in any event within 120
days after the end of each fiscal year of the Company, a
Consolidated balance sheet of the Company and its Consolidated
Subsidiaries as of the end of such fiscal year and the related
Consolidated statements of income and cash flows of the
Company and its Consolidated Subsidiaries for such fiscal year
setting forth in each case in comparative form the
corresponding figures as of the close of and for the preceding
fiscal year, all in reasonable detail and accompanied by an
opinion of independent public accountants of nationally
recognized standing, as to said financial statements and a
certificate of the principal financial officer, principal
accounting officer, the Vice-President and Treasurer or an
Assistant Treasurer of the Company stating that such officer
has no knowledge, except as specifically stated, of any
condition, event or act which constitutes a Default;
(iii) copies of the Forms 8-K and 10-K reports (or
similar reports) which the Company is required to file with
the Securities and Exchange Commission of the United States of
America, promptly after the filing thereof;
(iv) copies of each annual report, quarterly report,
special report or proxy statement mailed to substantially all
of the stockholders of the Company, promptly after the mailing
thereof to the stockholders;
(v) immediate notice of the occurrence of any Default
of which the principal financial officer, principal accounting
officer, the Vice-President and Treasurer or an Assistant
Treasurer of the Company shall have knowledge;
(vi) as soon as available and in any event within 15
days after the Company or any of its ERISA Affiliates knows or
has reason to know that any ERISA Event has occurred, a
statement of a senior officer of the Company with
responsibility for compliance with the requirements of ERISA
describing such ERISA Event and the action, if any, which the
Company or such ERISA Affiliate proposes to take with respect
thereto;
(vii) at the request of any Lender, promptly after
the filing thereof with the Internal Revenue Service, copies
of Schedule B (Actuarial Information) to
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51
each annual report (Form 5500 series) filed by the Company or
any of its ERISA Affiliates with respect to each Plan;
(viii) promptly after receipt thereof by the Company
or any of its ERISA Affiliates, copies of each notice from the
PBGC stating its intention to terminate any Plan or to have a
trustee appointed to administer any Plan;
(ix) promptly after such request, such other
documents and information relating to any Plan as any Lender
may reasonably request from time to time;
(x) promptly and in any event within five Business
Days after receipt thereof by the Company or any of its ERISA
Affiliates from the sponsor of a Multiemployer Plan, copies of
each notice concerning (A) (x) the imposition of Withdrawal
Liability in an amount in excess of $5,000,000 with respect to
any one Multiemployer Plan or in an aggregate amount in excess
of $25,000,000 with respect to all such Multiemployer Plans
within any one calendar year or (y) the reorganization or
termination, within the meaning of Title IV of ERISA, of any
Multiemployer Plan that has resulted or might reasonably be
expected to result in Withdrawal Liability in an amount in
excess of $5,000,000 or of all such Multiemployer Plans that
has resulted or might reasonably be expected to result in
Withdrawal Liability in an aggregate amount in excess of
$25,000,000 within any one calendar year and (B) the amount of
liability incurred, or that may be incurred, by the Company or
any of its ERISA Affiliates in connection with any event
described in such subclause (x) or (y);
(xi) promptly after the commencement thereof, notice
of all actions and proceedings before any court, governmental
agency or arbitrator affecting the Borrower or any Designated
Subsidiary of the type described in Section 4.01(f); and
(xii) from time to time such further information
respecting the financial condition and operations of the
Company and its Subsidiaries as any Lender may from time to
time reasonably request.
(i) Authorizations. Obtain, and cause each Designated
Subsidiary to obtain, at any time and from time to time all
authorizations, licenses, consents or approvals (including exchange
control approvals) as shall now or hereafter be necessary or desirable
under applicable law or regulations in connection with its making and
performance of this Agreement and, upon the request of any Lender,
promptly furnish to such Lender copies thereof.
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52
(j) Compliance with Environmental Laws. Comply, and cause each
of its Subsidiaries and all lessees and other Persons operating or
occupying its properties to comply, in all material respects, with all
applicable Environmental Laws and Environmental Permits;
obtain and renew and cause each of its Subsidiaries to obtain and renew
all Environmental Permits necessary for its operations and properties;
and conduct, and cause each of its Subsidiaries to conduct, any
investigation, study, sampling and testing, and undertake any cleanup,
removal, remedial or other action necessary to remove and clean up all
Hazardous Materials from any of its properties, in accordance with the
requirements of all Environmental Laws; provided, however, that neither
the Company nor any of its Subsidiaries shall be required to undertake
any such cleanup, removal, remedial or other action to the extent that
its obligation to do so is being contested in good faith and by proper
proceedings and appropriate reserves are being maintained with respect
to such circumstances.
(k) Change of Control. If a Change of Control shall occur,
within ten calendar days after the occurrence thereof, provide the
Agent with notice thereof, describing therein in reasonable detail the
facts and circumstances giving rise to such Change in Control.
SECTION 5.02. Negative Covenants. So long as any Advance shall remain
unpaid or any Lender shall have any Commitment hereunder, the Company will not:
(a) Liens, Etc. Issue, assume or guarantee, or permit any of
its Subsidiaries owning Restricted Property to issue, assume or
guarantee, any Debt secured by Liens on or with respect to any
Restricted Property without effectively providing that its obligations
to the Lenders under this Agreement and any of the Notes shall be
secured equally and ratably with such Debt so long as such Debt shall
be so secured, except that the foregoing shall not apply to:
(i) Liens affecting property of the Company or any of
its Subsidiaries existing on the Effective Date in effect as
of the date hereof or of any corporation existing at the time
it becomes a Subsidiary of the Company or at the time it is
merged into or consolidated with the Company or a Subsidiary
of the Company;
(ii) Liens on property of the Company or its
Subsidiaries existing at the time of acquisition thereof or
incurred to secure the payment of all or part of the purchase
price thereof or to secure Debt incurred prior to, at the time
of or within 24 months after acquisition thereof for the
purpose of financing all or part of the purchase price
thereof;
(iii) Liens on property of the Company or its
Subsidiaries (in the case of property that is, in the opinion
of the Board of Directors of the Company,
<PAGE>
53
substantially unimproved for the use intended by the Company)
to secure all or part of the cost of improvement thereof, or
to secure Debt incurred to provide funds for any such purpose;
(iv) Liens which secure only Debt owing by a
Subsidiary of the Company to the Company or to another
Subsidiary of the Company;
(v) Liens in favor of the United States of America,
any State, any foreign country, or any department, agency,
instrumentality, or political subdivisions of any such
jurisdiction, to secure partial, progress, advance or other
payments pursuant to any contract or statute or to secure any
Debt incurred for the purpose of financing all or any part of
the purchase price or cost of constructing or improving the
property subject thereto, including, without limitation, Liens
to secure Debt of the pollution control or industrial revenue
bond type; or
(vi) any extension, renewal or replacement (or
successive extensions, renewals or replacements), in whole or
in part, of any Lien referred to in the foregoing clauses (i)
to (v) inclusive of any Debt secured thereby, provided that
the principal amount of Debt secured thereby shall not exceed
the principal amount of Debt so secured at the time of such
extension, renewal or replacement, and that such extension,
renewal or replacement Lien shall be limited to all or part of
the property which secured the Lien extended, renewed or
replaced (plus improvements on such property);
provided, however, that, the Company and any one or more Subsidiaries
owning Restricted Property may issue, assume or guarantee Debt secured
by Liens which would otherwise be subject to the foregoing restrictions
in an aggregate principal amount which, together with the aggregate
outstanding principal amount of all other Debt of the Company and its
Subsidiaries owning Restricted Property that would otherwise be subject
to the foregoing restrictions (not including Debt permitted to be
secured under clause (i) through (vi) above) and the aggregate value of
the Sale and Leaseback Transactions in existence at such time, does not
at any one time exceed 10% of the Net Tangible Assets of the Company
and its Consolidated Subsidiaries; and provided further that the
following type of transaction, among others, shall not be deemed to
create Debt secured by Liens: Liens required by any contract or statute
in order to permit the Company or any of its Subsidiaries to perform
any contract or subcontract made by it with or at the request of the
United States of America, any foreign country or any department, agency
or instrumentality of any of the foregoing jurisdictions.
(b) Mergers, Etc. Merge or consolidate with or into, or
convey, transfer, lease or otherwise dispose of (whether in one
transaction or in a series of transactions) all or substantially all of
its assets (whether now owned or hereafter acquired) to, any Person;
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54
provided, however, that the Company may merge or consolidate with any
other Person so long as the Company is the surviving corporation and so
long as no Default shall have occurred and be continuing at the time of
such proposed transaction or would result therefrom.
ARTICLE VI
EVENTS OF DEFAULT
SECTION 6.01. Events of Default. If any of the following events
("Events of Default") shall occur and be continuing:
(a) Any Borrower shall fail to pay: (i) any principal of any
Advance when the same becomes due and payable; (ii) any facility fees,
utilization fees or any interest on any Advance payable under this
Agreement or any Note within three Business Days after the same becomes
due and payable; or (iii) any other fees or other amounts payable under
this Agreement or any Notes within 30 days after the same becomes due
and payable other than those fees and amounts the liabilities for which
are being contested in good faith by such Borrower and which have been
placed in Escrow by such Borrower; or
(b) Any representation or warranty made (or deemed made) by
any Borrower (or any of its officers) in connection with this Agreement
or by any Designated Subsidiary in the Designation Letter pursuant to
which such Designated Subsidiary became a Borrower hereunder shall
prove to have been incorrect in any material respect when made (or
deemed made); or
(c) The Company shall repudiate its obligations under, or
shall default in the due performance or observance of, any term,
covenant or agreement contained in Article VII of this Agreement; or
(d) (i) The Company shall fail to perform or observe any other
term, covenant or agreement contained in Section 5.02(a) and such
failure shall remain unremedied for a period of 30 days after any
Lender shall have given notice thereof to the Company (through the
Agent), or (ii) the Company or any other Borrower shall fail to perform
or to observe any other term, covenant or agreement contained in this
Agreement on its part to be performed or observed and such failure
shall remain unremedied for a period of 30 days after any Lender shall
have given notice thereof to the relevant Borrower or, in the case of
the Company, any of the principal financial officer, the principal
accounting officer, the Vice-President and Treasurer or an Assistant
Treasurer of the Company, and in the case of any other Borrower, a
responsible officer of such Borrower, first has knowledge of such
failure; or
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55
(e) (i) The Company or any of its Consolidated or Designated
Subsidiaries shall fail to pay any principal of or premium or interest
on any Debt (other than Debt owed to the Company or its Subsidiaries or
Affiliates) that is outstanding in a principal amount of at least
$150,000,000 in the aggregate (but excluding Debt outstanding hereunder
and Debt owed by such party to any bank, financial institution or other
institutional lender to the extent the Borrower or any Subsidiary has
deposits with such bank, financial institution or other institutional
lender sufficient to repay such Debt) of the Company or such Subsidiary
(as the case may be), when the same becomes due and payable (whether by
scheduled maturity, required prepayment, acceleration, demand or
otherwise), and such failure shall continue after the applicable grace
period, if any, specified in the agreement or instrument relating to
such Debt, or (ii) any other event shall occur or condition shall exist
under any agreement or instrument relating to any such Debt and shall
continue after the applicable grace period, if any, specified in such
agreement or instrument, if the effect of such event or condition is to
accelerate, or to permit the acceleration of, the maturity of such
Debt, or (iii) any such Debt shall be declared to be due and payable,
or required to be prepaid or redeemed (other than by a regularly
scheduled required prepayment or redemption), purchased or defeased, or
an offer to prepay, redeem, purchase or defease such Debt shall be
required to be made, in each case prior to the stated maturity thereof;
provided, however, that, for purposes of this Section 6.0l(e), in the
case of (x) Debt of any Person (other than the Company or one of its
Consolidated Subsidiaries) which the Company has guaranteed and (y)
Debt of Persons (other than the Company or one of its Consolidated
Subsidiaries) the payment of which is secured by a Lien on property of
the Company or such Subsidiary, such Debt shall be deemed to have not
been paid when due or to have been declared to be due and payable only
when the Company or such Subsidiary, as the case may be, shall have
failed to pay when due any amount which it shall be obligated to pay
with respect to such Debt; provided further, however, that any event or
occurrence described in this subsection (e) shall not be an Event of
Default if (A) such event or occurrence relates to the Debt of any
Subsidiary of the Company located in China, India, the Commonwealth of
Independent States or Turkey (collectively, the "Exempt Countries"),
(B) such Debt is not guaranteed or supported in any legally enforceable
manner by any Borrower or by any Subsidiary or Affiliate of the Company
located outside the Exempt Countries, (C) such event or occurrence is
due to the direct or indirect action of any government entity or agency
in any Exempt Country and (D) as of the last day of the calendar
quarter immediately preceding such event or occurrence, the book value
of the assets of such Subsidiary does not exceed $150,000,000 and the
aggregate book value of the assets of all Subsidiaries of the Company
located in Exempt Countries the Debt of which would cause an Event of
Default to occur but for the effect of this proviso does not exceed
$500,000,000; or
(f) The Company or any of its Designated or Consolidated
Subsidiaries shall generally not pay its debts as such debts become
due, or shall admit in writing its inability to pay its debts
generally, or shall make a general assignment for the benefit of
creditors;
<PAGE>
56
or any proceeding shall be instituted by or against the Company or any
such Subsidiaries seeking to adjudicate it a bankrupt or insolvent, or
seeking liquidation, winding up, reorganization, arrangement,
adjustment, protection, relief, or composition of it or its debts under
any law relating to bankruptcy, insolvency or reorganization or relief
of debtors, or seeking the entry of an order for relief or the
appointment of a receiver, trustee, custodian or other similar official
for it or for any substantial part of its property and, in the case of
any such proceeding instituted against it (but not instituted by it),
either such proceeding shall remain undismissed or unstayed for a
period of 30 days, or any of the actions sought in such proceeding
(including, without limitation, the entry of an order for relief
against, or the appointment of a receiver, trustee, custodian or other
similar official for, it or for any substantial part of its property)
shall occur; or the Company or any such Subsidiaries shall take any
corporate action to authorize any of the actions set forth above in
this subsection (f); provided, however, that any event or occurrence
described in this subsection (f) shall not be an Event of Default if
(A) such event or occurrence relates to any Subsidiary of the Company
located in an Exempt Country, (B) the Debt of such Subsidiary is not
guaranteed or supported in any legally enforceable manner by any
Borrower or by any Subsidiary or Affiliate of the Company located
outside the Exempt Countries, (C) such event or occurrence is due to
the direct or indirect action of any government entity or agency in any
Exempt Country and (D) as of the last day of the calendar quarter
immediately preceding such event or occurrence, the book value of the
assets of such Subsidiary does not exceed $150,000,000 and the
aggregate book value of the assets of all Subsidiaries of the Company
located in Exempt Countries with respect to which the happening of the
events or occurrences described in this subsection (f) would cause an
Event of Default to occur but for the effect of this proviso does not
exceed $500,000,000; or
(g) Any judgment or order for the payment of money in excess
of $150,000,000 shall be rendered against the Company or any of its
Subsidiaries and enforcement proceedings shall have been commenced by
any creditor upon such judgment or order and there shall be any period
of 10 consecutive days during which a stay of enforcement of such
judgment or order, by reason of a pending appeal or otherwise, shall
not be in effect; provided, however, that any such judgment or order
shall not be an Event of Default under this Section 6.01(g) if (A) such
judgment or order is rendered against any Subsidiary of the Company
located in an Exempt Country, (B) the Debt of such Subsidiary is not
guaranteed or supported in any legally enforceable manner by any
Borrower or by any Subsidiary or Affiliate of the Company located
outside the Exempt Countries, (C) such judgment or order is due to the
direct or indirect action of any government entity or agency in any
Exempt Country and (D) as of the last day of the calendar quarter
immediately preceding the tenth consecutive day of the stay period
referred to above, the book value of the assets of such Subsidiary does
not exceed $150,000,000 and the aggregate book value of the assets of
all Subsidiaries of the Company located in Exempt Countries the
judgments and orders against which would
<PAGE>
57
cause an Event of Default to occur but for the effect of this proviso
does not exceed $500,000,000; or
(h) Any non-monetary judgment or order shall be rendered
against the Company or any of its Subsidiaries that is reasonably
likely to have a Material Adverse Effect, and enforcement proceedings
shall have been commenced by any Person upon such judgment or order and
there shall be any period of 10 consecutive days during which a stay of
enforcement of such judgment or order, by reason of a pending appeal or
otherwise, shall not be in effect; or
(i) Any license, consent, authorization or approval (including
exchange control approvals) now or hereafter necessary to enable the
Company or any Designated Subsidiary to comply with its obligations
herein or under any Notes of such Borrower shall be modified, revoked,
withdrawn, withheld or suspended; or
(j) (i) Any ERISA Event shall have occurred with respect to a
Plan of any Borrower or any of its ERISA Affiliates and the sum
(determined as of the date of occurrence of such ERISA Event) of the
Insufficiency of such Plan and the Insufficiency of any and all other
Plans of the Borrowers and their ERISA Affiliates with respect to which
an ERISA Event shall have occurred and then exist (or the liability of
the Borrowers and their ERISA Affiliates related to such ERISA Event)
exceeds $150,000,000; or (ii) any Borrower or any of its ERISA
Affiliates shall be in default, as defined in Section 4219(c)(5) of
ERISA, with respect to any payment of Withdrawal Liability and the sum
of the outstanding balance of such Withdrawal Liability and the
outstanding balance of any other Withdrawal Liability that any Borrower
or any of its ERISA Affiliates has incurred exceeds 6% of Net Tangible
Assets of the Company and its Consolidated Subsidiaries; or (iii) any
Borrower or any of its ERISA Affiliates shall have been notified by the
sponsor of a Multiemployer Plan of such Borrower or any of its ERISA
Affiliates that such Multiemployer Plan is in reorganization or is
being terminated, within the meaning of Title IV of ERISA, and as a
result of such reorganization or termination the aggregate annual
contributions of the Borrowers and their ERISA Affiliates to all
Multiemployer Plans that are then in reorganization or being terminated
have been or will be increased over the amounts contributed to such
Multiemployer Plans for the plan years of such Multiemployer Plans
immediately preceding the plan year in which such reorganization or
termination occurs by an amount exceeding $150,000,000; or
then, and (i) in any such event (except as provided in clause (ii) below), the
Agent (A) shall at the request, or may with the consent, of the Majority
Lenders, by notice to the Company, declare the obligation of each Lender to make
Advances to be terminated, whereupon the same shall forthwith terminate, and (B)
shall at the request, or may with the consent, of the Majority Lenders, by
notice to the Company, declare the Advances, all interest thereon and all other
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58
amounts payable under this Agreement to be forthwith due and payable, whereupon
the Advances, all such interest and all such amounts shall become and be
forthwith due and payable, without presentment, demand, protest or further
notice of any kind, all of which are hereby expressly waived by the Borrowers
and (ii) in the case of the occurrence of any Event of Default described in
clause (i) or (ii) of Section 6.01(a), the Agent shall, at the request, or may
with the consent, of the Lenders which have made or assumed under this Agreement
at least 66-2/3% of the aggregate principal amount (based in respect of
Competitive Bid Advances denominated in Foreign Currencies on the Equivalent in
Dollars on the date of such request) of Competitive Bid Advances then
outstanding and to whom such Advances are owed, by notice to the Company,
declare the full unpaid principal of and accrued interest on all Competitive Bid
Advances hereunder and all other obligations of the Borrowers hereunder to be
immediately due and payable, whereupon such Advances and such obligations shall
be immediately due and payable, without presentment, demand, protest or other
further notice of any kind, all of which are hereby expressly waived by the
Borrowers; provided, however, that in the event of an actual or deemed entry of
an order for relief with respect to any Borrower under the United States
Bankruptcy Code of 1978, as amended, (x) the obligation of each Lender to make
Advances shall automatically be terminated and (y) the Advances, all such
interest and all such amounts shall automatically become and be due and payable,
without presentment, demand, protest or any notice of any kind, all of which are
hereby expressly waived by the Borrowers.
ARTICLE VII
GUARANTEE
SECTION 7.01. Unconditional Guarantee. For valuable
consideration, receipt whereof is hereby acknowledged, and to induce each Lender
to make Advances to the Designated Subsidiaries and to induce the Agent to act
hereunder, the Company hereby unconditionally and irrevocably guarantees to each
Lender and the Agent that:
(a) the principal of and interest on each Advance to each
Designated Subsidiary shall be promptly paid in full when due (whether
at stated maturity, by acceleration or otherwise) in accordance with
the terms hereof, and, in case of any extension of time of payment, in
whole or in part, of such Advance, that all such sums shall be promptly
paid when due (whether at stated maturity, by acceleration or
otherwise) in accordance with the terms of such extension; and
(b) all other amounts payable hereunder by any Designated
Subsidiary to any Lender or the Agent or the Sub-Agent, as the case may
be, shall be promptly paid in full when due in accordance with the
terms hereof (the obligations of the Designated Subsidiaries under
these subsections (a) and (b) of this Section 7.01 being the
"Obligations").
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59
In addition, the Company hereby unconditionally and irrevocably agrees that upon
default in the payment when due (whether at stated maturity, by acceleration or
otherwise) of any principal of, or interest on, any Advance to any Designated
Subsidiary or such other amounts payable by any Designated Subsidiary to any
Lender or the Agent, the Company will forthwith pay the same, without further
notice or demand.
SECTION 7.02. Guarantee Absolute. The Company guarantees that
the Obligations will be paid strictly in accordance with the terms of this
Agreement, regardless of any law, regulation or order now or hereafter in effect
in any jurisdiction affecting any of such terms or the rights of any Lender or
the Agent with respect thereto. The liability of the Company under this
guarantee shall be absolute and unconditional irrespective of:
(a) any lack of validity or enforceability of this Agreement
or any other agreement or instrument relating thereto;
(b) any change in the time, manner or place of payment of, or
in any other term of, all or any of the Obligations, or any other
amendment or waiver of or any consent to departure from this Agreement;
(c) any exchange, release or non-perfection of any collateral,
or any release or amendment or waiver of or consent to departure from
any other guaranty, for all or any of the Obligations; or
(d) any other circumstance which might otherwise constitute a
defense available to, or a discharge of, the Company, any Borrower or a
guarantor.
This guarantee shall continue to be effective or be reinstated, as the case may
be, if at any time any payment of any of the Obligations is rescinded or must
otherwise be returned by any of the Lenders or the Agent upon the insolvency,
bankruptcy or reorganization of the Company or any Borrower or otherwise, all as
though such payment had not been made.
SECTION 7.03. Waivers. The Company hereby expressly waives
diligence, presentment, demand for payment, protest, any requirement that any
right or power be exhausted or any action be taken against any Designated
Subsidiary or against any other guarantor of all or any portion of the Advances,
and all other notices and demands whatsoever.
SECTION 7.04. Remedies. Each of the Lenders and the Agent may
pursue its respective rights and remedies under this Article VII and shall be
entitled to payment hereunder notwithstanding any other guarantee of all or any
part of the Advances to the Designated Subsidiaries, and notwithstanding any
action taken by any such Lender or the Agent to enforce any of its rights or
remedies under such other guarantee, or any payment received thereunder. The
Company hereby irrevocably waives any claim or other right that it may now or
hereafter
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60
acquire against any Designated Subsidiary that arises from the existence,
payment, performance or enforcement of the Company's obligations under this
Article VII, including, without limitation, any right of subrogation,
reimbursement, exoneration, contribution or indemnification and any right to
participate in any claim or remedy of the Agent or the Lenders against any
Designated Subsidiary, whether or not such claim, remedy or right arises in
equity or under contract, statute or common law, including, without limitation,
the right to take or receive from the Designated Subsidiary, directly or
indirectly, in cash or other property or by set-off or in any other manner,
payment or security on account of such claim, remedy or right. If any amount
shall be paid to the Company in violation of the preceding sentence at any time
when all the Obligations shall not have been paid in full, such amount shall be
held in trust for the benefit of the Lenders and the Agent and shall forthwith
be paid to the Agent for its own account and the accounts of the respective
Lenders to be credited and applied to the Obligations, whether matured or
unmatured, in accordance with the terms of this Agreement, or to be held as
collateral for any Obligations or other amounts payable under this Agreement
thereafter arising. The Company acknowledges that it will receive direct and
indirect benefits from the financing arrangements contemplated by this Agreement
and that the waiver set forth in this section is knowingly made in contemplation
of such benefits.
SECTION 7.05. No Stay. The Company agrees that, as between (a)
the Company and (b) the Lenders and the Agent, the Obligations of any Designated
Subsidiary guaranteed by the Company hereunder may be declared to be forthwith
due and payable as provided in Article VI hereof for purposes of this Article
VII by declaration to the Company as guarantor notwithstanding any stay,
injunction or other prohibition preventing such declaration as against such
Designated Subsidiary and that, in the event of such declaration to the Company
as guarantor, such Obligations (whether or not due and payable by such
Designated Subsidiary), shall forthwith become due and payable by the Company
for purposes of this Article VII.
SECTION 7.06. Survival. This guarantee is a continuing
guarantee and shall (a) remain in full force and effect until payment in full
(after the Termination Date) of the Obligations and all other amounts payable
under this guaranty, (b) be binding upon the Company, its successors and
assigns, (c) inure to the benefit of and be enforceable by each Lender
(including each assignee Lender pursuant to Section 9.07) and the Agent and
their respective successors, transferees and assigns and (d) shall be reinstated
if at any time any payment to a Lender or the Agent hereunder is required to be
restored by such Lender or the Agent. Without limiting the generality of the
foregoing clause (c), each Lender may assign or otherwise transfer its interest
in any Advance to any other person or entity, and such other person or entity
shall thereupon become vested with all the rights in respect thereof granted to
such Lender herein or otherwise.
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61
ARTICLE VIII
THE AGENT
SECTION 8.01. Authorization and Action. Each Lender hereby
appoints and authorizes the Agent to take such action as agent on its behalf and
to exercise such powers and discretion under this Agreement as are delegated to
the Agent by the terms hereof, together with such powers and discretion as are
reasonably incidental thereto. As to any matters not expressly provided for by
this Agreement (including, without limitation, enforcement or collection of the
Notes), the Agent shall not be required to exercise any discretion or take any
action, but shall be required to act or to refrain from acting (and shall be
fully protected in so acting or refraining from acting) upon the instructions of
the Majority Lenders, and such instructions shall be binding upon all Lenders
and all holders of Notes; provided, however, that the Agent shall not be
required to take any action that exposes the Agent to personal liability or that
is contrary to this Agreement or applicable law. The Agent agrees to give to
each Lender prompt notice of each notice given to it by any Borrower pursuant to
the terms of this Agreement.
SECTION 8.02. Agent's Reliance, Etc. Neither the Agent nor any
of its directors, officers, agents or employees shall be liable for any action
taken or omitted to be taken by it or them under or in connection with this
Agreement, except for its or their own gross negligence or willful misconduct.
Without limitation of the generality of the foregoing, the Agent: (a) may treat
the Lender that made any Advance as the holder of the Debt resulting therefrom
until the Agent receives and accepts an Assignment and Acceptance entered into
by such Lender, as assignor, and an Eligible Assignee, as assignee, as provided
in Section 9.07; (b) may consult with legal counsel (including counsel for the
Company), independent public accountants and other experts selected by it and
shall not be liable for any action taken or omitted to be taken in good faith by
it in accordance with the advice of such counsel, accountants or experts; (c)
makes no warranty or representation to any Lender and shall not be responsible
to any Lender for any statements, warranties or representations (whether written
or oral) made in or in connection with this Agreement; (d) shall not have any
duty to ascertain or to inquire as to the performance or observance of any of
the terms, covenants or conditions of this Agreement on the part of any Borrower
or to inspect the property (including the books and records) of any Borrower;
(e) shall not be responsible to any Lender for the due execution, legality,
validity, enforceability, genuineness, sufficiency or value of this Agreement or
any other instrument or document furnished pursuant hereto; and (f) shall incur
no liability under or in respect of this Agreement by acting upon any notice,
consent, certificate or other instrument or writing (which may be by telecopier,
telegram or telex) believed by it to be genuine and signed or sent by the proper
party or parties.
SECTION 8.03. Citibank and Affiliates. With respect to its Commitment,
the Advances made by it and the Note issued to it, Citibank shall have the same
rights and powers under this Agreement as any other Lender and may exercise the
same as though it were not the
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62
Agent; and the term "Lender" or "Lenders" shall, unless otherwise expressly
indicated, include Citibank in its individual capacity. Citibank and its
Affiliates may accept deposits from, lend money to, act as trustee under
indentures of, accept investment banking engagements from and generally engage
in any kind of business with, the Company, any of its Subsidiaries and any
Person who may do business with or own securities of the Company or any such
Subsidiary, all as if Citibank were not the Agent and without any duty to
account therefor to the Lenders.
