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HONEYWELL INTERNATIONAL INC (HON)
10-K
Annual report pursuant to section 13 and 15(d)
Filed on 02/25/2005
Filed Period 12/31/2004

Table of contents

  • Page 1
    HONEYWELL INTERNATIONAL INC (HON) 10-K Annual report pursuant to section 13 and 15(d) Filed on 02/25/2005 Filed Period 12/31/2004

  • Page 2
    ....) 07962 (Address of principal executive offices) (Zip Code) Registrant's telephone number, including area code (973)455-2000 Securities registered pursuant to Section 12(b) of the Act: Title of Each Class Name of Each Exchange on Which Registered Common Stock, par value $1 per share* Zero Coupon...

  • Page 3
    ... The aggregate market value of the voting stock held by nonaffiliates of the Registrant was approximately $31.5 billion at June 30, 2004. There were 850,772,327 shares of Common Stock outstanding at January 31, 2005. Documents Incorporated by Reference Part III: Proxy Statement for Annual Meeting of...

  • Page 4
    [THIS PAGE INTENTIONALLY LEFT BLANK]

  • Page 5
    ... 9A. Controls and Procedures 9B. Other Information 10. Directors and Executive Officers of the Registrant 11. Executive Compensation 12. Security Ownership of Certain Beneficial Owners and Management 13. Certain Relationships and Related Transactions 14. Principal Accounting Fees and Services 15...

  • Page 6
    ... manufacturing company, serving customers worldwide with aerospace products and services, control, sensing and security technologies for buildings, homes and industry, turbochargers, automotive products, specialty chemicals, fibers, and electronic and advanced materials. Honeywell was incorporated...

  • Page 7
    ... power units Airborne auxiliary (APUs) power units Jet fuel starters Commercial, regional, business and military aircraft Ground power United Technologies (Pratt & Whitney Canada) United Technologies (Hamilton Sundstrand) Secondary power systems Ground power units Repair, overhaul and spare parts...

  • Page 8
    ... Units Product Classes Environmental control systems Major Products/Services Air management systems: Air conditioning Bleed air Cabin pressure control Air purification and treatment Electrical power systems: Power distribution and control Emergency power generation Repair, overhaul and spare parts...

  • Page 9
    ..., navigation and surveillance systems: Weather radar Navigation & communication radios Air-to-ground telephones Global positioning systems Automatic flight control systems Satellite systems Surveillance systems Integrated systems Flight management systems Cockpit display systems Rockwell Collins...

  • Page 10
    ... Business Units Product Classes Major Products/Services Data management and aircraft performance monitoring systems Vehicle management systems Aircraft information systems Network file servers Wireless network transceivers Satellite TV systems Audio/Video equipment Weather information network...

  • Page 11
    Automatic test equipment EW ATE Avionics ATE Vehicle health Management Boeing USAF Foreign air forces Northrop Grumman Lockheed Control products Radar altimeters Pressure products Air data products Thermal switches Magnetic sensors Military aircraft Missiles, UAVs Commercial applications Ball...

  • Page 12
    ...) Information technology services Logistics and sustainment DoE Dyncorp Local governments ITT Commercial space ground segment systems and services Lockheed Martin Raytheon SAIC The Washington Group United Space Alliance Aircraft Landing Systems Landing systems Wheels and brakes Friction products...

  • Page 13
    ... for homes and buildings Distributors Carrier Indoor air quality products including Contractors zoning, air cleaners, humidification, heat and energy recovery ventilators Retailers Controls plus integrated electronic System integrators systems for burners, boilers and furnaces Commercial customers...

  • Page 14

  • Page 15
    Strategic Business Units Product Classes Major Products/Services Analytical instrumentation Recorders Controllers Critical environment control solutions and services Aftermarket maintenance, repair and upgrade Major Customers/Uses Key Competitors Building Solutions Solutions and services HVAC ...

  • Page 16
    ... Security and safe applications Refrigeration Air conditioning Polyurethane foam Precision cleaning Optical Metalworking Hospitals Medical equipment manufacturers BASF Clarient Eastman Arkema INEOS Fluor Solvay-Solexis Hydrofluoric acid (HF) Anhydrous and aqueous hydrofluoric acid Fluorocarbons...

  • Page 17
    ...-silanes Hydroxylamine Diverse by product type Atotech BASF Solvay-Solexis Electronic chemicals Ultra high-purity HF Inorganic acids Hi-purity solvents Semiconductors Air Products Arch E. Merck Semiconductor materials and services Interconnectdielectrics Interconnect-metals Semiconductors...

  • Page 18
    ... of process, plants and equipment Customer catalyst manufacturing Petroleum, petrochemical, gas processing and chemical industries ABB Lummus Axens Exxon-Mobil Procatalyse Shell/Criterion Stone & Webster Zeochem Transportation Systems Honeywell Turbo Technologies Charge-air systems Turbochargers...

  • Page 19
    ... Wire and cable Antifreeze/coolant Ice-fighter products Windshield washer fluids Waxes, washes and specialty cleaners Auto supply retailers Specialty installers Mass merchandisers Friction Materials Friction materials Aftermarket brake hard parts Disc brake pads and shoes Drum brake linings Brake...

  • Page 20
    ... 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...

  • Page 21
    ..., some of our products compete with the captive component divisions of original equipment manufacturers. International Operations We are engaged in manufacturing, sales, service and research and development mainly in the United States, Europe, Canada, Asia and Latin America. U.S. exports and foreign...

  • Page 22
    ... accounted for 49 percent of total 2004 net sales of Automation and Control Solutions. The principal manufacturing facilities outside the U.S. are in Europe and Mexico, with less significant operations in Asia and Canada. Approximately 11 percent of total 2004 net sales of Specialty Materials...

  • Page 23
    ..., et al. v. Honeywell International Inc., et al., the United States District Court for the District of New Jersey held in May 2003 that a predecessor Honeywell site located in Jersey City, New Jersey constituted an imminent and substantial endangerment and ordered Honeywell to conduct the...

  • Page 24
    ... 1,152 locations consisting of plants, research laboratories, sales offices and other facilities. Our headquarters and administrative complex is located at Morris Township, New Jersey. Our plants are generally located to serve large marketing areas and to provide accessibility to raw materials and...

  • Page 25
    ... leased) Clearwater, FL Phoenix, AZ San Diego, CA Baton Rouge, LA Geismar, LA Mexicali, Mexico Item 3. Legal Proceedings Aerospace South Bend, IN Olathe, KS Minneapolis, MN Plymouth, MN Teterboro, NJ Automation and Control Solutions Northford, CT Freeport, IL Golden Valley, MN Specialty Materials...

  • Page 26
    ... and Chief Executive Officer Aerospace since January 2005. President and Chief Executive Officer Transportation Systems from July 2001 to December 2004. President of Honeywell Turbo Technologies from July 2000 to June 2001. Vice President and General Manager of Engineering Plastics from December...

  • Page 27
    ...,995. The following table summarizes Honeywell's purchases of its common stock, par value $1 per share, for the quarter ending December 31, 2004: Issuer Purchases of Equity Securities (a) (b) (c) Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs (d) Maximum Number (or...

  • Page 28
    ... per share. Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations BUSINESS OVERVIEW This Business Overview provides a summary of Honeywell's four reportable operating segments (Aerospace, Automation and Control Solutions, Specialty Materials and Transportation...

  • Page 29
    ..., radar and surveillance systems; aircraft and airport lighting; management and technical services and advanced systems and instruments); and Aircraft Landing Systems (aircraft wheels and brakes). Aerospace sells its products to original equipment (OE) manufacturers in the commercial air transport...

