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HONEYWELL INTERNATIONAL INC (HON)

10-K

Annual report pursuant to section 13 and 15(d)

Filed on 03/04/2004

Filed Period 12/31/2003

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HONEYWELL INTERNATIONAL INC (HON) 10-K Annual report pursuant to section 13 and 15(d) Filed on 03/04/2004 Filed Period 12/31/2003

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... number, including area code (973) 455-2000 Securities registered pursuant to Section 12(b) of the Act: Title of Each Class Common Stock, par value $1 per share* Name of Each Exchange on Which Registered New York Stock Exchange Chicago Stock Exchange Pacific Exchange New York Stock Exchange...

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April 26, 2004. _____ _____

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... Executive Officers of the Registrant...Executive Compensation...Security Ownership of Certain Beneficial Owners and Management...Certain Relationships and Related Transactions...Principal Accountant Fees and Services...Exhibits, Financial Statement Schedules, and Reports on Form 8-K...Page ---1 11...

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

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... 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 Major Customers/Uses Commercial, regional and general...

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systems 2

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... Products/Services Major Customers/Uses Key Competitors Network file servers Wireless network transceivers Satellite TV systems Audio/Video equipment Weather information network Navigation database information Cabin management systems Vibration detection and monitoring Mission management systems...

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... control solutions and services Aftermarket maintenance, repair and upgrade Automation and Control Products Control Products (Environmental controls and combustion; sensing and controls) Product Classes Landing systems Major Products/Services Wheels and brakes Friction products Wheel and brake...

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... and asset Security directors and utilities management solutions and Plant managers Siemens services Utilities Trane Enterprise building Large, global corporations integration solutions Public school systems Building information Universities services Local governments Specialty Materials Specialty...

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---------------------------------------------------------------------------------------------------------- 5

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...Tire and Rubber IGI Personal care Schumann-Sasol Packaging Firelogs Specialty additives Polyethylene waxes Coatings and inks BASF Petroleum waxes and PVC Clarient blends Plastics Eastman PVC lubricant systems Reflective coatings Plastic additives Security and safe applications Luminescent photodyes...

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Strategic Business Units Consumer Products Group Product Classes Aftermarket filters, spark plugs, electronic components and car care products Mass merchandisers Wire and cable NGK Peak/Old World Industries Pennzoil-Quaker State Purolator/Arvin Ind STP/ArmorAll/ Clorox Turtle Wax Various ...

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... products and services accounted for 48 percent of total net sales of Automation and Control Solutions. The principal manufacturing facilities outside the U.S. are in Europe, with less significant operations in Asia and Canada. Approximately 12 percent of total net sales of Specialty Materials...

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... any patent, trademark or related group of patents, or any licensing or distribution rights related to a specific process or product to be of material importance in relation to our total business. We have registered trademarks for a number of our products, including such consumer brands as Honeywell...

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... 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 excavation and transport for offsite disposal of approximately one million tons of chromium residue...

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... Study and should Honeywell agree to undertake such a remedy, such outcome could have a material adverse impact on our consolidated results of operations and operating cash flows in the periods recognized or paid. During 2003, three incidents occurred at our Baton Rouge, Louisiana chemical plant...

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... Statements of our 2003 Annual Report to Shareowners which is incorporated herein by reference. Item 4. Submission of Matters to a Vote of Security Holders Not Applicable. Executive Officers of the Registrant The executive officers of Honeywell, listed as follows, are elected annually by the Board...

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... and Business Group Executive of Chemical Specialties and Director, European Region of Rohm and Haas (chemical company) from June 1998 to October 2001. President and Chief Executive Officer Automation and Control Solutions since January 2004. President of Automation and Control Products from June...

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...to Financial Statements of our 2003 Annual Report to Shareowners which is incorporated herein by reference. The number of record holders of our common stock at December 31, 2003 was 88,454. The following table summarizes Honeywell's purchases of its common stock, par value $1 per share, for the year...

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... by the New York Stock Exchange (NYSE). All members of the Audit Committee are 'independent' as 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...

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... the two-year performance cycle relating to growth in earnings per share, revenue and return on investment. The value of any growth plan unit is not determinable and may be paid in cash or shares of Honeywell common stock. Growth plan units are therefore not included in the table above. (2) Column...

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...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 credited to participants' accounts equal to the value of any cash...

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... is shown in the consolidated financial statements or notes thereto. (a)(3.) Exhibits See the Exhibit Index on pages 20 through 22 of this Annual Report on Form 10-K. (b) Reports on Form 8-K During the three months ended December 31, 2003, Current Reports on Form 8-K were filed on October 16...

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November 17, reporting the expiration of a letter of intent to acquire our automotive Bendix Friction Materials business. 18

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...HONEYWELL INTERNATIONAL INC. March 4, 2004 By: /s/ JOHN J. TUS John J. Tus Vice President and Controller Pursuant to the requirements of the Securities Exchange Act of 1934, this annual report has been signed below by the following persons...and Controller (Principal Accounting Officer) March 4, 2004 ...

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...) 2003 Stock Incentive Plan of Honeywell International Inc. and its Affiliates (incorporated by reference to Honeywell's Proxy Statement, dated March 17, 2003, filed pursuant to Rule 14a-6 of the Securities and Exchange Act of 1934) Deferred Compensation Plan for Non-Employee Directors of Honeywell...

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... 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...

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... ----------Pages 26 through 76 of Honeywell's 2003 Annual Report to Shareowners (filed herewith) Omitted (Inapplicable) Omitted (Inapplicable) Subsidiaries of the Registrant (filed herewith) Omitted (Inapplicable) Consent of PricewaterhouseCoopers LLP (filed herewith) Powers of Attorney (filed...

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... 5, 2004 appearing in the 2003 Annual Report to Shareowners of Honeywell International Inc. (which report and consolidated financial statements are incorporated by reference in this Annual Report on Form 10-K) also included an audit of the Financial Statement Schedule listed in Item 15(a)(2) of this...

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HONEYWELL INTERNATIONAL INC SCHEDULE II -- VALUATION AND QUALIFYING ACCOUNTS Three Years Ended December 31, 2003 (In millions) Allowance for Doubtful Accounts: Balance December 31, 2000...Provision charged to income...Deductions from reserves(1)...Balance December 31, 2001...Provision charged to ...

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STATEMENT OF DIFFERENCES The registered trademark symbol shall be expressed as...The British pound sterling sign shall be expressed as...The Japanese Yen sign shall be expressed as...The Euro sign shall be expressed as...The section symbol shall be expressed as...Characters normally expressed as ...

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HONEYWELL INTERNATIONAL INC. SEVERANCE PLAN FOR SENIOR EXECUTIVES Amended and Restated Effective as of December 20, 2001

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... and position classification system adopted by the Company for use after January 1, 1994. (f) "Change in Control" is deemed to occur at the time (i) when any entity, person or group (other than the Company, any subsidiary or any savings, pension or other benefit plan for the benefit of employees of...

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... is not offered substantially comparable employment with the new employer, as determined by the Plan Administrator, in its sole discretion. In addition, following a Change in Control, a Covered Termination shall include any geographic relocation of the Participant's position to a new location which...

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(n) "Employer" means the Company and its participating divisions, subsidiaries, strategic business units and their respective successors. (o) "ERISA" means the Employee Retirement Income Security Act of 1974, as amended from time to time, together with applicable final regulations thereunder. (p) "...

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...) the number of months occurring before the first day of the month following the Participant's attainment of age 65 or, if later, eligibility to receive an unreduced retirement benefit under a qualified defined benefit pension plan maintained by an Employer. In the event of a Change in Control, the...

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...equivalent to Career Band 6 or above; provided, however, any employee who ceases to be employed in a position equivalent to Career Band 6 or above on or after a Change in Control shall nevertheless continue to be a Participant in the Plan. (b) A Participant in the Plan who is at any time the subject...

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... (12) months of the Severance Period, Pay Continuation and Prorated Annual Incentive Compensation will be recognized for purposes of the vesting and pension calculation provisions of the AlliedSignal Inc. Retirement Program or any other pension plan sponsored by an Employer in which the Participant...

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... affiliates and their respective officers, directors and employees in a form and manner prescribed by the Plan Administrator. Additionally, no severance benefits shall be payable under this Section 3 unless the Participant has returned to the Employer all property of the Employer and any information...

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... products, officers or employees to competitors or customers or potential customers of the Employer, or to current of former employees of the Employer. 6. Payment of Benefits Upon Incompetence or Death. In the event the Named Fiduciary is presented with evidence satisfactory to it that a Participant...

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... Human Resources and Communications, or such other person as the Board may appoint. The Plan Administrator shall have the authority to appoint and remove any other Named Fiduciary at his or her discretion. Any person acting on behalf of the Named Fiduciary shall serve without additional compensation...

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... Fiduciary's determination shall become final and conclusive. (d) If the Participant appeals the Named Fiduciary's denial of benefits in a timely fashion, the Plan Administrator shall re-examine all issues relevant to the original denial of benefits. Any such claimant, or his or her duly authorized...

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...an additional 60 days. Where such extension is necessary, the claimant shall be given written notice of the delay. Any decision of the Plan Administrator shall be binding on all persons affected thereby. (f) Any dispute, controversy, or claim arising out of or relating to any Plan benefit, including...

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..., as due, from the general funds of the Employer. This Plan shall constitute solely an unsecured promise by the Employer to pay severance benefits to employees to the extent provided herein. 10. Inalienability of Benefits. No Participant shall have the power to transfer, assign, anticipate, mortgage...

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...Company may be taken by action of its Board or by any appropriate officer or officers traditionally responsible for such determination or actions, or such other individual or individuals as may be designated by the Board or any such officer. 15. Governing Law. The Plan is an employee welfare benefit...

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.... (a) "Honeywell Employer" means the Employer and any other person, organization or entity that agrees in writing to be bound by the terms of the Plan for a period of time that extends at least through the two-year period following a Change in Control. (b) "Annual Incentive Compensation" means...

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... in Base Salary or Annual Incentive Compensation. (ii) (iii) Any significant reduction in benefit coverages available to the Participant under the Company's medical benefit plans for active employees or comparable medical benefit plans of any other Honeywell Employer or any significant increase...

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... than fifty (50) miles from the location of the Participant's position immediately prior to a Change in Control. (ix) (x) (xi) Any action by an Honeywell Employer that under applicable law constitutes constructive discharge. Any failure to pay the benefit determined under Section 20(b) within the...

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... provision of the Code (hereafter the "Section 4999 tax") or the Honeywell Employer has withheld the amount of the Section 4999 tax, an additional benefit (hereafter the "Enhancement Benefit") shall be paid from this Plan to such affected Participant. (b) The Enhancement Benefit payable shall be an...

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... secrets of an Honeywell Employer for personal gain or for the benefit of another party, or (iii) actively recruits and offers employment to any management employee of an Honeywell Employer. 22. Administration. (a) New Plan Administrator. On or before a Change in Control, the Company, its successors...

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... or Honeywell Employer Recommendations. Upon the occurrence of a Change in Control, the Corporation and any Honeywell Employer may make recommendations to the New Plan Administrator with respect to benefit determinations for affected Participants under the Plan and the New Plan Administrator shall...

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... determination as to the benefit payable under the terms of the Plan. Within 21 days of receipt of the notice from the affected Participant, the New Plan Administrator shall transmit to the Participant its own recommendation and that of the Corporation or responsible Honeywell Employer if such is...

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... terminated after a Change in Control; provided, however, the Plan may be amended if the purpose of the amendment is to increase benefits hereunder. (j) No Waiver. No waiver by a Participant at any time of any breach by the Company of, or of any lack of compliance with, any condition or provision of...