SECTION 8.04. Lender Credit Decision. Each Lender acknowledges
that it has, independently and without reliance upon the Agent or any other
Lender and based on the financial statements referred to in Section 4.01 and
such other documents and information as it has deemed appropriate, made its own
credit analysis and decision to enter into this Agreement. Each Lender also
acknowledges that it will, independently and without reliance upon the Agent or
any other Lender and based on such documents and information as it shall deem
appropriate at the time, continue to make its own credit decisions in taking or
not taking action under this Agreement.
SECTION 8.05. Indemnification. The Lenders agree to indemnify
the Agent (to the extent not reimbursed by a Borrower), ratably according to the
respective principal amounts of the Revolving Credit Advances then owed to each
of them (or if no Revolving Credit Advances are at the time outstanding, ratably
according to the respective amounts of their Commitments), from and against any
and all liabilities, obligations, losses, damages, penalties, actions,
judgments, suits, costs, expenses or disbursements of any kind or nature
whatsoever that may be imposed on, incurred by, or asserted against the Agent in
any way relating to or arising out of this Agreement or any action taken or
omitted by the Agent under this Agreement, provided that no Lender shall be
liable for any portion of such liabilities, obligations, losses, damages,
penalties, actions, judgments, suits, costs, expenses or disbursements resulting
from the Agent's gross negligence or willful misconduct. Without limitation of
the foregoing, each Lender agrees to reimburse the Agent promptly upon demand
for its ratable share of any out-of-pocket expenses (including counsel fees)
incurred by the Agent in connection with the preparation, execution, delivery,
administration, modification, amendment or enforcement (whether through
negotiations, legal proceedings or otherwise) of, or legal advice in respect of
rights or responsibilities under, this Agreement, to the extent that the Agent
is not reimbursed for such expenses by a Borrower.
SECTION 8.06. Successor Agent. The Agent may resign at any
time by giving written notice thereof to the Lenders and the Company and may be
removed at any time with or without cause by the Majority Lenders. The Company
may at any time, by notice to the Agent, propose a successor Agent (which shall
meet the criteria described below) specified in such notice and request that the
Lenders be notified thereof by the Agent with a view to their removal of the
Agent and their appointment of such successor Agent; the Agent agrees to forward
any such notice to the Lenders promptly upon its receipt by the Agent. Upon any
such resignation or removal, the Majority Lenders shall have the right to
appoint a successor Agent. If no successor
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63
Agent shall have been so appointed by the Majority Lenders, and shall have
accepted such appointment, within 30 days after the retiring Agent's giving of
notice of resignation or the Majority Lenders' removal of the retiring Agent,
then the retiring Agent may, on behalf of the Lenders, appoint a successor
Agent, which shall be a commercial bank organized under the laws of the United
States of America or of any State thereof and having a combined capital and
surplus of at least $500,000,000. Upon the acceptance of any appointment as
Agent hereunder by a successor Agent, such successor Agent shall thereupon
succeed to and become vested with all the rights, powers, discretion, privileges
and duties of the retiring Agent, and the retiring Agent shall be discharged
from its duties and obligations under this Agreement. After any retiring Agent's
resignation or removal hereunder as Agent, the provisions of this Article VIII
shall inure to its benefit as to any actions taken or omitted to be taken by it
while it was Agent under this Agreement.
SECTION 8.07. Sub-Agent. The Sub-Agent has been designated
under this Agreement to carry out duties of the Agent. The Sub-Agent shall be
subject to each of the obligations in this Agreement to be performed by the
Sub-Agent, and each of the Borrowers and the Lenders agrees that the Sub-Agent
shall be entitled to exercise each of the rights and shall be entitled to each
of the benefits of the Agent under this Agreement as relate to the performance
of its obligations hereunder.
ARTICLE IX
MISCELLANEOUS
SECTION 9.01. Amendments, Etc. No amendment or waiver of any
provision of this Agreement or the Revolving Credit Notes, nor consent to any
departure by any Borrower therefrom, shall in any event be effective unless the
same shall be in writing and signed by the Majority Lenders, and then such
waiver or consent shall be effective only in the specific instance and for the
specific purpose for which given; provided, however, that no amendment, waiver
or consent shall, unless in writing and signed by all the Lenders, do any of the
following: (a) increase the Commitments of the Lenders or subject the Lenders to
any additional obligations, (b) reduce the principal of, or interest on, the
Revolving Credit Advances or any fees or other amounts payable hereunder, (c)
postpone any date fixed for any payment of principal of, or interest on, the
Revolving Credit Advances or any fees or other amounts payable hereunder, (d)
release the Company from any of its obligations under Article VII, (e) require
the duration of an Interest Period to be nine months if such period is not
available to all Lenders or (f) amend this Section 9.01; and provided further
that no amendment, waiver or consent shall, unless in writing and signed by the
Agent in addition to the Lenders required above to take such action, affect the
rights or duties of the Agent under this Agreement or any Note.
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64
SECTION 9.02. Notices, Etc. All notices and other
communications provided for hereunder shall be in writing (including telecopier,
telegraphic or telex communication) and mailed (return receipt requested),
telecopied, telegraphed, telexed or delivered, if to the Company or to any
Designated Subsidiary, at the Company's address at 101 Columbia Road,
Morristown, New Jersey 07962-1219, Attention: Assistant Treasurer; if to any
Initial Lender, at its Domestic Lending Office specified opposite its name on
Schedule I hereto; if to any other Lender, at its Domestic Lending Office
specified in the Assignment and Acceptance pursuant to which it became a Lender;
and if to the Agent, at its address at Two Penns Way, New Castle, Delaware
19720, Attention: Bank Loan Syndications Department, with a copy to 399 Park
Avenue, New York, New York 10043, Attention: Carolyn Sheridan; or, as to any
Borrower or the Agent, at such other address as shall be designated by such
party in a written notice to the other parties and, as to each other party, at
such other address as shall be designated by such party in a written notice to
the Company and the Agent. All such notices and communications shall, when
mailed, telecopied, telegraphed or telexed, be effective when deposited in the
mails, telecopied, delivered to the telegraph company or confirmed by telex
answerback, respectively, except that notices and communications to the Agent
pursuant to Article II, III or VIII shall not be effective until received by the
Agent. Delivery by telecopier of an executed counterpart of any amendment or
waiver of any provision of this Agreement or the Notes or of any Exhibit hereto
to be executed and delivered hereunder shall be effective as delivery of a
manually executed counterpart thereof.
SECTION 9.03. No Waiver; Remedies. No failure on the part of
any Lender or the Agent to exercise, and no delay in exercising, any right
hereunder or under any Note shall operate as a waiver thereof; nor shall any
single or partial exercise of any such right preclude any other or further
exercise thereof or the exercise of any other right. The remedies herein
provided are cumulative and not exclusive of any remedies provided by law.
SECTION 9.04. Costs and Expenses. (a) The Company agrees to
pay on demand all costs and expenses of the Agent in connection with the
administration, modification and amendment of this Agreement, the Notes and the
other documents to be delivered hereunder, including, without limitation, (i)
all due diligence, syndication (including printing, distribution and bank
meetings), transportation, computer, duplication, appraisal, consultant, and
audit expenses and (ii) the reasonable fees and expenses of counsel for the
Agent with respect thereto. The Company further agrees to pay on demand all
costs and expenses of the Agent and the Lenders, if any (including, without
limitation, reasonable counsel fees and expenses), in connection with the
enforcement (whether through negotiations, legal proceedings or otherwise) of
this Agreement, the Notes and the other documents to be delivered hereunder,
including, without limitation, reasonable fees and expenses of counsel for the
Agent and each Lender in connection with the enforcement of rights under this
Section 9.04(a).
(b) Each Borrower agrees to indemnify and hold harmless the
Agent and each Lender and each of their Affiliates and their officers,
directors, employees, agents and advisors (each, an "Indemnified Party") from
and against any and all claims, damages, losses, liabilities
<PAGE>
65
and expenses (including, without limitation, reasonable fees and expenses of
counsel) that may be incurred by or asserted or awarded against any Indemnified
Party, in each case arising out of or in connection with or by reason of, or in
connection with the preparation for a defense of, any investigation, litigation
or proceeding arising out of, related to or in connection with the Notes, this
Agreement, any of the transactions contemplated herein or the actual or proposed
use of the proceeds of the Advances whether or not such investigation,
litigation or proceeding is brought by the Company, its directors, shareholders
or creditors or an Indemnified Party or any other Person or any Indemnified
Party is otherwise a party thereto and whether or not the transactions
contemplated hereby are consummated, except to the extent any such claim,
damage, loss, liability or expense has resulted from such Indemnified Party's
gross negligence or willful misconduct. The Company also agrees not to assert
any claim against any Indemnified Party on any theory of liability for special,
indirect, consequential or punitive damages arising out of or otherwise relating
to the Notes, this Agreement, any of the transactions contemplated herein or the
actual or proposed use of the proceeds of the Advances.
(c) If any payment of principal of, or Conversion of, any
Eurocurrency Rate Advance or LIBO Rate Advance is made by the Borrower to or for
the account of a Lender other than on the last day of the Interest Period for
such Advance, as a result of a payment or Conversion pursuant to Section
2.03(d), 2.05(b), 2.09(a) or (b) or 2.11, acceleration of the maturity of the
Notes pursuant to Section 6.01 or for any other reason, the Borrower shall, upon
demand by such Lender (with a copy of such demand to the Agent), pay to the
Agent for the account of such Lender any amounts required to compensate such
Lender for any additional losses, costs or expenses that it may reasonably incur
as a result of such payment or Conversion, including, without limitation, any
loss (including loss of anticipated profits), cost or expense incurred by reason
of the liquidation or reemployment of deposits or other funds acquired by any
Lender to fund or maintain such Advance.
(d) Without prejudice to the survival of any other agreement
of the Borrower hereunder, the agreements and obligations of the Borrower
contained in Sections 2.10, 2.13 and 9.04 shall survive the payment in full of
principal, interest and all other amounts payable hereunder and under the Notes
and the termination in whole of any Commitment hereunder.
SECTION 9.05. Right of Set-off. Upon (a) the occurrence and
during the continuance of any Event of Default and (b) the making of the request
or the granting of the consent specified by Section 6.01 to authorize the Agent
to declare the Notes due and payable pursuant to the provisions of Section 6.01,
each Lender and each of its Affiliates is hereby authorized at any time and from
time to time, to the fullest extent permitted by law, to set off and apply any
and all deposits (general or special, time or demand, provisional or final) at
any time held and other indebtedness at any time owing by such Lender or such
Affiliate to or for the credit or the account of any Borrower against any and
all of the obligations of such Borrower now or hereafter existing under this
Agreement and the Note of such Borrower held by such Lender, whether or not such
Lender shall have made any demand under this Agreement or such
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66
Note and although such obligations may be unmatured. Each Lender agrees promptly
to notify the relevant Borrower after any such set-off and application, provided
that the failure to give such notice shall not affect the validity of such
set-off and application. The rights of each Lender and its Affiliates under this
Section are in addition to other rights and remedies (including, without
limitation, other rights of set-off) that such Lender and its Affiliates may
have.
SECTION 9.06. Binding Effect. This Agreement shall become
effective (other than Sections 2.01 and 2.03, which shall only become effective
upon satisfaction of the conditions precedent set forth in Section 3.01) when it
shall have been executed by the Company and the Agent and when the Agent shall
have been notified by each Initial Lender that such Initial Lender has executed
it and thereafter shall be binding upon and inure to the benefit of each
Borrower, the Agent and each Lender and their respective successors and assigns,
except that no Borrower shall not have the right to assign its rights hereunder
or any interest herein without the prior written consent of the Lenders.
SECTION 9.07. Assignments and Participations. (a) Each Lender
may at any time, with notice to the Company prior to making any proposal to any
potential assignee and with the consent of the Company, which consent shall not
be unreasonably withheld (and shall at any time, if requested to do so by the
Company pursuant to Section 2.05(b), 2.10 or 2.13) assign to one or more Persons
all or a portion of its rights and obligations under this Agreement (including,
without limitation, all or a portion of its Commitment, the Revolving Credit
Advances owing to it and the Revolving Credit Note or Notes held by it);
provided, however, that (i) the Company's consent shall not be required (A) in
the case of an assignment to an Affiliate of such Lender, provided that notice
thereof shall have been given to the Company and the Agent, or (B) in the case
of an assignment of the type described in subsection (g) below; (ii) each such
assignment shall be of a constant, and not a varying, percentage of all rights
and obligations under this Agreement (other than any right to make Competitive
Bid Advances, Competitive Bid Advances owing to it and Competitive Bid Notes);
(iii) except in the case of an assignment to a Person that, immediately prior to
such assignment, was a Lender or an assignment of all of a Lender's rights and
obligations under this Agreement, the amount of the Commitment of the assigning
Lender being assigned pursuant to each such assignment (determined as of the
date of the Assignment and Acceptance with respect to such assignment) shall in
no event be less than $10,000,000 or an integral multiple of $1,000,000 in
excess thereof; (iv) each such assignment shall be to an Eligible Assignee, (v)
each such assignment made as a result of a demand by the Company pursuant to
this Section 9.07(a) shall be arranged by the Company after consultation with,
and subject to the approval of, the Agent, and shall be either an assignment of
all of the rights and obligations of the assigning Lender under this Agreement
or an assignment of a portion of such rights and obligations made concurrently
with another such assignment or other such assignments that together cover all
of the rights and obligations of the assigning Lender under this Agreement, (vi)
no Lender shall be obligated to make any such assignment as a result of a demand
by the Borrower pursuant to this Section 9.07(a) unless and until such Lender
shall have received one or more payments from either the Borrower or one or
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67
more Eligible Assignees in an aggregate amount at least equal to the aggregate
outstanding principal amount of the Advances owing to such Lender, together with
accrued interest thereon to the date of payment of such principal amount and all
other amounts payable to such Lender under this Agreement and all of the
obligations of the Borrower to such Lender shall have been satisfied; and (vii)
the parties to each such assignment shall execute and deliver to the Agent, for
its acceptance and recording in the Register, an Assignment and Acceptance,
together with a processing and recordation fee of $3,500 and, if the assigning
Lender is not retaining a Commitment hereunder, any Revolving Credit Note
subject to such assignment. Upon such execution, delivery, acceptance and
recording, from and after the effective date specified in each Assignment and
Acceptance, (x) the assignee thereunder shall be a party hereto and, to the
extent that rights and obligations hereunder have been assigned to it pursuant
to such Assignment and Acceptance, have the rights and obligations of a Lender
hereunder and (y) the Lender assignor thereunder shall, to the extent that
rights and obligations hereunder have been assigned by it pursuant to such
Assignment and Acceptance, relinquish its rights and be released from its
obligations under this Agreement (and, in the case of an Assignment and
Acceptance covering all or the remaining portion of an assigning Lender's rights
and obligations under this Agreement, such Lender shall cease to be a party
hereto, provided, however, that such assigning Lender's rights under Sections
2.10, 2.13 and 9.04, and its obligations under Section 8.05, shall survive such
assignment as to matters occurring prior to the effective date of such
assignment).
(b) By executing and delivering an Assignment and Acceptance,
the Lender assignor thereunder and the assignee thereunder confirm to and agree
with each other and the other parties hereto as follows: (i) other than as
provided in such Assignment and Acceptance, such assigning Lender makes no
representation or warranty and assumes no responsibility with respect to any
statements, warranties or representations made in or in connection with this
Agreement or any other instrument or document furnished pursuant hereto or the
execution, legality, validity, enforceability, genuineness, sufficiency or value
of this Agreement or any other instrument or document furnished pursuant hereto;
(ii) such assigning Lender makes no representation or warranty and assumes no
responsibility with respect to the financial condition of any Borrower or the
performance or observance by such Borrower of any of its obligations under this
Agreement or any other instrument or document furnished pursuant hereto; (iii)
such assignee confirms that it has received a copy of this Agreement, together
with copies of the financial statements referred to in Section 4.01 and such
other documents and information as it has deemed appropriate to make its own
credit analysis and decision to enter into such Assignment and Acceptance; (iv)
such assignee will, independently and without reliance upon the Agent, such
assigning Lender or any other Lender and based on such documents and information
as it shall deem appropriate at the time, continue to make its own credit
decisions in taking or not taking action under this Agreement; (v) such assignee
confirms that it is an Eligible Assignee; (vi) such assignee appoints and
authorizes the Agent to take such action as agent on its behalf and to exercise
such powers and discretion under this Agreement as are delegated to the Agent by
the terms hereof, together with such powers and discretion as are reasonably
incidental thereto; and (vii) such assignee agrees that it will perform in
accordance with their terms all of
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68
the obligations that by the terms of this Agreement are required to be performed
by it as a Lender.
(c) Upon its receipt of an Assignment and Acceptance executed
by an assigning Lender and an assignee representing that it is an Eligible
Assignee, together with any Revolving Credit Note or Notes subject to such
assignment, the Agent shall, if such Assignment and Acceptance has been
completed and is in substantially the form of Exhibit C hereto, (i) accept such
Assignment and Acceptance, (ii) record the information contained therein in the
Register and (iii) give prompt notice thereof to the Company and to each other
Borrower.
(d) The Agent shall maintain at its address referred to in
Section 9.02 a copy of each Assignment and Acceptance delivered to and accepted
by it and a register for the recordation of the names and addresses of the
Lenders and the Commitment of, and principal amount of the Advances owing to,
each Lender from time to time (the "Register"). The entries in the Register
shall be conclusive and binding for all purposes, absent manifest error, and the
Company, each other Borrower, the Agent and the Lenders may treat each Person
whose name is recorded in the Register as a Lender hereunder for all purposes of
this Agreement. The Register shall be available for inspection by the Company,
any other Borrower or any Lender at any reasonable time and from time to time
upon reasonable prior notice.
(e) Each Lender may sell participations to one or more banks
or other entities (other than the Company or any of its Affiliates) in or to all
or a portion of its rights and obligations under this Agreement (including,
without limitation, all or a portion of its Commitment, the Advances owing to it
and any Note or Notes held by it); provided, however, that (i) such Lender's
obligations under this Agreement (including, without limitation, its Commitment
to the Company and the other Borrowers hereunder) shall remain unchanged, (ii)
such Lender shall remain solely responsible to the other parties hereto for the
performance of such obligations, (iii) such Lender shall remain the holder of
any such Note for all purposes of this Agreement, (iv) the Company, any other
Borrower, the Agent and the other Lenders shall continue to deal solely and
directly with such Lender in connection with such Lender's rights and
obligations under this Agreement, (v) no participant under any such
participation shall have any right to approve any amendment or waiver of any
provision of this Agreement or any Note, or any consent to any departure by any
Borrower therefrom, except to the extent that such amendment, waiver or consent
would reduce the principal of, or interest on, the Notes or any fees or other
amounts payable hereunder, in each case to the extent subject to such
participation, or postpone any date fixed for any payment of principal of, or
interest on, the Notes or any fees or other amounts payable hereunder, in each
case to the extent subject to such participation and (vi) within 30 days of the
effective date of such participation, such Lender shall provide notice of such
participation to the Company.
(f) Any Lender may, in connection with any assignment or
participation or proposed assignment or participation pursuant to this Section
9.07, disclose to the assignee or
<PAGE>
69
participant or proposed assignee or participant, any information relating to
the Company or any Borrower furnished to such Lender by or on behalf of such
Borrower; provided that, prior to any such disclosure, the assignee or
participant or proposed assignee or participant shall agree to preserve the
confidentiality of any confidential information relating to such Borrower
received by it from such Lender.
(g) Notwithstanding any other provision set forth in this
Agreement, any Lender may at any time assign or create a security interest in
all or any portion of its rights under this Agreement (including, without
limitation, the Advances owing to it and any Note or Notes held by it) in favor
of any Federal Reserve Bank in accordance with Regulation A of the Board of
Governors of the Federal Reserve System.
SECTION 9.08. Designated Subsidiaries. (a) Designation. The
Company may at any time, and from time to time, by delivery to the Agent of a
Designation Letter duly executed by the Company and the respective Subsidiary
and substantially in the form of Exhibit D hereto, designate such Subsidiary as
a "Designated Subsidiary" for purposes of this Agreement and such Subsidiary
shall thereupon become a "Designated Subsidiary" for purposes of this Agreement
and, as such, shall have all of the rights and obligations of a Borrower
hereunder. The Agent shall promptly notify each Lender of each such designation
by the Company and the identity of the respective Subsidiary.
(b) Termination. Upon the payment and performance in full of
all of the indebtedness, liabilities and obligations under this Agreement and
the Notes of any Designated Subsidiary then, so long as at the time no Notice of
Revolving Credit Borrowing or Notice of Competitive Bid Borrowing in respect of
such Designated Subsidiary is outstanding, such Subsidiary's status as a
"Designated Subsidiary" shall terminate upon notice to such effect from the
Agent to the Lenders (which notice the Agent shall give promptly upon its
receipt of a request therefor from the Company). Thereafter, the Lenders shall
be under no further obligation to make any Advance hereunder to such Designated
Subsidiary.
SECTION 9.09. Confidentiality. Each of the Lenders and the
Agent hereby agrees that it will use reasonable efforts (e.g., procedures
substantially comparable to those applied by such Lender or the Agent in respect
of non-public information as to the business of such Lender or the Agent) to
keep confidential any financial reports and other information from time to time
supplied to it by the Company hereunder to the extent that such information is
not and does not become publicly available and which the Company indicates at
the time is to be treated confidentially, provided, however, that nothing herein
shall affect the disclosure of any such information (i) by the Agent to any
Lender, (ii) to the extent required by law (including statute, rule, regulation
or judicial process), (iii) to counsel for any Lender or the Agent or to their
respective independent public accountants, (iv) to bank examiners and auditors
and appropriate government examining authorities, (v) to the Agent or any other
Lender, (vi) in connection with any litigation to which any Lender or the Agent
is a party, (vii) to actual or prospective assignees
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70
and participants as contemplated by Section 9.07(f) or (viii) to any Affiliate
of the Agent or any Lender or to such Affiliate's officers, directors,
employees, agents and advisors, provided that, prior to any such disclosure,
such Affiliate or such Affiliate's officers, directors, employees, agents or
advisors, as the case may be, shall agree to preserve the confidentiality of any
confidential information relating to the Company received by it; a determination
by a Lender or the Agent as to the application of the circumstances described in
the foregoing clauses (i)-(viii) being conclusive if made in good faith; and
each of the Lenders and the Agent agrees that it will follow procedures which
are intended to put any transferee of such confidential information on notice
that such information is confidential.
SECTION 9.10. Mitigation of Yield Protection. Each Lender
hereby agrees that, commencing as promptly as practicable after it becomes aware
of the occurrence of any event giving rise to the operation of Section 2.10(a),
2.11 or 2.13 with respect to such Lender, such Lender will give notice thereof
through the Agent to the respective Borrower. A Borrower may at any time, by
notice through the Agent to any Lender, request that such Lender change its
Applicable Lending Office as to any Advance or Type of Advance or that it
specify a new Applicable Lending Office with respect to its Commitment and any
Advance held by it or that it rebook any such Advance with a view to avoiding or
mitigating the consequences of an occurrence such as described in the preceding
sentence, and such Lender will use reasonable efforts to comply with such
request unless, in the opinion of such Lender, such change or specification or
rebooking is inadvisable or might have an adverse effect, economic or otherwise,
upon it, including its reputation. In addition, each Lender agrees that, except
for changes or specifications or rebookings required by law or effected pursuant
to the preceding sentence, if the result of any change or change of
specification of Applicable Lending Office or rebooking would, but for this
sentence, be to impose additional costs or requirements upon the respective
Borrower pursuant to Section 2.10(a), Section 2.11 or Section 2.13 (which would
not be imposed absent such change or change of specification or rebooking) by
reason of legal or regulatory requirements in effect at the time thereof and of
which such Lender is aware at such time, then such costs or requirements shall
not be imposed upon such Borrower but shall be borne by such Lender. All
expenses incurred by any Bank in changing an Applicable Lending Office or
specifying another Applicable Lending Office of such Lender or rebooking any
Advance in response to a request from a Borrower shall be paid by such Borrower.
Nothing in this Section 9.10 (including, without limitation, any failure by a
Lender to give any notice contemplated in the first sentence hereof) shall
limit, reduce or postpone any obligations of the respective Borrower under
Section 2.10(a), Section 2.11 or Section 2.13, including any obligations payable
in respect of any period prior to the date of any change or specification of a
new Applicable Lending Office or any rebooking of any Advance.
SECTION 9.11. Governing Law. This Agreement and the Notes shall be
governed by, and construed in accordance with, the laws of the State of New
York.
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71
SECTION 9.12. Execution in Counterparts. This Agreement may be
executed in any number of counterparts and by different parties hereto in
separate counterparts, each of which when so executed shall be deemed to be an
original and all of which taken together shall constitute one and the same
agreement. Delivery of an executed counterpart of a signature page to this
Agreement by telecopier shall be effective as delivery of a manually executed
counterpart of this Agreement.
SECTION 9.13. Jurisdiction, Etc. (a) Each of the parties
hereto hereby irrevocably and unconditionally submits, for itself and its
property, to the nonexclusive jurisdiction of any New York State court or
federal court of the United States of America sitting in New York City, and any
appellate court from any thereof, in any action or proceeding arising out of or
relating to this Agreement or the Notes, or for recognition or enforcement of
any judgment, and each of the parties hereto hereby irrevocably and
unconditionally agrees that all claims in respect of any such action or
proceeding may be heard and determined in any such New York State court or, to
the extent permitted by law, in such federal court. Each Designated Subsidiary
hereby agrees that service of process in any such action or proceeding brought
in the any such New York State court or in such federal court may be made upon
CT Corporation System at its offices at 1633 Broadway, New York, New York 10019
(the "Process Agent") and each Designated Subsidiary hereby irrevocably appoints
the Process Agent its authorized agent to accept such service of process, and
agrees that the failure of the Process Agent to give any notice of any such
service shall not impair or affect the validity of such service or of any
judgment rendered in any action or proceeding based thereon. Each Borrower
hereby further irrevocably consents to the service of process in any action or
proceeding in such courts by the mailing thereof by any parties hereto by
registered or certified mail, postage prepaid, to such Borrower at its address
specified pursuant to Section 9.02. Each of the parties hereto agrees that a
final judgment in any such action or proceeding shall be conclusive and may be
enforced in other jurisdictions by suit on the judgment or in any other manner
provided by law. Nothing in this Agreement shall affect any right that any party
may otherwise have to serve legal process in any other manner permitted by law
or to bring any action or proceeding relating to this Agreement or the Notes in
the courts of any jurisdiction. To the extent that each Designated Subsidiary
has or hereafter may acquire any immunity from jurisdiction of any court or from
any legal process (whether through service or notice, attachment prior to
judgment, attachment in aid of execution, execution or otherwise) with respect
to itself or its property, each Designated Subsidiary hereby irrevocably waives
such immunity in respect of its obligations under this Agreement.
(b) Each of the parties hereto irrevocably and unconditionally
waives, to the fullest extent it may legally and effectively do so, any
objection that it may now or hereafter have to the laying of venue of any suit,
action or proceeding arising out of or relating to this Agreement or the Notes
in any New York State or federal court. Each of the parties hereto hereby
irrevocably waives, to the fullest extent permitted by law, the defense of an
inconvenient forum to the maintenance of such action or proceeding in any such
court.
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72
SECTION 9.14. Substitution of Currency. If a change in any
Foreign Currency occurs pursuant to any applicable law, rule or regulation of
any governmental, monetary or multi-national authority, this Agreement
(including, without limitation, the definitions of Eurocurrency Rate and LIBO
Rate) will be amended to the extent determined by the Agent (acting reasonably
and in consultation with the Company) to be necessary to reflect the change in
currency and to put the Lenders and the Borrowers in the same position, so far
as possible, that they would have been in if no change in such Foreign Currency
had occurred.
SECTION 9.15. Final Agreement. This written agreement
represents the full and final agreement between the parties with respect to the
matters addressed herein and supercedes all prior communications, written or
oral, with respect thereto. There are no unwritten agreements between the
parties.
SECTION 9.16. Judgment. (a) If for the purposes of obtaining
judgment in any court it is necessary to convert a sum due hereunder or under
the Notes in any currency (the "Original Currency") into another currency (the
"Other Currency"), the parties hereto agree, to the fullest extent that they may
effectively do so, that the rate of exchange used shall be that at which in
accordance with normal banking procedures the Agent could purchase the Original
Currency with the Other Currency at 9:00 A.M. (New York City time) on the first
Business Day preceding that on which final judgment is given.
(b) The obligation of each Borrower in respect of any sum due
in the Original Currency from it to any Lender or the Agent hereunder or under
the Revolving Credit Note or Revolving Credit Notes held by such Lender shall,
notwithstanding any judgment in any Other Currency, be discharged only to the
extent that on the Business Day following receipt by such Lender or the Agent
(as the case may be) of any sum adjudged to be so due in such Other Currency,
such Lender or the Agent (as the case may be) may in accordance with normal
banking procedures purchase Dollars with such Other Currency; if the amount of
Dollars so purchased is less than the sum originally due to such Lender or the
Agent (as the case may be) in the Original Currency, such Borrower agrees, as a
separate obligation and notwithstanding any such judgment, to indemnify such
Lender or the Agent (as the case may be) against such loss, and if the amount of
Dollars so purchased exceeds the sum originally due to any Lender or the Agent
(as the case may be) in the Original Currency, such Lender or the Agent (as the
case may be) agrees to remit to such Borrower such excess.