  • Page 30
    ... • Continuing to invest in sales and marketing resources and new product development capabilities to drive profitable growth. • Integrating Novar plc's Intelligent Building Systems division into our life safety, building controls, security and related service businesses (acquisition of Novar plc...

  • Page 31
    ... charge-air and thermal systems); the Consumer Products Group (car care products including anti-freeze (Prestone®), filters (Fram®), spark plugs (Autolite®), and cleaners, waxes and additives (Holts®)); and Friction Materials (friction materials and related brake system components (Bendix® and...

  • Page 32
    .... For financial reporting purposes, net periodic pension expense (income) is calculated based upon a number of actuarial assumptions including a discount rate for plan obligations and an expected rate of return on plan assets. We consider current market conditions, including changes in investment...

  • Page 33
    ... any contributions to our U.S. pension plans for the foreseeable future. Changes in net periodic pension expense may occur in the future due to changes in our expected rate of return on plan assets and discount rate resulting from economic events. The following table highlights the sensitivity of...

  • Page 34
    ... sales incentives described above is capitalized because the selection of our aircraft wheel and braking system hardware and auxiliary power units for installation on commercial aircraft results in the creation of future revenues and cash flows through aftermarket sales to fulfill long-term product...

  • Page 35
    ... associated with free and discounted products as cost of goods sold and the amortization expense associated with product credits and upfront cash payments as a reduction of sales. We regularly evaluate the recoverablitity of capitalized amounts whenever events or changes in circumstances indicate...

  • Page 36
    ... pretax gain on the dispositions of certain Specialty Materials (Engineering Plastics, Rudolstadt and Metglas) and Aerospace (Honeywell Aerospace Defense Services) businesses. The dispositions of these businesses did not materially impact net sales and segment profit in 2003 compared with 2002. 23

  • Page 37
    ..., plant and equipment of businesses in our Specialty Materials and Automation and Control Solutions reportable segments and of our Friction Materials business. See the repositioning and other charges section of this MD&A for further details. Equity in (Income) Loss of Affiliated Companies 2004...

  • Page 38
    ...percent due in part to tax benefits from export sales, favorable tax audit settlements and foreign tax planning strategies. The effective tax rate in 2003 also includes tax benefits expected to be realized as a result of the redesignation of our Friction Materials business from held for sale to held...

  • Page 39
    ... pension expense and lower sales of higher-margin products and services, principally in our Aerospace and Automation and Control Solutions reportable segments. Review of Business Segments 2004 2003 (Dollars in millions) 2002 Net Sales Aerospace Automation and Control Solutions Specialty Materials...

  • Page 40
    ... equipment (ground proximity warning systems) to meet new regulatory standards. Air transport aftermarket sales were adversely impacted in 2003 by a decrease in global flying hours of 1 percent and the financial problems being experienced by many of the commercial airlines. The global flying hours...

  • Page 41
    ... new programs and an increase in spending for information technology systems. Aerospace segment profit in 2003 decreased by 7 percent compared with 2002 due mainly to lower sales of commercial original equipment and higher-margin commercial aftermarket spare parts. Trends which may impact Aerospace...

  • Page 42
    ... in sales and marketing initiatives, mainly in our Automation and Control Products and Building Solutions businesses, respectively. Segment profit was also adversely impacted in 2003 by pricing pressures mainly in our Automation and Control Products and Process Solutions businesses. Trends...

  • Page 43
    ...our Fluorocarbons and Nylon System businesses. Specialty Materials segment profit in 2003 increased by 51 percent compared with 2002 due mainly to the impact of the prior year write-down of property, plant and equipment in several businesses, the benefits of cost actions including synergies from the...

  • Page 44
    ...for severance, were returned to income in 2003, due to fewer employee separations than originally planned associated with certain prior repositioning actions, resulting in reduced severance liabilities in our Automation and Control Solutions, Aerospace and Specialty Materials reportable segments. 31

  • Page 45

  • Page 46
    ... in our Aerospace, Automation and Control Solutions and Specialty Materials reportable segments. Our 2004 repositioning actions are expected to generate incremental pretax savings of approximately $75 million in 2005 compared with 2004 principally from planned workforce reductions. Cash expenditures...

  • Page 47
    ... the value of certain equity investments of $15 million. The following tables provide details of the pretax impact of total net repositioning and other charges by reportable segment. Aerospace 2004 2003 (Dollars in millions) 2002 Net repositioning charge Customer claims and settlements of contract...

  • Page 48
    Specialty Materials 2004 2003 (Dollars in millions) 2002 Net repositioning charge Other probable and reasonably estimable legal and environmental liabilities Business impairment charges Customer claims and settlements of contract liabilities Write-offs of receivables, inventories and other assets ...

  • Page 49
    Cash provided by operating activities increased by $54 million during 2004 compared with 2003 due primarily to increased cash earnings and a decrease in voluntary U.S. pension contributions of 34

  • Page 50
    ... by an increase in net asbestos related liability payments of $558 million as the prior year included $472 million in cash received from Equitas related to a comprehensive policy buy-back settlement, and an increase in working capital (receivables, inventories and accounts payable), usage of $268...

  • Page 51
    ... we expect it to impair, our access to the commercial paper markets. Commercial paper notes are sold at a discount and have a maturity of not more than 270 days from date of issuance. Borrowings under the commercial paper program are available for general corporate purposes as well as for financing...

  • Page 52
    ... to meet our future cash needs. Our available cash, committed credit lines, access to the public debt and equity markets using debt and equity securities, including commercial paper, as well as our ability to sell trade accounts receivables, provide additional sources of short-term and long-term...

  • Page 53
    ... of pending claims. Projecting future events is subject to many uncertainties that could cause asbestos liabilities to be higher or lower than those projected and recorded. There is no assurance that NARCO or Bendix insurance recoveries will be timely, that a NARCO plan of reorganization will...

  • Page 54
    ... progress or as additional technical or legal information becomes available. Given the uncertainties regarding the status of laws, regulations, enforcement policies, the impact of other potentially responsible parties, technology and information related to individual sites, we do not believe it is...

  • Page 55
    ... 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...

  • Page 56
    ... in the fair value or cash flows of underlying hedged foreign currency transactions. (3) Changes in the fair value of forward commodity contracts are offset by changes in the cash flows of underlying hedged commodity transactions. The above discussion of our procedures to monitor market risk and the...

  • Page 57
    ... at the customer's option. Inflation Highly competitive market conditions have minimized inflation's impact on the selling prices of our products and the costs of our purchased materials. Except for the costs of certain raw materials in our Specialty Materials reportable segment (See Business...

  • Page 58
    ...608 4,666 22,274 Costs, expenses and other Cost of products sold Cost of services sold Selling, general and administrative expenses (Gain) loss on sale of non-strategic businesses Asbestos related litigation charges, net of insurance Business impairment charges Equity in (income) loss of affiliated...

  • Page 59
    ... assets: Cash and cash equivalents Accounts, notes and other receivables Inventories Deferred income taxes Other current assets Total current assets Investments and long-term receivables Property, plant and equipment-net Goodwill Other intangible assets-net Insurance recoveries for asbestos related...

  • Page 60

  • Page 61
    ... (income) Pension contributions-U.S. plans Other postretirement benefit payments Other Changes in assets and liabilities, net of the effects of acquisitions and divestitures: Accounts, notes and other receivables Inventories Other current assets Accounts payable Accrued liabilities Net cash provided...

