Honeywell 2002 Annual Report Download - page 135

SCHEDULE 3.01(b)
DISCLOSED LITIGATION
While not giving an opinion as to whether any item is "reasonably
likely to have a Material Adverse Effect," we hereby disclose the litigation
matters as stated in our Form 10-Q for the quarter ended September 30, 2002,
under the heading "Legal Proceedings," the relevant portions of which are
attached.
SHAREOWNER LITIGATION - Honeywell and seven of its current and former
officers were named as defendants in several purported class action lawsuits
filed in the United States District Court for the District of New Jersey (the
Securities Law Complaints). The Securities Law Complaints principally allege
that the defendants violated federal securities laws by purportedly making false
and misleading statements and by failing to disclose material information
concerning Honeywell's financial performance, thereby allegedly causing the
value of Honeywell's stock to be artificially inflated. The purported class
period for which damages are sought is December 20, 1999 to June 19, 2000. On
January 15, 2002, the District Court dismissed the consolidated complaint
against four of Honeywell's current and former officers.
We believe that there is no factual or legal basis for the allegations in
the Securities Law Complaints. Although it is not possible at this time to
predict the result of these cases, we expect to prevail. However, an adverse
outcome could be material to our consolidated financial position or results of
operations. As a result of the uncertainty regarding the outcome of this matter,
no provision has been made in our financial statements with respect to this
contingent liability.
ENVIRONMENTAL MATTERS - We are subject to various federal, state and local
government requirements relating to the protection of employee health and safety
and 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 personal injury to our employees and employees of our
customers 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, have incurred remedial
response and voluntary cleanup costs for site contamination and are a party to
lawsuits and claims associated with environmental matters, including past
production of products containing toxic substances. Additional lawsuits, claims
and costs involving environmental matters are likely to continue to arise in the
future.
With respect to environmental matters involving site contamination, 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 environmental matters when environmental
assessments are made or remedial efforts or damage claim payments are probable
and the costs can be reasonably estimated. With respect to site contamination,
the timing of these accruals is generally no later than the completion of
feasibility studies. We expect that we will be able to fund expenditures for
these matters from operating cash flow. The timing of cash expenditures depends
on a number of factors, including the timing of litigation and settlements of