________________________________________________________________________________
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                                 UNITED STATES
                       SECURITIES AND EXCHANGE COMMISSION
                             WASHINGTON, D.C. 20549
                                   FORM 10-K
               [x] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d)
                     OF THE SECURITIES EXCHANGE ACT OF 1934
                  For the fiscal year ended December 31, 2002
                                       OR

             [ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d)
                     OF THE SECURITIES EXCHANGE ACT OF 1934
                    For the transition period from    to
                         Commission file number 1-8974

                          HONEYWELL INTERNATIONAL INC.

             (Exact name of registrant as specified in its charter)

                                                                          
               DELAWARE                                                   22-2640650
- ---------------------------------------                      ------------------------------------
    (State or other jurisdiction of                                    (I.R.S. Employer
    incorporation or organization)                                   Identification No.)

           101 Columbia Road
             P.O. Box 4000
        Morristown, New Jersey                                            07962-2497
- ---------------------------------------                      ------------------------------------
    (Address of principal executive                                       (Zip Code)
                offices)

Registrant's telephone number, including area code (973)455-2000
Securities registered pursuant to Section 12(b) of the Act:

                                                          
                                                                    Name of Each Exchange
          Title of Each Class                                        on Which Registered
- ---------------------------------------                      ------------------------------------
Common Stock, par value $1 per share*                              New York Stock Exchange
                                                                    Chicago Stock Exchange
                                                                       Pacific Exchange
                                                                   New York Stock Exchange
9.20% Debentures due February 15, 2003                             New York Stock Exchange
Zero Coupon Serial Bonds due 2009                                  New York Stock Exchange
9 1/2% Debentures due June 1, 2016                                 New York Stock Exchange

- ---------
*  The common stock is also listed for trading on the London stock exchange.

Securities registered pursuant to Section 12(g) of the Act:  None

Indicate by check mark whether the Registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the Registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days. Yes X No _

Indicate by check mark if disclosure of delinquent filers pursuant to Item 405
of Regulation S-K is not contained herein, and will not be contained, to the
best of Registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K [ ]

Indicate by check mark whether the Registrant is an accelerated filer (as
defined in Rule 12b-2 of the Securities Exchange Act of 1934). Yes X No _

The aggregate market value of the voting stock held by nonaffiliates of the
Registrant was approximately $28.9 billion at June 30, 2002.

There were 855,585,367 shares of Common Stock outstanding at February 21, 2003.

________________________________________________________________________________
________________________________________________________________________________

                               TABLE OF CONTENTS

          ITEM                                                                                             PAGE
          ----                                                                                             ----
                                                                                                     
Part I.    1  Business....................................................................................    1
           2  Properties..................................................................................   10
           3  Legal Proceedings...........................................................................   10
           4  Submission of Matters to a Vote of Security Holders.........................................   14
           Executive Officers of the Registrant...........................................................   14

Part II.   5  Market for Registrant's Common Equity and Related Stockholder Matters.......................   16
           6  Selected Financial Data.....................................................................   16
           7  Management's Discussion and Analysis of Financial Condition and Results of Operations.......   16
           7A Quantitative and Qualitative Disclosures About Market Risk..................................   16
           8  Financial Statements and Supplementary Data.................................................   16
           9  Changes in and Disagreements with Accountants on Accounting and Financial Disclosure........   16

Part III. 10  Directors and Executive Officers of the Registrant..........................................   16
          11  Executive Compensation......................................................................   17
          12  Security Ownership of Certain Beneficial Owners and Management and Related Stockholder
                  Matters.................................................................................   17
          13  Certain Relationships and Related Transactions..............................................   17
          14  Controls and Procedures.....................................................................   17
          15  [Reserved]..................................................................................   17
          16  Principal Accountant Fees and Services......................................................   17

Part IV.  17  Exhibits, Financial Statement Schedules, and Reports on Form 8-K............................   18

Signatures................................................................................................   19

- ---------

    This report contains certain statements that may be deemed 'forward-looking
statements' within the meaning of Section 21E of the Securities Exchange Act of
1934. All statements, other than statements of historical fact, that address
activities, events or developments that we or our management intends, expects,
projects, believes or anticipates will or may occur in the future are
forward-looking statements. Such statements are based upon certain assumptions
and assessments made by our management in light of their experience and their
perception of historical trends, current conditions, expected future
developments and other factors they believe to be appropriate. The
forward-looking statements included in this report are also subject to a number
of material risks and uncertainties, including but not limited to economic,
competitive, governmental and technological factors affecting our operations,
markets, products, services and prices. Such forward-looking statements are not
guarantees of future performance, and actual results, developments and business
decisions may differ from those envisaged by such forward-looking statements.

                                    PART I.

ITEM 1. BUSINESS

    Honeywell International Inc. (Honeywell) is a diversified 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 Delaware in 1985.

MAJOR BUSINESSES

    We globally manage our business operations through strategic business units,
which have been aggregated under four reportable segments: Aerospace, Automation
and Control Solutions, Specialty Materials and Transportation and Power Systems.
Financial information related to our reportable segments is included in Note 23
of Notes to Financial Statements in our 2002 Annual Report to Shareowners which
is incorporated herein by reference.

    Following is a description of our strategic business units:

STRATEGIC
BUSINESS UNITS       PRODUCT CLASSES             MAJOR PRODUCTS/SERVICES    MAJOR CUSTOMERS/USES            KEY COMPETITORS
- --------------       ---------------             -----------------------    --------------------            ---------------

AEROSPACE

Engines, Systems     Turbine propulsion          TFE731 turbofan            Business, regional              United Technologies
and Services         engines                     TPE331 turboprop            and military trainer aircraft   (Pratt & Whitney
                                                 TFE1042 turbofan           Commercial and military          Canada)
                                                 F124 turbofan               helicopters                    Rolls Royce/
                                                 LF502 turbofan             Military vehicles                Allison
                                                 LF507 turbofan                                             Turbomeca
                                                 CFE738 turbofan                                            Williams
                                                 AS907 turbofan
                                                 T53, T55 turboshaft
                                                 LT101 turboshaft
                                                 T800 turboshaft
                                                 AGT1500 turboshaft
                                                 LV 100 turboshaft
                                                 Retrofits
                                                 Repair, overhaul and
                                                  spare parts
                     ----------------------------------------------------------------------------------------------------------
                     Auxiliary power units       Airborne auxiliary         Commercial, regional,           United Technologies
                     (APUs)                       power units                business and                    (Pratt & Whitney
                                                 Jet fuel starters           military aircraft               Canada)
                                                 Secondary power            Ground power                    United Technologies
                                                  systems                                                    (Hamilton
                                                 Ground power units                                          Sundstrand)
                                                 Repair, overhaul and
                                                  spare parts
                     ----------------------------------------------------------------------------------------------------------
                     Environmental control       Air management systems:    Commercial, regional            Auxilec
                     systems                      Air conditioning           and general                    Barber Colman
                                                  Bleed air                  aviation aircraft              Dukes
                                                  Cabin pressure control    Military aircraft               Eaton-Vickers
                                                  Air purification and      Ground vehicles                 Liebherr
                                                    treatment               Spacecraft                      Litton Breathing
                                                 Electrical power systems:                                   Systems
                                                  Power distribution and                                    Pacific Scientific
                                                    control                                                 Parker Hannifin
                                                  Emergency power                                           United Technologies
                                                    generation                                               (Hamilton
                                                 Repair, overhaul and                                        Sundstrand)
                                                  spare parts                                               Smiths
                                                                                                            TAT
                                                                                                            Goodrich (Lucas
                                                                                                             Aerospace)
                     ----------------------------------------------------------------------------------------------------------
                     Engine systems and          Electronic and             Commercial, regional and        BAE Controls
                     accessories                  hydromechanical            general aviation aircraft      Goodrich
                                                  fuel controls             Military aircraft                (Chandler-Evans)
                                                 Engine start systems                                       Parker Hannifin
                                                 Electronic engine                                          Goodrich (Lucas
                                                  controls                                                   Aerospace)
                                                 Sensors                                                    United Technologies
                                                 Electric and pneumatic                                      (Hamilton
                                                  power generation systems                                   Sundstrand)
                                                 Thrust reverser
                                                  actuation, pneumatic and
                                                  electric
                     ----------------------------------------------------------------------------------------------------------

                                       1

STRATEGIC
BUSINESS UNITS       PRODUCT CLASSES             MAJOR PRODUCTS/SERVICES    MAJOR CUSTOMERS/USES            KEY COMPETITORS
- --------------       ---------------             -----------------------    --------------------            ---------------
                                                                                                
                     Aircraft hardware           Consumable hardware,       Commercial, regional, business  Anixter (Pentacon)
                     distribution                 including fasteners,       and military aviation          Arrow Pemco
                                                  bearings, bolts and        aircraft                       Avnet
                                                  o-rings                                                   BE Aerospace (M&M
                                                 Adhesives, sealants,                                        Aerospace)
                                                  lubricants, cleaners                                      Dixie
                                                  and paints                                                Fairchild Direct
                                                 Electrical connectors,                                     Wesco Aircraft
                                                  switches, relays and
                                                  circuit breakers
                                                 Value-added services,
                                                  repair and overhaul
                                                  kitting and point-of-use
                                                  replenishment
- -------------------------------------------------------------------------------------------------------------------------------
Aerospace            Avionics systems            Flight safety systems:     Commercial, business            Airshow, Inc.
Electronic                                        Enhanced Ground            and general aviation aircraft  BAE
Systems                                             Proximity Warning       Government aviation             Boeing/Jeppesen
                                                    Systems (EGPWS)                                         Century
                                                  Traffic Alert and                                         Garmin
                                                    Collision Avoidance                                     Goodrich
                                                    Systems (TCAS)                                          Kaiser
                                                  Windshear detection                                       L3
                                                    systems                                                 Lockheed Martin
                                                  Flight data and cockpit                                   Northrop Grumman
                                                    voice recorders                                         Rockwell Collins
                                                  Weather Radar                                             Smiths
                                                 Communication, navigation                                  S-tec
                                                  and surveillance                                          Thales
                                                  systems:                                                  Trimble/Terra
                                                  Weather radar                                             Universal Avionics
                                                  Navigation                                                Universal Weather
                                                    & communication radios
                                                  Air-to-ground telephones
                                                  Global positioning
                                                    systems
                                                  Automatic flight control
                                                    systems
                                                  Satellite systems
                                                  Surveillance systems
                                                 Integrated systems
                                                 Flight management systems
                                                 Cockpit display systems
                                                 Data management and
                                                  aircraft performance
                                                  monitoring systems
                                                 Vehicle management
                                                  systems
                                                 Aircraft information
                                                  systems
                                                 Network file servers
                                                 Wireless network
                                                  transceivers
                                                 Satellite TV systems
                                                 Audio/Video equipment
                                                 Weather information
                                                  network
                                                 Navigation database
                                                  information
                                                 Cabin management systems
                                                 Vibration detection and
                                                  monitoring
                                                 Mission management
                                                  systems
                                                 Tactical data management
                                                  systems
                     ----------------------------------------------------------------------------------------------------------
                     Airfield, Obstruction, and  Inset lights               Airports                        Safegate
                     Aircraft lighting           Control and monitoring     Commercial, regional, business  Siemens
                                                  systems                    and military aviation
                                                 Regulators                  aircraft
                                                 Tower and obstruction
                                                  lights
                                                 Interior and exterior
                                                  aircraft lighting
                                                 Visual docking guidance
                                                  systems
                     ----------------------------------------------------------------------------------------------------------

                                       2

STRATEGIC
BUSINESS UNITS       PRODUCT CLASSES             MAJOR PRODUCTS/SERVICES    MAJOR CUSTOMERS/USES            KEY COMPETITORS
- --------------       ---------------             -----------------------    --------------------            ---------------
                                                                                                
                     Inertial sensor             Inertial sensor systems    Military and                    Astronautics-
                                                  for guidance,              commercial vehicles             Kearfott
                                                  stabilization,            Commercial spacecraft           BAE
                                                  navigation and control     and launch vehicles            Ball
                                                 Gyroscopes,                Commercial, regional, business  GEC
                                                  accelerometers, inertial   and military aircraft          L3 Com
                                                  measurement units and     Transportation                  KVH
                                                  thermal switches          Missiles                        Northrop Grumman
                                                                            Munitions                       Rockwell
                                                                                                            Smiths
                     ----------------------------------------------------------------------------------------------------------
                     Automatic test              EW ATE                     Boeing                          Northrop Grumman
                     equipment                   Avionics ATE               USAF                            Lockheed
                                                 Vehicle health
                                                 Management
                     ----------------------------------------------------------------------------------------------------------
                     Control products            Radar altimeters           Military aircraft               Ball Brothers
                                                 Pressure products          Missiles, UAVs                  BAE
                                                 Air data products          Commercial                      Druck
                                                 Thermal switches            applications                   Goodrich
                                                 Magnetic sensors                                           Solarton
                                                 RF sensors                                                 NavCom
                                                                                                            Rosemount
                                                                                                            Northrop Grumman
                     ----------------------------------------------------------------------------------------------------------
                     Space products and          Guidance subsystems        Commercial spacecraft           BAE
                     subsystems                  Control subsystems         DOD                             Ithaco
                                                 Processing subsystems      FAA                             L3
                                                 Radiation hardended        NASA                            Northrop Grumman
                                                  electronics and                                           Raytheon
                                                  integrated circuits
                                                 GPS-based range safety
                                                  systems
                     ----------------------------------------------------------------------------------------------------------
                     Management and technical    Maintenance/operation      U.S. and foreign government     Boeing
                     services                     and provision of space     space communications,          Computer Sciences
                                                  systems, services          logistics and information      Dyncorp
                                                  and facilities             services                       ITT
                                                 Systems engineering        Commercial space ground         Lockheed Martin
                                                  and integration            segment systems and services   Raytheon
                                                 Information technology     Local governments               SAIC
                                                  services                                                  United Space
                                                 Logistics and sustainment                                   Alliance
- -------------------------------------------------------------------------------------------------------------------------------
Aircraft Landing     Landing systems             Wheels and brakes          Commercial and                  Aircraft Braking
Systems                                          Friction products           military aircraft               Systems
                                                 Wheel and brake                                            Dunlop
                                                  overhaul services                                         Goodrich
                                                                                                            Messier-Bugatti
- -------------------------------------------------------------------------------------------------------------------------------
Federal              Management services         Maintenance/               U.S. government                 Bechtel
Manufacturing &                                   operation of facilities                                   Lockheed Martin
Technologies                                                                                                The Washington
                                                                                                             Group
- -------------------------------------------------------------------------------------------------------------------------------

                                       3

STRATEGIC
BUSINESS UNITS       PRODUCT CLASSES             MAJOR PRODUCTS/SERVICES    MAJOR CUSTOMERS/USES            KEY COMPETITORS
- --------------       ---------------             -----------------------    --------------------            ---------------
                                                                                                
AUTOMATION AND CONTROL SOLUTIONS

Automation and       Control Products            Heating, ventilating and   Original equipment              Carrier
 Control Products                                 air conditioning           manufacturers (OEMs)           Cherry
                                                  controls and components   Distributors                    Danfoss
                                                  for homes and buildings   Contractors                     Eaton
                                                 Indoor air quality         Retailers                       Emerson
                                                  products including        System integrators              Endruss & Hauser
                                                  zoning, air cleaners,     Commercial customers and        Holmes
                                                  humidification, heat and   homeowners served by the       Invensys
                                                  energy recovery            distributor, wholesaler,       Johnson Controls
                                                  ventilators                contractor, retail and         Kavlico
                                                 Controls plus integrated    utility channels               Motorola
                                                  electronic systems for    Package and materials handling  Omron
                                                  burners, boilers and       operations                     Siemens
                                                  furnaces                  Appliance manufacturers         SPX (EST)
                                                 Consumer household         Automotive companies            Yokogawa
                                                  products including        Aviation companies
                                                  humidifiers and           Food and beverage processors
                                                  thermostats               Medical equipment
                                                 Water controls             Heat treat processors
                                                 Sensors, measurement,      Computer and business
                                                  control and industrial     equipment manufacturers
                                                  components                Data acquisition companies
                                                 Process control
                                                  instrumentation
                                                 Field instrumentation
                                                 Analytical
                                                  instrumentation
                                                 Recorders
                                                 Controllers
                                                 Datacom components
                     ----------------------------------------------------------------------------------------------------------
                     Security and fire           Security products and      OEMs                            Bosch
                     products and services        systems                   Retailers                       GE (Interlogix)
                                                 Fire products and systems  Distributors                    Pelco
                                                 Access controls and        Commercial customers            Phillips
                                                  closed circuit             and homeowners served by the   Siemens
                                                  television                 distributor, wholesaler,       SPX (EST)
                                                                             contractor, retail and         Tyco
                                                                             utility channels
- -------------------------------------------------------------------------------------------------------------------------------
Industry Solutions   Industrial automation       Advanced control software  Refining and petrochemical      Asea Brown Boveri
                     solutions                    and industrial             companies                      Aspentech
                                                  automation systems for    Chemical manufacturers          Emerson (Fisher-
                                                  control and monitoring    Oil and gas producers            Rosemount)
                                                  of continuous, batch and  Food and beverage processors    Invensys
                                                  hybrid operations         Pharmaceutical companies        Siemens
                                                 Production management      Utilities                       Yokogawa
                                                  software                  Film and coated producers
                                                 Communications systems     Pulp and paper industry
                                                  for Industrial Control    Continuous web producers in
                                                  equipment and systems      the paper, plastics, metals,
                                                 Consulting, networking      rubber, non-wovens and
                                                  engineering and            printing industries
                                                  installation
- -------------------------------------------------------------------------------------------------------------------------------
Service              Solutions and services      HVAC and building control  Building managers and owners    GroupMac
                                                  solutions and services    Contractors, architects and     Invensys
                                                 Energy management           developers                     Johnson Controls
                                                  solutions and services    Consulting engineers            Local contractors
                                                 Security 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
                                                 Critical environment
                                                  control solutions and
                                                  services
                                                 Aftermarket maintenance,   See Industry Solutions above    See Industry
                                                  repair and upgrade for                                     Solutions above
                                                  Industry Solutions
                                                  projects
- -------------------------------------------------------------------------------------------------------------------------------

                                       4

STRATEGIC
BUSINESS UNITS       PRODUCT CLASSES             MAJOR PRODUCTS/SERVICES    MAJOR CUSTOMERS/USES            KEY COMPETITORS
- --------------       ---------------             -----------------------    --------------------            ---------------
                                                                                                
SPECIALTY MATERIALS

Specialty Materials  Nylon products and          Nylon filament and         Commercial, residential and     BASF
                     services                     staple yarns               specialty carpet markets       Bayer
                                                 Bulk continuous            Nylon for fibers,               DSM
                                                  filament                   engineered resins and film     DuPont
                                                 Nylon polymer              Fertilizer ingredients          EMS
                                                 Caprolactam                Specialty chemicals             Enichem
                                                 Ammonium sulfate           Vitamins                        Hoechst
                                                 Cyclohexanol               Paper milling                   Kolon
                                                 Cyclohexanone              Food and pharmaceutical         Monsanto
                                                 Sulfuric acid               packaging                      Rexam Custom
                                                 Ammonia                    Housings (e.g., electric hand   Rhodia
                                                 Thermoplastic nylon         tools, chain saws)             Solutia
                                                 Thermoplastic alloys       Industrial applications         Toyoto
                                                  and blends                Automotive components           UBE
                                                 Post-consumer              Office furniture
                                                  recycled PET resins       Electrical and electronics
                                                 Cast nylon
                                                 Biaxially oriented nylon
                                                  film
                                                 Fluoropolymer film
                     ----------------------------------------------------------------------------------------------------------
                     Performance fibers          Industrial nylon and       Passenger car and truck tires   Acordis
                                                  polyester yarns           Passenger car and light truck   Akra
                                                 Extended-chain              seatbelts and airbags          DSM
                                                  polyethylene composites   Broad woven fabrics             DuPont
                                                                            Ropes and mechanical            Hyosung
                                                                             rubber goods                   Kolon
                                                                            Luggage                         Kosa
                                                                            Sports gear                     Solutia
                                                                            Bullet resistant vests,         Teijin
                                                                             helmets and heavy armor
                                                                            Cut-resistant workwear
                                                                            Sailcloth
                                                                            Cordage
                     ----------------------------------------------------------------------------------------------------------
                     Fluorocarbons               Genetron'r' refrigerants,  Refrigeration                   Atofina
                                                  aerosol and               Air conditioning                DuPont
                                                  insulation foam blowing   Polyurethane foam               INEOS Fluor
                                                  agents                    Precision cleaning              Solvay
                                                 Genesolv'r' solvents       Optical
                                                 Oxyfume sterilant gases    Metalworking
                                                 Ennovate 3000 blowing      Hospitals
                                                  agent for refrigeration   Medical equipment
                                                  insulation                 manufacturers
                     ----------------------------------------------------------------------------------------------------------
                     Hydrofluoric acid (HF)      Anhydrous and aqueous      Fluorocarbons                   Ashland
                                                  hydrofluoric acid         Steel                           Atofina
                                                                            Oil refining                    DuPont
                                                                            Chemical intermediates          E. Merck
                                                                                                            Hashimoto
                                                                                                            Norfluor
                                                                                                            Quimica Fluor
                     ----------------------------------------------------------------------------------------------------------
                     Fluorine specialties        Sulfur hexafluoride        Electric utilities              Air Products
                                                   (SF[u]6)                 Magnesium                       Asahi Glass
                                                 Iodine pentafluoride       Gear manufacturers              Atofina
                                                   (IF[u]5)                                                 Ausimont
                                                 Antimony pentafluoride                                     Kanto Denko Kogyo
                                                   (SbF[u]5)                                                Solvay Fluor
                     ----------------------------------------------------------------------------------------------------------
                     Nuclear services            UF[u]6 conversion services Nuclear fuel                    British Nuclear
                                                                            Electric utilities               Fuels
                                                                                                            Cameco
                                                                                                            Cogema
                                                                                                            Tennex
                     ----------------------------------------------------------------------------------------------------------
                     Life sciences               Active pharmaceutical      Agrichemicals                   Avecia
                                                  ingredients               Pharmaceuticals                 Degussa
                                                 Oxime-based fine           Biotech                         DSM
                                                  chemicals                                                 Lonza
                                                 Fluoroaromatics
                                                 Bromoaromatics
                     ----------------------------------------------------------------------------------------------------------

                                       5

STRATEGIC
BUSINESS UNITS       PRODUCT CLASSES             MAJOR PRODUCTS/SERVICES    MAJOR CUSTOMERS/USES            KEY COMPETITORS
- --------------       ---------------             -----------------------    --------------------            ---------------
                                                                                                
                     Electronic chemicals        Ultra high purity HF       Semiconductors                  Ashland
                                                 Solvents                                                   Arch
                                                 Inorganic acids                                            E. Merck
                                                 High purity solvents                                       Sigma Aldrich
                     ----------------------------------------------------------------------------------------------------------
                     Performance chemicals       HF derivatives             Diverse by product type         Atotech
                       Imaging chemicals         Fluoroaromatics                                            BASF
                       Chemical processing       Phosphors                                                  Solvay
                       Display chemicals         Catalysts
                       Surface treatment         Oxime silanes
                       Catalysts                 Hydroxylamine
                       Sealants
                     ----------------------------------------------------------------------------------------------------------
                     Specialty waxes             Polyethylene waxes         Coatings                        BASF
                                                 Petroleum waxes and        Inks                            Clariant
                                                  blends                    Candles                         Eastman
                                                                            Tire/Rubber                     Exxon
                                                                            Personal care                   IGI
                                                                            Packaging                       Leuna
                                                                                                            Schumann-Sasol
                     ----------------------------------------------------------------------------------------------------------
                     Specialty additives         Polyethylene waxes         PVC                             Eastman
                                                 Petroleum waxes and        Plastics                        Henkel
                                                  blends                    Reflective coatings             PolyOne
                                                 PVC lubricant systems
                                                 Plastic additives
                                                 Luminescent photodyes
                     ----------------------------------------------------------------------------------------------------------
                     Wafer                       Interconnect-              Semiconductors                  Applied Materials
                     fabrication                  dielectrics               Microelectronics                Dow Chemical
                     materials and               Interconnect-metals        Telecommunications              Dow Corning
                     services                    Semiconductor packaging                                    Japan Energy
                                                  materials                                                 JSR
                                                 Advanced polymers                                          Material Research
                                                 Sapphire substrates                                        Tokyo-Ohka
                                                 Anti-reflective coatings                                   Tosoh SMD
                                                 Global services                                            VMC/Ulvac
                     ----------------------------------------------------------------------------------------------------------
                     Specialty                   Amorphous metal ribbons    Electrical components           Allegheny Ludlum
                     electronic                   and components            Distribution and industrial     Amotech YuYu
                     materials                                               transformers                   AM&T
                                                                            High frequency                  Hitachi Metals
                                                                             magnetics                      Kawasaki Steel
                                                                            Metal joining                   Morgan/VAC
                                                                            Theft deterrent                 Toshiba
                                                                             systems
                                                                            Printed circuit
                                                                             boards
                     ----------------------------------------------------------------------------------------------------------
                     UOP (50%-owned joint        Processes                  Petroleum,                      ABB Lummus
                     venture)                    Catalysts                   petrochemical, gas             Axens
                                                 Molecular sieves            processing and                 ExxonMobil
                                                 Adsorbents                  chemical industries            Procatalyse
                                                 Design of process,                                         Shell/Criterion
                                                  plants and equipment                                      Stone & Webster
                                                 Customer catalyst                                          Zeochem
                                                  manufacturing
- -------------------------------------------------------------------------------------------------------------------------------
TRANSPORTATION AND POWER SYSTEMS

Garrett Engine       Charge-air systems          Turbochargers              Passenger car, truck            ABB
Boosting Systems                                 Remanufactured components   and off-highway                Aisin Seiki
                                                                             OEMs                           Borg-Warner
                                                                            Engine manufacturers            Hitachi
                                                                            Aftermarket distributors        Holset
                                                                             and dealers                    IHI
                                                                                                            MHI
                     ----------------------------------------------------------------------------------------------------------
                     Thermal systems             Charge-air coolers         Passenger car, truck            Behr/McCord
                                                 Aluminum radiators          and off-highway OEMs           Modine
                                                 Aluminum cooling           Engine manufacturers            Valeo
                                                   modules                  Aftermarket distributors
                                                 Exhaust gas coolers         and dealers
- -------------------------------------------------------------------------------------------------------------------------------

                                       6

STRATEGIC
BUSINESS UNITS       PRODUCT CLASSES             MAJOR PRODUCTS/SERVICES    MAJOR CUSTOMERS/USES            KEY COMPETITORS
- --------------       ---------------             -----------------------    --------------------            ---------------
                                                                                                
Consumer Products    Aftermarket                 Oil, air, fuel,            Automotive and heavy            AC Delco
Group                filters, spark plugs,        transmission and coolant   vehicle aftermarket channels,  Bosch
                     electronic components and    filters                    OEMs and OES                   Champion
                     car care products           PCV valves                 Auto supply retailers           Champ Labs
                                                 Spark plugs                Specialty installers            Havoline/Texaco
                                                 Wire and cable             Mass merchandisers              Mann & Hummel
                                                 Antifreeze/coolant                                         NGK
                                                 Ice-fighter products                                       Peak/Old World
                                                 Windshield washer fluids                                    Industries
                                                 Waxes, washes and                                          Pennzoil-Quaker
                                                  specialty cleaners                                         State
                                                                                                            Purolator/Arvin Ind
                                                                                                            STP/ArmorAll/
                                                                                                             Clorox
                                                                                                            Turtle Wax
                                                                                                            Various Private
                                                                                                             Label
                                                                                                            Wix/Dana
                                                                                                            Zerex/Valvoline
- -------------------------------------------------------------------------------------------------------------------------------
Friction Materials   Friction materials          Disc brake pads and shoes  Automotive and heavy vehicle    Akebono
                     Aftermarket brake hard      Drum brake linings          OEMs, OES, brake               Dana
                     parts                       Brake blocks                manufacturers and aftermarket  Delphi
                                                 Disc and drum brake         channels                       Federal-Mogul
                                                  components                Mass merchandisers              ITT Galfer
                                                 Brake hydraulic            Installers                      JBI
                                                  components                Railway and commercial/         Nisshinbo
                                                 Brake fluid                 military aircraft OEMs         TMD
                                                 Aircraft brake linings      and brake manufacturers        Roulunds
                                                 Railway linings
- -------------------------------------------------------------------------------------------------------------------------------

AEROSPACE SALES

    Our sales to aerospace customers were 40, 41 and 40 percent of our total
sales in 2002, 2001 and 2000, respectively. Our sales to commercial aerospace
original equipment manufacturers were 9, 12 and 11 percent of our total sales in
2002, 2001 and 2000, respectively. If there were a large decline in sales of
aircraft that use our components, operating results could be negatively
impacted. In addition, our sales to commercial aftermarket customers of
aerospace products and services were 14, 15 and 17 percent of our total sales in
2002, 2001 and 2000, respectively. If there were a large decline in the number
of flight hours for aircraft that use our components or services, operating
results could be negatively impacted. The terrorist attacks on September 11,
2001 resulted in an abrupt downturn in the aviation industry which was already
negatively impacted by a weak economy. This dramatic downturn in the commercial
air transport industry continued to adversely impact the operating results of
our Aerospace segment in 2002. In response, we have accelerated our
cost-reduction actions to mitigate the impact of this downturn.

U.S. GOVERNMENT SALES

    Sales to the U.S. Government (principally by our Aerospace segment), acting
through its various departments and agencies and through prime contractors,
amounted to $2,277, $2,491 and $2,219 million in 2002, 2001 and 2000,
respectively, which included sales to the U.S. Department of Defense of $1,833,
$1,631 and $1,548 million in 2002, 2001 and 2000, respectively. U.S. defense
spending increased in 2002 and is also expected to increase in 2003.

    In addition to normal business risks, companies engaged in supplying
military and other equipment to the U.S. Government are subject to unusual
risks, including dependence on Congressional appropriations and administrative
allotment of funds, changes in governmental procurement legislation and
regulations and other policies that may reflect military and political
developments, significant changes in contract scheduling, complexity of designs
and the rapidity with which they become obsolete, necessity for constant design
improvements, intense competition for U.S. Government business necessitating
increases in time and investment for design and development, difficulty of
forecasting costs and schedules when bidding on developmental and highly
sophisticated technical work and other factors characteristic of the industry.
Changes are customary over the life of U.S. Government contracts, particularly
development contracts, and generally result in adjustments of contract prices.

                                       7

    We, like other government contractors, are subject to government
investigations of business practices and compliance with government procurement
regulations. Although such regulations provide that a contractor may be
suspended or barred from government contracts under certain circumstances, and
the outcome of pending government investigations cannot be predicted with
certainty, we are not currently aware of any such investigations that we expect,
individually or in the aggregate, will have a material adverse effect on us. In
addition, we have a proactive business compliance program designed to ensure
compliance and sound business practices.

BACKLOG

    Our total backlog at year-end 2002 and 2001 was $7,332 and $7,178 million,
respectively. We anticipate that approximately $6,194 million of the 2002
backlog will be filled in 2003. We believe that backlog is not necessarily a
reliable indicator of our future sales because a substantial portion of the
orders constituting this backlog may be canceled at the customer's option.

COMPETITION

    We are subject to active competition in substantially all product and
service areas. Competition is expected to continue in all geographic regions.
Competitive conditions vary widely among the thousands of products and services
provided by us, and vary country by country. Depending on the particular
customer or market involved, our businesses compete on a variety of factors,
such as price, quality, reliability, delivery, customer service, performance,
applied technology, product innovation and product recognition. Brand identity,
service to customers and quality are generally important competitive factors for
our products and services, and there is considerable price competition. Other
competitive factors for certain products include breadth of product line,
research and development efforts and technical and managerial capability. While
our competitive position varies among our products and services, we believe we
are a significant competitor in each of our major product and service classes.
However, a number of our products and services are sold in competition with
those of a large number of other companies, some of which have substantial
financial resources and significant technological capabilities. In addition,
some of our products compete with the captive component divisions of original
equipment manufacturers.

INTERNATIONAL OPERATIONS

    We are engaged in manufacturing, sales and research and development mainly
in the United States, Europe, Canada, Asia and Latin America. U.S. exports and
foreign manufactured products are significant to our operations.

    Our international operations, including U.S. exports, are potentially
subject to a number of unique risks and limitations, including: fluctuations in
currency value; exchange control regulations; wage and price controls;
employment regulations; foreign investment laws; import and trade restrictions,
including embargoes; and governmental instability. However, we have limited
exposure in high risk countries and have taken action to mitigate these risks.

    Financial information related to geographic areas is included in Note 24 of
Notes to Financial Statements in our 2002 Annual Report to Shareowners which is
incorporated herein by reference.

RAW MATERIALS

    The principal raw materials used in our operations are generally readily
available. We experienced no significant or unusual problems in the purchase of
key raw materials and commodities in 2002. We are not dependent on any one
supplier for a material amount of our raw materials. However, we are highly
dependent on our suppliers and subcontractors in order to meet commitments to
our customers. In addition, many major components and product equipment items
are procured or subcontracted on a sole-source basis with a number of domestic
and foreign companies. We maintain a qualification and performance surveillance
process to control risk associated with such reliance on third parties. While we
believe that sources of supply for raw materials and components are generally
adequate, it is difficult to predict what effects shortages or price increases
may have in the future. A prolonged and substantial increase above recent
historical levels in petroleum prices would adversely affect our Specialty
Materials businesses which use petroleum byproducts as raw materials. However,
at present,

                                       8

we have no reason to believe a shortage of raw materials will cause any material
adverse impact during 2003.

PATENTS, TRADEMARKS, LICENSES AND DISTRIBUTION RIGHTS

    Our business as a whole, and that of our strategic business units, are not
dependent upon any single patent or related group of patents, or any licenses or
distribution rights. We own, or are licensed under, a large number of patents,
patent applications and trademarks acquired over a period of many years, which
relate to many of our products or improvements to those products and which are
of importance to our business. From time to time, new patents and trademarks are
obtained, and patent and trademark licenses and rights are acquired from others.
We also have distribution rights of varying terms for a number of products and
services produced by other companies. In our judgment, those rights are adequate
for the conduct of our business. We believe that, in the aggregate, the rights
under our patents, trademarks and licenses are generally important to our
operations, but we do not consider 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, Prestone, FRAM, Anso and Autolite.

RESEARCH AND DEVELOPMENT

    Our research activities are directed toward the discovery and development of
new products and processes, improvements in existing products and processes, and
the development of new uses for existing products.

    Research and development expense totaled $757, $832 and $818 million in
2002, 2001 and 2000, respectively. The decrease in research and development
expense in 2002 compared with 2001 relates mainly to lower spending by our
Aerospace segment due primarily to program completions and fewer new program
launches by original equipment manufacturers. Customer-sponsored (principally
the U.S. Government) research and development activities amounted to an
additional $603, $697 and $560 million in 2002, 2001 and 2000, respectively.

ENVIRONMENT

    We are subject to various federal, state and local government requirements
regulating the discharge of materials into the environment or otherwise relating
to the protection of the environment. It is our policy to comply with these
requirements, and we believe that, as a general matter, our policies, practices
and procedures are properly designed to prevent unreasonable risk of
environmental damage, and of resulting financial liability, in connection with
our business. Some risk of environmental damage is, however, inherent in some of
our operations and products, as it is with other companies engaged in similar
businesses.

    We are and have been engaged in the handling, manufacture, use and disposal
of many substances classified as hazardous or toxic by one or more regulatory
agencies. We believe that, as a general matter, our handling, manufacture, use
and disposal of these substances are in accord with environmental laws and
regulations. It is possible, however, that future knowledge or other
developments, such as improved capability to detect substances in the
environment or increasingly strict environmental laws and standards and
enforcement policies, could bring into question our handling, manufacture, use
or disposal of these substances.

    Among other environmental requirements, we are subject to the federal
superfund law, and similar state laws, under which we have been designated as a
potentially responsible party that may be liable for cleanup costs associated
with various hazardous waste sites, some of which are on the U.S. Environmental
Protection Agency's superfund priority list. Although, under some court
interpretations of these laws, there is a possibility that a responsible party
might have to bear more than its proportional share of the cleanup costs if it
is unable to obtain appropriate contribution from other responsible parties, we
have not had to bear significantly more than our proportional share in multi-
party situations taken as a whole.

    Further information regarding environmental matters is included in
Management's Discussion and Analysis of Financial Condition and Results of
Operations in our 2002 Annual Report to Shareowners

                                       9

which is incorporated herein by reference and in Item 3. Legal Proceedings of
this Annual Report on Form 10-K.

EMPLOYEES

    We have approximately 108,000 employees at December 31, 2002, of which
approximately 63,000 were located in the United States.

ITEM 2.  PROPERTIES

    We have over 1,000 locations consisting of plants, research laboratories,
sales offices and other facilities. Our headquarters and administrative complex
is located at Morristown, New Jersey. Our plants are generally located to serve
large marketing areas and to provide accessibility to raw materials and labor
pools. Our properties are generally maintained in good operating condition.
Utilization of these plants may vary with sales to customers and other business
conditions; however, no major operating facility is significantly idle. We own
or lease warehouses, railroad cars, barges, automobiles, trucks, airplanes and
materials handling and data processing equipment. We also lease space for
administrative and sales staffs. Our properties and equipment are in good
operating condition and are adequate for our present needs. We do not anticipate
difficulty in renewing existing leases as they expire or in finding alternative
facilities.

    Our principal plants, which are owned in fee unless otherwise indicated, are
as follows:

                                                                        
                                                 AEROSPACE
                                                 ---------
  Glendale, AZ                                South Bend, IN                  Albuquerque, NM
    (partially leased)                      Olathe, KS (leased)               Rocky Mount, NC
  Phoenix, AZ                                 Minneapolis, MN                 Urbana, OH
  Tempe, AZ                                    Plymouth, MN                   Redmond, WA
  Tucson, AZ                                   Teterboro, NJ                  Toronto, Canada
  Torrance, CA                                                                Yeovil, Somerset
    (partially leased)                                                          United Kingdom
  Clearwater, FL

                                     AUTOMATION AND CONTROL SOLUTIONS
                                     --------------------------------
  Phoenix, AZ                                  Northford, CT                  Golden Valley, MN
  San Diego, CA                                Freeport, IL                   Syosset, NY

                                            SPECIALTY MATERIALS
                                            -------------------
  Baton Rouge, LA                             Pottsville, PA                  Hopewell, VA
  Geismar, LA                                  Columbia, SC                   Seelze, Germany
  Moncure, NC                                Chesterfield, VA                 Longlaville, France

                                     TRANSPORTATION AND POWER SYSTEMS
                                     --------------------------------
  Mexicali, Mexico                       Thaon-Les-Vosges, France             Atessa, Italy
                                              Glinde, Germany                 Skelmersdale, United
                                                                                Kingdom

ITEM 3.  LEGAL PROCEEDINGS

    SHAREOWNER LITIGATION -- Honeywell and seven of its current and former
officers were named as defendants in several purported class action lawsuits
filed in the United States District Court for the District of New Jersey (the
Securities Law Complaints). The Securities Law Complaints principally allege
that the defendants violated federal securities laws by purportedly making false
and misleading statements and by failing to disclose material information
concerning Honeywell's financial performance, thereby allegedly causing the
value of Honeywell's stock to be artificially inflated. On January 15, 2002, the
District Court dismissed the consolidated complaint against four of Honeywell's
current and former officers. The Court has granted plaintiffs' motion for class
certification defining the purported class as all purchasers of Honeywell stock
between December 20, 1999 and June 19, 2000.

    The parties have agreed to participate in a two day settlement mediation in
April, 2003 in an attempt to resolve the cases without resort to a trial. All
significant discovery in the cases has been stayed pending further order of the
court.

                                       10

    Notwithstanding our agreement to mediate, we believe there is no factual or
legal basis for the allegations in the Securities Law Complaints. Although it is
not possible at this time to predict the litigation outcome of these cases, we
expect to prevail if the cases are not resolved through mediation. However, an
adverse litigation outcome could be material to our consolidated financial
position or results of operations. As a result of the uncertainty regarding the
outcome of this matter no provision has been made in our financial statements
with respect to this contingent liability.

    ENVIRONMENTAL MATTERS -- We are subject to various federal, state and local
government requirements relating to the protection of employee health and safety
and the environment. We believe that, as a general matter, our policies,
practices and procedures are properly designed to prevent unreasonable risk of
environmental damage and personal injury to our employees and employees of our
customers and that our handling, manufacture, use and disposal of hazardous or
toxic substances are in accord with environmental laws and regulations. However,
mainly because of past operations and operations of predecessor companies, we,
like other companies engaged in similar businesses, have incurred remedial
response and voluntary cleanup costs for site contamination and are a party to
lawsuits and claims associated with environmental matters, including past
production of products containing toxic substances. Additional lawsuits, claims
and costs involving environmental matters are likely to continue to arise in the
future.

    With respect to environmental matters involving site contamination, we
continually conduct studies, individually at our owned sites, and jointly as a
member of industry groups at non-owned sites, to determine the feasibility of
various remedial techniques to address environmental matters. It is our policy
to record appropriate liabilities for environmental matters when environmental
assessments are made or remedial efforts or damage claim payments are probable
and the costs can be reasonably estimated. With respect to site contamination,
the timing of these accruals is generally no later than the completion of
feasibility studies. We expect to fund expenditures for these matters from
operating cash flow. The timing of cash expenditures depends on a number of
factors, including the timing of litigation and settlements of personal injury
and property damage claims, regulatory approval of cleanup projects, remedial
techniques to be utilized and agreements with other parties.

    Although we do not currently possess sufficient information to reasonably
estimate the amounts of liabilities to be recorded upon future completion of
studies, litigation or settlements, and neither the timing nor the amount of the
ultimate costs associated with environmental matters can be determined, they
could be material to our consolidated results of operations. However,
considering our past experience and existing reserves, we do not expect that
these matters will have a material adverse effect on our consolidated financial
position.