  • Page 62
    Cash and cash equivalents at end of year $ 3,586 $2,950 $2,021 The Notes to Financial Statements are an integral part of this statement. 45

  • Page 63
    ... pension liability adjustment Change in fair value of effective cash flow hedges Nonowner changes in shareowners' equity Common stock issued for employee savings and option plans (including related tax benefits of $19) Repurchases of common stock Cash dividends on common stock ($0.75 per share...

  • Page 64

  • Page 65
    ... aerospace products and services, control, sensing and security technologies for buildings, homes and industry, turbochargers, automotive products, specialty chemicals, fibers, and electronic and advanced materials. The following is a description of the significant accounting policies of Honeywell...

  • Page 66
    ... sales incentives described above is capitalized because the selection of our aircraft wheel and braking system hardware and auxiliary power units for installation on commercial aircraft results in the creation of future revenues and cash flows through aftermarket sales to fulfill long-term product...

  • Page 67
    ... resolution values and dismissal rates. We have not accrued for future Bendix asbestos related claims as we cannot reasonably predict how many additional claims may be brought against us, the allegations in such claims or their probable outcomes and resulting settlement values in the tort system. We...

  • Page 68
    ...2003 2002 Net income (loss), as reported Deduct: Total stock-based employee compensation cost determined under fair value method for fixed stock option plans, net of related tax effects Pro forma net income (loss) Earnings (loss) per share of common stock: Basic-as reported Basic-pro forma Earnings...

  • Page 69

  • Page 70
    ... hedged items impact earnings. Changes in the fair value of derivatives not designated as hedges and the ineffective portion of cash flow hedges are recorded in current earnings. Transfers of Financial Instruments-Sales, transfers and securitization of financial instruments are accounted for under...

  • Page 71
    ...'s useful life. SFAS No. 143 primarily impacts our accounting for costs associated with the future retirement of nuclear fuel conversion facilities in our Specialty Materials reportable segment. Upon adoption on January 1, 2003, we recorded an increase in property, plant and equipment, net of $16...

  • Page 72
    ...2005 and to fund the acquisition with existing cash resources. Novar is a UK listed holding company which operates globally in the electrical, electronic and control products, the aluminum extrusion and the security printing businesses and had reported 2003 revenues of $2.7 billion. We do not intend...

  • Page 73
    ... 877 13 15 $3,059 The following table summarizes the pretax impact of total net repositioning and other charges by reportable segment. Years Ended December 31, 2004 2003 2002 Aerospace Automation and Control Solutions Specialty Materials Transportation Systems Corporate $ (5) 28 90 147 515 $775...

  • Page 74
    ... accruals, primarily for severance, were returned to income in 2004, due to fewer employee separations than originally planned associated with certain prior repositioning actions, resulting in reduced severance liabilities principally in our Automation and Control Solutions reportable segment. 54

  • Page 75
    ... planned associated with certain prior repositioning actions and higher than expected voluntary employee attrition, resulting in reduced severance liabilities in our Aerospace, Automation and Control Solutions and Specialty Materials reportable segments. The following table summarizes the status...

  • Page 76
    ..., no adjustment to the carrying value of Friction Materials' assets was required based on a current reassessment of the fair value of those assets. Such reassessment of the fair value of the property, plant and equipment was performed using discounted estimated future cash flows of the business. The...

  • Page 77
    ... in cash on the sales of these businesses. The sales of these businesses did not materially impact net sales and segment profit in 2003 compared with 2002. The after-tax loss on the sale of our Specialty Materials' businesses resulted mainly from tax benefits associated with prior capital losses...

  • Page 78
    ... average interest rate on short-term borrowings and commercial paper outstanding at December 31, 2004 and 2003 was 2.81 and 6.81 percent, respectively. Note 7-Income Taxes Income (loss) before taxes and cumulative effect of accounting change Years Ended December 31, 2004 2003 2002 United States...

  • Page 79
    ... earnings over (under) U.S. tax rate (1) Asset basis differences Nondeductible amortization State income taxes (1) Tax benefits on export sales ESOP dividend tax benefit Tax credits Equity income Redesignation of Friction Materials business from held for sale to held and used All other items-net 35...

  • Page 80
    ... to future income tax benefits and payables are as follows: Property, plant and equipment basis differences Postretirement benefits other than pensions and postemployment benefits Investment and other asset basis differences Other accrued items Net operating losses Tax credits Undistributed earnings...

  • Page 81
    ... benefit has no effect on deferred tax assets and liabilities existing at the enactment date. Rather, the impact of this deduction will be reported in the period in which the deduction is claimed on our federal income tax return. We are currently assessing the details of the Act and the net...

  • Page 82
    ...No credit losses were incurred during those years. Note 10-Inventories December 31, 2004 2003 Raw materials Work in process Finished products $1,153 779 1,382 3,314 $ 972 802 1,412 3,186 (20) (126) $3,040 Less- Progress payments Reduction to LIFO cost basis (24) (130) $3,160 Inventories valued...

  • Page 83
    December 31, 2004 2003 Investments Long-term receivables $305 237 $542 $181 388 $569 62

  • Page 84
    ...years ended December 31, 2004 and 2003 by reportable segment are as follows: December 31, 2003 Currency Translation Adjustment December 31, 2004 Acquisitions Divestitures Aerospace Automation and Control Solutions Specialty Materials Transportation Systems $ 1,641 2,832 781 535 5,789 $ 64 162...

  • Page 85
    ... years approximates $75 million. Note 14-Accrued Liabilities December 31, 2004 2003 Compensation and benefit costs Customer advances Income taxes Environmental costs Asbestos related liabilities Severance Product warranties and performance guarantees Other $ 538 545 216 267 744 97 270 2,294...

  • Page 86
    ... (including capitalized leases), 0.53%-15.69%, maturing at various dates through 2020 $ - 368 100 500 350 200 200 100 252 1,000 500 66 216 51 166 $ 750 339 100 500 350 200 200 100 267 1,000 500 66 216 51 322 $4,961 $4,069 The schedule of principal payments on long-term debt is as follows: At...

  • Page 87

  • Page 88
    ... letter of credit issuance fee in both Five-Year Credit Agreements, 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...

  • Page 89
    ... 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...

  • Page 90
    ... rate debt. Our interest rate swaps mature through 2007. Fair Value of Financial Instruments-The carrying value of cash and cash equivalents, trade accounts and notes receivables, payables, commercial paper and short-term borrowings contained in the Consolidated Balance Sheet approximates fair value...

  • Page 91
    ...Changes are as follows: December 31, 2004 2003 2002 Cumulative foreign exchange translation adjustments $ 489 $ 138 Fair value of effective cash flow hedges 8 17 Minimum pension liability (359) (344) $ 138 $(189) $ (413) 17 (713) $(1,109) Note 20-Stock-Based Compensation Plans We have stock plans...

  • Page 92

  • Page 93
    ... grants under the terms of our stock option plans at December 31, 2004. 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...

  • Page 94
    ... director receives a one-time grant of 3,000 shares of common stock, subject to specific restrictions. The Directors' Plan also provides for an annual grant to each director of options to purchase 5,000 shares of common stock at the fair market value on the date of grant. We have set aside 450,000...

  • Page 95
    ...former officers and directors are defendants in a purported class action lawsuit filed in the United States District Court for the District of New Jersey. The complaint principally alleges that the defendants breached their fiduciary duties to participants in the Honeywell Savings and Ownership Plan...

  • Page 96
    ..., et al. v. Honeywell International Inc., et al., the United States District Court for the District of New Jersey held in May 2003 that a predecessor Honeywell site located in Jersey City, New Jersey constituted an imminent and substantial endangerment and ordered Honeywell to conduct the...

