Honeywell 2002 Annual Report Download - page 256

We maintain $2 billion of bank revolving credit facilities with a group of banks
which are comprised of: (a) a $1 billion Five-Year Credit Agreement and (b) a $1
billion 364-Day Credit Agreement. The credit agreements are maintained for
general corporate purposes including support for the issuance of commercial
paper. We had no balance outstanding under either agreement at December 31,
2002.
Neither of the credit agreements restricts our ability to pay dividends and
neither contains 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 repayments of any outstanding borrowings under such credit
agreements. Such events of default include (a) non-payment of credit agreement
debt and interest, (b) noncompliance with the terms of the credit agreement
covenants, (c) default on 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.
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 Eurocurrency rate plus 0.135
percent (applicable margin).
The commitments under the 364-Day Credit Agreement terminate on November 26,
2003. If the credit facility is drawn, any outstanding balance on November 26,
2003 may be converted to a one year term loan at our option. We have agreed to
pay a facility fee of 0.06 percent per annum on the aggregate commitment for the
364-Day Credit Agreement, and we have paid upfront fees of 0.04 percent.
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 Eurocurrency rate plus 0.24
percent (applicable margin). The applicable margin on and after the term loan
conversion is 0.60 percent.
The facility fee and the applicable margin over the Eurocurrency rate on both
the Five-Year Credit Agreement and the 364-Day Credit Agreement are subject to
increase or decrease if our long-term debt ratings change, but the revolving
credit facilities are not subject to termination based on a decrease in our debt
ratings.
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:
At December 31,
---------------
2002
----------------------------------------------------
2003 ............................. $ 310
2004 ............................. 265
2005 ............................. 204
2006 ............................. 145
2007 ............................. 119
Thereafter ....................... 331
----------------------------------------------------
$1,374
====================================================
We have entered into agreements to lease land, equipment and buildings.
Principally all our operating leases have initial terms of up to 25 years, and
some contain renewal options subject to customary conditions. At any time during
the terms of some of our leases, we may at our option purchase the leased assets
for amounts that approximate fair value. In certain instances, to obtain
favorable financing terms from lessors, we used variable interest entities (as
defined in FIN 46) to finance leased property. At December 31, 2002, we were
leasing aircraft, equipment, land and buildings with related liabilities of
approximately $320 million on which we provided residual value guarantees on the
leased assets of approximately $265 million. Pursuant to FIN 46, we must
consolidate all variable interest entities in which we are the primary
beneficiary no later than July 1, 2003. We do not expect that any of our