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HONEYWELL INTERNATIONAL INC. SEVERANCE PLAN FOR SENIOR EXECUTIVES Exhibit A ACTIVE PARTICIPANTS IN SENIOR SEVERANCE PROGRAM 36 Months (base and target bonus Daniel P. Burnham Ralph E. Reins Frederic M. Poses John W. Barter Lawrence A. Bossidy Peter M. Kreindler 24 Months (base and target bonus ...

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HONEYWELL INTERNATIONAL INC. SEVERANCE PLAN FOR SENIOR EXECUTIVES Exhibit A (Continued) 18 Months (base and target bonus Ken Kivenko Ernest E. Linneman Walter C. Miller ...) B. Leonard Gregory L. Summe Mark P. Bulriss Nancy A. Garvey Jeffrey M. Lipshaw NOTES: (1) Per offer letter commitment -23-

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... is payable at an earlier or a later date than payments under the Plan. 2. Section 17 of the Plan shall be amended to read as follows: In the event that a Participant in the Plan becomes entitled to severance, redundancy or employment termination benefits under another severance plan, agreement or...

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... or any savings, pension or other benefit plan for the benefit of employees of the Company or its subsidiaries) becomes the beneficial owner, directly or indirectly, of securities of the Company representing 15% or more of either the then outstanding shares of common stock of the company or the...

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... 15(b) upon the attainment by such employee of age 55 and 10 years of service with the Company or an Affiliate. 4. Paragraph 19 of the 1993 Plan shall be amended by adding the following sentence to the end thereof: Further, during a Potential Change in Control Period and during a period of two...

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...,000 364-DAY CREDIT AGREEMENT Dated as of November 26, 2003 Among HONEYWELL INTERNATIONAL INC., as Borrower, and THE INITIAL LENDERS NAMED HEREIN, as Initial Lenders, and CITIBANK, N.A., as Administrative Agent and JPMORGAN CHASE BANK as Syndication Agent and BANK OF AMERICA, N.A. BARCLAYS BANK PLC...

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... Revolving Credit Advances...29 Increased Costs...30 Illegality...31 Payments and Computations...31 Taxes...32 Sharing of Payments, Etc...35 Use of Proceeds...35 Extension of Termination Date...36 Evidence of Debt...37 Certain Defined Terms...1 Computation of Time Periods...16 Accounting Terms...16...

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... and Action...56 Agent's Reliance, Etc...56 Citibank and Affiliates...57 Unconditional Guarantee...54 Guarantee Absolute...54 Waivers...55 Remedies...55 No Stay...55 Survival...55 Events of Default...50 Affirmative Covenants...45 Negative Covenants...48 Representations and Warranties of the Company...

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...12. SECTION 9.13. SECTION 9.14. SECTION 9.15. SECTION 9.16. Lender Credit Decision...57 Indemnification...57 Successor Agent...57 Sub-Agent...58 Amendments, Etc...58 ...and Participations...61 Designated Subsidiaries...64 Confidentiality...64 Mitigation of Yield Protection...65 Governing Law...65...

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... of Competitive Bid Borrowing Exhibit C Exhibit D Exhibit E Exhibit F Exhibit G Form of Assignment and Acceptance Form of Assumption Agreement Form of Designation Letter Form of Acceptance by Process Agent Form of Opinion of Gail E. Lehman, Assistant General Counsel of the Company Form of Opinion...

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...-DAY CREDIT AGREEMENT Dated as of November 26, 2003 HONEYWELL INTERNATIONAL INC., a Delaware corporation (the "Company"), the banks, financial institutions and other institutional lenders (the "Initial Lenders") listed on the signature pages hereof, and CITIBANK, N.A. ("Citibank"), as administrative...

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... of a Eurocurrency Rate Advance and, in the case of a 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 Margin" means (a) for Base Rate Advances, 0% per annum and (b) for...

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... prior to the Term Loan Conversion Date that the aggregate Advances exceed 50% of the aggregate 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 A+ or A1...

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... "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...

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... have acquired beneficial ownership (within the meaning of Rule 13d-3 promulgated by the Securities and Exchange Commission under the Act) of 30% or more in voting power of the outstanding Voting Stock of the Company or (ii) during any period of twelve consecutive calendar months commencing at the...

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... issued or accepted by banks and other financial institutions for the account of such Person; and (v) obligations of such Person under leases which are required to be capitalized on a balance sheet of such Person in accordance with GAAP. "Default" means any Event of Default or any event that would...

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... office in London offers to exchange such Foreign Currency for Dollars in London prior to 4:00 P.M. (London time) (unless otherwise indicated by the terms of this Agreement) on such date as is required pursuant to the terms of this Agreement. "ERISA" means the Employee Retirement Income Security...

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... a multiple) of the respective rates per annum at which deposits in Euros are offered by the principal office of each of the Reference Banks in London, England to prime banks in the London interbank market at 11:00 A.M. (London time) two Business Days before the first day of such Interest Period 8

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...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...

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... (including, without limitation, any emergency, supplemental or other marginal reserve requirement) for a member bank of the Federal Reserve System in New York City with respect to liabilities or assets consisting of or including Eurocurrency Liabilities (or with respect to any other category of...

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... (New York City time) on the third Business Day prior to the first day of such Interest Period, select; provided, however, that: (i) such Borrower may not select any Interest Period that ends after the scheduled Termination Date or, if the Revolving Credit Advances have been converted to a term loan...

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...at such time) of the Revolving Credit Advances owing to Lenders, or, if no such principal amount is then outstanding, Lenders having at least 51% of the Commitments. "Material Adverse Change" means any material adverse change in the financial condition or results of operations of the Company and its...

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... time more than 12 months after the time as of which the amount thereof is being computed) and (b) all goodwill, trade 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...

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... any property of the Company located within the United States of America that, in the opinion of the Company's Board of Directors, is a principal manufacturing property or (b) any shares of capital stock or Debt of any Subsidiary owning any such property. "Revolving Credit Advance" means an advance...

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... power upon the occurrence of any contingency), (b) the interest in the capital or profits of such limited liability company, partnership or joint venture or (c) the beneficial interest in such trust or estate is at the time directly or indirectly owned or controlled by such Person, by such Person...

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... the Company to amend this Agreement to take account of such changes. ARTICLE II AMOUNTS AND TERMS OF THE ADVANCES SECTION 2.01. The Revolving Credit Advances. Each Lender severally agrees, on the terms and conditions hereinafter set forth, to make Revolving Credit Advances to any Borrower from time...

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... (New York City time) on the date of such Revolving Credit Borrowing, in the case of a Revolving Credit Borrowing consisting of Advances denominated 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...

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...its Applicable Lending Office to the Agent at the applicable Agent's account, in same day funds, such Lender's ratable portion (as determined in accordance with Section 2.01) of such Revolving Credit Borrowing. After the Agent's receipt of such funds and upon fulfillment of the applicable conditions...

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... 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 such Competitive Bid Borrowing, not later than (w) 10:00 A.M. (New York City time) at least one Business Day prior to the date of the...

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... 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 of such proposed Competitive Bid Borrowing, in the case of a Competitive Bid Borrowing consisting of Fixed Rate Advances denominated in Dollars, (B) before 10:00...

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... consisting of Fixed Rate Advances denominated in Dollars, (B) before 11:00 A.M. (New York City time) three Business Days before the date of such proposed Competitive Bid Borrowing, in the case of a Competitive Bid Borrowing consisting of LIBO Rate Advances denominated in Dollars, (C) before 10:00...

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...applicable conditions set forth in Article III. Each Lender that is to make a Competitive 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...

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... 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 Bid Note evidencing such Competitive Bid Advance unless otherwise agreed in such...

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... to the Applicable Percentage in effect from time to time, payable in arrears quarterly on the last day of each March, June, September and December, commencing December 31, 2003, and on the Termination Date. (b) Agent's Fees. The Company shall pay to the Agent for its own account such fees, and at...

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... Section 2.05(c) only, the term "Rating Condition" shall mean a period commencing with notice (a "Rating Condition Notice") by the Agent to the Company and the Lenders to the effect that the Agent has been informed that the rating of the senior public Debt of the Company is unsatisfactory under the...

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.... (e) Mandatory Reduction. On the Termination Date, if the Company has made the Term Loan Election in accordance with Section 2.06 prior to such date, and from time to time thereafter upon each prepayment of the Revolving Credit Advances, the Commitments of the Lenders shall be automatically and...

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... Credit Advance plus (y) the Applicable Margin in effect from time to time plus (z) the Applicable Utilization Fee, if any, in effect from time to time, payable in arrears on the last day of such Interest Period and, if such Interest Period has a duration of more than three months, on each day...

Page 98
... shall be suspended. (e) If the applicable Telerate Page is unavailable and fewer than two Reference Banks furnish timely information to the Agent for determining the Eurocurrency Rate or LIBO Rate for any Eurocurrency Rate Advances or LIBO Rate Advances, as the case may be, (i) the Agent shall...

Page 99
... 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 Rate Advances, and, if such notice is given, such Borrower shall, prepay the outstanding principal amount of the Revolving Credit Advances comprising part of the same Revolving...

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... 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 101
... 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...

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...as the case may be, as specified in the applicable Notice of Competitive Bid Borrowing (or, in each case of Advances denominated in Foreign Currencies where market practice differs, in accordance with market practice), in each case for the actual number of days (including the first day but excluding...

Page 103
... deducted to the relevant taxation authority or other authority in accordance with applicable law. (b) In addition, each Borrower agrees to pay any present or future stamp or documentary taxes or any other excise or property taxes, charges or similar levies that arise from any payment made hereunder...

Page 104
... prior to such change in Applicable Lending Office . If any form or document referred to in this subsection (e) requires the disclosure of information, other than information necessary to compute the tax payable and information required on the date hereof by Internal Revenue Service form W-8ECI or...

Page 105
...2.10, and any indemnification for Taxes under this Section 2.13) 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 106
... additional amounts owing under Section 2.10, and any indemnification for Taxes under this Section 2.13) as of the effective date of such assignment; and (iii) with respect to any such Assuming Lender, such Assuming Lender or the Company shall have paid the applicable processing and recordation fee...

Page 107
...Lender shall maintain in accordance with its usual practice an account or accounts evidencing the indebtedness of each Borrower to such Lender resulting from each Revolving Credit Advance owing to such Lender from time to time, including the amounts of principal and interest payable and paid to such...

Page 108
... following conditions precedent have been satisfied: (a) There shall have occurred no Material Adverse Change since December 31, 2002, except as otherwise publicly disclosed prior to the date hereof. (b) There shall exist no action, suit, investigation, litigation or proceeding affecting the Company...

Page 109
... 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 27, 2002 among the...

Page 110
... signed by a duly authorized officer of the Company, dated as of the date of such initial Advance, certifying that such Borrower shall have obtained all governmental and third party authorizations, consents, approvals (including exchange control approvals) and licenses required under applicable laws...

Page 111
..., as though made on and as of such date, and additionally, if such Revolving Credit Borrowing shall have been requested by a Designated Subsidiary, the representations and warranties of such Designated Subsidiary contained in its Designation Letter are correct on and as of the date of such Revolving...

Page 112
... of this Agreement and the Notes of the Company, and the consummation of the transactions contemplated hereby, are within the Company's corporate powers, have been duly authorized by all necessary corporate action, and do not and will not cause or constitute a violation of any provision of law or...

Page 113
... firms of independent public accountants, and the Consolidated balance sheet of the Company and its Consolidated Subsidiaries as at September 30, 2003, and the related Consolidated statements of income and cash flows of the Company and its Consolidated Subsidiaries for the nine months then ended...

Page 114
... material liability of the Company or any of its ERISA Affiliates. (j) The Schedules B (Actuarial Information) to the 2002 annual reports (Form 5500 Series) with respect to each Plan of the Company or any of its ERISA Affiliates, copies of which have been filed with the Internal Revenue Service (and...