  • Page 97
    ... a plan. As a result of negotiations with counsel representing NARCO related asbestos claimants regarding settlement of all pending and potential NARCO related asbestos claims against Honeywell, we have reached definitive agreements with approximately 260,000 claimants, which represents in excess of...

  • Page 98
    ... by a large number of insurance policies written by dozens of insurance companies in both the domestic insurance market and the London excess market. At December 31, 2004, a significant portion of this coverage is with insurance companies with whom we have agreements to pay full policy limits based...

  • Page 99
    ... our probable insurance recoveries in light of any changes to the projected liability or other developments that may impact insurance recoveries. Friction Products-Honeywell's Bendix Friction Materials (Bendix) business manufactured automotive brake pads that contained chrysotile asbestos in an...

  • Page 100
    ... pending Bendix related asbestos claims as well as claims which may be filed against us in the future. This coverage is provided by a large number of insurance policies written by dozens of insurance companies in both the domestic insurance market and the London excess market. Although Honeywell has...

  • Page 101
    ... cash flows in any fiscal year. No assurances can be given, however, that the Variable Claims Factors will not substantially change. NARCO and Bendix asbestos related balances are included in the following balance sheet accounts: December 31, 2004 2003 Other current assets Insurance recoveries...

  • Page 102

  • Page 103
    ... could cause us to pay damage awards or settlements (or become subject to equitable remedies) that could have a material adverse effect on our results of operations or operating cash flows in the periods recognized or paid. Note 22-Pension and Other Postretirement Benefits We sponsor both funded...

  • Page 104
    ... plans that provide health care benefits and life insurance coverage to eligible retirees. Our retiree medical plans mainly cover U.S. employees who retire with pension eligibility for hospital, professional and other medical services. All non-union hourly and salaried employees joining Honeywell...

  • Page 105
    ...) Benefits paid Other Fair value of plan assets at end of year Funded status of plans Unrecognized net obligation at transition Unrecognized net loss Unrecognized prior service cost (credit) Net amount recognized Amounts recognized in Consolidated Balance Sheet consist of: Prepaid pension benefit...

  • Page 106
    (2) Excludes Non-U.S. plans of $40 and $23 million in 2004 and 2003, respectively. (3) Included in Other Liabilities-Non-Current on Consolidated Balance Sheet. 80

  • Page 107
    ...include the following components: Pension Benefits Years Ended December 31, 2004 2003 2002 Service cost Interest cost Expected return on plan assets Amortization of transition asset Amortization of prior service cost Recognition of actuarial losses Net periodic benefit cost (income) Settlements and...

  • Page 108
    ... the discount rate, we recorded a non-cash adjustment to equity through accumulated other nonowner changes of $606 million ($956 million on a pretax basis) which increased the additional minimum pension liability. Under SFAS No. 87, for our U.S. pension plans, we use the market-related value of plan...

  • Page 109
    ... over varying longterm periods combined with current market conditions and broad asset mix considerations. The expected rate of return is a long-term assumption and generally does not change annually. Our general funding policy for qualified pension plans is to contribute amounts at least sufficient...

  • Page 110
    ... units (SBUs) serving customers worldwide with aerospace products and services, control, sensing and security technologies for buildings, homes and industry, automotive products and chemicals. Segment information is consistent with how management reviews the businesses, makes investing and resource...

  • Page 111
    ...); Aerospace Electronic Systems (flight safety, communications, navigation, radar and surveillance systems; aircraft and airport lighting; management and technical services and advanced systems and instruments); and Aircraft Landing Systems (aircraft wheels and brakes). • Automation and Control...

  • Page 112
    HONEYWELL INTERNATIONAL INC. NOTES TO FINANCIAL STATEMENTS-(Continued) (Dollars in millions, except per share amounts) Years Ended December 31, 2004 2003 2002 Net sales Aerospace Automation and Control Solutions Specialty Materials Transportation Systems Corporate $ 9,748 8,031 3,497 4,323 2 $25,...

  • Page 113

  • Page 114
    ... before taxes and cumulative effect of accounting change is as follows: Years Ended December 31, 2004 2003 2002 Segment profit Gain (loss) on sale of non-strategic businesses Asbestos related litigation charges, net of insurance Business impairment charges Repositioning and other charges(1) Pension...

  • Page 115
    Non-cash investing and financing activities: Common stock contributed to U.S. pension plans Common stock contributed to U.S. savings plans Debt assumed in the purchase of leased assets Investment securities received in connection with sale of BCVS business 87 - 151 - - - 173 267 - 700 173 - 250

  • Page 116
    ... sales Gross profit Income before cumulative effect of accounting change Net income Earnings per share- basic: Income before cumulative effect of accounting change Net income Earnings per share- assuming dilution: Income before cumulative effect of accounting change Net income Dividends paid Market...

  • Page 117
    ... million, or $0.01 per share, on the sale of our Engineering Plastics business. (13) Includes an after-tax gain of $15 million, or $0.02 per share, related to the settlement of a patent infringement lawsuit. (14) Includes a $30 million provision for environmental, net repositioning and other charges...

  • Page 118
    ... of the Company's internal control over financial reporting based on our audit. We conducted our audit of internal control over financial reporting in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform...

  • Page 119
    ... external purposes in accordance with generally accepted accounting principles. A company's internal control over financial reporting includes those policies and procedures that (i) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and...

  • Page 120
    ..., the Chief Executive Officer and the Chief Financial Officer concluded that such disclosure controls and procedures were effective as of the end of the period covered by this Annual Report on Form 10-K in alerting them on a timely basis to material information relating to Honeywell required to be...

  • Page 121
    ... that term is defined in applicable SEC Rules and NYSE listing standards. Honeywell's Code of Business Conduct is available, free of charge, on our website under the heading "Investor Relations" (see "Corporate Governance"), or by writing to Honeywell, 101 Columbia Road, Morris Township, New Jersey...

  • Page 122

  • Page 123
    ...under Honeywell's U.S. tax-qualified savings plan if the Internal Revenue Code limitations on compensation and contributions did not apply. The company matching contribution is credited to participants' accounts in the form of notional shares of Honeywell common stock. Additional notional shares are...

  • Page 124
    ... information for the following plans and arrangements: • Employee benefit plans of Honeywell intended to meet the requirements of Section 401(a) of the Internal Revenue Code and a small number of foreign employee benefit plans that are similar to such Section 401(a) plans. • Equity compensation...

  • Page 125
    ... Accounts 101 All other financial statement schedules have been omitted because they are not applicable to us or the required information is shown in the consolidated financial statements or notes thereto. (a)(3.) Exhibits See the Exhibit Index on pages 98 through 100 of this Annual Report...

  • Page 126
    ...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: Name Name * David M. Cote Chairman of the Board, Chief Executive Officer...

  • Page 127
    ...Honeywell's Proxy Statement, dated March 10, 1994, filed pursuant to Rule 14a-b of the Securities and Exchange Act of 1934 , and amended by Exhibit 10.5 to Honeywell's Form 10-Q for the quarter ended June 30, 1999) Supplemental Non-Qualified Savings Plan for Highly Compensated Employees of Honeywell...

  • Page 128
    ... and co-book managers (filed herewith) Five-Year Credit Agreement dated as of November 26, 2003 among Honeywell, the initial lenders named therein, Citibank, N.A., as administrative agent, JPMorgan Chase Bank, as syndication agent, and Deutsche Bank AG, New York Branch, Bank of America, N.A., and...

  • Page 129
    ...Plan for Corporate Staff Employees (Involuntary Termination Following a Change in Control), as amended and restated (incorporated by reference to Exhibit 10.19 to Honeywell's Form 10-K for the year ended December 31, 2002) Employment Agreement dated... of Principal Financial Officer Pursuant to 18 ...