SECTION 9.17. Waiver of Jury Trial. Each Borrower, the Agent
and each Lender hereby irrevocably waive all right to trial by jury in any
action, proceeding or counterclaim (whether based on contract, tort or
otherwise) arising out of or relating to this Agreement or the Notes or the
actions of the Agent or any Lender in the negotiation, administration,
performance or enforcement thereof.
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73
IN WITNESS WHEREOF, the parties hereto have caused this
Agreement to be executed by their respective officers thereunto duly authorized,
as of the date first above written.
HONEYWELL INTERNATIONAL INC.
By: /s/ James V. Gelly
-----------------------------------
Name: James V. Gelly
Title: Vice President and Treasurer
CITIBANK, N.A., as Agent
By: /s/ Carolyn A. Kee
-----------------------------------
Name: Carolyn A. Kee
Title: Vice President
COMMITMENT ARRANGER AND ADMINISTRATIVE AGENT
$106,666,666.67 CITIBANK, N.A.
By: /s/ Carolyn A. Kee
-----------------------------------
Name: Carolyn A. Kee
Title: Vice President
CO-SYNDICATION AGENTS
$80,000,000.00 BANK OF AMERICA, N.A.
By: /s/ John W. Pocalyko
-----------------------------------
Name: John W. Pocalyko
Title: Managing Director
<PAGE>
74
$80,000,000.00 THE CHASE MANHATTAN BANK
By: /s/ John C. Riordan
-----------------------------------
Name: John C. Riordan
Title: Vice President
$80,000,000.00 DEUTSCHE BANK AG, NEW YORK AND/OR
CAYMAN ISLANDS BRANCH
By: /s/ Jean M. Hannigan
-----------------------------------
Name: Jean M. Hannigan
Title: Vice President
By: /s/ Iain Stewart
-----------------------------------
Name: Iain Stewart
Title: Vice President
AGENT
$80,000,000.00 BARCLAYS BANK PLC
By: /s/ Paul Kavanagh
-----------------------------------
Name: Paul Kavanagh
Title: Director
SENIOR MANAGING AGENTS
$50,000,000.00 BANCA NAZIONALE DE LAVORO
By:
-----------------------------------
Name:
Title:
<PAGE>
75
SENIOR MANAGING AGENTS
$50,000,000.00 BANCA NAZIONALE DE LAVORO S.p.A.
-NEW YORK BRANCH
By: /s/ Miguel J. Medida
-----------------------------------
Name: Miguel J. Medida
Title: Vice President
By: /s/ Leonardo Valentini
-----------------------------------
Name: Leonardo Valentini
Title: First Vice President
$50,000,000.00 THE BANK OF NEW YORK
By: /s/ Ernest Fung
-----------------------------------
Name: Ernest Fung
Title: Vice President
$50,000,000.00 BANK OF TOKYO-MITSUBISHI TRUST COMPANY
By: /s/ W. A. Nicola
-----------------------------------
Name: W. A. Nicola
Title: Vice President
$50,000,000.00 BANK ONE, NA
By: /s/ Stephen E. McDonald
-----------------------------------
Name: Stephen E. McDonald
Title: Senior Vice President
$50,000,000.00 HSBC BANK USA
By: /s/ Rochelle Forster
-----------------------------------
Name: Rochelle Forster
Title: Vice President
$50,000,000.00 MELLON BANK, N.A.
By: /s/ Donald G. Cassidy, Jr.
-----------------------------------
Name: Donald G. Cassidy, Jr.
Title: First Vice President
<PAGE>
76
$50,000,000.00 REVOLVING COMMITMENT VEHICLE CORPORATION
By: /s/ David P. Weintrob
-----------------------------------
Name: David P. Weintrob
Title: Vice President
CO-AGENTS
$21,666,666.67 ABN AMRO BANK N.V.
By: /s/ Peter L. Eaton
-----------------------------------
Name: Peter L. Eaton
Title: Group Vice President
By: /s/ John P. Richardson
-----------------------------------
Name: John P. Richardson
Title: Vice President
$21,666,666.67 BANCA DI ROMA
By: /s/ Steven Paley
-----------------------------------
Name: Steven Paley
Title: Vice President
By: /s/ Alessandro Paoli
-----------------------------------
Name: Alessandro Paoli
Title: Asst. Treasurer
<PAGE>
77
$21,666,666.67 BANQUE NATIONALE DE PARIS
By: /s/ Richard L. Sted
-----------------------------------
Name: Richard L. Sted
Title: Senior Vice President
By: /s/ Thomas George
-----------------------------------
Name: Thomas George
Title: Vice President, Corp.
Banking Division
$21,666,666.67 NORTHERN TRUST COMPANY
By: /s/ Eric Strickland
-----------------------------------
Name: Eric Strickland
Title: Vice President
$21,666,666.67 THE SUMITOMO BANK, LIMITED
By: /s/ P. R. C. Knight
-----------------------------------
Name: P. R. C. Knight
Title: Senior Vice President
$21,666,666.67 WELLS FARGO BANK, NATIONAL ASSOCIATION
By: /s/ Molly S. Van Metre
-----------------------------------
Name: Molly S. Van Metre
Title: Vice President &
Senior Banker
<PAGE>
78
LENDERS
$13,333,333.33 BANCO BILBAO VIZCAYA
By: /s/ John Martini
-----------------------------------
Name: John Martini
Title: Vice President, Corporate
Banking
By: /s/ Alejandro Lorca
-----------------------------------
Name: Alejandro Lorca
Title: Vice President, Corporate
Banking
$13,333,333.33 BANK OF MONTREAL
By: /s/ Brian L. Banke
-----------------------------------
Name: Brian L. Banke
Title: Director
$13,333,333.33 THE FUJI BANK, LIMITED
By: /s/ Raymond Ventura
-----------------------------------
Name: Raymond Ventura
Title: Vice President & Manager
$13,333,333.33 THE INDUSTRIAL BANK OF JAPAN
By: /s/ J. Kenneth Biegen
-----------------------------------
Name: J. Kenneth Biegen
Title: Vice President
$13,333,333.33 ROYAL BANK OF CANADA
By: /s/ Lynne Litterini
-----------------------------------
Name: Lynne Litterini
Title: Manager
<PAGE>
79
$13,333,333.33 STANDARD CHARTERED
By: /s/ Jacob H. Yahiayan
-----------------------------------
Name: Jacob H. Yahiayan
Title: Vice President
By: /s/ Lalita Vadhri
-----------------------------------
Name: Lalita Vadhri
Title: Assistant Vice President
$13,333,333.33 UNICREDITO ITALIANO
By: /s/ Christopher J. Eldin
-----------------------------------
Name: Christopher J. Eldin
Title: First Vice President &
Deputy Manager
By: /s/ Saiyed A. Abbas
-----------------------------------
Name: Saiyed A. Abbas
Title: Vice President
$1,000,000,000 TOTAL OF COMMITMENTS
<PAGE>
Exhibit 10.15
The U.S. $1 Billion Credit Agreement dated as of January 13, 2000 among
Honeywell International Inc., the initial lenders named therein, Citibank, N.A.,
as administrative agent, Morgan Guaranty Trust Company of New York, as
syndication agent, and Salomon Smith Barney Inc. and J.P. Morgan Securities
Inc., as arrangers, has substantially the same terms as the 364-Day Credit
Agreement dated as of December 2, 1999 filed as Exhibit 10.11 hereto.
Capitalized terms in this exhibit have the meanings set forth in the December 2
Credit Agreement. The following are the important differences between the
January 13 Credit Agreement and the December 2 Credit Agreement set forth in
Exhibit 10.11:
1. The January 13 Credit Agreement expires April 12, 2000 (90 days from the
Effective Date).
2. The January 13 Credit Agreement does not provide for extension of the
Termination Date.
3. The Commitment under the January 13 Credit Agreement is fixed at an
aggregate of $1 billion, with Citibank, N.A., and Morgan Guaranty Trust
Company of New York each committed to lend $500 million each.
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS
AEROSPACE SOLUTIONS
SALES OVERVIEW Sales in 1999 were $9,908 million or basically flat compared with
1998. Sales of avionics products were higher due principally to continued strong
demand for flight safety products such as collision avoidance and enhanced
ground proximity warning systems. Sales to the aftermarket, particularly repair
and overhaul and the military, were also higher. The acquisition of a
controlling interest in the Normalair-Garrett Ltd. (NGL) environmental controls
joint venture in the prior year also increased sales in 1999. This increase was
offset by lower sales to commercial air transport and military original
equipment manufacturers, and the effects of divestitures and a restructuring of
a government technical services contract.
Sales in 1998 were $9,890 million, an increase of $1,492 million, or
18 percent compared with 1997. This increase was driven by strong sales of
avionics products and increased deliveries to air transport manufacturers. Sales
of aftermarket products and services also increased. The acquisitions of the
Grimes Aerospace (Grimes) lighting systems business, Banner Aerospace (Banner)
FAA-certified hardware parts business and NGL also contributed to the sales
increase.
SEGMENT PROFIT OVERVIEW Segment profit in 1999 was $1,918 million, an increase
of $331 million, or 21 percent compared with 1998. The increase principally
resulted from improved sales of higher-margin aftermarket and avionics products
and cost structure improvements primarily from census and benefit cost
reductions.
Segment profit in 1998 was $1,587 million, an increase of $436 million, or
38 percent compared with 1997. The increase was driven by higher sales and the
improved mix of higher-margin aftermarket and avionics products and services.
Productivity improvements and divestitures also contributed to the increase. The
acquisitions of the Grimes, Banner and NGL businesses also improved segment
profit.
NET SALES
(Dollars in Billions)
[BAR GRAPH]
97............ $8.4
98............ $9.9
99............ $9.9
SEGMENT MARGIN
(Percent)
[BAR GRAPH]
97............ 13.7%
98............ 16.0%
99............ 19.4%
20 Honeywell 1999 Annual Report
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS
AUTOMATION & ASSET MANAGEMENT
SALES OVERVIEW Sales in 1999 were $6,115 million, an increase of $158 million,
or 3 percent compared with 1998. Sales were higher for the Home and Building
Control business driven by growth in control and consumer products and building
services and security. Acquisitions also contributed to the sales increase.
Lower sales from the energy retrofit and installed systems businesses were a
partial offset. Sales for the Industrial Control business were basically flat
compared with the prior year. Higher sales due to acquisitions and growth in the
sensing and control business were offset by the effects of continued weakness in
the pulp and paper and refining markets. Sales for the segment were also
negatively impacted by foreign currency fluctuations due to the strong dollar.
Sales in 1998 were $5,957 million or basically flat compared with 1997.
Sales were slightly higher for the Home and Building Control business, driven by
continued solid growth in the services business. This growth was moderated by a
planned reduction in the lower-margin energy retrofit and installed systems
businesses and unusually warm winters in North America and Europe. Sales for the
Industrial Control business were down slightly; however, after adjusting for
divestitures and negative foreign currency fluctuations due to the strong
dollar, sales increased slightly despite weakness in the pulp and paper,
refining and industrial components markets.
SEGMENT PROFIT OVERVIEW Segment profit in 1999 was $767 million, an increase of
$62 million, or 9 percent compared with 1998. Segment profit for the Home and
Building Control business was up significantly due to improvement in the control
products business and the exiting of the lower-margin energy retrofit and
installed systems businesses. Cost savings from census reductions also
contributed to the improvement. This increase was offset somewhat by lower
segment profit for the Industrial Control business as growth in the
higher-margin sensing and control business and cost structure improvements were
more than offset by the effects of continued weakness in the pulp and paper and
refining markets.
Segment profit in 1998 was $705 million, an increase of $95 million, or 16
percent compared with 1997. Segment profit for the Industrial Control business
increased significantly, driven by improvement in the Measurex business, the
contribution of higher-margin services and software growth and ongoing
productivity improvements. Segment profit for the Home and Building Control
business also improved due to improvement in the solutions and services business
resulting from productivity gains and a strategic repositioning. Solid profit
growth in the products business, despite challenges posed by the weather,
particularly in the residential products area, also contributed to the increase.
NET SALES
(Dollars in Billions)
[BAR GRAPH]
97.................. $5.9
98.................. $6.0
99.................. $6.1
SEGMENT MARGIN
(Percent)
[BAR GRAPH]
97.................. 10.3%
98.................. 11.8%
99.................. 12.5%
SALES MIX
[PIE CHART]
INDUSTRIAL CONTROL
Industrial Automation ...... 30%
Sensing & Control .......... 12%
HOME & BUILDING
Home & Building
Solutions & Services ....... 32%
Home & Building Products ... 26%
24 Honeywell 1999 Annual Report
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS
PERFORMANCE MATERIALS
SALES OVERVIEW Sales in 1999 were $4,007 million, a decrease of $162 million, or
4 percent compared with 1998 due principally to divestitures including the
environmental catalyst, Laminate Systems and phenol businesses. Lower sales for
carpet fibers also contributed to the decrease. Higher sales for specialty
films, engineering plastics and waxes were a partial offset. Higher sales from
the acquisitions of Johnson Matthey Electronics, a supplier of wafer fabrication
materials and interconnect products to the electronics and telecommunications
industries, and Pharmaceutical Fine Chemicals (PFC), a supplier of active and
intermediate pharmaceutical chemicals, were also a partial offset.
Sales in 1998 were $4,169 million, a decrease of $79 million, or 2 percent
compared with 1997. The divestitures of the phenol, environmental catalyst and
European laminates businesses and the exiting of the European carpet fibers and
a portion of the North American textile businesses drove the decline in sales.
Lower sales for the Electronic Materials business, reflecting softness in the
semiconductor and electronic markets, also contributed to the sales decrease.
Higher sales for specialty films and engineering plastics were a partial offset.
Increased sales due to the acquisitions of the Astor Holdings wax business and
PFC were also a partial offset.
SEGMENT PROFIT OVERVIEW Segment profit in 1999 was $439 million, a decrease of
$195 million, or 31 percent compared with 1998. The decrease principally
reflects the effects of the continuing pricing pressures in the Performance
Polymers and Electronic Materials businesses and higher raw material costs in
certain Performance Polymers businesses. The impact of prior year divestitures
also contributed to the decrease. The effect of improved sales volume for
specialty films, engineering plastics and waxes was a partial offset.
Segment profit in 1998 was $634 million, an increase of $93 million, or 17
percent compared with 1997. The increase was driven by a more favorable
price-cost relationship in the Performance Polymers nylon and polyester
businesses and the divestitures of the phenol and environmental catalyst
businesses. Lower raw material costs, acquisitions and cost structure
improvements from census reductions in the Specialty Chemicals businesses also
contributed to the increase. The negative effects of pricing pressures in
certain Specialty Chemicals businesses and lower sales for the Electronic
Materials business were partial offsets.
NET SALES
(Dollars in Billions)
[BAR GRAPH]
97.................. $4.2
98.................. $4.2
99.................. $4.0
SEGMENT MARGIN
(Percent)
[BAR GRAPH]
97.................. 12.7%
98.................. 15.2%
99.................. 11.0%
SALES MIX
[PIE CHART]
Performance Polymers .... 45%
Electronic Materials .... 19%
Specialty Chemicals ..... 36%
26 Honeywell 1999 Annual Report
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS
POWER & TRANSPORTATION PRODUCTS
SALES OVERVIEW Sales in 1999 were $3,581 million, an increase of $194 million,
or 6 percent compared with 1998. Sales for the Transportation and Power Systems
business were significantly higher driven by strong growth for the Turbocharging
Systems business due primarily to continued strong sales in Europe reflecting
the turbodiesel's increased penetration of the passenger car market. Sales for
the Commercial Vehicle Systems business also increased due principally to
increased North American truck builds. Sales for the Consumer Products Group
business also increased, led by higher sales of Prestone'r' products and
FRAM'r' filters. Lower sales for the Friction Materials business due to
pricing pressures and weakness in the European market were a partial offset.
Sales were also negatively impacted by foreign currency fluctuations due to the
strong dollar.
Sales in 1998 were $3,387 million, a decrease of $382 million, or 10
percent compared with 1997, reflecting the disposition of the automotive Safety
Restraints business. Excluding the divested Safety Restraints business, sales
increased 11 percent. Sales for the Transportation and Power Systems business
were strong led by higher sales for the Turbocharging Systems business which
benefited from increased penetration of the turbocharged diesel passenger car
market in Europe and the light truck market in North America. Sales for the
Commercial Vehicle Systems business also improved significantly, driven by an
improvement in truck builds and increased market penetration for anti-lock brake
systems. The increase also reflects higher sales for the Consumer Products Group
business due to the 1997 acquisitions of the Prestone'r' Products and Holt
Lloyd car care products businesses. Sales for the Friction Materials business
were moderately lower.
SEGMENT PROFIT OVERVIEW Segment profit in 1999 was $322 million, an increase of
$88 million, or 38 percent compared with 1998. The increase reflects higher
sales for the Transportation and Power Systems and Consumer Products Group
businesses. Cost structure improvements in these businesses resulting from Six
Sigma initiatives, materials procurement savings and census reductions also
contributed to the increase.
Segment profit in 1998 was $234 million, a decrease of $74 million, or 24
percent compared with 1997. The decrease reflects the absence of segment profit
from the divested Safety Restraints business. Segment profit from the Consumer
Products Group business decreased substantially, due in part to the initial
costs of new distribution facilities, higher advertising expense to increase
brand awareness and other expenses to improve future operations. The Friction
Materials business segment profit was also lower due primarily to decreased
sales. Segment profit from the Transportation and Power Systems businesses was
higher due principally to strong sales growth.
NET SALES
(Dollars in Billions)
[BAR GRAPH]
97.................. $3.8
98.................. $3.4
99.................. $3.6
SEGMENT MARGIN
(Percent)
[BAR GRAPH]
97.................. 8.2%
98.................. 6.9%
99.................. 9.0%
SALES MIX
[PIE CHART]
Turbocharging Systems ....... 32%
Friction Materials .......... 24%
Consumer Products Group ..... 29%
Commercial Vehicle Systems .. 15%
28 Honeywell 1999 Annual Report
<PAGE>
SELECTED FINANCIAL DATA
Honeywell International Inc.
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31 1999 1998 1997 1996 1995 1994
- ---------------------------------------------------------------------------------------------------------------------
(Dollars and Shares in Millions Except Per Share Amounts)
=====================================================================================================================
<S> <C> <C> <C> <C> <C> <C>
RESULTS OF OPERATIONS
Net sales $ 23,735 $ 23,555 $ 22,499 $ 21,283 $ 21,077 $ 18,874
--------------------------------------------------------------------
Net income(1) 1,541 1,903 1,641 1,423 1,209 1,038
- ---------------------------------------------------------------------------------------------------------------------
EARNINGS PER COMMON SHARE
Net earnings:
Basic $ 1.95 $ 2.38 $ 2.04 $ 1.77 $ 1.50 $ 1.28
--------------------------------------------------------------------
Assuming dilution 1.90 2.34 2.00 1.73 1.48 1.27
--------------------------------------------------------------------
Dividends 0.68 0.60 0.52 0.45 0.39 0.3238
- ---------------------------------------------------------------------------------------------------------------------
FINANCIAL POSITION AT YEAR-END
Property, plant and equipment--net $ 5,630 $ 5,600 $ 5,380 $ 5,353 $ 5,841 $ 5,360
--------------------------------------------------------------------
Total assets 23,527 22,738 20,118 18,322 17,525 16,207
--------------------------------------------------------------------
Short-term debt 2,609 2,190 1,238 867 956 624
--------------------------------------------------------------------
Long-term debt 2,457 2,776 2,394 2,034 1,848 1,926
--------------------------------------------------------------------
Total debt 5,066 4,966 3,632 2,901 2,804 2,550
--------------------------------------------------------------------
Shareowners' equity 8,599 8,083 6,775 6,385 5,632 4,837
- ---------------------------------------------------------------------------------------------------------------------
FINANCIAL STATISTICS(2)
Return on net sales (segment profit) 13.8 12.4 10.9 10.2 8.8 8.7
--------------------------------------------------------------------
Return on average investment (after-tax) 17.8 17.6 18.2 18.3 17.0 17.3
--------------------------------------------------------------------
Return on average shareowners' equity (after-tax) 26.2 25.9 24.9 23.8 22.9 23.2
--------------------------------------------------------------------
Total debt as a percent of total capital
(cash adjusted) 26.6 32.5 30.2 19.1 27.6 29.1
--------------------------------------------------------------------
Book value per share of common stock 10.82 10.17 8.52 7.95 7.01 6.01
- ---------------------------------------------------------------------------------------------------------------------
OTHER INFORMATION
Common shares outstanding at year-end 795.1 795.3 794.9 802.7 803.4 804.8
--------------------------------------------------------------------
Shares used in computing per share amounts:
Basic 792.0 798.4 803.0 803.1 805.3 809.6
--------------------------------------------------------------------
Assuming dilution 809.0 814.0 822.1 823.2 819.3 818.1
--------------------------------------------------------------------
Average investment(3) $ 12,843 $ 11,589 $ 9,717 $ 8,301 $ 7,858 $ 6,637
--------------------------------------------------------------------
Number of employees at year-end(4) 120,000 127,400 128,000 129,600 138,600 138,300
- ---------------------------------------------------------------------------------------------------------------------
</TABLE>
(1) In 1999, includes merger, repositioning and other charges and gains on the
sales of our Laminate Systems business and our investment in AMP common
stock resulting in a net after-tax charge of $624 million, or $0.78 per
share. In 1998, includes repositioning charges, a gain on settlement of
litigation claims and a tax benefit resulting from the favorable resolution
of certain prior-year research and development tax claims resulting in a
net after-tax charge of $4 million, with no impact on the per share amount.
In 1997, includes repositioning and other charges, gains on the sales of
our automotive Safety Restraints and certain Industrial Control businesses
and a charge related to the 1996 sale of our automotive Braking Systems
business resulting in a net after-tax charge of $5 million, or $0.01 per
share. In 1996, includes repositioning and other charges and a gain on the
sale of our automotive Braking Systems business resulting in a net
after-tax gain of $9 million, or $0.01 per share.
(2) The returns ratios exclude the impact of repositioning and other charges in
1999, 1998, 1997 and 1996, gains on the sales of our Laminate Systems
business and our investment in AMP common stock in 1999, gain on settlement
of litigation claims and a tax benefit resulting from the favorable
resolution of certain prior-year research and development tax claims in
1998, gains on the sales of our automotive Safety Restraints and certain
Industrial Control businesses and a charge related to the 1996 sale of our
automotive Braking Systems business in 1997, and gain on the sale of our
Braking Systems business in 1996.
(3) Investment is defined as shareowners' equity and non-current deferred
taxes-net plus cash adjusted total debt.
(4) Includes employees at facilities operated for the U.S. Department of
Energy.
30 Honeywell 1999 Annual Report
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS
OPERATIONS
RESULTS OF OPERATIONS
<TABLE>
<CAPTION>
(Dollars in Millions) 1999 1998 1997
- -------------------------------------------------------------
<S> <C> <C> <C>
NET SALES
------------------------------------
Aerospace Solutions $ 9,908 $ 9,890 $ 8,398
------------------------------------
Automation & Asset
Management 6,115 5,957 5,934
------------------------------------
Performance Materials 4,007 4,169 4,248
------------------------------------
Power & Transportation
Products 3,581 3,387 3,769
------------------------------------
Corporate 124 152 150
- -------------------------------------------------------------
$ 23,735 $ 23,555 $ 22,499
- -------------------------------------------------------------
SEGMENT PROFIT
------------------------------------
Aerospace Solutions $ 1,918 $ 1,587 $ 1,151
------------------------------------
Automation & Asset
Management 767 705 610
------------------------------------
Performance Materials 439 634 541
------------------------------------
Power & Transportation
Products 322 234 308
------------------------------------
Corporate (175) (248) (167)
- -------------------------------------------------------------
$ 3,271 $ 2,912 $ 2,443
- -------------------------------------------------------------
</TABLE>
Refer to Note 23 of Notes to Financial Statements for further information on our
reportable segments.
Net sales in 1999 were $23,735 million, an increase of $180 million, or 1
percent compared with 1998. Excluding the effect of divestitures and a change
from prime contractor to sub-contractor status on a government technical
services contract, sales increased approximately 4 percent. This increase
resulted principally from acquisitions. Fluctuations in foreign currency rates
decreased sales approximately 1 percent. Net sales in 1998 were $23,555 million,
an increase of $1,056 million, or 5 percent, compared with 1997. Acquisitions
and higher sales volume increased sales approximately 6 percent each. The
increase in sales volume includes a partial offset for lower selling prices. The
effects of divestitures and fluctuations in foreign currency rates lowered sales
by 6 percent and 1 percent, respectively.
Total segment profit in 1999 was $3,271 million, an increase of $359
million, or 12 percent compared with 1998. Segment profit margin for 1999 was
13.8 percent compared with 12.4 percent in 1998. The increase in segment profit
in 1999 was led by a substantial improvement by the Aerospace Solutions segment
with the Power & Transportation Products and Automation & Asset Management
segments also contributing solid gains. Lower Corporate expenses also
contributed to the increase. A substantial decrease in segment profit for the
Performance Materials segment was a partial offset. Total segment profit in 1998
was $2,912 million, an increase of $469 million, or 19 percent compared with
1997. Segment profit margin for 1998 was 12.4 percent compared with 10.9 percent
in 1997. The increase in segment profit in 1998 was led by a substantial
improvement by the Aerospace Solutions segment with the Automation & Asset
Management and Performance Materials segments also showing solid gains. A
substantial decrease in segment profit for the Power & Transportation Products
segment and higher Corporate expenses were partial offsets.
A discussion of net sales and segment profit by reportable segment can be
found in the Segment section of Management's Discussion and Analysis appearing
on pages 20, 24, 26 and 28 of this Annual Report.
Gain on sale of non-strategic businesses of $106 million in 1999 reflects
the pretax gain on the sale of our Laminate Systems business. The gain on sale
of non-strategic businesses of $303 million in 1997 was comprised of $354
million representing the total gain on the sales of our automotive Safety
Restraints business and certain Industrial Control businesses. This was
partially offset by a charge of $51 million related to the settlement of the
1996 sale of our automotive Braking Systems business. See Note 5 of Notes to
Financial Statements for further information.
Equity in income of affiliated companies of $76 million in 1999 decreased
by $86 million, or 53 percent compared with 1998. The decrease reflects a charge
of $40 million relating to the writedown of an equity investment and an equity
investee's severance actions as well as lower earnings from our UOP process
technology (UOP) joint venture. Equity in income of affiliated companies of $162
million in 1998 decreased by $29 million, or 15 percent, compared with 1997. The
decrease resulted mainly from lower earnings from UOP, partially offset by a
gain on the sale of a portion of our interest in our European Commercial Vehicle
Systems joint venture.
- --------------------------------------------------------------------------------
[BAR GRAPH] [BAR GRAPH]
SEGMENT PROFIT SEGMENT MARGIN
(Dollars in Millions) (Percent)
1997 1998 1999 1997 1998 1999
---- ---- ---- ---- ---- ----
$2,443 $2,912 $3,271 10.9% 12.4% 13.8%
Honeywell 1999 Annual Report 31
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS
Other (income) expense, $307 million of income in 1999, increased by $280
million compared with 1998. The increase principally reflects the net gain of
$268 million on our disposition of our investment in AMP Incorporated (AMP)
common stock. Other (income) expense, $27 million of income in 1998, decreased
by $60 million compared with 1997, principally reflecting lower investment
income and reduced benefits from foreign exchange hedging. A gain on litigation
settlements was a partial offset. See Note 6 of Notes to Financial Statements
for further information.
Interest and other financial charges of $265 million in 1999 decreased by
$10 million, or 4 percent, compared with 1998. The decrease results from lower
interest rates and tax interest expense somewhat offset by the effects of higher
average debt outstanding during 1999. Interest and other financial charges of
$275 million in 1998 were basically flat compared with 1997.
The effective tax rate was 31.5 percent, 31.3 percent and 32.2 percent in
1999, 1998 and 1997, respectively. See Note 8 of Notes to Financial Statements
for further information.
Net income in 1999 of $1,541 million, or $1.90 per share, was 19 percent
lower than 1998 net income of $1,903 million, or $2.34 per share. Net income in
1999 included the gains on our dispositions of our Laminate Systems business and
our investment in AMP and merger, repositioning and other charges. Net income in
1998 included repositioning charges, litigation settlements and a tax
settlement. Adjusted for these items, net income in 1999 was $624 million, or
$0.78 per share, higher than reported. This represents an increase of 14 percent
over 1998 if both years are adjusted for these items. The higher net income in
1999 was the result of substantially improved earnings for the Aerospace
Solutions, Automation & Asset Management and Power & Transportation Products
segments. The Performance Materials segment had lower earnings. Net income in
1998 of $1,903 million, or $2.34 per share, was 16 percent higher than 1997 net
income of $1,641 million, or $2.00 per share. Net income in 1997 included the
gains on our dispositions of our automotive Safety Restraints and certain
Industrial Control businesses and repositioning and other charges. Adjusted for
repositioning charges, litigation settlements and a tax settlement, net income
in 1998 was $4 million more than reported and earnings per share were the same.