    ASBESTOS MATTERS -- Like many other industrial companies, Honeywell is a
defendant in personal injury actions related to asbestos. We did not mine or
produce asbestos, nor did we make or sell insulation products or other
construction materials that have been identified as the primary cause of
asbestos related disease in the vast majority of claimants. Rather, we made
several products that contained small amounts of asbestos.

    Honeywell's Bendix Friction Materials business manufactured automotive brake
pads that included asbestos in an encapsulated form. There is a group of
potential claimants consisting largely of professional brake mechanics. From
1981 through December 31, 2002, we have resolved approximately 60,000 Bendix
claims at an average indemnity cost per claim of approximately two thousand
dollars. Through the second quarter of 2002, Honeywell had no out-of-pocket
costs for these cases since its insurance deductible was satisfied many years
ago. Beginning with claim payments made in the third quarter of 2002, Honeywell
began advancing indemnity and defense claim costs which amounted to
approximately $70 million in payments in the second half of 2002. A substantial
portion of this amount is expected to be reimbursed by insurance and $57 million
has been recorded as a receivable. There are currently approximately 50,000
claims pending and we have no reason to believe that the historic rate of
dismissal will change.

    On January 30, 2003, Honeywell and Federal-Mogul Corp. (Federal-Mogul)
entered into a letter of intent (LOI) pursuant to which Federal-Mogul would
acquire Honeywell's automotive Bendix Friction Materials (Bendix) business, with
the exception of certain U.S.-based assets. In exchange, Honeywell would receive
a permanent channeling injunction shielding it from all current and future
personal injury asbestos liabilities related to Honeywell's Bendix business.

                                       11

    Federal-Mogul, its U.S. subsidiaries and certain of its United Kingdom
subsidiaries voluntarily filed for financial restructuring under Chapter 11 of
the U.S. Bankruptcy Code in October 2001. Federal-Mogul will seek to establish
one or more trusts under Section 524(g) of the U.S. Bankruptcy Code as part of
its reorganization plan, including a trust for the benefit of Bendix asbestos
claimants. The reorganization plan to be submitted to the Bankruptcy Court for
approval will contemplate that the U.S. Bankruptcy Court in Delaware would issue
an injunction in favor of Honeywell that would channel to the Bendix 524(g)
trust all present and future asbestos claims relating to Honeywell's Bendix
business. The 524(g) trust created for the benefit of the Bendix claimants would
receive the rights to proceeds from Honeywell's Bendix related insurance
policies and would make these proceeds available to the Bendix claimants.
Honeywell would have no obligation to contribute any additional amounts toward
the settlement or resolution of Bendix related asbestos claims.

    In the fourth quarter of 2002, we recorded a charge of $167 million
consisting of a $131 million reserve for the sale of Bendix to Federal-Mogul,
our estimate of asbestos related liabilities net of insurance recoveries and
costs to complete the anticipated transaction with Federal-Mogul. Completion of
the transaction contemplated by the LOI is subject to the negotiation of
definitive agreements, the confirmation of Federal-Mogul's plan of
reorganization by the Bankruptcy Court, the issuance of a final, non-appealable
524(g) channeling injunction permanently enjoining any Bendix related asbestos
claims against Honeywell, and the receipt of all required governmental
approvals. We do not believe that completion of such transaction would have a
material adverse impact on our consolidated results of operations or financial
position. There can be no assurance, however, that the transaction contemplated
by the LOI will be completed. Honeywell presently has $2 billion of insurance
coverage remaining with respect to Bendix related asbestos claims. Although it
is impossible to predict the outcome of pending or future claims, in light of
our potential exposure, our prior experience in resolving 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 results of operations or
financial position.

    Another source of claims is refractory products (high temperature bricks and
cement) sold largely to the steel industry in the East and Midwest by North
American Refractories Company (NARCO), a business we owned from 1979 to 1986.
Less than 2 percent of NARCO's products contained asbestos.

    When we sold the NARCO business in 1986, we agreed to indemnify NARCO with
respect to personal injury claims for products that had been discontinued prior
to the sale (as defined in the sale agreement). NARCO retained all liability for
all other claims. NARCO had resolved approximately 176,000 claims through
January 4, 2002, the date NARCO filed for reorganization under Chapter 11 of the
U.S. Bankruptcy Code, at an average cost per claim of two thousand two hundred
dollars. Of those claims, 43 percent were dismissed on the ground that there was
insufficient evidence that NARCO was responsible for the claimant's asbestos
exposure. As of the date of NARCO's bankruptcy filing, there were approximately
116,000 remaining claims pending against NARCO, including approximately 7
percent in which Honeywell was also named as a defendant. Since 1983, Honeywell
and our insurers have contributed to the defense and settlement costs associated
with NARCO claims. We have approximately $2 billion of insurance remaining that
can be specifically allocated to NARCO related liability.

    As a result of the NARCO bankruptcy filing, all of the claims pending
against NARCO are automatically stayed pending the reorganization of NARCO. In
addition, because the claims pending against Honeywell necessarily will impact
the liabilities of NARCO, because the insurance policies held by Honeywell are
essential to a successful NARCO reorganization, and because Honeywell has
offered to commit the value of those policies to the reorganization, the
bankruptcy court has temporarily enjoined any claims against Honeywell, current
or future, related to NARCO. Although the stay has been extended eleven times
since January 4, 2002, there is no assurance that such stay will remain in
effect. In connection with NARCO's bankruptcy 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, and to forgive any outstanding NARCO
indebtedness, upon the confirmation and consummation of such a plan.

    As a result of ongoing negotiations with counsel representing NARCO related
asbestos claimants regarding settlement of all pending and potential NARCO
related asbestos claims against Honeywell,

                                       12

we have reached definitive agreements or agreements in principle with
approximately 236,000 claimants, which represents approximately 90 percent of
the approximately 260,000 current claimants who are now expected to file a claim
as part of the NARCO reorganization process. We are also in discussions with the
NARCO Committee of Asbestos Creditors on Trust Distribution Procedures for
NARCO. We believe that, as part of the NARCO plan of reorganization, a trust
will be established pursuant to these Trust Distribution Procedures for the
benefit of all asbestos claimants, current and future. If the trust is put in
place and approved by the court as fair and equitable, Honeywell as well as
NARCO will be entitled to a permanent channeling injunction barring all present
and future individual actions in state or federal courts and requiring all
asbestos related claims based on exposure to NARCO products to be made against
the federally-supervised trust. As part of its ongoing settlement negotiations,
Honeywell is seeking to cap its annual contributions to the trust with respect
to future claims at a level that would not have a material impact on Honeywell's
operating cash flows. Given the substantial progress of negotiations between
Honeywell and NARCO related asbestos claimants and between Honeywell and the
Committee of Asbestos Creditors during the fourth quarter of 2002, Honeywell has
developed an estimated liability for settlement of pending and future asbestos
claims.

    During the fourth quarter 2002, Honeywell recorded a charge of $1.4 billion
for NARCO related asbestos litigation charges, net of insurance recoveries. This
charge consists of the estimated liability to settle current asbestos related
claims, the estimated liability related to future asbestos related 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 approximately 90 percent of current claimants. Once finalized,
settlement payments with respect to current claims are expected to be made over
approximately a four-year period.

    The liability for future claims estimates the probable value of future
asbestos related bodily injury claims asserted against NARCO over a 15 year
period and obligations to NARCO's parent as discussed above. In light of the
uncertainties inherent in making long-term projections we do not believe that we
have a reasonable basis for estimating asbestos claims beyond 2018 under
Statement of Financial Accounting Standard No. 5 'Accounting for Contingencies.'
Honeywell retained the expert services of Hamilton, Rabinovitz and Alschuler,
Inc. (HR&A) to project the probable number and value, including trust claim
handling costs, of asbestos related future liabilities. The methodology used to
estimate the liability for future claims has been commonly accepted by numerous
courts and is the same methodology that is utilized by the expert who is
routinely retained by the asbestos claimants committee in asbestos related
bankruptcies. The valuation methodology includes an analysis of the population
likely to have been exposed to asbestos containing products, epidemiological
studies to estimate the number of people likely to develop asbestos related
diseases, NARCO claims filing history and the pending inventory of NARCO
asbestos related claims.

    Honeywell has substantial insurance that reimburses it for portions of the
costs incurred to settle NARCO related claims and court judgments as well as
defense costs. This coverage is provided by a large number of insurance policies
written by dozens of insurance companies in both the domestic insurance market
and the London excess market. Over one-half of this coverage is with Equitas and
other London-based insurance companies with a majority of this coverage subject
to a coverage-in-place agreement. Coverage-in-place agreements are settlement
agreements between policyholders and the insurers specifying the terms and
conditions under which coverage will be applied as claims are presented for
payment. These agreements govern such things as what events will be deemed to
trigger coverage, how liability for a claim will be allocated among insurers and
what procedures the policyholder must follow in order to obligate the insurer to
pay claims. We conducted an analysis to determine the amount of insurance that
we estimate is probable that we will recover in relation to payment of current
and projected future claims. While the substantial majority of our insurance
carriers are solvent, some of our individual carriers are insolvent, which has
been considered in our analysis of probable recoveries. Some of our insurance
carriers have challenged our right to enter into settlement agreements resolving
all NARCO related asbestos claims against Honeywell. However, we believe there
is no factual or legal basis for such challenges and we believe that it is
probable that we will prevail in the resolution of, or in any litigation that is
brought regarding these disputes and have recognized approximately $900 million
in probable insurance recoveries from these carriers. We made

                                       13

judgments concerning insurance coverage that we believe are reasonable and
consistent with our historical dealings with our insurers, our knowledge of any
pertinent solvency issues surrounding insurers and various judicial
determinations relevant to our insurance programs. Based on our analysis, we
recorded insurance recoveries that are deemed probable through 2018 of
$1.8 billion.

    Projecting future events is subject to many uncertainties that could cause
the NARCO related asbestos liabilities to be higher or lower than those
projected and recorded. There is no assurance that ongoing settlement
negotiations will be successfully completed, that a plan of reorganization will
be proposed or confirmed, that insurance recoveries will be timely or whether
there will be any NARCO related asbestos claims beyond 2018. Given the inherent
uncertainty in predicting future events, we plan to review our estimates
periodically, and update them based on our experience and other relevant
factors. Similarly we will reevaluate our projections concerning our probable
insurance recoveries in light of any changes to the projected liability or other
developments that may impact insurance recoveries.

    OTHER MATTERS -- We are subject to a number of other lawsuits,
investigations and claims (some of which involve substantial amounts) arising
out of the conduct of our business. With respect to all these other matters,
including those relating to commercial transactions, government contracts,
product liability and non-environmental health and safety matters, while the
ultimate results of these lawsuits, investigations and claims cannot be
determined, we do not expect that these matters will have a material adverse
effect on our consolidated results of operations or financial position.

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 of Directors. There are no family relationships among them.

             NAME, AGE,
             DATE FIRST
             ELECTED AN
          EXECUTIVE OFFICER                                 BUSINESS EXPERIENCE
          -----------------             -----------------------------------------------------------
                                     
David M. Cote (a), 50                   Chairman of the Board and Chief Executive Officer since
             2002                         July 2002. President and Chief Executive Officer from
                                          February 2002 to June 2002. Chairman of the Board,
                                          President and Chief Executive Officer of TRW
                                          (manufacturer of aerospace and automotive products) from
                                          August 2001 to February 2002. President and Chief
                                          Executive Officer of TRW from February 2001 to July 2001.
                                          President and Chief Operating Officer of TRW from
                                          November 1999 to January 2001. Senior Vice President of
                                          General Electric Company and President and Chief
                                          Executive Officer of GE Appliances from June 1996 to
                                          November 1999.

Dr. Nance K. Dicciani, 55               President and Chief Executive Officer Specialty Materials
             2001                         since November 2001. Senior Vice President and Business
                                          Group Executive of Chemical Specialties and Director,
                                          European Region of Rohm and Haas (chemical company) from
                                          June 1998 until October 2001. Vice President and General
                                          Manager of Monomers Division of Rohm and Haas from May
                                          1996 until May 1998.

- ---------
(a) Also a Director.

                                       14

             NAME, AGE,
             DATE FIRST
             ELECTED AN
          EXECUTIVE OFFICER                                 BUSINESS EXPERIENCE
          -----------------             -----------------------------------------------------------
                                     
Robert J. Gillette, 43                  President and Chief Executive Officer Transportation and
             2001                         Power Systems since July 2001. President of Garrett
                                          Engine Boosting Systems from July 2000 until June 2001.
                                          Vice President and General Manager of Engineering
                                          Plastics from December 1996 until June 2000.

J. Kevin Gilligan, 48                   President and Chief Executive Officer Automation and
             2001                         Control Solutions since July 2001. President of Home and
                                          Building Control from January 2000 until June 2001.
                                          President of Home and Building Control's Solutions and
                                          Services business from October 1997 until December 1999.

Robert D. Johnson, 55                   President and Chief Executive Officer Aerospace since July
             1998                         2001. Chief Operating Officer and Executive Vice
                                          President, Aerospace, from December 1999 to June 2001.
                                          President and Chief Executive Officer of AlliedSignal
                                          Aerospace from April 1999 to November 1999.
                                          President -- Aerospace Marketing, Sales and Services from
                                          January 1999 to March 1999. President -- Aerospace
                                          Electronic & Avionics Systems from October 1997 to
                                          December 1998.

Larry E. Kittelberger, 54               Senior Vice President Administration and Chief Information
             2001                         Officer since August 2001. Senior Vice President and
                                          Chief Information Officer of Lucent Technologies Inc.
                                          from November 1999 until August 2001. Senior Vice
                                          President and Chief Information Officer of AlliedSignal
                                          Inc from February 1999 until November 1999. Vice
                                          President and Chief Information Officer from August 1995
                                          to January 1999.

Peter M. Kreindler, 57                  Senior Vice President and General Counsel since
             1992                         March 1992. Secretary from December 1994 through
                                          November 1999.

Richard F. Wallman, 51                  Senior Vice President and Chief Financial Officer since
             1995                         March 1995.

Thomas W. Weidenkopf, 44                Senior Vice President Human Resources and Communications
             2002                         since April 2002. Vice President of Human Resources of
                                          Aerospace from March 1999 to March 2002. Vice President,
                                          Human Resources -- Aerospace Marketing, Sales & Services
                                          from March 1997 to February 1999.

                                       15

                                    PART II.

ITEM 5.  MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS

    Market and dividend information for Honeywell's common stock is included in
Note 25 of Notes to Financial Statements of our 2002 Annual Report to
Shareowners which is incorporated herein by reference.

    The number of record holders of our common stock at December 31, 2002 was
89,758.

ITEM 6.  SELECTED FINANCIAL DATA

    Selected Financial Data on page 25 of our 2002 Annual Report to Shareowners
is incorporated herein by reference.

ITEM 7.  MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
         OF OPERATIONS

    'Management's Discussion and Analysis' on pages 26 through 39 of our 2002
Annual Report to Shareowners is incorporated herein by reference.

ITEM 7A.  QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

    Information relating to market risk is included under the caption 'Financial
Instruments' in 'Management's Discussion and Analysis' on pages 36 and 37 of our
2002 Annual Report to Shareowners, and such information is incorporated herein
by reference.

ITEM 8.  FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

    Our consolidated financial statements, together with the report thereon of
PricewaterhouseCoopers LLP dated February 6, 2003, appearing on pages 40 through
66 of our 2002 Annual Report to Shareowners, are incorporated herein by
reference. With the exception of the aforementioned information and the
information incorporated by reference in Items 1, 5, 6, 7 and 7A, the 2002
Annual Report to Shareowners is not to be deemed filed as part of this
Form 10-K Annual Report.

ITEM 9.  CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
         FINANCIAL DISCLOSURE

Not Applicable.

                                   PART III.

ITEM 10.  DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT

    Information relating to the Directors of Honeywell, as well as information
relating to compliance with Section 16(a) of the Securities Exchange Act of
1934, will be contained in our definitive Proxy Statement involving the election
of the Directors which will be filed with the Securities and Exchange Commission
pursuant to Regulation 14A not later than 120 days after December 31, 2002, and
such information is incorporated herein by reference. Certain other information
relating to the Executive Officers of Honeywell appears in Part I. of this Form
10-K Annual Report under the heading 'Executive Officers of the Registrant'.

    We maintain an internet website at http://www.honeywell.com. Our Annual
Report on Form 10-K, Quarterly Reports on Form 10-Q, Current Reports on
Form 8-K, and any amendments to those reports, are available free of charge on
our website under the heading 'Investor Relations' (see 'SEC Filings') as soon
as reasonably practicable after they are filed with, or furnished to, the
Securities and Exchange Commission. Honeywell's Code of Business Conduct,
Corporate Governance Guidelines and Charters of the Committees of the Board of
Directors are also available, free of charge, on our website under the heading
'Investor Relations' (see 'Corporate Governance'). Honeywell's Code of Business
Conduct applies to all Honeywell directors, officers (including the Chief
Executive Officer, Chief Financial Officer and Controller) and employees.
Amendments to or waivers of the Code of

                                       16

Business Conduct will be published on our website within five business days of
such amendment or waiver.

    The members of the Audit Committee of our Board of Directors are: Russell E.
Palmer (Chair), Hans W. Becherer, Marshall N. Carter, Ann M. Fudge, James J.
Howard, John R. Stafford, and Michael W. Wright. The Board has determined that
each of the members of the Audit Committee satisfies the financial literacy
requirements of the New York Stock Exchange and that Mr. Palmer satisfies the
'audit committee financial expert' criteria established by the Securities and
Exchange Commission and the 'financial expert' criteria proposed by the New York
Stock Exchange. Mr Palmer is 'independent' as that term is used in Item
7(d)(3)(iv) of Schedule 14A under the Securities Exchange Act.

ITEM 11.  EXECUTIVE COMPENSATION

    Information relating to executive compensation is contained in the Proxy
Statement referred to above in 'Item 10. Directors and Executive Officers of the
Registrant,' and such information is incorporated herein by reference.

ITEM 12.  SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND
          RELATED STOCKHOLDER MATTERS

    Information relating to security ownership of certain beneficial owners and
management and equity compensation plans is contained in the Proxy Statement
referred to above in 'Item 10. Directors and Executive Officers of the
Registrant,' and such information is incorporated herein by reference.

ITEM 13.  CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

    Information relating to certain relationships and related transactions is
contained in the Proxy Statement referred to above in 'Item 10. Directors and
Executive Officers of the Registrant,' and such information is incorporated
herein by reference.

ITEM 14.  CONTROLS AND PROCEDURES

    Within the 90 days prior to the filing of this report, Honeywell management,
including the Chief Executive Officer and Chief Financial Officer, conducted an
evaluation of the effectiveness of our disclosure controls and procedures
pursuant to Exchange Act Rule 13a-14. Based upon that evaluation, the Chief
Executive Officer and the Chief Financial Officer concluded that such disclosure
controls and procedures are effective in alerting them on a timely basis to
material information relating to Honeywell required to be included in
Honeywell's periodic filings under the Exchange Act. There have been no
significant changes in internal controls or in factors that could significantly
affect internal controls, including any corrective actions with regard to
significant deficiencies and material weaknesses, subsequent to the date the
Chief Executive Officer and Chief Financial Officer completed their evaluation.

ITEM 15.  [RESERVED]

ITEM 16.  PRINCIPAL ACCOUNTANT FEES AND SERVICES

    Information relating to fees paid to and services performed by
PricewaterhouseCoopers LLP in 2002 and 2001 and our Audit Committee's
pre-approval policies and procedures with respect to non-audit services are
contained in the Proxy Statement referred to above in 'Item 10. Directors and
Executive Officers of the Registrant,' and such information is incorporated
herein by reference.

                                       17

                                    PART IV.

ITEM 17.  EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K

                                                              PAGE NUMBER IN
                                                              ANNUAL REPORT
                                                              TO SHAREOWNERS
                                                              --------------
                                                                 
(a)(1.) Consolidated Financial Statements:
            Incorporated by reference to the 2002 Annual
              Report to Shareowners:
                Consolidated Statement of Operations for the
                  years ended December 31, 2002, 2001 and
                  2000                                              40
                Consolidated Balance Sheet at December 31,
                  2002 and 2001                                     41
                Consolidated Statement of Cash Flows for the
                  years ended December 31, 2002, 2001 and
                  2000                                              42
                Consolidated Statement of Shareowners'
                  Equity for the years ended December 31,
                  2002, 2001 and 2000                               43
                Notes to Financial Statements                       44
                Report of Independent Accountants                   66

                                                              PAGE NUMBER
                                                              IN FORM 10-K
                                                              ------------
                                                                
(a)(2.) Consolidated Financial Statement Schedules:
            Report of Independent Accountants on Financial
              Statement Schedule                                   25
            Schedule II -- Valuation and Qualifying Accounts       26

    All other financial statement schedules have been omitted because they are
not applicable to us or the required information is shown in the consolidated
financial statements or notes thereto.

(a)(3.) Exhibits

    See the Exhibit Index on pages 22 through 24 of this Form 10-K Annual
Report.

(b) Reports on Form 8-K

    During the three months ended December 31, 2002, a Current Report on Form
8-K was filed on December 30, reporting the contribution of $700 million of our
stock to our U.S. pension plans.

                                       18

                                   SIGNATURES

    Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the Registrant has duly caused this annual report to be
signed on its behalf by the undersigned, thereunto duly authorized.

                                            HONEYWELL INTERNATIONAL INC.

March 6, 2003                               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 on behalf of the
Registrant and in the capacities and on the date indicated:

                        NAME
                        ----

                          *
     -------------------------------------------
                    David M. Cote
               Chairman of the Board,
               Chief Executive Officer
                    and Director

                          *
     -------------------------------------------
                   Hans W. Becherer
                       Director

                          *
     -------------------------------------------
                    Gordon M. Bethune
                       Director

                          *
     -------------------------------------------
                   Marshall N. Carter
                       Director

                          *
     -------------------------------------------
                    Jaime Chico Pardo
                       Director

                          *
     -------------------------------------------
                     Ann M. Fudge
                       Director

               /s/ RICHARD F. WALLMAN
     -------------------------------------------
                     Richard F. Wallman
                  Senior Vice President and
                    Chief Financial Officer
                (Principal Financial Officer)

*By:        /s/ RICHARD F. WALLMAN
   ------------------------------------------
            (Richard F. Wallman
              Attorney-in-fact)

                          *
     -------------------------------------------
                 James J. Howard
                     Director

                          *
     -------------------------------------------
                    Bruce Karatz
                     Director

                           *
     -------------------------------------------
                   Robert P. Luciano
                      Director

                           *
     -------------------------------------------
                    Russell E. Palmer
                       Director

                           *
     -------------------------------------------
                    Ivan G. Seidenberg
                       Director

                           *
     -------------------------------------------
                     John R. Stafford
                       Director

                           *
     -------------------------------------------
                      Michael W. Wright
                        Director

                       /s/ JOHN J. TUS
     -------------------------------------------
                          John J. Tus
                Vice President and Controller
               (Principal Accounting Officer)

March 6, 2003

                                       19

                     CERTIFICATION PURSUANT TO SECTION 302
                       OF THE SARBANES-OXLEY ACT OF 2002

    I, David M. Cote, 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 annual 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 of the circumstances under which such statements
were made, not misleading with respect to the period covered by this annual
report;

    3. Based on my knowledge, the financial statements, and other financial
information included in this annual report, fairly present in all material
respects the financial condition, results of operations and cash flows of the
registrant as of, and for, the periods presented in this annual report;

    4. The registrant's other certifying officers and I are responsible for
establishing and maintaining disclosure controls and procedures (as defined in
Exchange Act Rules 13a-14 and 15d-14) for the registrant and we have:

        (a) designed such disclosure controls and procedures to ensure that
    material information relating to the registrant, including its consolidated
    subsidiaries, is made known to us by others within those entities,
    particularly during the period in which this annual report is being
    prepared;

        (b) evaluated the effectiveness of the registrant's disclosure controls
    and procedures as of a date within 90 days prior to the filing date of this
    annual report (the 'Evaluation Date'); and

        (c) presented in this annual report our conclusions about the
    effectiveness of the disclosure controls and procedures based on our
    evaluation as of the Evaluation Date.

    5. The registrant's other certifying officers and I have disclosed, based on
our most recent evaluation, to the registrant's auditors and the audit committee
of the registrant's board of directors (or persons performing the equivalent
function):

        (a) all significant deficiencies in the design or operation of internal
    controls which could adversely affect the registrant's ability to record,
    process, summarize and report financial data and have identified for the
    registrant's auditors any material weaknesses in internal controls; and

        (b) any fraud, whether or not material, that involves management or
    other employees who have a significant role in the registrant's internal
    controls; and

    6. The registrant's other certifying officers and I have indicated in this
annual report whether or not there were significant changes in internal controls
or in other factors that could significantly affect internal controls subsequent
to the date of our most recent evaluation, including any corrective actions with
regard to significant deficiencies and material weaknesses.

Date: March 6, 2003                         By:          /s/ DAVID M. COTE
                                               .................................
                                                             David M. Cote
                                                        Chief Executive Officer

                                       20

                     CERTIFICATION PURSUANT TO SECTION 302
                       OF THE SARBANES-OXLEY ACT OF 2002

    I, Richard F. Wallman, 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 annual 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 of the circumstances under which such statements
were made, not misleading with respect to the period covered by this annual
report;

    3. Based on my knowledge, the financial statements, and other financial
information included in this annual report, fairly present in all material
respects the financial condition, results of operations and cash flows of the
registrant as of, and for, the periods presented in this annual report;

    4. The registrant's other certifying officers and I are responsible for
establishing and maintaining disclosure controls and procedures (as defined in
Exchange Act Rules 13a-14 and 15d-14) for the registrant and we have:

        (a) designed such disclosure controls and procedures to ensure that
    material information relating to the registrant, including its consolidated
    subsidiaries, is made known to us by others within those entities,
    particularly during the period in which this annual report is being
    prepared;

        (b) evaluated the effectiveness of the registrant's disclosure controls
    and procedures as of a date within 90 days prior to the filing date of this
    annual report (the 'Evaluation Date'); and

        (c) presented in this annual report our conclusions about the
    effectiveness of the disclosure controls and procedures based on our
    evaluation as of the Evaluation Date.

    5. The registrant's other certifying officers and I have disclosed, based on
our most recent evaluation, to the registrant's auditors and the audit committee
of the registrant's board of directors (or persons performing the equivalent
function):

        (a) all significant deficiencies in the design or operation of internal
    controls which could adversely affect the registrant's ability to record,
    process, summarize and report financial data and have identified for the
    registrant's auditors any material weaknesses in internal controls; and

        (b) any fraud, whether or not material, that involves management or
    other employees who have a significant role in the registrant's internal
    controls; and

    6. The registrant's other certifying officers and I have indicated in this
annual report whether or not there were significant changes in internal controls
or in other factors that could significantly affect internal controls subsequent
to the date of our most recent evaluation, including any corrective actions with
regard to significant deficiencies and material weaknesses.

Date: March 6, 2003                         By:       /s/ RICHARD F. WALLMAN
                                               .................................
                                                         Richard F. Wallman
                                                       Chief Financial Officer

                                       21

                                 EXHIBIT INDEX

EXHIBIT NO.                                   DESCRIPTION
- -----------                                   -----------
                    
  2                  Omitted (Inapplicable)

  3(i)               Restated Certificate of Incorporation of Honeywell
                        (incorporated by reference to Exhibit 3(i) to Honeywell's
                        Form 8-K filed December 3, 1999)

  3(ii)              By-laws of Honeywell, as amended (incorporated by reference
                        to Exhibit 3(ii) to Honeywell's Form 10-Q for the quarter
                        ended September 30, 2001)

  4                  Honeywell is a party to several long-term debt instruments
                        under which, in each case, the total amount of securities
                        authorized does not exceed 10% of the total assets of
                        Honeywell and its subsidiaries on a consolidated basis.
                        Pursuant to paragraph 4(iii)(A) of Item 601(b) of
                        Regulation S-K, Honeywell agrees to furnish a copy of such
                        instruments to the Securities and Exchange Commission upon
                        request.

  9                  Omitted (Inapplicable)

 10.1                Master Support Agreement, dated February 26, 1986, as
                        amended and restated January 27, 1987, as further amended
                        July 1, 1987 and as again amended and restated
                        December 7, 1988, by and among Honeywell, Wheelabrator
                        Technologies Inc., certain subsidiaries of Wheelabrator
                        Technologies Inc., The Henley Group, Inc. and Henley Newco
                        Inc. (incorporated by reference to Exhibit 10.1 to
                        Honeywell's Form 10-K for the year ended December 31,
                        1988)

 10.2*               Deferred Compensation Plan for Non-Employee Directors of
                        AlliedSignal Inc., as amended (incorporated by reference
                        to Exhibit 10.2 to Honeywell's Form 10-K for the year
                        ended December 31, 1996)

 10.3*               Stock Plan for Non-Employee Directors of AlliedSignal Inc.,
                        as amended (incorporated by reference to Exhibit C to
                        Honeywell's Proxy Statement, dated March 10, 1994, filed
                        pursuant to Rule 14a-6 of the Securities Exchange Act of
                        1934)

 10.4*               1985 Stock Plan for Employees of AlliedSignal Inc. and its
                        Subsidiaries, as amended (incorporated by reference to
                        Exhibit 19.3 to Honeywell's Form 10-Q for the quarter
                        ended September 30, 1991)

 10.5*               AlliedSignal Inc. Incentive Compensation Plan for Executive
                        Employees, as amended (incorporated by reference to
                        Exhibit B to Honeywell's Proxy Statement, dated March 10,
                        1994, filed pursuant to Rule 14a-6 of the Securities
                        Exchange Act of 1934, and to Exhibit 10.5 to Honeywell's
                        Form 10-Q for the quarter ended June 30, 1999)

 10.6*               Supplemental Non-Qualified Savings Plan for Highly
                        Compensated Employees of Honeywell International Inc. and
                        its Subsidiaries, as amended and restated (filed herewith)

 10.7*               AlliedSignal Inc. Severance Plan for Senior Executives, as
                        amended and restated (incorporated by reference to
                        Exhibit 10.7 to Honeywell's Form 10-K for the year ended
                        December 31, 2000)

 10.8*               Salary and Incentive Award Deferral Plan for Selected
                        Employees of Honeywell International Inc. and its
                        Affiliates, as amended and restated (filed herewith)

                                       22

EXHIBIT NO.                                   DESCRIPTION
- -----------                                   -----------
                   
  10.9*               1993 Stock Plan for Employees of Honeywell International
                        Inc. and its Affiliates (incorporated by reference to
                        Exhibit A to Honeywell's Proxy Statement, dated March 10,
                        1994, filed pursuant to Rule 14a-6 of the Securities
                        Exchange Act of 1934)

  10.10               364-Day Credit Agreement dated as of November 27, 2002 among
                        Honeywell, the initial lenders named therein, Citibank,
                        N.A., as administrative agent, JPMorgan Chase Bank,
                        Deutsche Bank AG, New York Branch, Bank of America, N.A.
                        and Barclays Bank PLC, as syndication agents, and Salomon
                        Smith Barney Inc., as lead arranger and book manager, as
                        amended (filed herewith)

  10.11               Amendment No. 1 to the Five-Year Credit Agreement dated as
                        of November 27, 2002 among Honeywell, the initial lenders
                        named therein, Citibank, N.A., as administrative agent,
                        JPMorgan Chase Bank, Deutsche Bank AG and Bank of America,
                        N.A., as syndication agents, and Salomon Smith Barney
                        Inc., as lead arranger and book manager (filed herewith)

  10.12*              Honeywell International Inc. Supplemental Pension Plan, as
                        amended and restated (incorporated by reference to
                        Exhibit 10.13 to Honeywell's Form 10-K for the year ended
                        December 31, 2000)

  10.13*              Employment Agreement dated as of December 1, 1999 between
                        Honeywell and Michael R. Bonsignore (incorporated by
                        reference to Exhibit 10.14 to Honeywell's Form 8-K filed
                        December 3, 1999)

  10.14*              Long Term Performance Plan for Key Executives of Honeywell
                        International Inc. (incorporated by reference to Exhibit
                        10.16 to Honeywell's Form 10-Q for the quarter ended
                        March 31, 2000)

  10.15*              Honeywell International Inc. Supplemental Executive
                        Retirement Plan for Executives in Career Band 6 and Above
                        (incorporated by reference to Exhibit 10.16 to Honeywell's
                        Form 10-K for the year ended December 31, 2000)

  10.16*              Honeywell Supplemental Defined Benefit Retirement Plan, as
                        amended and restated (incorporated by reference to
                        Exhibit 10.17 to Honeywell's Form 10-K for the year ended
                        December 31, 2000)

  10.17*              Form of Escrow Agreement used to secure certain supplemental
                        retirement benefits for certain executive officers of
                        Honeywell (incorporated by reference to Exhibit 10.18 to
                        Honeywell's Form 10-K for the year ended December 31,
                        2000)

  10.18*              Form of Promissory Note representing loans to certain
                        executive officers of Honeywell of required withholding
                        taxes relating to the securing of certain supplemental
                        retirement benefits (incorporated by reference to Exhibit
                        10.19 to Honeywell's Form 10-K for the year ended
                        December 31, 2000)

  10.19*              Honeywell International Inc. Severance Plan for Corporate
                        Staff Employees (Involuntary Termination Following a
                        Change in Control), as amended and restated (filed
                        herewith)

  10.20*              Employment Agreement dated as of July 3, 2001 between
                        Honeywell and Lawrence A. Bossidy (incorporated by
                        reference to Exhibit 10.21 to Honeywell's Form 10-Q for
                        the quarter ended June 30, 2001)

                                       23

EXHIBIT NO.                                   DESCRIPTION
- -----------                                   -----------
                   
  10.21*              Early Retirement Agreement dated as of July 3, 2001 between
                        Honeywell and Michael R. Bonsignore (incorporated by
                        reference to Exhibit 10.22 to Honeywell's Form 10-Q for
                        the quarter ended June 30, 2001)
  10.22*              Settlement Agreement between Honeywell International Inc.,
                        Honeywell Europe S.A. and their affiliates and
                        Giannantonio Ferrari, dated July 27, 2001 (incorporated
                        by reference to Exhibit 10.23 to Honeywell's Form 10-Q for
                        the quarter ended September 30, 2001)
  10.23*              Employment Agreement dated as of February 18, 2002 between
                        Honeywell and David M. Cote (incorporated by reference to
                        Exhibit 10.24 to Honeywell's Form 8-K filed March 4, 2002)
  10.24*              Employment Separation Agreement and Release dated
                        February 18, 2002, between Honeywell and Dr. Barry C.
                        Johnson (incorporated by reference to Exhibit 10.25 to
                        Honeywell's Form 10-Q for the quarter ended March 31,
                        2002)
  11                  Omitted (Inapplicable)
  12                  Statement re: Computation of Ratio of Earnings to Fixed
                        Charges (filed herewith)
  13                  Pages 25 through 66 of Honeywell's 2002 Annual Report to
                        Shareowners (filed herewith)
  16                  Omitted (Inapplicable)
  18                  Omitted (Inapplicable)
  21                  Subsidiaries of the Registrant (filed herewith)
  22                  Omitted (Inapplicable)
  23                  Consent of PricewaterhouseCoopers LLP (filed herewith)
  24                  Powers of Attorney (filed herewith)
  99.1                Certification of Principal Executive Officer pursuant to
                        18 U.S.C. Section 1350, as adopted pursuant to Section
                        906 of the Sarbanes-Oxley Act of 2002 (filed herewith)
  99.2                Certification of Principal Financial Officer pursuant to
                        18 U.S.C. Section 1350, as adopted pursuant to Section
                        906 of the Sarbanes-Oxley Act of 2002 (filed herewith)

- ---------

    The Exhibits identified above with an asterisk(*) are management contracts
or compensatory plans or arrangements.

                                       24

                      REPORT OF INDEPENDENT ACCOUNTANTS ON
                          FINANCIAL STATEMENT SCHEDULE

To the Board of Directors and Shareowners of
HONEYWELL INTERNATIONAL INC.

    Our audits of the consolidated financial statements referred to in our
report dated February 6, 2003, appearing in the 2002 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 17(a)(2) of this Form 10-K. In our opinion, the Financial Statement
Schedule presents fairly, in all material respects, the information set forth
therein when read in conjunction with the related consolidated financial
statements.

/s/ PricewaterhouseCoopers LLP
Florham Park, New Jersey
February 6, 2003

                                       25

                          HONEYWELL INTERNATIONAL INC
                SCHEDULE II -- VALUATION AND QUALIFYING ACCOUNTS
                      THREE YEARS ENDED DECEMBER 31, 2002
                                 (IN MILLIONS)

                                                           
ALLOWANCE FOR DOUBTFUL ACCOUNTS:

Balance December 31, 1999...................................  $ 84
    Provision charged to income.............................    52
    Deductions from reserves(1).............................   (37)
                                                              ----
Balance December 31, 2000...................................    99
    Provision charged to income.............................    84
    Deductions from reserves(1).............................   (55)
                                                              ----
Balance December 31, 2001...................................   128
    Provision charged to income.............................   109
    Deductions from reserves(1).............................   (90)
                                                              ----
Balance December 31, 2002...................................  $147
                                                              ----
                                                              ----

- ---------

(1) Represents uncollectible accounts written off, less recoveries, translation
    adjustments and reserves acquired.

                                       26

                          STATEMENT OF DIFFERENCES
                          ------------------------

 The British pound sterling sign shall be expressed as.................. 'L'
 The Japanese Yen sign shall be expressed as............................ 'Y'
 The Euro sign shall be expressed as.................................... 'E'
 The registered trademark symbol shall be expressed as.................. 'r'
 Characters normally expressed as subscript shall be preceded by........ [u]

                                                                    EXHIBIT 10.6

         SUPPLEMENTAL NON-QUALIFIED SAVINGS PLAN FOR HIGHLY COMPENSATED
     EMPLOYEES OF HONEYWELL INTERNATIONAL INC. AND ITS SUBSIDIARIES (Career
                                Band 6 and above)
                 (As Amended and Restated as of January 1, 2002)

1.   Eligibility

     Those highly compensated employees ("HCEs") of Honeywell International Inc.
(the "Corporation") and its subsidiaries within the meaning of Section 414(q) of
the Internal Revenue Code of 1986 (the "Code") in Career Band 6 and above who
are eligible to participate in any of the qualified (as determined under Code
Section 401(a)) savings plans maintained by the Corporation or its subsidiaries,
other than any such plan maintained by Pittway Corporation and its affiliates or
by Honeywell Inc. prior to April 1, 2000, (the "Qualified Savings Plans") are
eligible to participate in the Supplemental Non-Qualified Savings Plan for
Highly Compensated Employees of Honeywell International Inc. and its
Subsidiaries (Career Band 6 and above) (the "Plan").

2.   Definitions

     Capitalized terms not otherwise defined in the Plan have the respective
meanings set forth in the applicable Qualified Savings Plans.

3.   Participation

     (a) Time and Form of Election. Any eligible employee may become a
participant in the Plan (a "Participant") as of the beginning of the next
available pay period, by executing a written or electronic notice of election to
participate and filing such notice with the Plan Administrator (as defined in
Section 10(a)) prior to the beginning of such pay period. Such notice may direct
that a portion (determined in accordance with paragraph 4(a)) of the base annual
salary exclusive of shift differentials, overtime or other premium pay, bonus,
incentive or other extra compensation, but inclusive of severance pay (unless
otherwise specifically excluded by the severance pay plan) or salary deferred
under this Plan or otherwise ("Base Annual Salary"), which would have been
payable to such Participant during such pay period and succeeding pay periods,
in lieu of such payment, be credited to a deferred compensation account
maintained under the Plan as an unfunded book entry stated as a cash balance
(the "Participant's Account"). Amounts so credited to the Participant's Account
shall constitute "Participant Deferred Contributions." A Participant's election
to direct that a portion of his or her Base Annual Salary be credited to the
Participant's Account shall continue in effect until the Participant terminates
such election, the Participant is no longer an HCE or the Participant is no
longer eligible to contribute to the Qualified Savings Plans. Any such
termination shall be effective only with respect to the Participant's Base
Annual Salary payable after the end of the pay period in which one of the events
in the preceding sentence occurs. Amounts credited to the Participant's Account
prior to the effective date of the termination of the election shall not be
affected and shall be distributed only in accordance with the terms of the Plan
and Participant's distribution election thereunder.

     (b) Change or Resumption of Amount Deferred. A Participant may elect at any
time to modify the amount of Base Annual Salary to be credited to the
Participant's Account under the Plan, which modification shall be effective for
the next available pay period following his or her election. Amounts credited to
the Participant's Account prior to the effective date of such change shall not
be affected by such change and shall be distributed only in accordance with the
terms of the Plan.

4.   Contributions to Participants' Accounts

     (a) Participant Deferred Contributions. Unless the Plan Administrator shall
have established a lesser amount, a Participant may elect to defer an aggregate
amount equal to the difference between (i) a full percentage of such
Participant's Base Annual Salary from 1% to the maximum percentage permitted
under the Qualified Savings Plans and Code Section 415(c)(1)(B) for Before-Tax
Contributions by an individual who is not an HCE and who is eligible to
participate in the Qualified Savings Plans, without regard to any other
limitations which may apply under the Code and without regard to any After-Tax
Contributions which might be made under the Qualified Savings Plans, and (ii)
the full amount of Before-Tax Contributions made by such Participant under the
Qualified Savings Plans; provided, however, that a Participant who elects to
defer any amount hereunder shall be required to make the maximum Before-Tax
Contributions permissible under the Qualified Savings Plans for the applicable
Plan Year (after giving effect to deferrals under the Plan or otherwise).