  • Page 130
    HONEYWELL INTERNATIONAL INC SCHEDULE II-VALUATION AND QUALIFYING ACCOUNTS Three Years Ended December 31, 2004 (In millions) Allowance for Doubtful Accounts...) 150 100 (113) $ 137 (1) Represents uncollectible accounts written off, less recoveries, translation adjustments and reserves acquired. 101

  • Page 131

  • Page 132
    ... OF AMERICA, N.A., BARCLAYS BANK PLC, DEUTSCHE BANK AG NEW YORK BRANCH and UBS SECURITIES LLC, as documentation agents, and CITIGROUP GLOBAL MARKETS INC. and J.P. MORGAN SECURITIES INC., as joint lead arrangers and co-book managers, hereby agree as follows: ARTICLE I DEFINITIONS AND ACCOUNTING TERMS...

  • Page 133
    ...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 Letter of Credit Rate" means, as of any date, a percentage per annum determined by reference to the Public Debt Rating in...

  • Page 134
    ... Available Amount of the Letters of Credit exceeds 50% of the aggregate Revolving Credit Commitments, a percentage per annum determined by reference to the Public Debt Rating in effect on such date as set forth below Public Debt Rating Applicable S&P/Moody's Utilization Fee Level 1 ------A+ or A1...

  • Page 135
    ...) 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...

  • Page 136
    ... "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...

  • Page 137
    ...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...

  • Page 138
    ... 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...

  • Page 139
    ... within the following 30 days, and the contributing sponsor, as defined in Section 4001(a)(13) of ERISA, of such Plan is required under Section 4043(b)(3) of ERISA (taking into account Section 4043(b)(2) of ERISA) to notify the PBGC that the event is about to occur; (b) the application for a minimum...

  • Page 140
    ...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...

  • Page 141
    ...) having a term equal to such Interest Period. "Events of Default" has the meaning specified in Section 6.01. "Facility" means the Revolving Credit Facility or the Letter of Credit Facility. "Federal Funds Rate" means, for any period, a fluctuating interest rate per annum equal for each day during...

  • Page 142
    ... 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...

  • Page 143
    ... an Issuing Bank and notifies the Agent of its Applicable Lending Office (which information shall be recorded by the Agent in the Register), for so long as the Initial Issuing Bank or Eligible Assignee, as the case may be, shall have a Letter of Credit Commitment. "L/C Cash Deposit Account" means an...

  • Page 144
    ..., 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...

  • Page 145
    ... 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. "Note" means a Revolving Credit Note or a Competitive Bid Note...

  • Page 146
    ...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 Letter of Credit Rate, the Applicable Margin, the Applicable Utilization Fee and the...

  • Page 147
    ... 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...

  • Page 148
    ... 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...

  • Page 149
    ... 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 AND LETTERS OF CREDIT SECTION 2.01. The Revolving Credit Advances and Letters of Credit. (a) Revolving Credit...

  • Page 150
    ... Borrower remains obligated for the reimbursement of any drawings under such Letters of Credit under the terms of this Agreement. No Letter of Credit shall have an expiration date (including all rights of the applicable Borrower or the beneficiary to require renewal) of later than the Termination...

  • Page 151
    ... 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...

  • Page 152
    ... 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...

  • Page 153
    ... 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...

  • Page 154
    ...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...

  • Page 155
    ... 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...

  • Page 156
    ... 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 25

  • Page 157
    ...Letter of Credit, (C) expiration date of such Letter of Credit (which shall not be later than the Termination Date), (D) name and address of the beneficiary of such Letter of Credit and (E) form of such Letter of Credit, and shall be accompanied by such customary application and agreement for letter...

  • Page 158
    ...the Agent. Upon written demand by such Issuing Bank, with a copy of such demand to the Agent and the Company, each Lender shall pay to the Agent such Lender's Ratable Share of such outstanding Revolving Credit Advance, by making available for the account of its Applicable Lending Office to the Agent...

  • Page 159
    ...to time, payable in arrears quarterly on the last day of each March, June, September and December, commencing December 31, 2004, and on the Termination Date. (b) Letter of Credit Fees. (i) Each Borrower shall pay to the Agent for the account of each Lender a fee on such Lender's Ratable Share of the...

  • Page 160
    ... after the Termination Date payable upon demand; provided that the Applicable Letter of Credit Rate shall be 1% above the Applicable Letter of Credit Rate in effect upon the occurrence and during the continuation of an Event of Default if the Borrowers are required to pay default interest pursuant...

  • Page 161
    ... Lender's Commitments under this Section 2.06(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 accrued facility fees or Letter of Credit fees payable to such Lender pursuant to the provisions...

  • Page 162
    ... or request the issuance of a Letter of Credit under this Agreement shall be suspended for a period of 60 calendar days, except for Base Rate Advances and Eurocurrency Rate Advances having an Interest Period ending not later than 90 calendar days after such Change of Control. A notice of termination...

  • Page 163
    ...any Letter of Credit Application, any Letter of Credit or any other agreement or instrument relating thereto (all of the foregoing being, collectively, the "L/C Related Documents"); (ii) any change in the time, manner or place of payment of any Letter of Credit; (iii) the existence of any claim, set...

  • Page 164
    ...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...

  • Page 165
    ... 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...

  • Page 166
    ... such LIBO Rate Advances owing by such Borrower, on the last day of the Interest Periods relating to such Advances, in an aggregate amount (or deposit an amount in the L/C Cash Deposit Account) sufficient to reduce such sum (calculated on the basis of the Available Amount of Letters of Credit being...

  • Page 167
    ... 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...

  • Page 168
    ... 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...

  • Page 169
    ... 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, facility fees or Letter of Credit fees are payable. Each determination by the Agent of an interest rate hereunder shall...

  • Page 170
    ... 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...

  • Page 171
    ... or reduction in the rate of, withholding tax in such jurisdiction, if available to such Lender. If the forms provided by a Lender at the time such Lender first becomes a party to this Agreement or changes its Applicable Lending Office indicate a United States interest withholding tax rate in excess...

  • Page 172
    ...2.11, and any indemnification for Taxes under this Section 2.14) 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 9.06(a) for...

  • Page 173
    ...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. 42

  • Page 174
    ... the initial Borrowing hereunder is subject to the following conditions precedent: (a) The Effective Date shall have occurred. (b) The Company shall have terminated the commitments and paid in full all outstanding obligations under the 364-Day Credit Agreement dated as of November 26, 2003 among the...

  • Page 175
    ... 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...

  • Page 176
    ... 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...

  • Page 177
    .... 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...

  • Page 178
    ... or provided for in such balance sheet or the notes thereto as at such date. No Material Adverse Change has occurred since December 31, 2003, except as otherwise publicly disclosed prior to the date hereof. (f) There is no action, suit, investigation, litigation or proceeding, including, without...

  • Page 179
    ...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...

  • Page 180
    ... 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...

  • Page 181
    ...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...

  • Page 182
    ... 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...

  • Page 183
    ... 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...

  • Page 184
    ... (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...

  • Page 185
    ... 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...

  • Page 186
    ... 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...

  • Page 187
    ... 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...

  • Page 188
    ... 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...

  • Page 189
    ... upon such demand the Company will, (a) pay to the Agent on behalf of the Lenders in same day funds at the Agent's office designated in such demand, for deposit in the L/C Cash Deposit Account, an amount equal to the aggregate Available Amount of all Letters of Credit then outstanding or (b) make...

  • Page 190
    ...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...

  • Page 191
    ... 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...

  • Page 192
    ...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...