Page 115
... its material rights (charter and statutory) privileges and franchises; provided, however, that the Company and each Designated Subsidiary may consummate any merger, consolidation or sale of assets permitted under Section 5.02(b). (e) Visitation Rights. At any reasonable time and from time to time...

Page 116
... officer has no knowledge, except as specifically stated, of any condition, event or act which constitutes a Default; (iii) copies of the Forms 8-K and 10-K reports (or similar reports) which the Company is required to file with the Securities and Exchange Commission of the United States of America...

Page 117
... 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 5500...

Page 118
... Subsidiaries to conduct, any investigation, study, sampling and testing, and undertake any cleanup, removal, remedial or other action necessary to remove and clean up all Hazardous Materials from any of its properties, in accordance with the requirements of all Environmental Laws; provided, however...

Page 119
... including Debt permitted to be secured under clause (i) through (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...

Page 120
... this Agreement on its part to be performed or observed and such failure shall remain unremedied for a period of 30 days after any Lender shall have given notice thereof to the relevant Borrower or, in the case of the Company, any of the principal financial officer, the principal accounting officer...

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... 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...

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... 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 123
... 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 Borrower or any of its ERISA...

Page 124
...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, regardless of any law, regulation or order now or...

Page 125
... the Designated Subsidiary, directly or indirectly, in cash or other property or by set-off or in any other 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...

Page 126
... or applicable law. The Agent agrees to give to each Lender prompt notice of each notice given to it by any Borrower pursuant to the terms of this Agreement. SECTION 8.02. Agent's Reliance, Etc. Neither the Agent nor any of its directors, officers, agents or employees shall be liable for any action...

Page 127
... its Affiliates may accept deposits from, lend money to, act as trustee under indentures of, accept investment banking engagements from and generally engage in any kind of business with, the Company, any of its Subsidiaries and any Person who may do business with or own securities of the Company or...

Page 128
Majority Lenders' removal of the retiring Agent, then the retiring Agent may, on behalf of the Lenders, appoint a successor Agent, which shall be a commercial bank organized under the laws of the United States of America or of any State thereof and having a combined capital and surplus of at least $...

Page 129
...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 to ensure that the Agent has on record an effective e-mail address for such Lender) and (ii) that any...

Page 130
...diligence, syndication (including printing, distribution and bank meetings), transportation, computer, duplication, appraisal, consultant, and audit expenses and (ii) the reasonable fees and expenses of counsel for the Agent with respect thereto. The Company further agrees to pay on demand all costs...

Page 131
...shall at any time, if requested to do so by the Company pursuant to Section 2.05(b), 2.10 or 2.13) assign to one or more Persons all or a portion of its rights and obligations under this Agreement (including, without limitation, all or a portion of its Commitment, the Revolving Credit Advances owing...

Page 132
... and deliver to the Agent, for its acceptance and recording in the Register, an Assignment and Acceptance, together with a processing and recordation fee of $3,500 and, if the assigning Lender is not retaining a Commitment hereunder, any Revolving Credit Note subject to such assignment. Upon such...

Page 133
... Assignment and Acceptance, (ii) record the information contained therein in the Register and (iii) give prompt notice thereof to the Company and to each other Borrower. (d) The Agent shall maintain at its address referred to in Section 9.02 a copy of each Assumption Agreement and each Assignment...

Page 134
..., such Affiliate or such Affiliate's officers, directors, employees, agents or advisors, as the case may be, shall agree to preserve the confidentiality of any confidential information relating to the Company received by it; a determination by a Lender or the Agent as to the application of the...

Page 135
... Section 2.11 or Section 2.13, 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 136
...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 given...

Page 137
...the extent that on the Business Day following receipt by such Lender or the Agent (as the case may be) of any sum adjudged to be so due in such Other Currency, such Lender or the Agent (as the case may be) may in accordance with normal banking procedures purchase Dollars with such Other Currency; if...

Page 138
... or the actions of the Agent or any Lender in the negotiation, administration, performance or enforcement thereof. IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be executed by their respective officers thereunto duly authorized, as of the date first above written. HONEYWELL...

Page 139
$82,608,695.65 DEUTSCHE BANK AG NEW YORK BRANCH By: /s/ Jean M. Hannigan ... Director SENIOR MANAGING AGENTS $56,521,739.13 ABN AMRO BANK N.V. By...America By: /s/ Richard Pace -----------------------------------Title: Director $56,521,739.13 BANK OF TOKYO-MITSUBISHI TRUST COMPANY...

Page 140
MANAGING AGENTS $39,130,434.78 HSBC BANK USA By: /s/ Johan Sorennson -----------------------------------Title: First Vice President $39,130,434.78 THE NORTHERN TRUST COMPANY By: /s/ Ashish S. Bhagwat -----------------------------------Title: Vice President LENDERS $21,739,130.43 ROYAL BANK OF CANADA...

Page 141
... Title: Vice President and Team Leader $13,043,478.26 SOCIETE GENERALE By: /s/ Ambrish D. Thanawala Title: Director $13,043,478.26 WACHOVIA BANK, N.A. By: /s Title: Director $13,043,478.26 WELLS FARGO BANK, NATIONAL ASSOCIATION By: /s/ Peter Angelica Title: Vice President $13,043,478...

Page 142
...: (212) 415-9606 388 Greenwich Street New York, NY 10013 Attn: Carolyn Sheridan Phone: (212) 559-3245 Fax: (212) 826-2371 EURODOLLAR LENDING OFFICE ----------------------------208 South LaSalle Street Suite 1500 Chicago, IL 60604 Attn: Credit Administration Phone: (312) 992-51521 Fax: (312) 992-5157...

Page 143
... (212) 278-5396 Fax: (212) 278-7862 Deutsche Bank AG New York Branch HSBC Bank USA Banca Intesa S.p.A. JPMorgan Chase Bank Mizuho Corporate Bank, Ltd. The Northern Trust Company Royal Bank of Canada Societe Generale 1221 Avenue of the America New York, NY 10020 Attn: Maria Manesis-Iarriccio...

Page 144
Sumitomo Mitsui Banking Corporation 277 Park Avenue New York, NY 10172 Attn: Edward McColly Phone: (212) 224-4139 Fax: (212) 224-4384 677 Washington Blvd. 6th Floor South Stamford, CT 05901 Attn: Christopher Aitkin Phone: (203) 719-3845 Fax: (203) 719-3888 375 Park Avenue New York, NY 10152 Attn: ...

Page 145
...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 July 2003, an amended complaint making similar allegations and naming several current and former officers...

Page 146
... on our consolidated financial position. In the matter entitled Interfaith Community Organization, 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...

Page 147
... sites located in Jersey City, New Jersey which are the subject of an Administrative Consent Order (ACO) entered into with the New Jersey Department of Environmental Protection (NJDEP) in 1993. Under the ACO, Honeywell agreed to study and remediate these sites in accordance with NJDEP's directions...

Page 148
... these claims, and our insurance coverage, we do not believe that the Bendix related asbestos claims will have a material adverse effect on our consolidated financial position. Another source of claims is refractory products (high temperature bricks and cement) sold largely to the steel industry...

Page 149
...filing, we paid NARCO's parent company $40 million and agreed to provide NARCO with up to $20 million in financing. We also agreed to pay $20 million to NARCO's parent company upon the filing of a plan of reorganization for NARCO acceptable to Honeywell, and to pay NARCO's parent company $40 million...

Page 150
... claims through 2018 and obligations to NARCO's parent, net of insurance recoveries of $1.8 billion. The estimated liability for current claims is based on terms and conditions, including evidentiary requirements, in definitive agreements or agreements in principle with in excess of 90 percent...

Page 151
...of $467 million, including legal fees. During the nine months ended September 30, 2003, we received $477 million in insurance reimbursements including $472 million in cash received from Equitas related to a comprehensive policy buy-back settlement of all insurance claims by Honeywell against Equitas...

Page 152
...in any Major Currency are payable in such currency at the applicable Payment Office in same day funds. Each Revolving Credit Advance owing to the Lender by the Borrower pursuant to the Credit Agreement, and all payments made on account of principal thereof, shall be recorded by the Lender and, prior...

Page 153
... 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 of the State of New York. [NAME OF BORROWER] By Name: Title: 2

Page 154
ADVANCES AND PAYMENTS OF PRINCIPAL Amount of Amount of Unpaid Type of Advance in Principal Paid Principal Notation Date Advance Relevant Currency Interest Rate or Prepaid Balance Made By 3

Page 155
... are payable in lawful money of _____ to Citibank, N.A., as Agent, for the account of the Lender at the office of _____, at _____ in same day funds. This Promissory Note is one of the Competitive Bid Notes referred to in, and is entitled to the benefits of, the Credit Agreement. The Credit Agreement...

Page 156
... Castle, Delaware 19720 Attention: Bank Loan Syndication Ladies and Gentlemen: The undersigned, [Name of Borrower], refers to the 364-Day Credit Agreement, dated as of November 26, 2003 (as amended or modified from time to time, the "Credit Agreement", the terms defined therein being used herein as...

Page 157
The undersigned hereby certifies that the conditions precedent 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 ...

Page 158
... Period] Interest Rate Basis Day Count Convention Interest Payment Date(s) [Currency] Borrower's Account Location [Date] 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...

Page 159
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 160
... - FORM OF ASSIGNMENT AND ACCEPTANCE Dated: _____ Reference is made to the 364-Day Credit Agreement dated as of November 26, 2003 (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...

Page 161
... by it as a Lender; and (vi) attaches any U.S. Internal Revenue Service forms required under Section 2.13 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...

Page 162
... and Acceptance Dated: Section 1. Percentage interest assigned: Assignee's Commitment: Section 2. (a) Assigned Advances Aggregate outstanding principal amount of Revolving Credit Advances in Dollars assigned: Aggregate outstanding principal amount of Revolving Credit Advances in lawful currency...

Page 163
...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 five Business Days after the delivery of this Assignment and Acceptance to the Agent. 4

Page 164
... Attention: Bank Loan Syndication Ladies and Gentlemen: Reference is made to the 364-Day Credit Agreement dated as of November 26, 2003 among Honeywell International Inc. (the "Company"), the Lenders parties thereto, and Citibank, N.A. as Agent (the "Credit Agreement"; terms defined therein being...

Page 165
... Lending Office (and address for notices) the offices set forth beneath its name on the signature pages hereof; and (vi) attaches the forms prescribed by the Internal Revenue Service of the United States required under Section 2.13 of Credit Agreement. The Assuming Lender requests that the Company...

Page 166
... with, the laws of the State of New York. Very truly yours, [NAME OF ASSUMING LENDER] By Name: Title: Domestic Lending Office (and address for notices): [Address] Eurodollar Lending Office [NAME OF ASSIGNOR](2) By Name: Title: [Address] Above Acknowledged and Agreed to: HONEYWELL INTERNATIONAL INC...

Page 167
... the 364-Day Credit Agreement dated as of November 26, 2003 among Honeywell International Inc. (the "Company"), the Lenders named therein, and Citibank, N.A., as Agent for said Lenders (the "Credit Agreement"). For convenience of reference, terms used herein and defined in the Credit Agreement shall...

Page 168
... Subsidiary in accordance with their respective terms except to the extent that such enforcement may be limited by applicable bankruptcy, insolvency and other similar laws affecting creditors' rights generally. 4. There is no action, suit, investigation, litigation or proceeding including, without...

Page 169
... Advance will not be, (a) an "investment company" within the meaning of the Investment Company Act of 1940, as amended, or (b) a "holding company" within the meaning of the Public Utility Holding Company Act of 1935, as amended. Very truly yours, HONEYWELL INTERNATIONAL INC. By Name: Title: [THE...

Page 170
... months prior notice to the Agent (and hereby acknowledges that the undersigned has been retained for its services as Process Agent through _____ __, 2004), (ii) the undersigned will maintain an office in New York City through such date and will give the Agent prompt notice of any change of address...