     (b) Plan Employer Contributions. There shall be credited to the
Participant's Account employer contributions under the Plan ("Plan Employer
Contributions") in an aggregate amount equal to (i) minus (ii), where (i) is 50%
(for participants entitled to a 50% Employer Contribution in the Qualified
Savings Plans) or 100% (for participants entitled to a 100% Employer
Contribution in the Qualified Savings Plans) of the lesser of (x) 8% of the
Participant's Base Annual Salary, or (y) the sum of the Participant's
Participant Contributions under the Qualified Savings Plans and Participant
Deferred Contributions under the Plan, expressed as a percentage of Base Annual
Salary, and (ii) is the total amount of Employer Contributions made with respect
to the Participant under the Qualified Savings Plans; provided, however, that in
no event shall the combined Plan Employer Contributions and Employer
Contributions made with respect to the Participant exceed 8% of the
Participant's Base Annual Salary, and provided, further, that Plan Employer
Contributions shall not be made with respect to a Participant during any period
of suspension of Employer Contributions with respect to such Participant under
the terms of the Qualified Savings Plans, whether or not such Participant
continues to make Participant Contributions under the Qualified Savings Plans
during the period of such suspension. Notwithstanding the preceding sentence,
there shall be credited to the Participant's Account an amount equal to the
product of (i) the number of whole shares of common stock of Honeywell
International Inc. ("Common Stock") credited to such Participant's Account under
Section 5(b) on December 29, 2000, and (ii) $0.08 (such product rounded to the
nearest full dollar). The amount determined under the preceding sentence shall
be credited to the Participant's Account as Plan Employer Contributions in
accordance with Section 5(a) and shall be credited to such Account no later than
December 31, 2000.

     (c) Vesting. Participant Deferred Contributions, Plan Employer
Contributions (collectively "Total Contribution Amounts") and all amounts
accrued with respect to Total Contribution Amounts in accordance with Section 5,
shall be vested at the time such amounts are credited to the Participant's
Account.

                                      -2-

     (d) All Contributions Prorated. Total Contribution Amounts shall be
credited to a Participant's Account each pay period.

5.   The Participant's Account

     (a) Crediting of Participant's Accounts. Participant Deferred Contributions
shall be credited to the Participant's Account under the Plan as unfunded book
entries stated as cash balances. Participant Deferred Contributions credited to
the Participant's Account prior to January 1, 1994 or after the Participant has
terminated employment shall accrue amounts (to be posted each Valuation Date)
equivalent to interest, compounded daily, at a rate based upon the cost to the
Corporation of borrowing at a fixed rate for a 15-year term. Such rate shall be
determined annually by the Chief Financial Officer of the Corporation in
consultation with the Treasurer of the Corporation. Participant Deferred
Contributions credited to the Participant's Account on or after January 1, 1994,
but before a Participant terminates employment, shall accrue amounts (to be
posted each Valuation Date) equivalent to interest, compounded daily, at a rate
determined annually by the Management Development and Compensation Committee
(the "Committee") of the Board of Directors (the "Board") of the Corporation.
The rate established in the preceding sentence shall not exceed the greater of
(i) 10%, or (ii) 200% of the 10-year U.S. Treasury Bond rate at the time of
determination and, once established for a calendar year, shall remain in effect
with respect to all Participant Deferred Contributions credited to the
Participant's Account during such calendar year until such amounts are
distributed. Plan Employer Contributions shall be credited to the Participant's
Account under the Plan as unfunded book entries stated as shares of Common Stock
(including fractional shares). The number of shares of Common Stock credited to
a Participant's Account shall be determined by dividing the equivalent cash
amount (as determined under Section 4(b)) by the closing price of Common Stock
on the day that such Plan Employer Contributions are credited to the
Participant's Account. Amounts equivalent to the dividends that would have been
payable in respect of the Common Stock shall be credited to the Participant's
Account as if reinvested in Common Stock, with the number of shares credited
determined by dividing the equivalent cash dividend amount by the closing price
of Common Stock on the date the dividends would have been payable. Amounts
credited to the Participant's Account shall accrue amounts equivalent to
interest and dividends, as the case may be, until distributed in accordance with
the Plan.

     (b) Transition Rule for Plan Employer Contributions. The balance of each
Participant's Account attributable to Plan Employer Contributions, determined as
of the close of business on the day prior to the effective date of the amendment
and restatement of the Plan and adjusted to reflect all gains, losses and
dividends that have been credited to such Participant's Account through the day
prior to such effective date, shall be converted into the equivalent number of
shares of Common Stock by dividing such balance by the closing price of Common
Stock on the trading date next preceding such effective date. Such amount shall
be an unfunded book entry only and shall (i) thereafter be credited with
equivalent dividend amounts in accordance with Section 5(a), and (ii) be
distributed in accordance with Section 6(a)(ii).

6.   Distribution from Accounts

     (a)  Form of Election.

     (i) Participant Deferred Contributions. At the time a Participant makes an
election pursuant to Section 3(a), the Participant shall also make an election
with respect to the

                                      -3-

distribution of the aggregate amount of the Participant Deferred Contributions,
plus earnings credited thereon pursuant to Section 5 (collectively the
"Participant Deferred Contribution Amounts"), credited to the Participant's
Account pursuant to such election. A Participant may elect to receive such
amount in one lump-sum payment or in a number of annual installments (up to
fifteen installments). The lump-sum payment or the first installment shall be
paid in cash as soon as practicable during the month of January of such future
calendar year as the Participant may designate or, if the Participant so
elects, as soon as practicable during the month of January of the calendar
year immediately following the later of the year in which the Participant last
contributed to the Plan or the year in which the Participant terminates
employment with the Corporation or any of its subsidiaries (whether by reason
of Retirement or otherwise). Except as otherwise provided in Section 8,
subsequent installments shall be paid in cash as soon as practicable during
the month of January of each succeeding calendar year until the entire amount of
the Participant Deferred Contribution Amounts shall have been paid. The amount
of each installment shall be determined by multiplying the balance of the
Participant Deferred Contribution Amounts each year by a fraction, the numerator
of which is one and the denominator of which is (A) the number of installments
elected, reduced by (B) one for each annual installment previously received.

     (ii) Plan Employer Contributions. The distribution election made pursuant
to subsection (i) above shall also apply to the timing of the distribution of
the aggregate number of shares of Common Stock representing the Plan Employer
Contributions plus reinvested dividends pursuant to Section 5 (collectively the
"Plan Employer Contribution Amounts") credited to the Participant's Account
pursuant to Section 5. Except to the extent otherwise provided with respect to
fractional shares, all distributions of Plan Employer Contribution Amounts shall
be made in Common Stock. A Participant may elect to receive such Plan Employer
Contribution Amounts in one lump-sum payment or in a number of annual
installments (up to fifteen installments). The lump-sum payment or the first
installment shall be paid as soon as practicable during the month of January of
such future calendar year as the Participant may designate, or, if the
Participant so elects, as soon as practicable during the month of January of the
calendar year immediately following the later of the year in which the
Participant last contributed to the Plan or the year in which the Participant
terminates employment with the Corporation or any of its subsidiaries (whether
by reason of Retirement or otherwise). Except as otherwise provided in Section
8, subsequent installments shall be paid as soon as practicable during the month
of January of each succeeding calendar year until the entire amount of the Plan
Employer Contribution Amounts shall have been paid. The amount of each
installment shall be determined by (A) multiplying the balance of the Plan
Employer Contribution Amounts on the last Valuation Date of each year by a
fraction, the numerator of which is one and the denominator of which is (x) the
number of installments elected, reduced by (y) one for each annual installment
previously received, and (B) rounding the result down to the next whole share of
Common Stock; provided, however, the amount of the last installment shall be
determined without regard to the rounding requirement of the preceding portion
of this sentence. Any fractional shares of Common Stock shall be paid in an
equivalent cash amount, as determined using the closing price of Common Stock on
the trading date next preceding the distribution date.

     (b) Adjustment of Method of Distribution. Prior to the beginning of any
calendar year, a Participant may elect to change the timing and method of
distribution of the Participant Deferred Contribution Amounts and Plan Employer
Contribution Amounts credited to the Participant's Account commencing with
such calendar year. Participant Deferred Contribution Amounts and Plan
Employer Contribution Amounts credited to the Participant's Account prior to
the effective date of such change (the "Prior Balance"), and all amounts
thereafter accrued with

                                      -4-

respect to the Prior Balance, shall not be affected by such change and, except
as otherwise provided in this Section 6 or as determined by the Plan
Administrator pursuant to Section 8, shall be distributed only in accordance
with the election in effect at the time such Prior Balance was credited to the
Participant's Account.

     (c)(i) Distribution Default for Participant Deferred Contribution Amounts.
Any Participant Deferred Contribution Amounts credited to a Participant's
Account which are not covered by a timely distribution election under
subsections (a) and (b) above shall be distributed to the Participant in one
lump-sum cash payment as soon as practicable during the month of January of the
calendar year immediately following the later of the year in which the
Participant last contributed to the Plan or the year in which the Participant
terminates his employment with the Corporation or any of its subsidiaries
(whether by reason of Retirement or otherwise); provided, however, if the
Participant has made an election pursuant to Sections 9(a)(i) or 9(a)(ii), the
lump sum payment shall be made within the 90-day period following a Change in
Control, as defined in Section 9(c).

     (c)(ii) Distribution Default for Plan Employer Contribution Amounts. Any
Plan Employer Contribution Amounts credited to a Participant's Account which are
not covered by a timely distribution election under subsections (a) and (b)
above shall be distributed to the Participant in Common Stock as soon as
practicable during the month of January of the calendar year immediately
following the later of the year in which the Participant last contributed to the
Plan or the year in which the Participant terminates his employment with the
Corporation or any of it subsidiaries (whether by reason of Retirement or
otherwise); provided, however, if the Participant has made an election pursuant
to Sections 9(a)(i) or (ii), the distribution shall be made within the 90-day
period following a Change in Control, as defined in Section 9(c). Any fractional
shares of Common Stock shall be paid in an equivalent cash amount, as determined
using the closing price of Common Stock on the trading date next preceding the
distribution date.

     (d) Changing Prior Distribution Elections. The Plan Administrator may from
time to time allow Participants to request new elections with respect to the
distribution of a Participant's Prior Balance under the Plan (other than any
portion of such Prior Balance for which distributions have already commenced).
The Plan Administrator shall reserve the right to accept or reject any such
request at any time and such election shall be subject to such restrictions and
limitations as the Plan Administrator shall determine in its sole discretion,
provided that any new election shall generally be required to be made at least
twelve (12) months prior to any scheduled payment date. The Plan Administrator
may also allow a Participant to request an immediate distribution of all or a
portion of such Participant's Prior Balance (including any portion of such Prior
Balance for which distributions have already commenced) and any Deferred
Contribution Amounts and Plan Employer Contribution Amounts credited to the
Participant's Account immediately prior to such request. Any such immediate
distribution shall be subject to a penalty equal to six percent (6%) of the
amount requested to be distributed and shall be subject to such other
restrictions or conditions as may be established by the Plan Administrator from
time to time.

     (e) Special Distribution Provision. Notwithstanding any provision in this
Plan to the contrary, if all or a portion of a Participant's Account is
determined to be includible in the Participant's gross income and subject to
income tax at any time prior to the time such Account would otherwise be paid,
the Participant's Account or that portion of the Participant's Account shall
be distributed to the Participant. For this purpose, an amount is determined
to be includible in the Participant's gross income upon the earliest of: (i) a
final determination by the

                                      -5-

Internal Revenue Service addressed to the Participant which is not appealed,
(ii) a final determination by the United States Tax Court or any other federal
court affirming an IRS determination, or (iii) an opinion addressed to the
Corporation by the tax counsel for the Corporation that, by reason of the
Code, Treasury Regulations, published Internal Revenue Service rulings, court
decisions or other substantial precedent, the amount is subject to federal
income tax prior to payment.

7.   Distribution on Death

     (a) Participant Deferred Contribution Amounts. If a Participant should die
before all Participant Deferred Contribution Amounts credited to the
Participant's Account have been paid in accordance with the election referred to
in Sections 6(a) or 6(b), the balance of the Participant Deferred Contribution
Amounts in such Participant's Account shall be paid in cash as soon as
practicable following the Participant's death to the beneficiary designated in
writing by the Participant and filed with the Plan Administrator; provided,
however, if the Participant has made an election pursuant to Sections 9(a)(i) or
9(a)(ii), such amount shall be paid within the 90-day period following a Change
in Control, as defined in Section 9(c). If (i) no beneficiary designation has
been made, or (ii) the designated beneficiary shall have predeceased the
Participant and no further designation has been made, then such balance shall be
paid to the estate of the Participant. A Participant may change the designated
beneficiary at any time during the Participant's lifetime by filing a subsequent
designation in writing with the Plan Administrator.

     (b) Plan Employer Contribution Amounts. If a Participant should die before
all Plan Employer Contribution Amounts credited to the Participant's Account
have been paid in accordance with the election referred to in Sections 6(a) or
6(b), the balance of the Plan Employer Contribution Amounts in such
Participant's Account shall be paid in Common Stock as soon as practicable
following the Participant's death to the beneficiary designated in writing by
the Participant and filed with the Plan Administrator; provided, however, if the
Participant has made an election pursuant to Sections 9(a)(i) or 9(a)(ii), such
amount shall be paid within the 90-day period following a Change in Control, as
defined in Section 9(c). If (i) no such beneficiary designation has been made,
or (ii) the designated beneficiary shall have predeceased the Participant and no
further designation has been made, then such balance shall be paid to the estate
of the Participant. A Participant may change the designated beneficiary at any
time during the Participant's lifetime by filing a subsequent designation in
writing with the Plan Administrator. Any fractional shares of Common Stock shall
be paid in an equivalent cash amount, as determined using the closing price of
Common Stock on the trading date next preceding the distribution date.

8.   Payment in the Event of Hardship

     Upon receipt of a request from a Participant, delivered in writing to the
Plan Administrator along with a Certificate of Unavailability of Resources form,
the Plan Administrator, or his designee, may cause the Corporation to accelerate
(or require the subsidiary of the Corporation which employs or employed the
Participant to accelerate) payment of all or any part of the amount credited to
the Participant's Account, including accrued amounts, if it finds in its sole
discretion that payment of such amounts in accordance with the Participant's
prior election under Sections 6(a) or 6(b) would result in severe financial
hardship to the Participant, and such hardship is the result of an unforeseeable
emergency caused by circumstances beyond the control of the Participant.
Acceleration of payment may not be made under this Section 8 to the extent
that such hardship is or may be relieved (a) through reimbursement or
compensation by insurance or otherwise, (b) by liquidation of the Participant's

                                      -6-

assets, to the extent the liquidation of assets would not itself cause severe
financial hardship, or (c) by cessation of deferrals under this Plan or any
tax-qualified savings plan of the Corporation or its subsidiaries. Any
distribution of Participant Deferred Contribution Amounts pursuant to this
Section 8 shall be made in cash, while any distribution of Plan Employer
Contribution Amounts pursuant to this Section 8 shall be made in Common Stock.
Any fractional shares of Common Stock shall be paid in an equivalent cash
amount, as determined using the closing price of Common Stock on the trading
date next preceding the distribution date.

9.   Change in Control

     (a)(i) Initial Lump-Sum Payment Election. Notwithstanding any election made
pursuant to Section 6, any person who becomes eligible to participate in the
Plan may file a written election with the Plan Administrator at the time the
individual makes an election to participate pursuant to Section 3(a) to have the
aggregate amount credited to the Participant's Account (commencing with the date
on which such written election is filed) paid in one-lump sum payment as soon as
practicable following a Change in Control, but in no event later than 90 days
after such Change in Control. Any distribution of Participant Deferred
Contribution Amounts pursuant to this Section 9 shall be made in cash, while any
distribution of Plan Employer Contribution Amounts pursuant to this Section 9
shall be made in Common Stock (or the common stock of any successor corporation
issued in exchange for, or with respect to, Common Stock incident to the Change
in Control). Any fractional shares of Common Stock (or the common stock of any
successor corporation issued in exchange for, or with respect to, Common Stock
incident to the Change in Control) shall be paid in an equivalent cash amount.

     (a)(ii) Subsequent Lump-Sum Payment Election. A Participant who did not
make an election pursuant to Section 9(a)(i) or who has revoked, pursuant to
Section 9(a)(iii), an election previously made under Section 9(a)(i) or this
Section 9(a)(ii) may, prior to the earlier of a Change in Control or the
beginning of the calendar year in which the election is to take effect, elect to
have the aggregate amount credited to the Participant's Account for all calendar
years commencing with the first calendar year beginning after the date the
election is made, paid in one lump-sum payment as soon as practicable following
a Change in Control, but in no event later than 90 days after such Change in
Control. Amounts credited to the Participant's Account prior to the effective
date of the election made pursuant to this Section 9(a)(ii) shall not be
affected by such election and shall be distributed following a Change in Control
in accordance with any prior election in effect under Sections 9(a)(i) or
9(a)(ii).

     (a)(iii) Revocation of Prior Change in Control Payment Elections. A
Participant may, prior to a Change in Control, file an election revoking any
election made pursuant to Sections 9(a)(i) or 9(a)(ii) or file a new lump sum
payment election under this Section 9 with respect to amounts previously
credited to the Participant's Account. Any such revocation or new election shall
be made at the time specified by the Plan Administrator and shall be subject to
such restrictions and limitations as the Plan Administrator shall determine from
time to time.

     (b) Interest Equivalents. Notwithstanding anything to the contrary in the
Plan, after a Change in Control, the Plan may not provide, or be amended to
provide, interest accruals with respect to Participant Deferred Contributions at
rates lower than the rates in effect under Section 5 immediately prior to the
Change in Control.

     (c) Definition of Change in Control. For purposes of the Plan, a Change in
Control is deemed to occur at the time (i) when any entity, person or group
(other than the Corporation, any subsidiary or any savings, pension or other
benefit plan for the benefit of employees of the

                                      -7-

Corporation or its subsidiaries) which therefore beneficially owned less than
30% of the common stock then outstanding acquires shares of Common Stock in a
transaction or series of transactions that results in such entity, person or
group directly or indirectly owning beneficially 30% or more of the outstanding
Common Stock, (ii) of the purchase of shares of Common Stock pursuant to a
tender offer or exchange offer (other than an offer by the Corporation) for all,
or any part of, the Common Stock, (iii) of a merger in which the Corporation
will not survive as an independent, publicly owned corporation, a consolidation,
or a sale, exchange or other disposition of all or substantially all of the
Corporation's assets, (iv) of a substantial change in the composition of the
Board during any period of two consecutive years such that individuals who at
the beginning of such period were members of the Board cease for any reason to
constitute at least a majority thereof, unless the election, or the nomination
for election by the stockholders of the Corporation, of each new director was
approved by a vote of at least two-thirds of the directors then still in
office who were directors at the beginning of the period, or (v) of any
transaction or other event which the Corporate Governance Committee of the
Board, in its discretion, determines to be a Change in Control for purposes of
the Plan.

10.  Administration

     (a) Plan Administrator. The Plan Administrator and "named fiduciary" for
purposes of ERISA shall be the Senior Vice President-Human Resources and
Communications of the Corporation (or the person acting in such capacity in the
event such position is abolished, restructured or renamed). The Plan
Administrator shall have the authority to appoint one or more other named
fiduciaries of the Plan and to designate persons, other than named fiduciaries,
to carry out fiduciary responsibilities under the Plan, pursuant to Section
405(c)(1)(B) of ERISA. Any person acting on behalf of the Plan Administrator
shall serve without additional compensation. The Plan Administrator shall keep
or cause to be kept such records and shall prepare or cause to be prepared such
returns or reports as may be required by law or necessary for the proper
administration of the Plan.

     (b) Powers and Duties of Plan Administrator. The Plan Administrator shall
have the full discretionary power and authority to construe and interpret the
Plan (including, without limitation, supplying omissions from, correcting
deficiencies in, or resolving inconsistencies or ambiguities in, the language of
the Plan); to determine all questions of fact arising under the Plan, including
questions as to eligibility for and the amount of benefits; to establish such
rules and regulations (consistent with the terms of the Plan) as it deems
necessary or appropriate for administration of the Plan; to delegate
responsibilities to others to assist it in administering the Plan; to retain
attorneys, consultants, accountants or other persons (who may be employees of
the Corporation and its subsidiaries) to render advice and assistance as it
shall determine to be necessary to effect the proper discharge of any duty for
which it is responsible; and to perform all other acts it believes reasonable
and proper in connection with the administration of the Plan. The Plan
Administrator shall be entitled to rely on the records of the Corporation and
its subsidiaries in determining any Participant's entitlement to and the amount
of benefits payable under the Plan. Any determination of the Plan Administrator,
including interpretations of the Plan and determinations of questions of fact,
shall be final and binding on all parties.

     (c) Indemnification. To the extent permitted by law, the Corporation shall
indemnify the Plan Administrator from all claims for liability, loss, or damage
(including payment of expenses in connection with defense against such claims)
arising from any act or failure to act in connection with the Plan.

- --------------------------------------------------------------------------------

                                      -8-

11.  Claims Procedures and Appeals

     (a) Any request or claim for Plan benefits must be made in writing and
shall be deemed to be filed by a Participant when a written request is made by
the claimant or the claimant's authorized representative which is reasonably
calculated to bring the claim to the attention of the Plan Administrator.

     (b) The Plan Administrator shall provide notice in writing to any
Participant when a claim for benefits under the Plan has been denied in whole or
in part. Such notice shall be provided within 90 days of the receipt by the Plan
Administrator of the Participant's claim or, if special circumstances require,
and the Participant is so notified in writing, within 180 days of the receipt by
the Plan Administrator of the Participant's claim. The notice shall be written
in a manner calculated to be understood by the claimant and shall:

          (i) set forth the specific reasons for the denial of benefits;

          (ii) contain specific references to Plan provisions relative to the
denial;

          (iii) describe any material and information, if any, necessary for the
claim for benefits to be allowed, that had been requested, but not received by
the Plan Administrator; and

          (iv) advise the Participant that any appeal of the Plan
Administrator's adverse determination must be made in writing to the Plan
Administrator within 60 days after receipt of the initial denial notification,
and must set forth the facts upon which the appeal is based.

     (c) If notice of the denial of a claim is not furnished within the time
periods set forth above, the claim shall be deemed denied and the claimant shall
be permitted to proceed to the review procedures set forth below. If the
Participant fails to appeal the Plan Administrator's denial of benefits in
writing and within 60 days after receipt by the claimant of written notification
of denial of the claim (or within 60 days after a deemed denial of the claim),
the Plan Administrator's determination shall become final and conclusive.

     (d) If the Participant appeals the Plan Administrator'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 representative, may review any pertinent documents, as determined by
the Plan Administrator, and submit in writing any issues or comments to be
addressed on appeal.

     (e) The Plan Administrator shall advise the Participant and such
individual's representative of its decision, which shall be written in a manner
calculated to be understood by the claimant, and include specific references to
the pertinent Plan provisions on which the decision is based. Such response
shall be made within 60 days of receipt of the written appeal, unless special
circumstances require an extension of such 60-day period for not more than an
additional 60 days. Where such extension is necessary, the claimant shall be
given written notice of the delay. If the decision on review is not furnished
within the time set forth above, the claim shall be deemed denied on review.

     (f) Any dispute, controversy, or claim arising out of or relating to any
Plan benefit, including, without limitation, any dispute, controversy or claim
as to whether the decision of the Plan Administrator respecting the benefits
under this Plan or interpretation of this Plan is arbitrary and capricious, that
is not settled in accordance with the procedures outlined in this

                                      -9-

Section 11, shall be settled by final and binding arbitration in accordance with
the American Arbitration Association Employment Dispute Resolution or other
applicable Rules. Before resorting to arbitration, an aggrieved Participant must
first follow the review procedure outlined in this Section of the Plan. If there
is still a dispute after the procedures in this Section have been exhausted, the
Participant must request arbitration in writing within six (6) months after the
Plan Administrator issues, or is deemed to have issued, its determination under
subparagraph (e) above.

          The arbitrator shall be selected by mutual agreement of the parties,
if possible. If the parties fail to reach agreement upon appointment of an
arbitrator within 30 days following receipt by one party of the other party's
notice of desire to arbitrate, the arbitrator shall be selected from a panel or
panels of persons submitted by the American Arbitration Association (the "AAA").
The selection process shall be that which is set forth in the AAA Employment
Dispute Resolution Rules, except that, if the parties fail to select an
arbitrator from one or more panels, AAA shall not have the power to make an
appointment but shall continue to submit additional panels until an arbitrator
has been selected.

          All fees and expenses of the arbitration, including a transcript if
requested, will be borne by the Corporation. The arbitrator shall have no power
to amend, add to or subtract from this Plan. The award shall be admissible in
any court or agency action seeking to enforce or render unenforceable this Plan
or any portion thereof. Any action to enforce or vacate the arbitrator's award
shall be governed by the Federal Arbitration Act if applicable.

12.  Miscellaneous

     (a) Anti-Alienation. The right of a Participant to receive any amount
credited to the Participant's Account shall not be transferable or assignable by
the Participant, except by will or by the laws of descent and distribution. To
the extent that any person acquires a right to receive any amount credited to a
Participant's Account hereunder, such right shall be no greater than that of an
unsecured general creditor of the Corporation. Except as expressly provided
herein, any person having an interest in any amount credited to a Participant's
Account under the Plan shall not be entitled to payment until the date the
amount is due and payable. No person shall be entitled to anticipate any payment
by assignment, pledge or transfer in any form or manner prior to actual or
constructive receipt thereof.

     (b) Unsecured General Creditor. Neither the Corporation nor any of its
subsidiaries shall be required to reserve or otherwise set aside funds, Common
Stock or other assets for the payment of its obligations hereunder. However, the
Corporation or any subsidiary may, in its sole discretion, establish funds for
payment of its obligations hereunder. Any such funds shall remain assets of the
Corporation or such subsidiary, as the case may be, and subject to the claims of
its general creditors. Such funds, if any, shall not be deemed to be assets of
the Plan. The Plan is intended to be unfunded for tax purposes and for purposes
of Title I of the Employee Retirement Income Security Act of 1974, as amended.

     (c) Withholding. The Corporation shall withhold from any distribution made
from Participant Deferred Contribution Amounts the amount necessary to satisfy
applicable federal, state and local tax withholding requirements. With respect
to distributions of Plan Employer Contribution Amounts, the delivery of the
shares of Common Stock shall be delayed until the Participant makes
arrangements, pursuant to procedures to be adopted by the Plan Administrator,
to satisfy the applicable federal, state and local tax withholding requirements.

                                      -10-

     (d) Termination and Amendment. The Corporation may at any time amend or
terminate the Plan. No amendment or termination shall impair the rights of a
Participant with respect to amounts then credited to the Participant's Account.

     (e) Benefit Statements. Each Participant will receive periodic statements
(not less frequently than annually) regarding the Participant's Account. Each
such statement shall indicate the amount of the balances credited to the
Participant's Account as of the end of the period covered by such statement.

     (f) Legal Interpretation. This Plan and its provisions shall be construed
in accordance with the laws of the State of Delaware to the extent such Delaware
law is not inconsistent with the provisions of ERISA. The text of this Plan
shall, to the extent permitted by law, govern the determination of the rights
and obligations created or referred to herein. Headings to the Sections,
paragraphs and subparagraphs are for reference purposes only and do not limit or
extend the meaning of any of the Plan's provisions.

     (g) Employment. The adoption and maintenance of this Plan shall not be
deemed to constitute a contract between the Corporation or its subsidiaries and
any employee or to be a consideration for or condition of employment of any
person. No provision of the Plan shall be deemed to give any employee the right
to continue in the employ of the Corporation or its subsidiaries or to interfere
with the right of the Corporation or its subsidiaries to discharge any employee
at any time without regard to the effect which such discharge might have upon
the employee's participation in the Plan or benefits under it.

     (h) Fiduciary Capacities. Any person or group of persons may serve in more
than one fiduciary capacity with respect to the Plan. For purposes of this
Section 12(h), the term "fiduciary" shall have the same meaning as in ERISA.

     (i) Participants Subject to Section 16. Notwithstanding anything herein to
the contrary, if any request, election or other action under the Plan affecting
a Participant subject to Section 16 of the Securities Exchange Act of 1934
should require the approval of the Committee to exempt such request, election or
other action from potential liability under Section 16, then the approval of the
Committee shall be obtained in lieu of the approval of the Plan Administrator.

                                      -11-

                                                                    EXHIBIT 10.8

                    Salary and Incentive Award Deferral Plan
                                       for
           Selected Employees of Honeywell International Inc. and its
                                   Affiliates

                                                            Amended and Restated
                                                           as of January 1, 2002

                                      -2-

1.   Eligibility

     Those employees of Honeywell International Inc. (the "Corporation") and its
affiliates who are designated by the Management Development and Compensation
Committee (the "Committee") shall be eligible to participate in this
supplemental non-qualified Salary and Incentive Award Deferral Plan for Selected
Employees of Honeywell International Inc. and its Affiliates (the "Plan").

2.   Participation

     An eligible employee may become a participant in the Plan (a "Participant")
by filing a timely written deferral election with the Corporation. Such election
shall request that a portion of the compensation elements described in paragraph
3(a) and paragraph 3(b) be credited to an unfunded deferred compensation account
maintained for the Participant under the Plan (the "Participant Account" or
"Account"). A Participant's direction, if accepted by the Corporation, shall
become effective for the pay period or payment date in the next succeeding
calendar year (or for a newly eligible Participant, for the next succeeding pay
period or payment date after the receipt of the direction by the Corporation),
and shall continue in effect until the Participant terminates such direction,
effective as of the end of the calendar year, or is no longer eligible to be a
Participant. Any modification of Participant's direction shall be effective only
with respect to compensation payable with respect to pay periods in the calendar
year next following the date such direction is received by the Corporation.

3.   Contributions to Participant Accounts

     (a) Base Annual Salary. A Participant in Career Band 6 and above (or a
Participant who occupies a position equivalent thereto) may, prior to the
beginning of any calendar year (and with respect to a newly eligible
Participant, within thirty days after first becoming so eligible) elect to defer
an aggregate amount of base annual salary otherwise payable in such subsequent
calendar year (or with respect to a newly eligible Participant, in the remainder
of the calendar year), exclusive of any bonus or any other compensation or
allowance paid or payable by the Corporation or its affiliates (the "Base Annual
Salary"). The amount deferred under this paragraph 3(a) shall not be greater
than fifty percent (50%) of the Participant's Base Annual Salary for such pay
period.

     (b) Incentive Awards. A Participant may, to the extent that the Honeywell
International Inc. Incentive Compensation Plan For Executive Employees (the
"Incentive Plan") (or any successor plan) permits deferrals of an incentive
award (the "Incentive Award") payable thereunder, elect to defer an amount not
greater than one hundred percent of such Incentive Award. Any amount so deferred
shall be deemed to be deferred under this Plan but shall, to the extent the
provisions of the Incentive Plan are not inconsistent with this Plan, otherwise
be subject to the terms of the Incentive Plan. Any deferral of an Incentive
Award shall be made by filing an appropriate deferral election with the
Corporation not later than the date established by the Corporation from time to
time.

                                      -3-

     (c) Deferral Amounts. All amounts determined under this paragraph 3 which
are the subject of a written deferral election (the "Deferral Amounts") shall,
in accordance with the relevant Participant direction, be credited to a
Participant Account maintained under the Plan on the same day the Base Annual
Salary or Incentive Award would otherwise have been payable.

4.   Deferral Requirements

     Amounts may be deferred under this Plan for a minimum period of three years
or such shorter period as may be approved by the Committee. Except as otherwise
provided in paragraphs 9 or 10 or as approved by Committee, no amount shall be
withdrawn from a Participant Account prior to the earlier of: three years
following the last day of the calendar year in which the Deferral Amounts were
earned; the date the Participant reaches normal retirement age and is eligible
to receive a benefit under a pension plan of the Corporation or one of its
affiliates; the date of Participant's death; or the date the Participant ceases
to be employed by the Corporation or any of its affiliates. Notwithstanding the
preceding provisions of this Section 4, a Participant may request an immediate
withdrawal of all or a portion of such Participant's Account prior to any date
described above or prior to the date the Account has been completely withdrawn,
provided that such a request and withdrawal shall be subject to such penalties,
restrictions or conditions as may be established by the Corporation from time to
time. The penalty shall be a percentage of the amount requested to be withdrawn,
calculated as the difference between (a) 6%, and (b) 50% of the amount, if any,
by which 10% exceeds the interest rate on 10-year U.S. Treasury Bonds on the
first business day of the calendar quarter during which the withdrawal request
is made.

5.   Interest Equivalents

     Deferral Amounts shall accrue additional amounts equivalent to interest
("Interest Equivalents"), compounded daily, from the date the Deferral Amount is
credited to the Account to the date of distribution. A single rate for
calculating Interest Equivalents shall be established by the Committee, in its
sole discretion, for all Deferral Amounts credited to Participant Accounts in
each calendar year. The rate established by the Committee shall not exceed the
greater of (i) 10% or (ii) 200% of the 10-year U.S. Treasury Bond rate at the
time of determination. Such Interest Equivalents, once established for a
calendar year, shall remain in effect with respect to Deferral Amounts credited
to Participant Accounts during the calendar year until the Deferral Amounts are
distributed.

     The rate of notional interest established by the Committee shall be set
forth on Schedule A attached hereto and made a part hereof. Any portion of such
rate designated as the "Contingent Rate" shall become nonforfeitable only if the
Participant is still employed by the Corporation or any affiliate at the end of
the third full calendar year following the calendar year in which the Deferral
Amount relates, provided, however, in the event a Participant terminates
employment with the Corporation or an affiliate prior to such date for reasons
other than gross cause, the Committee shall treat such portion as nonforfeitable
in the event the Participant's employment with the Corporation or Affiliate is
involuntarily terminated (including a termination for "good reason" under any
applicable severance plan of the Corporation or affiliate) or is terminated for
such reasons as the Committee may determine from time to time in its

                                      -4-

sole discretion. Notwithstanding the preceding sentence, in the event a
Participant withdraws any portion of the Deferral Amount prior to the end of the
third full calendar year following the calendar year to which the Deferral
Amount relates, the amount of Contingent Rate interest credited with respect to
such Deferred Amount at the time of withdrawal shall remain credited to such
Account subject to the provisions of the preceding sentence but shall not be
credited with any Interest Equivalents after such date ("Frozen Contingent
Interest"). The rate established by the Committee and set forth on Schedule A
shall remain in effect until superceded by action of the Committee and amendment
of such Schedule A.

     Notwithstanding anything in the Plan to the contrary, from and after the
occurrence of a Change in Control, the rate at which Deferral Amounts accrue
Interest Equivalents may not be decreased.

6.   Participant Accounts

     All amounts credited to a Participant's Account pursuant to paragraphs 3
and 4 shall be unfunded general obligations of the Corporation, and no
Participant shall have any claim to or security interest in any asset of the
Corporation on account thereof.

7.   Distribution from Accounts

     At the time a Participant makes an election pursuant to paragraph 3, the
Participant shall also make an election with respect to the distribution of the
Deferral Amounts and Interest Equivalents accrued thereon which are credited to
the Participant's Account pursuant to such election. A Participant may elect to
receive such distribution in one lump-sum payment or in a number of
approximately equal annual payments (provided the payment period may not include
more than fifteen such installments). The lump-sum or the first installment
shall be paid as soon as practicable during the month of January of the calendar
year designated by the Participant. Except as otherwise provided in paragraphs
8, 9 and 10, all installment payments following the initial installment payment
shall be paid in cash as soon as practicable during the month of January of each
succeeding calendar year until the entire amount in the Account shall have been
paid. Notwithstanding the foregoing, in the event a Participant's employment
with the Company is terminated either voluntarily (other than on account of
retirement as defined in the qualified pension plan in which the Participant
participates or for "good reason" under any applicable severance plan of the
Company) or for "gross cause" (as defined in the AlliedSignal Inc. Severance
Plan for Senior Executives), the nonforfeitable portion of such Participant's
Deferred Amounts for performance years beginning after 1997 for amounts deferred
under paragraph 3(b) or after 1998 for amount deferred under paragraph 3(a)
(including the vested portion of any applicable notional interest credited
thereto) shall be distributed in a lump sum as soon as practicable in January of
the calendar year following such termination of employment. Any Frozen
Contingent Interest credited to the Participant's Account shall be payable to
the Participant in one lump sum after the date the Frozen Contingent Interest
becomes nonforfeitable pursuant to Paragraph 5.

          The Corporation may from time to time allow Participants to request
new elections with respect to the distribution of all Deferral Amounts and
Interest Equivalents accrued thereon that are credited to such Participant under
the Plan (other than any

                                      -5-

such amounts currently payable to a Participant). The Corporation shall reserve
the right to accept or reject any such request at any time and such election
shall be subject to such restrictions and limitations as the Corporation shall
determine in its sole discretion, provided that any new election shall generally
be required to be made at least twelve (12) months prior to any scheduled
payment date.

     Notwithstanding any provision in this Plan to the contrary, if all or a
portion of a Participant's Account is determined to be includible in the
Participant's gross income and subject to income tax at any time prior to the
time such Account would otherwise be paid, the Participant's Account or that
portion of the Participant's Account shall be distributed to the Participant.
For this purpose, an amount is determined to be includible in the Participant's
gross income upon the earliest of: (i) a final determination by the Internal
Revenue Service addressed to the Participant which is not appealed, (ii) a final
determination by the United States Tax Court or any other federal court
affirming an IRS determination, or (iii) an opinion addressed to the Corporation
by the tax counsel for the Corporation that, by reason of the Code, Treasury
Regulations, published Internal Revenue Service rulings, court decisions or
other substantial precedent, the amount is subject to federal income tax prior
to payment.

8.   Distribution on Death

     If a Participant should die before all amounts credited to the
Participant's Account have been distributed, the balance in the Account shall be
paid as soon as practical thereafter to the beneficiary designated in writing by
the Participant. Payment to a beneficiary pursuant to a designation by a
Participant shall be made in one lump sum to the designated beneficiary as soon
as practicable following the death of the Participant. Such beneficiary
designations shall be effective when received by the Corporation, and shall
remain in effect until rescinded or modified by the Participant by an
appropriate written direction. If no beneficiary is properly designated by the
Participant or if the designated beneficiary shall have predeceased the
Participant, such balance in the Account shall be paid to the estate of the
Participant.

9.   Payment in the Event of Hardship

     Upon receipt of a request from a Participant, delivered in writing to the
Corporation along with a Certificate of Unavailability of Other Resources form,
the Committee, the Senior Vice President - Human Resources and Communications,
or his designee, may cause the Corporation to accelerate (or require the
subsidiary of the Corporation which employs or employed the Participant to
accelerate) payment of all or any part of the Deferral Amount and Interest
Equivalents credited to the Participant's Account, if it finds in its sole
discretion that payment of such amounts in accordance with the Participant's
prior election under paragraph 3 would result in severe financial hardship to
the Participant and such hardship is the result of an unforeseeable emergency
caused by circumstances beyond the control of the Participant. Acceleration of
payment may not be made under this paragraph 9 to the extent that such hardship
is or may be relieved (i) through reimbursement or compensation by insurance or
otherwise, (ii) by liquidation of the Participant's assets, to the extent the
liquidation of assets would not itself cause severe financial hardship or (iii)
by cessation of deferrals under this Plan or any tax-qualified savings plan of
the Corporation.

                                      -6-

10.  Change in Control

     (a) Initial Lump Sum Election. Notwithstanding any election made pursuant
to paragraph 7, a Participant may file a written election with the Corporation
to have the Deferral Amounts and Interest Equivalents accrued thereon which are
credited thereafter to the Participant's Account paid in one lump-sum payment as
soon as practicable following a Change in Control, but in no event later than 90
days after such Change in Control. The Interest Equivalents on any Deferred
Amount payable pursuant to this paragraph 10(a) shall include the "Contingent
Rate" credited to such Deferred Amount without regard to whether such amount has
become nonforfeitable as provided in paragraph 5 at the time payment is made
under this paragraph 10(a).

     (b) Revocation of Lump-Sum Election. A Participant may revoke an election
made pursuant to paragraph 10(a) (including an election not to be paid in one
lump sum upon a Change in Control) by filing an appropriate written notice with
the Corporation. A revocation notice filed pursuant to this paragraph 10(b)
shall be subject to such terms and conditions as the Corporation shall establish
and shall be effective with respect to any or all of the Participant's Deferral
Amounts and Interest Equivalents accrued thereon which are credited to such
Participant under the Plan. Any such election shall be subject to such
restrictions and limitations as the Corporation shall determine in its sole
discretion.

     (c) Limitation on Elections. Any election made pursuant to paragraph 10(a)
or 10(b) shall not be effective unless filed with the Corporation at least 90
days prior to a Change in Control.

     (d) Definition of Change in Control. For purposes of the Plan, a Change in
Control is deemed to occur at the time (i) when an entity, person or group
(other than the Corporation, any subsidiary or savings, pension or other benefit
plan for the benefit of employees of the Corporation or its subsidiaries) which
theretofore beneficially owned less than 30% of the Corporation's common stock
(the "Common Stock") then outstanding, acquires shares of Common Stock in a
transaction or a series of transactions that results in such entity, person or
group directly or indirectly owning beneficially 30% or more of the outstanding
Common Stock, (ii) of the purchase of Common Stock pursuant to a tender offer or
exchange offer (other than an offer by the Corporation) for all, or any part of,
the Common Stock (iii) of a merger in which the Corporation will not survive as
an independent, publicly owned corporation, a consolidation, a sale, exchange or
other disposition of all or substantially all of the Corporation's assets, (iv)
of a substantial change in the composition of the Board during any period of two
consecutive years such that individuals who at the beginning of such period were
members of the Board cease for any reason to constitute at least a majority
thereof, unless the election, or the nomination for election by the shareowners
of the Corporation, of each new director was approved by a vote of at least
two-thirds of the directors then still in office who were directors at the
beginning of the period, or (v) of any transaction or other event which the
Committee, in its sole discretion, determines to be a Change in Control for
purposes of the Plan.