  • Page 193
    ... 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....for its Ratable Share of any costs and expenses (including, without limitation, fees and expenses of counsel) payable by the Company under Section 9.04...

  • Page 194
    ...principal, interest and all other amounts payable hereunder and under the Notes. Each of the Agent and each Issuing Bank agrees to return to the Lenders their respective Ratable Shares of any amounts paid under this Section 8.05 that are subsequently reimbursed by the Company or any Borrower. In the...

  • Page 195
    ... 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...

  • Page 196
    ...telecopier. Each Lender agrees (i) to notify the Agent in writing of such Lender's e-mail address(es) to which a Notice may be sent by electronic transmission (including by electronic communication) on or before the date such Lender becomes a party to this Agreement (and from time to time thereafter...

  • Page 197
    ...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...

  • Page 198
    ... 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 and (y) Unissued Letter of Credit Commitment of the assigning Lender being assigned...

  • Page 199
    ... 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, or the perfection or priority...

  • Page 200
    ... 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...

  • Page 201
    ... (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...

  • Page 202
    ... Section 2.12 or Section 2.14, 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 9.10. Governing Law. This Agreement and the Notes shall be governed by, and construed...

  • Page 203
    ... 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...

  • Page 204
    ...the terms of such Letter of Credit. SECTION 9.17. Patriot Act Notice. Each Lender hereby notifies the Company that pursuant to the requirements of the USA Patriot Act (Title III of Pub. L. 107-56 (signed into law October 26, 2001)) (the "Act"), it is required to obtain, verify and record information...

  • Page 205
    ... 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: Title: /s/ John J. Tus Treasurer CITICORP USA, INC., as Agent By: Title: LETTER OF CREDIT COMMITMENT 66,666,667 CITIBANK...

  • Page 206
    ... President DOCUMENTATION AGENTS 75,000,000.00 BANK OF AMERICA, N.A. By: Title: $75,000,000.00 John W. Pocalyko Managing Director BARCLAYS BANK PLC By: Title: /s/ Nicholas A. Bell Director $75,000,000.00 DEUTSCHE BANK AG NEW YORK BRANCH By: Title: By: Title: /s/ Joel Makowsky Director /s/ Oliver...

  • Page 207
    ... Senior Vice President $50,000,000.00 WACHOVIA BANK, N.A. By: Title: Robert G. McGill, Jr. Director MANAGING AGENTS 34,000,000.00 ING CAPITAL LLC By: Title: $34,000,000.00 /s/ Willem Pijpers Managing Director THE NORTHERN TRUST COMPANY By: Title: /s/ Ashish S. Bhagwat Vice President 76

  • Page 208
    LENDERS ------$20,000,000.00 CREDIT INDUSTRIEL ET COMMERCIAL By: Title: $20,000,000.00 /s/ Eric Dulot Vice President MIZUHO CORPORATE BANK, LTD. By: /s/ Bertram H. Tang Title: Senior Vice President & Team Leader ROYAL BANK OF CANADA By: Title: /s/ Howard Lee Authorized Signatory $20,000,000.00 ...

  • Page 209
    ...SANTANDER CENTRAL HISPANO, S.A., NEW YORK BRANCH By: Title: By: Title: /s/ Luis Pastor Vice President /s/ Dom Rodriguez Vice President $12,000,000.00 DANSKE BANK A/S, CAYMAN ISLANDS BRANCH By: Title: By: Title: /s/ Angelor J. Balestrieri Vice President /s/ John A. O'Neill Assistant General Manager...

  • Page 210
    ...Credit Industriel et Commercial 520 Madison Avenue New York, NY 10022 Attn: Eric Dulot Phone: (212) 715-4430 -------------------------------------- --------------------------------------EURODOLLAR LENDING OFFICE -----------------------------------------208 South LaSalle Street Suite...

  • Page 211
    ... --------------------------------------- -----------------------------------------Deutsche Bank AG New York Branch 90 Hudson Street, Floor 1 90 Hudson Street, Floor 1 Jersey City, NJ 07302 Jersey City, NJ 07302 Attn: Joe Cusmai Attn: Joe Cusmai Phone: (201) 593-2202 Phone: (201) 593...

  • Page 212
    ... --------------------------------------- -----------------------------------------Sumitomo Mitsui Banking Corporation 277 Park Avenue 277 Park Avenue New York, NY 10172 New York, NY 10172 Attn: Edward McColly Attn: Edward McColly Phone: (212) 224-4139 Phone: (212) 224-4139...

  • Page 213
    SCHEDULE 2.01(b) EXISTING LETTERS OF CREDIT None

  • Page 214
    ... hearing on the terms of the settlement is scheduled for August 16, 2004. Although members of the class may opt out of the settlement, Honeywell believes that any such claims would be fully insured. ERISA Class Action Lawsuit -- Honeywell and several of its current and former officers and directors...

  • Page 215
    ..., et al. v. Honeywell International Inc., et al., the United States District Court for the District of New Jersey held in May 2003 that a predecessor Honeywell site located in Jersey City, New Jersey constituted an imminent and substantial endangerment and ordered Honeywell to conduct the...

  • Page 216
    ... impact on our consolidated results of operations and operating cash flows in the periods recognized or paid. However, we do not expect that this matter will have a material adverse effect on our consolidated financial position. Asbestos Matters -- Like many other industrial companies, Honeywell...

  • Page 217
    ...part of its ongoing settlement negotiations, Honeywell has reached agreement in principle with the representative for future NARCO claimants to cap its annual contributions to the trust with respect to future claims at a level that would not have a material impact on Honeywell's operating cash flows...

  • Page 218
    ... by a large number of insurance policies written by dozens of insurance companies in both the domestic insurance market and the London excess market. At June 30, 2004, a significant portion of this coverage is with insurance companies with whom we have agreements to pay full policy limits based on...

  • Page 219
    ... our probable insurance recoveries in light of any changes to the projected liability or other developments that may impact insurance recoveries. Friction Products -- Honeywell's Bendix Friction Materials (Bendix) business manufactured automotive brake pads that contained chrysotile asbestos in an...

  • Page 220
    ... pending Bendix related asbestos claims as well as claims which may be filed against us in the future. This coverage is provided by a large number of insurance policies written by dozens of insurance companies in both the domestic insurance market and the London excess market. Although Honeywell has...

  • Page 221
    ...If the rate and types of claims filed, the average indemnity cost of such claims and the period of time over which claim settlements are paid (collectively, the "Variable Claims Factors") do not substantially change, Honeywell would not expect future Bendix related asbestos claims to have a material...

  • Page 222
    ... _____, 200_ FOR VALUE RECEIVED, the undersigned, [NAME OF BORROWER], a _____ corporation (the "Borrower"), HEREBY PROMISES TO PAY to the order of _____ (the "Lender") for the account of its Applicable Lending Office on the Termination Date (each as defined in the Credit Agreement referred to below...

  • Page 223
    ... hereby waives presentment, demand, protest and notice of any kind. No failure to exercise, and no delay in exercising, any rights hereunder on the part of the holder hereof shall operate as a waiver of such rights. This promissory note shall be governed by, and construed in accordance with the laws...

  • Page 224
    ADVANCES AND PAYMENTS OF PRINCIPAL Date Type of Amount of Interest Rate Amount of Unpaid Principal Notation Advance Advance in Principal Paid Balance Made By Relevant Currency or Prepaid

  • Page 225
    ... BID PROMISSORY NOTE Dated: _____, 200_ FOR VALUE RECEIVED, the undersigned, [NAME OF BORROWER], a _____ corporation (the "Borrower"), HEREBY PROMISES TO PAY to the order of _____ (the "Lender") for the account of its Applicable Lending Office (as defined in the Five Year Credit Agreement dated...

