Honeywell 2004 Annual Report Download - page 95

HONEYWELL INTERNATIONAL INC.
NOTES TO FINANCIAL STATEMENTS—(Continued)
(Dollars in millions, except per share amounts)
shares for issuance under the Directors' Plan. Options generally become exercisable over a three-year period and expire after ten years.
Note 21—Commitments and Contingencies
Shareowner Litigation—Honeywell and three of its former officers were defendants in a class action lawsuit filed in the United
States District Court for the District of New Jersey. Plaintiffs alleged, among other things, that the defendants violated federal
securities laws by purportedly making false and misleading statements and by failing to disclose material information concerning
Honeywell's financial performance, thereby allegedly causing the value of Honeywell's stock to be artificially inflated. The Court
certified a class consisting of all purchasers of Honeywell stock between December 20, 1999 and June 19, 2000. On June 4, 2004
Honeywell and the lead plaintiffs agreed to a settlement of this matter which required a payment to the class of $100 million.
Honeywell's contribution to the settlement was $15 million, which amount had previously been fully reserved. Honeywell's insurance
carriers paid the remainder of the settlement. The settlement was approved by the Court on August 16, 2004. A small number of class
members, including the Florida State Board of Administration (FSBA), opted out of the settlement. The FSBA claims have been
settled for $1.25 million. Honeywell believes that all opt-out claims, including that of the FSBA, are fully insured.
ERISA Class Action Lawsuit—Honeywell and several of its current and 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 (the “Savings Plan”)
by purportedly making false and misleading statements, failing to disclose material information concerning Honeywell's financial
performance, and failing to diversify the Savings Plan's assets and monitor the prudence of Honeywell stock as a Savings Plan
investment. In September 2004, Honeywell reached an agreement in principle to settle this matter for $14 million plus an agreement to
permit Savings Plan participants greater diversification rights. The settlement will be paid in full by Honeywell's insurers. The
settlement will require Court approval, which is expected in 2005.
Environmental Matters—We are subject to various federal, state, local and foreign government requirements relating to the
protection of 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 and that our handling, manufacture, use and disposal of
hazardous or toxic substances are in accord with environmental and safety 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 and
safety 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 or jointly with
other responsible parties, to determine the feasibility of various remedial techniques to address environmental matters. It is our policy
to record appropriate liabilities for environmental matters when remedial efforts or damage claim payments are probable and the costs
can be reasonably estimated. Such liabilities are based on our best estimate of the undiscounted future costs required to complete the
remedial work. The recorded liabilities are adjusted periodically as remediation efforts 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 possible to develop
an estimate of the range of reasonably possible environmental loss in excess of our accruals. We expect to fund expenditures for these
matters from operating cash flow. The timing
71