                                      -7-

11.  Miscellaneous

     (a) No Alienation of Benefits. Except insofar as may otherwise be required
by law, no amount payable at any time under the Plan shall be subject in any
manner to alienation by anticipation, sale, transfer, assignment, bankruptcy,
pledge, attachment, charge, or encumbrance of any kind nor in any manner be
subject to the debts or liabilities of any person and any attempt to so alienate
or subject any such amount, whether presently or thereafter payable, shall be
void. If any person shall attempt to, or shall alienate, sell, transfer, assign,
pledge, attach, charge, or otherwise encumber any amount payable under the Plan,
or any part thereof, or if by reason of such person's bankruptcy or other event
happening at any such time such amount would be made subject to the person's
debts or liabilities or would otherwise not be enjoyed by that person, then the
Corporation, if it so elects, may direct that such amount be withheld and that
same or any part thereof be paid or applied to or for the benefit of such
person, the person's spouse, children or other dependents, or any of them, in
such manner and proportion as the Corporation may deem proper.

     (b) No Right or Interest in Corporation's Assets. Neither the Corporation
nor any of its Affiliates shall be required to reserve or otherwise set aside
funds for the payment of obligations arising under this Plan. The Corporation
may, in its sole discretion, establish funds, segregate assets or take such
other action as it shall determine necessary or appropriate to secure the
payment of its obligations arising under this Plan. This Plan is intended to be
unfunded for tax purposes and for purposes of Title I of the Employee Retirement
Income Security Act of 1974, as amended. Nothing contained herein, and no action
taken pursuant to the provisions of this Plan shall create or be construed to
create a trust of any kind, or a fiduciary relationship between the Corporation
and any Participant or any other person. To the extent that any person acquires
a right to receive payments under this Plan, such right shall be no greater than
the right of an unsecured creditor of the Corporation.

     (c) Administration. The Corporation shall have sole discretion and
authority to administer the Plan, including the authority to interpret its
terms, promulgate regulations thereunder, determine eligibility to participate
in the Plan and make any finding of fact which may be necessary to determine the
obligation of the Plan with respect to the payment of benefits.

     (d) Amendment. The Corporation may amend, modify or terminate the Plan at
any time, or from time to time; provided, however, that no change to the Plan
shall impair the right of any Participant with respect to amounts then credited
to an Account; and further provided that during a Potential Change in Control
Period (as defined in Section 11(h) hereof) and from and after the occurrence of
a Change in Control, the Plan may not, without the consent of the Participant,
be amended in any manner which would adversely affect such Participant's rights
and expectations with respect to Deferred Amounts credited to such Participant's
Account immediately prior to such amendment.

     (e) Accounting. Each Participant shall receive periodic statements (not
less frequently than annually) setting forth the cumulative Deferral Amounts and
Interest Equivalents credited to, and any distributions from, the Participant's
Account.

                                      -8-

     (f) Facility of Payments. If the Corporation shall find that any person to
whom any amount is payable under the plan is unable to care for his or her
affairs because of illness or accident, or is a minor, or has died, then any
payment due the person or the person's estate (unless a prior claim therefore
has been made by a duly appointed legal representative), may, if the Corporation
so elects in its sole discretion, be paid to the person's spouse, a child, a
relative, an institution having custody of such person, or any other person
deemed by the Corporation to be a proper recipient on behalf of such person
otherwise entitled to payment. Any such payment shall be a complete discharge of
the liability of the Corporation and the Plan therefore.

     (g) Governing Law. The Plan is intended to constitute an unfunded deferred
compensation arrangement for a select group of management or highly compensated
personnel and all rights thereunder shall be governed by and construed in
accordance with the laws of New York.

     (h) Potential Change in Control Period. A "Potential Change in Control
Period" shall commence when: (i) the Corporation enters into an agreement, the
consummation of which would result in the occurrence of a Change in Control;
(ii) the Corporation or any person or group publicly announces an intention to
take or to consider taking actions which, if consummated, would result in a
Change in Control; (iii) any person or group (other than the Corporation, any
subsidiary or any savings, pension or other benefit plan for the benefit of
employees of the Corporation or its subsidiaries) becomes the beneficial owner,
directly or indirectly, of securities of the Corporation representing 15% or
more of either the then outstanding shares of common stock of the Corporation or
the combined voting power of the Corporation's then outstanding securities (not
including in the securities beneficially owned by such person or group any
securities acquired directly from the Corporation or its affiliates); or (iv)
the Board adopts a resolution to the effect that, for purposes of the Plan, a
Potential Change in Control Period has commenced. The Potential Change in
Control Period shall continue until the earlier of (A) a Change in Control, or
(B) the adoption by the Board of a resolution stating that, for purposes of the
Plan, the Potential Change in Control Period has expired.

                                      -9-

                                   SCHEDULE A
                             Notional Interest Rate

                  Deferred Incentive Awards (Band 6 and Above)

Year Award Earned     Vested Rate      Contingent Rate      Total Rate
- -----------------   ----------------   ---------------   ----------------
1975 - 1992         Treasury bills +         N/A         Treasury bills +
                           3%*                                   3%*
1993 - 1997               10%                N/A                10%
1998 - 2000                8%                 3%                11%
2001 +                     7%                 3%                10%

*/Three-month Treasury bill average rate for the immediately preceding calendar
quarter as reported by the Federal Reserve Bank; rate changes each calendar
quarter.

                  Deferred Incentive Awards (Band 5 and Below)

Year Award Earned     Vested Rate      Contingent Rate      Total Rate
- -----------------   ----------------   ---------------   ----------------
1975 - 1997         Treasury bills +         N/A         Treasury bills +
                           3%*                                  3%*
1998 +                     6%                 3%                9%

*/Three-month Treasury bill average rate for the immediately preceding calendar
quarter as reported by the Federal Reserve Bank; rate changes each calendar
quarter.

                       Deferred Salary (Band 6 and Above)

Year Salary Earned   Vested Rate   Contingent Rate   Total Rate
- ------------------   -----------   ---------------   ----------
1994 - 1998               10%            N/A             10%
1999 - 2001                8%             3%             11%
2002 +                     7%             3%             10%

                                                                   EXHIBIT 10.10

                            364-DAY CREDIT AGREEMENT

                          Dated as of November 27, 2002

          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 agent (the "Agent") for the Lenders (as hereinafter defined),
JPMORGAN CHASE BANK, DEUTSCHE BANK AG, NEW YORK BRANCH, BANK OF AMERICA, N.A.
and BARCLAYS BANK PLC, as syndication agents, and SALOMON SMITH BARNEY INC., as
lead arranger book manager, hereby agree as follows:

                                   ARTICLE I

                        DEFINITIONS AND ACCOUNTING TERMS

          SECTION 1.01. Certain Defined Terms.

          As used in this Agreement, the following terms shall have the
following meanings (such meanings to be equally applicable to both the singular
and plural 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. For purposes of
     this definition, the term "control" (including the terms "controlling",
     "controlled by" and "under common control with") of a Person means the
     possession, direct or indirect, of the power to direct or cause the
     direction of the management and policies of such Person, whether through
     the ownership of Voting Stock, by contract or otherwise.

          "Agent's Account" means (a) in the case of Advances denominated in
     Dollars, the account of the Agent maintained by the Agent at Citibank at
     its office at 388 Greenwich Street, New York, New York 10013, Account No.
     36852248, Attention: Janet Wallace, (b) in the case of Advances denominated
     in any Foreign Currency, the account of the Sub-Agent designated in writing
     from time to time by the Agent to the Company and the Lenders for such
     purpose and (c) in any such case, such other account of the Agent as is
     designated in writing from time to time by the Agent to the Company and the
     Lenders for such purpose.

          "Alternate Currency" means any lawful currency other than Dollars and
     the Major Currencies that is freely transferrable and convertible into
     Dollars.

          "Applicable Lending Office" means, with respect to each Lender, such
     Lender's Domestic Lending Office in the case of a Base Rate Advance and
     such Lender's Eurocurrency Lending Office in the case 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 Eurocurrency Rate Advances, as of any date, a percentage per annum
     determined by reference to the Public Debt Rating in effect on such date as
     set forth below:

- -----------------------------------------------------------------------
                                                  Applicable Margin for
                         Applicable Margin for      Eurocurrency Rate
                           Eurocurrency Rate      Advances On and After
Public Debt Rating       Advances Prior to Term    Term Loan Conversion
   S&P/Moody's            Loan Conversion Date            Date
- -----------------------------------------------------------------------

Level 1
A+ or A1 or above                 0.200%                  0.550%
- -----------------------------------------------------------------------
Level 2
Lower than Level 1 but            0.240%                  0.600%
at least A or A2
- -----------------------------------------------------------------------
Level 3
Lower than Level 2 but            0.280%                  0.700%
at least A- or A3
- -----------------------------------------------------------------------
Level 4
Lower than Level 3 but            0.400%                  0.875%
at least BBB+ or Baa1
- -----------------------------------------------------------------------
Level 5
Lower than Level 4                0.625%                  1.375%
- -----------------------------------------------------------------------

          "Applicable Percentage" means, as of any date prior to the Term Loan
     Conversion Date, 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                               Percentage
- -------------------------------------------------------
Level 1
A+ or A1 or above                              0.050%
- -------------------------------------------------------
Level 2 Lower than Level 1 but at
least A or A2                                  0.060%
- -------------------------------------------------------
Level 3
Lower than Level 2 but at                      0.070%
least A- or A3
- -------------------------------------------------------

                                       2

- -------------------------------------------------------
Level 4
Lower than Level 3 but at                      0.100%
least BBB+ or Baa1
- -------------------------------------------------------
Level 5
Lower than Level 4                             0.125%
- -------------------------------------------------------

          "Applicable Utilization Fee" means, as of any date 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 1
A+ or A1 or above                            0.050%
- -------------------------------------------------------
Level 2
Lower than Level 1 but at                    0.050%
least A or A2
- -------------------------------------------------------
Level 3
Lower than Level 2 but at                    0.100%
least A- or A3
- -------------------------------------------------------
Level 4
Lower than Level 3 but at                    0.125%
least BBB+ or Baa1
- -------------------------------------------------------
Level 5
Lower than Level 4                           0.125%
- -------------------------------------------------------

          "Assignment and Acceptance" means an assignment and acceptance entered
     into by a Lender and an Eligible Assignee, and accepted by the Agent, in
     substantially the form of Exhibit C hereto.

          "Assuming Lender" means an Eligible Assignee not previously a Lender
     that becomes a Lender hereunder pursuant to Section 2.16.

          "Assumption Agreement" means an agreement in substantially the form of
     Exhibit D hereto by which an Eligible Assignee agrees to become a Lender
     hereunder pursuant to Section 2.16, in each case agreeing to be bound by
     all obligations of a Lender hereunder.

          "Base Rate" means a fluctuating interest rate per annum in effect from
     time to time, which rate per annum shall at all times be equal to the
     highest of:

               (a) the rate of interest announced publicly by Citibank in New
          York, New York, from time to time, as Citibank's base rate;

                                       3

               (b) the sum (adjusted to the nearest 1/32 of 1% or, if there is
          no nearest 1/32 of 1%, to the next higher 1/32 of 1%) of (i) 1/2 of 1%
          per annum, plus (ii) the rate obtained by dividing (A) the latest
          three-week moving average of secondary market morning offering rates
          in the United States for three-month certificates of deposit of major
          United States money market banks, such three-week moving average
          (adjusted to the basis of a year of 360 days) being determined weekly
          on each Monday (or, if such day is not a Business Day, on the next
          succeeding Business Day) for the three-week period ending on the
          previous Friday by Citibank on the basis of such rates reported by
          certificate of deposit dealers to and published by the Federal Reserve
          Bank of New York or, if such publication shall be suspended or
          terminated, on the basis of quotations for such rates received by
          Citibank from three New York certificate of deposit dealers of
          recognized standing selected by Citibank, by (B) a percentage equal to
          100% minus the average of the daily percentages specified during such
          three-week period by the Board of Governors of the Federal Reserve
          System (or any successor) for determining the maximum reserve
          requirement (including, but not limited to, any emergency,
          supplemental or other marginal reserve requirement) for Citibank with
          respect to liabilities consisting of or including (among other
          liabilities) three-month Dollar non-personal time deposits in the
          United States, plus (iii) the average during such three-week period of
          the annual assessment rates estimated by Citibank for determining the
          then current annual assessment payable by Citibank to the Federal
          Deposit Insurance Corporation (or any successor) for insuring Dollar
          deposits of Citibank in the United States; and

               (c) 1/2 of one percent per annum above the Federal Funds Rate.

          "Base Rate Advance" means a Revolving Credit Advance denominated in
     Dollars that bears interest as provided in Section 2.07(a)(i).

          "Borrower" means the Company or any Designated Subsidiary, as the
     context requires.

          "Borrowing" means a Revolving Credit Borrowing or a Competitive Bid
     Borrowing.

          "Business Day" means a day of the year on which banks are not required
     or authorized by law to close in New York City and, if the applicable
     Business Day relates to any Eurocurrency Rate Advance or LIBO Rate Advance,
     on which dealings are carried on in the London interbank market and banks
     are open for business in London and in the country of issue of the currency
     of such Eurocurrency Rate Advance or LIBO Rate Advance (or, in the case of
     an Advance denominated in Euros, on which the Trans-European Automated
     Real-Time Gross Settlement Express Transfer (TARGET) System is open) and,
     if the applicable Business Day relates to any Local Rate Advance, on which
     banks are open for business in the country of issue of the currency of such
     Local Rate Advance.

                                       4

          "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 of the Company or its Subsidiaries) which theretofore
     beneficially owned less than 30% of the Voting Stock of the Company then
     outstanding shall 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 Effective Date, individuals who at the beginning of such
     twelve-month period were directors of the Company shall cease to constitute
     a majority of the Board of Directors of the Company.

          "Commitment" means as to any Lender (i) the Dollar amount set forth
     opposite its name on the signature pages hereof, (ii) if such Lender has
     become a Lender hereunder pursuant to an Assumption Agreement, the Dollar
     amount set forth as its Commitment in such Assumption Agreement or (iii) if
     such Lender has entered into any Assignment and Acceptance, the Dollar
     amount set forth for such Lender in the Register maintained by the
     Administrative Agent pursuant to Section 9.07(d), in each case as the same
     may be terminated or reduced, as the case may be, pursuant to Section 2.05.

          "Competitive Bid Advance" means an advance by a Lender to any Borrower
     as part of a Competitive Bid Borrowing resulting from the competitive
     bidding procedure described in Section 2.03 and refers to a Fixed Rate
     Advance, a LIBO Rate Advance or a Local Rate Advance (each of which shall
     be a "Type" of Competitive Bid Advance).

          "Competitive Bid Borrowing" means a borrowing consisting of
     simultaneous Competitive Bid Advances from each of the Lenders whose offer
     to make one or more Competitive Bid Advances as part of such borrowing has
     been accepted under the competitive bidding procedure described in Section
     2.03.

          "Competitive Bid Note" means a promissory note of any Borrower payable
     to the order of any Lender, in substantially the form of Exhibit A-2
     hereto, evidencing the indebtedness of such Borrower to such Lender
     resulting from a Competitive Bid Advance made by such Lender to such
     Borrower.

          "Competitive Bid Reduction" has the meaning specified in Section 2.01.

          "Consenting Lenders" has the meaning specified in Section 2.16(b).

          "Consolidated" refers to the consolidation of accounts in accordance
     with GAAP.

          "Consolidated Subsidiary" means, at any time, any Subsidiary the
     accounts of which are required at that time to be included on a
     Consolidated basis in the Consolidated financial statements of the Company,
     assuming that such financial statements are prepared in accordance with
     GAAP.

                                       5

          "Convert", "Conversion" and "Converted" each refers to a conversion of
     Revolving Credit Advances of one Type into Revolving Credit Advances of the
     other Type pursuant to Section 2.08 or 2.11.

          "Debt" means, with respect to any Person: (i) indebtedness of such
     Person, which is not limited as to recourse to such Person, for borrowed
     money (whether by loan or the issuance and sale of debt securities) or for
     the deferred (for 90 days or more) purchase or acquisition price of
     property or services; (ii) indebtedness or obligations of others which such
     Person has assumed or guaranteed; (iii) indebtedness or obligations of
     others secured by a lien, charge or encumbrance on property of such Person
     whether or not such Person shall have assumed such indebtedness or
     obligations; (iv) obligations of such Person in respect of letters of
     credit (other than performance letters of credit, except to the extent
     backing an obligation of any Person which would be Debt of such Person),
     acceptance facilities, or drafts or similar instruments 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
     constitute an Event of Default but for the requirement that notice be given
     or time elapse or both.

          "Designated Subsidiary" means any corporate Subsidiary of the Company
     designated for borrowing privileges under this Agreement pursuant to
     Section 9.08.

          "Designation Letter" means, with respect to any Designated Subsidiary,
     a letter in the form of Exhibit E hereto signed by such Designated
     Subsidiary and the Company.

          "Disclosed Litigation" has the meaning specified in Section 3.01(b).

          "Dollars" and the "$" sign each mean lawful money of the United States
     of America.

          "Domestic Lending Office" means, with respect to any Initial Lender,
     the office of such Lender specified as its "Domestic Lending Office"
     opposite its name on Schedule I hereto and, with respect to any other
     Lender, the office of such Lender specified as its "Domestic Lending
     Office" in the Assumption Agreement or in the Assignment and Acceptance
     pursuant to which it became a Lender, or such other office of such Lender
     as such Lender may from time to time specify to the Company and the Agent.

          "Domestic Subsidiary" means any Subsidiary whose operations are
     conducted primarily in the United States excluding any Subsidiary whose
     assets consist primarily of the stock of Subsidiaries whose operations are
     conducted outside the United States of America.

          "Effective Date" has the meaning specified in Section 3.01.

                                       6

          "Eligible Assignee" means (i) a Lender; (ii) an Affiliate of a Lender;
     (iii) a commercial bank organized under the laws of the United States, or
     any State thereof, and having total assets in excess of $10,000,000,000;
     (iv) a savings and loan association or savings bank organized under the
     laws of the United States, or any State thereof, and having a net worth of
     at least $500,000,000, calculated in accordance with GAAP; (v) a commercial
     bank organized under the laws of any other country that is a member of the
     Organization for Economic Cooperation and Development or has concluded
     special lending arrangements with the International Monetary Fund
     associated with its General Arrangements to Borrow, or a political
     subdivision of any such country, and having total assets in excess of
     $10,000,000,000, so long as such bank is acting through a branch or agency
     located in the country in which it is organized or another country that is
     described in this clause (v); and (vi) the central bank of any country that
     is a member of the Organization for Economic Cooperation and Development.

          "Environmental Action" means any action, suit, demand, demand letter,
     claim, notice of non-compliance or violation, notice of liability or
     potential liability, investigation, proceeding, consent order or consent
     agreement relating in any way to any Environmental Law, Environmental
     Permit or Hazardous Materials or arising from alleged injury or threat of
     injury to health, safety or the environment, including, without limitation,
     (a) by any governmental or regulatory authority for enforcement, cleanup,
     removal, response, remedial or other actions or damages and (b) by any
     governmental or regulatory authority or any third party for damages,
     contribution, indemnification, cost recovery, compensation or injunctive
     relief.

          "Environmental Law" means any federal, state, local or foreign
     statute, law, ordinance, rule, regulation, code, order, judgment, decree or
     judicial or agency interpretation, policy or guidance relating to pollution
     or protection of the environment, health, safety or natural resources,
     including, without limitation, those relating to the use, handling,
     transportation, treatment, storage, disposal, release or discharge of
     Hazardous Materials.

          "Environmental Permit" means any permit, approval, identification
     number, license or other authorization required under any Environmental
     Law.

          "Equivalent" in Dollars of any Foreign Currency on any date means the
     equivalent in Dollars of such Foreign Currency 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 terms of this Agreement, and
     the "Equivalent" in any Foreign Currency of Dollars means the equivalent in
     such Foreign Currency of Dollars determined by using the quoted spot rate
     at which the Sub-Agent's principal 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.

                                       7

          "ERISA" means the Employee Retirement Income Security Act of 1974, as
     amended from time to time, and the regulations promulgated and rulings
     issued thereunder.

          "ERISA Affiliate" of any Person means any other Person that for
     purposes of Title IV of ERISA is a member of such Person's controlled
     group, or under common control with such Person, within the meaning of
     Section 414 of the Internal Revenue Code.

          "ERISA Event" with respect to any Person means (a) (i) the occurrence
     of a reportable event, within the meaning of Section 4043 of ERISA, with
     respect to any Plan of such Person or any of its ERISA Affiliates unless
     the 30-day notice requirement with respect to such event has been waived by
     the PBGC, or (ii) the requirements of subsection (1) of Section 4043(b) of
     ERISA are met with respect to a contributing sponsor, as defined in Section
     4001(a)(13) of ERISA, of a Plan of such Person or any of its ERISA
     Affiliates, and an event described in paragraph (9), (10), (11), (12) or
     (13) of Section 4043(c) of ERISA is reasonably expected to occur with
     respect to such Plan within the following 30 days; (b) the application for
     a minimum funding waiver with respect to a Plan of such Person or any of
     its ERISA Affiliates; (c) the provision by the administrator of any Plan of
     such Person or any of its ERISA Affiliates of a notice of intent to
     terminate such Plan in a distress termination pursuant to Section
     4041(a)(2) of ERISA (including any such notice with respect to a plan
     amendment referred to in Section 4041(e) of ERISA); (d) the cessation of
     operations at a facility of such Person or any of its ERISA Affiliates in
     the circumstances described in Section 4062(e) of ERISA; (e) the withdrawal
     by such Person or any of its ERISA Affiliates from a Multiple Employer Plan
     during a plan year for which it was a substantial employer, as defined in
     Section 4001(a)(2) of ERISA; (f) the conditions for the imposition of a
     lien under Section 302(f) of ERISA shall have been met with respect to any
     Plan of such Person or any of its ERISA Affiliates; (g) the adoption of an
     amendment to a Plan of such Person or any of its ERISA Affiliates requiring
     the provision of security to such Plan pursuant to Section 307 of ERISA; or
     (h) the institution by the PBGC of proceedings to terminate a Plan of such
     Person or any of its ERISA Affiliates pursuant to Section 4042 of ERISA, or
     the occurrence of any event or condition described in Section 4042 of ERISA
     that constitutes grounds for the termination of, or the appointment of a
     trustee to administer, such Plan.

          "Escrow" means an escrow established with an independent escrow agent
     pursuant to an escrow agreement reasonably satisfactory in form and
     substance to the Person or Persons asserting the obligation of one or more
     Borrowers to make a payment to it or them hereunder.

          "EURIBO Rate" means, for any Interest Period for each Eurocurrency
     Rate Advance comprising part of the same Borrowing, the rate per annum
     appearing on Page 248 of the Telerate Service (or on any successor or
     substitute page of such Service, or any successor to or substitute for such
     Service, providing rate quotations comparable to those currently provided
     on such page of such Service, as determined by the Agent from

                                       8

     time to time for purposes of providing quotations of interest rates
     applicable to deposits in Euro by reference to the Banking Federation of
     the European Union Settlement Rates for deposits in Euro) at approximately
     10:00 a.m., London time, two Business Days prior to the commencement of
     such Interest Period, as the rate for deposits in Euros with a maturity
     comparable to such Interest Period or, if for any reason such rate is not
     available, the average (rounded upward to the nearest whole multiple of
     1/16 of 1% per annum, if such average is not such 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 in an amount
     substantially equal to such Reference Bank's Eurocurrency Rate Advance
     comprising part of such Borrowing to be outstanding during such Interest
     Period and for a period equal to such Interest Period (subject, however, to
     the provisions of Section 2.07).

          "Euro" means the lawful currency of the European Union as constituted
     by the Treaty of Rome which established the European Community, as such
     treaty may be amended from time to time and as referred to in the EMU
     legislation.

          "Eurocurrency Lending Office" means, with respect to any Initial
     Lender, the office of such Lender specified as its "Eurocurrency Lending
     Office" opposite its name on Schedule I hereto and, with respect to any
     other Lender, the office of such Lender specified as its "Eurocurrency
     Lending Office" in the Assumption Agreement or in the Assignment and
     Acceptance pursuant to which it became a Lender (or, if no such office is
     specified, its Domestic Lending Office), or such other office of such
     Lender as such Lender may from time to time specify to the Company and the
     Agent.

          "Eurocurrency Liabilities" has the meaning assigned to that term in
     Regulation D of the Board of Governors of the Federal Reserve System, as in
     effect from time to time.

          "Eurocurrency Rate" means, for any Interest Period for each
     Eurocurrency Rate Advance comprising part of the same Revolving Credit
     Borrowing, an interest rate per annum equal to the rate per annum obtained
     by dividing (a) (i) in the case of any Advance denominated in Dollars or
     any Major Currency other than Euros, the rate per annum (rounded upwards,
     if necessary, to the nearest 1/100 of 1%) appearing on the applicable
     Telerate Page as the London interbank offered rate for deposits in Dollars
     or in the relevant 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 or, if for any reason such rate is not
     available, the average (rounded upward to the nearest whole multiple of
     1/32 of 1% per annum, if such average is not such a multiple) of the rate
     per annum at which deposits in Dollars or in the relevant Major Currency
     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 in an amount substantially equal to such Reference Bank's
     Eurocurrency Rate Advance comprising part of such Revolving Credit
     Borrowing to be outstanding during such Interest Period and for a period
     equal to such Interest Period or, (ii) in the case of any Advance
     denominated in Euros, the EURIBO Rate by (b) a percentage equal to 100%
     minus the Eurocurrency Rate Reserve Percentage

                                       9

     for such Interest Period. If the Telerate Page is unavailable, the
     Eurocurrency Rate for any Interest Period for each Eurocurrency Rate
     Advance comprising part of the same Revolving Credit Borrowing shall be
     determined by the Agent on the basis of applicable rates furnished to and
     received by the Agent from the Reference Banks two Business Days before the
     first day of such Interest Period, subject, however, to the provisions of
     Section 2.08.

          "Eurocurrency Rate Advance" means a Revolving Credit Advance
     denominated in Dollars or in a Major Currency that bears interest as
     provided in Section 2.07(a)(ii).

          "Eurocurrency Rate Reserve Percentage" for any Interest Period for all
     Eurocurrency Rate Advances or LIBO Rate Advances comprising part of the
     same Borrowing means the reserve percentage applicable two Business Days
     before the first day of such Interest Period under regulations issued from
     time to time by the Board of Governors of the Federal Reserve System (or
     any successor) for determining the maximum reserve requirement (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
     liabilities that includes deposits by reference to which the interest rate
     on Eurocurrency Rate Advances or LIBO Rate Advances is determined) having a
     term equal to such Interest Period.

          "Events of Default" has the meaning specified in Section 6.01.

          "Extension Date" has the meaning specified in Section 2.16(a).

          "Federal Funds Rate" means, for any period, a fluctuating interest
     rate per annum equal for each day during such period to the weighted
     average of the rates on overnight Federal funds transactions with members
     of the Federal Reserve System arranged by Federal funds brokers, as
     published for such day (or, if such day is not a Business Day, for the next
     preceding Business Day) by the Federal Reserve Bank of New York, or, if
     such rate is not so published for any day that is a Business Day, the
     average of the quotations for such day on such transactions received by the
     Agent from three Federal funds brokers of recognized standing selected by
     it.

          "Fixed Rate Advance" has the meaning specified in Section 2.03(a)(i),
     which Advance shall be denominated in Dollars or in any Foreign Currency.

          "Foreign Currency" means any Major Currency or any Alternate Currency.

          "GAAP" has the meaning specified in Section 1.03.

          "Hazardous Materials" means (a) petroleum and petroleum products,
     byproducts or breakdown products, radioactive materials,
     asbestos-containing materials, polychlorinated biphenyls and radon gas and
     (b) any other chemicals, materials or substances designated, classified or
     regulated as hazardous or toxic or as a pollutant or contaminant under any
     Environmental Law.

                                       10

          "Insufficiency" means, with respect to any Plan, the amount, if any,
     of its unfunded benefit liabilities, as defined in Section 4001(a)(18) of
     ERISA.

          "Interest Period" means, for each Eurocurrency Rate Advance comprising
     part of the same Revolving Credit Borrowing and each LIBO Rate Advance
     comprising part of the same Competitive Bid Borrowing, the period
     commencing on the date of such Eurocurrency Rate Advance or LIBO Rate
     Advance or the date of the Conversion of any Base Rate Advance into such
     Eurocurrency Rate Advance and ending on the last day of the period selected
     by the Borrower requesting such Borrowing pursuant to the provisions below
     and, thereafter, with respect to Eurocurrency Rate Advances, each
     subsequent period commencing on the last day of the immediately preceding
     Interest Period and ending on the last day of the period selected by such
     Borrower pursuant to the provisions below. The duration of each such
     Interest Period shall be one, two, three or six months and, if available to
     all Lenders, nine months, as the Borrower requesting the Borrowing may,
     upon notice received by the Agent not later than 11:00 A.M. (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 pursuant to Section 2.06
          prior to such selection, that ends after the Maturity Date;

               (ii) Interest Periods commencing on the same date for
          Eurocurrency Rate Advances comprising part of the same Revolving
          Credit Borrowing or for LIBO Rate Advances comprising part of the same
          Competitive Bid Borrowing shall be of the same duration;

               (iii) whenever the last day of any Interest Period would
          otherwise occur on a day other than a Business Day, the last day of
          such Interest Period shall be extended to occur on the next succeeding
          Business Day, provided, however, that, if such extension would cause
          the last day of such Interest Period to occur in the next following
          calendar month, the last day of such Interest Period shall occur on
          the next preceding Business Day; and

               (iv) whenever the first day of any Interest Period occurs on a
          day of an initial calendar month for which there is no numerically
          corresponding day in the calendar month that succeeds 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 regulations promulgated and rulings
     issued thereunder.

          "Lenders" means, collectively, (i) Initial Lenders, (ii) each Assuming
     Lender that shall become a party hereto pursuant to Section 2.16 and (iii)
     each Eligible Assignee that shall become a party hereto pursuant to Section
     9.07(a), (b) and (c).

                                       11

          "LIBO Rate" means, for any Interest Period for all LIBO Rate Advances
     comprising part of the same Competitive Bid Borrowing, an interest rate per
     annum equal to the rate per annum obtained by dividing (a) (i) in the case
     of any Advance denominated in Dollars or any Foreign Currency other than
     Euro, the rate per annum (rounded upwards, if necessary, to the nearest
     1/100 of 1%) appearing on the applicable Telerate Page as the London
     interbank offered rate for deposits in Dollars or in the relevant Foreign
     Currency at approximately 11:00 A.M. (London time) two Business Days prior
     to the first day of such Interest Period or, if for any reason such rate is
     not available, the average (rounded upward to the nearest whole multiple of
     1/32 of 1% per annum, if such average is not such a multiple) of the rate
     per annum at which deposits in Dollars or in the relevant Foreign Currency
     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 in an amount substantially equal to the amount that would be the
     Reference Banks' respective ratable shares of such Borrowing if such
     Borrowing were to be a Revolving Credit Borrowing to be outstanding during
     such Interest Period and for a period equal to such Interest Period or,
     (ii) in the case of any Advance denominated in Euros, the EURIBO Rate by
     (b) a percentage equal to 100% minus the Eurocurrency Rate Reserve
     Percentage for such Interest Period. If the Telerate Page is unavailable,
     the LIBO Rate for any Interest Period for each LIBO Rate Advance comprising
     part of the same Competitive Bid Borrowing shall be determined by the Agent
     on the basis of applicable rates furnished to and received by the Agent
     from the Reference Banks two Business Days before the first day of such
     Interest Period, subject, however, to the provisions of Section 2.08.

          "LIBO Rate Advance" means a Competitive Bid Advance denominated in
     Dollars or in any Foreign Currency and bearing interest based on the LIBO
     Rate.

          "Lien" means any lien, mortgage, pledge, security interest or other
     charge or encumbrance of any kind.

          "Local Rate Advance" means a Competitive Bid Advance denominated in
     any Foreign Currency sourced from the jurisdiction of issuance of such
     Foreign Currency and bearing interest at a fixed rate.

          "Major Currencies" means lawful currency of the United Kingdom of
     Great Britain and Northern Ireland, lawful currency of Japan and Euros.

          "Majority Lenders" means at any time Lenders holding at least 51% of
     the then aggregate principal amount (based on the Equivalent in Dollars 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
     Consolidated Subsidiaries taken as a whole.

                                       12

          "Material Adverse Effect" means a material adverse effect on (a) the
     financial condition or results of operations of the Company and its
     Consolidated Subsidiaries taken as a whole, (b) the rights and remedies of
     the Agent or any Lender under this Agreement or any Note or (c) the ability
     of the Borrowers to perform their obligations under this Agreement or any
     Note.

          "Maturity Date" means the earlier of (a) the first anniversary of the
     Termination Date and (b) the date of termination in whole of the aggregate
     Commitments pursuant to Section 2.05 or 6.01.

          "Moody's" means Moody's Investors Service, Inc.

          "Multiemployer Plan" of any Person means a multiemployer plan, as
     defined in Section 4001(a)(3) of ERISA, to which such Person or any of its
     ERISA Affiliates is making or accruing an obligation to make contributions,
     or has within any of the preceding five plan years made or accrued an
     obligation to make contributions.

          "Multiple 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 at least one
     Person other than such Person or any of its ERISA Affiliates or (b) was so
     maintained and in respect of which such Person or any of its ERISA
     Affiliates could have liability under Section 4064 or 4069 of ERISA in the
     event such plan has been or were to be terminated.

          "Net Tangible Assets of the Company and its Consolidated
     Subsidiaries", as at any particular date of determination, means the total
     amount of assets (less applicable reserves and other properly deductible
     items) after deducting therefrom (a) all current liabilities (excluding any
     thereof which are by their terms extendible or renewable at the option of
     the obligor thereon to a 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 Subsidiaries and computed in accordance
     with GAAP.

          "Non-Consenting Lender" has the meaning specified in Section 2.16(b).

          "Note" means a Revolving Credit Note or a Competitive Bid Note.

          "Notice of Competitive Bid Borrowing" has the meaning specified in
     Section 2.03(a).

          "Notice of Revolving Credit Borrowing" has the meaning specified in
     Section 2.02(a).

          "Obligations" has the meaning specified in Section 7.01(b).

                                       13

          "Payment Office" means, for any Foreign Currency, such office of
     Citibank as shall be from time to time selected by the Agent and notified
     by the Agent to the Borrowers and the Lenders.

          "PBGC" means the Pension Benefit Guaranty Corporation (or any
     successor).

          "Person" means an individual, partnership, corporation (including a
     business trust), joint stock company, trust, unincorporated association,
     joint venture, limited liability company or other entity, or a government
     or any political subdivision or agency thereof.

          "Plan" means a Single Employer Plan or a Multiple Employer Plan.

          "Process Agent" has the meaning specified in Section 9.13(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 senior unsecured debt
     issued by the Company. For purposes of the foregoing, (a) if only one of
     S&P and Moody's shall have in effect a Public Debt Rating, the Applicable
     Margin, the Applicable Utilization Fee and the Applicable Percentage shall
     be determined by reference to the available rating; (b) if neither S&P nor
     Moody's shall have in effect a Public Debt Rating, the Applicable Margin,
     the Applicable Utilization Fee and the Applicable Percentage will be set in
     accordance with Level 5 under the definition of "Applicable Margin",
     "Applicable Utilization Fee" or "Applicable Percentage", as the case may
     be; (c) if the ratings established by S&P and Moody's shall fall within
     different levels, the Applicable Margin, the Applicable Utilization Fee and
     the Applicable Percentage shall be based upon the higher rating, provided
     that if the lower of such ratings is more than one level below the higher
     of such ratings, the Applicable Margin, the Applicable Utilization Fee and
     the Applicable Percentage shall be determined by reference to the level
     that is one level above such lower rating; (d) if any rating established by
     S&P or Moody's shall be changed, such change shall be effective as of the
     date on which such change is first announced publicly by the rating agency
     making such change; and (e) if S&P or Moody's shall change the basis on
     which ratings are established, each reference to the Public Debt Rating
     announced by S&P or Moody's, as the case may be, shall refer to the then
     equivalent rating by S&P or Moody's, as the case may be.

          "Rating Condition" has the meaning specified in Section 2.05(c)(ii).

          "Rating Condition Notice" has the meaning specified in Section
     2.05(c)(ii).

          "Reference Banks" means Citibank, Bank of America, N.A., JPMorgan
     Chase Bank and Deutsche Bank AG New York Branch.

          "Register" has the meaning specified in Section 9.07(d).

          "Restricted Property" means (a) 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

                                       14

     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 by a Lender to any
     Borrower as part of a Revolving Credit Borrowing and refers to a Base Rate
     Advance or a Eurocurrency Rate Advance (each of which shall be a "Type" of
     Revolving Credit Advance).

          "Revolving Credit Borrowing" means a borrowing consisting of
     simultaneous Revolving Credit Advances of the same Type made by each of the
     Lenders pursuant to Section 2.01.

          "Revolving Credit Note" means a promissory note of any Borrower
     payable to the order of any Lender, delivered pursuant to a request made
     under Section 2.17 in substantially the form of Exhibit A-1 hereto,
     evidencing the aggregate indebtedness of such Borrower to such Lender
     resulting from the Revolving Credit Advances made by such Lender to such
     Borrower.

          "Sale and Leaseback Transaction" means any arrangement with any Person
     (other than the Company or a Subsidiary of the Company), or to which any
     such Person is a party, providing for the leasing to the Company or to a
     Subsidiary of the Company owning Restricted Property for a period of more
     than three years of any Restricted Property that has been or is to be sold
     or transferred by the Company or such Subsidiary to such Person, or to any
     other Person (other than the Company or a Subsidiary of the Company) to
     which funds have been or are to be advanced by such Person on the security
     of the leased property. It is understood that arrangements pursuant to
     Section 168(f)(8) of the Internal Revenue Code of 1954, as amended, or any
     successor provision having similar effect, are not included within 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 Affiliates or (b) was so maintained and in
     respect of which such Person or any of its ERISA Affiliates could have
     liability under Section 4069 of ERISA in the event such plan has been or
     were to be terminated.

          "S&P" means Standard & Poor's Ratings Group, a division of The McGraw
     Hill Companies, Inc.

          "Sub-Agent" means Citibank International plc.

          "Subsidiary" of any Person means any corporation, partnership, joint
     venture, limited liability company, trust or estate of which (or in which)
     more than 50% of (a) the issued and outstanding capital stock having
     ordinary voting power to elect a majority of the Board of Directors of such
     corporation (irrespective of whether at the time capital stock of any other
     class or classes of such corporation shall or might have voting power upon
     the occurrence of any contingency), (b) the interest in the capital or
     profits of such

                                       15

     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 Subsidiaries or by one or more of such Person's other
     Subsidiaries.

          "Telerate Page" means, as applicable, page 3740 or 3750 (or any
     successor pages, respectively) of Telerate Service of Bridge Information
     Services.

          "Term Loan Conversion Date" means the Termination Date on which all
     Revolving Credit Advances outstanding on such date are converted into a
     term loan pursuant to Section 2.06.

          "Term Loan Election" has the meaning specified in Section 2.06.

          "Termination Date" means the earlier of (a) November 26, 2003, or such
     later date to which it may be extended pursuant to Section 2.16, and (b)
     the date of termination in whole of the Commitments pursuant to Section
     2.05(a) or Section 6.01 or, if all Lenders elect to terminate their
     Commitments as provided therein, Section 2.05(d).

          "Threatened" means, with respect to any action, suit, investigation,
     litigation or proceeding, a written communication to the Company or a
     Designated Subsidiary, as the case may be, expressing an intention to
     immediately bring such action, suit, investigation, litigation or
     proceeding.

          "Voting Stock" means capital stock issued by a corporation, or
     equivalent interests in any other Person, the holders of which are
     ordinarily, in the absence of contingencies, entitled to vote for the
     election of directors (or persons performing similar functions) of such
     Person, even if the right so to vote has been suspended by the happening of
     such a contingency.

          "Withdrawal Liability" has the meaning specified in Part I of Subtitle
     E of Title IV of ERISA.

          SECTION 1.02. Computation of Time Periods. In this Agreement in the
computation of periods of time from a specified date to a later specified date,
the word "from" means "from and including" and the words "to" and "until" each
mean "to but excluding".

          SECTION 1.03. Accounting Terms. All accounting terms not specifically
defined herein shall be construed, and all financial computations and
determinations pursuant hereto shall be made, in accordance with generally
accepted accounting principles consistent with those applied in the preparation
of the financial statements referred to in Section 4.01(e) ("GAAP"); provided,
however, that, if any changes in accounting principles from those used in the
preparation of such financial statements have been required by the rules,
regulations, pronouncements or opinions of the Financial Accounting Standards
Board or the American Institute of Certified Public Accountants (or successors
thereto or agencies with similar functions) and have been adopted by the Company
with the agreement of its independent certified public accountants, the Lenders
agree to consider a request by the Company to amend this Agreement to take
account of such changes.