This represents an increase of 16 percent over 1997 if both years are adjusted
for repositioning and other charges and the specified settlements and gains. The
higher net income in 1998 was the result of substantially improved earnings for
the Aerospace Solutions and Automation & Asset Management segments. Earnings for
the Performance Materials segment were also slightly higher. The Power &
Transportation Products segment had lower earnings.
FINANCIAL CONDITION, LIQUIDITY AND CAPITAL RESOURCES
Total assets at December 31, 1999 were $23,527 million, an increase of $789
million, or 3 percent from December 31, 1998. Total assets at December 31, 1998
were $22,738 million, an increase of $2,620 million, or 13 percent from December
31, 1997. The increase from year-end 1997 to year-end 1998 primarily reflects
acquisitions and our investment in AMP.
Cash provided by operating activities of $2,374 million during 1999
increased by $400 million compared with 1998 due principally to net income
excluding the impact of the gains on our dispositions of our Laminate Systems
business and our investment in AMP and merger, repositioning and other charges.
Cash provided by operating activities of $1,974 million during 1998 increased by
$40 million compared with 1997.
- --------------------------------------------------------------------------------
[BAR GRAPH] [BAR GRAPH] [BAR GRAPH]
EARNINGS PER SHARE RESEARCH AND FREE CASH FLOW
(Dollars Per Share) DEVELOPMENT EXPENSE (Dollars in Billions)
(Dollars in Millions)
1997 1998 1999 1997 1998 1999 1997 1998 1999
---- ---- ---- ---- ---- ---- ---- ---- ----
$2.00 $2.34 $2.68 $796 $876 $909 $1.1 $1.4 $1.7
32 Honeywell 1999 Annual Report
<PAGE>
Cash used for investing activities of $291 million during 1999 decreased by
$1,302 million compared with 1998. The decrease relates principally to the
proceeds from the disposition of our investment in AMP. An increase in proceeds
from sales of businesses, primarily Laminate Systems, also contributed to the
decrease. Higher spending for acquisitions, mainly Johnson Matthey Electronics,
and the liquidation in the prior year of short-term investments were partial
offsets. Cash used for investing activities of $1,593 million during 1998
decreased by $403 million compared with 1997 due primarily to lower spending for
acquisitions and the liquidation of short-term investments. This was partially
offset by lower proceeds from the sales of businesses and our investment in AMP.
On February 3, 2000, we completed a tender offer acquiring substantially
all of the outstanding shares of Pittway Corporation (Pittway) Common Stock and
Class A Stock for approximately $2.2 billion, including the assumption of the
net debt of Pittway of approximately $167 million. The acquisition was funded
through the issuance of commercial paper. Pittway designs, manufactures and
distributes security and fire systems for homes and buildings and had 1998
sales of $1.3 billion.
We continuously assess the relative strength of each business in our
portfolio as to strategic fit, market position and profit contribution in order
to upgrade our combined portfolio and identify operating units that will most
benefit from increased investment. We identify acquisition candidates that will
further our strategic plan and strengthen our existing core businesses. We also
identify operating units that do not fit into our long-term strategic plan based
on their market position, relative profitability or growth potential. These
operating units are considered for potential divestiture, restructuring or other
repositioning action subject to regulatory constraints.
- --------------------------------------------------------------------------------
[BAR GRAPH] [BAR GRAPH]
DEBT AS A PERCENT CAPITAL EXPENDITURES
OF TOTAL CAPITAL (Dollars in Millions)
(Percent)
1997 1998 1999 1997 1998 1999
---- ---- ---- ---- ---- ----
30.2% 32.5% 26.6% $1,015 $1,037 $986
Capital expenditures were $986, $1,037 and $1,015 million in 1999, 1998 and
1997, respectively. Spending by the reportable segments and Corporate since 1997
is shown in Note 23 of Notes to Financial Statements. Our total capital
expenditures in 2000 are currently projected at approximately $1,050 million.
These expenditures are expected to be financed principally by internally
generated funds and are primarily planned for expansion and cost reduction.
Cash used for financing activities of $1,110 million during 1999 increased
by $1,002 million compared with 1998. The increase relates principally to lower
net issuances of debt of $1,190 million. Cash dividends paid in 1999 were also
$46 million higher. Lower net stock repurchases of $234 million were a partial
offset. Total debt of $5,066 million at year-end 1999 was $100 million, or 2
percent higher than at December 31, 1998. Cash used for financing activities of
$108 million during 1998 decreased by $677 million compared with 1997. The
decrease relates to higher net issuances of debt of $809 million somewhat offset
by an increase in net stock repurchases of $128 million and higher cash
dividends paid of $47 million. Total debt of $4,966 million at year-end 1998 was
$1,334 million, or 37 percent higher than at December 31, 1997. The increase in
total debt resulted principally from our investment in AMP, acquisitions and
common stock repurchases.
In September 1999, a $1 billion shelf registration filed with the
Securities and Exchange Commission for the issuance of debt securities was
declared effective. In December 1999, we entered into a $3 billion bank
revolving credit facility which is comprised of (a) a $1 billion Five-Year
Credit Agreement; and, (b) a $2 billion 364-Day Credit Agreement, which reduces
to $1 billion on March 31, 2000 bringing the total bank revolving credit
facility to $2 billion. The credit agreements which replaced previous credit
agreements maintained by AlliedSignal and the former Honeywell were established
for general corporate purposes including support for the issuance of commercial
paper. There was $2,023 and $1,773 million of commercial paper outstanding at
year-end 1999 and 1998, respectively. See Note 15 of Notes to Financial
Statements for details of long-term debt and a discussion of the Credit
Agreements.
In January 2000, we entered into an additional $1 billion bank revolving
credit facility to be used to support the issuance of commercial paper to
finance in part the acquisition of Pittway. This bank revolving credit facility
expires on April 12, 2000 and has terms and conditions similar to the $2 billion
364-Day Credit Agreement.
Honeywell 1999 Annual Report 33
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS
We believe that our available cash, committed credit lines, and access to
the public debt markets using debt securities and commercial paper, provide
adequate short-term and long-term liquidity.
From 1997 to 1999, we purchased $3.1 billion of treasury shares in
connection with our stock repurchase programs. As of June 4, 1999, the date of
the merger agreement between AlliedSignal and the former Honeywell, all share
repurchase programs were rescinded.
The Board of Directors approved a quarterly dividend increase of 10.3
percent from $0.17 to $0.1875 per share. The dividend increase will be effective
with the first quarter of 2000.
MERGER AND REPOSITIONING CHARGES Upon completion of the merger between
AlliedSignal and the former Honeywell, we recognized a pretax charge of $642
million for the cost of actions designed to improve our combined competitiveness
and productivity and improve future profitability. The merger-related actions
included the elimination of redundant corporate offices and functional
administrative overhead; elimination of redundant and excess facilities and
workforce in our combined aerospace businesses; adoption of six sigma
productivity initiatives at the former Honeywell businesses; and the transition
to a global shared services model. The components of the charge included
severance costs of $342 million, asset impairments of $108 million, other exit
costs of $57 million and merger-related transaction and period expenses of $135
million. Planned global workforce reductions consisted of approximately 6,500
administrative and manufacturing positions. Asset impairments principally
related to the elimination of redundant or excess corporate and aerospace
facilities and equipment.
- --------------------------------------------------------------------------------
[BAR GRAPH] [BAR GRAPH]
DIVIDENDS PER SHARE MARKET VALUE OF
(Dollars Per Share) COMMON STOCK
(Dollars Per Share)
1997 1998 1999 1997 1998 1999
---- ---- ---- ---- ---- ----
$0.52 $0.60 $0.68 $38.81 $44.31 $57.69
At year-end, approximately $9 million of redundant assets were not able to be
removed from service and are currently being depreciated over their shortened
useful lives. Other exit costs related to lease terminations and contract
cancellation losses negotiated or subject to reasonable estimation at year-end.
Merger-related transaction and period expenses consisted of investment banking
and legal fees, former Honeywell deferred compensation vested upon change in
control and other direct merger-related expenses incurred in the period the
merger was completed. All merger-related actions are expected to be completed by
December 31, 2000.
In 1999, we also recognized a pretax charge of $321 million for the costs
of actions designed to reposition principally the AlliedSignal business units
for improved productivity and future profitability. These repositioning actions
included the organizational realignment of our aerospace businesses to
strengthen market focus and simplify business structure; elimination of an
unprofitable product line and rationalization of manufacturing capacity and
infrastructure in the Performance Polymers business; a reduction in
infrastructure in the Turbocharging Systems business; closing a wax refinery and
carbon materials plant and rationalization of manufacturing capacity in the
Specialty Chemicals business; elimination of two manufacturing facilities in our
Electronic Materials business; a plant closure and outsourcing activity in our
automotive Consumer Products Group business; and related and general workforce
reductions in all AlliedSignal businesses and our Industrial Control business.
The components of the charge included severance costs of $140 million, asset
impairments of $149 million, and other exit costs of $32 million. Global
workforce reductions consisted of approximately 5,100 manufacturing,
administrative, and sales positions. Asset impairments principally related to
manufacturing plant and equipment held for sale and capable of being taken out
of service and actively marketed in the period of impairment. Other exit costs
principally consisted of environmental exit costs associated with chemical plant
shutdowns. All repositioning actions, excluding environmental remediation, are
expected to be completed by December 31, 2000.
We expect that the merger and repositioning actions committed to in 1999
will generate incremental pretax savings of $250 million in 2000, $575 million
in 2001 and $750 million in 2002 principally from planned workforce reductions
and facility consolidations. Cash expenditures for severance, other exit costs,
and future period expenses necessary to execute these
34 Honeywell 1999 Annual Report
<PAGE>
actions will exceed $500 million and will principally be incurred in 2000. Such
expenditures will be funded through future operating cash flows, proceeds from
government required divestitures resulting from the merger and sale of
merger-related, excess or duplicate facilities and equipment. The government
required divestitures will not materially affect our results of operations or
financial position.
In 1998, we recognized a pretax charge of $54 million related to
productivity initiatives which included workforce reductions of 1,200 employees
and facility consolidations principally in our Home and Building Control and
Industrial Control businesses. These actions were completed by December 31,
1999, with substantially all reserve spending occurring in 1999.
In 1997, we recognized a pretax charge of $215 million for costs to
eliminate AlliedSignal's three sector administrative offices; consolidate our
automotive Consumer Products Group business; close four performance materials
manufacturing facilities; and, execute workforce reductions and facility
consolidations in our Home and Building Control and Industrial Control
businesses. The charge principally consisted of severance for approximately
2,900 employees and other cash exit costs. These actions were essentially
completed by December 31, 1998, with substantially all reserve spending
occurring in 1998.
The 1998 and 1997 actions generated over $150 million in incremental pretax
savings in 1999 and were funded through proceeds received from the sales of
non-strategic businesses.
ENVIRONMENTAL MATTERS We are subject to various federal, state and local
government requirements relating to the protection of the environment. We
believe that, as a general matter, our policies, practices and procedures are
properly designed to prevent unreasonable risk of environmental damage and that
our handling, manufacture, use and disposal of hazardous or toxic substances are
in accord with environmental laws and regulations. However, mainly because of
past operations and operations of predecessor companies, we, like other
companies engaged in similar businesses, are a party to lawsuits and claims and
have incurred remedial response and voluntary cleanup costs associated with
environmental matters. Additional lawsuits, claims and costs involving
environmental matters are likely to continue to arise in the future. We
continually conduct studies, individually at our owned sites, and jointly as a
member of industry groups at non-owned sites, to determine the feasibility of
various remedial techniques to address environmental matters. It is our policy
to record appropriate liabilities for such matters when environmental
assessments are made or remedial efforts are probable and the costs can be
reasonably estimated. The timing of these accruals is generally no later than
the completion of feasibility studies.
Remedial response and voluntary cleanup expenditures were $78, $77 and $90
million in 1999, 1998 and 1997, respectively, and are currently estimated to be
approximately $82 million in 2000. We expect that we will be able to fund such
expenditures from operating cash flow. The timing of expenditures depends on a
number of factors, including regulatory approval of cleanup projects, remedial
techniques to be utilized and agreements with other parties.
At December 31, 1999 and 1998, the recorded liability for environmental
matters was $349 and $406 million, respectively. In addition, in 1999 and 1998
we incurred operating costs for ongoing businesses of approximately $89 and $75
million, respectively, and capital expenditures of $40 and $52 million,
respectively relating to compliance with environmental regulations.
Although we do not currently possess sufficient information to reasonably
estimate the amounts of liabilities to be recorded upon future completion of
studies or settlements, and neither the timing nor the amount of the ultimate
costs associated with environmental matters can be determined, they may be
significant to our consolidated results of operations. We do not expect that
environmental matters will have a material adverse effect on our consolidated
financial position.
See Note 21 of Notes to Financial Statements for a discussion of our
commitments and contingencies, including those related to environmental matters.
FINANCIAL INSTRUMENTS As a result of our global operating and financing
activities, we are exposed to market risks from changes in interest and foreign
currency exchange rates, which may adversely affect our results of operations
and financial position. We minimize our risks from interest and foreign currency
exchange rate fluctuations through our normal operating and financing activities
and, when deemed appropriate, through the use of derivative financial
instruments. We do not use derivative financial instruments for trading or other
speculative purposes and do not use leveraged derivative financial instruments.
A discussion of our accounting policies for derivative financial instruments is
included in Note 1 of Notes to Financial Statements.
Honeywell 1999 Annual Report 35
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS
Our exposure to market risk from changes in interest rates relates
primarily to our debt obligations. As described in Notes 15 and 17 of Notes to
Financial Statements, we issue both fixed and variable rate debt and use
interest rate swaps to manage our exposure to interest rate movements and reduce
borrowing costs.
Our exposure to market risk for changes in foreign currency exchange rates
arises from international financing activities between subsidiaries and foreign
currency denominated receivables, payables, and firm commitments arising from
international transactions. We attempt to have all such transaction exposures
hedged with internal natural offsets to the fullest extent possible and, once
these opportunities have been exhausted, through foreign currency forward and
option agreements with third parties. We also use derivative financial
instruments to hedge the impact of exchange rate movements on the translated
U.S. dollar value of the net income for a number of foreign subsidiaries.
Foreign currency forward and option agreements used to hedge net income are
marked to market, with gains or losses recognized immediately in income. Our
principal foreign currency exposures relate to the Belgian franc, the French
franc, the German mark (collectively the Euro countries), and the British pound,
the Canadian dollar, and the U.S. dollar. At December 31, 1999, we held or had
written foreign currency forward and option agreements, maturing through 2003.
We write foreign currency options only in combination with purchased options as
an integral transaction and economic alternative to using forward agreements.
Derivative financial instruments expose us to counterparty credit risk for
nonperformance and to market risk related to changes in interest or currency
exchange rates. We manage exposure to counterparty credit risk through specific
minimum credit standards, diversification of counterparties, and procedures to
monitor concentrations of credit risk. Our counterparties are substantial
investment and commercial banks with significant experience using such
derivative instruments. We monitor the impact of market risk on the fair value
and cash flows of our derivative and other financial instruments considering
reasonably possible changes in interest and currency exchange rates and restrict
the use of derivative financial instruments to hedging activities.
The following table illustrates the potential change in fair value for
interest rate sensitive instruments based on a hypothetical immediate
one-percentage-point increase in interest rates across all maturities and the
potential change in fair value for foreign exchange rate sensitive instruments
based on a 10 percent increase in U.S. dollar per local currency exchange rates
across all maturities at December 31, 1999 and 1998.
<TABLE>
<CAPTION>
Estimated
Face or Increase
Notional Carrying Fair (Decrease)
(Dollars in Millions) Amount Value(1) Value(1) In Fair Value
- ------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
December 31, 1999
INTEREST RATE SENSITIVE INSTRUMENTS
Long-term debt
(including current
maturities)(2) $(2,712) $(2,705) $(2,702) $(120)
Interest rate swaps 1,100 (4) (36) (22)
FOREIGN EXCHANGE RATE SENSITIVE INSTRUMENTS
Foreign currency
exchange contracts(3) 1,445 4 6 25
- ------------------------------------------------------------------------------------------------
December 31, 1998
INTEREST RATE SENSITIVE INSTRUMENTS
Long-term debt
(including current
maturities)(2) $(3,041) $(3,018) $(3,278) $(162)
Interest rate swaps 1,450 3 6 (23)
FOREIGN EXCHANGE RATE SENSITIVE INSTRUMENTS
Foreign currency
exchange contracts(3) 2,087 1 (4) 74
- ------------------------------------------------------------------------------------------------
</TABLE>
(1) Asset or (liability).
(2) Excludes capitalized leases.
(3) Increases in the fair value of foreign currency exchange contracts are
substantially offset by changes in the fair value of net underlying hedged
foreign currency transactions.
The above discussion of our procedures to monitor market risk and the estimated
changes in fair value resulting from our sensitivity analyses are
forward-looking statements of market risk assuming certain adverse market
conditions occur. Actual results in the future may differ materially from these
estimated results due to actual developments in the global financial markets.
The methods used by us to assess and mitigate risk discussed above should not be
considered projections of future events.
36 Honeywell 1999 Annual Report
<PAGE>
OTHER MATTERS
LITIGATION On March 13, 1990, Litton Systems, Inc. filed a legal action against
the former Honeywell in U.S. District Court, Central District of California, Los
Angeles, with claims that were subsequently split into two separate cases. One
alleges patent infringement under federal law for using an ion-beam process to
coat mirrors incorporated in the former Honeywell's ring laser gyroscopes, and
tortious interference under state law for interfering with Litton's prospective
advantage with customers and contractual relationships with an inventor and his
company, Ojai Research, Inc. The other case alleges monopolization and attempted
monopolization under federal antitrust laws by the former Honeywell in the sale
of inertial reference systems containing ring laser gyroscopes into the
commercial aircraft market. The former Honeywell generally denied Litton's
allegations in both cases. In the patent/tort case, the former Honeywell also
contested the validity as well as the infringement of the patent, alleging,
among other things, that the patent had been obtained by Litton's inequitable
conduct before the United States Patent and Trademark Office.
In 1993 and 1995,trials were held in each case and juries initially awarded
Litton significant monetary damages. However, those verdicts were set aside by
the trial court judge who ordered, at a minimum, new trials on the issue of
damages in each case.
Following cross-appeals by the parties of various issues to the Federal
Circuit and the U.S. Supreme Court in the patent/tort case, it was remanded to
the trial court for further legal and perhaps factual review with respect to
both liability and damages. On September 23, 1999, the trial court issued
dispositive rulings in the case, granting the former Honeywell's Motion for
Judgment as a Matter of Law and Summary Judgment on the Patent claims on various
grounds; granting the former Honeywell's Motion for Judgment as a Matter of Law
on the State Law Claims on the grounds of insufficient evidence; and denying
Litton's Motion for Partial Summary Judgment. We expect that Litton will appeal
the trial court's rulings.
A retrial of damages in the antitrust case commenced October 29, 1998, and
on December 9, 1998, a jury returned a verdict against Honeywell for actual
damages in the amount of $250 million. Following post trial motions, on
September 24, 1999, the trial court issued rulings denying the former
Honeywell's Motion for Judgment as a Matter of Law and Motion for New Trial and
Remittitur as they related to Litton Systems, Inc., but granting the former
Honeywell's Motion for Judgment as a Matter of Law as it relates to Litton
Systems, Canada, Limited. The net effect of these rulings was to reduce the
existing judgment against the former Honeywell of $750 million to $660 million,
plus attorney fees and costs of approximately $35 million. We believe that there
is no factual or legal basis for the magnitude of the jury's award and believe
that it should be overturned. We also believe we have very strong arguments that
the liability portion of the jury verdict in the first antitrust trial was
erroneous. Both parties have appealed this judgment, as to both liability and
damages, to the U.S. Court of Appeals for the Ninth Circuit.
Although it is not possible at this time to predict the result of any
further appeals in this case, potential does remain for an adverse outcome which
could be material to our financial position or results of operations. As a
result of the uncertainty regarding the outcome of this matter, no provision has
been made in the financial statements with respect to this contingent liability.
For a detailed discussion of this litigation, see Note 21 of Notes to the
Financial Statements.
YEAR 2000 UPDATE In preparation for the transition to the calendar Year 2000, we
completed extensive remediation efforts with respect to the various aspects of
the Year 2000 problem, including information systems, production and facilities
equipment, products, customers and suppliers. While there can be no assurances
that future problems will not occur, these efforts resulted in a successful
transition into the Year 2000 without any major complications being identified
to date related to the Year 2000 problem.
Our total cost for Year 2000 compliance was approximately $195 million.
This amount does not include our share of costs for Year 2000 issues by
partnerships and joint ventures in which we participate but are not the
operator. Incremental spending was not material because most Year 2000
compliance costs were met with amounts that were normally budgeted for
procurement and maintenance of our information systems and production and
facilities equipment. The redirection of spending from procurement of
information systems and production and facilities equipment to implementation of
Year 2000 compliance plans may in some instances have delayed productivity
improvements.
Honeywell 1999 Annual Report 37
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS
EURO CONVERSION On January 1, 1999, certain member countries of the European
Union established fixed conversion rates between their existing currencies and
the European Union's common currency (Euro). The transition period for the
introduction of the Euro is between January 1, 1999 and January 1, 2002. We have
identified and are ensuring that all Euro conversion compliance issues are
addressed. Although we cannot predict the impact of the Euro conversion at this
time, we do not expect the Euro conversion will have a material adverse effect
on our consolidated results of operations.
SALES TO THE U.S. GOVERNMENT Sales to the U.S. Government, acting through its
various departments and agencies and through prime contractors, amounted to
$2,383, $2,693 and $2,655 million in 1999, 1998 and 1997, respectively. This
included sales to the Department of Defense (DoD), as a prime contractor and
subcontractor, of $1,415, $1,658 and $1,618 million in 1999, 1998 and 1997,
respectively. Sales to the DoD accounted for 6.0, 7.0 and 7.2 percent of our
total sales in 1999, 1998 and 1997, respectively. We are affected by U.S.
Government budget constraints for defense and space programs. U.S. defense
spending increased slightly in 1999 and is also expected to increase slightly in
2000.
BACKLOG Our total backlog at year-end 1999 and 1998 was $8,736 and $9,400
million, respectively. We anticipate that approximately $6,400 million of the
1999 backlog will be filled in 2000. We believe that backlog is not a reliable
indicator of our future sales because a substantial portion of the orders
constituting this backlog may be canceled at the customer's option.
INFLATION Highly competitive market conditions have minimized inflation's impact
on the selling prices of our products and the cost of our purchased materials.
Cost increases for materials and labor have generally been low, and productivity
enhancement programs, including Six Sigma initiatives, have largely offset any
impact.
NEW ACCOUNTING PRONOUNCEMENTS In June 1998, the Financial Accounting Standards
Board (FASB) issued Statement of Financial Accounting Standards No. 133,
"Accounting for Derivative Instruments and Hedging Activities"(SFAS No.133).
SFAS No. 133 requires derivatives to be recorded on the balance sheet as assets
or liabilities, measured at fair value. Gains or losses resulting from changes
in values of derivatives would be accounted for depending on the use of the
derivative and whether it qualifies for hedge accounting. In June 1999, the FASB
issued Statement of Financial Accounting Standards No. 137, which defers the
effective date of SFAS No. 133 to fiscal years beginning after June 15, 2000. We
are currently completing an analysis of these standards and their impact on our
results of operations and financial position.
38 Honeywell 1999 Annual Report
<PAGE>
REPORT OF INDEPENDENT ACCOUNTANTS
[PRICEWATERHOUSECOOPERS LOGO]
To the Board of Directors and Shareowners of Honeywell International Inc.
In our opinion, based on our audits and the report of other auditors, the
accompanying consolidated balance sheet and the related consolidated statements
of income, of shareowners' equity and of cash flows present fairly, in all
material respects, the financial position of Honeywell International Inc. and
its subsidiaries at December 31, 1999 and 1998, and the results of their
operations and their cash flows for each of the three years in the period ended
December 31, 1999 in conformity with accounting principles generally accepted in
the United States. These financial statements are the responsibility of the
Company's management; our responsibility is to express an opinion on these
financial statements based on our audits. We did not audit the financial
statements of Honeywell Inc., a wholly-owned subsidiary, which statements
reflect total assets of $7,170.4 million as of December 31, 1998, and total
sales of $8,426.7 million and $8,027.5 million for each of the two years in the
period ended December 31, 1998. Those statements were audited by other auditors
whose report thereon has been furnished to us, and our opinion expressed herein,
insofar as it relates to the amounts included for Honeywell Inc. as of and for
the two years ended December 31, 1998 is based solely on the report of the other
auditors. We conducted our audits of these statements in accordance with
auditing standards generally accepted in the United States, which require that
we plan and perform the audit to obtain reasonable assurance about whether the
financial statements are free of material misstatement. An audit includes
examining, on a test basis, evidence supporting the amounts and disclosures in
the financial statements, assessing the accounting principles used and
significant estimates made by management, and evaluating the overall financial
statement presentation. We believe that our audits and the report of other
auditors provide a reasonable basis for the opinion expressed above.
/s/ PRICEWATERHOUSECOOPERS LLP
PRICEWATERHOUSECOOPERS LLP
Florham Park, New Jersey
January 27, 2000, except as to Note 25
which is as of February 4, 2000
Honeywell 1999 Annual Report 39
<PAGE>
CONSOLIDATED STATEMENT OF INCOME
Honeywell International Inc.
<TABLE>
<CAPTION>
Years Ended December 31
--------------------------------------
(Dollars in Millions Except Per Share Amounts) 1999 1998 1997
- ---------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Net sales $ 23,735 $ 23,555 $ 22,499
- ---------------------------------------------------------------------------------------------
Costs, expenses and other
--------------------------------------
Cost of goods sold 18,495 17,689 17,444
--------------------------------------
Selling, general and administrative expenses 3,216 3,008 2,940
--------------------------------------
Gain on sale of non-strategic businesses (106) -- (303)
--------------------------------------
Equity in income of affiliated companies (76) (162) (191)
--------------------------------------
Other (income) expense (307) (27) (87)
--------------------------------------
Interest and other financial charges 265 275 277
- ---------------------------------------------------------------------------------------------
21,487 20,783 20,080
- ---------------------------------------------------------------------------------------------
Income before taxes on income 2,248 2,772 2,419
--------------------------------------
Taxes on income 707 869 778
- ---------------------------------------------------------------------------------------------
Net income $ 1,541 $ 1,903 $ 1,641
=============================================================================================
Earnings per share of common stock--basic $ 1.95 $ 2.38 $ 2.04
--------------------------------------
Earnings per share of common stock--assuming dilution $ 1.90 $ 2.34 $ 2.00
=============================================================================================
</TABLE>
The Notes to Financial Statements are an integral part of this statement.
40 Honeywell 1999 Annual Report
<PAGE>
CONSOLIDATED BALANCE SHEET
Honeywell International Inc.
<TABLE>
<CAPTION>
December 31
----------------------
(Dollars in Millions) 1999 1998
- --------------------------------------------------------------------------------
<S> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents $ 1,991 $ 1,018
----------------------
Accounts and notes receivable 3,896 3,899
----------------------
Inventories 3,436 3,456
----------------------
Other current assets 1,099 981
- --------------------------------------------------------------------------------
Total current assets 10,422 9,354
----------------------
Investments and long-term receivables 782 1,792
----------------------
Property, plant and equipment -- net 5,630 5,600
----------------------
Goodwill and other intangible assets--net 4,660 4,365
----------------------
Other assets 2,033 1,627
- --------------------------------------------------------------------------------
Total assets $ 23,527 $ 22,738
================================================================================
LIABILITIES
Current liabilities:
Accounts payable $ 2,129 $ 2,018
----------------------
Short-term borrowings 302 133
----------------------
Commercial paper 2,023 1,773
----------------------
Current maturities of long-term debt 284 284
----------------------
Accrued liabilities 3,534 3,437
- --------------------------------------------------------------------------------
Total current liabilities 8,272 7,645
----------------------
Long-term debt 2,457 2,776
----------------------
Deferred income taxes 864 861
----------------------
Postretirement benefit obligations other than pensions 1,968 2,042
----------------------
Other liabilities 1,367 1,331
- --------------------------------------------------------------------------------
CONTINGENCIES
SHAREOWNERS' EQUITY
Capital -- common stock -- Authorized 2,000,000,000
shares (par value $1 per share): issued
1999 -- 957,599,006 shares
1998 -- 953,326,000 shares 958 953
----------------------
-- additional paid-in capital 2,318 1,719
----------------------
Common stock held in treasury, at cost:
----------------------
1999 -- 162,466,000 shares
----------------------
1998 -- 157,991,553 shares (4,254) (3,413)
----------------------
Accumulated other nonowner changes (355) (94)
----------------------
Retained earnings 9,932 8,918
- --------------------------------------------------------------------------------
Total shareowners' equity 8,599 8,083
- --------------------------------------------------------------------------------
Total liabilities and shareowners' equity $ 23,527 $ 22,738
================================================================================
</TABLE>
The Notes to Financial Statements are an integral part of this statement.