  • Page 226
    ..., [Name of Borrower], refers to the Five Year Credit Agreement, dated as of October 22, 2004 (as amended or modified from time to time, the "Credit Agreement", the terms defined therein being used herein as therein defined), among the undersigned, certain Lenders parties thereto, and Citicorp USA...

  • Page 227
    ... to this Revolving Credit Borrowing set forth in Section 3.04 of the Credit Agreement have been satisfied and the applicable statements contained therein are true on the date hereof, and will be true on the date of the Proposed Revolving Credit Borrowing. Very truly yours, [NAME OF BORROWER] By...

  • Page 228
    ... Rate Basis Day Count Convention Interest Payment Date(s) [Currency] Borrower's Account Location The undersigned hereby certifies that the conditions precedent to this Competitive Bid Borrowing set forth in Section 3.05 of the Credit Agreement have been satisfied and the applicable statements...

  • Page 229
    The undersigned hereby confirms that the Proposed Competitive Bid Borrowing is to be made available to it in accordance with Section 2.03(a)(v) of the Credit Agreement. Very truly yours, [NAME OF BORROWER] By Name: Title: 2

  • Page 230
    ... dated as of October 22, 2004 (as amended or modified from time to time, the "Credit Agreement") among Honeywell International Inc., a Delaware corporation (the "Borrower"), the Lenders (as defined in the Credit Agreement), and Citicorp USA, Inc., as agent (the "Agent") for the Lenders. Terms...

  • Page 231
    ... (vi) attaches any U.S. Internal Revenue Service forms required under Section 2.14 of the Credit Agreement. 4. Following the execution of this Assignment and Acceptance, it will be delivered to the Agent for acceptance and recording by the Agent. The effective date for this Assignment and Acceptance...

  • Page 232
    Schedule 1 to Assignment and Acceptance Dated: Section 1. Percentage interest assigned: Assignee's Revolving Credit Commitment: Assignee's Letter of Credit Commitment: Section 2. (a) Assigned Advances Aggregate outstanding principal amount of Revolving Credit Advances in Dollars assigned: Aggregate ...

  • Page 233
    ...ASSIGNOR], as Assignor By_____ Title: Dated:_____ [NAME OF ASSIGNEE], as Assignee By_____ Title: Dated:_____ Domestic Lending Office: [Address] Eurocurrency Lending Office: [Address] Consented to this _____ day of _____ [NAME OF BORROWER] By_____] Name: Title 1) This date should be no earlier than...

  • Page 234
    ... is made to the Five Year Credit Agreement dated as of October 22, 2004 among Honeywell International Inc. (the "Company"), the Lenders named therein, and Citicorp USA, Inc., as Agent for said Lenders (the "Credit Agreement"). For convenience of reference, terms used herein and defined in the...

  • Page 235
    ...before any court, governmental agency or arbitration that (i) is reasonably likely to have a Material Adverse Effect, or (ii) purports to effect the legality, validity or enforceability of this Designation Letter, the Credit Agreement, any Note of the Designated Subsidiary or the consummation of the...

  • Page 236
    ... maintain an office in New York City through such date and will give the Agent prompt notice of any change of address of the undersigned, (iii) the undersigned will perform its duties as Process Agent to receive on behalf of _____ and its property service of copies of the summons and complaint and...

  • Page 237
    This acceptance and agreement shall be binding upon the undersigned and all successors of the undersigned. Very truly yours, [PROCESS AGENT] By_____ 2

  • Page 238
    ...iv) of the Five Year Credit Agreement dated as of October 22, 2004 among Honeywell International Inc. (the "Company"), the Lenders parties thereto, and Citicorp USA, Inc., as Agent for said Lenders (the "Credit Agreement"). Terms defined in the Credit Agreement are, unless otherwise defined herein...

  • Page 239
    ... under, any material indenture, loan or credit agreement, lease, mortgage, security agreement, bond, note or any similar document. The Credit Agreement and the Notes of the Company have been duly executed and delivered on behalf of the Company. 3. No authorization, approval, or other action by, and...

  • Page 240
    ...of New York) wherein any Lender or Applicable Lending Office may be located or wherein enforcement of the Credit Agreement or the Notes of the Company may be sought which limits rates of interest which may be charged or collected by such Lender. 5. There is no action, suit, investigation, litigation...

  • Page 241
    ... Five Year Credit Agreement dated as of October 22, 2004 among Honeywell International Inc., the Lenders named therein, and Citicorp USA, Inc., as Agent for such Lenders (the "Credit Agreement"). In connection therewith, I have also examined the following documents: (i) The Designation Letter (as...

  • Page 242
    ... Lending Office may be located or wherein enforcement of the Credit Agreement, the Designation Letter of the Designated Subsidiary or the Notes of the Designated Subsidiary may be sought which limits rates of interest which may be charged or collected by such Lender. 4. There is no action, suit...

  • Page 243
    ..." within the meaning of the Public Utility Holding Company Act of 1935, as amended. In connection with the opinions expressed by me above in paragraph 3, I wish to point out that (i) provisions of the Credit Agreement which permit the Agent or any Lender to take action or make determinations may be...

  • Page 244
    ... Inc Ladies and Gentlemen: We have acted as counsel to Citicorp USA, Inc., as Agent (the "Agent"), in connection with the Credit Agreement, dated as of October 22, 2004 (the "Credit Agreement"), among Honeywell International Inc., a Delaware corporation (the "Borrower"), and each of you. Unless...

  • Page 245
    ... truthfulness of the representations made in the Credit Agreement. That each of the Opinion Documents is the legal, valid and binding obligation of each party thereto, other than the Borrower, enforceable against each such party in accordance with its terms. That: (F) (1) The Borrower is an entity...

  • Page 246
    ... becomes a Lender in accordance with the provisions of the Credit Agreement. Any such person may rely on the opinion expressed above as if this opinion letter were addressed and delivered to such person on the date hereof. This opinion letter is rendered to you in connection with the transactions...

  • Page 247
    ...Dated as of October 22, 2004 Among HONEYWELL INTERNATIONAL INC., as Borrower and THE INITIAL LENDERS NAMED HEREIN, as Initial Lenders and CITICORP USA, INC., as Administrative Agent and JPMORGAN CHASE BANK as Syndication Agent and BANK OF AMERICA, N.A. BARCLAYS BANK PLC DEUTSCHE BANK AG NEW YORK...

  • Page 248
    ...Under Letters of Credit . Fees ...Termination or Reduction of the Commitments ...Repayment of Advances ...Interest on Revolving Credit Advances ...Interest Rate Determination ...Prepayments of Revolving Credit Advances ...Increased Costs ...Illegality ...Payments and Computations ...Taxes ...Sharing...

  • Page 249
    ...Precedent to Each Competitive Bid Borrowing ...Determinations Under Section 3.01 ... 42 43 44 44 45 46 Representations and Warranties of the Company ... 46 Affirmative Covenants ...Negative Covenants ... 49 52 Events of Default ...Actions in Respect of the Letters of Credit upon Default ... 54 58...

  • Page 250
    ...SECTION 9.14. SECTION 9.15. Agent's Reliance, Etc ...CUSA and Affiliates ...Lender Credit Decision ...Indemnification ...Successor Agent ...Sub-Agent ...Other Agents ... 61 61 62 62... Counterparts ...Jurisdiction, Etc ...Substitution of Currency ...Final Agreement ...Judgment ... 64 64 65 65 66 67 69...