                                       16

                                   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 to time on any Business Day during the
period from the Effective Date until the Termination Date in an aggregate amount
(based in respect of any Revolving Credit Advance denominated in a Major
Currency on the Equivalent in Dollars determined on the date of delivery of the
applicable Notice of Revolving Credit Borrowing), not to exceed at any time
outstanding such Lender's Commitment, provided that the aggregate amount of the
Commitments of the Lenders shall be deemed used from time to time to the extent
of the aggregate amount (based in respect of any Competitive Bid Advance
denominated in a Foreign Currency on the Equivalent in Dollars at such time) of
the Competitive Bid Advances then outstanding and such deemed use of the
aggregate amount of the Commitments shall be allocated among the Lenders ratably
according to their respective Commitments (such deemed use of the aggregate
amount of the Commitments being a "Competitive Bid Reduction"). Each Revolving
Credit Borrowing shall be in an aggregate amount not less than $10,000,000 (or
the Equivalent thereof in any Major Currency determined on the date of delivery
of the applicable Notice of Revolving Credit Borrowing) or an integral multiple
of $1,000,000 (or the Equivalent thereof in any Major Currency determined on the
date of delivery of the applicable Notice of Revolving Credit Borrowing) in
excess thereof and shall consist of Revolving Credit Advances of the same Type
made on the same day by the Lenders ratably according to their respective
Commitments; provided, however, that if there is no unused portion of the
Commitment of one or more Lenders at the time of any requested Revolving Credit
Borrowing such Borrowing shall consist of Revolving Credit Advances of the same
Type made on the same day by the Lender or Lenders who do then have an unused
portion of their Commitments ratably according to the unused portion of such
Commitments. Notwithstanding anything herein to the contrary, no Revolving
Credit Borrowing may be made in a Major Currency if, after giving effect to the
making of such Revolving Credit Borrowing, the Equivalent in Dollars of the
aggregate amount of outstanding Revolving Credit Advances denominated in Major
Currencies, together with the Equivalent in Dollars of the aggregate amount of
outstanding Competitive Bid Advances denominated in Foreign Currencies, would
exceed $500,000,000. Within the limits of each Lender's Commitment, any Borrower
may borrow under this Section 2.01, prepay pursuant to Section 2.09 and reborrow
under this Section 2.01.

          SECTION 2.02. Making the Revolving Credit Advances. (a) Each Revolving
Credit Borrowing shall be made on notice, given not later than (x) 10:00 A.M.
(New York City time) on the third Business Day prior to the date of the proposed
Revolving Credit Borrowing in the case of a Revolving Credit Borrowing
consisting of Eurocurrency Rate Advances denominated in any Major Currency, (y)
11:00 A.M. (New York City time) on the third Business Day prior to the date of
the proposed Revolving Credit Borrowing in the case of a Revolving Credit
Borrowing consisting of Eurocurrency Rate Advances denominated in Dollars or (z)
9:00 A.M. (New York City time) on the day of the proposed Revolving Credit
Borrowing in the case of a Revolving Credit Borrowing consisting of Base Rate
Advances, by any Borrower to the Agent (and the Agent shall, in the case of a
Revolving Credit Borrowing consisting of Eurocurrency Rate Advances, immediately
relay such notice to the Sub-Agent), which shall give

                                       17

to each Lender prompt notice thereof by telecopier or telex. Each such notice of
a Revolving Credit Borrowing (a "Notice of Revolving Credit Borrowing") shall be
by telephone, confirmed immediately in writing, or telecopier or telex in
substantially the form of Exhibit B-1 hereto, specifying therein the requested
(i) date of such Revolving Credit Borrowing, (ii) Type of Advances comprising
such Revolving Credit Borrowing, (iii) aggregate amount of such Revolving Credit
Borrowing, and (iv) in the case of a Revolving Credit Borrowing consisting of
Eurocurrency Rate Advances, initial Interest Period and currency for each such
Revolving Credit Advance. Each Lender shall, before 11:00 A.M. (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 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
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 set forth in
Article III, the Agent will make such funds available to the Borrower requesting
the Revolving Credit Borrowing at the Agent's aforesaid address or at the
applicable Payment Office, as the case may be.

          (b) Anything in subsection (a) above to the contrary notwithstanding,
a Borrower may not select Eurocurrency Rate Advances for any proposed Revolving
Credit Borrowing if the obligation of the Lenders to make Eurocurrency Rate
Advances shall then be suspended pursuant to Section 2.08 or 2.11.

          (c) Each Notice of Revolving Credit Borrowing of any Borrower shall be
irrevocable and binding on such Borrower. In the case of any Revolving Credit
Borrowing that the related Notice of Revolving Credit Borrowing specifies is to
be comprised of Eurocurrency Rate Advances, the Borrower requesting such
Revolving Credit Borrowing shall indemnify each Lender against any loss, cost or
expense incurred by such Lender as a result of any failure by such Borrower to
fulfill on or before the date specified in such Notice of Revolving Credit
Borrowing for such Revolving Credit Borrowing the applicable conditions set
forth in Article III, including, without limitation, any loss (including loss of
anticipated profits), cost or expense incurred by reason of the liquidation or
reemployment of deposits or other funds acquired by such Lender to fund the
Revolving Credit Advance to be made by such Lender as part of such Revolving
Credit Borrowing when such Revolving Credit Advance, as a result of such
failure, is not made on such date.

          (d) Unless the Agent shall have received notice from a Lender prior to
the date of any Revolving Credit Borrowing that such Lender will not make
available to the Agent such Lender's ratable portion of such Revolving Credit
Borrowing, the Agent may assume that such Lender has made such portion available
to the Agent on the date of such Revolving Credit Borrowing in accordance with
subsection (a) of this Section 2.02 and the Agent may, in reliance upon such
assumption, make available to the Borrower proposing such Revolving Credit
Borrowing on such date a corresponding amount. If and to the extent that such
Lender shall not have so made such ratable portion available to the Agent, such
Lender and such Borrower severally agree to repay to the Agent forthwith on
demand such corresponding amount together with interest thereon, for each day
from the date such amount is made available to such Borrower

                                       18

until the date such amount is repaid to the Agent, at (i) in the case of such
Borrower, the higher of (A) the interest rate applicable at the time to
Revolving Credit Advances comprising such Revolving Credit Borrowing and (B) the
cost of funds incurred by the Agent in respect of such amount and (ii) in the
case of such Lender, (A) the Federal Funds Rate in the case of Advances
denominated in Dollars or (B) the cost of funds incurred by the Agent in respect
of such amount in the case of Advances denominated in any Major Currency. If
such Lender shall repay to the Agent such corresponding amount, such amount so
repaid shall constitute such Lender's Revolving Credit Advance as part of such
Revolving Credit Borrowing for purposes of this Agreement.

          (e) The failure of any Lender to make the Revolving Credit Advance to
be made by it as part of any Revolving Credit Borrowing shall not relieve any
other Lender of its obligation, if any, hereunder to make its Revolving Credit
Advance on the date of such Revolving Credit Borrowing, but no Lender shall be
responsible for the failure of any other Lender to make the Revolving Credit
Advance to be made by such other Lender on the date of any Revolving Credit
Borrowing.

          SECTION 2.03. The Competitive Bid Advances. (a) Each Lender severally
agrees that any Borrower may request Competitive Bid Borrowings under this
Section 2.03 from time to time on any Business Day during the period from the
date hereof until the date occurring seven days prior to the Termination Date in
the manner set forth below; provided that, following the making of each
Competitive Bid Borrowing, the aggregate amount (based in respect of any Advance
denominated in a Foreign Currency on the Equivalent in Dollars on such Business
Day) of the Advances then outstanding shall not exceed the aggregate amount of
the Commitments of the Lenders (computed without regard to any Competitive Bid
Reduction). Notwithstanding anything herein to the contrary, no Competitive Bid
Borrowing may be made in a Foreign Currency if, after giving effect to the
making of such Revolving Credit Borrowing, the Equivalent in Dollars of the
aggregate amount of outstanding Competitive Bid Advances denominated in Foreign
Currencies, together with the Equivalent in Dollars of the aggregate amount of
outstanding Revolving Credit Advances denominated in Major Currencies, would
exceed $500,000,000.

          (i) Any Borrower may request a Competitive Bid Borrowing under this
     Section 2.03 by delivering to the Agent (and the Agent shall, in the case
     of a Competitive Bid Borrowing not consisting of Fixed Rate Advances or
     LIBO Rate Advances to be denominated in Dollars, immediately notify the
     Sub-Agent), by telecopier or telex, a notice of a Competitive Bid Borrowing
     (a "Notice of Competitive Bid Borrowing"), in substantially the form of
     Exhibit B-2 hereto, specifying therein the requested (A) date of such
     proposed Competitive Bid Borrowing, (B) aggregate amount of such proposed
     Competitive Bid Borrowing, (C) interest rate basis and day count convention
     to be offered by the Lenders, (D) currency of such proposed Competitive Bid
     Borrowing, (E) in the case of a Competitive Bid Borrowing consisting of
     LIBO Rate Advances, Interest Period of each Competitive Bid Advance to be
     made as part of such Competitive Bid Borrowing, or in the case of a
     Competitive Bid Borrowing consisting of Fixed Rate Advances or Local Rate
     Advances, maturity date for repayment of each Fixed Rate Advance or Local
     Rate Advance to be made as part of such Competitive Bid Borrowing (which
     maturity date may not be earlier than the date occurring five days after
     the date of

                                       19

     such Competitive Bid Borrowing or later than the Termination Date), (F)
     interest payment date or dates relating thereto, (G) location of such
     Borrower's account to which funds are to be advanced, and (H) other terms
     (if any) to be applicable to 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 proposed Competitive Bid Borrowing, if such Borrower shall
     specify in its Notice of Competitive Bid Borrowing that the rates of
     interest to be offered by the Lenders shall be fixed rates per annum (each
     Advance comprising any such Competitive Bid Borrowing being referred to
     herein as a "Fixed Rate Advance") and that the Advances comprising such
     proposed Competitive Bid Borrowing shall be denominated in Dollars, (x)
     10:00 A.M. (New York City time) at least four Business Days prior to the
     date of the proposed Competitive Bid Borrowing, if such Borrower shall
     instead specify in its Notice of Competitive Bid Borrowing that the
     Advances comprising such Competitive Bid Borrowing shall be LIBO Rate
     Advances denominated in Dollars, (y) 3:00 P.M. (New York City time) at
     least three Business Days prior to the date of the proposed Competitive Bid
     Borrowing, if such Borrower shall specify in the Notice of Competitive Bid
     Borrowing that the Advances comprising such proposed Competitive Bid
     Borrowing shall be either Fixed Rate Advances denominated in any Foreign
     Currency or Local Rate Advances denominated in any Foreign Currency and (z)
     3:00 P.M. (New York City time) at least five Business Days prior to the
     date of the proposed Competitive Bid Borrowing, if such Borrower shall
     instead specify in its Notice of Competitive Bid Borrowing that the
     Advances comprising such Competitive Bid Borrowing shall be LIBO Rate
     Advances denominated in any Foreign Currency. Each Notice of Competitive
     Bid Borrowing shall be irrevocable and binding on such Borrower. Any Notice
     of Competitive Bid Borrowing by a Designated Subsidiary shall be given to
     the Agent in accordance with the preceding sentence through the Company on
     behalf of such Designated Subsidiary. The Agent shall in turn promptly
     notify each Lender of each request for a Competitive Bid Borrowing received
     by it from such Borrower by sending such Lender a copy of the related
     Notice of Competitive Bid Borrowing.

          (ii) Each Lender may, if, in its sole discretion, it elects to do so,
     irrevocably offer to make one or more Competitive Bid Advances to the
     Borrower proposing the Competitive Bid Borrowing as part of such proposed
     Competitive Bid Borrowing at a rate or rates of interest specified by such
     Lender in its sole discretion, by notifying the Agent (which shall give
     prompt notice thereof to such Borrower and to the Sub-Agent, if
     applicable), (A) before 9:30 A.M. (New York City time) on the date 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 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 A.M. (New York City time) on the second Business Day prior to
     the date of such proposed Competitive Bid Borrowing, in the case of a
     Competitive Bid Borrowing consisting of either Fixed Rate Advances
     denominated in any Foreign Currency or Local Rate Advances denominated in
     any Foreign Currency and (D) before 10:00 A.M. (New York City time) four
     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 any Foreign Currency, of the

                                       20

     minimum amount and maximum amount of each Competitive Bid Advance which
     such Lender would be willing to make as part of such proposed Competitive
     Bid Borrowing (which amounts, or the Equivalent thereof in Dollars, as the
     case may be, may, subject to the proviso to the first sentence of this
     Section 2.03(a), exceed such Lender's Commitment, if any), the rate or
     rates of interest therefor and such Lender's Applicable Lending Office with
     respect to such Competitive Bid Advance; provided that if the Agent in its
     capacity as a Lender shall, in its sole discretion, elect to make any such
     offer, it shall notify such Borrower of such offer at least 30 minutes
     before the time and on the date on which notice of such election is to be
     given to the Agent, by the other Lenders. If any Lender shall elect not to
     make such an offer, such Lender shall so notify the Agent, before 10:00
     A.M. (New York City time) (and the Agent shall notify the Sub-Agent, if
     applicable) on the date on which notice of such election is to be given to
     the Agent by the other Lenders, and such Lender shall not be obligated to,
     and shall not, make any Competitive Bid Advance as part of such Competitive
     Bid Borrowing; provided that the failure by any Lender to give such notice
     shall not cause such Lender to be obligated to make any Competitive Bid
     Advance as part of such proposed Competitive Bid Borrowing.

          (iii) The Borrower proposing the Competitive Bid Advance shall, in
     turn, (A) before 10:30 A.M. (New York City time) on the date of such
     proposed Competitive Bid Borrowing, in the case of a Competitive Bid
     Borrowing consisting of Fixed Rate Advances 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 A.M. (New York City time) on the Business Day prior to the
     date of such Competitive Bid Borrowing, in the case of a Competitive Bid
     Borrowing consisting of either Fixed Rate Advances denominated in any
     Foreign Currency or Local Rate Advances denominated in any Foreign Currency
     and (D) before 10:00 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
     any Foreign Currency, either:

               (x) cancel such Competitive Bid Borrowing by giving the Agent
          notice to that effect, or

               (y) accept one or more of the offers made by any Lender or
          Lenders pursuant to paragraph (ii) above, in its sole discretion, by
          giving notice to the Agent (and the Agent shall give notice to the
          Sub-Agent, if applicable) of the amount of each Competitive Bid
          Advance (which amount shall be equal to or greater than the minimum
          amount, and equal to or less than the maximum amount, notified to such
          Borrower by the Agent on behalf of such Lender for such Competitive
          Bid Advance pursuant to paragraph (ii) above) to be made by each
          Lender as part of such Competitive Bid Borrowing, and reject any
          remaining offers made by Lenders pursuant to paragraph (ii) above by
          giving the Agent notice to that effect; provided, however, that such
          Borrower shall not accept any offer in excess of the requested bid
          amount for any maturity. Such Borrower shall accept the offers made by
          any Lender or Lenders to make Competitive Bid

                                       21

          Advances in order of the lowest to the highest rates of interest
          offered by such Lenders. If two or more Lenders have offered the same
          interest rate, the amount to be borrowed at such interest rate will be
          allocated among such Lenders in proportion to the amount that each
          such Lender offered at such interest rate.

          (iv) If the Borrower proposing the Competitive Bid Borrowing notifies
     the Agent that such Competitive Bid Borrowing is canceled pursuant to
     paragraph (iii)(x) above, the Agent shall give prompt notice thereof to the
     Lenders and such Competitive Bid Borrowing shall not be made.

          (v) If the Borrower proposing the Competitive Bid Borrowing accepts
     one or more of the offers made by any Lender or Lenders pursuant to
     paragraph (iii)(y) above, the Agent shall in turn promptly notify (A) each
     Lender that has made an offer as described in paragraph (ii) above, of the
     date and aggregate amount of such Competitive Bid Borrowing and whether or
     not any offer or offers made by such Lender pursuant to paragraph (ii)
     above have been accepted by the Borrower, (B) each Lender that is to make a
     Competitive Bid Advance as part of such Competitive Bid Borrowing, of the
     amount of each Competitive Bid Advance to be made by such Lender as part of
     such Competitive Bid Borrowing, and (C) each Lender that is to make a
     Competitive Bid Advance as part of such Competitive Bid Borrowing, upon
     receipt, that the Agent has received forms of documents appearing to
     fulfill the 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 of Competitive Bid Advances to be denominated in any
     Foreign Currency, on the date of such Competitive Bid Borrowing specified
     in the notice received from the Agent pursuant to clause (A) of the
     preceding sentence or any later time when such Lender shall have received
     notice from the Agent pursuant to clause (C) of the preceding sentence,
     make available for the account of its Applicable Lending Office to the
     Agent (x) in the case of a Competitive Bid Borrowing denominated in
     Dollars, at its address referred to in Section 9.02, in same day funds,
     such Lender's portion of such Competitive Bid Borrowing in Dollars, and (y)
     in the case of a Competitive Bid Borrowing in a Foreign Currency, at the
     Payment Office for such Foreign Currency as shall have been notified by the
     Agent to the Lenders prior thereto, in same day funds, such Lender's
     portion of such Competitive Bid Borrowing in such Foreign Currency. Upon
     fulfillment of the applicable conditions set forth in Article III and after
     receipt by the Agent of such funds, the Agent will make such funds
     available to such Borrower's account at the location specified by such
     Borrower in its Notice of Competitive Bid Borrowing. Promptly after each
     Competitive Bid Borrowing the Agent will notify each Lender of the amount
     of such Competitive Bid Borrowing, the consequent Competitive Bid Reduction
     and the dates upon which such Competitive Bid Reduction commenced and will
     terminate.

          (vi) If the Borrower proposing the Competitive Bid Borrowing notifies
     the Agent that it accepts one or more of the offers made by any Lender or
     Lenders pursuant to paragraph (iii)(y) above, such notice of acceptance
     shall be irrevocable and binding on such Borrower. Such Borrower shall
     indemnify each Lender against any loss, cost or

                                       22

     expense incurred by such Lender as a result of any failure by such Borrower
     to fulfill on or before the date specified in the related Notice of
     Competitive Bid Borrowing for such Competitive Bid Borrowing the applicable
     conditions set forth in Article III, including, without limitation, any
     loss (including loss of anticipated profits), cost or expense incurred by
     reason of the liquidation or reemployment of deposits or other funds
     acquired by such Lender to fund the Competitive Bid Advance to be made by
     such Lender as part of such Competitive Bid Borrowing when such Competitive
     Bid Advance, as a result of such failure, is not made on such date.

          (b) Each Competitive Bid Borrowing shall be in an aggregate amount not
less than $10,000,000 (or the Equivalent thereof in any Foreign Currency,
determined as of the time of the applicable Notice of Competitive Bid Borrowing)
or an integral multiple of $1,000,000 (or the Equivalent thereof in any Foreign
Currency, determined as of the time of the applicable Notice of Competitive Bid
Borrowing) in excess thereof and, following the making of each Competitive Bid
Borrowing, the Borrower that has borrowed such Competitive Bid Borrowing shall
be in compliance with the limitation set forth in the proviso to the first
sentence of subsection (a) above.

          (c) Within the limits and on the conditions set forth in this Section
2.03, any Borrower may from time to time borrow under this Section 2.03, repay
or prepay pursuant to subsection (d) below, and reborrow under this Section
2.03, provided that a Competitive Bid Borrowing shall not be made within three
Business Days of the date of any other Competitive Bid Borrowing.

          (d) Any Borrower that has borrowed through a Competitive Bid Borrowing
shall repay to the Agent for the account of each Lender that has made a
Competitive Bid Advance, on the maturity date of such Competitive Bid Advance
(such maturity date being that specified by such Borrower for repayment of such
Competitive Bid Advance in the related Notice of Competitive Bid Borrowing
delivered pursuant to subsection (a)(i) above and provided in the Competitive
Bid Note evidencing such Competitive Bid Advance), the then unpaid principal
amount of such Competitive Bid Advance. Such Borrower shall have no right to
prepay any principal amount of any Competitive Bid Advance unless, and then only
on the terms, specified by such Borrower for such Competitive Bid Advance in the
related Notice of Competitive Bid Borrowing delivered pursuant to subsection
(a)(i) above and set forth in the Competitive Bid Note evidencing such
Competitive Bid Advance.

          (e) Each Borrower that has borrowed through a Competitive Bid
Borrowing shall pay interest on the unpaid principal amount of each Competitive
Bid Advance comprising such Competitive Bid Borrowing from the date of such
Competitive Bid Advance to the date the principal amount of such Competitive Bid
Advance is repaid in full, at the rate of interest for such Competitive Bid
Advance specified by the Lender making such Competitive Bid Advance in its
notice with respect thereto delivered pursuant to subsection (a)(ii) above,
payable on the interest payment date or dates specified by such Borrower for
such Competitive Bid Advance in the related Notice of Competitive Bid Borrowing
delivered pursuant to subsection (a)(i) above, as provided in the Competitive
Bid Note evidencing such Competitive Bid Advance. Upon the occurrence and during
the continuance of an Event of Default under Section 6.01(a), such Borrower
shall pay interest on the amount of unpaid principal of and interest on each

                                       23

Competitive Bid Advance owing to a Lender, payable in arrears on the date or
dates interest is payable thereon, at a rate per annum equal at all times to 1%
per annum above the rate per annum required to be paid on such Competitive Bid
Advance under the terms of the Competitive Bid Note evidencing such Competitive
Bid Advance unless otherwise agreed in such Competitive Bid Note.

          (f) The indebtedness of any Borrower resulting from each Competitive
Bid Advance made to such Borrower as part of a Competitive Bid Borrowing shall
be evidenced by a separate Competitive Bid Note of the Borrower payable to the
order of the Lender making such Competitive Bid Advance.

          SECTION 2.04. Fees. (a) Facility Fee. The Company agrees to pay to the
Agent for the account of each Lender a facility fee on the aggregate amount of
such Lender's Commitment from the date hereof in the case of each Initial Lender
and from the effective date specified in the Assumption Agreement or the
Assignment and Acceptance, as the case may be, pursuant to which it became a
Lender in the case of each other Lender until the Termination Date at a rate per
annum equal 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, 2002, and on the Termination Date.

          (b) Agent's Fees. The Company shall pay to the Agent for its own
account such fees, and at such times, as the Company and the Agent may
separately agree.

          SECTION 2.05. Termination or Reduction of the Commitments. (a)
Optional Ratable Termination or Reduction. The Company shall have the right,
upon at least three Business Days' notice to the Agent, to terminate in whole or
reduce ratably in part the unused portions of the respective Commitments of the
Lenders, provided that each partial reduction shall be in an aggregate amount
not less than $10,000,000 or an integral multiple of $1,000,000 in excess
thereof and provided further that the aggregate amount of the Commitments of the
Lenders shall not be reduced to an amount that is less than the sum of the
aggregate principal amount of the Competitive Bid Advances denominated in
Dollars then outstanding plus the Equivalent in Dollars (determined as of the
date of the notice of prepayment) of the aggregate principal amount of the
Competitive Bid Advances denominated in Foreign Currencies then outstanding. The
aggregate amount of the Commitments, once reduced as provided in this Section
2.05(a), may not be reinstated.

          (b) Non-Ratable Termination by Assignment. The Company shall have the
right, upon at least ten Business Days' written notice to the Agent (which shall
then give prompt notice thereof to the relevant Lender), to require any Lender
to assign, pursuant to and in accordance with the provisions of Section 9.07,
all of its rights and obligations under this Agreement and under the Notes to an
Eligible Assignee selected by the Company; provided, however, that (i) no Event
of Default shall have occurred and be continuing at the time of such request and
at the time of such assignment; (ii) the assignee shall have paid to the
assigning Lender the aggregate principal amount of, and any interest accrued and
unpaid to the date of such assignment on, the Note or Notes of such Lender;
(iii) the Company shall have paid to the assigning Lender any and all facility
fees and other fees payable to such Lender and all other accrued and unpaid
amounts owing to such Lender under any provision of this Agreement

                                       24

(including, but not limited to, any increased costs or other additional amounts
owing under Section 2.10 and any indemnification for Taxes under 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 9.07(a) for
such assignment; provided further that the Company shall have no right to
replace more than three Lenders in any calendar year pursuant to this Section
2.05(b); and provided further that the assigning Lender's rights under Sections
2.10, 2.13 and 9.04, and its obligations under Section 8.05, shall survive such
assignment as to matters occurring prior to the date of assignment.

          (c) Non-Ratable Reduction. (i) The Company shall have the right, at
any time other than during any Rating Condition, upon at least ten Business
Days' notice to a Lender (with a copy to the Agent), to terminate in whole such
Lender's Commitment (determined without giving effect to any Competitive Bid
Reduction). Such termination shall be effective, (i) with respect to such
Lender's unused Commitment, on the date set forth in such notice, provided,
however, that such date shall be no earlier than ten Business Days after receipt
of such notice and (ii) with respect to each Advance outstanding to such Lender,
on the last day of the then current Interest Period relating to such Advance;
provided further, however, that such termination shall not be effective, if,
after giving effect to such termination, the Company would, under this Section
2.05(c), reduce the Lenders' Commitments in any calendar year by an amount in
excess of the Commitments of any three Lenders or $480,000,000, whichever is
greater on the date of such termination. Notwithstanding the preceding proviso,
the Company may terminate in whole the Commitment of any Lender in accordance
with the terms and conditions set forth in Section 2.05(b) or 2.16(b). Upon
termination of a Lender's Commitment under this Section 2.05(c), the Company
will pay or cause to be paid all principal of, and interest accrued to the date
of such payment on, Advances owing to such Lender and pay any facility fees or
other fees payable to such Lender pursuant to the provisions of Section 2.04,
and all other amounts payable to such Lender hereunder (including, but not
limited to, any increased costs or other amounts owing under Section 2.10 and
any indemnification for Taxes under Section 2.13); and upon such payments, the
obligations of such Lender hereunder shall, by the provisions hereof, be
released and discharged; provided, however, that such Lender's rights under
Sections 2.10, 2.13 and 9.04, and its obligations under Section 8.05 shall
survive such release and discharge as to matters occurring prior to such date.
The aggregate amount of the Commitments of the Lenders once reduced pursuant to
this Section 2.05(c) may not be reinstated.

          (ii) For purposes of this 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 standard set forth in the next sentence, and ending
with notice by the Agent to the Company and the Lenders to the effect that such
condition no longer exists. The Agent shall give a Rating Condition Notice
promptly upon receipt from the Company or any Lender of notice stating, in
effect, that both of S&P and Moody's (or any successor by merger or
consolidation to the business of either thereof), respectively, then rate the
senior public Debt of the Company lower than BBB- and Baa3. The Company agrees
to give notice to the Agent forthwith upon any change in a rating by either such
organization of the senior public Debt of the Company; the Agent shall have no
duty whatsoever to verify the accuracy of any such notice from the Company or
any Lender or to monitor

                                       25

independently the ratings of the senior public Debt of the Company and no Lender
shall have any duty to give any such notice. The Agent shall give notice to the
Lenders and the Company as to the termination of a Rating Condition promptly
upon receiving a notice from the Company to the Agent (which notice the Agent
shall promptly notify to the Lenders) stating that the rating of the senior
public Debt of the Company does not meet the standard set forth in the second
sentence of this clause (ii), and requesting that the Agent notify the Lenders
of the termination of the Rating Condition. The Rating Condition shall terminate
upon the giving of such notice by the Agent.

          (d) Termination 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 Commitment,
which Commitment shall be terminated effective as of the later of (i) the date
that is 60 calendar days after such Change of Control or (ii) the end of the
Interest Period for any Advance outstanding at the time of such Change of
Control or for any Advance made pursuant to the next sentence of this Section
2.05(d). Upon the occurrence of a Change of Control, each Borrower's right to
make a Borrowing under this Agreement shall be suspended for a period of 60
calendar days, except for Advances having an interest period ending not later
than 90 calendar days after such Change of Control. A notice of termination
pursuant to this Section 2.05(d) shall not have the effect of accelerating any
outstanding Advance of such Lender and the Notes of such Lender.

          (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 permanently
reduced on a pro rata basis by an amount equal to the amount by which (i) the
aggregate Commitments immediately prior to such reduction exceeds (ii) the
aggregate unpaid principal amount of all Revolving Credit Advances outstanding
at such time.

          SECTION 2.06. Repayment of Advances. (a) Revolving Credit Advances.
Each Borrower shall, subject to the next succeeding sentence, repay to the Agent
for the ratable account of the Lenders on the Termination Date the aggregate
principal amount of the Revolving Credit Advances then outstanding. The Company
may, upon not less than 15 days' notice to the Agent, elect (the "Term Loan
Election") to convert all of the Revolving Credit Advances outstanding on the
Termination Date in effect at such time into a term loan which the Borrowers
shall repay in full ratably to the Lenders on the Maturity Date; provided that
the Term Loan Election may not be exercised if on the date of notice of the Term
Loan Election or on the date on which the Term Loan Election is to be effected
(x) a Default has occurred and is continuing or (y) the representations and
warranties in Section 4.01 (other than the representations set forth in the last
sentence of subsection (e) thereof and in subsections (f), (h)-(l) and (n)
thereof) are not true and correct as though made on and as of such date. All
Revolving Credit Advances converted into a term loan pursuant to this Section
2.06(a) shall continue to constitute Revolving Credit Advances except that the
Borrowers may not reborrow pursuant to Section 2.01 after all or any portion of
such Revolving Credit Advances have been prepaid pursuant to Section 2.09.

          (b) Competitive Bid Advances. Each Borrower shall repay to the
Administrative Agent, for the account of each Lender that has made a Competitive
Bid Advance, the aggregate outstanding principal amount of each Competitive Bid
Advance made to such

                                       26

Borrower and owing to such Lender on the earlier of (i) the maturity date
therefor, specified in the related Notice of Competitive Bid Borrowing delivered
pursuant to Section 2.03(a)(i) and (ii) the Termination Date.

          SECTION 2.07. Interest on Revolving Credit Advances. (a) Scheduled
Interest. Each Borrower shall pay interest on the unpaid principal amount of
each Revolving Credit Advance owing by such Borrower to each Lender from the
date of such Revolving Credit Advance until such principal amount shall be paid
in full, at the following rates per annum:

          (i) Base Rate Advances. During such periods as such Revolving Credit
     Advance is a Base Rate Advance, a rate per annum equal at all times to the
     sum of (x) the Base Rate in effect from time to time plus (y) the
     Applicable Margin in effect from time to time plus (z) the Applicable
     Utilization Fee in effect from time to time, payable in arrears quarterly
     on the last day of each March, June, September and December during such
     periods and on the date such Base Rate Advance shall be paid in full.

          (ii) Eurocurrency Rate Advances. During such periods as such Revolving
     Credit Advance is a Eurocurrency Rate Advance, a rate per annum equal at
     all times during each Interest Period for such Revolving Credit Advance to
     the sum of (x) the Eurocurrency Rate for such Interest Period for such
     Revolving Credit Advance plus (y) the Applicable Margin in effect from time
     to time plus (z) the Applicable Utilization Fee 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
     that occurs during such Interest Period every three months from the first
     day of such Interest Period and on the date such Eurocurrency Rate Advance
     shall be Converted or paid in full.

          (b) Default Interest. Upon the occurrence and during the continuance
of an Event of Default under Section 6.01(a), each Borrower shall pay interest
on (i) the unpaid principal amount of each Revolving Credit Advance owing by
such Borrower to each Lender, payable in arrears on the dates referred to in
clause (a)(i) or (a)(ii) above, at a rate 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 that is not paid when due, from the date such amount
shall be due until such amount shall be paid in full, payable in arrears on the
date such amount shall be paid in full and on demand, at a rate 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.

          SECTION 2.08. Interest Rate Determination. (a) Each Reference Bank
agrees to furnish to the Agent timely information for the purpose of determining
each Eurocurrency Rate and each LIBO Rate if the applicable Telerate Page is
unavailable. If any one or more of the Reference Banks shall not furnish such
timely information to the Agent for the purpose of determining any such interest
rate, the Agent shall determine such interest rate on the basis of timely
information furnished by the remaining Reference Banks. The Agent shall give
prompt notice to the Company and the Lenders of the applicable interest rate
determined by the Agent

                                       27

for purposes of Section 2.07(a)(i) or (ii), and the rate, if any, furnished by
each Reference Bank for the purpose of determining the interest rate under
Section 2.07(a)(ii).

          (b) If, with respect to any Eurocurrency Rate Advances, the Majority
Lenders notify the Agent that (i) they are unable to obtain matching deposits in
the London interbank market at or about 11:00 A.M. (London time) on the second
Business Day before the making of a Borrowing in sufficient amounts to fund
their respective Revolving Credit Advances as part of such Borrowing during its
Interest Period or (ii) the Eurocurrency Rate for any Interest Period for such
Advances will not adequately reflect the cost to such Majority Lenders of
making, funding or maintaining their respective Eurocurrency Rate Advances for
such Interest Period, the Agent shall forthwith so notify each Borrower and the
Lenders, whereupon (A) the Borrower will, on the last day of the then existing
Interest Period therefor, (1) if such Eurocurrency Rate Advances are denominated
in Dollars, either (x) prepay such Advances or (y) Convert such Advances into
Base Rate Advances and (2) if such Eurocurrency Rate Advances are denominated in
any Major Currency, either (x) prepay such Advances or (y) redenominate such
Advances into an Equivalent amount of Dollars and Convert such Advances into
Base Rate Advances, and (B) the obligation of the Lenders to make Eurocurrency
Rate Advances in the same currency as such Eurocurrency Rate Advances shall be
suspended until the Agent shall notify each Borrower and the Lenders that the
circumstances causing such suspension no longer exist.

          (c) If any Borrower, in requesting a Revolving Credit Borrowing
comprised of Eurocurrency Rate Advances, shall fail to select the duration of
the Interest Period for such Eurocurrency Rate Advances in accordance with the
provisions contained in the definition of "Interest Period" in Section 1.01, the
Agent will forthwith so notify the Borrower and the Lenders and such Advances
will (to the extent such Eurocurrency Rate Advances remain outstanding on such
day) automatically, on the last day of the then existing Interest Period
therefor, (i) if such Eurocurrency Rate Advances are denominated in Dollars,
Convert into Base Rate Advances and (ii) if such Eurocurrency Rate Advances are
denominated in any Major Currency, be redenominated into an Equivalent amount of
Dollars and be Converted into Base Rate Advances.

          (d) Upon the occurrence and during the continuance of any Event of
Default under Section 6.01(a), (i) each Eurocurrency Rate Advance will (to the
extent such Eurocurrency Rate Advance remains outstanding on such day)
automatically, on the last day of the then existing Interest Period therefor,
(A) if such Eurocurrency Rate Advance is denominated in Dollars, be Converted
into a Base Rate Advance and (B) if such Eurocurrency Rate Advance is
denominated in any Major Currency, be redenominated into an Equivalent amount of
Dollars and Converted into a Base Rate Advance and (ii) the obligation of the
Lenders to make Eurocurrency Rate Advances 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,

                                       28

          (i) the Agent shall forthwith notify the relevant Borrower and the
     Lenders that the interest rate cannot be determined for such Eurocurrency
     Rate Advances or LIBO Rate Advances, as the case may be,

          (ii) with respect to Eurocurrency Rate Advances, each such Advance
     will (to the extent such Eurocurrency Rate Advance remains outstanding on
     such day) automatically, on the last day of the then existing Interest
     Period therefor, (A) if such Eurocurrency Rate Advance is denominated in
     Dollars, be prepaid by the applicable Borrower or be automatically
     Converted into a Base Rate Advance and (B) if such Eurocurrency Rate
     Advance is denominated in any Major Currency, be prepaid by the applicable
     Borrower or be automatically redenominated into an Equivalent amount of
     Dollars and Converted into a Base Rate Advance (or if such Advance is then
     a Base Rate Advance, will continue as a Base Rate Advance), and

          (iii) the obligation of the Lenders to make Eurocurrency Rate Advances
     or LIBO Rate Advances shall be suspended until the Agent shall notify the
     Borrowers and the Lenders that the circumstances causing such suspension no
     longer exist.

          SECTION 2.09. Prepayments of Revolving Credit Advances. (a) Optional
Prepayments. Each Borrower may, upon notice to the Agent stating the proposed
date and aggregate principal amount of the prepayment, given not later than
11:00 A.M. (New York City time) on the second Business Day prior to the date of
such proposed prepayment, in the case of Eurocurrency Rate Advances, and not
later than 11:00 A.M. (New York City time) on the day of such proposed
prepayment, in the case of Base 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 Credit Borrowing in whole
or ratably in part, together with accrued interest to the date of such
prepayment on the principal amount prepaid; provided, however, that (x) each
partial prepayment shall be in an aggregate principal amount not less than
$10,000,000 or the Equivalent thereof in a Major Currency (determined on the
date notice of prepayment is given) or an integral multiple of $1,000,000 or the
Equivalent thereof in a Major Currency (determined on the date notice of
prepayment is given) in excess thereof and (y) in the event of any such
prepayment of a Eurocurrency Rate Advance other than on the last day of the
Interest Period therefor, such Borrower shall be obligated to reimburse the
Lenders in respect thereof pursuant to Section 9.04(c). Each notice of
prepayment by a Designated Subsidiary shall be given to the Administrative Agent
through the Company.

          (b) Mandatory Prepayments. (i) If, on any date, the sum of (A) the
aggregate principal amount of all Advances denominated in Dollars then
outstanding plus (B) the Equivalent in Dollars (determined on the third Business
Day prior to such date) of the aggregate principal amount of all Advances
denominated in Foreign Currencies then outstanding exceeds 103% of the aggregate
Commitments of the Lenders on such date, the Company and each other Borrower, if
any, shall thereupon promptly prepay the outstanding principal amount of any
Advances owing by such Borrower in an aggregate amount sufficient to reduce such
sum to an amount not to exceed 100% of the aggregate Commitments of the Lenders
on such date, together with any interest accrued to the date of such prepayment
on the principal amounts prepaid and, in the case of any prepayment of a
Eurocurrency Rate Advance, a LIBO Rate Advance or a Local Rate Advance on a date
other than the last day of an Interest Period or at its maturity, any

                                       29

additional amounts which such Borrower shall be obligated to reimburse to the
Lenders in respect thereof pursuant to Section 9.04(c). The Agent shall give
prompt notice of any prepayment required under this Section 2.09(b)(i) to the
Borrowers and the Lenders.

          (ii) If, on any date, the sum of (A) the Equivalent in Dollars of the
aggregate principal amount of all Eurocurrency Rate Advances denominated in
Major Currencies then outstanding plus (B) the Equivalent in Dollars of the
aggregate principal amount of all Competitive Bid Advances denominated in
Foreign Currencies then outstanding, shall exceed 110% of $500,000,000, the
Company and each other Borrower shall prepay the outstanding principal amount of
any such Eurocurrency Rate Advances or any such LIBO Rate Advances owing by such
Borrower, on the last day of the Interest Periods relating to such Advances, in
an aggregate amount sufficient to reduce such sum to an amount not to exceed
$500,000,000, together with any interest accrued to the date of such prepayment
on the principal amounts prepaid. The Agent shall give prompt notice of any
prepayment required under this Section 2.09(b)(ii) to the Borrowers and the
Lenders.

          SECTION 2.10. Increased Costs. (a) If, due to either (i) the
introduction of or any change in or in the interpretation of any law or
regulation or (ii) the compliance with any guideline or request from any central
bank or other governmental authority including, without limitation, any agency
of the European Union or similar monetary or multinational authority (whether or
not having the force of law), there shall be any increase in the cost to any
Lender of agreeing to make or making, funding or maintaining Eurocurrency Rate
Advances or LIBO Rate Advances (excluding for purposes of this Section 2.10 any
such increased costs resulting from (i) Taxes or Other Taxes (as to which
Section 2.13 shall govern) and (ii) changes in the basis of taxation of overall
net income or overall gross income by the United States or by the foreign
jurisdiction or state under the laws of which such Lender is organized or has
its Applicable Lending Office or any political subdivision thereof), then the
Borrower of such Advances shall from time to time, upon demand by such Lender
(with a copy of such demand to the Agent), pay to the Agent for the account of
such Lender additional amounts sufficient to compensate such Lender for such
increased cost. A certificate as to the amount of such increased cost, submitted
to such Borrower and the Agent by such Lender, shall be conclusive and binding
for all purposes, absent manifest error.

          (b) If any Lender determines that compliance with any law or
regulation or any guideline or request from any central bank or other
governmental authority including, without limitation, any agency of the European
Union or similar monetary or multinational authority (whether or not having the
force of law) affects or would affect the amount of capital required or expected
to be maintained by such Lender or any corporation controlling such Lender and
that the amount of such capital is increased by or based upon the existence of
such Lender's commitment to lend hereunder and other commitments of this type,
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 such
Lender or such corporation in the light of such circumstances, to the extent
that such Lender reasonably determines such increase in capital to be allocable
to the existence of such Lender's commitment to lend hereunder. A certificate as
to such amounts submitted to the Company and the Agent by such Lender shall be
conclusive and binding for all purposes, absent manifest error.

                                       30

          (c) Any Lender claiming any additional amounts payable pursuant to
this Section 2.10 shall, upon the written request of the Company delivered to
such Lender and the Agent, assign, pursuant to and in accordance with the
provisions of Section 9.07, all of its rights and obligations under this
Agreement and under the Notes to an Eligible Assignee selected by the Company;
provided, however, that (i) no Default shall have occurred and be continuing at
the time of such request and at the time of such assignment; (ii) the assignee
shall have paid to the assigning Lender the aggregate principal amount of, and
any interest accrued and unpaid to the date of such assignment on, the Note or
Notes of such Lender; (iii) the Company shall have paid to the assigning Lender
any and all facility fees and other fees payable to such Lender and all other
accrued and unpaid amounts owing to such Lender under any provision of this
Agreement (including, but not limited to, any increased costs or other
additional amounts owing under this Section 2.10, and any indemnification for
Taxes under 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 9.07(a) for such assignment; provided further that the assigning
Lender's rights under Sections 2.10, 2.13 and 9.04, and its obligations under
Section 8.05, shall survive such assignment as to matters occurring prior to the
date of assignment.