Honeywell 1999 Annual Report 41
<PAGE>
CONSOLIDATED STATEMENT OF CASH FLOWS
Honeywell International Inc.
<TABLE>
<CAPTION>
Years Ended December 31
--------------------------------------------
(Dollars in Millions) 1999 1998 1997
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net income $1,541 $1,903 $1,641
--------------------------------------------
Adjustments to reconcile net income to net cash provided by operating activities:
Gain on sale of non-strategic businesses (106) -- (303)
--------------------------------------------
Gain on disposition of investment in AMP Incorporated (268) -- --
--------------------------------------------
Merger, repositioning and other charges 1,287 54 341
--------------------------------------------
Depreciation and amortization 881 897 888
--------------------------------------------
Undistributed earnings of equity affiliates (39) (24) (65)
--------------------------------------------
Deferred income taxes (11) 221 116
--------------------------------------------
Net taxes paid on sales of businesses and investments (246) (300) (21)
--------------------------------------------
Other (165) (176) (535)
--------------------------------------------
Changes in assets and liabilities, net of the effects of acquisitions and
divestitures:
Accounts and notes receivable (54) (154) (165)
--------------------------------------------
Inventories 90 (96) (159)
--------------------------------------------
Other current assets (39) 3 (88)
--------------------------------------------
Accounts payable 121 35 264
--------------------------------------------
Accrued liabilities (618) (389) 20
- ------------------------------------------------------------------------------------------------------------------------------------
Net cash provided by operating activities 2,374 1,974 1,934
- ------------------------------------------------------------------------------------------------------------------------------------
CASH FLOWS FROM INVESTING ACTIVITIES
Expenditures for property, plant and equipment (986) (1,037) (1,015)
--------------------------------------------
Proceeds from disposals of property, plant and equipment 67 150 149
--------------------------------------------
Decrease in investments and long-term receivables -- -- 25
--------------------------------------------
(Increase) in investments (20) (1) (6)
--------------------------------------------
Disposition (purchase) of investment in AMP Incorporated 1,164 (890) --
--------------------------------------------
Cash paid for acquisitions (1,311) (581) (1,816)
--------------------------------------------
Proceeds from sales of businesses 784 335 796
--------------------------------------------
Decrease (increase) in short-term investments 11 431 (129)
- ------------------------------------------------------------------------------------------------------------------------------------
Net cash (used for) investing activities (291) (1,593) (1,996)
- ------------------------------------------------------------------------------------------------------------------------------------
CASH FLOWS FROM FINANCING ACTIVITIES
Net increase in commercial paper 250 909 307
--------------------------------------------
Net increase (decrease) in short-term borrowings 156 16 (11)
--------------------------------------------
Proceeds from issuance of common stock 419 216 195
--------------------------------------------
Proceeds from issuance of long-term debt 25 687 630
--------------------------------------------
Payments of long-term debt (375) (366) (489)
--------------------------------------------
Repurchases of common stock (1,058) (1,089) (940)
--------------------------------------------
Cash dividends on common stock (527) (481) (434)
--------------------------------------------
Other -- -- (43)
- ------------------------------------------------------------------------------------------------------------------------------------
Net cash (used for) financing activities (1,110) (108) (785)
- ------------------------------------------------------------------------------------------------------------------------------------
Net increase (decrease) in cash and cash equivalents 973 273 (847)
--------------------------------------------
Cash and cash equivalents at beginning of year 1,018 745 1,592
- ------------------------------------------------------------------------------------------------------------------------------------
Cash and cash equivalents at end of year $ 1,991 $1,018 $ 745
====================================================================================================================================
</TABLE>
The Notes to Financial Statements are an integral part of this statement.
42 Honeywell 1999 Annual Report
<PAGE>
CONSOLIDATED STATEMENT OF SHAREOWNERS' EQUITY
Honeywell International Inc.
<TABLE>
<CAPTION>
Common Common Stock
Stock Issued Additional Held in Treasury Accumulated Total
------------ Paid-in ---------------- Other Non- Retained Shareowners'
(In Millions Except Per Share Amounts) Shares Amount Capital Shares Amount owner Changes Earnings Equity
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
BALANCE AT DECEMBER 31, 1996 953.5 $953 $ 999 (150.8) $(1,953) $ 97 $6,289 $ 6,385
- ------------------------------------------------------------------------------------------------------------------------------------
Net income 1,641 1,641
--------------------------------------------------------------------------------
Foreign exchange translation adjustments (293) (293)
--------------------------------------------------------------------------------
Minimum pension liability adjustment (2) (2)
--------------------------------------------------------------------------------
Unrealized holding loss on marketable securities (10) (10)
--------------------------------------------------------------------------------
Nonowner changes in shareowners' equity 1,336
--------------------------------------------------------------------------------
Common stock issued for acquisitions 32 1.0 8 40
--------------------------------------------------------------------------------
Common stock issued for employee benefit
plans (including related tax benefits of $100) 3.6 4 354 12.7 94 452
--------------------------------------------------------------------------------
Repurchases of common stock (4.2) (4) (150) (21.0) (814) (968)
--------------------------------------------------------------------------------
Cash dividends on common stock ($.52 per share) (434) (434)
--------------------------------------------------------------------------------
Other 0.2 (36) (36)
- ------------------------------------------------------------------------------------------------------------------------------------
BALANCE AT DECEMBER 31, 1997 953.1 953 1,199 (158.1) (2,665) (208) 7,496 6,775
- ------------------------------------------------------------------------------------------------------------------------------------
Net income 1,903 1,903
--------------------------------------------------------------------------------
Foreign exchange translation adjustments 34 34
--------------------------------------------------------------------------------
Minimum pension liability adjustment (10) (10)
--------------------------------------------------------------------------------
Unrealized holding gain on marketable securities 90 90
--------------------------------------------------------------------------------
Nonowner changes in shareowners' equity 2,017
--------------------------------------------------------------------------------
Common stock issued for acquisitions 322 11.1 98 420
--------------------------------------------------------------------------------
Common stock issued for employee benefit
plans (including related tax benefits of $91) 3.8 4 348 11.0 96 448
--------------------------------------------------------------------------------
Repurchases of common stock (3.9) (4) (156) (22.0) (942) (1,102)
--------------------------------------------------------------------------------
Cash dividends on common stock ($.60 per share) (481) (481)
--------------------------------------------------------------------------------
Other 0.3 6 6
- ------------------------------------------------------------------------------------------------------------------------------------
BALANCE AT DECEMBER 31, 1998 953.3 953 1,719 (158.0) (3,413) (94) 8,918 8,083
- ------------------------------------------------------------------------------------------------------------------------------------
Net income 1,541 1,541
--------------------------------------------------------------------------------
Foreign exchange translation adjustments (126) (126)
--------------------------------------------------------------------------------
Minimum pension liability adjustment (43) (43)
--------------------------------------------------------------------------------
Unrealized holding loss on marketable securities (92) (92)
--------------------------------------------------------------------------------
Nonowner changes in shareowners' equity 1,280
--------------------------------------------------------------------------------
Common stock issued for employee benefit
plans (including related tax benefits of $237) 4.7 5 602 14.5 125 732
--------------------------------------------------------------------------------
Repurchases of common stock (18.9) (966) (966)
--------------------------------------------------------------------------------
Cash dividends on common stock ($.68 per share) (527) (527)
--------------------------------------------------------------------------------
Other (0.4) (3) (3)
- ------------------------------------------------------------------------------------------------------------------------------------
BALANCE AT DECEMBER 31, 1999 957.6 $958 $2,318 (162.4) $(4,254) $(355) $9,932 $8,599
====================================================================================================================================
</TABLE>
The Notes to Financial Statements are an integral part of this statement.
Honeywell 1999 Annual Report 43
<PAGE>
NOTES TO FINANCIAL STATEMENTS
Honeywell International Inc. (Dollars in Millions Except Per Share Amounts)
NOTE 1
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
HONEYWELL INTERNATIONAL INC. is a diversified technology and manufacturing
company,serving customers worldwide with aerospace products and services,
control technologies for buildings, homes and industry,automotive products,
power generation systems, specialty chemicals,fibers, plastics and electronic
and advanced materials. As described in Note 2, Honeywell International Inc. was
formed upon the merger of AlliedSignal Inc. and Honeywell Inc. The following is
a description of the significant accounting policies of Honeywell International
Inc.
PRINCIPLES OF CONSOLIDATION The consolidated financial statements include the
accounts of Honeywell International Inc. and all of its subsidiaries in which a
controlling interest is maintained. All intercompany transactions and balances
are eliminated in consolidation.
INVENTORIES Inventories are valued at the lower of cost or market using the
first-in, first-out or the average cost method and the last-in, first-out (LIFO)
method for certain qualifying domestic inventories.
INVESTMENTS Investments in affiliates over which we have a significant
influence, but not a controlling interest, are accounted for using the equity
method of accounting. Other investments are carried at market value, if readily
determinable, or cost.
PROPERTY, PLANT AND EQUIPMENT Property, plant and equipment are recorded at cost
less accumulated depreciation. For financial reporting, the straight-line method
of depreciation is used over the estimated useful lives of 10 to 40 years for
buildings and improvements and 3 to 15 years for machinery and equipment.
GOODWILL AND OTHER INTANGIBLE ASSETS Goodwill represents the excess of
acquisition costs over the fair value of net assets of businesses acquired and
is amortized on a straight-line basis over appropriate periods up to 40 years.
Goodwill was $4,282 and $3,951 million, net, at December 31, 1999 and 1998,
respectively. Accumulated amortization was $804 and $723 million at December 31,
1999 and 1998, respectively.
Other intangible assets includes patents, trademarks, customer lists and
other items amortized on a straight-line basis over appropriate periods up to 24
years. Other intangible assets were $378 and $414 million, net, at December 31,
1999 and 1998, respectively. Accumulated amortization was $398 and $338 million
at December 31, 1999 and 1998, respectively.
LONG-LIVED ASSETS We periodically evaluate the recoverability of the carrying
amount of long-lived assets (including property, plant, and equipment, goodwill
and other intangible assets) whenever events or changes in circumstances
indicate that the carrying amount of an asset may not be fully recoverable. An
impairment is assessed when the undiscounted expected future cash flows derived
from an asset are less than its carrying amount. Impairment losses are measured
as the amount by which the carrying value of an asset exceeds its fair value and
are recognized in operating results. We also continually evaluate the estimated
useful lives of all long-lived assets and periodically revise such estimates
based on current events.
SALES RECOGNITION Product and service sales are recognized when an agreement of
sale exists, product delivery has occurred or services have been rendered,
pricing is fixed or determinable, and collection is reasonably assured. Sales
under long-term contracts in the Aerospace Solutions and Automation & Asset
Management segments are recorded on a percentage-of-completion method measured
on the cost-to-cost basis for engineering-type contracts and the units-of-
delivery basis for production-type contracts. Provisions for anticipated losses
on long-term contracts are recorded in full when such losses become evident.
ENVIRONMENTAL EXPENDITURES Environmental expenditures that relate to current
operations are expensed or capitalized as appropriate. Expenditures that relate
to an existing condition caused by past operations, and that do not provide
future benefits, are expensed as incurred. Liabilities are recorded when
environmental assessments are made or remedial efforts are probable and the
costs can be reasonably estimated. The timing of these accruals is generally no
later than the completion of feasibility studies.
FOREIGN CURRENCY TRANSLATION Assets and liabilities of subsidiaries operating
outside the United States with a functional currency other than U.S. dollars are
translated into U.S. dollars using year-end exchange rates. Sales, costs and
expenses are translated at the average exchange rates effective during the year.
Foreign currency translation gains and losses are included as a component of
Accumulated Other Nonowner Changes in shareowners' equity. For subsidiaries
operating in highly inflationary environments, inventories and property, plant
and equipment, including related expenses, are remeasured at the rate of
exchange in effect on the date the assets are acquired, while monetary assets
and liabilities are remeasured at year-end exchange rates. Remeasurement
adjustments for these operations are included in net income.
FINANCIAL INSTRUMENTS Interest rate swap, foreign currency forward and option
agreements are accounted for as a hedge of the related asset, liability, firm
commitment or anticipated transaction when designated and effective as a hedge
of such items. Agreements qualifying for hedge accounting are accounted for as
follows:
o Changes in the amount to be received or paid under interest rate swap
agreements are recognized in Interest and Other Financial Charges.
o Gains and losses on foreign currency exchange contracts used to hedge
assets, liabilities and net income are recognized in Other (Income)
Expense.
o Gains and losses on foreign currency exchange contracts to hedge net
investments in foreign subsidiaries are recognized in the Cumulative
Foreign Exchange Translation Adjustment.
o Gains and losses on foreign currency exchange contracts used to hedge firm
foreign currency commitments, and purchased foreign currency options used
to hedge anticipated foreign currency transactions, are recognized in the
measurement of the hedged transaction when the transaction occurs.
44 Honeywell 1999 Annual Report
<PAGE>
Changes in the fair value of agreements not qualifying for hedge accounting
are recognized in Other (Income) Expense. Gains and losses on terminated
interest rate swap agreements are amortized over the shorter of the remaining
term of the agreement or the hedged liability.
The carrying value of each agreement is reported in Accounts and Notes
Receivable, Other Current Assets, Accounts Payable or Accrued Liabilities, as
appropriate.
INCOME TAXES Deferred tax liabilities or assets reflect temporary differences
between amounts of assets and liabilities for financial and tax reporting. Such
amounts are adjusted, as appropriate, to reflect changes in tax rates expected
to be in effect when the temporary differences reverse. A valuation allowance is
established for any deferred tax asset for which realization is not likely.
RESEARCH AND DEVELOPMENT Research and development costs for company-sponsored
research and development projects are expensed as incurred. Such costs are
classified as part of Cost of Goods Sold and were $909, $876 and $796 million in
1999, 1998 and 1997, respectively.
EARNINGS PER SHARE Basic earnings per share is based on the weighted average
number of common shares outstanding. Diluted earnings per share is based on the
weighted average number of common shares outstanding and all dilutive potential
common shares outstanding. All earnings per share data in this report reflect
earnings per share -- assuming dilution, unless otherwise indicated.
CASH AND CASH EQUIVALENTS Cash and cash equivalents includes cash on hand and on
deposit and highly liquid, temporary cash investments with an original maturity
of three months or less.
USE OF ESTIMATES The preparation of consolidated financial statements in
conformity with generally accepted accounting principles requires management to
make estimates and assumptions that affect the reported amounts in the financial
statements and related disclosures in the accompanying notes. Actual results
could differ from those estimates.
RECLASSIFICATIONS Certain prior year amounts have been reclassified to conform
with the current year presentation.
NOTE 2
ALLIEDSIGNAL-HONEYWELL MERGER
On December 1, 1999, AlliedSignal Inc. (AlliedSignal) and Honeywell Inc. (former
Honeywell) completed a merger under an Agreement and Plan of Merger (Merger
Agreement) dated as of June 4, 1999. Under the Merger Agreement, a wholly-owned
subsidiary of AlliedSignal merged with and into the former Honeywell. As a
result of the merger, the former Honeywell has become a wholly-owned subsidiary
of AlliedSignal. At the effective time of the merger AlliedSignal was renamed
Honeywell International Inc. (Honeywell).
The former Honeywell shareowners were entitled to receive 1.875 shares of
Honeywell common stock for each share of the former Honeywell common stock with
cash paid in lieu of any fractional shares. As a result, former Honeywell
shareowners were entitled to receive approximately 241 million shares of
Honeywell common stock valued at approximately $15 billion at the merger date.
In addition, outstanding former Honeywell employee stock options were converted
at the same exchange factor into options to purchase approximately 10 million
shares of Honeywell common stock.
The merger qualified as a tax-free reorganization and was accounted for
under the pooling-of-interests accounting method. Accordingly, Honeywell's
consolidated financial statements have been restated for all periods prior to
the merger to include the results of operations, financial position and cash
flows of the former Honeywell as though it had always been a part of Honeywell.
There were no material transactions between AlliedSignal and the former
Honeywell prior to the merger and there were no material adjustments to conform
the accounting policies of the combining companies.
The net sales and net income previously reported by the separate companies
and the combined amounts presented in the accompanying Consolidated Statement of
Income are as follows:
<TABLE>
<CAPTION>
NINE MONTHS ENDED Year Ended Year Ended
SEPTEMBER 30, December 31, December 31,
1999 1998 1997
(UNAUDITED)
- ---------------------------------------------------------------
<S> <C> <C> <C>
NET SALES
AlliedSignal $11,252 $15,128 $14,472
--------------------------------------
Former Honeywell 6,324 8,427 8,027
- ---------------------------------------------------------------
Combined $17,576 $23,555 $22,499
===============================================================
Net income
AlliedSignal $ 1,121 $ 1,331 $ 1,170
--------------------------------------
Former Honeywell 413 572 471
- ---------------------------------------------------------------
Combined $ 1,534 $ 1,903 $ 1,641
===============================================================
</TABLE>
As described in Note 4, fees and expenses related to the merger and costs
to integrate the combined companies were expensed in the fourth quarter of 1999.
Honeywell 1999 Annual Report 45
<PAGE>
NOTES TO FINANCIAL STATEMENTS
Honeywell International Inc. (Dollars in Millions Except Per Share Amounts)
NOTE 3
ACQUISITIONS
In addition to the pooling-of-interests transaction discussed in Note 2, we
acquired businesses for an aggregate cost of $1,314,$1,191 and $2,180 million in
1999,1998 and 1997,respectively. The following table presents information about
the more significant acquisitions:
<TABLE>
<CAPTION>
Acquisition Aggregate Annual
1999 Date Cost Goodwill Net Sales
- ------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Johnson Matthey
Electronics(1) 8/99 $655 $331 $670
TriStar Aerospace Co.(2) 12/99 300 147 200
1998
- ------------------------------------------------------------------------
Banner Aerospace(3) 1/98 $350 $175 $250
Pharmaceutical
Fine Chemicals(4) 6/98 390 297 110
1997
- ------------------------------------------------------------------------
Measurex Corporation(5) 3/97 $600 $306 $420
Prestone Products(6) 6/97 400 279 300
Grimes Aerospace Company(7) 7/97 475 416 230
Astor Holdings, Inc.(8) 10/97 370 271 300
- ------------------------------------------------------------------------
</TABLE>
(1) Johnson Matthey Electronics supplies wafer fabrication materials and
interconnect products to the electronics and telecommunications industries.
(2) TriStar Aerospace Co. distributes fasteners, fastening systems and related
hardware and provides customized inventory management services to original
equipment manufacturers of aircraft and aircraft components, commercial
airlines and aircraft maintenance, repair and overhaul facilities.
(3) Banner Aerospace distributes FAA-certified aircraft hardware principally to
commercial air transport and general aviation markets.
(4) Pharmaceutical Fine Chemicals manufactures and distributes active and
intermediate pharmaceutical chemicals.
(5) Measurex Corporation designs and supplies measurements, control and
industrial automation systems that unify business and control information
for the pulp and paper industry.
(6) Prestone Products supplies antifreeze/coolant and other car care products.
(7) Grimes Aerospace Company manufactures interior and exterior aircraft
lighting systems.
(8) Astor Holdings, Inc. manufactures value-added, wax-based processing aids,
sealants and adhesives.
All the acquisitions were accounted for under the purchase method of
accounting, and accordingly, the assets and liabilities of the acquired
businesses were recorded at their estimated fair values at the dates of
acquisition. The excess of purchase price over the estimated fair values of the
net assets acquired,of $678, $883 and $1,478 million in 1999, 1998 and 1997,
respectively, was recorded as goodwill and is amortized over estimated useful
lives. In connection with these acquisitions the amounts recorded for
transaction costs and the costs of integrating the acquired businesses into
Honeywell were not material. The results of operations of the acquired
businesses have been included in the consolidated results of Honeywell from
their respective acquisition dates. The pro forma results for 1999, 1998 and
1997, assuming these acquisitions had been made at the beginning of the year,
would not be materially different from reported results.
NOTE 4
MERGER, REPOSITIONING AND OTHER CHARGES
Upon completion of the merger between AlliedSignal and the former Honeywell, we
recognized a pretax charge of $642 million for the cost of actions designed to
improve our combined competitiveness and productivity and improve future
profitability.The merger-related actions included the elimination of redundant
corporate offices and functional administrative overhead; elimination of
redundant and excess facilities and workforce in our combined aerospace
businesses; adoption of six sigma productivity initiatives at the former
Honeywell businesses; and, the transition to a global shared services model. The
components of the charge included severance costs of $342 million, asset
impairments of $108 million, other exit costs of $57 million and merger-related
transaction and period expenses of $135 million. Planned global workforce
reductions consisted of approximately 6,500 administrative and manufacturing
positions. Asset impairments principally related to the elimination of redundant
or excess corporate and aerospace facilities and equipment. At year-end,
approximately $9 million of redundant assets were not able to be removed from
service and are currently being depreciated over their shortened useful lives.
Other exit costs related to lease terminations and contract cancellation losses
negotiated or subject to reasonable estimation at year-end. Merger-related
transaction and period expenses consisted of investment banking and
legal fees,former Honeywell deferred compensation vested upon change in control
and other direct merger-related expenses incurred in the period the merger was
completed. All merger-related actions are expected to be completed by December
31, 2000.
In 1999,we also recognized a pretax charge of $321 million for the cost of
actions designed to reposition principally the AlliedSignal business units for
improved productivity and future profitability. These repositioning actions
included the organizational realignment of our aerospace businesses to
strengthen market focus and simplify business structure; elimination of an
unprofitable product line and rationalization of manufacturing capacity and
infrastructure in the Performance Polymers business; a reduction in
infrastructure in the Turbocharging Systems business; closing a wax refinery and
carbon materials plant and rationalization of manufacturing capacity in the
Specialty Chemicals business; elimination of two manufacturing facilities in our
Electronic Materials business; a plant closure and outsourcing activity in our
automotive Consumer Products Group business; and related and general workforce
reductions in all AlliedSignal businesses and our Industrial Control business.
The components of the charge included severance costs of $140 million, asset
impairments of $149 million, and other exit costs of $32 million. Global
workforce reductions consisted of approximately 5,100 manufacturing,
administrative, and sales positions. Asset impairments principally related to
manufacturing plant and equipment held for sale and capable of being taken out
of service and actively marketed in the period of impairment. Other exit costs
principally consisted of environmental exit costs associated with chemical plant
shutdowns. All repositioning actions, excluding environmental remediation, are
expected to be completed by December 31, 2000.
46 Honeywell 1999 Annual Report
<PAGE>
The following table summarizes planned workforce reductions, liabilities
and asset impairments recognized in the 1999 merger and repositioning actions.
<TABLE>
<CAPTION>
Number of Severance Asset Exit Merger Fees
Employees Costs Impairments Costs and Expenses Total
- ---------------------------------------------------------------------------------
<C> <C> <C> <C> <C> <C> <C>
1999 charges 11,600 $482 $ 257 $89 $135 $ 963
1999 usage (2,800) (58) (257) (4) (77) (396)
- ---------------------------------------------------------------------------------
Balance at
December 31,
1999 8,800 $424 $ -- $85 $ 58 $ 567
================================================================================
</TABLE>
In 1999, we recognized other charges consisting of losses on aerospace
engine maintenance contracts and a contract cancellation penalty totaling $45
million, customer and employee claims of $69 million, contract settlements and
contingent liabilities of $18 million, and other write-offs principally related
to tangible and intangible assets removed from service, including inventory, of
$152 million. We also recognized a $36 million charge resulting from an other
than temporary decline in value of an equity investment due to a significant
deterioration in market conditions and a $4 million charge related to an equity
investee's severance action involving approximately 220 employees. The
investee's severance action was completed by year-end.
In 1998, we recognized a pretax charge of $54 million related to
productivity initiatives which included workforce reductions and facility
consolidations principally in our Home and Building Control and Industrial
Control businesses. The components of the charge included severance costs of $46
million and other exit costs of $8 million. Global workforce reductions included
approximately 1,200 sales, marketing, manufacturing and other administrative
positions. Other exit costs consisted of lease termination penalties to
consolidate field office locations and other period costs incurred to
rationalize product lines. These actions were completed by December 31, 1999,
with substantially all reserve spending occurring in 1999.
In 1997, we recognized a pretax charge of $215 million for costs to
eliminate AlliedSignal's three sector administrative offices; consolidate our
automotive Consumer Products Group business; close four performance materials
manufacturing facilities; and, execute a workforce reduction and facility
consolidations in our Home and Building Control and Industrial Control
businesses. The components of the charge included severance costs of $134
million, asset impairments of $42 million, and other exit costs of $39 million.
Global workforce reductions included approximately 2,900 sales, marketing,
manufacturing and other administrative positions. Asset impairments principally
related to administrative and manufacturing facilities and equipment held for
disposal. Other exit costs principally consisted of lease termination costs and
other shut-down period expenses. These actions were essentially completed by
December 31, 1998, with substantially all reserve spending and asset disposals
occurring in 1998.
In 1997, we also recognized other charges consisting of a $40 million
write-off of capitalized business process reengineering costs associated with
information technology projects as required by Emerging Issues Task Force Issue
No. 97-13, customer claims and legal settlements of $30 million, and other
write-offs principally related to tangible and intangible assets removed from
service, including inventory, of $43 million. We also recognized a $13 million
charge related to an other than temporary decline in value of an equity
investment resulting from the Asian economic downturn in late 1997.
The following table summarizes the pretax impact of total merger,
repositioning and other charges by reportable business segment.
<TABLE>
<CAPTION>
1999 1998 1997
- ---------------------------------------------------
<S> <C> <C> <C>
Aerospace Solutions $ 315 $ 1 $ 23
-----------------------
Automation & Asset
Management 215 52 88
-----------------------
Performance Materials 251 -- 110
-----------------------
Power & Transportation
Products 129 -- 77
-----------------------
Corporate 377 1 43
- ---------------------------------------------------
$1,287 $ 54 $341
===================================================
</TABLE>
The following table summarizes the pretax distribution of total merger,
repositioning and other charges by income statement classification.
<TABLE>
<CAPTION>
1999 1998 1997
- ---------------------------------------------------
<S> <C> <C> <C>
Cost of goods sold $ 947 $ 54 $328
-----------------------
Selling, general and
administrative expenses 300 -- --
-----------------------
Equity in income of
affiliated companies 40 -- 13
- ---------------------------------------------------
$1,287 $ 54 $341
===================================================
</TABLE>
Honeywell 1999 Annual Report 47
<PAGE>
NOTES TO FINANCIAL STATEMENTS
Honeywell International Inc. (Dollars in Millions Except Per Share Amounts)
NOTE 5
GAIN ON SALE OF NON-STRATEGIC BUSINESSES
In 1999, we sold our Laminate Systems business for approximately $425 million in
cash resulting in a pretax gain of $106 million. The Laminate Systems business
had 1998 net sales of about $400 million.
In 1997, we sold our automotive Safety Restraints business for $710 million
in cash resulting in a pretax gain of $277 million. We also sold certain
Industrial Control businesses for approximately $126 million in cash and
receivables, resulting in a total pretax gain of $77 million. In 1997 we also
recorded a charge of $51 million related to the settlement of the 1996 sale of
our automotive Braking Systems business. The total pretax impact of the gains on
sales of non-strategic businesses in 1997, net of the Braking Systems business
settlement, was $303 million.
NOTE 6
OTHER (INCOME) EXPENSE
<TABLE>
<CAPTION>
Years ended December 31 1999 1998 1997
- --------------------------------------------------------------------
<S> <C> <C> <C>
Interest income and other $ (76) $(57) $(105)
---------------------------------------
Minority interests 46 37 45
---------------------------------------
Foreign exchange (gain) loss (9) 17 (27)
---------------------------------------
Gain on disposition of
investment in AMP
Incorporated (268) -- --
---------------------------------------
Litigation settlements -- (24) --
- --------------------------------------------------------------------
$(307) $(27) $ (87)
====================================================================
</TABLE>
In April 1999, we reached an agreement with Tyco International Ltd. (Tyco)
and AMP Incorporated (AMP), settling AMP's claim to the gain we would realize on
the disposition of our investment in AMP common stock. We made a payment to AMP
of $50 million, and the parties released all claims that they had against each
other relating to AMP. Subsequently, we converted our investment in AMP common
stock into Tyco common stock and sold the Tyco common stock for net cash
proceeds of $1.2 billion resulting in a pretax gain of $268 million, net of the
settlement payment.
NOTE 7
INTEREST AND OTHER FINANCIAL CHARGES
<TABLE>
<CAPTION>
Years ended December 31 1999 1998 1997
- --------------------------------------------------------------------
<S> <C> <C> <C>
Total interest and other
financial charges $287 $300 $298
---------------------------------------
Less--Capitalized interest (22) (25) (21)
- --------------------------------------------------------------------
$265 $275 $277
====================================================================
</TABLE>
Cash payments of interest during the years 1999, 1998 and 1997 were $328,
$426 and $286 million, respectively.