  • Page 251
    SECTION 9.16. SECTION 9.17. SECTION 9.18. No Liability of the Issuing Banks ...Patriot Act Notice ...Waiver of Jury Trial ... 73 73 74

  • Page 252
    SCHEDULES Schedule I - List of Applicable Lending Offices Schedule 2.01(b) - Existing Letters of Credit Schedule 3.01(b) - Disclosed Litigation EXHIBITS Exhibit A-1 Exhibit A-2 Exhibit B-1 Exhibit B-2 Exhibit C Exhibit D Exhibit E Exhibit F Exhibit G Exhibit H Form of Revolving Credit Note Form of ...

  • Page 253

  • Page 254
    ..., you will be paid a Dividend Equivalent in an amount equal to any cash or stock dividends paid by the Company upon one Share of Common Stock for each Restricted Unit credited to your account. Vesting. Except in the event of your Full Retirement, death, Disability, or a Change in Control, or as...

  • Page 255
    ...of the date of Change in Control will immediately lapse. No later than 90 days after the date of Change in Control, you will receive for the Restricted Units a single payment in cash equal to the product of the number of outstanding Restricted Units as of the date of Change in Control (including any...

  • Page 256
    ...right to recover, or receive reimbursement for, any compensation or profit you realize on the disposition of Shares received for Restricted Units to the extent that the Company has a right of recovery or reimbursement under applicable securities laws. Plan Terms Govern. The vesting and redemption of...

  • Page 257
    ... data file, certain personal information about you, including, but not limited to, name, home address and telephone number, date of birth, social insurance number, salary, nationality, job title, any shares or directorships held in the Company, details of all Restricted Units or other entitlement to...

  • Page 258
    ... under the Plan are not to be considered part of your salary or compensation under your employment with your local employer for purposes of calculating any severance, resignation, redundancy or other end of service payments, vacation, bonuses, long-term service awards, indemnification, pension or...

  • Page 259
    ...to the application of the terms and conditions set forth in this Agreement and the Plan unless you contact Honeywell International Inc., Executive Compensation/AB-1D, 101 Columbia Road, Morristown, NJ 07962 in writing within thirty (30) days of the date of this Agreement. Honeywell International Inc...

  • Page 260

  • Page 261
    .... Notwithstanding anything in this Agreement to the contrary, except in the event of a Change in Control (as defined in the Stock Plan), no Growth Plan Unit awards will be paid unless the Company attains a minimum level of earnings per share growth during the Performance Cycle. The minimum level of...

  • Page 262
    ... and one-half months from the end of the year in which the payment vests. Form of Payment. Growth Plan Units may be paid out in either cash or shares of the Company's common stock ("Shares"), at the discretion of the Committee. Payment shall be made in the same currency as your pay ("Local Currency...

  • Page 263
    ...the Change in Control or two and one-half months after the end of the calendar year in which the Change in Control occurs. Such single sum payment may be in cash or Shares, as determined by the Committee. 10. Change in Status. If your role within the Company changes during the Performance Cycle such...

  • Page 264
    ... application of the terms and conditions set forth in this Agreement and the Stock Plan unless you contact Honeywell International Inc., Executive Compensation/AB-1D, 101 Columbia Road, Morristown, NJ 07962, in writing, within thirty (30) days of the date of this Agreement. HONEYWELL INTERNATIONAL...

  • Page 265
    .... Nevertheless, in the event this Agreement and the Stock Plan cannot be harmonized with each other, the terms of the Stock Plan shall control. You should consult the Stock Plan for additional information with respect to your rights, responsibilities and entitlements. The Company reserves the right...

  • Page 266
    ...HONEYWELL INTERNATIONAL INC. STATEMENT RE: COMPUTATION OF RATIO OF EARNINGS TO FIXED CHARGES 2004 2003 2002 (In millions) 2001 2000 Determination of Earnings: Income (loss) before taxes Add (Deduct): Amortization of capitalized interest Fixed charges Equity income, net... for capitalized leases. (b)...

  • Page 267
    ... Percent Ownership Name Class Honeywell Electronic Materials Inc. Honeywell HomeMed L.L.C. Honeywell Nylon L.L.C. Honeywell Technology Solutions Inc. Honeywell Intellectual Properties Inc. Honeywell Specialty Wax & Additives Inc. Honeywell Specialty Materials, L.L.C. Grimes Aerospace Company...

  • Page 268
    ...-108461), and Form S-4 (No. 333-82049) of Honeywell International Inc. of our report dated February 25, 2005 relating to the financial statements, financial statement schedule, management's assessment of the effectiveness of internal control over financial reporting and the effectiveness of internal...

  • Page 269

  • Page 270
    ...David M. Cote, a director of Honeywell International Inc. (the "Company"), a Delaware corporation, hereby appoint David J. Anderson, ...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 ...Dated: February 1, 2005

  • Page 271
    ...Savings and Ownership Plan I, Honeywell Savings and Ownership Plan II, the Honeywell Supplemental Savings Plan, the Honeywell Executive Supplemental Savings Plan, the UK Share Purchase Plan of the Company, the Ireland Employees Share Ownership program of the Company, the Employee Stock Purchase Plan...

  • Page 272
    ...of (1) two percent of the Common Stock of the Company issued and outstanding at the end of the preceding fiscal year, as adjusted for stock splits and stock dividends, or (2) shares having a market value of $200,000,000), and any warrants to purchase such shares. I hereby grant to each such attorney...

  • Page 273
    ...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 ...number of counterparts, each of which shall be an original, with the same effect as if the signatures thereto and hereto were upon the same instrument...

  • Page 274
    ...Savings and Ownership Plan I, Honeywell Savings and Ownership Plan II, the Honeywell Supplemental Savings Plan, the Honeywell Executive Supplemental Savings Plan, the UK Share Purchase Plan of the Company, the Ireland Employees Share Ownership program of the Company, the Employee Stock Purchase Plan...

  • Page 275
    /s/ Clive R. Hollick Clive R. Hollick, Director /s/ James J. Howard James J. Howard, Director /s/ Eric K. Shinseki Eric K. Shinseki, Director /s/ John R. Stafford John R. Stafford, Director /s/ Michael W. Wright Michael W. Wright, Director Dated: February 1, 2005

  • Page 276
    ...of (1) two percent of the Common Stock of the Company issued and outstanding at the end of the preceding fiscal year, as adjusted for stock splits and stock dividends, or (2) shares having a market value of $200,000,000), and any warrants to purchase such shares. I hereby grant to each such attorney...

  • Page 277
    ... signed in any number of counterparts, each of which shall be an original, with the same effect as if the signatures thereto and hereto were upon the same instrument...., Director /s/ John R. Stafford John R. Stafford, Director /s/ Michael W. Wright Michael W. Wright, Director Dated: February 1, 2005

  • Page 278
    ... the registrant's ability to record, process, summarize and report financial information; and (b) any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting. Date: February 25, 2005 By...

  • Page 279

  • Page 280
    ... the registrant's ability to record, process, summarize and report financial information; and (b) any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting. Date: February 25, 2005 By...

  • Page 281

  • Page 282
    ... In connection with the Annual Report of Honeywell International Inc. (the Company) on Form 10-K for the year ending December 31, 2004 as filed with the Securities and Exchange Commission on the date hereof (the Report), I, David M. Cote, Chief Executive Officer of the Company, certify, pursuant to...

  • Page 283
    ... connection with the Annual Report of Honeywell International Inc. (the Company) on Form 10-K for the year ending December 31, 2004 as filed with the Securities and Exchange Commission on the date hereof (the Report), I, David J. Anderson, Chief Financial Officer of the Company, certify, pursuant to...