          SECTION 2.11. Illegality. Notwithstanding any other provision of this
Agreement, if any Lender shall notify the Agent that the introduction of or any
change in or in the interpretation of any law or regulation makes it unlawful,
or any central bank or other governmental authority asserts that it is unlawful,
for any Lender or its Eurocurrency Lending Office to perform its obligations
hereunder to make Eurocurrency Rate Advances in Dollars or any Major Currency or
LIBO Rate Advances in Dollars or in any Foreign Currency or to fund or maintain
Eurocurrency Rate Advances in Dollars or in any Major Currency or LIBO Rate
Advances in Dollars or in any Foreign Currency hereunder, (a) each such
Eurocurrency Rate Advance or such LIBO Rate Advance, as the case may be, will
automatically, upon such demand, (i) if such Eurocurrency Rate Advance or LIBO
Rate Advance is denominated in Dollars, be Converted into a Base Rate Advance or
an Advance that bears interest at the rate set forth in Section 2.07(a)(i), as
the case may be, and (ii) if such Eurocurrency Rate Advance or LIBO Rate Advance
is denominated in any Foreign Currency, be redenominated into an Equivalent
amount of Dollars and Converted into a Base Rate Advance or an Advance that
bears interest at the rate set forth in Section 2.07(a)(i), as the case may be,
and (b) the obligation of the Lenders to make such Eurocurrency Rate Advances or
such LIBO Rate Advances shall be suspended until the Agent shall notify the
Borrower and the Lenders that the circumstances causing such suspension no
longer exist.

          SECTION 2.12. Payments and Computations. (a) Each Borrower shall make
each payment hereunder and under any Notes, except with respect to principal of,
interest on, and other amounts relating to, Advances denominated in a Foreign
Currency, not later than 11:00 A.M. (New York City time) on the day when due in
Dollars to the Agent at the applicable Agent's Account in same day funds. Each
Borrower shall make each payment hereunder and under any Notes with respect to
principal of, interest on, and other amounts relating to Advances denominated in
a Foreign Currency not later than 12:00 Noon (at the Payment Office for such
Foreign Currency) on the day when due in such Foreign Currency to the Agent in
same day funds by deposit of such funds to the applicable Agent's Account. The
Agent will promptly thereafter cause to be distributed like funds relating to
the payment of principal or interest or

                                       31

facility fees ratably (other than amounts payable pursuant to Section 2.03,
2.05(b), 2.05(c), 2.10, 2.13, 2.16 or 9.04(c)) to the Lenders for the account of
their respective Applicable Lending Offices, and like funds relating to the
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 Register pursuant to
Section 9.07(c), from and after the effective date specified in such Assignment
and Acceptance, the Agent shall make all payments hereunder and under any Notes
in respect of the interest assigned thereby to the Lender assignee thereunder,
and the parties to such Assignment and Acceptance shall make all appropriate
adjustments in such payments for periods prior to such effective date directly
between themselves. Upon any Assuming Lender becoming a Lender hereunder as a
result of the effectiveness of an extension of the Termination Date pursuant to
Section 2.16, and upon the Agent's receipt of such Lender's Assumption Agreement
and recording the information contained therein in the Register, from and after
the Increase Date or the Extension Date, as the case may be, the Agent shall
make all payments hereunder and under any Notes in respect of the interest
assumed thereby to the Assuming Lender.

          (b) All computations of interest based on the Base Rate and of
facility fees shall be made by the Agent on the basis of a year of 365 or 366
days, as the case may be, all computations of interest based on the Eurocurrency
Rate or the Federal Funds Rate shall be made by the Agent on the basis of a year
of 360 days and all computations in respect of Competitive Bid Advances shall be
made by the Agent or the Sub-Agent, 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 the last day) occurring in the period for which such
interest or facility fees are payable. Each determination by the Agent of an
interest rate hereunder shall be conclusive and binding for all purposes, absent
manifest error.

          (c) Whenever any payment hereunder or under the Notes shall be stated
to be due on a day other than a Business Day, such payment shall be made on the
next succeeding Business Day, and such extension of time shall in such case be
included in the computation of payment of interest or facility fee, as the case
may be; provided, however, that, if such extension would cause payment of
interest on or principal of Eurocurrency Rate Advances or LIBO Rate Advances to
be made in the next following calendar month, such payment shall be made on the
next preceding Business Day.

          (d) Unless the Agent shall have received notice from any Borrower
prior to the date on which any payment is due to the Lenders hereunder that such
Borrower will not make such payment in full, the Agent may assume that such
Borrower has made such payment in full to the Agent on such date and the Agent
may, in reliance upon such assumption, cause to be distributed to each Lender on
such due date an amount equal to the amount then due such Lender. If and to the
extent such Borrower shall not have so made such payment in full to the Agent,
each Lender shall repay to the Agent forthwith on demand such amount distributed
to such Lender together with interest thereon, for each day from the date such
amount is distributed to such Lender until the date such Lender repays such
amount to the Agent, at (i) the Federal

                                       32

Funds Rate in the case of Advances denominated in Dollars or (ii) the cost of
funds incurred by the Agent in respect of such amount in the case of Advances
denominated in Foreign Currencies.

          SECTION 2.13. Taxes. (a) Any and all payments by any Borrower
(including the Company in its capacity as a guarantor under Article VII hereof)
hereunder or under the Notes shall be made, in accordance with Section 2.12,
free and clear of and without deduction for any and all present or future taxes,
levies, imposts, deductions, charges or withholdings, and all liabilities with
respect thereto, excluding, in the case of each Lender and the Agent, net income
taxes imposed by the United States and taxes imposed on its overall net income,
and franchise taxes imposed on it in lieu of net income taxes, by the
jurisdiction under the laws of which such Lender or the Agent (as the case may
be) is organized or any political subdivision thereof and, in the case of each
Lender, taxes imposed on its overall net income, and franchise taxes imposed on
it in lieu of net income taxes, by the jurisdiction of such Lender's Applicable
Lending Office or any political subdivision thereof (all such non-excluded
taxes, levies, imposts, deductions, charges, withholdings and liabilities in
respect of payments hereunder or under the Notes being hereinafter referred to
as "Taxes"). If any Borrower (including the Company in its capacity as a
guarantor under Article VII hereof) shall be required by law to deduct any Taxes
from or in respect of any sum payable hereunder or under any Note to any Lender
or the Agent, (i) the sum payable shall be increased as may be necessary so that
after making all required deductions (including deductions applicable to
additional sums payable under this Section 2.13) such Lender or the Agent (as
the case may be) receives an amount equal to the sum it would have received had
no such deductions been made, (ii) such Borrower shall make such deductions and
(iii) such Borrower shall pay the full amount 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 or under the Notes or
from the execution, delivery or registration of, performing under, or otherwise
with respect to, this Agreement or the Notes (hereinafter referred to as "Other
Taxes").

          (c) Each Borrower shall indemnify each Lender and the Agent for the
full amount of Taxes or Other Taxes (including, without limitation, any taxes
imposed by any jurisdiction on amounts payable under this Section 2.13) imposed
on or paid by such Lender or the Agent (as the case may be) and any liability
(including penalties, interest and expenses) arising therefrom or with respect
thereto; provided, however, that a Borrower shall not be obligated to pay any
amounts in respect of penalties, interest or expenses pursuant to this paragraph
that are payable solely as a result of (i) the failure on the part of the
pertinent Lender or the Agent to pay over those amounts received from the
Borrowers under this clause (c) or (ii) the gross negligence or willful
misconduct on the part of the pertinent Lender or the Agent. This
indemnification shall be made within 30 days from the date such Lender or the
Agent (as the case may be) makes written demand therefor. Each Lender agrees to
provide reasonably prompt notice to the Agent, the Company and any Borrower of
any imposition of Taxes or Other Taxes against such Lender; provided that
failure to give such notice shall not affect such Lender's rights to
indemnification hereunder. Each Lender agrees that it will, promptly upon a
request by the Company or a Borrower having made an indemnification payment
hereunder, furnish to the Company or such Borrower, as the case may be, such
evidence as is reasonably available to such

                                       33

Lender as to the payment of the relevant Taxes or Other Taxes, and that it will,
if requested by the Company or such Borrower, cooperate with the Company or such
Borrower, as the case may be, in its efforts to obtain a refund or similar
relief in respect of such payment.

          (d) Within 30 days after the date of any payment of Taxes, each
Borrower shall furnish to the Agent, at its address referred to in Section 9.02,
the original or a certified copy of a receipt evidencing payment thereof. In the
case of any payment hereunder or under the Notes by or on behalf of any Borrower
through an account or branch outside the United States or by or on behalf of any
Borrower by a payor that is not a United States person, if such Borrower
determines that no Taxes are payable in respect thereof, such Borrower shall
furnish, or shall cause such payor to furnish, to the Agent, at such address, an
opinion of counsel acceptable to the Agent stating that such 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.

          (e) Each Lender organized under the laws of a jurisdiction outside the
United States, on or prior to the date of its execution and delivery of this
Agreement in the case of each Initial Lender and on the date of the Assignment
and Acceptance or the Assumption Agreement, as the case may be, pursuant to
which it becomes a Lender in the case of each other Lender, and from time to
time thereafter as requested in writing by any Borrower (but only so long as
such Lender remains lawfully able to do so), shall provide the Agent and each
Borrower with two original Internal Revenue Service forms W-8ECI or W-8BEN, as
appropriate, or any successor or other form prescribed by the Internal Revenue
Service, certifying that such Lender is exempt from or entitled to a reduced
rate of United States withholding tax on payments pursuant to this Agreement or
the Notes. In addition, each Lender further agrees to provide any Borrower with
any form or document as any Borrower may request which is required by any taxing
authority outside the United States in order to secure an exemption from, or
reduction in the rate of, withholding tax. If the forms provided by a Lender at
the time such Lender first becomes a party to this Agreement indicates a United
States interest withholding tax rate in excess of zero, withholding tax at such
rate shall be considered excluded from Taxes unless and until such Lender
provides the appropriate forms certifying that a lesser rate applies, whereupon
withholding tax at such lesser rate only shall be considered excluded from Taxes
for periods governed by such form; provided, however, that, if at the date of
the Assignment and Acceptance or the Assumption Agreement, as the case may be,
pursuant to which a Lender becomes a party to this Agreement, such Lender was
entitled to payments under subsection (a) in respect of United States
withholding tax with respect to interest paid at such date, then, to such
extent, the term Taxes shall include (in addition to withholding taxes that may
be imposed in the future or other amounts otherwise includable in Taxes) United
States withholding tax, if any, applicable with respect to such Lender on such
date. 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 W-8BEN, that a Lender reasonably considers to be confidential,
such Lender shall give notice thereof to each Borrower and shall not be
obligated to include in such form or document such confidential information.

          (f) For any period with respect to which a Lender has failed to
provide each Borrower with the appropriate form described in Section 2.13(e)
(other than if such failure is due

                                       34

to a change in law occurring subsequent to the date on which a form originally
was required to be provided, or if such form otherwise is not required under the
first sentence of subsection (e) above), such Lender shall not be entitled to
indemnification under Section 2.13(a) or (c) with respect to Taxes imposed by
the United States by reason of such failure; provided, however, that should a
Lender become subject to Taxes because of its failure to deliver a form required
hereunder, each Borrower shall take such steps as such Lender shall reasonably
request to assist such Lender to recover such Taxes.

          (g) If any Borrower is required to pay any additional amount to any
Lender or to the Agent or on behalf of any of them to any taxing authority
pursuant to this Section 2.13, such Lender shall, upon the written request of
the Company delivered to such Lender and the Agent, assign, pursuant to and in
accordance with the provisions of Section 9.07, all of its rights and
obligations under this Agreement and under the Notes to an Eligible Assignee
selected by the Company; provided, however, that (i) no Default shall have
occurred and be continuing at the time of such request and at the time of such
assignment; (ii) the assignee shall have paid to the assigning Lender the
aggregate principal amount of, and any interest accrued and unpaid to the date
of such assignment on, the Note or Notes of such Lender; (iii) the Company shall
have paid to the assigning Lender any and all facility fees and other fees
payable to such Lender and all other accrued and unpaid amounts owing to such
Lender under any provision of this Agreement (including, but not limited to, any
increased costs or other 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 (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 9.07(a) for such assignment; provided
further that the assigning Lender's rights under Sections 2.10, 2.13 and 9.04,
and its obligations under Section 8.05, shall survive such assignment as to
matters occurring prior to the date of assignment.

          SECTION 2.14. Sharing of Payments, Etc. If any Lender shall obtain any
payment (whether voluntary, involuntary, through the exercise of any right of
setoff, or otherwise) on account of the Revolving Credit Advances owing to it
(other than pursuant to Section 2.03, 2.05(b), 2.05(c), 2.10, 2.13, 2.16 or
9.04(c)) in excess of its ratable share of payments on account of the Revolving
Credit Advances obtained by all the Lenders, such Lender shall forthwith
purchase from the other Lenders such participations in the Revolving Credit
Advances owing to them as shall be necessary to cause such purchasing Lender to
share the excess payment ratably with each of them; provided, however, that if
all or any portion of such excess payment is thereafter recovered from such
purchasing Lender, such purchase from each Lender shall be rescinded and such
Lender shall repay to the purchasing Lender the purchase price to the extent of
such recovery together with an amount equal to such Lender's ratable share
(according to the proportion of (i) the amount of such Lender's required
repayment to (ii) the total amount so recovered from the purchasing Lender) of
any interest or other amount paid or payable by the purchasing Lender in respect
of the total amount so recovered. Each Borrower agrees that any Lender so
purchasing a participation from another Lender pursuant to this Section 2.14
may, to the fullest extent permitted by law, exercise all its rights of payment
(including the right of setoff) with respect to such participation as fully as
if such Lender were the direct creditor of such Borrower in the amount of such
participation.

                                       35

          SECTION 2.15. Use of Proceeds. The proceeds of the Advances shall be
available (and each Borrower agrees that it shall use such proceeds) for general
corporate purposes of such Borrower and its Subsidiaries, including, without
limitation, backstop of commercial paper.

          SECTION 2.16. Extension of Termination Date. (a) At least 45 (but no
earlier than 60) days prior to the Termination Date then in effect and provided
all representations and warranties are true and correct in all material respects
and no Event of Default has occurred and is continuing, the Company may, at its
option, by written notice to the Agent, request that the Lenders extend the
Termination Date for an additional 364 days from the Termination Date then in
effect; provided, however, that the Company shall not have made the Term Loan
Election for Revolving Credit Advances outstanding on such Termination Date
prior to such time. Each Lender, in its sole discretion, shall consent or not
consent to such extension and shall notify the Agent of its consent or
nonconsent to such extension within 20 Business Days of notice of such request
from the Agent. If all of the Lenders consent in writing, the then applicable
Termination Date shall, effective as at such Termination Date (the "Extension
Date"), be extended for a period of 364 days from such Extension Date.

          (b) If not all of the Lenders consent, pursuant to subsection (a) of
this Section 2.16, to an extension of the Termination Date then in effect (the
Lenders so consenting in writing being the "Consenting Lenders", and any Lender
not so consenting being a "Non-Consenting Lender"), the Company may:

          (i) arrange for one or more Consenting Lenders or other Eligible
     Assignees as Assuming Lenders to assume, effective on the Extension Date,
     any Non-Consenting Lender's Commitment and all of the obligations of such
     Lender under this Agreement thereafter arising, and effective on such
     Extension Date, each such Consenting Lender or such Assuming Lender will be
     substituted for such Non-Consenting Lender under this Agreement; provided,
     however, that the amount of the Commitment of any such Assuming Lender as a
     result of such substitution shall in no event be less than $10,000,000;
     provided further that (i) any such Consenting Lender or Assuming Lender
     shall have paid to such Non-Consenting Lender the aggregate principal
     amount of, and any interest accrued and unpaid to the date of the
     assignment on, the Advances of such Non-Consenting Lender; (ii) the Company
     shall have paid to such Non-Consenting Lender any and all facility fees and
     other fees payable to such Non-Consenting Lender and all other accrued and
     unpaid amounts owing to such Non-Consenting Lender under any provision of
     this Agreement (including, but not limited to, any increased costs or other
     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
     required under Section 9.07(a) for such assignment; provided further that
     such Non-Consenting Lender's rights under Sections 2.10, 2.13 and 9.04, and
     its obligations under Section 8.05, shall survive such substitution as to
     matters occurring prior to the date of substitution; provided further that,
     on or prior to the tenth day prior to the Extension Date, (x) any such
     Assuming Lender shall have delivered to the Company and the Agent an
     Assumption Agreement in substantially the form of Exhibit D hereto, duly
     executed by such Assuming Lender, such Non-Consenting

                                       36

     Lender and the Company, (y) any such Consenting Bank shall have delivered
     confirmation in writing satisfactory to the Agent as to its increased
     Commitment and (z) each Non-Consenting Lender being replaced pursuant to
     this clause (i) shall have delivered to the Agent any Revolving Credit Note
     or Notes held by such Non-Consenting Lender; and provided further that, if
     requested by any Assuming Lender, each Borrower, at its own expense, shall
     have executed and delivered to the Agent no later than 10:00 A.M. (New York
     City time) on the Extension Date, Revolving Credit Notes payable to the
     order of each such Assuming Lender, if any, dated as of the Extension Date
     and substantially in the form of Exhibit A-1 hereto; or

          (ii) subject to the giving of notice to such Non-Consenting Lender at
     least four days prior to the Extension Date, pay, prepay or cause to be
     prepaid, on and effective as of the Extension Date, all principal of, and
     interest accrued to the date of such payment on, Advances and all other
     amounts owing to such Non-Consenting Lender hereunder (including, but not
     limited to, any increased costs or other additional amounts owing under
     Section 2.10 and any indemnification for Taxes under Section 2.13) and
     terminate in whole any Non-Consenting Lender's Commitment, notwithstanding
     the provisions of Section 2.05; and, upon such payment or prepayment, the
     obligations of such Non-Consenting Lender hereunder shall, by the
     provisions hereof, be released and discharged; provided, however, that such
     Non-Consenting Lender's rights under Sections 2.10, 2.13 and 9.04, and its
     obligations under Section 8.05 shall survive such release and discharge as
     to matters occurring prior to the Extension Date.

          (c) In the event that, on or prior to the then applicable Extension
Date, all Non-Consenting Lenders shall have been superseded by Consenting
Lenders or Assuming Lenders or shall have had their Commitments terminated
pursuant to subsection (b)(i) or (b)(ii) above, the Termination Date then in
effect shall be extended for the additional one-year period as described in
subsection (a) above, each Non-Consenting Lender shall have no further
Commitment hereunder, and each Assuming Lender, if any, shall thereafter be
substituted as a party to this Agreement and be a Lender for the purposes of
this Agreement, without any further acknowledgment by or the consent of the
Lenders. The Agent shall thereupon promptly deliver the new Revolving Credit
Notes to the respective Assuming Lenders requesting such Notes and record in the
Register the relevant information with respect to each Consenting Lender and
each such Assuming Lender.

          (d) In the event that (x) as to a Non-Consenting Lender, neither
procedure contemplated by subsection (b)(i) or (b)(ii) above is implemented in a
timely basis or (y) the Company shall, by written notice to the Agent at least
four days prior to the Extension Date, withdraw its request for the extension of
the Termination Date then in effect, such request by the Company shall be deemed
not to have been made, all actions theretofore taken under subsection (b)(i) or
(b)(ii) above shall be deemed to be of no effect, the Agent shall return any
Revolving Credit Notes received from any Non-Consenting Lender to such
Non-Consenting Lender and all the rights and obligations of the parties shall
continue as if no such request had been made.

          SECTION 2.17. Evidence of Debt. (a) Each 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

                                       37

from time to time, including the amounts of principal and interest payable and
paid to such Lender from time to time hereunder in respect of Revolving Credit
Advances. Each Borrower agrees that upon request of any Lender to such Borrower
(with a copy of such notice to the Agent) that such Lender receive a Revolving
Credit Note to evidence (whether for purposes of pledge, enforcement or
otherwise) the Revolving Credit Advances owing to, or to be made by, such
Lender, such Borrower shall promptly execute and deliver to such Lender a
Revolving Credit Note payable to the order of such Lender in a principal amount
up to the Commitment of such Lender.

          (b) The Register maintained by the Agent pursuant to Section 9.07(d)
shall include a control account, and a subsidiary account for each Lender, in
which accounts (taken together) shall be recorded (i) the date and amount of
each Borrowing made hereunder, the Type of Advances comprising such Borrowing
and, if appropriate, the Interest Period applicable thereto, (ii) the terms of
each Assumption Agreement and each Assignment and Acceptance delivered to and
accepted by it, (iii) the amount of any principal or interest due and payable or
to become due and payable from each Borrower to each Lender hereunder and (iv)
the amount of any sum received by the Agent from each Borrower hereunder and
each Lender's share thereof.

          (c) Entries made in good faith by the Agent in the Register pursuant
to subsection (b) above, and by each Lender in its account or accounts pursuant
to subsection (a) above, shall be prima facie evidence of the amount of
principal and interest due and payable or to become due and payable from the
Borrowers to, in the case of the Register, each Lender and, in the case of such
account or accounts, such Lender, under this Agreement, absent manifest error;
provided, however, that the failure of the Agent or such Lender to make an
entry, or any finding that an entry is incorrect, in the Register or such
account or accounts shall not limit or otherwise affect the obligations of any
Borrower under this Agreement.

                                   ARTICLE III

                     CONDITIONS TO EFFECTIVENESS AND LENDING

          SECTION 3.01. Conditions Precedent to Effectiveness of Sections 2.01
and 2.03. Sections 2.01 and 2.03 of this Agreement shall become effective on and
as of the first date (the "Effective Date") on which the following conditions
precedent have been satisfied:

          (a) There shall have occurred no Material Adverse Change since
     December 31, 2001, except as otherwise publicly disclosed prior to the date
     hereof.

          (b) There shall exist no action, suit, investigation, litigation or
     proceeding affecting the Company or any of its Subsidiaries pending or to
     the knowledge of the Company Threatened before any court, governmental
     agency or arbitrator that (i) is reasonably likely to have a Material
     Adverse Effect, other than the matters described on Schedule 3.01(b) hereto
     (the "Disclosed Litigation") or (ii) purports to affect the legality,
     validity or enforceability of this Agreement or any Note of the Company or
     the consummation of the transactions contemplated hereby, and there shall
     have been no adverse change in the status, or financial effect on the
     Company or any of its Subsidiaries, of the Disclosed Litigation from that
     described on Schedule 3.01(b) hereto.

                                       38

          (c) The Company shall have paid all accrued fees and expenses of the
     Agent and the Lenders in respect of this Agreement.

          (d) On the Effective Date, the following statements shall be true and
     the Agent shall have received a certificate signed by a duly authorized
     officer of the Company, dated the Effective Date, stating that:

               (i) The representations and warranties contained in Section 4.01
          are correct on and as of the Effective Date, and

               (ii) No event has occurred and is continuing that constitutes a
          Default.

          (e) The Agent shall have received on or before the Effective Date the
     following, each dated such day, in form and substance satisfactory to the
     Agent:

               (i) The Revolving Credit Notes of the Company to the order of the
          Lenders to the extent requested by any Lender pursuant to Section
          2.17.

               (ii) Certified copies of the resolutions of the Board of
          Directors of the Company approving this Agreement and the Notes of the
          Company, and of all documents evidencing other necessary corporate
          action and governmental approvals, if any, with respect to this
          Agreement and such Notes.

               (iii) A certificate of the Secretary or an Assistant Secretary of
          the Company certifying the names and true signatures of the officers
          of the Company authorized to sign this Agreement and the Notes of the
          Company and the other documents to be delivered hereunder.

               (iv) A favorable opinion of Gail E. Lehman, Assistant General
          Counsel of the Company, substantially in the form of Exhibit G hereto
          and as to such other matters as any Lender through the Agent may
          reasonably request.

               (v) A favorable opinion of Shearman & Sterling, counsel for the
          Agent, substantially in the form of Exhibit I hereto.

               (vi) Such other approvals, opinions or documents as any Lender,
          through the Agent, may reasonably request.

          SECTION 3.02. Conditions Precedent to Initial Borrowing. The
obligation of each Lender to make an Advance on the occasion of the initial
Borrowing hereunder is subject to the following conditions precedent:

          (a) The Effective Date shall have occurred.

          (b) The Company shall have terminated all outstanding commitments of
     lenders (and paid in full all outstanding debt under the related credit
     agreements) which backstop commercial paper issuance, other than
     commitments made by parties which are not Lenders hereunder.

                                       39

          (c) The Company shall have paid all accrued fees and expenses of the
     Agent (including the billed fees and expenses of counsel to the Agent).

          SECTION 3.03. Initial Loan to Each Designated Subsidiary. The
obligation of each Lender to make an initial Advance to each Designated
Subsidiary following any designation of such Designated Subsidiary as a Borrower
hereunder pursuant to Section 9.08 is subject to the Agent's receipt on or
before the date of such initial Advance of each of the following, in form and
substance satisfactory to the Agent and dated such date, and (except for the
Revolving Credit Notes) in sufficient copies for each Lender:

          (a) The Revolving Credit Notes of such Borrower to the order of the
     Lenders to the extent requested by any Lender pursuant to Section 2.17.

          (b) Certified copies of the resolutions of the Board of Directors of
     such Borrower (with a certified English translation if the original thereof
     is not in English) approving this Agreement and the Notes of such Borrower,
     and of all documents evidencing other necessary corporate action and
     governmental approvals, if any, with respect to this Agreement and such
     Notes.

          (c) A certificate of the Secretary or an Assistant Secretary of such
     Borrower certifying the names and true signatures of the officers of such
     Borrower authorized to sign this Agreement and the Notes of such Borrower
     and the other documents to be delivered hereunder.

          (d) A certificate signed by a duly authorized officer of the Company,
     dated as of the date of such 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 and regulations necessary for such Borrower
     to execute and deliver this Agreement and the Notes and to perform its
     obligations thereunder.

          (e) The Designation Letter of such Designated Subsidiary,
     substantially in the form of Exhibit E hereto.

          (f) Evidence of the Process Agent's acceptance of its appointment
     pursuant to Section 9.13(a) as the agent of such Borrower, substantially in
     the form of Exhibit F hereto.

          (g) A favorable opinion of counsel to such Designated Subsidiary,
     dated the date of such initial Advance, substantially in the form of
     Exhibit H hereto.

          (h) Such other approvals, opinions or documents as any Lender, through
     the Agent, may reasonably request.

          SECTION 3.04. Conditions Precedent to Each Revolving Credit Borrowing.
The obligation of each Lender to make a Revolving Credit Advance on the occasion
of each Revolving Credit Borrowing shall be subject to the conditions precedent
that the Effective Date shall have occurred and on the date of such Revolving
Credit Borrowing (a) the following

                                       40

statements shall be true (and each of the giving of the applicable Notice of
Revolving Credit Borrowing and the acceptance by the Borrower requesting such
Revolving Credit Borrowing of the proceeds of such Revolving Credit Borrowing
shall constitute a representation and warranty by such Borrower that on the date
of such Borrowing such statements are true):

          (i) the representations and warranties of the Company contained in
     Section 4.01 (except the representations set forth in the last sentence of
     subsection (e) thereof and in subsections (f), (h)-(l) and (n) thereof) are
     correct on and as of the date of such Revolving Credit Borrowing, before
     and after giving effect to such Revolving Credit Borrowing and to the
     application of the proceeds therefrom, 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 Credit Borrowing, before and after
     giving effect to such Revolving Credit Borrowing and to the application of
     the proceeds therefrom, as though made on and as of such date, and

          (ii) no event has occurred and is continuing, or would result from
     such Revolving Credit Borrowing or from the application of the proceeds
     therefrom, that constitutes a Default;

and (b) the Agent shall have received such other approvals, opinions or
documents as any Lender through the Agent may reasonably request.

          SECTION 3.05. Conditions Precedent to Each Competitive Bid Borrowing.
The obligation of each Lender that is to make a Competitive Bid Advance on the
occasion of a Competitive Bid Borrowing to make such Competitive Bid Advance as
part of such Competitive Bid Borrowing is subject to the conditions precedent
that (i) the Agent shall have received the written confirmatory Notice of
Competitive Bid Borrowing with respect thereto, (ii) on or before the date of
such Competitive Bid Borrowing, but prior to such Competitive Bid Borrowing, the
Agent shall have received a Competitive Bid Note payable to the order of such
Lender and substantially in the form of Exhibit A-2 hereto for each of the one
or more Competitive Bid Advances to be made by such Lender as part of such
Competitive Bid Borrowing, in a principal amount equal to the principal amount
of the Competitive Bid Advance to be evidenced thereby and otherwise on such
terms as were agreed to for such Competitive Bid Advance in accordance with
Section 2.03, and (iii) on the date of such Competitive Bid Borrowing the
following statements shall be true (and each of the giving of the applicable
Notice of Competitive Bid Borrowing and the acceptance by the Borrower
requesting such Competitive Bid Borrowing of the proceeds of such Competitive
Bid Borrowing shall constitute a representation and warranty by such Borrower
that on the date of such Competitive Bid Borrowing such statements are true):

          (a) the representations and warranties of the Company contained in
     Section 4.01 (except the representations set forth in the last sentence of
     subsection (e) thereof and in subsections (f), (h)-(l) and (n) thereof) are
     correct on and as of the date of such Competitive Bid Borrowing, before and
     after giving effect to such Competitive Bid Borrowing and to the
     application of the proceeds therefrom, as though made on and as of such
     date, and, if such Competitive Bid Borrowing shall have been requested by a

                                       41

     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 Competitive Bid Borrowing, before and after
     giving effect to such Competitive Bid Borrowing and to the application of
     the proceeds therefrom, as though made on and as of such date,

          (b) no event has occurred and is continuing, or would result from such
     Competitive Bid Borrowing or from the application of the proceeds
     therefrom, that constitutes a Default, and

          (c) no event has occurred and no circumstance exists as a result of
     which the information concerning such Borrower that has been provided to
     the Agent and each Lender by such Borrower in connection herewith would
     include an untrue statement of a material fact or omit to state any
     material fact necessary to make the statements contained therein, in the
     light of the circumstances under which they were made, not misleading,

and (iv) the Agent shall have received such other approvals, opinions or
documents as any Lender through the Agent may reasonably request.

          SECTION 3.06. Determinations Under Section 3.01. For purposes of
determining compliance with the conditions specified in Section 3.01, each
Lender shall be deemed to have consented to, approved or accepted or to be
satisfied with each document or other matter required thereunder to be consented
to or approved by or acceptable or satisfactory to the Lenders unless an officer
of the Agent responsible for the transactions contemplated by this Agreement
shall have received notice from such Lender prior to the date that the Company,
by notice to the Lenders, designates as the proposed Effective Date, specifying
its objection thereto. The Agent shall promptly notify the Lenders of the
occurrence of the Effective Date.

                                   ARTICLE IV

                         REPRESENTATIONS AND WARRANTIES

          SECTION 4.01. Representations and Warranties of the Company. The
Company represents and warrants as follows:

          (a) The Company is a corporation duly organized, validly existing and
     in good standing under the laws of the State of Delaware.

          (b) The execution, delivery and performance by the Company 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
     regulation or any provision of the Certificate of Incorporation or By-Laws
     of the Company or result in the breach of, or constitute a default or
     require any consent under, or result in the creation of any lien, charge or
     encumbrance upon any of the properties, revenues, or assets of the Company
     pursuant to, any indenture or other agreement or instrument to which the
     Company is a party or by which the Company or its property may be bound or
     affected.

                                       42

          (c) No authorization, consent, approval (including any exchange
     control approval), license or other action by, and no notice to or filing
     or registration with, any governmental authority, administrative agency or
     regulatory body or any other third party is required for the due execution,
     delivery and performance by the Company of this Agreement or the Notes of
     the Company.

          (d) This Agreement has been, and each of the Notes when delivered
     hereunder will have been, duly executed and delivered by the Company. This
     Agreement is, and each of the Notes of the Company when delivered hereunder
     will be, the legal, valid and binding obligation of the Company enforceable
     against the Company 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.

          (e) The Consolidated balance sheet of the Company and its Consolidated
     Subsidiaries as at December 31, 2001, and the related Consolidated
     statements of income and cash flows of the Company and its Consolidated
     Subsidiaries for the fiscal year then ended (together with the notes to the
     financial statements of the Company and its Consolidated Subsidiaries and
     the Consolidated statements of cash flows of the Company and its
     Consolidated Subsidiaries), accompanied by an opinion of one or more
     nationally recognized firms of independent public accountants, and the
     Consolidated balance sheet of the Company and its Consolidated Subsidiaries
     as at September 30, 2002, and the related Consolidated statements of income
     and cash flows of the Company and its Consolidated Subsidiaries for the
     nine months then ended, duly certified by the principal financial officer
     of the Company, copies of which have been furnished to each Lender, are
     materially complete and correct, and fairly present, subject, in the case
     of said balance sheet as at September 30, 2002, and said statements of
     income and cash flows for the nine months then ended, to year-end audit
     adjustments, the Consolidated financial condition of the Company and its
     Consolidated Subsidiaries as at such dates and the Consolidated results of
     the operations of the Company and its Consolidated Subsidiaries for the
     periods ended on such dates, all in accordance with GAAP consistently
     applied, except as otherwise noted therein; the Company and its
     Consolidated Subsidiaries do not have on such date any material contingent
     liabilities, liabilities for taxes, unusual forward or long-term
     commitments or unrealized or anticipated losses from any unfavorable
     commitments, except as referred to or reflected or provided for in such
     balance sheet or the notes thereto as at such date. No Material Adverse
     Change has occurred since December 31, 2001, except as otherwise publicly
     disclosed prior to the date hereof.

          (f) There is no action, suit, investigation, litigation or proceeding,
     including, without limitation, any Environmental Action, pending or to the
     knowledge of the Company Threatened affecting the Company or any of its
     Subsidiaries before any court, governmental agency or arbitrator that (i)
     is reasonably likely to have a Material Adverse Effect (other than the
     Disclosed Litigation), or (ii) purports to affect the legality, validity or
     enforceability of this Agreement or any Note or the consummation of the
     transactions contemplated hereby, and there has been no adverse change in
     the status, or financial effect on the Company or any of its Subsidiaries,
     of the Disclosed Litigation from that described on Schedule 3.01(b) hereto.

                                       43

          (g) Following application of the proceeds of each Advance, not more
     than 25 percent of the value of the assets (either of the Borrower of such
     Advance or of such Borrower and its Subsidiaries on a Consolidated basis)
     subject to the provisions of Section 5.02(a) or subject to any restriction
     contained in any agreement or instrument between such Borrower and any
     Lender or any Affiliate of any Lender relating to Debt and within the scope
     of Section 6.01(e) will be margin stock (within the meaning of Regulation U
     issued by the Board of Governors of the Federal Reserve System).

          (h) The Company and each wholly-owned direct Subsidiary of the Company
     have, in the aggregate, met their minimum funding requirements under ERISA
     with respect to their Plans in all material respects and have not incurred
     any material liability to the PBGC, other than for the payment of premiums,
     in connection with such Plans.

          (i) No ERISA Event has occurred or is reasonably expected to occur
     with respect to any Plan of the Company or any of its ERISA Affiliates that
     has resulted in or is reasonably likely to result in a material liability
     of the Company or any of its ERISA Affiliates.

          (j) The Schedules B (Actuarial Information) to the 2001 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 which will be furnished to any Bank through the Administrative
     Agent upon the request of such Bank through the Administrative Agent to the
     Company), are complete and accurate in all material respects and fairly
     present in all material respects the funding status of such Plans at such
     date, and since the date of each such Schedule B there has been no material
     adverse change in funding status.

          (k) Neither the Company nor any of its ERISA Affiliates has incurred
     or reasonably expects to incur any Withdrawal Liability to any
     Multiemployer Plan in an annual amount exceeding 6% of Net Tangible Assets
     of the Company and its Consolidated Subsidiaries.

          (l) Neither the Company nor any of its ERISA Affiliates has been
     notified by the sponsor of a Multiemployer Plan that such Multiemployer
     Plan is in reorganization or has been terminated, within the meaning of
     Title IV of ERISA. No such Multiemployer Plan is reasonably expected to be
     in reorganization or to be terminated, within the meaning of Title IV of
     ERISA, in a reorganization or termination which might reasonably be
     expected to result in a liability of the Company in an amount in excess of
     $5,000,000.

          (m) The Company is not, and immediately after the application by the
     Company of the proceeds of each Loan 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.

          (n) To the best of the Company's knowledge, the operations and
     properties of the Company and its Subsidiaries taken as a whole comply in
     all material respects with all Environmental Laws, all necessary
     Environmental Permits have been applied for or have been obtained and are
     in effect for the operations and properties of the Company and its
     Subsidiaries and the Company and its Subsidiaries are in compliance in all

                                       44

     material respects with all such Environmental Permits. To the best of the
     Company's knowledge no circumstances exist that would be reasonably likely
     to form the basis of an Environmental Action against the Company or any of
     its Subsidiaries or any of their properties that could have a Material
     Adverse Effect.

                                    ARTICLE V

                            COVENANTS OF THE BORROWER

          SECTION 5.01. Affirmative Covenants. So long as any Advance shall
remain unpaid or any Lender shall have any Commitment hereunder, the Company
will:

          (a) Compliance with Laws, Etc. Comply, and cause each Designated
     Subsidiary to comply with all applicable laws, rules, regulations and
     orders, such compliance to include, without limitation, compliance with
     ERISA and Environmental Laws as provided in Section 5.01(j), if failure to
     comply with such requirements would have a Material Adverse Effect.

          (b) Payment of Taxes, Etc. Pay and discharge, and cause each
     Designated Subsidiary to pay and discharge, all taxes, assessments and
     governmental charges or levies imposed upon it or on its income or profits
     or upon any of its property; provided, however, that neither the Company
     nor any of its Subsidiaries shall be required to pay or discharge any such
     tax, assessment, charge or claim that is being contested in good faith and
     by proper proceedings and as to which appropriate reserves are being
     maintained.

          (c) Maintenance of Insurance. Maintain, and cause each Designated
     Subsidiary to maintain, insurance with responsible and reputable insurance
     companies or associations in such amounts and covering such risks as is
     usually carried by companies engaged in similar businesses and owning
     similar properties in the same general areas in which the Company or such
     Subsidiary operates.

          (d) Preservation of Corporate Existence, Etc. Preserve and maintain,
     and cause each Designated Subsidiary to preserve and maintain, its
     corporate existence and all 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,
     permit the Agent or any of the Lenders or any agents or representatives
     thereof, to examine and make copies of and abstracts from the records and
     books of account of, and visit the properties of, the Company and any
     Designated Subsidiary, and to discuss the affairs, finances and accounts of
     the Company and any Designated Subsidiary with any of their officers or
     directors and with their independent certified public accountants.

          (f) Keeping of Books. Keep, and cause each Designated Subsidiary to
     keep, proper books of record and account, in which full and correct entries
     shall be made of all financial transactions and the assets and business of
     the Company and each Designated

                                       45

     Subsidiary in accordance with generally accepted accounting principles in
     effect from time to time.

          (g) Maintenance of Properties, Etc. Maintain and preserve, and cause
     each Designated Subsidiary to maintain and preserve, all of its properties
     that are used or useful in the conduct of its business in good working
     order and condition, ordinary wear and tear excepted; provided, however,
     that neither the Company nor any of its Designated Subsidiaries shall be
     required to maintain or preserve any property if the failure to maintain or
     preserve such property shall not have a Material Adverse Effect.

          (h) Reporting Requirements. Furnish to the Agent (with a copy for each
     Lender) and the Agent shall promptly forward the same to the Lenders:

               (i) as soon as available and in any event within 60 days after
          the end of each of the first three quarters of each fiscal year of the
          Company, a Consolidated balance sheet of the Company and its
          Consolidated Subsidiaries as of the end of such quarter and a
          Consolidated statement of income and cash flows of the Company and its
          Consolidated Subsidiaries for the period commencing at the end of the
          previous fiscal year and ending with the end of such quarter, setting
          forth in each case in comparative form the corresponding figures as of
          the corresponding date and for the corresponding period of the
          preceding fiscal year, all in reasonable detail and certified by the
          principal financial officer, principal accounting officer, the
          Vice-President and Treasurer or an Assistant Treasurer of the Company,
          subject, however, to year-end auditing adjustments, which certificate
          shall include 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 Consolidated Subsidiaries as of the end
          of such fiscal year and the related Consolidated statements of income
          and cash flows of the Company and its Consolidated Subsidiaries for
          such fiscal year setting forth in each case in comparative form the
          corresponding figures as of the close of and for the preceding fiscal
          year, all in reasonable detail and accompanied by an opinion of
          independent public accountants of nationally recognized standing, as
          to said financial statements and a certificate of the principal
          financial officer, principal accounting officer, the Vice-President
          and Treasurer or an Assistant Treasurer of the Company stating that
          such 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, promptly after
          the filing thereof;

               (iv) copies of each annual report, quarterly report, special
          report or proxy statement mailed to substantially all of the
          stockholders of the Company, promptly after the mailing thereof to the
          stockholders;

                                       46

               (v) immediate notice of the occurrence of any Default of which
          the principal financial officer, principal accounting officer, the
          Vice-President and Treasurer or an Assistant Treasurer of the Company
          shall have knowledge;

               (vi) as soon as available and in any event within 15 days after
          the Company or any of its ERISA Affiliates knows or has reason to know
          that any ERISA Event has occurred, a statement of a senior officer of
          the Company with responsibility for compliance with the requirements
          of ERISA describing such ERISA Event and the action, if any, which the
          Company or such ERISA Affiliate proposes to take with respect thereto;

               (vii) at the request of any Lender, promptly after the filing
          thereof with the Internal Revenue Service, copies of Schedule B
          (Actuarial Information) to each annual report (Form 5500 series) filed
          by the Company or any of its ERISA Affiliates with respect to each
          Plan;

               (viii) promptly after receipt thereof by the Company or any of
          its ERISA Affiliates, copies of each notice from the PBGC stating its
          intention to terminate any Plan or to have a trustee appointed to
          administer any Plan;

               (ix) promptly after such request, such other documents and
          information relating to any Plan as any Lender may reasonably request
          from time to time;

               (x) promptly and in any event within five Business Days after
          receipt thereof by the Company or any of its ERISA Affiliates from the
          sponsor of a Multiemployer Plan, copies of each notice concerning (A)
          (x) the imposition of Withdrawal Liability in an amount in excess of
          $5,000,000 with respect to any one Multiemployer Plan or in an
          aggregate amount in excess of $25,000,000 with respect to all such
          Multiemployer Plans within any one calendar year or (y) the
          reorganization or termination, within the meaning of Title IV of
          ERISA, of any Multiemployer Plan that has resulted or might reasonably
          be expected to result in Withdrawal Liability in an amount in excess
          of $5,000,000 or of all such Multiemployer Plans that has resulted or
          might reasonably be expected to result in Withdrawal Liability in an
          aggregate amount in excess of $25,000,000 within any one calendar year
          and (B) the amount of liability incurred, or that may be incurred, by
          the Company or any of its ERISA Affiliates in connection with any
          event described in such subclause (x) or (y);

               (xi) promptly after the commencement thereof, notice of all
          actions and proceedings before any court, governmental agency or
          arbitrator affecting the Borrower or any Designated Subsidiary of the
          type described in Section 4.01(f); and

               (xii) from time to time such further information respecting the
          financial condition and operations of the Company and its Subsidiaries
          as any Lender may from time to time reasonably request.