The weighted average interest rate on short-term borrowings and commercial
paper outstanding at December 31, 1999 and 1998 was 5.97 and 5.78 percent,
respectively.
NOTE 8
TAXES ON INCOME
<TABLE>
<CAPTION>
INCOME BEFORE TAXES ON INCOME
Years ended December 31 1999 1998 1997
- --------------------------------------------------------------------
<S> <C> <C> <C>
United States $1,742 $2,085 $1,903
---------------------------------------
Foreign 506 687 516
- --------------------------------------------------------------------
$2,248 $2,772 $2,419
====================================================================
TAXES ON INCOME
Years ended December 31 1999 1998 1997
- --------------------------------------------------------------------
United States $ 531 $ 616 $ 602
---------------------------------------
Foreign 176 253 176
- --------------------------------------------------------------------
$ 707 $ 869 $ 778
====================================================================
Years ended December 31 1999 1998 1997
- --------------------------------------------------------------------
Taxes on income consist of:
Current:
United States $ 416 $ 424 $ 417
---------------------------------------
State 113 49 81
---------------------------------------
Foreign 189 175 164
- --------------------------------------------------------------------
718 648 662
- --------------------------------------------------------------------
Deferred:
United States 37 81 84
---------------------------------------
State (35) 62 20
---------------------------------------
Foreign (13) 78 12
- --------------------------------------------------------------------
(11) 221 116
- --------------------------------------------------------------------
$ 707 $ 869 $ 778
====================================================================
Years ended December 31 1999 1998 1997
- --------------------------------------------------------------------
The U.S. statutory federal
income tax rate is reconciled
to our effective income
tax rate as follows:
Statutory U.S. federal
income tax rate 35.0% 35.0% 35.0%
---------------------------------------
Taxes on foreign
earnings over (under)
U.S. tax rate (1.2) 1.0 --
---------------------------------------
Asset basis
differences (1.6) (1.5) (1.7)
---------------------------------------
Nondeductible amortization 3.3 1.3 1.4
---------------------------------------
State income taxes 2.2 2.5 2.5
---------------------------------------
Tax benefits of Foreign
Sales Corporation (4.4) (2.2) (2.4)
---------------------------------------
ESOP dividend tax benefit (.7) (.6) (.6)
---------------------------------------
Tax credits (1.2) (1.1) (.2)
---------------------------------------
All other items--net .1 (3.1) (1.8)
- --------------------------------------------------------------------
31.5% 31.3% 32.2%
====================================================================
</TABLE>
48 Honeywell 1999 Annual Report
<PAGE>
DEFERRED INCOME TAXES
<TABLE>
<CAPTION>
December 31 1999 1998
- --------------------------------------------------------------------
<S> <C> <C>
Included in the following
balance sheet accounts:
Other current assets $ 789 $ 694
---------------------------------------
Other assets 143 103
---------------------------------------
Accrued liabilities (13) (26)
---------------------------------------
Deferred income taxes (864) (861)
- --------------------------------------------------------------------
$ 55 $ (90)
====================================================================
</TABLE>
DEFERRED TAX ASSETS (LIABILITIES)
<TABLE>
<CAPTION>
December 31 1999 1998
- --------------------------------------------------------------------
<S> <C> <C>
The principal components of deferred tax
assets and (liabilities) are as follows:
Property, plant and equipment
basis differences $(648) $(715)
------------------------------
Postretirement benefits other than
pensions and postemployment
benefits 869 918
------------------------------
Investment and other asset basis
differences (328) (390)
------------------------------
Other accrued items 552 490
------------------------------
Net operating losses 184 218
------------------------------
Deferred foreign gain (27) (39)
------------------------------
Undistributed earnings of subsidiaries (33) (55)
------------------------------
All other items--net (491) (487)
- --------------------------------------------------------------------
78 (60)
------------------------------
Valuation allowance (23) (30)
- --------------------------------------------------------------------
$ 55 $ (90)
====================================================================
</TABLE>
The amount of federal tax net operating loss carryforwards available at
December 31, 1999 was $166 million. The majority of these loss carryforwards
were generated by certain subsidiaries prior to their acquisition in 1997 and
have expiration dates through the year 2011. The use of pre-acquisition
operating losses is subject to limitations imposed by the Internal Revenue
Code. We do not anticipate that these limitations will affect utilization of
the carryforwards prior to their expiration. We also have foreign net operating
losses of $434 million which are available to reduce future income tax payments
in several countries, subject to varying expiration rules.
Deferred income taxes have not been provided on approximately $1.6 billion
of undistributed earnings of foreign affiliated companies, which are considered
to be permanently reinvested. It is not practicable to estimate the amount of
tax that might be payable on the eventual remittance of such earnings.
Cash payments of income taxes during the years 1999, 1998 and 1997 were
$625, $650 and $473 million, respectively.
NOTE 9
EARNINGS PER SHARE
The following table sets forth the computations of basic and diluted
earnings per share:
<TABLE>
<CAPTION>
Average Per Share
Income Shares Amount
- -------------------------------------------------------------------------------
<S> <C> <C> <C>
1999
Earnings per share of common
stock--basic $1,541 792,010,145 $1.95
-------------------------------------------
Dilutive securities issuable in
connection with stock plans 16,979,863
-------------------------------------------
Earnings per share of common
stock--assuming dilution $1,541 808,990,008 $1.90
- -------------------------------------------------------------------------------
1998
Earnings per share of common
stock--basic $1,903 798,390,836 $2.38
-------------------------------------------
Dilutive securities issuable in
connection with stock plans 15,608,334
-------------------------------------------
Earnings per share of common
stock--assuming dilution $1,903 813,999,170 $2.34
- -------------------------------------------------------------------------------
1997
Earnings per share of common
stock--basic $1,641 803,029,575 $2.04
-------------------------------------------
Dilutive securities issuable in
connection with stock plans 19,074,591
-------------------------------------------
Earnings per share of common
stock--assuming dilution $1,641 822,104,166 $2.00
- -------------------------------------------------------------------------------
</TABLE>
The diluted earnings per share calculation excludes the effect of stock
options when the options' exercise prices exceed the average market price of the
common shares during the period. In 1999, 1998 and 1997, the number of stock
options not included in the computations was 868,631, 3,688,074 and 3,826,900,
respectively. These stock options were outstanding at the end of each of the
respective years.
Honeywell 1999 Annual Report 49
<PAGE>
NOTES TO FINANCIAL STATEMENTS
Honeywell International Inc. (Dollars in Millions Except Per Share Amounts)
NOTE 10
ACCOUNTS AND NOTES RECEIVABLE
<TABLE>
<CAPTION>
December 31 1999 1998
- --------------------------------------------------------------------
<S> <C> <C>
Trade $3,545 $3,469
--------------------------------
Other 435 508
- --------------------------------------------------------------------
3,980 3,977
- --------------------------------------------------------------------
Less--Allowance for doubtful
accounts and refunds (84) (78)
- --------------------------------------------------------------------
$3,896 $3,899
====================================================================
</TABLE>
Unbilled receivables related to long-term contracts were $359 and $387
million at December 31, 1999 and 1998, respectively, and are generally billable
and collectible within one year.
We are a party to agreements under which we can sell undivided interests in
designated pools of trade accounts receivable. At both December 31, 1999 and
1998, trade accounts receivable on the Consolidated Balance Sheet have been
reduced by approximately $500 million reflecting such sales. We act as an agent
for the purchasers in the collection and administration of the receivables.
NOTE 11
INVENTORIES
<TABLE>
<CAPTION>
December 31 1999 1998
- -------------------------------------------------------------------
<S> <C> <C>
Raw materials $1,027 $ 996
-------------------------------
Work in process 973 1,095
-------------------------------
Finished products 1,589 1,555
- -------------------------------------------------------------------
3,589 3,646
- -------------------------------------------------------------------
Less--
Progress payments and customer advances (44) (83)
-------------------------------
Reduction to LIFO cost basis (109) (107)
- -------------------------------------------------------------------
$3,436 $3,456
====================================================================
</TABLE>
Inventories valued at LIFO amounted to $167 and $214 million at December
31, 1999 and 1998, respectively. Had such LIFO inventories been valued at
current costs, their carrying values would have been approximately $109 and $107
million higher at December 31, 1999 and 1998, respectively.
Inventories related to long-term contracts, net of progress payments and
customer advances, were $271 and $260 million at December 31, 1999 and 1998,
respectively.
NOTE 12
INVESTMENTS AND LONG-TERM RECEIVABLES
<TABLE>
<CAPTION>
December 31 1999 1998
- --------------------------------------------------------------------
<S> <C> <C>
Investment in AMP Incorporated(1) $ -- $ 1,041
-------------------------------
Investments 664 640
-------------------------------
Long-term receivables 118 111
- -------------------------------------------------------------------
$ 782 $ 1,792
====================================================================
</TABLE>
(1) Investment in AMP was liquidated in 1999. See Note 6. Includes
unrealized holding gain of $151 million at December 31, 1998.
NOTE 13
PROPERTY, PLANT AND EQUIPMENT
<TABLE>
<CAPTION>
December 31 1999 1998
- --------------------------------------------------------------------
<S> <C> <C>
Land and improvements $ 371 $ 407
-------------------------------
Machinery and equipment 9,574 9,471
-------------------------------
Buildings and improvements 2,192 2,174
-------------------------------
Construction in progress 566 605
- -------------------------------------------------------------------
12,703 12,657
- -------------------------------------------------------------------
Less--Accumulated depreciation and
amortization (7,073) (7,057)
- -------------------------------------------------------------------
$ 5,630 $ 5,600
====================================================================
</TABLE>
NOTE 14
ACCRUED LIABILITIES
<TABLE>
<CAPTION>
December 31 1999 1998
- --------------------------------------------------------------------
<S> <C> <C>
Compensation and benefit costs $ 828 $ 849
-------------------------------
Customer advances 511 466
-------------------------------
Income taxes 186 384
-------------------------------
Environmental costs 104 128
-------------------------------
Other 1,905 1,610
- --------------------------------------------------------------------
$ 3,534 $ 3,437
====================================================================
</TABLE>
50 Honeywell 1999 Annual Report
<PAGE>
Note 15
LONG-TERM DEBT AND CREDIT AGREEMENTS
<TABLE>
<CAPTION>
December 31 1999 1998
- --------------------------------------------------------------------------------
<S> <C> <C>
6.75% notes due 2000 $ -- $ 100
----------------------
6.60% notes due 2001 100 100
----------------------
6.75% notes due 2002 200 200
----------------------
9 7/8% debentures due 2002 171 171
----------------------
8 5/8% debentures due 2006 100 100
----------------------
7.0% notes due 2007 350 350
----------------------
7 1/8% notes due 2008 200 200
----------------------
6.20% notes due 2008 200 200
----------------------
Zero coupon bonds and money
multiplier notes, 13.0%-14.26%,
due 2000-2009 100 174
----------------------
5 3/4% dealer remarketable securities
due 2011 200 200
----------------------
Industrial development bond
obligations, 3.15%-6.75%, maturing
at various dates through 2027 107 99
----------------------
6 5/8% debentures due 2028 216 250
----------------------
9.065% debentures due 2033 51 51
----------------------
Other (including capitalized leases),
1.54%-12.42%, maturing at
various dates through 2016 462 581
- ----------------------------------------------------------------------------
$2,457 $2,776
============================================================================
</TABLE>
The schedule of principal payments on long-term debt is as follows:
<TABLE>
<CAPTION>
Long-term
At December 31, 1999 Debt
- --------------------------------------------------------------------------------
<S> <C>
2000 $284
-------------------
2001 176
-------------------
2002 402
-------------------
2003 88
-------------------
2004 37
-------------------
Thereafter 1,754
- --------------------------------------------------------------------------------
2,741
- --------------------------------------------------------------------------------
Less--Current portion 284
- --------------------------------------------------------------------------------
$2,457
- --------------------------------------------------------------------------------
</TABLE>
In December 1999, we entered into a $3 billion bank revolving credit
facility with a group of 25 banks which is comprised of: (a) a $1 billion
Five-Year Credit Agreement and (b) a $2 billion 364 Day Credit Agreement which
reduces to $1 billion on March 31, 2000, bringing the total revolving credit
facility to $2 billion. The credit agreements which replaced previous credit
agreements maintained by AlliedSignal and the former Honeywell were established
for general corporate purposes including support for the issuance of commercial
paper. We had no balance outstanding under either agreement at December 31,
1999.
Neither of the credit agreements restrict our ability to pay dividends
and neither contain financial covenants. The failure to comply with customary
conditions or the occurrence of customary events of default contained in the
credit agreements would prevent any further borrowings and would generally
require the repayment of any outstanding borrowings under such credit
agreements. Such events of default include (a) non-payment of credit agreement
debt and interest thereon, (b) non-compliance with the terms of the credit
agreement covenants, (c) cross-default with other debt in certain circumstances,
(d) bankruptcy and (e) defaults upon obligations under the Employee Retirement
Income Security Act. Additionally, each of the banks has the right to terminate
its commitment to lend under the credit agreements if any person or group
acquires beneficial ownership of 30 percent or more of our voting stock or,
during any 12-month period, individuals who were directors of Honeywell at the
beginning of the period cease to constitute a majority of the Board of Directors
(the Board).
Loans under the Five-Year Credit Agreement are required to be repaid no
later than December 2, 2004. We have agreed to pay a facility fee of 0.065
percent per annum on the aggregate commitment for the Five-Year Credit
Agreement, subject to increase or decrease in the event of changes in our
long-term debt ratings.
Interest on borrowings under the Five-Year Credit Agreement would be
determined, at our option, by (a) an auction bidding procedure; (b) the highest
of the floating base rate of the agent bank, 0.5 percent above the average CD
rate, or 0.5 percent above the Federal funds rate or (c) the average
Eurocurrency rate of three reference banks plus 0.135 percent (applicable
margin). The applicable margin over the Eurocurrency rate on the Five-Year
Credit Agreement is subject to increase or decrease if our long-term debt
ratings change.
The commitments under the 364-Day Credit Agreement terminate on
November 30, 2000. Annually, prior to the Agreement's anniversary date, we may
request that the termination date of the 364-Day Credit Agreement be extended by
364 days. We have agreed to pay a facility fee of 0.055 percent per annum on the
aggregate commitment for the 364-Day Credit Agreement.
Interest on borrowings under the 364-Day Credit Agreement would be
determined, at our option, by (a) an auction bidding procedure; (b) the highest
of the floating base rate of the agent bank, 0.5 percent above the average CD
rate, or 0.5 percent above the Federal funds rate or (c) the average
Eurocurrency rate of three reference banks plus 0.145 percent (applicable
margin).
In January 2000, we entered into an additional $1 billion bank
revolving credit facility to be used to support the issuance of commercial paper
to finance in part the acquisition of Pittway Corporation. This bank revolving
credit facility expires on April 12, 2000 and has terms and conditions similar
to the $2 billion 364-Day Credit Agreement.
NOTE 16
LEASE COMMITMENTS
Future minimum lease payments under operating leases having initial or
remaining noncancellable lease terms in excess of one year are as follows:
<TABLE>
<CAPTION>
Lease
At December 31, 1999 Payments
- --------------------------------------------------------------------------------
<S> <C>
2000 $ 248
---------------------
2001 193
---------------------
2002 149
---------------------
2003 108
---------------------
2004 79
---------------------
Thereafter 260
- --------------------------------------------------------------------------------
$1,037
=================================================================================
</TABLE>
Rent expense was $291, $262 and $251 million in 1999, 1998 and 1997,
respectively.
Honeywell 1999 Annual Report 51
<PAGE>
NOTES TO FINANCIAL STATEMENTS
Honeywell International Inc. (Dollars in Millions Except Per Share Amounts)
NOTE 17
FINANCIAL INSTRUMENTS
As a result of our global financing and operating activities, we are exposed
to market risks from changes in interest and foreign currency exchange rates,
which may adversely affect our operating results and financial position.
We minimize our risks from interest and foreign currency exchange rate
fluctations through our normal financing and operating activities and, when
deemed appropriate, through the use of derivative financial instruments. We do
not use derivative financial instruments for trading or other speculative
purposes and do not use leveraged derivative financial instruments.
Interest rate swap agreements are used to manage interest rate risk by
adjusting our ratio of fixed to floating interest rates payable on our
outstanding debt. At December 31, 1999 and 1998, interest rate swap agreements
effectively changed $850 and $1,000 million, respectively, of fixed rate debt at
an average rate of 6.6 and 7.0 percent, respectively, to LIBOR and commercial
paper based floating rate debt. Other interest rate swaps at December 31, 1999
and 1998 effectively changed $250 and $450 million, respectively, of LIBOR and
commercial paper based floating rate swaps and debt to fixed rate swaps and debt
with an average fixed rate of 6.3 and 6.4 percent, respectively. Our interest
rate swaps mature through the year 2007.
Our exposure to market risk for changes in foreign currency exchange
rates arises from international financing activities between subsidiaries, and
foreign currency denominated receivables, payables, and firm commitments arising
from international transactions. We attempt to have all such transaction
exposure hedged with internal natural offsets to the fullest extent possible
and, once these opportunities have been exhausted, through foreign currency
forward and option agreements with third parties. We also use derivative
financial instruments to hedge the impact of exchange rate movements on the
translated U.S. dollar value of the net income for a number of foreign
subsidiaries. Foreign currency forward and option agreements used to hedge net
income are marked-to-market, with gains or losses recognized immediately in
income. Our principal foreign currency exposures relate to the Belgian franc,
the French franc, the German mark (collectively the Euro countries), and the
British pound, the Canadian dollar, and the U.S. dollar.
At December 31, 1999, we held or had written foreign currency forward
and option agreements maturing through 2003. We write foreign currency options
only in combination with purchased options as an integral transaction and
economic alternative to using forward agreements.
Derivative financial instruments expose us to counterparty credit risk
for nonperformance and to market risk related to changes in interest or currency
exchange rates. We manage our exposure to counterparty credit risk through
specific minimum credit standards, diversification of counterparties, and
procedures to monitor concentrations of credit risk. Our counterparties are
substantial investment and commercial banks with significant experience using
such derivative instruments. We monitor the impact of market risk on the fair
value and cash flows of our derivative and other financial instruments
considering reasonably possible changes in interest and currency exchange rates
and restrict the use of derivative financial instruments to hedging activities.
The values of our outstanding derivative financial instruments at
December 31, 1999 and 1998 follows:
<TABLE>
<CAPTION>
Notional
Principal Carrying Fair
Amount Value Value(1)
- --------------------------------------------------------------------------------
<S> <C> <C> <C>
DECEMBER 31, 1999
Interest rate
swap agreements $1,100 $(4) $(36)
- --------------------------------------------------------------------------------
Foreign currency
exchange contracts 1,445 4 6
================================================================================
DECEMBER 31, 1998
Interest rate
swap agreements $1,450 $ 3 $ 6
- --------------------------------------------------------------------------------
Foreign currency
exchange contracts 2,087 1 (4)
- --------------------------------------------------------------------------------
</TABLE>
(1) The fair value of financial instruments is based on quoted market prices or
other valuation techniques, as appropriate.
Other financial instruments that are not carried on the Consolidated
Balance Sheet at amounts, which approximate fair values, are certain debt
instruments. The carrying value of long-term debt and related current maturities
(excluding capitalized leases of $36 and $42 million at December 31, 1999 and
1998, respectively) were $2,705 and $3,018 million and the fair values were
$2,702 and $3,278 million at December 31, 1999 and 1998, respectively. The fair
values are estimated based on the quoted market price for the issues (if traded)
or based on current rates offered to us for debt of the same remaining maturity
and characteristics.
52 Honeywell 1999 Annual Report
<PAGE>
NOTE 18
CAPITAL STOCK
We are authorized to issue up to 2,000,000,000 shares of common stock, with
a par value of one dollar. Common shareowners are entitled to receive such
dividends as may be declared by the Board, are entitled to one vote per share,
and are entitled, in the event of liquidation, to share ratably in all the
assets of Honeywell which are available for distribution to the common
shareowners. Common shareowners do not have preemptive or conversion rights.
Shares of common stock issued and outstanding or held in the treasury are not
liable to further calls or assessments. There are no restrictions on us relative
to dividends or the repurchase or redemption of common stock. As of June 4,
1999, the date of the Merger Agreement between AlliedSignal and the former
Honeywell, all share repurchase programs were rescinded.
We are authorized to issue up to 40,000,000 shares of preferred stock
without par value and may establish series of preferred stock having such number
of shares and such terms as we may determine.
NOTE 19
OTHER NONOWNER CHANGES IN SHAREOWNERS' EQUITY
Total nonowner changes in shareowners' equity are included in the Consolidated
Statement of Shareowners' Equity. The components of Accumulated Other
Nonowner Changes are as follows:
<TABLE>
<CAPTION>
After-
Pretax Tax Tax
- --------------------------------------------------------------------------------
<S> <C> <C> <C>
YEAR ENDED DECEMBER 31, 1999
Unrealized gains on securities
available for sale $ -- $ -- $ --
------------------------------
Reclassification adjustment
for gains on securities available
for sale included in net income (152) 60 (92)
- --------------------------------------------------------------------------------
Net unrealized losses arising
during the year (152) 60 (92)
------------------------------
Foreign exchange translation adjustments (126) -- (126)
------------------------------
Minimum pension liability adjustment (70) 27 (43)
- --------------------------------------------------------------------------------
$(348) $ 87 $(261)
================================================================================
</TABLE>
<TABLE>
<CAPTION>
After-
Pretax Tax Tax
- --------------------------------------------------------------------------------
<S> <C> <C> <C>
YEAR ENDED DECEMBER 31, 1998
Unrealized gains on securities
available for sale $ 149 $ (59) $ 90
------------------------------
Reclassification adjustment
for gains on securities available
for sale included in net income -- -- --
- --------------------------------------------------------------------------------
Net unrealized gains arising
during the year 149 (59) 90
------------------------------
Foreign exchange translation adjustments 34 -- 34
------------------------------
Minimum pension liability adjustment (16) 6 (10)
- --------------------------------------------------------------------------------
$ 167 $ (53) $ 114
================================================================================
YEAR ENDED DECEMBER 31, 1997
Unrealized (losses) on securities
available for sale $ (5) $ 2 $ (3)
------------------------------
Reclassification adjustment
for losses on securities available
for sale included in net income (13) 6 (7)
- --------------------------------------------------------------------------------
Net unrealized losses arising
during the year (18) 8 (10)
------------------------------
Foreign exchange translation adjustments (293) -- (293)
------------------------------
Minimum pension liability adjustment (3) 1 (2)
- --------------------------------------------------------------------------------
$(314) $ 9 $(305)
================================================================================
</TABLE>
The components of Accumulated Other Nonowner Changes are as follows:
<TABLE>
<CAPTION>
December 31 1999 1998 1997
- --------------------------------------------------------------------------------
<S> <C> <C> <C>
Cumulative foreign exchange translation
adjustment $(295) $(169) $(203)
----------------------------
Unrealized holding gains on securities
available for sale -- 92 2
----------------------------
Minimum pension liability (60) (17) (7)
- --------------------------------------------------------------------------------
$(355) $ (94) $(208)
================================================================================
</TABLE>
NOTE 20
STOCK-BASED COMPENSATION PLANS
We have stock plans available to grant incentive stock options, non-qualified
stock options and stock appreciation rights to officers and employees.
FIXED STOCK OPTIONS The exercise price, term and other conditions applicable to
each option granted under the stock plans are generally determined by the
Management Development and Compensation Committee of the Board. The options
are granted at a price equal to the stock's fair market value on the date of
grant. The options generally become exercisable over a three-year period
and expire after ten years.
Honeywell 1999 Annual Report 53
<PAGE>
NOTES TO FINANCIAL STATEMENTS
Honeywell International Inc. (Dollars in Millions Except Per Share Amounts)
The following table summarizes information about stock option activity for
the three years ended December 31, 1999:
<TABLE>
<CAPTION>
Weighted
Average
Number Exercise
of Options Price
- ----------------------------------------------------------------
<S> <C> <C>
Outstanding at December 31, 1996 59,572,251 18.25
---------------------------
Granted 11,753,454 37.49
---------------------------
Assumed 1,258,125 27.73
---------------------------
Exercised (11,712,796) 16.13
---------------------------
Lapsed or canceled (908,254) 28.45
- ----------------------------------------------------------------
Outstanding at December 31, 1997 59,962,780 22.47
---------------------------
Granted 9,819,362 34.33
---------------------------
Exercised (10,708,194) 20.28
---------------------------
Lapsed or canceled (4,352,142) 26.33
- ----------------------------------------------------------------
Outstanding at December 31, 1998 54,721,806 25.66
---------------------------
Granted 20,580,611 54.93
---------------------------
Exercised (16,956,945) 23.04
---------------------------
Lapsed or canceled (2,304,969) 35.38
- ----------------------------------------------------------------
Outstanding at December 31, 1999 56,040,503 36.81
================================================================
</TABLE>
The following table summarizes information about stock options outstanding
at December 31, 1999:
<TABLE>
<CAPTION>
Options Outstanding Options Exercisable
---------------------------------- -----------------------
Weighted Weighted
Range of Weighted Average Average
exercise Number Average Exercise Number Exercise
prices Outstanding Life(1) Price Exercisable Price
- ---------------------------------------------------------------------------
<C> <C> <C> <C> <C> <C>
$ 7.18-$17.79 12,323,028 3.7 $16.11 10,823,028 $15.88
------------------------------------------------------------
$17.81-$34.19 10,211,074 5.5 23.55 8,541,514 23.18
------------------------------------------------------------
$34.20-$42.29 18,511,527 8.0 38.56 9,627,702 38.56
------------------------------------------------------------
$42.32-$66.73 14,994,874 9.7 60.68 1,935,460 51.90
------------------------------------------------------------
56,040,503 7.1 36.81 30,927,704 27.21
- ---------------------------------------------------------------------------
</TABLE>
(1) Average remaining contractual life in years.
There were 33,530,799 and 37,012,857 options exercisable at weighted average
exercise prices of $20.38 and $18.01 at December 31, 1998 and 1997,
respectively. There were 11,182,210 shares available for future grants under
the terms of our stock option plans at December 31, 1999.
Statement of Financial Accounting Standards No. 123, "Accounting for
Stock-Based Compensation," (SFAS No. 123) requires that the cost of stock based
compensation be measured using a fair value based method. As permitted by SFAS
No. 123, we elected to continue to account for stock-based compensation using
the intrinsic value based method under Accounting Principles Board Opinion No.
25, "Accounting for Stock Issued to Employees." Accordingly, no compensation
cost has been recognized for our fixed stock option plans. The following table
sets forth pro forma information, including related assumptions, as if
compensation cost had been determined consistent with the requirements of SFAS
No. 123.
<TABLE>
<CAPTION>
1999 1998 1997
- ---------------------------------------------------------------
<S> <C> <C> <C>
Weighted average fair
value per share of options
granted during the year(1) $12.70 $ 9.24 $ 9.15
---------------------------------
Reduction of:
Net income $ 65 $ 48 $ 48
---------------------------------
Earnings per share of
common stock--basic $ .08 $ .06 $ .06
---------------------------------
Earnings per share of
common stock--
assuming dilution $ .08 $ .06 $ .06
---------------------------------
Assumptions:
Historical dividend yield 1.3% 1.6% 1.8%
---------------------------------
Historical volatility 24.6% 20.7% 19.1%
---------------------------------
Risk-free rate of return 5.2% 5.3% 6.4%
---------------------------------
Expected life (years) 5.0 5.0 5.0
- ---------------------------------------------------------------
</TABLE>
(1) Estimated on date of grant using Black-Scholes option-pricing model.
RESTRICTED STOCK UNITS Restricted stock unit (RSU) awards entitle the holder to
receive one share of common stock for each unit when the units vest. RSU's are
issued to certain key employees as compensation and as incentives tied directly
to the achievement of certain performance objectives.
RSU's issued were 1,175,127 in 1999, 942,143 in 1998 and 660,912 in 1997.
There were 2,657,561, 3,117,736 and 3,242,472 RSU's outstanding, with a weighted
average grant date fair value per share of $37.81, $28.84 and $24.83 at December
31, 1999, 1998 and 1997, respectively.
NON-EMPLOYEE DIRECTORS' PLAN We also have a Stock Plan for Non-Employee
Directors (Directors' Plan) under which restricted shares and options are
granted. New directors receive grants of 3,000 shares of common stock, subject
to certain restrictions. In addition, each director will be granted an option to
purchase 2,000 shares of common stock each year on the date of the annual
meeting of shareowners. We have set aside 450,000 shares for issuance under the
Directors' Plan. Options generally become exercisable over a three-year period
and expire after ten years.
EMPLOYEE STOCK MATCH PLANS We sponsor employee savings plans under which we
match, in the form of our common stock, certain eligible U.S. employee savings
plan contributions. Shares issued under the stock match plans were 2.6, 3.4 and
3.4 million in 1999, 1998 and 1997, respectively at a cost of $142, $139 and
$132 million, respectively.