Page 171
This acceptance and agreement shall be binding upon the undersigned and all successors of the undersigned. Very truly yours, [PROCESS AGENT] By 2

Page 172
EXHIBIT G - FORM OF OPINION OF GAIL E. LEHMAN, ASSISTANT GENERAL COUNSEL FOR THE COMPANY _____ __, 2003 To each of the Lenders parties to the Credit Agreement (as defined below), and to Citibank, N.A., as Agent for said Lenders Honeywell International Inc. Ladies and Gentlemen: This opinion is ...

Page 173
...relied upon certificates of the Company or its officers or of public officials. I have assumed the due execution and delivery, pursuant to due authorization, of the Credit Agreement by the Initial Lenders and the Agent. I am qualified to practice law in the State of New York, and I do not purport to...

Page 174
... of America to adjudicate any controversy relating to the Credit Agreement or the Notes of the Company or (ii) the effect of the law of any jurisdiction (other than the State of New York) wherein any Lender or Applicable Lending Office may be located or wherein enforcement of the Credit Agreement or...

Page 175
...such matters of law and examined the original, certified, conformed or photographic copies of such other documents, records, agreements and certificates as I have considered relevant hereto. Except as expressly specified herein all terms used herein and defined in the Credit Agreement shall have the...

Page 176
..., revenues, or assets of the Designated Subsidiary pursuant to, any material indenture or other agreement or...law of any jurisdiction (other than the State of New York) wherein any Lender or Applicable Lending Office may be located or wherein enforcement of the Credit Agreement, the Designation Letter...

Page 177
..." 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 178
... delivery of the 364-Day Credit Agreement dated as of November 26, 2003 (the "Credit Agreement"), among Honeywell International Inc., a Delaware corporation (the "Company"), and each of you (each a "Lender"). Unless otherwise defined herein, terms defined in the Credit Agreement are used herein as...

Page 179
...any opinion herein concerning any other law. Without limiting the generality of the foregoing, we express no opinion as to the effect of the law of a jurisdiction other than the State of New York wherein any Lender may be located or wherein enforcement of the Credit Agreement or any of the Notes may...

Page 180
...or change may affect the legal analysis, a legal conclusion or any other matter set forth in or relating to this opinion letter. Accordingly, any Lender relying on this opinion letter at any time should seek advice of its counsel as to the proper application of this opinion letter at such time. Very...

Page 181

Page 182
...CREDIT AGREEMENT Dated as of November 26, 2003 Among HONEYWELL INTERNATIONAL INC., as Borrower, and THE INITIAL LENDERS NAMED HEREIN, as Initial Lenders, and CITIBANK, N.A., as Administrative Agent and JPMORGAN CHASE BANK as Syndication Agent and BANK OF AMERICA, N.A. BARCLAYS BANK PLC DEUTSCHE BANK...

Page 183
...1.01. Certain Defined Terms...1 SECTION 1.02. Computation of Time Periods...18 SECTION 1.03. Accounting Terms...18 ARTICLE II SECTION 2.01. The Revolving Credit Advances and Letters of Credit...18 SECTION 2.02. Making the Revolving Credit Advances...19 SECTION 2.03. The Competitive Bid Advances...21...

Page 184
...IV SECTION 4.01. Representations and Warranties of the Company...46 ARTICLE V SECTION 5.01. Affirmative Covenants...48 SECTION 5.02. Negative Covenants...52 ARTICLE VI SECTION 6.01. Events of Default...53 SECTION 6.02. Actions in Respect of the Letters of Credit upon Default...57 ARTICLE VII SECTION...

Page 185
... SECTION 8.03. Citibank and Affiliates...61 SECTION 8.04. Lender Credit Decision...61 SECTION 8.05. ... Effect...66 SECTION 9.06. Assignments and Participations...66 SECTION 9.07. Designated Subsidiaries...69... Yield Protection...70 SECTION 9.10. Governing Law...70 SECTION 9.11. Execution in Counterparts...

Page 186
... H Form of Revolving Credit Note Form of Competitive Bid Note Form of Notice of Revolving Credit Borrowing Form of Notice of Competitive Bid Borrowing Form of Assignment and Acceptance Form of Designation Letter Form of Acceptance by Process Agent Form of Opinion of Gail E. Lehman, Assistant General...

Page 187
... forms of the terms defined): "Advance" means a Revolving Credit Advance or a Competitive Bid Advance. "Affiliate" means, as to any Person, any other Person that, directly or indirectly, controls, is controlled by or is under common control with such Person or is a director or officer of such Person...

Page 188
... the case of a 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...

Page 189
... plus the aggregate 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...

Page 190
...) 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...

Page 191
... "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 192
... issued or accepted by banks and other financial institutions for the account of such Person; and (v) obligations of such Person under leases which are required to be capitalized on a balance sheet of such Person in accordance with GAAP. "Default" means any Event of Default or any event that would...

Page 193
... determined by using the quoted spot rate at which the Sub-Agent's principal office in London offers to exchange Dollars for such Foreign Currency in London prior to 4:00 P.M. (London time) (unless otherwise indicated by the terms of this Agreement) on such date as is required pursuant to the...

Page 194
... office in London offers to exchange such Foreign Currency for Dollars in London prior to 4:00 P.M. (London time) (unless otherwise indicated by the terms of this Agreement) on such date as is required pursuant to the terms of this Agreement. "ERISA" means the Employee Retirement Income Security...

Page 195
...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 196
... (including, without limitation, any emergency, supplemental or other marginal reserve requirement) for a member bank of the Federal Reserve System in New York City with respect to liabilities or assets consisting of or including Eurocurrency Liabilities (or with respect to any other category of...

Page 197
...such initial calendar month by the number of months equal to the number of months in such Interest Period, such Interest Period shall end on the last Business Day of such succeeding calendar month. "Internal Revenue Code" means the Internal Revenue Code of 1986, as amended from time to time, and the...

Page 198
... 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 interest bearing cash deposit account to...

Page 199
... at least 51% of the Revolving Credit Commitments. "Material Adverse Change" means any material adverse change in the financial condition or results of operations of the Company and its Consolidated Subsidiaries taken as a whole. "Material Adverse Effect" means a material adverse effect on (a) the...

Page 200
... Employer Plan or a Multiple Employer Plan. "Process Agent" has the meaning specified in Section 9.12(a). "Public Debt Rating" means, as of any date, the highest rating that has been most recently announced by either S&P or Moody's, as the case may be, for any class of non-credit enhanced long-term...

Page 201
... any property of the Company located within the United States of America that, in the opinion of the Company's Board of Directors, is a principal manufacturing property or (b) any shares of capital stock or Debt of any Subsidiary owning any such property. "Revolving Credit Advance" means an advance...

Page 202
... this definition of "Sale and Leaseback Transaction". "Single Employer Plan" of any Person means a single employer plan, as defined in Section 4001(a)(15) of ERISA, that (a) is maintained for employees of such Person or any of its ERISA Affiliates and no Person other than such Person and its ERISA...

Page 203
...of any contingency), (b) the interest in the capital or profits of such limited liability company, partnership or joint venture or (c) the beneficial interest in such trust or estate is at the time directly or indirectly owned or controlled by such Person, by such Person and one or more of its other...

Page 204
... 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 Advances. Each Lender severally agrees, on the terms and conditions hereinafter...

Page 205
(b) Letters of Credit. Each Issuing Bank agrees, on the terms and conditions hereinafter set forth, to issue performance and financial letters of credit (each, a "Letter of Credit") in any Major Currency for the account of any Borrower from time to time on any Business Day during the period from the...

Page 206
... (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 applicable Agent's account, in...

Page 207
... 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 such Competitive Bid Borrowing, not later than (w) 10:00 A.M. (New York City time) at least one Business Day prior to the date of the...

Page 208
... 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 of such proposed Competitive Bid Borrowing, in the case of a Competitive Bid Borrowing consisting of Fixed Rate Advances denominated in Dollars, (B) before 10:00...

Page 209
... consisting of Fixed Rate Advances denominated in Dollars, (B) before 11:00 A.M. (New York City time) three Business Days before the date of such proposed Competitive Bid Borrowing, in the case of a Competitive Bid Borrowing consisting of LIBO Rate Advances denominated in Dollars, (C) before 10:00...

Page 210
...applicable conditions set forth in Article III. Each Lender that is to make a Competitive 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...

Page 211
... 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 Bid Note evidencing such Competitive Bid Advance unless otherwise agreed in such...

Page 212
... to each such participation. In consideration and in furtherance of the foregoing, each Lender hereby absolutely and unconditionally agrees to pay to the Agent, for the account of such Issuing Bank, such Lender's Ratable Share of each drawing made under a Letter of Credit funded by such Issuing...

Page 213
... 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 for the account of such Issuing Bank, by deposit to the Agent...

Page 214
... in effect from time to time, payable in arrears quarterly on the last day of each March, June, September and December, commencing December 31, 2003, 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...

Page 215
... have paid the processing and recordation fee required under Section 9.06(a) for such assignment and (v) if the assigning Lender is an Issuing Bank, the Company shall pay to the Agent for deposit in the L/C Cash Deposit Account an amount equal to the Available Amount of all Letters of Credit issued...

Page 216
... by a Lender. In the event that a Change of Control occurs, each Lender may, by notice to the Company and the Agent given not later than 50 calendar days after such Change of Control, terminate its Revolving Credit Commitment and its Unissued Letter of Credit Commitment, if any, which Commitments...

Page 217
...of the Letters of Credit issued by such Issuing Banks shall have expired or been fully drawn upon and all other obligations of the Borrowers hereunder to such Issuing Banks have been paid in full, the balance, if any, in the L/C Cash Deposit Account shall be promptly returned to the Company. SECTION...

Page 218
... Credit Advance plus (y) the Applicable Margin in effect from time to time plus (z) the Applicable Utilization Fee, if any, in effect from time to time, payable in arrears on the last day of such Interest Period and, if such Interest Period has a duration of more than three months, on each day...

Page 219
... per annum equal at all times to 1% per annum above the rate per annum required to be paid on such Revolving Credit Advance pursuant to clause (a)(i) or (a)(ii) above and (ii) to the fullest extent permitted by law, the amount of any interest, fee or other amount payable hereunder by such Borrower...

Page 220
... shall be suspended. (e) If the applicable Telerate page is unavailable and fewer than two Reference Banks furnish timely information to the Agent for determining the Eurocurrency Rate or LIBO Rate for any Eurocurrency Rate Advances or LIBO Rate Advances, as the case may be, (i) the Agent shall...

Page 221
... amount of all Competitive Bid Advances denominated in Foreign Currencies then outstanding plus (C) the Equivalent in Dollars of the aggregate Available Amount of all Letters of Credit denominated in Major Currencies then outstanding (in each case, determined on the third Business Day prior to such...

Page 222
... Letters of Credit (or similar contingent obligations) hereunder, then, upon demand by such Lender (with a copy of such demand to the Agent), the 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...

Page 223
... 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 224
... differs, in 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...

Page 225
..., at such address, an opinion of counsel acceptable to the Agent stating that such payment is exempt from Taxes. For purposes of this subsection (d) and subsection (e), the terms "United States" and "United States person" shall have the meanings specified in Section 7701 of the Internal Revenue Code...

Page 226
... prior to such change in Applicable Lending Office . If any form or document referred to in this subsection (e) requires the disclosure of information, other than information necessary to compute the tax payable and information required on the date hereof by Internal Revenue Service form W-8ECI or...

Page 227
...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 228
... following conditions precedent have been satisfied: (a) There shall have occurred no Material Adverse Change since December 31, 2002, except as otherwise publicly disclosed prior to the date hereof. (b) There shall exist no action, suit, investigation, litigation or proceeding affecting the Company...