                                       47

          (i) Authorizations. Obtain, and cause each Designated Subsidiary to
     obtain, at any time and from time to time all authorizations, licenses,
     consents or approvals (including exchange control approvals) as shall now
     or hereafter be necessary or desirable under applicable law or regulations
     in connection with its making and performance of this Agreement and, upon
     the request of any Lender, promptly furnish to such Lender copies thereof.

          (j) Compliance with Environmental Laws. Comply, and cause each of its
     Subsidiaries and all lessees and other Persons operating or occupying its
     properties to comply, in all material respects, with all applicable
     Environmental Laws and Environmental Permits; obtain and renew and cause
     each of its Subsidiaries to obtain and renew all Environmental Permits
     necessary for its operations and properties; and conduct, and cause each of
     its 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, that neither the Company nor any of its Subsidiaries
     shall be required to undertake any such cleanup, removal, remedial or other
     action to the extent that its obligation to do so is being contested in
     good faith and by proper proceedings and appropriate reserves are being
     maintained with respect to such circumstances.

          (k) Change of Control. If a Change of Control shall occur, within ten
     calendar days after the occurrence thereof, provide the Agent with notice
     thereof, describing therein in reasonable detail the facts and
     circumstances giving rise to such Change in Control.

          SECTION 5.02. Negative Covenants. So long as any Advance shall remain
unpaid or any Lender shall have any Commitment hereunder, the Company will not:

          (a) Liens, Etc. Issue, assume or guarantee, or permit any of its
     Subsidiaries owning Restricted Property to issue, assume or guarantee, any
     Debt secured by Liens on or with respect to any Restricted Property without
     effectively providing that its obligations to the Lenders under this
     Agreement and any of the Notes shall be secured equally and ratably with
     such Debt so long as such Debt shall be so secured, except that the
     foregoing shall not apply to:

               (i) Liens affecting property of the Company or any of its
          Subsidiaries existing on the Effective Date in effect as of the date
          hereof or of any corporation existing at the time it becomes a
          Subsidiary of the Company or at the time it is merged into or
          consolidated with the Company or a Subsidiary of the Company;

               (ii) Liens on property of the Company or its Subsidiaries
          existing at the time of acquisition thereof or incurred to secure the
          payment of all or part of the purchase price thereof or to secure Debt
          incurred prior to, at the time of or within 24 months after
          acquisition thereof for the purpose of financing all or part of the
          purchase price thereof;

                                       48

               (iii) Liens on property of the Company or its Subsidiaries (in
          the case of property that is, in the opinion of the Board of Directors
          of the Company, substantially unimproved for the use intended by the
          Company) to secure all or part of the cost of improvement thereof, or
          to secure Debt incurred to provide funds for any such purpose;

               (iv) Liens which secure only Debt owing by a Subsidiary of the
          Company to the Company or to another Subsidiary of the Company;

               (v) Liens in favor of the United States of America, any State,
          any foreign country, or any department, agency, instrumentality, or
          political subdivisions of any such jurisdiction, to secure partial,
          progress, advance or other payments pursuant to any contract or
          statute or to secure any Debt incurred for the purpose of financing
          all or any part of the purchase price or cost of constructing or
          improving the property subject thereto, including, without limitation,
          Liens to secure Debt of the pollution control or industrial revenue
          bond type; or

               (vi) any extension, renewal or replacement (or successive
          extensions, renewals or replacements), in whole or in part, of any
          Lien referred to in the foregoing clauses (i) to (v) inclusive of any
          Debt secured thereby, provided that the principal amount of Debt
          secured thereby shall not exceed the principal amount of Debt so
          secured at the time of such extension, renewal or replacement, and
          that such extension, renewal or replacement Lien shall be limited to
          all or part of the property which secured the Lien extended, renewed
          or replaced (plus improvements on such property);

     provided, however, that, the Company and any one or more Subsidiaries
     owning Restricted Property may issue, assume or guarantee Debt secured by
     Liens which would otherwise be subject to the foregoing restrictions in an
     aggregate principal amount which, together with the aggregate outstanding
     principal amount of all other Debt of the Company and its Subsidiaries
     owning Restricted Property that would otherwise be subject to the foregoing
     restrictions (not 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 that the following type of transaction,
     among others, shall not be deemed to create Debt secured by Liens: Liens
     required by any contract or statute in order to permit the Company or any
     of its Subsidiaries to perform any contract or subcontract made by it with
     or at the request of the United States of America, any foreign country or
     any department, agency or instrumentality of any of the foregoing
     jurisdictions.

          (b) Mergers, Etc. Merge or consolidate with or into, or convey,
     transfer, lease or otherwise dispose of (whether in one transaction or in a
     series of transactions) all or substantially all of its assets (whether now
     owned or hereafter acquired) to, any Person; provided, however, that the
     Company may merge or consolidate with any other Person so long as the
     Company is the surviving corporation and so long as no Default shall have

                                       49

     occurred and be continuing at the time of such proposed transaction or
     would result therefrom.

                                   ARTICLE VI

                                EVENTS OF DEFAULT

          SECTION 6.01. Events of Default. If any of the following events
("Events of Default") shall occur and be continuing:

          (a) Any Borrower shall fail to pay: (i) any principal of any Advance
     when the same becomes due and payable; (ii) any facility fees or any
     interest on any Advance payable under this Agreement or any Note within
     three Business Days after the same becomes due and payable; or (iii) any
     other fees or other amounts payable under this Agreement or any Notes
     within 30 days after the same becomes due and payable other than those fees
     and amounts the liabilities for which are being contested in good faith by
     such Borrower and which have been placed in Escrow by such Borrower; or

          (b) Any representation or warranty made (or deemed made) by any
     Borrower (or any of its officers) in connection with this Agreement or by
     any Designated Subsidiary in the Designation Letter pursuant to which such
     Designated Subsidiary became a Borrower hereunder shall prove to have been
     incorrect in any material respect when made (or deemed made); or

          (c) The Company shall repudiate its obligations under, or shall
     default in the due performance or observance of, any term, covenant or
     agreement contained in Article VII of this Agreement; or

          (d) (i) The Company shall fail to perform or observe any other term,
     covenant or agreement contained in Section 5.02(a) and such failure shall
     remain unremedied for a period of 30 days after any Lender shall have given
     notice thereof to the Company (through the Agent), or (ii) the Company or
     any other Borrower shall fail to perform or to observe any other term,
     covenant or agreement contained in 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, the Vice-President and Treasurer
     or an Assistant Treasurer of the Company, and in the case of any other
     Borrower, a responsible officer of such Borrower, first has knowledge of
     such failure; or

          (e) (i) The Company or any of its Consolidated or Designated
     Subsidiaries shall fail to pay any principal of or premium or interest on
     any Debt (other than Debt owed to the Company or its Subsidiaries or
     Affiliates) that is outstanding in a principal amount of at least
     $150,000,000 in the aggregate (but excluding Debt outstanding hereunder and
     Debt owed by such party to any bank, financial institution or other
     institutional lender to the extent the Borrower or any Subsidiary has
     deposits with such bank, financial institution or other institutional
     lender sufficient to repay such Debt) of

                                       50

     the Company or such Subsidiary (as the case may be), when the same becomes
     due and payable (whether by scheduled maturity, required prepayment,
     acceleration, demand or otherwise), and such failure shall continue after
     the applicable grace period, if any, specified in the agreement or
     instrument relating to such Debt, or (ii) any other event shall occur or
     condition shall exist under any agreement or instrument relating to any
     such Debt and shall continue after the applicable grace period, if any,
     specified in such agreement or instrument, if the effect of such event or
     condition is to accelerate, or to permit the acceleration of, the maturity
     of such Debt, or (iii) any such Debt shall be declared to be due and
     payable, or required to be prepaid or redeemed (other than by a regularly
     scheduled required prepayment or redemption), purchased or defeased, or an
     offer to prepay, redeem, purchase or defease such Debt shall be required to
     be made, in each case prior to the stated maturity thereof; provided,
     however, that, for purposes of this Section 6.0l(e), in the case of (x)
     Debt of any Person (other than the Company or one of its Consolidated
     Subsidiaries) which the Company has guaranteed and (y) Debt of Persons
     (other than the Company or one of its Consolidated Subsidiaries) the
     payment of which is secured by a Lien on property of the Company or such
     Subsidiary, such Debt shall be deemed to have not been paid when due or to
     have been declared to be due and payable only when the Company or such
     Subsidiary, as the case may be, shall have failed to pay when due any
     amount which it shall be obligated to pay with respect to such Debt;
     provided further, however, that any event or occurrence described in this
     subsection (e) shall not be an Event of Default if (A) such event or
     occurrence relates to the Debt of any Subsidiary of the Company located in
     China, India, the Commonwealth of Independent States or Turkey
     (collectively, the "Exempt Countries"), (B) such Debt is not guaranteed or
     supported in any legally enforceable manner by any Borrower or by any
     Subsidiary or Affiliate 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 assets of such Subsidiary does not exceed
     $150,000,000 and the aggregate book value of the assets of all Subsidiaries
     of the Company located in Exempt Countries the Debt of which would cause an
     Event of Default to occur but for the effect of this proviso does not
     exceed $500,000,000; or

          (f) The Company or any of its Designated or Consolidated Subsidiaries
     shall generally not pay its debts as such debts become due, or shall admit
     in writing its inability to pay its debts generally, or shall make a
     general assignment for the benefit of creditors; or any proceeding shall be
     instituted by or against the Company or any such Subsidiaries seeking to
     adjudicate it a bankrupt or insolvent, or seeking liquidation, winding up,
     reorganization, arrangement, adjustment, protection, relief, or composition
     of it or its debts under any law relating to bankruptcy, insolvency or
     reorganization or relief of debtors, or seeking the entry of an order for
     relief or the appointment of a receiver, trustee, custodian or other
     similar official for it or for any substantial part of its property and, in
     the case of any such proceeding instituted against it (but not instituted
     by it), either such proceeding shall remain undismissed or unstayed for a
     period of 30 days, or any of the actions sought in such proceeding
     (including, without limitation, the entry of an order for relief against,
     or the appointment of a receiver, trustee, custodian or other similar
     official for, it or for any substantial part of its property) shall occur;
     or the Company or any such Subsidiaries shall take any corporate action to
     authorize any of the

                                       51

     actions set forth above in this subsection (f); provided, however, that any
     event or occurrence described in this subsection (f) shall not be an Event
     of Default if (A) such event or occurrence relates to any Subsidiary of the
     Company located in an Exempt Country, (B) the Debt of such Subsidiary is
     not guaranteed or supported in any legally enforceable manner by any
     Borrower or by any Subsidiary or Affiliate 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 assets of such Subsidiary
     does not exceed $150,000,000 and the aggregate book value of the assets of
     all Subsidiaries of the Company located in Exempt Countries with respect to
     which the happening of the events or occurrences described in this
     subsection (f) would cause an Event of Default to occur but for the effect
     of this proviso does not exceed $500,000,000; or

          (g) Any judgment or order for the payment of money in excess of
     $150,000,000 shall be rendered against the Company or any of its
     Subsidiaries and enforcement proceedings shall have been commenced by any
     creditor upon such judgment or order and there shall be any period of 10
     consecutive days during which a stay of enforcement of such judgment or
     order, by reason of a pending appeal or otherwise, shall not be in effect;
     provided, however, that any such judgment or order shall not be an Event of
     Default under this Section 6.01(g) if (A) such judgment or order is
     rendered against any Subsidiary of the Company located in an Exempt
     Country, (B) the Debt of such Subsidiary is not guaranteed or supported in
     any legally enforceable manner by any Borrower or by any Subsidiary or
     Affiliate of the Company located outside the Exempt Countries, (C) such
     judgment or order 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 the tenth consecutive day of the
     stay period referred to above, the book value of the assets of such
     Subsidiary does not exceed $150,000,000 and the aggregate book value of the
     assets of all Subsidiaries of the Company located in Exempt Countries the
     judgments and orders against which would cause an Event of Default to occur
     but for the effect of this proviso does not exceed $500,000,000; or

          (h) Any non-monetary judgment or order shall be rendered against the
     Company or any of its Subsidiaries that is reasonably likely to have a
     Material Adverse Effect, and enforcement proceedings shall have been
     commenced by any Person upon such judgment or order and there shall be any
     period of 10 consecutive days during which a stay of enforcement of such
     judgment or order, by reason of a pending appeal or otherwise, shall not be
     in effect; or

          (i) Any license, consent, authorization or approval (including
     exchange control approvals) now or hereafter necessary to enable the
     Company or any Designated Subsidiary to comply with its obligations herein
     or under any Notes of such Borrower shall be modified, revoked, withdrawn,
     withheld or suspended; or

          (j) (i) Any ERISA Event shall have occurred with respect to a Plan of
     any Borrower or any of its ERISA Affiliates and the sum (determined as of
     the date of

                                       52

     occurrence of such ERISA Event) of the Insufficiency of such Plan and the
     Insufficiency of any and all other Plans of the Borrowers and their ERISA
     Affiliates with respect to which an ERISA Event shall have occurred and
     then exist (or the liability of the Borrowers and their ERISA Affiliates
     related to such ERISA Event) exceeds $150,000,000; or (ii) any Borrower or
     any of its ERISA Affiliates shall be in default, as defined in Section
     4219(c)(5) of ERISA, with respect to any payment of Withdrawal Liability
     and the sum of the outstanding balance of such Withdrawal Liability and the
     outstanding balance of any other Withdrawal Liability that any Borrower or
     any of its ERISA Affiliates has incurred exceeds 6% of Net Tangible Assets
     of the Company and its Consolidated Subsidiaries; or (iii) any Borrower or
     any of its ERISA Affiliates shall have been notified by the sponsor of a
     Multiemployer Plan of such Borrower or any of its ERISA Affiliates that
     such Multiemployer Plan is in reorganization or is being terminated, within
     the meaning of Title IV of ERISA, and as a result of such reorganization or
     termination the aggregate annual contributions of the Borrowers and their
     ERISA Affiliates to all Multiemployer Plans that are then in reorganization
     or being terminated have been or will be increased over the amounts
     contributed to such Multiemployer Plans for the plan years of such
     Multiemployer Plans immediately preceding the plan year in which such
     reorganization or termination occurs by an amount exceeding $150,000,000;
     or

then, and (i) in any such event (except as provided in clause (ii) below), the
Agent (A) shall at the request, or may with the consent, of the Majority
Lenders, by notice to the Company, declare the obligation of each Lender to make
Advances to be terminated, whereupon the same shall forthwith terminate, and (B)
shall at the request, or may with the consent, of the Majority Lenders, by
notice to the Company, declare the Advances, all interest thereon and all other
amounts payable under this Agreement to be forthwith due and payable, whereupon
the Advances, all such interest and all such amounts shall become and be
forthwith due and payable, without presentment, demand, protest or further
notice of any kind, all of which are hereby expressly waived by the Borrowers
and (ii) in the case of the occurrence of any Event of Default described in
clause (i) or (ii) of Section 6.01(a), the Agent shall, at the request, or may
with the consent, of the Lenders which have made or assumed under this Agreement
at least 66-2/3% of the aggregate principal amount (based in respect of
Competitive Bid Advances denominated in Foreign Currencies on the Equivalent in
Dollars on the date of such request) of Competitive Bid Advances then
outstanding and to whom such Advances are owed, by notice to the Company,
declare the full unpaid principal of and accrued interest on all Competitive Bid
Advances hereunder and all other obligations of the Borrowers hereunder to be
immediately due and payable, whereupon such Advances and such obligations shall
be immediately due and payable, without presentment, demand, protest or other
further notice of any kind, all of which are hereby expressly waived by the
Borrowers; provided, however, that in the event of an actual or deemed entry of
an order for relief with respect to any Borrower under the United States
Bankruptcy Code of 1978, as amended, (x) the obligation of each Lender to make
Advances shall automatically be terminated and (y) the Advances, all such
interest and all such amounts shall automatically become and be due and payable,
without presentment, demand, protest or any notice of any kind, all of which are
hereby expressly waived by the Borrowers.

                                  ARTICLE VII

                                       53

                                   GUARANTEE

          SECTION 7.01. Unconditional Guarantee. For valuable consideration,
receipt whereof is hereby acknowledged, and to induce each Lender to make
Advances to the Designated Subsidiaries and to induce the Agent to act
hereunder, the Company hereby unconditionally and irrevocably guarantees to each
Lender and the Agent that:

          (a) the principal of and interest on each Advance to each Designated
     Subsidiary shall be promptly paid in full when due (whether at stated
     maturity, by acceleration or otherwise) in accordance with the terms
     hereof, and, in case of any extension of time of payment, in whole or in
     part, of such Advance, that all such sums shall be promptly paid when due
     (whether at stated maturity, by acceleration or otherwise) in accordance
     with the terms of such extension; and

          (b) all other amounts payable hereunder by any Designated Subsidiary
     to any Lender or the Agent or the Sub-Agent, as the case may be, shall be
     promptly paid in full when due in accordance with the terms hereof (the
     obligations of the Designated Subsidiaries under these subsections (a) and
     (b) of this Section 7.01 being the "Obligations").

In addition, the Company hereby unconditionally and irrevocably agrees that upon
default in the payment when due (whether at stated maturity, by acceleration or
otherwise) of any principal of, or interest on, any Advance to any Designated
Subsidiary or such other amounts payable by any Designated Subsidiary to any
Lender or the Agent, the Company will forthwith pay the same, without further
notice or demand.

          SECTION 7.02. Guarantee Absolute. The Company guarantees that the
Obligations will be paid strictly in accordance with the terms of this
Agreement, regardless of any law, regulation or order now or hereafter in effect
in any jurisdiction affecting any of such terms or the rights of any Lender or
the Agent with respect thereto. The liability of the Company under this
guarantee shall be absolute and unconditional irrespective of:

          (a) any lack of validity or enforceability of this Agreement or any
     other agreement or instrument relating thereto;

          (b) any change in the time, manner or place of payment of, or in any
     other term of, all or any of the Obligations, or any other amendment or
     waiver of or any consent to departure from this Agreement (including,
     without limitation, any extension of the Termination Date pursuant to
     Section 2.16);

          (c) any exchange, release or non-perfection of any collateral, or any
     release or amendment or waiver of or consent to departure from any other
     guaranty, for all or any of the Obligations; or

          (d) any other circumstance which might otherwise constitute a defense
     available to, or a discharge of, the Company, any Borrower or a guarantor.

                                       54

This guarantee shall continue to be effective or be reinstated, as the case may
be, if at any time any payment of any of the Obligations is rescinded or must
otherwise be returned by any of the Lenders or the Agent upon the insolvency,
bankruptcy or reorganization of the Company or any Borrower or otherwise, all as
though such payment had not been made.

          SECTION 7.03. Waivers. The Company hereby expressly waives diligence,
presentment, demand for payment, protest, any requirement that any right or
power be exhausted or any action be taken against any Designated Subsidiary or
against any other guarantor of all or any portion of the Advances, and all other
notices and demands whatsoever.

          SECTION 7.04. Remedies. Each of the Lenders and the Agent may pursue
its respective rights and remedies under this Article VII and shall be entitled
to payment hereunder notwithstanding any other guarantee of all or any part of
the Advances to the Designated Subsidiaries, and notwithstanding any action
taken by any such Lender or the Agent to enforce any of its rights or remedies
under such other guarantee, or any payment received thereunder. The Company
hereby irrevocably waives any claim or other right that it may now or hereafter
acquire against any Designated Subsidiary that arises from the existence,
payment, performance or enforcement of the Company's obligations under this
Article VII, including, without limitation, any right of subrogation,
reimbursement, exoneration, contribution or indemnification and any right to
participate in any claim or remedy of the Agent or the Lenders against any
Designated Subsidiary, whether or not such claim, remedy or right arises in
equity or under contract, statute or common law, including, without limitation,
the right to take or receive from 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 shall not have been paid in full, such amount shall be
held in trust for the benefit of the Lenders and the Agent and shall forthwith
be paid to the Agent for its own account and the accounts of the respective
Lenders to be credited and applied to the Obligations, whether matured or
unmatured, in accordance with the terms of this Agreement, or to be held as
collateral for any Obligations or other amounts payable under this Agreement
thereafter arising. The Company acknowledges that it will receive direct and
indirect benefits from the financing arrangements contemplated by this Agreement
and that the waiver set forth in this section is knowingly made in contemplation
of such benefits.

          SECTION 7.05. No Stay. The Company agrees that, as between (a) the
Company and (b) the Lenders and the Agent, the Obligations of any Designated
Subsidiary guaranteed by the Company hereunder may be declared to be forthwith
due and payable as provided in Article VI hereof for purposes of this Article
VII by declaration to the Company as guarantor notwithstanding any stay,
injunction or other prohibition preventing such declaration as against such
Designated Subsidiary and that, in the event of such declaration to the Company
as guarantor, such Obligations (whether or not due and payable by such
Designated Subsidiary), shall forthwith become due and payable by the Company
for purposes of this Article VII.

          SECTION 7.06. Survival. This guarantee is a continuing guarantee and
shall (a) remain in full force and effect until payment in full (after the
Termination Date) of the Obligations and all other amounts payable under this
guaranty, (b) be binding upon the Company, its successors and assigns, (c) inure
to the benefit of and be enforceable by each

                                       55

Lender (including each Assuming Lender and each assignee Lender pursuant to
Section 9.07) and the Agent and their respective successors, transferees and
assigns and (d) shall be reinstated if at any time any payment to a Lender or
the Agent hereunder is required to be restored by such Lender or the Agent.
Without limiting the generality of the foregoing clause (c), each Lender may
assign or otherwise transfer its interest in any Advance to any other person or
entity, and such other person or entity shall thereupon become vested with all
the rights in respect thereof granted to such Lender herein or otherwise.

                                  ARTICLE VIII

                                   THE AGENT

          SECTION 8.01. Authorization and Action. Each Lender hereby appoints
and authorizes the Agent to take such action as agent on its behalf and to
exercise such powers and discretion under this Agreement as are delegated to the
Agent by the terms hereof, together with such powers and discretion as are
reasonably incidental thereto. As to any matters not expressly provided for by
this Agreement (including, without limitation, enforcement or collection of the
Notes), the Agent shall not be required to exercise any discretion or take any
action, but shall be required to act or to refrain from acting (and shall be
fully protected in so acting or refraining from acting) upon the instructions of
the Majority Lenders, and such instructions shall be binding upon all Lenders
and all holders of Notes; provided, however, that the Agent shall not be
required to take any action that exposes the Agent to personal liability or that
is contrary to this Agreement 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 taken or
omitted to be taken by it or them under or in connection with this Agreement,
except for its or their own gross negligence or willful misconduct. Without
limitation of the generality of the foregoing, the Agent: (a) may treat the
Lender that made any Advance as the holder of the Debt resulting therefrom until
the Agent receives and accepts an Assignment and Acceptance entered into by such
Lender, as assignor, and an Eligible Assignee, as assignee, as provided in
Section 9.07; (b) may consult with legal counsel (including counsel for the
Company), independent public accountants and other experts selected by it and
shall not be liable for any action taken or omitted to be taken in good faith by
it in accordance with the advice of such counsel, accountants or experts; (c)
makes no warranty or representation to any Lender and shall not be responsible
to any Lender for any statements, warranties or representations (whether written
or oral) made in or in connection with this Agreement; (d) shall not have any
duty to ascertain or to inquire as to the performance or observance of any of
the terms, covenants or conditions of this Agreement on the part of any Borrower
or to inspect the property (including the books and records) of any Borrower;
(e) shall not be responsible to any Lender for the due execution, legality,
validity, enforceability, genuineness, sufficiency or value of this Agreement or
any other instrument or document furnished pursuant hereto; and (f) shall incur
no liability under or in respect of this Agreement by acting upon any notice,
consent, certificate or other instrument or writing (which may be by telecopier,
telegram or telex) believed by it to be genuine and signed or sent by the proper
party or parties.

                                       56

          SECTION 8.03. Citibank and Affiliates. With respect to its Commitment,
the Advances made by it and the Note issued to it, Citibank shall have the same
rights and powers under this Agreement as any other Lender and may exercise the
same as though it were not the Agent; and the term "Lender" or "Lenders" shall,
unless otherwise expressly indicated, include Citibank in its individual
capacity. Citibank and 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 any such Subsidiary, all as if Citibank were not the Agent and
without any duty to account therefor to the Lenders.

          SECTION 8.04. Lender Credit Decision. Each Lender acknowledges that it
has, independently and without reliance upon the Agent or any other Lender and
based on the financial statements referred to in Section 4.01 and such other
documents and information as it has deemed appropriate, made its own credit
analysis and decision to enter into this Agreement. Each Lender also
acknowledges that it will, independently and without reliance upon the Agent or
any other Lender and based on such documents and information as it shall deem
appropriate at the time, continue to make its own credit decisions in taking or
not taking action under this Agreement.

          SECTION 8.05. Indemnification. The Lenders agree to indemnify the
Agent (to the extent not reimbursed by a Borrower), ratably according to the
respective principal amounts of the Revolving Credit Advances then owed to each
of them (or if no Revolving Credit Advances are at the time outstanding, ratably
according to the respective amounts of their Commitments), from and against any
and all liabilities, obligations, losses, damages, penalties, actions,
judgments, suits, costs, expenses or disbursements of any kind or nature
whatsoever that may be imposed on, incurred by, or asserted against the Agent in
any way relating to or arising out of this Agreement or any action taken or
omitted by the Agent under this Agreement, provided that no Lender shall be
liable for any portion of such liabilities, obligations, losses, damages,
penalties, actions, judgments, suits, costs, expenses or disbursements resulting
from the Agent's gross negligence or willful misconduct. Without limitation of
the foregoing, each Lender agrees to reimburse the Agent promptly upon demand
for its ratable share of any out-of-pocket expenses (including counsel fees)
incurred by the Agent in connection with the preparation, execution, delivery,
administration, modification, amendment or enforcement (whether through
negotiations, legal proceedings or otherwise) of, or legal advice in respect of
rights or responsibilities under, this Agreement, to the extent that the Agent
is not reimbursed for such expenses by a Borrower.

          SECTION 8.06. Successor Agent. The Agent may resign at any time by
giving written notice thereof to the Lenders and the Company and may be removed
at any time with or without cause by the Majority Lenders. The Company may at
any time, by notice to the Agent, propose a successor Agent (which shall meet
the criteria described below) specified in such notice and request that the
Lenders be notified thereof by the Agent with a view to their removal of the
Agent and their appointment of such successor Agent; the Agent agrees to forward
any such notice to the Lenders promptly upon its receipt by the Agent. Upon any
such resignation or removal, the Majority Lenders shall have the right to
appoint a successor Agent. If no successor Agent shall have been so appointed by
the Majority Lenders, and shall have accepted such appointment, within 30 days
after the retiring Agent's giving of notice of resignation or the

                                       57

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 $500,000,000. Upon
the acceptance of any appointment as Agent hereunder by a successor Agent, such
successor Agent shall thereupon succeed to and become vested with all the
rights, powers, discretion, privileges and duties of the retiring Agent, and the
retiring Agent shall be discharged from its duties and obligations under this
Agreement. After any retiring Agent's resignation or removal hereunder as Agent,
the provisions of this Article VIII shall inure to its benefit as to any actions
taken or omitted to be taken by it while it was Agent under this Agreement.

          SECTION 8.07. Sub-Agent. The Sub-Agent has been designated under this
Agreement to carry out duties of the Agent. The Sub-Agent shall be subject to
each of the obligations in this Agreement to be performed by the Sub-Agent, and
each of the Borrowers and the Lenders agrees that the Sub-Agent shall be
entitled to exercise each of the rights and shall be entitled to each of the
benefits of the Agent under this Agreement as relate to the performance of its
obligations hereunder.

                                   ARTICLE IX

                                 MISCELLANEOUS

          SECTION 9.01. Amendments, Etc. No amendment or waiver of any provision
of this Agreement or the Revolving Credit Notes, nor consent to any departure by
any Borrower therefrom, shall in any event be effective unless the same shall be
in writing and signed by the Majority Lenders, and then such waiver or consent
shall be effective only in the specific instance and for the specific purpose
for which given; provided, however, that no amendment, waiver or consent shall,
unless in writing and signed by all the Lenders, do any of the following: (a)
increase the Commitments of the Lenders or subject the Lenders to any additional
obligations, (b) reduce the principal of, or interest on, the Revolving Credit
Advances or any fees or other amounts payable hereunder, (c) postpone any date
fixed for any payment of principal of, or interest on, the Revolving Credit
Advances or any fees or other amounts payable hereunder (other than as permitted
by Section 2.16 to the extent any Lender consents thereunder), (d) release the
Company from any of its obligations under Article VII, (e) require the duration
of an Interest Period to be nine months if such period is not available to all
Lenders or (f) amend this section 9.01; and provided further that no amendment,
waiver or consent shall, unless in writing and signed by the Agent in addition
to the Lenders required above to take such action, affect the rights or duties
of the Agent under this Agreement or any Note.

          SECTION 9.02. Notices, Etc. All notices and other communications
provided for hereunder shall be in writing (including telecopier, telegraphic or
telex communication) and mailed (return receipt requested), telecopied,
telegraphed, telexed or delivered, if to the Company or to any Designated
Subsidiary, at the Company's address at 101 Columbia Road, Morristown, New
Jersey 07962-1219, Attention: Assistant Treasurer; if to any Initial Lender, at
its Domestic Lending Office specified opposite its name on Schedule I hereto; if
to any other Lender, at its Domestic Lending Office specified in the Assumption
Agreement or the Assignment and Acceptance pursuant to which it became a Lender;
and if to the Agent, at its

                                       58

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: Carolyn Sheridan; or, as to any Borrower or the Agent, at such
other address as shall be designated by such party in a written notice to the
other parties and, as to each other party, at such other address as shall be
designated by such party in a written notice to the Company and the Agent. All
such notices and communications shall, when mailed, telecopied, telegraphed or
telexed, be effective when deposited in the mails, telecopied, delivered to the
telegraph company or confirmed by telex answerback, respectively, except that
notices and communications to the Agent pursuant to Article II, III or VIII
shall not be effective until received by the Agent. Delivery by telecopier of an
executed counterpart of any amendment or waiver of any provision of this
Agreement or the Notes or of any Exhibit hereto to be executed and delivered
hereunder shall be effective as delivery of a manually executed counterpart
thereof.

          SECTION 9.03. No Waiver; Remedies. No failure on the part of any
Lender or the Agent to exercise, and no delay in exercising, any right hereunder
or under any Note shall operate as a waiver thereof; nor shall any single or
partial exercise of any such right preclude any other or further exercise
thereof or the exercise of any other right. The remedies herein provided are
cumulative and not exclusive of any remedies provided by law.

          SECTION 9.04. Costs and Expenses. (a) The Company agrees to pay on
demand all costs and expenses of the Agent in connection with the
administration, modification and amendment of this Agreement, the Notes and the
other documents to be delivered hereunder, including, without limitation, (i)
all due 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 and expenses of the Agent and the Lenders, if any (including, without
limitation, reasonable counsel fees and expenses), in connection with the
enforcement (whether through negotiations, legal proceedings or otherwise) of
this Agreement, the Notes and the other documents to be delivered hereunder,
including, without limitation, reasonable fees and expenses of counsel for the
Agent and each Lender in connection with the enforcement of rights under this
Section 9.04(a).

          (b) Each Borrower agrees to indemnify and hold harmless the Agent and
each Lender and each of their Affiliates and their officers, directors,
employees, agents and advisors (each, an "Indemnified Party") from and against
any and all claims, damages, losses, liabilities and expenses (including,
without limitation, reasonable fees and expenses of counsel) that may be
incurred by or asserted or awarded against any Indemnified Party, in each case
arising out of or in connection with or by reason of, or in connection with the
preparation for a defense of, any investigation, litigation or proceeding
arising out of, related to or in connection with the Notes, this Agreement, any
of the transactions contemplated herein or the actual or proposed use of the
proceeds of the Advances whether or not such investigation, litigation or
proceeding is brought by the Company, its directors, shareholders or creditors
or an Indemnified Party or any other Person or any Indemnified Party is
otherwise a party thereto and whether or not the transactions contemplated
hereby are consummated, except to the extent any such claim, damage, loss,
liability or expense has resulted from such Indemnified Party's gross negligence
or willful misconduct.

                                       59

The Company also agrees not to assert any claim against any Indemnified Party on
any theory of liability for special, indirect, consequential or punitive damages
arising out of or otherwise relating to the Notes, this Agreement, any of the
transactions contemplated herein or the actual or proposed use of the proceeds
of the Advances.

          (c) If any payment of principal of, or Conversion of, any Eurocurrency
Rate Advance or LIBO Rate Advance is made by the Borrower to or for the account
of a Lender other than on the last day of the Interest Period for such Advance,
as a result of a payment or Conversion pursuant to Section 2.03(d), 2.05(b),
2.09(a) or (b), 2.11 or 2.16, acceleration of the maturity of the Notes pursuant
to Section 6.01 or for any other reason, the Borrower shall, upon demand by such
Lender (with a copy of such 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 that it may reasonably incur as a result of
such payment or Conversion, including, without limitation, any loss (including
loss of anticipated profits), cost or expense incurred by reason of the
liquidation or reemployment of deposits or other funds acquired by any Lender to
fund or maintain such Advance.

          (d) Without prejudice to the survival of any other agreement of the
Borrower hereunder, the agreements and obligations of the Borrower contained in
Sections 2.10, 2.13 and 9.04 shall survive the payment in full of principal,
interest and all other amounts payable hereunder and under the Notes and the
termination in whole of any Commitment hereunder.

          SECTION 9.05. Right of Set-off. Upon (a) the occurrence and during the
continuance of any Event of Default and (b) the making of the request or the
granting of the consent specified by Section 6.01 to authorize the Agent to
declare the Notes due and payable pursuant to the provisions of Section 6.01,
each Lender and each of its Affiliates is hereby authorized at any time and from
time to time, to the fullest extent permitted by law, to set off and apply any
and all deposits (general or special, time or demand, provisional or final) at
any time held and other indebtedness at any time owing by such Lender or such
Affiliate to or for the credit or the account of any Borrower against any and
all of the obligations of such Borrower now or hereafter existing under this
Agreement and the Note of such Borrower held by such Lender, whether or not such
Lender shall have made any demand under this Agreement or such Note and although
such obligations may be unmatured. Each Lender agrees promptly to notify the
relevant Borrower after any such set-off and application, provided that the
failure to give such notice shall not affect the validity of such set-off and
application. The rights of each Lender and its Affiliates under this Section are
in addition to other rights and remedies (including, without limitation, other
rights of set-off) that such Lender and its Affiliates may have.

          SECTION 9.06. Binding Effect. This Agreement shall become effective
(other than Sections 2.01 and 2.03, which shall only become effective upon
satisfaction of the conditions precedent set forth in Section 3.01) when it
shall have been executed by the Company and the Agent and when the Agent shall
have been notified by each Initial Lender that such Initial Lender has executed
it and thereafter shall be binding upon and inure to the benefit of each
Borrower, the Agent and each Lender and their respective successors and assigns,
except that no Borrower shall not have the right to assign its rights hereunder
or any interest herein without the prior written consent of the Lenders.

                                       60

          SECTION 9.07. Assignments and Participations. (a) Each Lender may at
any time, with notice to the Company prior to making any proposal to any
potential assignee and with the consent of the Company, which consent shall not
be unreasonably withheld (and 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 to it and the Revolving Credit Note or Notes held by it);
provided, however, that (i) the Company's consent shall not be required (A) in
the case of an assignment to an Affiliate of such Lender, provided that notice
thereof shall have been given to the Company and the Agent, or (B) in the case
of an assignment of the type described in subsection (g) below; (ii) each such
assignment shall be of a constant, and not a varying, percentage of all rights
and obligations under this Agreement (other than any right to make Competitive
Bid Advances, Competitive Bid Advances owing to it and Competitive Bid Notes);
(iii) except in the case of an assignment to a Person that, immediately prior to
such assignment, was a Lender or an assignment of all of a Lender's rights and
obligations under this Agreement, the amount of the Commitment of the assigning
Lender being assigned pursuant to each such assignment (determined as of the
date of the Assignment and Acceptance with respect to such assignment) shall in
no event be less than $10,000,000 or an integral multiple of $1,000,000 in
excess thereof; (iv) each such assignment shall be to an Eligible Assignee, (v)
each such assignment made as a result of a demand by the Company pursuant to
this Section 9.07(a) shall be arranged by the Company after consultation with,
and subject to the approval of, the Agent, and shall be either an assignment of
all of the rights and obligations of the assigning Lender under this Agreement
or an assignment of a portion of such rights and obligations made concurrently
with another such assignment or other such assignments that together cover all
of the rights and obligations of the assigning Lender under this Agreement, (vi)
no Lender shall be obligated to make any such assignment as a result of a demand
by the Borrower pursuant to this Section 9.07(a) unless and until such Lender
shall have received one or more payments from either the Borrower or one or more
Eligible Assignees in an aggregate amount at least equal to the aggregate
outstanding principal amount of the Advances owing to such Lender, together with
accrued interest thereon to the date of payment of such principal amount and all
other amounts payable to such Lender under this Agreement and all of the
obligations of the Borrower to such Lender shall have been satisfied; and (vii)
the parties to each such assignment shall execute 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 execution, delivery, acceptance and
recording, from and after the effective date specified in each Assignment and
Acceptance, (x) the assignee thereunder shall be a party hereto and, to the
extent that rights and obligations hereunder have been assigned to it pursuant
to such Assignment and Acceptance, have the rights and obligations of a Lender
hereunder and (y) the Lender assignor thereunder shall, to the extent that
rights and obligations hereunder have been assigned by it pursuant to such
Assignment and Acceptance, relinquish its rights and be released from its
obligations under this Agreement (and, in the case of an Assignment and
Acceptance covering all or the remaining portion of an assigning Lender's rights
and obligations under this Agreement, such Lender shall cease to be a party
hereto, provided, however, that such assigning Lender's rights under Sections
2.10, 2.13 and 9.04, and its obligations under Section 8.05, shall survive such
assignment as to matters occurring prior to the effective date of such
assignment).

                                       61

          (b) By executing and delivering an Assignment and Acceptance, the
Lender assignor thereunder and the assignee thereunder confirm to and agree with
each other and the other parties hereto as follows: (i) other than as provided
in such Assignment and Acceptance, such assigning Lender makes no representation
or warranty and assumes no responsibility with respect to any statements,
warranties or representations made in or in connection with this Agreement or
any other instrument or document furnished pursuant hereto or the execution,
legality, validity, enforceability, genuineness, sufficiency or value of this
Agreement or any other instrument or document furnished pursuant hereto; (ii)
such assigning Lender makes no representation or warranty and assumes no
responsibility with respect to the financial condition of any Borrower or the
performance or observance by such Borrower of any of its obligations under this
Agreement or any other instrument or document furnished pursuant hereto; (iii)
such assignee confirms that it has received a copy of this Agreement, together
with copies of the financial statements referred to in Section 4.01 and such
other documents and information as it has deemed appropriate to make its own
credit analysis and decision to enter into such Assignment and Acceptance; (iv)
such assignee will, independently and without reliance upon the Agent, such
assigning Lender or any other Lender and based on such documents and information
as it shall deem appropriate at the time, continue to make its own credit
decisions in taking or not taking action under this Agreement; (v) such assignee
confirms that it is an Eligible Assignee; (vi) such assignee appoints and
authorizes the Agent to take such action as agent on its behalf and to exercise
such powers and discretion under this Agreement as are delegated to the Agent by
the terms hereof, together with such powers and discretion as are reasonably
incidental thereto; and (vii) such assignee agrees that it will perform in
accordance with their terms all of the obligations that by the terms of this
Agreement are required to be performed by it as a Lender.

          (c) Upon its receipt of an Assignment and Acceptance executed by an
assigning Lender and an assignee representing that it is an Eligible Assignee,
together with any Revolving Credit Note or Notes subject to such assignment, the
Agent shall, if such Assignment and Acceptance has been completed and is 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
9.02 a copy of each Assumption Agreement and each Assignment and Acceptance
delivered to and accepted by it and a register for the recordation of the names
and addresses of the Lenders and the Commitment of, and principal amount of the
Advances owing to, each Lender from time to time (the "Register"). The entries
in the Register shall be conclusive and binding for all purposes, absent
manifest error, and the Company, each other Borrower, the Agent and 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.

