Honeywell 2003 Annual Report Download - page 391

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 repayment of any outstanding borrowings under such credit
agreements. Such events of default include: (a) non-payment of credit agreement
debt, interest or fees; (b) non-compliance with the terms of the credit
agreement covenants; (c) cross-default to other debt in certain circumstances;
(d) bankruptcy; and (e) defaults upon obligations under Employee Retirement
Income Security Act. Additionally, each of the banks has the right to terminate
its commitment to lend additional funds or issue additional letters of credit
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 November 26, 2008. We have agreed to pay a facility fee of 0.08 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 Honeywell's option, by (a) an auction bidding procedure; (b) the highest of
the floating base rate publicly announced by Citibank, N.A., 0.5 percent above
the average CD rate, or 0.5 percent above the Federal funds rate; or (c) the
Eurocurrency rate plus 0.22 percent (applicable margin).
The commitments under the 364-Day Credit Agreement terminate on November 24,
2004. If the credit facility is drawn, any outstanding balance on November 24,
2004 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.
Interest on borrowings under the 364-Day Credit Agreement would be determined,
at Honeywell's option, by (a) an auction bidding procedure; (b) the highest of
the floating base rate publicly announced by Citibank, N.A., 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, the applicable margin over the Eurocurrency rate on both the
Five-Year Credit Agreement and the 364-Day Credit Agreement, and the letter of
credit issuance fee in the Five-Year Credit Agreement, are subject to change,
based upon a grid determined by our long-term debt ratings. Neither credit
agreement is subject to termination based upon a decrease in our debt ratings or
a material adverse change.
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,
(Dollars in Millions) 2003
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2004 ......................................................... $ 274
2005 ......................................................... 207
2006 ......................................................... 144
2007 ......................................................... 106
2008 ......................................................... 103
Thereafter ................................................... 208
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$1,042
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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. At December 31, 2003, we were leasing
aircraft on which we provided residual value guarantees on the leased assets of
approximately $24 million. We do not expect that any of our commitments under
the lease agreements will have a material adverse effect on our consolidated
results of operations, financial position or liquidity.
Rent expense was $314, $274 and $321 million in 2003, 2002 and 2001,
respectively.
NOTE 17--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 and
commodity prices, which may adversely affect our operating results and