Page 229
..., as administrative agent, as amended, and each Lender that is a party to said credit agreement hereby waives any requirement of prior notice to the termination of commitments or prepayment of obligations under said credit agreement. (c) The Company shall have paid all accrued fees and expenses...

Page 230
... signed by a duly authorized officer of the Company, dated as of the date of such initial Advance, certifying that such Borrower shall have obtained all governmental and third party authorizations, consents, approvals (including exchange control approvals) and licenses required under applicable laws...

Page 231
...as though made on and as of such date, and additionally, if such Revolving Credit Borrowing or issuance shall have been requested by a Designated Subsidiary, the representations and warranties of such Designated Subsidiary contained in its Designation Letter are correct on and as of the date of such...

Page 232
... of this Agreement and the Notes of the Company, and the consummation of the transactions contemplated hereby, are within the Company's corporate powers, have been duly authorized by all necessary corporate action, and do not and will not cause or constitute a violation of any provision of law or...

Page 233
... firms of independent public accountants, and the Consolidated balance sheet of the Company and its Consolidated Subsidiaries as at September 30, 2003, and the related Consolidated statements of income and cash flows of the Company and its Consolidated Subsidiaries for the nine months then ended...

Page 234
... material liability of the Company or any of its ERISA Affiliates. (j) The Schedules B (Actuarial Information) to the 2002 annual reports (Form 5500 Series) with respect to each Plan of the Company or any of its ERISA Affiliates, copies of which have been filed with the Internal Revenue Service (and...

Page 235
... its material rights (charter and statutory) privileges and franchises; provided, however, that the Company and each Designated Subsidiary may consummate any merger, consolidation or sale of assets permitted under Section 5.02(b). (e) Visitation Rights. At any reasonable time and from time to time...

Page 236
... a statement that such officer has no knowledge, except as specifically stated, of any condition, event or act which constitutes a Default; (ii) as soon as available and in any event within 120 days after the end of each fiscal year of the Company, a Consolidated balance sheet of the Company and its...

Page 237
... 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 5500...

Page 238
... Subsidiaries to conduct, any investigation, study, sampling and testing, and undertake any cleanup, removal, remedial or other action necessary to remove and clean up all Hazardous Materials from any of its properties, in accordance with the requirements of all Environmental Laws; provided, however...

Page 239
... including Debt permitted to be secured under clause (i) through (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...

Page 240
... this Agreement on its part to be performed or observed and such failure shall remain unremedied for a period of 30 days after any Lender shall have given notice thereof to the relevant Borrower or, in the case of the Company, any of the principal financial officer, the principal accounting officer...

Page 241
... 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 242
... 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 243
... 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 Borrower or any of its ERISA...

Page 244
... such Letter of Credit. After all such Letters of Credit shall have expired or been fully drawn upon and all other obligations of the Borrowers hereunder and under the Notes shall have been paid in full, the balance, if any, in such L/C Cash Deposit Account shall be promptly returned to the Company...

Page 245
...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, regardless of any law, regulation or order now or...

Page 246
... the Designated Subsidiary, directly or indirectly, in cash or other property or by set-off or in any other 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...

Page 247
... or applicable law. The Agent agrees to give to each Lender prompt notice of each notice given to it by any Borrower pursuant to the terms of this Agreement. SECTION 8.02. Agent's Reliance, Etc. Neither the Agent nor any of its directors, officers, agents or employees shall be liable for any action...

Page 248
... its Affiliates may accept deposits from, lend money to, act as trustee under indentures of, accept investment banking engagements from and generally engage in any kind of business with, the Company, any of its Subsidiaries and any Person who may do business with or own securities of the Company or...

Page 249
... 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 case of any investigation, litigation or proceeding giving rise to...

Page 250
... Lending Office specified in the Assignment and Acceptance pursuant to which it became a Lender; and if to the Agent, at its address at Two Penns Way, New Castle, Delaware 19720, Attention: Bank Loan Syndications Department, with a copy to 388 Greenwich Street, New York, New York 10013, Attention...

Page 251
...diligence, syndication (including printing, distribution and bank meetings), transportation, computer, duplication, appraisal, consultant, and audit expenses and (ii) the reasonable fees and expenses of counsel for the Agent with respect thereto. The Company further agrees to pay on demand all costs...

Page 252
... Agent and each Lender and each of their Affiliates and their officers, directors, employees, agents and advisors (each, an "Indemnified ...demand to the Agent), pay to the Agent for the account of such Lender any amounts required to compensate such Lender for any additional losses, costs or expenses...

Page 253
...SECTION 9.06. Assignments and Participations. (a) Each Lender may at any time, with notice to the Company prior to making any proposal ...obligations under this Agreement specified in the applicable Assignment and Acceptance; (iii) except in the case of an assignment to a Person that, immediately prior...

Page 254
... in substantially the form of Exhibit C hereto, (i) accept such Assignment and Acceptance, (ii) record the information contained therein in the Register and (iii) give prompt notice thereof to the Company and to each other Borrower. (d) The Agent shall maintain at its address referred to in Section...

Page 255
...the Lenders may treat each Person whose name is recorded in the Register as a Lender hereunder for all purposes of this Agreement. The Register shall be available for inspection by the Company, any other Borrower or any Lender at any reasonable time and from time to time upon reasonable prior notice...

Page 256
..., such Affiliate or such Affiliate's officers, directors, employees, agents or advisors, as the case may be, shall agree to preserve the confidentiality of any confidential information relating to the Company received by it; a determination by a Lender or the Agent as to the application of the...

Page 257
... 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 258
...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 given...

Page 259
... that are caused by such Issuing Bank's failure to exercise care when determining whether drafts and other documents presented under a Letter of Credit comply with the terms thereof or any failure to honor a Letter of Credit where such Issuing Bank is, under applicable law, required to honor it. The...

Page 260
... $100,000,000 BANK OF AMERICA, N.A. By: /s/ John W. Pocalyko Title: Managing Director $100,000,000 JPMORGAN CHASE BANK By: /s Title: Vice President $300,000,000 TOTAL OF LETTER OF CREDIT COMMITMENTS REVOLVING CREDIT COMMITMENT $127,173,913.04 ARRANGER AND ADMINISTRATIVE AGENT CITIBANK, N.A. By...

Page 261
...: Vice President DOCUMENTATION AGENTS $107,391,304.35 BANK OF AMERICA, N.A. By: /s/ John W. Pocalyko Title: Managing Director $107,391,304.35 BARCLAYS BANK PLC By: /s/ Douglas Berneggeh Title: Director $107,391,304.35 DEUTSCHE BANK AG NEW YORK BRANCH By: /s/ Jean M. Hannigan Title: Director By...

Page 262
...PARIBAS By: /s/ Michel de Vibraye Title: Head of CFI North America By: /s/ Richard Pace Title: Director $73,478,260.87 BANK OF TOKYO-MITSUBISHI TRUST COMPANY By: /s Title: Vice President MANAGING AGENTS $50,869,565.22 HSBC BANK USA By: /s/ Johan Sorennson Title: First Vice President $50,869...

Page 263
... J. Eldin ------------------------------------ Title: First Vice President & Deputy Manager $16,956,521.74 BANCO BILBAO VIZCAYA ARGENTARIA S.A. ... CORPORATE BANK, LTD. By: /s/ Bertran -----------------------------------Title: Vice President and Team Leader $16,956,521.74 SOCIETE GENERALE By...

Page 264
...Title: Director $16,956,521.74 WELLS FARGO BANK, NATIONAL ASSOCIATION By: /s/ Peter Angelica -----------------------------------Title: Vice President $16,956,521.74 WESTPAC BANKING CORPORATION By: /s/ Lisa Porter -----------------------------------Title: Vice President $1,300...

Page 265
...LENDING OFFICE -------------------------------------------------------------------------------------------ABN AMRO Bank N.V. 208 South LaSalle Street 208 South LaSalle Street Suite 1500 Suite 1500 Chicago, IL 60604 Chicago, IL 60604 Attn: Credit Administration Attn: Credit Administration Phone: (312...

Page 266
...Bank A/S, Cayman 299 Park avenue, 14th Floor 299 Park avenue, 14th Floor Branch New York, NY 10171 New York, NY 10171 Attn: Loan Administration Attn: Loan Administration Phone: (212) 984-8462 Phone...Societe Generale 1221 Avenue of the America 1221 Avenue of the America New York, NY 10020 New York, NY...

Page 267
...-0096 Fax: (704) 715-0096 Wells Fargo Bank, National 70 East 55th Street 70 East 55th Street Association 11th Floor 11th Floor New York City, NY 10022-3222 New York City, NY 10022-3222 Attn: Peter M. Angelica\ Attn: Peter M. Angelica\ Phone: (212) 836-4141 Phone: (212) 836-4141 Fax: (212) 593-5241...

Page 268
... 26-Apr-01 22-May-04 USD $ 600,000 South Carolina's Workers Compensation 7206396 Bank of America 15-Aug-98 1-Sep-04 USD $ 575,000 ILLINOIS INDUSTRIAL 7410922 Bank of America 26-Dec-02 31-Dec-04 USD $ 524,281 Allianz Insurance Company 7409958 Bank of America 15-Jul-02 30-Jun-04 USD $ 220,000...

Page 269
...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 July 2003, an amended complaint making similar allegations and naming several current and former officers...

Page 270
... on our consolidated financial position. In the matter entitled Interfaith Community Organization, 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...

Page 271
... sites located in Jersey City, New Jersey which are the subject of an Administrative Consent Order (ACO) entered into with the New Jersey Department of Environmental Protection (NJDEP) in 1993. Under the ACO, Honeywell agreed to study and remediate these sites in accordance with NJDEP's directions...

Page 272
... these claims, and our insurance coverage, we do not believe that the Bendix related asbestos claims will have a material adverse effect on our consolidated financial position. Another source of claims is refractory products (high temperature bricks and cement) sold largely to the steel industry...

Page 273
...filing, we paid NARCO's parent company $40 million and agreed to provide NARCO with up to $20 million in financing. We also agreed to pay $20 million to NARCO's parent company upon the filing of a plan of reorganization for NARCO acceptable to Honeywell, and to pay NARCO's parent company $40 million...

Page 274
... claims through 2018 and obligations to NARCO's parent, net of insurance recoveries of $1.8 billion. The estimated liability for current claims is based on terms and conditions, including evidentiary requirements, in definitive agreements or agreements in principle with in excess of 90 percent...

Page 275
...of $467 million, including legal fees. During the nine months ended September 30, 2003, we received $477 million in insurance reimbursements including $472 million in cash received from Equitas related to a comprehensive policy buy-back settlement of all insurance claims by Honeywell against Equitas...

Page 276
...in any Major Currency are payable in such currency at the applicable Payment Office in same day funds. Each Revolving Credit Advance owing to the Lender by the Borrower pursuant to the Credit Agreement, and all payments made on account of principal thereof, shall be recorded by the Lender and, prior...

Page 277
... 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 of the State of New York. [NAME OF BORROWER] By Name: Title: 2

Page 278
ADVANCES AND PAYMENTS OF PRINCIPAL Amount of Amount of Principal Unpaid Type of Advance in Interest Paid Principal Notation DATE Advance Relevant Currency Rate or Prepaid Balance Made By 3

Page 279
... are payable in lawful money of _____ to Citibank, N.A., as Agent, for the account of the Lender at the office of _____, at _____ in same day funds. This Promissory Note is one of the Competitive Bid Notes referred to in, and is entitled to the benefits of, the Credit Agreement. The Credit Agreement...

Page 280
...Castle, Delaware 19720 Attention: Bank Loan Syndication Ladies and Gentlemen: The undersigned, [Name of Borrower], refers to the Five Year Credit Agreement, dated as of November 26, 2003 (as amended or modified from time to time, the "Credit Agreement", the terms defined therein being used herein as...