54 Honeywell 1999 Annual Report
<PAGE>
NOTE 21
COMMITMENTS AND CONTINGENCIES
LITTON LITIGATION On March 13, 1990, Litton Systems, Inc. (Litton) filed a legal
action against the former Honeywell in U.S. District Court, Central District of
California, Los Angeles (the trial court) with claims that were subsequently
split into two separate cases. One alleges patent infringement under federal law
for using an ion-beam process to coat mirrors incorporated in the former
Honeywell's ring laser gyroscopes, and tortious interference under state law for
interfering with Litton's prospective advantage with customers and contractual
relationships with an inventor and his company, Ojai Research, Inc. The other
case alleges monopolization and attempted monopolization under federal antitrust
laws by the former Honeywell in the sale of inertial reference systems
containing ring laser gyroscopes into the commercial aircraft market. The former
Honeywell generally denied Litton's allegations in both cases. In the
patent/tort case, the former Honeywell also contested the validity as well as
the infringement of the patent, alleging, among other things, that the patent
had been obtained by Litton's inequitable conduct before the United States
Patent and Trademark Office.
Patent/Tort Case U.S. District Court Judge Mariana Pfaelzer presided over a
three month patent infringement and tortious interference trial in 1993. On
August 31, 1993, a jury returned a verdict in favor of Litton, awarding damages
against the former Honeywell in the amount of $1.2 billion on three claims. The
former Honeywell filed post-trial motions contesting the verdict and damage
award. On January 9, 1995, the trial court set them all aside, ruling, among
other things, that the Litton patent was invalid due to obviousness,
unenforceable because of Litton's inequitable conduct before the Patent and
Trademark Office, and in any case, not infringed by the former Honeywell's
current process. It further ruled that Litton's state tort claims were not
supported by sufficient evidence. The trial court also held that if its rulings
concerning liability were vacated or reversed on appeal, the former Honeywell
should at least be granted a new trial on the issue of damages because the
jury's award was inconsistent with the clear weight of the evidence and based
upon a speculative damage study.
The trial court's rulings were appealed to the U.S. Court of Appeals for
the Federal Circuit, and on July 3, 1996, in a two to one split decision, a
three judge panel of that court reversed the trial court's rulings of patent
invalidity, unenforceability and non-infringement, and also found the former
Honeywell to have violated California law by intentionally interfering with
Litton's consultant contracts and customer prospects. However, the panel upheld
two trial court rulings favorable to the former Honeywell, namely that the
former Honeywell was entitled to a new trial for damages on all claims, and also
to a grant of intervening patent rights which are to be defined and quantified
by the trial court. After unsuccessfully requesting a rehearing of the panel's
decision by the full Federal Circuit appellate court, the former Honeywell filed
a petition with the U.S. Supreme Court on November 26, 1996, seeking review of
the panel's decision. In the interim, Litton filed a motion and briefs with the
trial court seeking injunctive relief against the former Honeywell's commercial
ring laser gyroscope sales. After the former Honeywell and certain aircraft
manufacturers filed briefs and made oral arguments opposing the injunction, the
trial court denied Litton's motion on public interest grounds on December 23,
1996, and then scheduled the patent/tort damages retrial for May 6, 1997.
On March 17, 1997, the U.S. Supreme Court granted the former Honeywell's
petition for review and vacated the July 3, 1996 Federal Circuit panel decision.
The case was remanded to the Federal Circuit panel for reconsideration in light
of a recent decision by the U.S. Supreme Court in the Warner-Jenkinson vs.
Hilton Davis case, which refined the law concerning patent infringement under
the doctrine of equivalents. On March 21, 1997, Litton filed a notice of appeal
to the Federal Circuit of the trial court's December 23, 1996 decision to deny
injunctive relief, but the Federal Circuit stayed any briefing or consideration
of that matter until such time as it completed its reconsideration of liability
issues ordered by the U.S. Supreme Court.
The liability issues were argued before the same three judge Federal
Circuit panel on September 30, 1997. On April 7, 1998, the panel issued its
decision:
(i) affirming the trial court's ruling that the former Honeywell's
hollow cathode and RF ion-beam processes do not literally infringe
the asserted claims of Litton's `849 reissue patent (Litton's
patent);
(ii) vacating the trial court's ruling that the former Honeywell's RF
ion-beam process does not infringe the asserted claims of Litton's
patent under the doctrine of equivalents, but also vacating the
jury's verdict on that issue and remanding that issue to the trial
court for further proceedings in accordance with the
Warner-Jenkinson decision;
(iii) vacating the jury's verdict that the former Honeywell's hollow
cathode process infringes the asserted claims of Litton's patent
under the doctrine of equivalents and remanding that issue to the
trial court for further proceedings;
(iv) reversing the trial court's ruling with respect to the torts of
intentional interference with contractual relations and intentional
interference with prospective economic advantage, but also vacating
the jury's verdict on that issue, and remanding the issue to the
trial court for further proceedings in accordance with California
state law;
(v) affirming the trial court's grant of a new trial to the former
Honeywell on damages for all claims, if necessary;
(vi) affirming the trial court's order granting intervening rights to the
former Honeywell in the patent claim;
(vii) reversing the trial court's ruling that the asserted claims of
Litton's patent were invalid due to obviousness and reinstating the
jury's verdict on that issue; and
(viii) reversing the trial court's determination that Litton had obtained
Litton's patent through inequitable conduct.
Honeywell 1999 Annual Report 55
<PAGE>
NOTES TO FINANCIAL STATEMENTS
Honeywell International Inc. (Dollars in Millions Except Per Share Amounts)
Litton's request for a rehearing of the panel's decision by the full
Federal Circuit court was denied and its appeal of the denial of an injunction
was dismissed. The case was remanded to the trial court for further legal and
perhaps factual review. The parties filed motions with the trial court to
dispose of the remanded issues as matters of law, which were argued before the
trial court on July 26, 1999. On September 23, 1999, the trial court issued
dispositive rulings in the case, granting the former Honeywell's Motion for
Judgment as a Matter of Law and Summary Judgment on the Patent claims on various
grounds; granting the former Honeywell's Motion for Judgment as a Matter of Law
on the State Law Claims on the grounds of insufficient evidence; and denying
Litton's Motion for Partial Summary Judgment. We expect that Litton will appeal
the trial court's rulings.
When preparing for the patent/tort damages retrial that was scheduled for
May 1997, Litton had submitted a revised damage study to the trial court,
seeking damages as high as $1.9 billion. We believe that our ion-beam processes
do not infringe Litton's patent, and further, that Litton's damage study remains
flawed and speculative for a number of reasons. We expect that the trial court's
latest rulings in the case will eventually be affirmed since they are consistent
with the Federal Circuit's most recent opinions in this case and others which
deal with alleged patent infringement under the doctrine of equivalence, and
since, absent any patent infringement, Litton has not proven any tortious
behavior by the former Honeywell which interfered with its contracts or business
prospects. We also believe that it is reasonably possible that no damages will
ultimately be awarded to Litton.
Although it is not possible at this time to predict the result of any
further appeals in this case, potential does remain for an adverse outcome which
could be material to our financial position or results of operations. We believe
however, that any potential award of damages for an adverse judgment of
infringement or interference should be based upon a reasonable royalty
reflecting the value of the ion-beam coating process, and further that such an
award would not be material to our financial position or results of operations.
As a result of the uncertainty regarding the outcome of this matter, no
provision has been made in the financial statements with respect to this
contingent liability.
Antitrust Case Preparations for, and conduct of, the trial in the antitrust case
have generally followed the completion of comparable proceedings in the
patent/tort case. The antitrust trial did not begin until November 20, 1995.
Judge Pfaelzer also presided over the trial, but it was held before a different
jury. At the close of evidence and before jury deliberations began, the trial
court dismissed, for failure of proof, Litton's contentions that the former
Honeywell had illegally monopolized and attempted to monopolize by:
(i) engaging in below-cost predatory pricing;
(ii) tying and bundling product offerings under packaged pricing;
(iii) misrepresenting its products and disparaging Litton products; and
(iv) acquiring the Sperry Avionics business in 1986.
On February 2, 1996, the case was submitted to the jury on the remaining
allegations that the former Honeywell had illegally monopolized and attempted to
monopolize by:
(i) entering into certain long-term exclusive dealing and penalty
arrangements with aircraft manufacturers and airlines to exclude
Litton from the commercial aircraft market, and
(ii) failing to provide Litton with access to proprietary software used in
the cockpits of certain business jets.
On February 29, 1996, the jury returned a $234 million single damages
verdict against the former Honeywell for illegal monopolization, which verdict
would have been automatically trebled. On March 1, 1996, the jury indicated that
it was unable to reach a verdict on damages for the attempt to monopolize claim,
and a mistrial was declared as to that claim.
The former Honeywell subsequently filed a motion for judgment as a matter
of law and a motion for a new trial, contending, among other things, that the
jury's partial verdict should be overturned because the former Honeywell was
prejudiced at trial, and Litton failed to prove essential elements of liability
or submit competent evidence to support its speculative, all-or-nothing $298.5
million damage claim. Litton filed motions for entry of judgment and injunctive
relief. On July 24, 1996, the trial court denied the former Honeywell's
alternative motions for judgment as a matter of law or a complete new trial, but
concluded that Litton's damage study was seriously flawed and granted the former
Honeywell a retrial on damages only. The court also denied Litton's two motions.
At that time, Judge Pfaelzer was expected to conduct the retrial of antitrust
damages sometime following the retrial of patent/tort damages. However, after
the U.S. Supreme Court remanded the patent/tort case to the Federal Circuit in
March 1997, Litton moved to have the trial court expeditiously schedule the
antitrust damages retrial. In September 1997, the trial court rejected that
motion, indicating that it wished to know the outcome of the current patent/tort
appeal before scheduling retrials of any type.
Following the April 7, 1998 Federal Circuit panel decision in the
patent/tort case, Litton again petitioned the trial court to schedule the
retrial of antitrust damages. The trial court tentatively scheduled the trial to
commence in the fourth quarter of 1998, and reopened limited discovery and other
pretrial preparations. Litton then filed another antitrust damage claim of
nearly $300 million.
The damages only retrial began October 29, 1998 before Judge Pfaelzer and a
new jury. On December 9, 1998, the jury returned verdicts against the former
Honeywell totaling $250 million, $220 million of which is in favor of Litton and
$30 million of which is in favor of its sister corporation, Litton Systems,
Canada, Limited.
56 Honeywell 1999 Annual Report
<PAGE>
On January 27, 1999, the court vacated its prior mistrial ruling with
respect to the attempt to monopolize claim and entered a treble damages judgment
in the total amount of $750 million for actual and attempted monopolization. The
former Honeywell filed appropriate post-judgment motions with the trial court
and Litton filed motions seeking to add substantial attorney's fees and costs to
the judgment. A hearing on the post-judgment motions was held before the trial
court on May 20, 1999. On September 24, 1999, the trial court issued rulings
denying the former Honeywell's Motion for Judgment as a Matter of Law and Motion
for New Trial and Remittitur as they related to Litton Systems Inc., but
granting the former Honeywell's Motion for Judgment as a Matter of Law as it
relates to Litton Systems, Canada, Limited. The net effect of these rulings was
to reduce the existing judgment against the former Honeywell of $750 million to
$660 million, plus attorney fees and costs of approximately $35 million. Both
parties have appealed the judgment, as to both liability and damages, to the
U.S. Court of Appeals for the Ninth Circuit. Execution of the trial court's
judgment will be stayed pending resolution of the former Honeywell's
post-judgment motions and the disposition of any appeals filed by the parties.
We expect to obtain substantial relief from the current adverse judgment in
the antitrust case by an appeal to the Ninth Circuit, based upon sound
substantive and procedural legal grounds. We believe that there was no factual
or legal basis for the magnitude of the jury's award in the damages retrial and
that, as was the case in the first trial, the jury's award should be overturned.
We also believe there are serious questions concerning the identity and nature
of the business arrangements and conduct which were found by the first antitrust
jury in 1996 to be anti-competitive and damaging to Litton, and the verdict of
liability should be overturned as a matter of law.
Although it is not possible at this time to predict the result of any
eventual appeals in this case, potential remains for an adverse outcome which
could be material to our financial position or results of operations. As a
result of the uncertainty regarding the outcome of this matter, no provision has
been made in the financial statements with respect to this contingent liability.
We also believe that it would be inappropriate for Litton to obtain recovery of
the same damages, e.g. losses it suffered due to the former Honeywell's sales of
ring laser gyroscope-based inertial systems to OEMs and airline customers, under
multiple legal theories, claims, and cases, and that eventually any duplicative
recovery would be eliminated from the antitrust and patent/tort cases.
In the fall of 1996, Litton and the former Honeywell commenced a court
ordered mediation of the patent, tort and antitrust claims. No claim was
resolved or settled, and the mediation is currently in recess.
ENVIRONMENTAL MATTERS In accordance with our accounting policy (see Note 1),
liabilities are recorded for environmental matters generally no later than the
completion of feasibility studies. Although we do not currently possess
sufficient information to reasonably estimate the amounts of the liabilities to
be recorded upon future completion of studies, they may be significant to the
consolidated results of operations, but we do not expect that they will have a
material adverse effect on our consolidated financial position. The liabilities
for environmental costs recorded in Accrued Liabilities and Other Liabilities at
December 31, 1999 were $104 and $245 million, respectively, and at December 31,
1998 were $128 and $278 million, respectively.
OTHER MATTERS We are subject to a number of other lawsuits, investigations and
claims (some of which involve substantial amounts) arising out of the conduct of
our business. With respect to all these other matters, including those relating
to commercial transactions, government contracts, product liability and
non-environmental health and safety matters, while the ultimate results of these
lawsuits, investigations and claims cannot be determined, we do not expect that
these matters will have a material adverse effect on our consolidated results of
operations or financial position.
We have issued or are a party to various direct and indirect guarantees,
bank letters of credit and customer guarantees. We do not expect that these
guarantees will have a material adverse effect on our consolidated results of
operations or financial position.
Honeywell 1999 Annual Report 57
<PAGE>
NOTES TO FINANCIAL STATEMENTS
Honeywell International Inc. (Dollars in Millions Except Per Share Amounts)
NOTE 22
PENSION AND OTHER POSTRETIREMENT BENEFITS
We provide separate pension and retiree medical benefit plans for employees of
both AlliedSignal and the former Honeywell. Pension benefits for substantially
all U.S. employees are provided through non-contributory, defined benefit
pension plans. Employees in foreign countries, who are not U.S. citizens, are
covered by various retirement benefit arrangements, some of which are considered
to be defined benefit pension plans for accounting purposes. Our retiree medical
plans cover U.S. and Canadian employees who retire with pension eligibility for
hospital, professional and other medical services. Most of the U.S. retiree
medical plans require deductibles and copayments and virtually all are
integrated with Medicare. Retiree contributions are generally required based on
coverage type, plan and Medicare eligibility. The retiree medical and life
insurance plans are not funded. Claims and expenses are paid from our general
assets.
The following disclosures present financial information for the combined
AlliedSignal and former Honeywell significant pension and retiree medical
benefit plans using weighted-average assumptions to calculate benefit costs and
obligations.
Net periodic pension and other postretirement benefit costs (income)
include the following components:
<TABLE>
<CAPTION>
Other
Pension Postretirement
Benefits Benefits
----------------------------- --------------------------
1999 1998 1997 1999 1998 1997
----------------------------- --------------------------
<S> <C> <C> <C> <C> <C> <C>
Service cost $ 229 $ 233 $ 212 $ 32 $ 30 $ 29
----------------------------- --------------------------
Interest cost 710 721 707 125 121 129
----------------------------- --------------------------
Assumed return on
plan assets (1,062) (951) (849) -- -- --
----------------------------- --------------------------
Amortization of
prior service cost 50 45 43 (18) (18) (14)
----------------------------- --------------------------
Other (48) (40) (17) (79) (52) (17)
- ------------------------------------------------------ --------------------------
Benefit cost (income) $ (121) $ 8 $ 96 $ 60 $ 81 $ 127
====================================================== ==========================
</TABLE>
The following table summarizes the balance sheet impact, including the
benefit obligations, assets,funded status and weighted average rate assumptions
associated with our significant pension and retiree medical benefit plans.
<TABLE>
<CAPTION>
Other
Pension Postretirement
Benefits Benefits
------------------------- ------------------------
1999 1998 1999 1998
------------------------- ------------------------
<S> <C> <C> <C> <C>
Change in benefit
obligation
Benefit obligation at
beginning of year $ 11,101 $ 10,118 $ 1,867 $ 1,880
------------------------- ------------------------
Service cost 229 233 32 30
------------------------- ------------------------
Interest cost 710 721 125 121
------------------------- ------------------------
Participant contributions 7 7 -- --
------------------------- ------------------------
Plan amendments 29 94 (16) 5
------------------------- ------------------------
Actuarial (gains) losses (1,223) 621 (114) 8
------------------------- ------------------------
Acquisitions 95 91 -- --
------------------------- ------------------------
Benefits paid (794) (723) (144) (145)
------------------------- ------------------------
Settlements and
curtailments (128) (65) (42) (32)
------------------------- ------------------------
Translation effect (88) 4 -- --
- ------------------------------------------------------ ------------------------
Benefit obligation
at end of year 9,938 11,101 1,708 1,867
- ------------------------------------------------------ ------------------------
Change in plan assets
Fair value of plan assets
at beginning of year 11,560 11,072 -- --
------------------------- ------------------------
Actual return on
plan assets 2,232 1,016 -- --
------------------------- ------------------------
Company contributions 108 183 -- --
------------------------- ------------------------
Participant
contributions 8 7 -- --
------------------------- ------------------------
Acquisitions 57 63 -- --
------------------------- ------------------------
Settlements (80) (48) -- --
------------------------- ------------------------
Benefits paid (794) (723) -- --
------------------------- ------------------------
Translation effect (69) (10) -- --
- ------------------------------------------------------ ------------------------
Fair value of plan assets
at end of year 13,022 11,560 -- --
- ------------------------------------------------------ ------------------------
Funded status of plans 3,084 459 (1,708) (1,867)
------------------------- ------------------------
Unrecognized transition
(asset) (27) (37) -- --
------------------------- ------------------------
Unrecognized net (gain) (2,742) (402) (257) (143)
------------------------- ------------------------
Unrecognized prior
service cost (credit) 305 360 (145) (184)
- ------------------------------------------------------ ------------------------
(Accrued) prepaid
benefit cost $ 620 $ 380 $(2,110) $(2,194)
====================================================== ========================
Assumptions at
December 31:
Discount rate 8.00% 6.75% 8.00% 6.75%
------------------------- ------------------------
Assumed rate of return
on plan assets 10.00% 9.80% -- --
------------------------- ------------------------
Assumed annual rate
of compensation increase 4.00% 4.60% -- --
====================================================== ========================
</TABLE>
58 Honeywell 1999 Annual Report
<PAGE>
The projected benefit obligation, accumulated benefit obligation and fair
value of plan assets for the pension plans with accumulated benefit obligations
in excess of plan assets were $608, $534, and $210 million, respectively, as of
December 31, 1999 and $623, $540 and $216 million, respectively, as of December
31, 1998.
For measurement purposes, we assumed an annual health-care cost trend rate
of 6 percent for 2000 and beyond. Assumed health care cost trend rates have a
significant effect on the amounts reported for the health care plan. A
one-percentage-point change in assumed health care cost trend rates would have
the following effects:
<TABLE>
<CAPTION>
One-Percentage- One-Percentage-
Point Increase Point Decrease
- --------------------------------------------------------------
<S> <C> <C>
Effect on total of
service and interest
cost components $ 14 $ (12)
------------------------------------
Effect on
postretirement
benefit obligation $135 $(120)
- --------------------------------------------------------------
</TABLE>
NOTE 23
SEGMENT FINANCIAL DATA
Statement of Financial Accounting Standards No. 131, "Disclosures about Segments
of an Enterprise and Related Information" (SFAS No. 131), establishes standards
for reporting information about operating segments. The following information is
provided in accordance with the requirements of SFAS No. 131 and is consistent
with how business results are reported internally to management.
We globally manage our business operations through strategic business units
(SBUs) offering products and services to the aerospace, automation and control,
chemicals, and automotive industries. Based on similar economic and operational
characteristics, our SBUs are aggregated into the following four reportable
segments:
Aerospace Solutions includes Engines & Systems (auxiliary power units;
propulsion engines; environmental control systems; engine controls; and
power generation systems); Aerospace Electronic Systems (flight safety
communications, navigation, radar and surveillance systems; aircraft and
airfield lighting; and advanced systems and instruments); Aerospace
Services (repair and overhaul services; hardware; logistics; and management
and technical services); and Aircraft Landing Systems (aircraft wheels and
brakes).
Automation & Asset Management includes Home and Building Control (controls
for heating, ventilating, humidification and air-conditioning equipment;
energy-efficient lighting controls; home consumer products; security and
fire alarm systems; home automation systems; and building management
systems and services); and Industrial Control (systems for the automation
and control of process operations; solid-state sensors for position,
pressure, air flow, temperature and current; precision electromechanical
switches; control products; advanced vision-based sensors; and fiber-optic
components).
Performance Materials includes Performance Polymers (fibers; plastic
resins; specialty films; and intermediate chemicals); Specialty Chemicals
(fluorine-based products; pharmaceutical and agricultural chemicals;
specialty waxes, adhesives and sealants; and process technology); and
Electronic Materials (wafer fabrication materials and services; printed
circuit boards; advanced chip packaging and amorphous metals).
Power & Transportation Products includes Transportation & Power Systems
(turbochargers; charge-air coolers; portable power systems; air brake and
anti-lock braking systems); the Consumer Products Group (car care products
including anti-freeze, filters, spark plugs, cleaners, waxes and
additives); and Friction Materials (friction material and related brake
system components).
The accounting policies of the segments are the same as those described in
Note 1. We evaluate segment performance based on segment profit, which excludes
general corporate unallocated expenses, gains on sales of non-strategic
businesses, equity income, other income (expense), interest and other financial
charges and merger, repositioning and other charges, and other. We do not
disaggregate assets on a products and services basis for internal management
reporting and, therefore, such information is not presented. Intersegment sales
approximate market and are not significant. Reportable segment data were as
follows:
Honeywell 1999 Annual Report 59
<PAGE>
NOTES TO FINANCIAL STATEMENTS
Honeywell International Inc. (Dollars in Millions Except Per Share Amounts)
<TABLE>
<CAPTION>
1999 1998 1997
- ----------------------------------------------------------------
<S> <C> <C> <C>
Net sales
Aerospace Solutions $ 9,908 $ 9,890 $ 8,398
--------------------------------
Automation & Asset
Management 6,115 5,957 5,934
--------------------------------
Performance Materials 4,007 4,169 4,248
--------------------------------
Power & Transportation
Products 3,581 3,387 3,769
--------------------------------
Corporate 124 152 150
- ----------------------------------------------------------------
$23,735 $23,555 $22,499
================================================================
Depreciation and amortization
Aerospace Solutions $ 291 $ 304 $ 267
--------------------------------
Automation & Asset
Management 192 194 191
--------------------------------
Performance Materials 214 212 240
--------------------------------
Power & Transportation
Products 106 111 123
--------------------------------
Corporate 78 76 67
- ----------------------------------------------------------------
$ 881 $ 897 $ 888
================================================================
Segment profit
Aerospace Solutions $ 1,918 $ 1,587 $ 1,151
--------------------------------
Automation & Asset
Management 767 705 610
--------------------------------
Performance Materials 439 634 541
--------------------------------
Power & Transportation
Products 322 234 308
--------------------------------
Corporate (175) (248) (167)
- ----------------------------------------------------------------
$ 3,271 $ 2,912 $ 2,443
================================================================
Capital expenditures
Aerospace Solutions $ 270 $ 287 $ 269
--------------------------------
Automation & Asset
Management 212 212 194
--------------------------------
Performance Materials 282 308 309
--------------------------------
Power & Transportation
Products 143 149 161
--------------------------------
Corporate 79 81 82
- ----------------------------------------------------------------
$ 986 $ 1,037 $ 1,015
================================================================
</TABLE>
A reconciliation of segment profit to consolidated income before taxes on
income is as follows:
<TABLE>
<CAPTION>
1999 1998 1997
- --------------------------------------------------------------
<S> <C> <C> <C>
Segment profit $ 3,271 $2,912 $2,443
------------------------------
Gain on sale of non-strategic
businesses 106 -- 303
------------------------------
Equity in income of
affiliated companies 116 162 204
------------------------------
Other income (expense) 39 3 87
------------------------------
Interest and other
financial charges (265) (275) (277)
------------------------------
Merger, repositioning and
other charges (1,287) (54) (341)
------------------------------
Other(1) 268 24 --
- --------------------------------------------------------------
Income before taxes
on income $ 2,248 $2,772 $2,419
==============================================================
</TABLE>
(1) Other represents the gain on our disposition of our investment in AMP
common stock in 1999 and litigation settlements in 1998.
NOTE 24
GEOGRAPHIC AREAS-- FINANCIAL DATA
<TABLE>
<CAPTION>
United Other
States Europe International Total
- ---------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Net sales(1) 1999 $16,913 $4,608 $2,214 $23,735
--------------------------------------------
1998 17,082 4,510 1,963 $23,555
--------------------------------------------
1997 16,162 4,308 2,029 $22,499
- ---------------------------------------------------------------------------
Long-lived assets(2) 1999 $ 7,837 $1,840 $ 613 $10,290
--------------------------------------------
1998 7,346 1,944 675 $ 9,965
--------------------------------------------
1997 7,250 1,288 483 $ 9,021
- ---------------------------------------------------------------------------
</TABLE>
(1) Sales between geographic areas approximate market and are not significant.
Net sales are classified according to their country of origin. Included in
United States net sales are export sales of $3,715, $3,824, and $3,632
million in 1999, 1998 and 1997, respectively. Our sales are not materially
dependent on a single customer or a small group of customers.
(2) Long-lived assets are comprised of property, plant and equipment, goodwill
and other intangible assets.
NOTE 25
SUBSEQUENT EVENT
On February 3, 2000, we completed a tender offer acquiring substantially all of
the outstanding shares of Pittway Corporation (Pittway) Common Stock and Class A
Stock for approximately $2.2 billion, including the assumption of the net debt
of Pittway of approximately $167 million. The acquisition was funded through the
issuance of commercial paper. Pittway designs, manufactures and distributes
security and fire systems for homes and buildings and had 1998 sales of $1.3
billion.
60 Honeywell 1999 Annual Report
<PAGE>
NOTE 26
UNAUDITED QUARTERLY FINANCIAL INFORMATION
<TABLE>
<CAPTION>
1999 1998
- -----------------------------------------------------------------------------------------------------------------------------------
Mar. 31 June 30 Sept. 30 Dec. 31 Year Mar. 31 June 30 Sept. 30 Dec. 31 Year
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Net sales $5,582 $5,958 $6,036 $6,159 $23,735 $5,569 $5,904 $5,861 $6,221 $23,555
--------------------------------------------------------------------------------------------------------
Gross profit 1,390 1,333(1) 1,462(3) 1,055(5) 5,240 1,320 1,454 1,491 1,601(7) 5,866
--------------------------------------------------------------------------------------------------------
Net income 440 540(1,2) 554(3,4) 7(5,6) 1,541 396 476 474 557(7,8,9) 1,903
--------------------------------------------------------------------------------------------------------
Earnings per share--basic .55 .68 .70 .01 1.95 .49 .60 .60 .70 2.38
--------------------------------------------------------------------------------------------------------
Earnings per share--
assuming dilution .55 .67(1,2) .68(3,4) .01(5,6) 1.90 .48 .58 .58 .69(7,8,9) 2.34
--------------------------------------------------------------------------------------------------------
Dividends paid(10) .17 .17 .17 .17 .68 .15 .15 .15 .15 .60
--------------------------------------------------------------------------------------------------------
Market price(11)
--------------------------------------------------------------------------------------------------------
High 50.94 68.63 67.56 63.75 68.63 43.81 47.56 46.69 45.13 47.56
--------------------------------------------------------------------------------------------------------
Low 37.81 49.25 57.50 52.38 37.81 34.63 39.63 32.63 33.06 32.63
- -----------------------------------------------------------------------------------------------------------------------------------
</TABLE>
(1) Includes $222 million, after-tax $156 million, or $0.19 per share for
repositioning and other charges. See Note 4 of Notes to Financial
Statements for further information.
(2) Includes an after-tax gain of $161 million, or $0.20 per share on the
disposition of our investment in AMP common stock. See Note 6 of Notes to
Financial Statements for further information.
(3) Includes $103 million, after-tax $65 million, or $0.08 per share for
repositioning and other charges. See Note 4 of Notes to Financial
Statements for further information.
(4) Includes an after-tax gain of $59 million, or $0.07 per share on the sale
of our Laminate Systems business. See Note 5 of Notes to Financial
Statements for further information.
(5) Includes $622 million, after-tax $395 million, or $0.49 per share for
repositioning and other charges. See Note 4 of Notes to Financial
Statements for further information.
