Honeywell 2002 Annual Report Download - page 264

The Directors' Plan provides for an annual grant to each director of options to
purchase 2,000 shares of common stock at the fair market value on the date of
grant. 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 5.6, 4.9 and 3.9 million in 2002, 2001
and 2000, respectively, at a cost of $173, $185 and $161 million, respectively.
NOTE 21. COMMITMENTS AND CONTINGENCIES
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. On January 15, 2002, the District Court dismissed the
consolidated complaint against four of Honeywell's current and former officers.
The Court has granted plaintiffs' motion for class certification defining the
purported class as all purchasers of Honeywell stock between December 20, 1999
and June 19, 2000.
The parties have agreed to participate in a two day settlement mediation in
April, 2003 in an attempt to resolve the cases without resort to a trial. All
significant discovery in the cases has been stayed pending further order of the
court.
Notwithstanding our agreement to mediate, we believe 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 litigation outcome of these cases, we
expect to prevail if the cases are not resolved through mediation. However, an
adverse litigation 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 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 personal injury
and property damage claims, regulatory approval of cleanup projects, remedial
techniques to be utilized and agreements with other parties.
Although we do not currently possess sufficient information to reasonably
estimate the amounts of liabilities to be recorded upon future completion of
studies, litigation or settlements, and neither the timing nor the amount of the
ultimate costs associated with environmental matters can be determined, they
could be material to our consolidated results of operations. However,
considering our past experience and existing reserves, we do not expect that
these matters will have a material adverse effect on our consolidated financial
position.