Page 281
The undersigned hereby certifies that the conditions precedent 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 ...

Page 282
... Rate Basis (E) Day Count Convention (F) Interest Payment Date(s) (G) [Currency] (H) Borrower's Account Location (I [Date] 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...

Page 283
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 284
... and Competitive Bid Notes) equal to the percentage interest specified on Schedule 1 hereto of the outstanding rights and obligations under the Credit Agreement (including, in the case of an assignment of any Revolving Credit Commitment, participations in Letters of Credit held by the Assignor...

Page 285
... by it as a Lender; and (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...

Page 286
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: ...

Page 287
... NAME OF 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 five...

Page 288
... dated as of November 26, 2003 among Honeywell International Inc. (the "Company"), the Lenders named therein, and Citibank, N.A., as Agent for said Lenders (the "Credit Agreement"). For convenience of reference, terms used herein and defined in the Credit Agreement shall have the respective meanings...

Page 289
... Subsidiary in accordance with their respective terms except to the extent that such enforcement may be limited by applicable bankruptcy, insolvency and other similar laws affecting creditors' rights generally. 4. There is no action, suit, investigation, litigation or proceeding including, without...

Page 290
... Advance will not be, (a) an "investment company" within the meaning of the Investment Company Act of 1940, as amended, or (b) a "holding company" within the meaning of the Public Utility Holding Company Act of 1935, as amended. Very truly yours, HONEYWELL INTERNATIONAL INC. By Name: Title: [THE...

Page 291
... months prior notice to the Agent (and hereby acknowledges that the undersigned has been retained for its services as Process Agent through _____ __, 2008), (ii) the undersigned will maintain an office in New York City through such date and will give the Agent prompt notice of any change of address...

Page 292
This acceptance and agreement shall be binding upon the undersigned and all successors of the undersigned. Very truly yours, [PROCESS AGENT] By 2

Page 293
EXHIBIT F - FORM OF OPINION OF GAIL E. LEHMAN, ASSISTANT GENERAL COUNSEL FOR THE COMPANY _____ __, 2003 To each of the Lenders parties to the Credit Agreement (as defined below), and to Citibank, N.A., as Agent for said Lenders Honeywell International Inc. Ladies and Gentlemen: This opinion is ...

Page 294
...relied upon certificates of the Company or its officers or of public officials. I have assumed the due execution and delivery, pursuant to due authorization, of the Credit Agreement by the Initial Lenders and the Agent. I am qualified to practice law in the State of New York, and I do not purport to...

Page 295
... of America to adjudicate any controversy relating to the Credit Agreement or the Notes of the Company or (ii) the effect of the law of any jurisdiction (other than the State of New York) wherein any Lender or Applicable Lending Office may be located or wherein enforcement of the Credit Agreement or...

Page 296
...such matters of law and examined the original, certified, conformed or photographic copies of such other documents, records, agreements and certificates as I have considered relevant hereto. Except as expressly specified herein all terms used herein and defined in the Credit Agreement shall have the...

Page 297
..., revenues, or assets of the Designated Subsidiary pursuant to, any material indenture or other agreement or...law of any jurisdiction (other than the State of New York) wherein any Lender or Applicable Lending Office may be located or wherein enforcement of the Credit Agreement, the Designation Letter...

Page 298
..." 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 299
... delivery of the Five Year Credit Agreement dated as of November 26, 2003 (the "Credit Agreement"), among Honeywell International Inc., a Delaware corporation (the "Company"), and each of you (each a "Lender"). Unless otherwise defined herein, terms defined in the Credit Agreement are used herein as...

Page 300
...any opinion herein concerning any other law. Without limiting the generality of the foregoing, we express no opinion as to the effect of the law of a jurisdiction other than the State of New York wherein any Lender may be located or wherein enforcement of the Credit Agreement or any of the Notes may...

Page 301
...or change may affect the legal analysis, a legal conclusion or any other matter set forth in or relating to this opinion letter. Accordingly, any Lender relying on this opinion letter at any time should seek advice of its counsel as to the proper application of this opinion letter at such time. Very...

Page 302

Page 303
... the Senior Severance Plan) or program. Date of Termination You have previously agreed to your separation from service from the Company. Accordingly, your last day of work ("Last Day of Active Employment") will be January 9, 2004. Vacation Pay Unused 2003 vacation pay shall be paid out as a lump...

Page 304
...and other applicable taxes and withholdings. Employee Benefits A general description of your rights to continued participation in your employee benefit plans is attached hereto as Exhibit A. Such description is for information purposes only and is not a part of this Agreement and Release. Additional...

Page 305
...signed Agreement and Release in the form provided to Thomas W. Weidenkopf at 101 Columbia Road, Morristown, New Jersey, no later than March 10, 2004. In the event that before the end of your Benefit Period you (i) accept a position with the Company as an employee, or (ii) return to work at Honeywell...

Page 306
... omission occurring after the date you sign this Agreement and Release. All claims, including contingent claims, for incentive compensation awards under any Honeywell Group plan or payroll practice, along with any claims under any state wage and hour laws, are specifically subject to this release of...

Page 307
... entitled to receive any additional payments or benefits from the Honeywell Group related to your employment or termination of employment other than as expressly provided herein. Cooperation and Nondisclosure In further exchange for the Consideration you receive under this Agreement and Release, you...

Page 308
...for sale or sells products or services that compete with products and services offered for sale by Honeywell's Automation and Control Solutions business. Nothing herein, however, shall prohibit you from acquiring or holding not more than one percent (1%) of any class of publicly traded securities of...

Page 309
... any agreements signed by you relating to intellectual property and confidential information acquired by you as a result of your employment with the Company remain in full force and effect and place legal obligations upon you that continue beyond your employment with the Company. In further exchange...

Page 310
... to the balance of the 21 day review period; and have the right to revoke this Agreement signing it, by providing written notice Resources representative. If you revoke this 15-day period, it becomes null and and Release within 15 days after of revocation to your Human this Agreement and Release...

Page 311
...retain your coverage in the Company's group health insurance plans for active employees through the end of the month in which your Benefit Period ends, except as otherwise provided below. The employee share of any premiums shall automatically be deducted from your Severance Pay unless you notify the...

Page 312
... under applicable law. Your current deductions will continue until the end of your Benefit Period unless you decide to change or terminate your contributions. At the end of your Benefit Period, you will receive information relating to the distribution of your Savings Plan account balance, if...

Page 313
... the Retirement Pension Planning Department at 877-258-3699, option 5. Unemployment Insurance You may be eligible for unemployment benefits. You should contact your local unemployment office. Short-Term Incentive Compensation Plan For the portion of the current calendar year ending on your Last Day...

Page 314
... on your Last Day of Active Employment. Any deferred incentive compensation and deferred salary account balances, plus interest at the "applicable interest rate" (determined pursuant to the applicable program and subject to the Additional Consideration paragraph of the Agreement and Release), will...

Page 315
... premium paid, and the Company will release the collateral assignment on the policy. Plan maturity occurs at age 60 or after approximately 15 years of participation, whichever is later. For questions or information, call David Soczek of Marsh Financial Services, at 1-612-332-5152, or contact Kenneth...

Page 316
...the end of my employment by Honeywell which relate either to my work assignment at Honeywell or to Honeywell's Trade Secrets, Proprietary and Confidential Information for the purpose of determining Honeywell's rights in each such Invention. I will not file any patent application relating to any such...

Page 317
... and Confidential Information for dissemination outside Honeywell or file any patent application relating to any Invention I Make during the period of time I was employed by Honeywell without the prior written approval of Honeywell's Law Department. I will execute any agreement relating to...

Page 318
... with all security policies and procedures that may, from time to time, have been established by Honeywell. I have returned all of them, along with all copies, facsimiles and specimens of them and any other tangible forms of Honeywell's Trade Secrets, Proprietary and Confidential Information in my...

Page 319
... the scope of my employment; or (ii) based upon information I acquired from Honeywell which is not normally made available to the public; or (iii) commissioned by Honeywell, but not within my scope of employment, I hereby agree to: (a) (b) (c) submit to Honeywell's Law Department for approval prior...

Page 320
... companies, divisions, subsidiaries, affiliates and business units, including businesses acquired by the purchase of assets or stock, merger or otherwise. "Trade Secrets, Proprietary and Confidential Information" means information which is not generally known in the industries in which Honeywell...

Page 321
-19d) "Make" or "Made", when used in relation to Inventions, includes any one or any combination of (i) conception, (ii) reduction to practice or (iii) development of an Invention, and is applicable without regard to whether the individual is a sole or joint inventor.

Page 322
... EMPLOYMENT BY HONEYWELL IN WHICH I HAVE AN OWNERSHIP INTEREST WHICH ARE NOT THE SUBJECT MATTER OF ISSUED PATENTS OR PRINTED PUBLICATIONS: (If there are none, please enter the word "NONE") NOTE: Please describe each such Invention without disclosing confidential information Attach additional sheets...

Page 323

Page 324
... OF RATIO OF EARNINGS TO FIXED CHARGES 2003 ---Determination of Earnings: Income (loss) before taxes...Add (Deduct): Amortization of capitalized interest...Fixed charges...Equity income, net of distributions...Total earnings, as defined...2002 ---2001 ---(In millions) $ (422) 25 512 199 -----$ 314...

Page 325

Page 326
... and Analysis 27 Consolidated Statement of Operations 45 Consolidated Balance Sheet 46 Consolidated Statement of Cash Flows 47 Consolidated Statement of Shareowners' Equity 48 Notes to Financial Statements 49 Management's Responsibility for Financial Statements 76 Report of Independent Auditors...

Page 327
... of SFAS No. 143. In 2003, also includes net repositioning, environmental and other charges, gains on sales of non-strategic businesses and a gain related to the settlement of a patent infringement lawsuit resulting in a net after-tax charge of $22 million, or $0.03 per share. In 2002, includes...

Page 328
.... Our Aerospace portfolio includes Engines, Systems and Services (auxiliary power units; propulsion engines; environmental control systems; engine controls; repair and overhaul services; hardware; logistics and power generation systems); Aerospace Electronic Systems (flight safety communications...

Page 329
..., safe and comfortable. Our ACS portfolio includes Automation and Control Products (controls for heating, cooling, indoor air quality, ventilation, humidification and home automation; advanced software applications for home/building control and optimization; sensors, switches, control systems and...

Page 330
measuring pressure, air flow, temperature, electrical current and, security and fire detection, access control and video surveillance systems); Building Solutions (installs, maintains and upgrades systems that keep buildings safe, comfortable and productive); and Process Solutions (provides a full ...

Page 331
systems); the Consumer Products Group (car care products including anti-freeze (Prestone(R)), filters (Fram(R)), spark plugs (Autolite(R)), and cleaners, waxes and additives (Holts(R)); and Friction Materials (friction materials and related brake system components (Bendix(R)). Transportation Systems...

Page 332
.... See Note 21 of Notes to Financial Statements for a discussion of management's judgments applied in the recognition and measurement of insurance recoveries for asbestos related liabilities. Defined Benefit Pension Plans We maintain defined benefit pension plans covering a majority of our employees

Page 333
.... 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 334
... of an additional minimum pension liability if the fair value of plan assets is less than the accumulated benefit obligation at the end of the plan year. In 2003, we recorded a non-cash adjustment to equity through accumulated other nonowner changes of $369 million ($604 million on a pretax...

Page 335
... accumulated other nonowner changes of $606 million ($956 million on a pretax basis) which increased the additional minimum pension liability. Equity market returns and interest rates significantly impact the funded status of our pension plans. Based on future plan asset performance and interest...

Page 336
..., any valuation allowance recorded against our deferred tax assets. Additionally, valuation allowances related to deferred tax assets can be impacted by changes to tax laws and future taxable income levels. In the event we determine that we will not be able to realize our deferred tax assets in the...