(6) Includes $300 million, after-tax $228 million, or $0.28 per share for
repositioning and other charges. See Note 4 of Notes to Financial
Statements for further information.
(7) Includes $54 million, after-tax $35 million, or $0.04 per share for
repositioning charges. See Note 4 of Notes to Financial Statements for
further information.
(8) Includes an after-tax gain of $14 million, or $0.02 per share for a
settlement of litigation claims.
(9) Includes a tax benefit of $17 million, or $0.02 per share resulting from
the favorable resolution of certain prior-year research and development tax
claims.
(10) Represents the historical dividends of AlliedSignal.
(11) Represents the historical market price of AlliedSignal up to December 1,
1999, and of Honeywell subsequent to that date. From composite tape-- stock
is primarily traded on the New York Stock Exchange.
Honeywell 1999 Annual Report 61
<PAGE>
EXHIBIT 21
SUBSIDIARIES OF THE REGISTRANT
<TABLE>
<CAPTION>
SECURITIES OWNED
COUNTRY OR ------------------------
STATE OF PERCENT
NAME INCORPORATION CLASS OWNERSHIP
---- ------------- ----- ---------
<S> <C> <C> <C>
Honeywell Inc....................................... Delaware Common Stock 100
AlliedSignal International Finance Corporation...... Delaware Common Stock 100
Honeywell Technology Solutions Inc.................. Delaware Common Stock 100
Honeywell Intellectual Properties Inc............... Arizona Common Stock 100
Honeywell Specialty Wax & Additives Inc............. Delaware Common Stock 100
ASI Specialty Chemicals, L.L.C...................... Delaware Common Stock 100
Grimes Holdings Inc................................. Delaware Common Stock 100
Prestone Holdings Inc............................... Delaware Common Stock 100
</TABLE>
-------------------
The names of the Registrant's other consolidated subsidiaries, which are
primarily totally-held by the Registrant, are not listed because all such
subsidiaries, considered in the aggregate as a single subsidiary, would not
constitute a significant subsidiary.
<PAGE>
EXHIBIT 23.1
CONSENT OF INDEPENDENT ACCOUNTANTS
We hereby consent to the incorporation by reference in Honeywell
International Inc.'s Registration Statements on Form S-8 (Nos. 33-09896,
33-51455, 33-55410, 33-58347, 33-60261, 33-62963, 333-14673, 333-57509,
333-57515, 333-57517, 333-57519, 333-83511 and 333-88141), on Form S-3 (Nos.
33-14071, 33-55425, 33-64245, 333-22355, 333-49455, 333-68847, 333-74075 and
333-86157) and on Form S-4 (No. 333-82049) of our report dated January 27, 2000,
except as to the subsequent event described in Note 25 which is as of
February 4, 2000, relating to the financial statements, which appears in the
Annual Report to Shareowners, which is incorporated by reference in this Annual
Report on Form 10-K.
/s/ PRICEWATERHOUSECOOPERS LLP
PRICEWATERHOUSECOOPERS LLP
Florham Park, New Jersey
February 22, 2000
<PAGE>
EXHIBIT 23.2
INDEPENDENT AUDITORS' CONSENT
We consent to the incorporation by reference in Registration Statement Nos.
33-09896, 33-51455, 33-55410, 33-58347, 33-60261, 33-62963, 333-14673,
333-57509, 333-57515, 333-57517, 333-57519, 333-83511 and 333-88141 of Honeywell
International Inc. on Form S-8 and Registration Statement Nos. 33-14071,
33-55425, 33-64245, 333-22355, 333-49455, 333-68847, 333-74075 and 333-86157 of
Honeywell International Inc. on Form S-3 and Registration Statement No.
333-82049 of Honeywell International Inc. on Form S-4 of our report dated
February 10, 1999, appearing in this Annual Report on Form 10-K of Honeywell
International Inc. for the year ended December 31, 1999.
/s/ DELOITTE & TOUCHE LLP
DELOITTE & TOUCHE LLP
Parsippany, New Jersey
February 21, 2000
<PAGE>
POWER OF ATTORNEY
I, Lawrence A. Bossidy, a director of Honeywell International Inc., a
Delaware corporation (the "Company"), hereby appoint Michael R. Bonsignore,
Peter M. Kreindler, Richard F. Wallman, Kathleen M. Gibson, Richard J. Diemer,
Jr. and James V. Gelly, each with power to act without the other and with power
of substitution and resubstitution, as my attorney-in-fact and agent for me and
in my name, place and stead, in any and all capacities,
(i) to sign the Company's Annual Report on Form 10-K under the
Securities Exchange Act of 1934 for the year ended December 31, 1999,
(ii) to sign any amendment to the Annual Report referred to in (i)
above, and
(iii) to file the documents described in (i) and (ii) above and all
exhibits thereto and any and all other documents in connection therewith,
granting unto each said attorney and agent full power and authority to do and
perform every act and thing requisite, necessary or desirable to be done in
connection therewith, as fully to all intents and purposes as I might or could
do in person, hereby ratifying and confirming all that said attorneys-in-fact
and agents, or any of them, or their or his or her substitutes or substitute,
may lawfully do or cause to be done by virtue hereof.
/s/Lawrence A. Bossidy
----------------------------------------
Lawrence A. Bossidy
Dated: January 28, 2000
<PAGE>
POWER OF ATTORNEY
I, Michael R. Bonsignore, a director of Honeywell International Inc., a
Delaware corporation (the "Company"), hereby appoint Lawrence A. Bossidy, Peter
M. Kreindler, Richard F. Wallman, Kathleen M. Gibson, Richard J. Diemer, Jr. and
James V. Gelly, each with power to act without the other and with power of
substitution and resubstitution, as my attorney-in-fact and agent for me and in
my name, place and stead, in any and all capacities,
(i) to sign the Company's Annual Report on Form 10-K under the
Securities Exchange Act of 1934 for the year ended December 31, 1999,
(ii) to sign any amendment to the Annual Report referred to in (i)
above, and
(iii) to file the documents described in (i) and (ii) above and all
exhibits thereto and any and all other documents in connection therewith,
granting unto each said attorney and agent full power and authority to do and
perform every act and thing requisite, necessary or desirable to be done in
connection therewith, as fully to all intents and purposes as I might or could
do in person, hereby ratifying and confirming all that said attorneys-in-fact
and agents, or any of them, or their or his or her substitutes or substitute,
may lawfully do or cause to be done by virtue hereof.
/s/Michael R. Bonsignore
----------------------------------------
Michael R. Bonsignore
Dated: January 28, 2000
<PAGE>
POWER OF ATTORNEY
I, Hans W. Becherer, a director of Honeywell International Inc., a
Delaware corporation (the "Company"), hereby appoint Lawrence A. Bossidy,
Michael R. Bonsignore, Peter M. Kreindler, Richard F. Wallman, Kathleen M.
Gibson, Richard J. Diemer, Jr. and James V. Gelly, each with power to act
without the other and with power of substitution and resubstitution, as my
attorney-in-fact and agent for me and in my name, place and stead, in any and
all capacities,
(i) to sign the Company's Annual Report on Form 10-K under the
Securities Exchange Act of 1934 for the year ended December 31, 1999,
(ii) to sign any amendment to the Annual Report referred to in (i)
above, and
(iii) to file the documents described in (i) and (ii) above and all
exhibits thereto and any and all other documents in connection therewith,
granting unto each said attorney and agent full power and authority to do and
perform every act and thing requisite, necessary or desirable to be done in
connection therewith, as fully to all intents and purposes as I might or could
do in person, hereby ratifying and confirming all that said attorneys-in-fact
and agents, or any of them, or their or his or her substitutes or substitute,
may lawfully do or cause to be done by virtue hereof.
/s/Hans W. Becherer
----------------------------------------
Hans W. Becherer
Dated: January 28, 2000
<PAGE>
POWER OF ATTORNEY
I, Gordon M. Bethune, a director of Honeywell International Inc., a
Delaware corporation (the "Company"), hereby appoint Lawrence A. Bossidy,
Michael R. Bonsignore, Peter M. Kreindler, Richard F. Wallman, Kathleen M.
Gibson, Richard J. Diemer, Jr. and James V. Gelly, each with power to act
without the other and with power of substitution and resubstitution, as my
attorney-in-fact and agent for me and in my name, place and stead, in any and
all capacities,
(i) to sign the Company's Annual Report on Form 10-K under the
Securities Exchange Act of 1934 for the year ended December 31, 1999,
(ii) to sign any amendment to the Annual Report referred to in (i)
above, and
(iii) to file the documents described in (i) and (ii) above and all
exhibits thereto and any and all other documents in connection therewith,
granting unto each said attorney and agent full power and authority to do and
perform every act and thing requisite, necessary or desirable to be done in
connection therewith, as fully to all intents and purposes as I might or could
do in person, hereby ratifying and confirming all that said attorneys-in-fact
and agents, or any of them, or their or his or her substitutes or substitute,
may lawfully do or cause to be done by virtue hereof.
/s/Gordon M. Bethune
----------------------------------------
Gordon M. Bethune
Dated: January 28, 2000
<PAGE>
POWER OF ATTORNEY
I, Marshall N. Carter, a director of Honeywell International Inc., a
Delaware corporation (the "Company"), hereby appoint Lawrence A. Bossidy,
Michael R. Bonsignore, Peter M. Kreindler, Richard F. Wallman, Kathleen M.
Gibson, Richard J. Diemer, Jr. and James V. Gelly, each with power to act
without the other and with power of substitution and resubstitution, as my
attorney-in-fact and agent for me and in my name, place and stead, in any and
all capacities,
(i) to sign the Company's Annual Report on Form 10-K under the
Securities Exchange Act of 1934 for the year ended December 31, 1999,
(ii) to sign any amendment to the Annual Report referred to in (i)
above, and
(iii) to file the documents described in (i) and (ii) above and all
exhibits thereto and any and all other documents in connection therewith,
granting unto each said attorney and agent full power and authority to do and
perform every act and thing requisite, necessary or desirable to be done in
connection therewith, as fully to all intents and purposes as I might or could
do in person, hereby ratifying and confirming all that said attorneys-in-fact
and agents, or any of them, or their or his or her substitutes or substitute,
may lawfully do or cause to be done by virtue hereof.
/s/Marshall N. Carter
----------------------------------------
Marshall N. Carter
Dated: January 28, 2000
<PAGE>
POWER OF ATTORNEY
I, Jaime Chico Pardo, a director of Honeywell International Inc., a
Delaware corporation (the "Company"), hereby appoint Lawrence A. Bossidy,
Michael R. Bonsignore, Peter M. Kreindler, Richard F. Wallman, Kathleen M.
Gibson, Richard J. Diemer, Jr. and James V. Gelly, each with power to act
without the other and with power of substitution and resubstitution, as my
attorney-in-fact and agent for me and in my name, place and stead, in any and
all capacities,
(i) to sign the Company's Annual Report on Form 10-K under the
Securities Exchange Act of 1934 for the year ended December 31, 1999,
(ii) to sign any amendment to the Annual Report referred to in (i)
above, and
(iii) to file the documents described in (i) and (ii) above and all
exhibits thereto and any and all other documents in connection therewith,
granting unto each said attorney and agent full power and authority to do and
perform every act and thing requisite, necessary or desirable to be done in
connection therewith, as fully to all intents and purposes as I might or could
do in person, hereby ratifying and confirming all that said attorneys-in-fact
and agents, or any of them, or their or his or her substitutes or substitute,
may lawfully do or cause to be done by virtue hereof.
/s/Jaime Chico Pardo
----------------------------------------
Jaime Chico Pardo
Dated: January 28, 2000
<PAGE>
POWER OF ATTORNEY
I, Ann M. Fudge, a director of Honeywell International Inc., a Delaware
corporation (the "Company"), hereby appoint Lawrence A. Bossidy, Michael R.
Bonsignore, Peter M. Kreindler, Richard F. Wallman, Kathleen M. Gibson, Richard
J. Diemer, Jr. and James V. Gelly, each with power to act without the other and
with power of substitution and resubstitution, as my attorney-in-fact and agent
for me and in my name, place and stead, in any and all capacities,
(i) to sign the Company's Annual Report on Form 10-K under the
Securities Exchange Act of 1934 for the year ended December 31, 1999,
(ii) to sign any amendment to the Annual Report referred to in (i)
above, and
(iii) to file the documents described in (i) and (ii) above and all
exhibits thereto and any and all other documents in connection therewith,
granting unto each said attorney and agent full power and authority to do and
perform every act and thing requisite, necessary or desirable to be done in
connection therewith, as fully to all intents and purposes as I might or could
do in person, hereby ratifying and confirming all that said attorneys-in-fact
and agents, or any of them, or their or his or her substitutes or substitute,
may lawfully do or cause to be done by virtue hereof.
/s/Ann M. Fudge
----------------------------------------
Ann M. Fudge
Dated: January 28, 2000
<PAGE>
POWER OF ATTORNEY
I, James J. Howard, a director of Honeywell International Inc., a Delaware
corporation (the "Company"), hereby appoint Lawrence A. Bossidy, Michael R.
Bonsignore, Peter M. Kreindler, Richard F. Wallman, Kathleen M. Gibson, Richard
J. Diemer, Jr. and James V. Gelly, each with power to act without the other and
with power of substitution and resubstitution, as my attorney-in-fact and agent
for me and in my name, place and stead, in any and all capacities,
(i) to sign the Company's Annual Report on Form 10-K under the
Securities Exchange Act of 1934 for the year ended December 31, 1999,
(ii) to sign any amendment to the Annual Report referred to in (i)
above, and
(iii) to file the documents described in (i) and (ii) above and all
exhibits thereto and any and all other documents in connection therewith,
granting unto each said attorney and agent full power and authority to do and
perform every act and thing requisite, necessary or desirable to be done in
connection therewith, as fully to all intents and purposes as I might or could
do in person, hereby ratifying and confirming all that said attorneys-in-fact
and agents, or any of them, or their or his or her substitutes or substitute,
may lawfully do or cause to be done by virtue hereof.
/s/James J. Howard
----------------------------------------
James J. Howard
Dated: January 28, 2000
<PAGE>
POWER OF ATTORNEY
I, Bruce Karatz, a director of Honeywell International Inc., a Delaware
corporation (the "Company"), hereby appoint Michael R. Bonsignore, Peter M.
Kreindler, Richard F. Wallman, Kathleen M. Gibson, Richard J. Diemer, Jr. and
James V. Gelly, each with power to act without the other and with power of
substitution and resubstitution, as my attorney-in-fact and agent for me and in
my name, place and stead, in any and all capacities,
(i) to sign the Company's Annual Report on Form 10-K under the
Securities Exchange Act of 1934 for the year ended December 31, 1999,
(ii) to sign any amendment to the Annual Report referred to in (i)
above, and
(iii) to file the documents described in (i) and (ii) above and all
exhibits thereto and any and all other documents in connection therewith,
granting unto each said attorney and agent full power and authority to do and
perform every act and thing requisite, necessary or desirable to be done in
connection therewith, as fully to all intents and purposes as I might or could
do in person, hereby ratifying and confirming all that said attorneys-in-fact
and agents, or any of them, or their or his or her substitutes or substitute,
may lawfully do or cause to be done by virtue hereof.
/s/Bruce Karatz
----------------------------------------
Bruce Karatz
Dated: January 28, 2000
<PAGE>
POWER OF ATTORNEY
I, Robert P. Luciano, a director of Honeywell International Inc., a
Delaware corporation (the "Company"), hereby appoint Lawrence A. Bossidy,
Michael R. Bonsignore, Peter M. Kreindler, Richard F. Wallman, Kathleen M.
Gibson, Richard J. Diemer, Jr. and James V. Gelly, each with power to act
without the other and with power of substitution and resubstitution, as my
attorney-in-fact and agent for me and in my name, place and stead, in any and
all capacities,
(i) to sign the Company's Annual Report on Form 10-K under the
Securities Exchange Act of 1934 for the year ended December 31, 1999,
(ii) to sign any amendment to the Annual Report referred to in (i)
above, and
(iii) to file the documents described in (i) and (ii) above and all
exhibits thereto and any and all other documents in connection therewith,
granting unto each said attorney and agent full power and authority to do and
perform every act and thing requisite, necessary or desirable to be done in
connection therewith, as fully to all intents and purposes as I might or could
do in person, hereby ratifying and confirming all that said attorneys-in-fact
and agents, or any of them, or their or his or her substitutes or substitute,
may lawfully do or cause to be done by virtue hereof.
/s/Robert P. Luciano
----------------------------------------
Robert P. Luciano
Dated: January 28, 2000
<PAGE>
POWER OF ATTORNEY
I, Russell E. Palmer, a director of Honeywell International Inc., a
Delaware corporation (the "Company"), hereby appoint Michael R. Bonsignore,
Peter M. Kreindler, Richard F. Wallman, Kathleen M. Gibson, Richard J. Diemer,
Jr. and James V. Gelly, each with power to act without the other and with power
of substitution and resubstitution, as my attorney-in-fact and agent for me and
in my name, place and stead, in any and all capacities,
(i) to sign the Company's Annual Report on Form 10-K under the
Securities Exchange Act of 1934 for the year ended December 31, 1999,
(ii) to sign any amendment to the Annual Report referred to in (i)
above, and
(iii) to file the documents described in (i) and (ii) above and all
exhibits thereto and any and all other documents in connection therewith,
granting unto each said attorney and agent full power and authority to do and
perform every act and thing requisite, necessary or desirable to be done in
connection therewith, as fully to all intents and purposes as I might or could
do in person, hereby ratifying and confirming all that said attorneys-in-fact
and agents, or any of them, or their or his or her substitutes or substitute,
may lawfully do or cause to be done by virtue hereof.
/s/Russell E. Palmer
----------------------------------------
Russell E. Palmer
Dated: January 28, 2000
<PAGE>
POWER OF ATTORNEY
I, Ivan G. Seidenberg, a director of Honeywell International Inc., a
Delaware corporation (the "Company"), hereby appoint Lawrence A. Bossidy,
Michael R. Bonsignore, Peter M. Kreindler, Richard F. Wallman, Kathleen M.
Gibson, Richard J. Diemer, Jr. and James V. Gelly, each with power to act
without the other and with power of substitution and resubstitution, as my
attorney-in-fact and agent for me and in my name, place and stead, in any and
all capacities,
(i) to sign the Company's Annual Report on Form 10-K under the
Securities Exchange Act of 1934 for the year ended December 31, 1999,
(ii) to sign any amendment to the Annual Report referred to in (i)
above, and
(iii) to file the documents described in (i) and (ii) above and all
exhibits thereto and any and all other documents in connection therewith,
granting unto each said attorney and agent full power and authority to do and
perform every act and thing requisite, necessary or desirable to be done in
connection therewith, as fully to all intents and purposes as I might or could
do in person, hereby ratifying and confirming all that said attorneys-in-fact
and agents, or any of them, or their or his or her substitutes or substitute,
may lawfully do or cause to be done by virtue hereof.
/s/Ivan G. Seidenberg
----------------------------------------
Ivan G. Seidenberg
Dated: January 28, 2000
<PAGE>
POWER OF ATTORNEY
I, Andrew C. Sigler, a director of Honeywell International Inc., a
Delaware corporation (the "Company"), hereby appoint Lawrence A. Bossidy,
Michael R. Bonsignore, Peter M. Kreindler, Richard F. Wallman, Kathleen M.
Gibson, Richard J. Diemer, Jr. and James V. Gelly, each with power to act
without the other and with power of substitution and resubstitution, as my
attorney-in-fact and agent for me and in my name, place and stead, in any and
all capacities,
(i) to sign the Company's Annual Report on Form 10-K under the
Securities Exchange Act of 1934 for the year ended December 31, 1999,
(ii) to sign any amendment to the Annual Report referred to in (i)
above, and
(iii) to file the documents described in (i) and (ii) above and all
exhibits thereto and any and all other documents in connection therewith,
granting unto each said attorney and agent full power and authority to do and
perform every act and thing requisite, necessary or desirable to be done in
connection therewith, as fully to all intents and purposes as I might or could
do in person, hereby ratifying and confirming all that said attorneys-in-fact
and agents, or any of them, or their or his or her substitutes or substitute,
may lawfully do or cause to be done by virtue hereof.
/s/Andrew C. Sigler
----------------------------------------
Andrew C. Sigler
Dated: January 28, 2000
<PAGE>
POWER OF ATTORNEY
I, John R. Stafford, a director of Honeywell International Inc., a
Delaware corporation (the "Company"), hereby appoint Lawrence A. Bossidy,
Michael R. Bonsignore, Peter M. Kreindler, Richard F. Wallman, Kathleen M.
Gibson, Richard J. Diemer, Jr. and James V. Gelly, each with power to act
without the other and with power of substitution and resubstitution, as my
attorney-in-fact and agent for me and in my name, place and stead, in any and
all capacities,
(i) to sign the Company's Annual Report on Form 10-K under the
Securities Exchange Act of 1934 for the year ended December 31, 1999,
(ii) to sign any amendment to the Annual Report referred to in (i)
above, and
(iii) to file the documents described in (i) and (ii) above and all
exhibits thereto and any and all other documents in connection therewith,
granting unto each said attorney and agent full power and authority to do and
perform every act and thing requisite, necessary or desirable to be done in
connection therewith, as fully to all intents and purposes as I might or could
do in person, hereby ratifying and confirming all that said attorneys-in-fact
and agents, or any of them, or their or his or her substitutes or substitute,
may lawfully do or cause to be done by virtue hereof.
/s/John R. Stafford
----------------------------------------
John R. Stafford
Dated: January 28, 2000
<PAGE>
POWER OF ATTORNEY
I, Michael W. Wright, a director of Honeywell International Inc., a
Delaware corporation (the "Company"), hereby appoint Lawrence A. Bossidy,
Michael R. Bonsignore, Peter M. Kreindler, Richard F. Wallman, Kathleen M.
Gibson, Richard J. Diemer, Jr. and James V. Gelly, each with power to act
without the other and with power of substitution and resubstitution, as my
attorney-in-fact and agent for me and in my name, place and stead, in any and
all capacities,
(i) to sign the Company's Annual Report on Form 10-K under the
Securities Exchange Act of 1934 for the year ended December 31, 1999,
(ii) to sign any amendment to the Annual Report referred to in (i)
above, and
(iii) to file the documents described in (i) and (ii) above and all
exhibits thereto and any and all other documents in connection therewith,
granting unto each said attorney and agent full power and authority to do and
perform every act and thing requisite, necessary or desirable to be done in
connection therewith, as fully to all intents and purposes as I might or could
do in person, hereby ratifying and confirming all that said attorneys-in-fact
and agents, or any of them, or their or his or her substitutes or substitute,
may lawfully do or cause to be done by virtue hereof.
/s/Michael W. Wright
----------------------------------------
Michael W. Wright
Dated: January 28, 2000
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
This schedule contains summary financial information extracted from the
consolidated balance sheet at December 31, 1999 and the consolidated statement
of income for the year ended December 31, 1999 and is qualified in its
entirety by reference to such financial statements.
</LEGEND>
<MULTIPLIER> 1,000,000
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-END> DEC-31-1999
<CASH> 1,991
<SECURITIES> 0
<RECEIVABLES> 3,545
<ALLOWANCES> 84
<INVENTORY> 3,436
<CURRENT-ASSETS> 10,422
<PP&E> 12,703
<DEPRECIATION> 7,073
<TOTAL-ASSETS> 23,527
<CURRENT-LIABILITIES> 8,272
<BONDS> 2,457
0
0
<COMMON> 958
<OTHER-SE> 7,641
<TOTAL-LIABILITY-AND-EQUITY> 23,527
<SALES> 23,735
<TOTAL-REVENUES> 23,735
<CGS> 18,495
<TOTAL-COSTS> 18,495
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 265
<INCOME-PRETAX> 2,248
<INCOME-TAX> 707
<INCOME-CONTINUING> 1,541
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 1,541
<EPS-BASIC> 1.95
<EPS-DILUTED> 1.90
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
This schedule contains summary financial information extracted from the
consolidated balance sheets at September 30, 1999, June 30, 1999 and
March 31, 1999, and the consolidated statements of income for the 9 months
ended September 30, 1999, 6 months ended June 30, 1999 and 3 months ended
March 31, 1999 and is qualified in its entirety by reference to such financial
statements.
</LEGEND>
<RESTATED>
<MULTIPLIER> 1,000,000
<S> <C> <C> <C>
<PERIOD-TYPE> 9-MOS 6-MOS 3-MOS
<FISCAL-YEAR-END> DEC-31-1999 DEC-31-1999 DEC-31-1999
<PERIOD-END> SEP-30-1999 JUN-30-1999 MAR-31-1999
<CASH> 1,125 796 869
<SECURITIES> 0 0 0
<RECEIVABLES> 3,568 3,375 3,325
<ALLOWANCES> 84 75 76
<INVENTORY> 3,481 3,507 3,478
<CURRENT-ASSETS> 9,318 8,794 8,795
<PP&E> 12,805 12,573 12,609
<DEPRECIATION> 7,120 7,059 7,051
<TOTAL-ASSETS> 22,212 21,160 22,224
<CURRENT-LIABILITIES> 7,017 6,334 7,209
<BONDS> 2,480 2,677 2,757
0 0 0
0 0 0
<COMMON> 953 953 953
<OTHER-SE> 7,634 7,030 7,123
<TOTAL-LIABILITY-AND-EQUITY> 22,212 21,160 22,224
<SALES> 17,576 11,540 5,582
<TOTAL-REVENUES> 17,576 11,540 5,582
<CGS> 13,391 8,817 4,192
<TOTAL-COSTS> 13,391 8,817 4,192
<OTHER-EXPENSES> 0 0 0
<LOSS-PROVISION> 0 0 0
<INTEREST-EXPENSE> 192 132 73
<INCOME-PRETAX> 2,265 1,442 646
<INCOME-TAX> 731 462 206
<INCOME-CONTINUING> 1,534 980 440
<DISCONTINUED> 0 0 0
<EXTRAORDINARY> 0 0 0
<CHANGES> 0 0 0
<NET-INCOME> 1,534 980 440
<EPS-BASIC> 1.94 1.23 0.55
<EPS-DILUTED> 1.90 1.22 0.55
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
This schedule contains summary financial information extracted from the
consolidated balance sheets at December 31, 1998, September 30, 1998,
June 30, 1998, March 31, 1998 and December 31, 1997 and the consolidated
statements of income for the year ended December 31, 1998, 9 months ended
September 30, 1998, 6 months ended June 30, 1998, 3 months ended March 31, 1998
and year ended December 31, 1997 and is qualified in its entirety by reference
to such financial statements.
</LEGEND>
<RESTATED>
<MULTIPLIER> 1,000,000
<S> <C> <C> <C> <C> <C>
<PERIOD-TYPE> 12-MOS 9-MOS 6-MOS 3-MOS 12-MOS
<FISCAL-YEAR-END> DEC-31-1998 DEC-31-1998 DEC-31-1998 DEC-31-1998 DEC-31-1997
<PERIOD-END> DEC-31-1998 SEP-30-1998 JUN-30-1998 MAR-31-1998 DEC-31-1997
<CASH> 1,018 632 570 530 745
<SECURITIES> 0 0 31 91 455
<RECEIVABLES> 3,469 3,331 3,229 3,299 3,342
<ALLOWANCES> 78 78 71 68 75
<INVENTORY> 3,456 3,647 3,568 3,437 3,121
<CURRENT-ASSETS> 9,354 8,688 8,486 8,508 8,831
<PP&E> 12,657 12,672 12,315 12,263 12,234
<DEPRECIATION> 7,057 7,174 6,943 6,907 6,854
<TOTAL-ASSETS> 22,738 20,871 20,402 20,014 20,118
<CURRENT-LIABILITIES> 7,645 6,373 6,000 6,052 6,755
<BONDS> 2,776 2,795 3,058 2,765 2,392
0 0 0 0 0
0 0 0 0 0
<COMMON> 953 953 953 953 953
<OTHER-SE> 7,130 6,645 6,315 6,198 5,823
<TOTAL-LIABILITY-AND-EQUITY> 22,738 20,871 20,402 20,014 20,118
<SALES> 23,555 17,334 11,473 5,569 22,499
<TOTAL-REVENUES> 23,555 17,334 11,473 5,569 22,499
<CGS> 17,689 13,069 8,699 4,249 17,444
<TOTAL-COSTS> 17,689 13,069 8,699 4,249 17,444
<OTHER-EXPENSES> 0 0 0 0 0
<LOSS-PROVISION> 0 0 0 0 0
<INTEREST-EXPENSE> 275 188 122 60 277
<INCOME-PRETAX> 2,772 1,978 1,281 582 2,419
<INCOME-TAX> 869 632 409 186 778
<INCOME-CONTINUING> 1,903 1,346 872 396 1,641
<DISCONTINUED> 0 0 0 0 0
<EXTRAORDINARY> 0 0 0 0 0
<CHANGES> 0 0 0 0 0
<NET-INCOME> 1,903 1,346 872 396 1,641
<EPS-BASIC> 2.38 1.69 1.09 0.49 2.04
<EPS-DILUTED> 2.34 1.64 1.04 0.48 2.00
</TABLE>