Page 337
(Dollars in Millions) 2003 2002 2001 Net sales ...$23,103 $22,274 $23,652 % change compared with prior year ...4% (6)% (5 31

Page 338
... percentage points in 2003 compared with 2002 due mainly to higher pension and other employee benefit expenses. Selling, general and administrative expenses as a percentage of sales decreased by 0.6 percentage points in 2002 compared with 2001 due mainly to a $106 million reduction in repositioning...

Page 339
...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. Loss on sale of non-strategic businesses...

Page 340
...details. This increase also resulted from an improvement in earnings of $23 million from joint ventures in our Specialty Materials and Automation and Control Solutions reportable segments and from income of $15 million resulting from exiting joint ventures in our Aerospace and Transportation Systems...

Page 341
... 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 and...

Page 342
... by the impact of higher pension expense and lower sales of higher-margin products and services, principally in our Aerospace and Automation and Control Solutions reportable segments. The increase of $0.15 loss per share in 2002 compared with 2001 resulted mainly from an increase in repositioning...

Page 343
... of accounting change ...$ 1,640 $ (945) $ (422 (1) Segment profit in 2001 includes pretax amortization of goodwill and indefinite-lived intangible assets of $204 million (Aerospace--$60 million, Automation and Control Solutions--$92 million, Specialty Materials--$32 million and Transportation...

Page 344
...sales of repair and overhaul services have improved in 2003 signaling increased maintenance and out-sourcing activity by the major airlines, discretionary spending by airlines for purchases of spare parts for replacements and upgrades continues to be weak. Air transport original equipment (OE) sales...

Page 345
... due mainly to lower sales of higher-margin commercial aftermarket products such as avionics upgrades and spare parts and contract losses. This decrease was partially offset by lower costs primarily from workforce reductions. Automation and Control Solutions (Dollars in Millions) 2003 2002 2001 Net...

Page 346
... to the benefits of repositioning actions, mainly workforce reductions. This increase was partially offset by the impact of lower sales volumes and pricing pressures, mainly in our Automation and Control Products and Building Solutions businesses. Specialty Materials (Dollars in Millions) 2003 2002...

Page 347
Materials segment profit in 2002 increased by 61 percent compared with 2001 due mainly to the absence of goodwill amortization expense in 2002 and the impact of higher volumes in our Electronic Materials and Nylon System businesses, lower raw material costs, and lower costs resulting from plant ...

Page 348
... due to higher build rates for medium and heavy-duty vehicles in Asia and North America. Sales for our Consumer Products Group and Friction Materials businesses also both increased by 2 percent due mainly to favorable foreign exchange. Trends which may impact Transportation Systems operating results...

Page 349
..., mainly for severance, were returned to income in 2003, due to fewer employee separations than originally anticipated associated with certain 2002 repositioning actions, resulting in reduced severance liabilities in our Automation and Control Solutions, Aerospace and Specialty Materials reportable...

Page 350
... to costs for the planned shutdown and consolidation of manufacturing plants in our Specialty Materials and Automation and Control Solutions reportable segments. Severance costs related to announced workforce reductions of approximately 8,100 manufacturing and administrative positions, which are...

Page 351
value of certain equity investments of $15 million. In 2001, we recognized other charges consisting of a settlement of the Litton Systems, Inc. litigation for $440 million, other probable and reasonably estimable legal and environmental liabilities of $249 million (see Note 21 of Notes to 38

Page 352
... General Electric and redeemed our $200 million 5 3/4% dealer remarketable securities due 2011, resulting in a loss of $6 million. The following tables provide details of the pretax impact of total net repositioning, litigation, business impairment and other charges by reportable segment. Aerospace...

Page 353
... ...--6 General Electric merger expenses ...--42 254 $1,430 $506 LIQUIDITY AND CAPITAL RESOURCES Cash Flow Summary Our cash flows from operating, investing and financing activities, as reflected in the Consolidated Statement of Cash Flows, are summarized as follows: (Dollars in Millions) 2003...

Page 354
... Solutions reportable segment in 2002, and reduced proceeds from sales of businesses of $46 million. Proceeds from business sales in 2003 resulted from the sale of certain non-core Specialty Materials (Engineering Plastics, Rudolstadt and Metglas) and Aerospace (Honeywell Aerospace Defense Services...

Page 355
Investors Service, Standard & Poor's and Fitch, Inc. are A-2, A and A+, respectively, for long-term debt and P-1, A-1 and F-1, respectively, for short-term debt. Our credit ratings by each of the three major debt-rating agencies reflect a "negative outlook" due principally to the lower operating ...

Page 356
... a group of banks, arranged by Citigroup Global Markets Inc. and J.P. Morgan Securities Inc., comprised of: (a) a $1.3 billion Five-Year Credit Agreement, with a $300 million letter of credit sub-limit and (b) a $1 billion 364-Day Credit Agreement. The credit agreements are maintained for general...

Page 357
Following is a summary of our significant contractual obligations and probable liability payments at December 31, 2003: 41

Page 358
... postretirement benefits (OPEB) obligations. We made voluntary contributions of $670 and $830 million ($700 million in Honeywell common stock and $130 million in cash) to our U.S. pension plans in 2003 and 2002, respectively. Future plan contributions are dependent upon actual plan asset returns and...

Page 359
... provides credit support to the purchasers of the receivable interest by limiting their losses in the event that a portion of the receivables sold becomes uncollectible. At December 31, 2003, our retained subordinated and undivided interests at risk were $174 and $321 million, respectively...

Page 360
... 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...

Page 361
...changes in interest or currency exchange rates. We manage our exposure to counterparty credit risk through specific minimum credit standards, diversification of counterparties, and procedures to monitor concentrations of credit risk. Our counterparties are substantial investment and commercial banks...

Page 362
... 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 363
cost increases for materials and labor have generally been low, and productivity enhancement programs, including repositioning actions and Six Sigma initiatives, have largely offset any impact. Recent Accounting Pronouncements See Note 1 of Notes to Financial Statements for a discussion of recent ...

Page 364
... 31 Dollars in Millions, Except Per Share Amounts) 2003 2002 2001 Net sales ...$23,103 $22,274 $23,652 Costs, expenses and other Cost of goods sold ...18,235 17,615 20,125 Selling, general and administrative expenses ...2,950 2,757 3,064 (Gain) loss on sale of non-strategic businesses ...(38) 124...

Page 365
CONSOLIDATED BALANCE SHEET Honeywell International Inc. December 31 Dollars in Millions) 2003 2002 ASSETS Current assets: Cash and cash equivalents ...$ 2,950 $ 2,021 Accounts, notes and other receivables ...3,643 3,264 Inventories ...2,939 2,953 Deferred income taxes ...1,526 1,301 Other current ...

Page 366
...Dollars in Millions) 2003 2002 2001 CASH FLOWS FROM OPERATING ACTIVITIES Net income (loss) ...$1,324 $ (220) $ (99) Adjustments to reconcile net income (loss) to net cash provided by operating activities: Cumulative effect of accounting change ...20 --(Gain) loss on sale of non-strategic businesses...

Page 367
... changes in shareowners' equity .. Common stock issued for employee savings and option plans (including related tax benefits of $19) ...75 9.3 182 Repurchases of common stock ...(1.9) (62) Cash dividends on common stock ($.75 per share) ...Other owner changes ...2 .4 8 BALANCE AT DECEMBER 31, 2003...

Page 368
...' equity .. 2,244 Common stock issued for employee savings and option plans (including related tax benefits of $19) ...257 Repurchases of common stock ...(62) Cash dividends on common stock ($.75 per share) ...(645) (645) Other owner changes ...10 BALANCE AT DECEMBER 31, 2003 ...$ (189) $10,129...

Page 369
... technology and 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. The following...

Page 370
basis over the expected period benefited by future cash inflows up to 25 years. 49

Page 371
...aircraft flight hours, number of landings, as well as actual aircraft retirements. See Note 13 for additional details. Environmental Expenditures Environmental expenditures that relate to current operations are expensed or capitalized as appropriate. Expenditures that relate to an existing condition...

Page 372
...resulting settlement values in the tort system. We continually...careful analysis of each individual issue with the assistance of outside legal counsel and, if applicable, other experts. In connection with the recognition of liabilities for asbestos related matters, we record asbestos related insurance...

Page 373
...SFAS No. 123. (Dollars in Millions, Except Per Share Amounts) 2003 2002 2001 Net income (loss), as reported ...$1,324 $ (220) $ (99) Deduct: Total stock-based employee compensation cost determined under fair value method for fixed stock option plans, net of related tax effects .. (48) (64) (85 Pro...

Page 374
...140, "Accounting for Transfers and Servicing of Financial Assets and Extinguishments of Liabilities". We sell interests in designated pools of trade accounts receivables to third parties. The receivables are removed from the Consolidated Balance Sheet at the time they are sold. The value assigned to...

Page 375
... number of common shares outstanding and all dilutive potential common shares outstanding. Use of Estimates The preparation of consolidated financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the reported...

Page 376
... 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 million and recognized an asset retirement...

Page 377
resulted in the recognition of a non-cash charge of $31 million ($20 million after-tax, or $0.02 per share) that is reported as a cumulative effect of an accounting change. This accounting change did not have a material impact on results of operations for 2003. Pro forma effects for 2002 and 2001 ...

Page 378
(Dollars in Millions) 2003 2002 2001 Cost of goods sold ...$272 $ 561 $2,134 Selling, general and administrative expenses ...4 45 151 Asbestos related litigation charges, net of insurance ...-1,548 159 Business impairment charges ...-877 145 Equity in (income) loss of affiliated companies ...2 13 ...

Page 379
... to costs for the planned shutdown and consolidation of manufacturing plants in our Specialty Materials and Automation and Control Solutions reportable segments. Severance costs related to announced workforce reductions of approximately 8,100 manufacturing and administrative positions, which are...

Page 380
... charges of $877 million related to businesses in our Specialty Materials and Automation and Control Solutions reportable segments, as well as our Friction Materials business. Based on current operating losses and deteriorating economic conditions in certain chemical and telecommunications end...

Page 381
...summary of non-strategic businesses sold: Year Ended December 31, 2003 Pretax After-tax (Dollars in Millions) Gain (Loss) Gain (Loss Specialty Materials--Engineering Plastics, Rudolstadt and Metglas ...$25 $(5) Aerospace--Honeywell Aerospace Defense Services ...13 9 38 $ 4 In 2003, we realized...

Page 382
... than book basis which resulted in an after-tax gain. The sales of these businesses reduced net sales and increased segment profit in 2002 compared with 2001 by approximately $500 and $31 million, respectively. NOTE 5--OTHER (INCOME) EXPENSE Years Ended December 31 Dollars in Millions) 2003 2002...

Page 383
... TAXES Income (loss) before taxes and cumulative effect of accounting change Years Ended December 31 Dollars in Millions) 2003 2002 2001 United States ...$ 925 $(1,262) $(751) Foreign ...715 317 329 1,640 $ (945) $(422 Tax expense (benefit) Years Ended December 31 Dollars in Millions) 2003...

Page 384
... of Friction Materials business from held for sale to held and used ...(6.6) --All other items--net ...1.1 (4.8) (1.5 18.0% (76.7)% (76.6 (1) Net of changes in valuation allowance. Deferred tax assets (liabilities) December 31 Dollars in Millions) 2003 2002 Deferred income taxes represent...

Page 385
... cumulative effect of accounting change ...$ (99) $ (99) Cumulative effect of accounting change Net income (loss) ...$ (99) $ (99 Average shares Average shares outstanding ...812,273,417 812,273,417 Dilutive securities issuable in connection with stock plans Total average shares ...812,273,417...

Page 386
... of accounting change Net income (loss) ...$ (0.12) $ (0.12 In 2003, the diluted earnings per share calculation excludes the effect of stock options when the options' exercise prices exceed the average market price of the common shares during the period. In 2003, the number of stock options...

Page 387
...10--INVENTORIES December 31 Dollars in Millions) 2003 2002 Raw materials ...$ 972 $ 936 Work in process ...802 804 Finished products ...1,311 1,361 3,085 3,101 Less--Progress payments ...(20) (28) --Reduction to LIFO cost basis ...(126) (120 2,939 $2,953 Inventories valued at LIFO amounted to...

Page 388
... in Millions) 2002 Acquisitions Divestitures Adjustment 2003 Aerospace ...$1,644 $ -$ (3) $-$1,641 Automation and Control Solutions ...2,678 136 -18 2,832 Specialty Materials ...849 5 (89) 16 781 Transportation Systems ...527 --8 535 5,698 $141 $(92) $42 $5,789 Intangible assets are comprised...

Page 389
... Income taxes ...145 38 Environmental costs ...90 75 Asbestos related liabilities ...730 741 Severance ...171 325 Product warranties and performance guarantees ...242 179 Other ...2,064 2,147 4,344 $4,403 NOTE 15--LONG-TERM DEBT AND CREDIT AGREEMENTS December 31 Dollars in Millions) 2003 2002...

Page 390
... a group of banks, arranged by Citigroup Global Markets Inc. and J.P. Morgan Securities Inc., comprised of: (a) a $1.3 billion Five-Year Credit Agreement, with a $300 million letter of credit sub-limit and (b) a $1 billion 364-Day Credit Agreement. The credit agreements are maintained for general...

Page 391
... 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...

Page 392
... and to market risk related to changes in interest or currency exchange rates. We manage our exposure to counterparty credit risk through specific minimum credit standards, diversification of counter parties, and procedures to monitor concentrations of credit risk. Our counterparties are substantial...

Page 393
... 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. Summarized below are the carrying values and fair values of our other financial instruments at December 31, 2003...

Page 394
61

Page 395
... in the Consolidated Statement of Shareowners' Equity. The changes in Accumulated Other Nonowner Changes are as follows: After(Dollars in Millions) Pretax Tax Tax YEAR ENDED DECEMBER 31, 2003 Foreign exchange translation adjustments ...$ 551 $ -$ 551 Change in fair value of effective cash flow...

Page 396
The components of Accumulated Other Nonowner Changes are as follows: December 31 Dollars in Millions) 2003 2002 2001 Cumulative foreign exchange translation adjustments ...$ 138 $ (413) $(723) Fair value of effective cash flow hedges ...17 17 (5) Minimum pension liability ...(344) (713) (107 189)...

Page 397
... stock options, non-qualified stock options and stock appreciation rights to officers and employees. Fixed Stock Options The exercise price, term and other conditions applicable to each option granted under the stock plans are generally determined by the Management Development and Compensation...

Page 398
$50.13-$66.73 ...7,733,113 5.9 62.62 7,730,713 62.62 54,290,346 6.1 37.68 40,547,240 41.14 (1) Average remaining contractual life in years. 63

Page 399
...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 400
... 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 excavation and transport for offsite disposal of approximately one million tons of chromium residue...

Page 401
...such a remedy, such outcome could have a material adverse impact on our consolidated results of operations and operating cash flows in the periods recognized or paid. During 2003, three incidents occurred at Honeywell's Baton Rouge, Louisiana chemical plant including a release of chlorine, a release...

Page 402

Page 403
...filing, we paid NARCO's parent company $40 million and agreed to provide NARCO with up to $20 million in financing. We also agreed to pay $20 million to NARCO's parent company upon the filing of a plan of reorganization for NARCO acceptable to Honeywell, and to pay NARCO's parent company $40 million...

Page 404
66

Page 405
... 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 encapsulated form. There is a group of...

Page 406
67

Page 407
...number of insurance policies written by dozens of insurance companies in both the domestic insurance market and the London excess market. Although Honeywell has approximately $1.9 billion in insurance, there are gaps in our coverage due to insurance company insolvencies, the comprehensive policy buy...

Page 408
... and paid claims related to the estimated liabilities for pending claims. In the fourth quarter of 2002, we recorded a charge of $167 million consisting of a $131 million reserve for the then contemplated sale of Bendix to Federal-Mogul, our estimate of asbestos related liability net of insurance...

Page 409
...all claims by Honeywell against Equitas arising from asbestos claims related to NARCO and Bendix. NARCO and Bendix asbestos related balances are included in the following balance sheet accounts: December 31 Dollars in Millions) 2003 2002 Other current assets ...$ 130 $ 320 Insurance recoveries for...

Page 410
.../guarantee claims ...(192) (140) (194 End of year ...$ 275 $ 217 $ 217 Product warranties and product performance guarantees are included in the following balance sheet accounts: December 31 Dollars in Millions) 2003 2002 Accrued liabilities ...$242 $179 Other liabilities ...33 38 275 $217...

Page 411
... balance sheet impact, including the benefit obligations, assets and funded status associated with our significant pension and other postretirement benefit plans at December 31, 2003 and 2002. Other Postretirement Pension Benefits Benefits Dollars in Millions) 2003 2002 2003 2002 Change in benefit...

Page 412
-------------------------------------------------------------------------------------Net amount recognized ...$ 3,136 $ 2,541 $(1,857) $(1,866) ====================================================================================== 70

Page 413
...) --Additional minimum liability (3) ...(453) (757) --Accumulated other nonowner changes ...485 1,089 Net amount recognized ...$3,136 $2,541 $(1,857) $(1,866 (1) (2) (3) Included in Other Assets--Non-Current on Consolidated Balance Sheet. Excludes Non U.S. plans of $23 and $15 million in 2003...

Page 414
...00% ---Actuarial assumptions used to determine net periodic benefit cost (income) for years ended December 31: Discount rate ...6.75% 7.25% 7.75% 6.75% 7.25% 7.75% Expected rate of return on plan assets ...9.00% 10.00% 10.00% ---Expected annual rate of compensation increase ...4.00% 4.00% 4.00 71

Page 415
... plan asset returns over varying long-term 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. Other Postretirement Benefits December 31 2003 2002 Assumed health care...

Page 416
...Millions) Increase Decrease Effect on total of service and interest cost components .. $ 8 $ (7) Effect on postretirement benefit obligation ...$127 $(115 In December 2003, the Medicare Prescription Drug, Improvement and Modernization Act of 2003 (the Act) was signed into law. The Act will offer...

Page 417
.... Transportation Systems includes Honeywell Turbo Technologies (turbochargers and charge-air and thermal systems); the Consumer Products Group (car care products including anti-freeze, filters, spark plugs, cleaners, waxes and additives); and Friction Materials (friction materials and related brake...

Page 418
...23,103 $22,274 $23,652 =================================================================================== Depreciation Aerospace ...$ 215 $ 224 $ 232 Automation and Control Solutions ...143 167 178 Specialty Materials ...133 180 199 Transportation Systems ...80 66 78 Corporate ...24 34 37...

Page 419
... December 31 Dollars in Millions) 2003 2002 2001 Goodwill and indefinite-lived intangible asset amortization Aerospace ...$ -$ -$ 60 Automation and Control Solutions ...--92 Specialty Materials ...--32 Transportation Systems ...--20 204 Segment profit Aerospace ...$1,221 $1,308 $1,599 Automation...

Page 420
...25--SUPPLEMENTAL CASH FLOW INFORMATION Years Ended December 31 Dollars in Millions) 2003 2002 2001 Interest paid, net of amounts capitalized ...$367 $352 $297 Income taxes paid, net of refunds ...31 (14) 79 Non-cash investing and financing activities: Common stock contributed to U.S. pension plans...

Page 421
... per share, on adjustments to sales of non-strategic businesses in the third quarter of 2003. Includes a $53 million provision for net repositioning charges and business impairment charges of $43 million for the write-down of long-lived assets of our Friction Materials business and a chemical...

Page 422
in gross profit was $127 million. (12) Includes an after-tax gain of $98 million, or $0.12 per share, on the sales of our Pharmaceutical Fine Chemicals and Automation and Control's Consumer Products businesses. (13) Includes a $444 million provision for net repositioning and other charges, business ...

Page 423
...Officer REPORT OF INDEPENDENT AUDITORS TO THE BOARD OF DIRECTORS AND SHAREOWNERS OF HONEYWELL INTERNATIONAL INC. In our opinion, the accompanying consolidated balance sheet and the related consolidated statements of operations, of shareowners' equity and of cash flows present fairly, in all material...

Page 424

Page 425
... Properties Inc...Honeywell Specialty Wax & Additives Inc...Honeywell Specialty Materials, L.L.C...Grimes Aerospace Company...Prestone Products Corporation... The names of Honeywell's other consolidated subsidiaries, which are primarily totally-held by Honeywell, are not listed because all...

Page 426

Page 427
..., which is incorporated in this Annual Report on Form 10-K. We also consent to the incorporation by reference of our report dated February 5, 2004 relating to the financial statement schedule, which appears in this Form 10-K. /s/ PRICEWATERHOUSECOOPERS LLP Florham Park, New Jersey March 4, 2004

Page 428

Page 429
...and stead in any and all capacities, (i) to sign the Company's Annual Report on Form 10-K under the Securities Exchange Act of 1934 for the year ended December 31, 2003, (ii) to sign any amendment to the Annual Report referred to in (i) above, and (iii) to file the documents described in (i) and (ii...

Page 430
... employees, and (b) on Form S-3 or other appropriate form for the registration of shares of the Company's Common Stock to be offered under the Dividend Reinvestment and Share Purchase Plan of the Company and any plan which is a successor to such plan. I hereby grant to each such attorney full power...

Page 431
/s/ Marshall N. Carter Marshall N. Carter, Director /s/ Jaime Chico Pardo Jaime Chico Pardo, Director /s/ Clive R. Hollick Clive R. Hollick, Director /s/ James J. Howard James J. Howard, Director /s/ Russell E. Palmer Russell E. Palmer, Director /s/ Ivan G. Seidenberg Ivan G. Seidenberg, ...

Page 432
...or accompanied by warrants to purchase debt or equity securities of the Company, it subsidiaries, joint ventures or affiliates or another person or entity, provided the number of shares of the Company's Common Stock into or for which such debt securities may be converted or exchanged or which may be...

Page 433
This Power of Attorney may be 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. /s/ Hans W. Becherer Hans W. Becherer, Director /s/ Gordon M. Bethune Gordon M. Bethune, ...

Page 434
...and stead in any and all capacities, (i) to sign the Company's Annual Report on Form 10-K under the Securities Exchange Act of 1934 for the year ended December 31, 2003, (ii) to sign any amendment to the Annual Report referred to in (i) above, and (iii) to file the documents described in (i) and (ii...

Page 435
... employees, and (b) on Form S-3 or other appropriate form for the registration of shares of the Company's Common Stock to be offered under the Dividend Reinvestment and Share Purchase Plan of the Company and any plan which is a successor to such plan. I hereby grant to each such attorney full power...

Page 436
...or accompanied by warrants to purchase debt or equity securities of the Company, it subsidiaries, joint ventures or affiliates or another person or entity, provided the number of shares of the Company's Common Stock into or for which such debt securities may be converted or exchanged or which may be...

Page 437

Page 438
..., Chief Executive Officer, certify that: 1. I have reviewed this Annual Report on Form 10-K of Honeywell International Inc.; 2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light...

Page 439

Page 440
..., Chief Financial Officer, certify that: 1. I have reviewed this Annual Report on Form 10-K of Honeywell International Inc.; 2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light...

Page 441

Page 442
... In connection with the Annual Report of Honeywell International Inc. (the Company) on Form 10-K for the year ending December 31, 2003 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 443

Page 444
... connection with the Annual Report of Honeywell International Inc. (the Company) on Form 10-K for the year ending December 31, 2003 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...

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