          (e) Each Lender may sell participations to one or more banks or other
entities (other than the Company or any of its Affiliates) in or to all or a
portion of its rights and obligations under this Agreement (including, without
limitation, all or a portion of its Commitment, the Advances owing to it and any
Note or Notes held by it); provided, however,

                                       62

that (i) such Lender's obligations under this Agreement (including, without
limitation, its Commitment to the Company and the other Borrowers hereunder)
shall remain unchanged, (ii) such Lender shall remain solely responsible to the
other parties hereto for the performance of such obligations, (iii) such Lender
shall remain the holder of any such Note for all purposes of this Agreement,
(iv) the Company, any other Borrower, the Agent and the other Lenders shall
continue to deal solely and directly with such Lender in connection with such
Lender's rights and obligations under this Agreement, (v) no participant under
any such participation shall have any right to approve any amendment or waiver
of any provision of this Agreement or any Note, or any consent to any departure
by any Borrower therefrom, except to the extent that such amendment, waiver or
consent would reduce the principal of, or interest on, the Notes or any fees or
other amounts payable hereunder, in each case to the extent subject to such
participation, or postpone any date fixed for any payment of principal of, or
interest on, the Notes or any fees or other amounts payable hereunder, in each
case to the extent subject to such participation and (vi) within 30 days of the
effective date of such participation, such Lender shall provide notice of such
participation to the Company.

          (f) Any Lender may, in connection with any assignment or participation
or proposed assignment or participation pursuant to this Section 9.07, disclose
to the assignee or participant or proposed assignee or participant, any
information relating to the Company or any Borrower furnished to such Lender by
or on behalf of such Borrower; provided that, prior to any such disclosure, the
assignee or participant or proposed assignee or participant shall agree to
preserve the confidentiality of any confidential information relating to such
Borrower received by it from such Lender.

          (g) Notwithstanding any other provision set forth in this Agreement,
any Lender may at any time assign or create a security interest in all or any
portion of its rights under this Agreement (including, without limitation, the
Advances owing to it and any Note or Notes held by it) in favor of any Federal
Reserve Bank in accordance with Regulation A of the Board of Governors of the
Federal Reserve System.

          SECTION 9.08. Designated Subsidiaries (a) Designation. The Company may
at any time, and from time to time, by delivery to the Agent of a Designation
Letter duly executed by the Company and the respective Subsidiary and
substantially in the form of Exhibit E hereto, designate such Subsidiary as a
"Designated Subsidiary" for purposes of this Agreement and such Subsidiary shall
thereupon become a "Designated Subsidiary" for purposes of this Agreement and,
as such, shall have all of the rights and obligations of a Borrower hereunder.
The Agent shall promptly notify each Lender of each such designation by the
Company and the identity of the respective Subsidiary.

          (b) Termination. Upon the payment and performance in full of all of
the indebtedness, liabilities and obligations under this Agreement and the Notes
of any Designated Subsidiary then, so long as at the time no Notice of Revolving
Credit Borrowing or Notice of Competitive Bid Borrowing in respect of such
Designated Subsidiary is outstanding, such Subsidiary's status as a "Designated
Subsidiary" shall terminate upon notice to such effect from the Agent to the
Lenders (which notice the Agent shall give promptly upon its receipt of a
request therefor from the Company). Thereafter, the Lenders shall be under no
further obligation to make any Advance hereunder to such Designated Subsidiary.

                                       63

          SECTION 9.09. Confidentiality. Each of the Lenders and the Agent
hereby agrees that it will use reasonable efforts (e.g., procedures
substantially comparable to those applied by such Lender or the Agent in respect
of non-public information as to the business of such Lender or the Agent) to
keep confidential any financial reports and other information from time to time
supplied to it by the Company hereunder to the extent that such information is
not and does not become publicly available and which the Company indicates at
the time is to be treated confidentially, provided, however, that nothing herein
shall affect the disclosure of any such information (i) by the Agent to any
Lender, (ii) to the extent required by law (including statute, rule, regulation
or judicial process), (iii) to counsel for any Lender or the Agent or to their
respective independent public accountants, (iv) to bank examiners and auditors
and appropriate government examining authorities, (v) to the Agent or any other
Lender, (vi) in connection with any litigation to which any Lender or the Agent
is a party, (vii) to actual or prospective assignees and participants as
contemplated by Section 9.07(f) or (viii) to any Affiliate of the Agent or any
Lender or to such Affiliate's officers, directors, employees, agents and
advisors, provided that, prior to any such disclosure, 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 circumstances described in the foregoing clauses
(i)-(viii) being conclusive if made in good faith; and each of the Lenders and
the Agent agrees that it will follow procedures which are intended to put any
transferee of such confidential information on notice that such information is
confidential.

          SECTION 9.10. Mitigation of Yield Protection. Each Lender hereby
agrees that, commencing as promptly as practicable after it becomes aware of the
occurrence of any event giving rise to the operation of Section 2.10(a), 2.11 or
2.13 with respect to such Lender, such Lender will give notice thereof through
the Agent to the respective Borrower. A Borrower may at any time, by notice
through the Agent to any Lender, request that such Lender change its Applicable
Lending Office as to any Advance or Type of Advance or that it specify a new
Applicable Lending Office with respect to its Commitment and any Advance held by
it or that it rebook any such Advance with a view to avoiding or mitigating the
consequences of an occurrence such as described in the preceding sentence, and
such Lender will use reasonable efforts to comply with such request unless, in
the opinion of such Lender, such change or specification or rebooking is
inadvisable or might have an adverse effect, economic or otherwise, upon it,
including its reputation. In addition, each Lender agrees that, except for
changes or specifications or rebookings required by law or effected pursuant to
the preceding sentence, if the result of any change or change of specification
of Applicable Lending Office or rebooking would, but for this sentence, be to
impose additional costs or requirements upon the respective Borrower pursuant to
Section 2.10(a), Section 2.11 or Section 2.13 (which would not be imposed absent
such change or change of specification or rebooking) by reason of legal or
regulatory requirements in effect at the time thereof and of which such Lender
is aware at such time, then such costs or requirements shall not be imposed upon
such Borrower but shall be borne by such Lender. All expenses incurred by any
Bank in changing an Applicable Lending Office or specifying another Applicable
Lending Office of such Lender or rebooking any Advance in response to a request
from a Borrower shall be paid by such Borrower. Nothing in this Section 9.10
(including, without limitation, any failure by a Lender to give any notice
contemplated in the first sentence hereof) shall limit, reduce or postpone any
obligations of the respective Borrower under Section 2.10(a), Section 2.11 or
Section 2.13, including any obligations payable

                                       64

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 9.11. Governing Law. This Agreement and the Notes shall be
governed by, and construed in accordance with, the laws of the State of New
York.

          SECTION 9.12. Execution in Counterparts. This Agreement may be
executed in any number of counterparts and by different parties hereto in
separate counterparts, each of which when so executed shall be deemed to be an
original and all of which taken together shall constitute one and the same
agreement. Delivery of an executed counterpart of a signature page to this
Agreement by telecopier shall be effective as delivery of a manually executed
counterpart of this Agreement.

          SECTION 9.13. Jurisdiction, Etc. (a) Each of the parties hereto hereby
irrevocably and unconditionally submits, for itself and its property, to the
nonexclusive jurisdiction of any New York State court or federal court of the
United States of America sitting in New York City, and any appellate court from
any thereof, in any action or proceeding arising out of or relating to this
Agreement or the Notes, or for recognition or enforcement of any judgment, and
each of the parties hereto hereby irrevocably and unconditionally agrees that
all claims in respect of any such action or proceeding may be heard and
determined in any such New York State court or, to the extent permitted by law,
in such federal court. Each Designated Subsidiary hereby agrees that service of
process in any such action or proceeding brought in the any such New York State
court or in such federal court may be made upon CT Corporation System at its
offices at 1633 Broadway, New York, New York 10019 (the "Process Agent") and
each Designated Subsidiary hereby irrevocably appoints the Process Agent its
authorized agent to accept such service of process, and agrees that the failure
of the Process Agent to give any notice of any such service shall not impair or
affect the validity of such service or of any judgment rendered in any action or
proceeding based thereon. Each Borrower hereby further irrevocably consents to
the service of process in any action or proceeding in such courts by the mailing
thereof by any parties hereto by registered or certified mail, postage prepaid,
to such Borrower at its address specified pursuant to Section 9.02. Each of the
parties hereto agrees that a final judgment in any such action or proceeding
shall be conclusive and may be enforced in other jurisdictions by suit on the
judgment or in any other manner provided by law. Nothing in this Agreement shall
affect any right that any party may otherwise have to serve legal process in any
other manner permitted by law or to bring any action or proceeding relating to
this Agreement or the Notes in the courts of any jurisdiction. To the extent
that each Designated Subsidiary has or hereafter may acquire any immunity from
jurisdiction of any court or from any legal process (whether through service or
notice, attachment prior to judgment, attachment in aid of execution, execution
or otherwise) with respect to itself or its property, each Designated Subsidiary
hereby irrevocably waives such immunity in respect of its obligations under this
Agreement.

          (b) Each of the parties hereto irrevocably and unconditionally waives,
to the fullest extent it may legally and effectively do so, any objection that
it may now or hereafter have to the laying of venue of any suit, action or
proceeding arising out of or relating to this Agreement or the Notes in any New
York State or federal court. Each of the parties hereto

                                       65

hereby irrevocably waives, to the fullest extent permitted by law, the defense
of an inconvenient forum to the maintenance of such action or proceeding in any
such court.

          SECTION 9.14. Substitution of Currency. If a change in any Foreign
Currency occurs pursuant to any applicable law, rule or regulation of any
governmental, monetary or multi-national authority, this Agreement (including,
without limitation, the definitions of Eurocurrency Rate and LIBO Rate) will be
amended to the extent determined by the Agent (acting reasonably and in
consultation with the Company) to be necessary to reflect the change in currency
and to put the Lenders and the Borrowers in the same position, so far as
possible, that they would have been in if no change in such Foreign Currency had
occurred.

          SECTION 9.15. Final Agreement. This written agreement represents the
full and final agreement between the parties with respect to the matters
addressed herein and supercedes all prior communications, written or oral, with
respect thereto. There are no unwritten agreements between the parties.

          SECTION 9.16. Judgment. (a) If for the purposes of obtaining judgment
in any court it is necessary to convert a sum due hereunder or under the Notes
in any currency (the "Original Currency") into another currency (the "Other
Currency"), the parties hereto agree, to the fullest extent that they may
effectively do so, that the rate of exchange used shall be that at which in
accordance with normal banking procedures the Agent could purchase the Original
Currency with the Other Currency at 9:00 A.M. (New York City time) on the first
Business Day preceding that on which final judgment is given.

          (b) The obligation of each Borrower in respect of any sum due in the
Original Currency from it to any Lender or the Agent hereunder or under the
Revolving Credit Note or Revolving Credit Notes held by such Lender shall,
notwithstanding any judgment in any Other Currency, be discharged only to 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 the amount of
Dollars so purchased is less than the sum originally due to such Lender or the
Agent (as the case may be) in the Original Currency, such Borrower agrees, as a
separate obligation and notwithstanding any such judgment, to indemnify such
Lender or the Agent (as the case may be) against such loss, and if the amount of
Dollars so purchased exceeds the sum originally due to any Lender or the Agent
(as the case may be) in the Original Currency, such Lender or the Agent (as the
case may be) agrees to remit to such Borrower such excess.

                                       66

          SECTION 9.17. Waiver of Jury Trial. Each Borrower, the Agent and each
Lender hereby irrevocably waive all right to trial by jury in any action,
proceeding or counterclaim (whether based on contract, tort or otherwise)
arising out of or relating to this Agreement or the Notes 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 INTERNATIONAL INC.

                                         By:/s/ James V. Gelly
                                            ------------------------------------
                                            Name: James V. Gelly
                                            Title: Vice President and Treasurer

                                         CITIBANK, N.A., as Agent

                                         By /s/ Carolyn A. Kee
                                            ------------------------------------
                                            Name: Carolyn A. Kee
                                            Title: Vice President

COMMITMENT                               ARRANGER AND ADMINISTRATIVE AGENT

$126,333,333                             CITIBANK, N.A.

                                         By: /s/ Carolyn A. Kee
                                            ------------------------------------
                                            Name: Carolyn A. Kee
                                            Title: Vice President

                                         CO-SYNDICATION AGENTS

$70,000,000                              JPMORGAN CHASE BANK

                                         By: /s/ Randolph Cates
                                            ------------------------------------
                                            Name: Randolph Cates
                                            Title: Vice President

$94,000,000                              BANK OF AMERICA, N.A.

                                         By /s/ John W. Pocalyko
                                            ------------------------------------
                                            Name: John W. Pocalyko
                                            Title: Managing Director

                                       67

$94,000,000                              BARCLAYS BANK PLC

                                         By:/s/ Douglas Bernegger
                                            ------------------------------------
                                            Name: Douglas Bernegger
                                            Title: Director

$94,000,000                              DEUTSCHE BANK AG, NEW YORK BRANCH

                                         By:/s/ Jean M. Hannigan
                                            ------------------------------------
                                            Name: Jean M. Hannigan
                                            Title: Director

                                         By:/s/ Ping Chen
                                            ------------------------------------
                                            Name: Ping Chen
                                            Title: Associate

                                         MANAGING AGENTS

$55,000,000                              BNP PARIBAS

                                         By:/s/ Christopher Criswell
                                            ------------------------------------
                                            Name: Christopher Criswell
                                            Title: Managing Director

                                         By:/s/ Bruno Lavole
                                            ------------------------------------
                                            Name: Bruno Lavole
                                            Title: Managing Director

$55,000,000                              BANK OF TOKYO-MITSUBISHI TRUST
                                         COMPANY

                                         By:/s/ Spencer Hughes
                                            ------------------------------------
                                            Name: Spencer Hughes
                                            Title: Vice President

$55,000,000                              HSBC BANK USA

                                         By:/s/Diane M. Zieske
                                            ------------------------------------
                                            Name: Diane M. Zieske
                                            Title: First Vice President

                                       68

$55,000,000                              ABN AMRO BANK N.V.

                                         By:/s/ James S. Kreitler
                                            ------------------------------------
                                            Name: James S. Kreitler
                                            Title: Senior Vice President

                                         By:/s/ Todd J. Miller
                                            ------------------------------------
                                            Name: Todd J. Miller
                                            Title: Assistant Vice President

$50,000,000                              BANK ONE, NA

                                         By:/s/ Mahua Thakurta
                                            ------------------------------------
                                            Name: Mahua Thakurta
                                            Title: Associate Director

$50,000,000                              THE NORTHERN TRUST COMPANY

                                         By:/s/ Ashish S. Bhagwat
                                            ------------------------------------
                                            Name: Ashish S. Bhagwat
                                            Title: Vice President

                                         CO-AGENTS

$21,666,667                              SUMITOMO MITSUI BANKING
                                         CORPORATION

                                         By:/s/ Robert H. Riley III
                                            ------------------------------------
                                            Name: Robert H. Riley III
                                            Title: Senior Vice President

$25,000,000                              WELLS FARGO BANK, NATIONAL
                                         ASSOCIATION

                                         By:/s/ Peter M. Angelica
                                            ------------------------------------
                                            Name: Peter M. Angelica
                                            Title: Vice President

$25,000,000                              ROYAL BANK OF CANADA

                                         By:/s/ Scott Umbs
                                            ------------------------------------
                                            Name: Scott Umbs
                                            Title: Manager

                                       69

$25,000,000                              UNICREDITO ITALIANO

                                         By:/s/ Christopher Eldin
                                            ------------------------------------
                                            Name: Christopher Eldin
                                            Title: FVP & Deputy Manager

                                         By:/s/ Charles Michael
                                            ------------------------------------
                                            Name: Charles Michael
                                            Title: Vice President

                                         LENDERS

$15,000,000                              ALLIED IRISH BANKS PLC

                                         By:/s/ Niamh Carolan
                                            ------------------------------------
                                            Name: Niamh Carolan
                                            Title: Vice President

$15,000,000                              BANCO BILBAO VIZCAYA ARGENTARIA S.A.

                                         By:/s/ Miguel Lara
                                            ------------------------------------
                                            Name: Miguel Lara
                                            Title: VP, Global Corporate
                                                   Banking

                                         By:/s/ Phillip Paddack
                                            ---------------------------------
                                            Name: Phillip Paddack
                                            Title: Senior VP, Branch Manager

$15,000,000                              WESTPAC BANKING CORPORATION

                                         By:/s/ Lisa Porter
                                            ------------------------------------
                                            Name: Lisa Porter
                                            Title: Vice President

$15,000,000                              THE BANK OF NOVA SCOTIA

                                         By:/s/ KCC Clarke
                                            ------------------------------------
                                            Name: KCC Clarke
                                            Title: Managing Director

$15,000,000                              CREDIT AGRICOLE INDOSUEZ

                                         By:/s/ Richard A. Drennan
                                            ------------------------------------
                                            Name: Richard A. Drennan

                                       70

                                            Title: Vice President
                                                   Sr. Relationship Manager

                                         By:/s/ Theodore D. Tice
                                            ------------------------------------
                                            Theodore D. Tice
                                            Title: Vice President
                                                   Sr. Relationship Manager

$15,000,000                              INTESA BCI

                                         By:/s/ F. Maffei
                                            ------------------------------------
                                            Name: F. Maffei
                                            Title: Vice President

                                         By:/s/ C. Dougherty
                                            ------------------------------------
                                            Name: C. Dougherty
                                            Title: Vice President

$15,000,000                              SOCIETE GENERALE

                                         By:/s/ Ambrish D. Thanawala
                                            ------------------------------------
                                            Name: Ambrish D. Thanawala
                                            Title: Director Corporate Banking

$1,000,000,000             TOTAL OF COMMITMENTS

                                       71

                                   SCHEDULE I
                           APPLICABLE LENDING OFFICES

- ----------------------------------------------------------------------------------------------------
NAME OF INITIAL LENDER         DOMESTIC LENDING OFFICE            EURODOLLAR 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) 992-51521             Phone: (312) 992-51521
                               Fax: (312) 992-5157                Fax: (312) 992-5157
- ----------------------------------------------------------------------------------------------------
Allied Irish Banks, plc        AIB Business Support Unit,         AIB Business Support Unit,
                               BankCentre                         BankCentre
                               8 Ballsbridge                      8 Ballsbridge
                               Dublin 4, Ireland                  Dublin 4, Ireland
                               Attn: C.M. McCabe                  Attn: C.M. McCabe
                               T: 3531 641 3998                   T: 3531 641 3998
                               F: 3531 660 3529                   F: 3531 660 3529
- ----------------------------------------------------------------------------------------------------
Banco Bilbao Vizcaya           1345 Avenue of the Americas        1345 Avenue of the Americas
Argentarie S.A.                45th Floor                         45th Floor
                               New York, NY 10105                 New York, NY 10105
                               Attn: Miguel Lara                  Attn: Miguel Lara
                               Phone: (212) 728-1664              Phone: (212) 728-1664
                               Fax: (212) 333-2904                Fax: (212) 333-2904
- ----------------------------------------------------------------------------------------------------
Bank of America, N.A.          101 N. Tryon Street                101 N. Tryon Street
                               Charlotte, NC 28255                Charlotte, NC 28255
                               Attn: Carrie Cunder                Attn: Carrie Cunder
                               Phone: (704) 386-8382              Phone: (704) 386-8382
                               Fax: (704) 409-0064                Fax: (704) 409-0064
- ----------------------------------------------------------------------------------------------------
The Bank of Tokyo-Mitsubishi   1251 Avenue of the Americas        1251 Avenue of the Americas
                               12th Floor                         12th Floor
                               New York, NY 10020                 New York, NY 10020
                               Attn: William Derasmo              Attn: William Derasmo
                               Phone: (212) 782-4359              Phone: (212) 782-4359
                               Fax: (212) 782-6445                Fax: (212) 782-6445
- ----------------------------------------------------------------------------------------------------
Bank One, NA                   One Bank One Plaza                 One Bank One Plaza
                               Chicago, IL 60670                  Chicago, IL 60670
                               Attn: Claudia Kech                 Attn: Claudia Kech
                               Phone: (312) 732-1031              Phone: (312) 732-1031
                               Fax: (312) 732-4840                Fax: (312) 732-4840
- ----------------------------------------------------------------------------------------------------
The Bank of Nova Scotia        One Liberty Plaza                  One Liberty Plaza
                               New York, NY  10006                New York, NY  10006
                               Attn: Todd Meller                  Attn: Todd Meller
                               Phone: (212) 225-5096              T: 212 225-5096
- ----------------------------------------------------------------------------------------------------
Barclays Bank PLC              222 Broadway - 7th Floor           222 Broadway - 7th Floor
                               New York, NY 10038                 New York, NY 10038
                               Attn: Chima Michael                Attn: Chima Michael
                               Phone: (212) 412-3161              Phone: (212) 412-3161
                               Fax: (212) 412-5306 / 7 / 8        Fax: (212) 412-5306 / 7 / 8
- ----------------------------------------------------------------------------------------------------

                                       72

- ----------------------------------------------------------------------------------------------------
                                                            
BNP Paribas                    499 Park Avenue                    499 Park Avenue
                               New York, NY  10022                New York, NY  10022
                               Attn: Andree Mitton/Robin          Attn: Andree Mitton/Robin Jackson-
                               Jackson-Bogner                     Bogner
                               Phone: (212) 415-9617/9616         Phone: (212) 415-9617/9616
                               Fax: (212) 415-9606                Fax: (212) 415-9606
- ----------------------------------------------------------------------------------------------------
Citibank, N.A.                 388 Greenwich Street               388 Greenwich Street
                               New York, NY  10013                New York, NY  10013
                               Attn: Carolyn Sheridan             Attn: Carolyn Sheridan
                               Phone: (212) 559-3245              Phone: (212) 559-3245
                               Fax: (212) 826-2371                Fax: (212) 826-2371
- ----------------------------------------------------------------------------------------------------
Credit Agricole Indosuez       55 East Monroe 47th Floor          55 East Monroe 47th Floor
                               Chicago, IL 60603                  Chicago, IL 60603
                               Attn:  Kimberly WSilp              Attn:  Kimberly WSilp
                               T: (312) 917-7450                  T: (312) 917-7450
                               F: (312) 372-4421                  F: (312) 372-4421
- ----------------------------------------------------------------------------------------------------
Deutsche Bank AG, New York     31 West 52nd Street                31 West 52nd Street
Branch                         New York, NY  10019                New York, NY  10019
                               Attn: Colin T. Taylor              Attn: Colin T. Taylor
                               Phone: (212) 474-7904              Phone: (212) 474-7904
                               Fax: (212) 474-8212                Fax: (212) 474-8212
- ----------------------------------------------------------------------------------------------------
HSBC Bank USA                  Agent Servicing Dept. 26th Floor   Agent Servicing Dept. 26th Floor
                               One HSBC Center                    One HSBC Center
                               Buffalo, NY  14203                 Buffalo, NY  14203
                               Attn: Tansia Hunter                Attn: Tansia Hunter
                               Phone: (716) 841-1930              Phone: (716) 841-1930
                               Fax: (716) 841-0269                Fax: (716) 841-0269
- ----------------------------------------------------------------------------------------------------
Intesa BCI                     1 S William Street                 1 S William Street
                               New York, NY  10004                New York, NY  10004
                               Attn: Frank Maffei                 Attn: Frank Maffei
- ----------------------------------------------------------------------------------------------------
JPMorgan Chase Bank            One Chase Manhattan Plaza          One Chase Manhattan Plaza
                               New York, NY 10081                 New York, NY 10081
                               Attn: Lenora Kiernan               Attn: Lenora Kiernan
                               Phone: (212) 552-7309              Phone: (212) 552-7309
                               Fax: (212) 552-5650                Fax: (212) 552-5650
- ----------------------------------------------------------------------------------------------------
The Northern Trust Company     50 S. LaSalle Street               50 S. LaSalle Street
                               Chicago, IL 60675                  Chicago, IL 60675
                               Attn: Linda Honda                  Attn: Linda Honda
                               Phone: (312) 444-3532              Phone: (312) 444-3532
                               Fax: (312) 630-1566                Fax: (312) 630-1566
- ----------------------------------------------------------------------------------------------------

                                       73

- ----------------------------------------------------------------------------------------------------
                                                            
Royal Bank of Canada           One Liberty Plaza, 3rd Floor       One Liberty Plaza, 3rd Floor
                               165 Broadway                       165 Broadway
                               New York, NY 10006                 New York, NY 10006
                               Attn: Karim Amr                    Attn: Karim Amr
                               Phone: (212) 428-6369              Phone: (212) 428-6369
                               Fax: (212) 428-2372                Fax: (212) 428-2372

                               with a copy to:                    with a copy to:

                               Attn: L. Litterini                 Attn: L. Litterini
                               Phone: (212) 428-6502              Phone: (212) 428-6502
                               Fax: (212) 428-2319                Fax: (212) 428-2319
- ----------------------------------------------------------------------------------------------------
Societe Generale               1221 Avenue of the America         1221 Avenue of the America
                               New York, NY  10020                New York, NY  10020
                               Attn: Maria Manesis-Iarriccio      Attn:  Maria Manesis-Iarriccio
                               Phone: (212) 278-5396              Phone:  (212) 278-5396
                               Fax: (212) 278-7862                Fax: (212) 278-7862
- ----------------------------------------------------------------------------------------------------
Sumitomo Mitsui Banking        277 Park Avenue                    277 Park Avenue
Corporation                    New York, NY 10172                 New York, NY 10172
                               Attn: Edward McColly               Attn: Edward McColly
                               Phone: (212) 224-4139              Phone: (212) 224-4139
                               Fax: (212) 224-4384                Fax: (212) 224-4384
- ----------------------------------------------------------------------------------------------------
Unicredito Italiano            375 Park Avenue                    375 Park Avenue
                               New York, NY 10152                 New York, NY 10152
                               Attn: Evangeline Blanco            Attn: Evangeline Blanco
                               Phone: (212) 546-9615              Phone: (212) 546-9615
                               Fax: (212) 546-9675                Fax: (212) 546-9675
- ----------------------------------------------------------------------------------------------------
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                Fax: (212) 593-5241
- ----------------------------------------------------------------------------------------------------
Westpac Banking Corporation    GMO Nightshift Operations          GMO Nightshift Operations
                               255 Elizabeth St. 3rd Floor        255 Elizabeth St. 3rd Floor
                               Sydney, NSW 2000                   Sydney, NSW 2000
                               Australia                          Australia
                               Attn: Matt Healey                  Attn: Matt Healey
                               Phone: 011 612 9284-8241           Phone: 011 612 9284-8241
                               Fax: 011 44 207 621 7608           Fax: 011 44 207 621 7608
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                                       74

                                SCHEDULE 3.01(b)

                              DISCLOSED LITIGATION

          While not giving an opinion as to whether any item is "reasonably
likely to have a Material Adverse Effect," we hereby disclose the litigation
matters as stated in our Form 10-Q for the quarter ended September 30, 2002,
under the heading "Legal Proceedings," the relevant portions of which are
attached.

     SHAREOWNER LITIGATION - Honeywell and seven of its current and former
officers were named as defendants in several purported class action lawsuits
filed in the United States District Court for the District of New Jersey (the
Securities Law Complaints). The Securities Law Complaints principally allege
that the defendants violated federal securities laws by purportedly making false
and misleading statements and by failing to disclose material information
concerning Honeywell's financial performance, thereby allegedly causing the
value of Honeywell's stock to be artificially inflated. The purported class
period for which damages are sought is December 20, 1999 to June 19, 2000. On
January 15, 2002, the District Court dismissed the consolidated complaint
against four of Honeywell's current and former officers.

     We believe that there is no factual or legal basis for the allegations in
the Securities Law Complaints. Although it is not possible at this time to
predict the result of these cases, we expect to prevail. However, an adverse
outcome could be material to our consolidated financial position or results of
operations. As a result of the uncertainty regarding the outcome of this matter,
no provision has been made in our financial statements with respect to this
contingent liability.

     ENVIRONMENTAL MATTERS - We are subject to various federal, state and local
government requirements relating to the protection of employee health and safety
and the environment. We believe that, as a general matter, our policies,
practices and procedures are properly designed to prevent unreasonable risk of
environmental damage and personal injury to our employees and employees of our
customers and that our handling, manufacture, use and disposal of hazardous or
toxic substances are in accord with environmental laws and regulations. However,
mainly because of past operations and operations of predecessor companies, we,
like other companies engaged in similar businesses, have incurred remedial
response and voluntary cleanup costs for site contamination and are a party to
lawsuits and claims associated with environmental matters, including past
production of products containing toxic substances. Additional lawsuits, claims
and costs involving environmental matters are likely to continue to arise in the
future.

     With respect to environmental matters involving site contamination, we
continually conduct studies, individually at our owned sites, and jointly as a
member of industry groups at non-owned sites, to determine the feasibility of
various remedial techniques to address environmental matters. It is our policy
to record appropriate liabilities for environmental matters when environmental
assessments are made or remedial efforts or damage claim payments are probable
and the costs can be reasonably estimated. With respect to site contamination,
the timing of these accruals is generally no later than the completion of
feasibility studies. We expect that we will be able to fund expenditures for
these matters from operating cash flow. The timing of cash expenditures depends
on a number of factors, including the timing of litigation and settlements of

personal injury and property damage claims, regulatory approval of cleanup
projects, remedial techniques to be utilized and agreements with other parties.

     Although we do not currently possess sufficient information to reasonably
estimate the amounts of liabilities to be recorded upon future completion of
studies, litigation or settlements, and neither the timing nor the amount of the
ultimate costs associated with environmental matters can be determined, they
could be material to our consolidated results of operations. However,
considering our past experience and existing reserves, we do not expect that
these matters will have a material adverse effect on our consolidated financial
position.

     ASBESTOS MATTERS - Like more than a thousand other industrial companies,
Honeywell is a defendant in personal injury actions related to asbestos. Our
involvement is limited because we did not mine or produce asbestos, nor did we
make or sell insulation products or other construction materials that have been
identified as the primary cause of asbestos-related disease in the vast majority
of claimants. Rather, we made several products that contained small amounts of
asbestos.

     Honeywell's Bendix Friction Materials business manufactured automotive
brake pads that included asbestos in an encapsulated form. There is a limited
group of potential claimants consisting largely of professional brake mechanics.
From 1981 through September 30, 2002, we have resolved approximately 56,000
Bendix claims at an average cost per claim of approximately one thousand two
hundred dollars. Through the second quarter of 2002, Honeywell had no
out-of-pocket costs for these cases since its insurance deductible was satisfied
many years ago. There are currently approximately 50,000 claims pending and we
have no reason to believe that the historic rate of dismissal will change. We
have $2 billion of insurance remaining, which we expect to cover the vast
majority of claims. Although it is impossible to predict the outcome of pending
or future claims, in light of our potential exposure, our prior experience in
resolving these claims, and our insurance coverage, we do not believe that the
Bendix asbestos-related claims will have a material adverse effect on our
consolidated results of operations or financial position.

     Another source of claims is refractory products (high temperature bricks
and cement) sold largely to the steel industry in the East and Midwest by North
American Refractories Company (NARCO), a business we owned from 1979 to 1986.
Less than 2 percent of NARCO's products contained asbestos.

     When we sold the NARCO business in 1986, we agreed to indemnify NARCO with
respect to personal injury claims for products that had been discontinued prior
to the sale (as defined in the sale agreement). NARCO retained all liability for
all other claims. NARCO has resolved approximately 176,000 claims through
January 4, 2002 at an average cost per claim of two thousand two hundred
dollars. Of those claims, 43 percent were dismissed on the ground that there was
insufficient evidence that NARCO was responsible for the claimant's asbestos
exposure. There are approximately 116,000 claims currently pending against
NARCO, including approximately 7 percent in which Honeywell is also named as a
defendant. During the past 18 years, Honeywell and our insurers have contributed
to the cost of the NARCO defense. We have

                                       2

approximately $2 billion of insurance remaining that can be specifically
allocated to NARCO-related liability.

     On January 4, 2002, NARCO filed for reorganization under Chapter 11 of the
U.S. Bankruptcy Code. As a result, all of the claims pending against NARCO are
automatically stayed pending the reorganization of NARCO. In addition, because
the claims pending against Honeywell necessarily will impact the liabilities of
NARCO, because the insurance policies held by Honeywell are essential to a
successful NARCO reorganization, and because Honeywell has offered to commit the
value of those policies to the reorganization, the bankruptcy court has
temporarily enjoined any claims against Honeywell, current or future, related to
NARCO. Although the stay has been extended eight times since January 4, 2002,
there is no assurance that such stay will remain in effect. In connection with
NARCO's bankruptcy 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, and to forgive any outstanding NARCO indebtedness, upon the
confirmation and consummation of such a plan.

     We are involved in ongoing negotiations with counsel representing more than
75% of the NARCO-related asbestos claimants regarding settlement of all pending
and potential NARCO-related asbestos claims against Honeywell. We believe that,
as part of the NARCO plan of reorganization, a trust will be established for the
benefit of all asbestos claimants, current and future. If the trust is put in
place and approved by the court as fair and equitable, Honeywell as well as
NARCO will be entitled to a permanent channeling injunction barring all present
and future individual actions in state or federal courts and requiring all
asbestos-related claims based on exposure to NARCO products to be made against
the federally-supervised trust. As part of its ongoing settlement negotiations,
Honeywell is seeking to cap its annual contributions to the trust with respect
to future claims at a level that would not have a material impact on Honeywell's
operating cash flows. Although there is no assurance that ongoing settlement
negotiations will be successfully completed or that a plan of reorganization
will be proposed or confirmed, the cost of securing a settlement which would
resolve all future, as well as all pending, NARCO-related asbestos claims could
exceed the value of our existing insurance and reserves plus the existing NARCO
assets. While any such settlement could have a material adverse impact on our
consolidated operating results or operating cash flows in the periods recognized
or paid, we do not believe that it would have a material adverse impact on our
consolidated financial position.

                                       3

                             EXHIBIT A-1 - FORM OF
                                REVOLVING CREDIT
                                PROMISSORY NOTE

                                                    Dated: _______________, 200_

          FOR VALUE RECEIVED, the undersigned, [NAME OF BORROWER], a
_________________________ corporation (the "Borrower"), HEREBY PROMISES TO PAY
to the order of _________________________ (the "Lender") for the account of its
Applicable Lending Office on the Termination Date (each as defined in the Credit
Agreement referred to below) the aggregate principal amount of the Revolving
Credit Advances made by the Lender to the Borrower pursuant to the 364-Day
Credit Agreement dated as of November 27, 2002 among Honeywell International
Inc., the Lender and certain other lenders parties thereto, and Citibank, N.A.,
as Agent for the Lender and such other lenders (as amended or modified from time
to time, the "Credit Agreement"; the terms defined therein being used herein as
therein defined) outstanding on such date.

          The Borrower promises to pay interest on the unpaid principal amount
of each Revolving Credit Advance from the date of such Revolving Credit Advance
until such principal amount is paid in full, at such interest rates, and payable
at such times, as are specified in the Credit Agreement.

          Both principal and interest in respect of each Revolving Credit
Advance (i) in Dollars are payable in lawful money of the United States of
America to Citibank, N.A., as Agent, at 388 Greenwich Street, New York, New
York, 10013, in same day funds and (ii) 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 to any transfer hereof, endorsed on the grid
attached hereto which is part of this Promissory Note.

          This Promissory Note is one of the Revolving Credit Notes referred to
in, and is entitled to the benefits of, the Credit Agreement. The Credit
Agreement, among other things, (i) provides for the making of Revolving Credit
Advances by the Lender to the Borrower from time to time in an aggregate amount
not to exceed at any time outstanding the Dollar amount first above mentioned or
the Equivalent thereof in one or more Major Currencies, the indebtedness of the
Borrower resulting from each such Revolving Credit Advance being evidenced by
this Promissory Note, (ii) contains provisions for determining the Dollar
Equivalent of Revolving Credit Advances denominated in Major Currencies and
(iii) contains provisions for acceleration of the maturity hereof upon the
happening of certain stated events and also for prepayments on account of
principal hereof prior to the maturity hereof upon the terms and conditions
therein specified.

          The Borrower hereby waives presentment, demand, protest and notice of
any kind. No failure to exercise, and no delay in exercising, any rights
hereunder on the part of the holder hereof shall operate as a waiver of such
rights.

          This promissory note shall be governed by, and construed in accordance
with the laws of the State of New York.

                                               [NAME OF BORROWER]

                                               By
                                                 -------------------------------
                                                 Name:
                                                 Title:

                                       2

                       ADVANCES AND PAYMENTS OF PRINCIPAL

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                 Amount of               Amount of
                 Advance in              Principal     Unpaid
       Type of    Relevant    Interest      Paid      Principal   Notation
Date   Advance    Currency      Rate     or Prepaid    Balance     Made By
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                                       3

                              EXHIBIT A-2 - FORM OF
                                 COMPETITIVE BID
                                 PROMISSORY NOTE

                                                    Dated: _______________, 200_

          FOR VALUE RECEIVED, the undersigned, [NAME OF BORROWER], a
_________________________ corporation (the "Borrower"), HEREBY PROMISES TO PAY
to the order of _________________________ (the "Lender") for the account of its
Applicable Lending Office (as defined in the 364-Day Credit Agreement dated as
of November 27, 2002 among Honeywell International Inc., the Lender and certain
other lenders parties thereto, and Citibank, N.A., as Agent for the Lender and
such other lenders (as amended or modified from time to time, the "Credit
Agreement"; the terms defined therein being used herein as therein defined)), on
_______________, the principal amount of [U.S.$_______________] [for a
Competitive Bid Advance in a Foreign Currency, list currency and amount of such
Advance].

          The Borrower promises to pay interest on the unpaid principal amount
hereof from the date hereof until such principal amount is paid in full, at the
interest rate and payable on the interest payment date or dates provided below:

          Interest Rate: [____% per annum (calculated on the basis of a year of
_____ days for the actual number of days elapsed)].

          Interest Payment Date or Dates: ______________

          Both principal and interest 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, among other things, contains provisions for acceleration of the
maturity hereof upon the happening of certain stated events.

          The Borrower hereby waives presentment, demand, protest and notice of
any kind. No failure to exercise, and no delay in exercising, any rights
hereunder on the part of the holder hereof shall operate as a waiver of such
rights.

          This Promissory Note shall be governed by, and construed in accordance
with, the laws of the State of New York.

                                            [NAME OF BORROWER]

                                            By
                                              ----------------------------------
                                              Name:
                                              Title:

                                       2

                         EXHIBIT B-1 - FORM OF NOTICE OF
                           REVOLVING CREDIT BORROWING

Citibank, N.A., as Agent
 for the Lenders parties
 to the Credit Agreement
 referred to below
 Two Penns Way
 New Castle, Delaware  19720                                              [Date]

          Attention: Bank Loan Syndication

Ladies and Gentlemen:

          The undersigned, [Name of Borrower], refers to the 364-Day Credit
Agreement, dated as of November 27, 2002 (as amended or modified from time to
time, the "Credit Agreement", the terms defined therein being used herein as
therein defined), among the undersigned, certain Lenders parties thereto, and
Citibank, N.A., as Agent for said Lenders, and hereby gives you notice,
irrevocably, pursuant to Section 2.02 of the Credit Agreement that the
undersigned hereby requests a Revolving Credit Borrowing under the Credit
Agreement, and in that connection sets forth below the information relating to
such Revolving Credit Borrowing (the "Proposed Revolving Credit Borrowing") as
required by Section 2.02(a) of the Credit Agreement:

          (i) The Business Day of the Proposed Revolving Credit Borrowing is
_______________.

          (ii) The Type of Advances comprising the Proposed Revolving Credit
Borrowing is [Base Rate Advances] [Eurocurrency Rate Advances].

          (iii) The aggregate amount of the Proposed Revolving Credit Borrowing
is [$_______________] [for a Revolving Credit Borrowing in a Major Currency,
list currency and amount of Revolving Credit Borrowing].

          [(iv) The initial Interest Period for each Eurocurrency Rate Advance
made as part of the Proposed Revolving Credit Borrowing is _____ month[s].]

          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 Credit
Borrowing.

                                            Very truly yours,

                                            [NAME OF BORROWER]

                                            By
                                               ---------------------------------
                                               Name:
                                               Title:

                                       2

                        EXHIBIT B-2 - FORM OF NOTICE OF
                           COMPETITIVE BID BORROWING

Citibank, N.A., as Agent
 for the Lenders parties
 to the Credit Agreement
 referred to below
 Two Penns Way
 New Castle, Delaware  19720                                              [Date]

Attention: Bank Loan Syndication

Ladies and Gentlemen:

          The undersigned, [Name of Borrower], refers to the 364-Day Credit
Agreement, dated as of November 27, 2002 (as amended or modified from time to
time, the "Credit Agreement", the terms defined therein being used herein as
therein defined), among Honeywell International Inc., certain Lenders parties
thereto and Citibank, N.A., as Agent for said Lenders, and hereby gives you
notice, irrevocably, pursuant to Section 2.03 of the Credit Agreement that the
undersigned hereby requests a Competitive Bid Borrowing under the Credit
Agreement, and in that connection sets forth the terms on which such Competitive
Bid Borrowing (the "Proposed Competitive Bid Borrowing") is requested to be
made:

          (A) Date of Competitive Bid Borrowing               __________________

          (B) Aggregate Amount of Competitive Bid Borrowing   __________________

          (C) [Maturity Date] [Interest Period]               __________________

          (D) Interest Rate Basis                             __________________

          (E) Day Count Convention                            __________________

          (F) Interest Payment Date(s)                        __________________

          (G) [Currency]                                      __________________

          (H) Borrower's Account Location                     __________________

          (I) ___________________                             __________________

          The undersigned hereby certifies that the conditions precedent to this
Competitive Bid Borrowing set forth in Section 3.05 of the Credit Agreement have
been satisfied and the applicable statements contained therein are true on the
date hereof, and will be true on the date of the Proposed Competitive Bid
Borrowing.

          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

                              EXHIBIT C - FORM OF
                           ASSIGNMENT AND ACCEPTANCE

                                                            Dated: _____________

          Reference is made to the 364-Day Credit Agreement dated as of November
27, 2002 (as amended or modified from time to time, the "Credit Agreement")
among Honeywell International Inc., a Delaware corporation (the "Borrower"), the
Lenders (as defined in the Credit Agreement), and Citibank, N.A., as agent (the
"Agent") for the Lenders. Terms defined in the Credit Agreement are used herein
with the same meaning.

          ____________ (the "Assignor") and ____________ (the "Assignee") agree
as follows:

          1. The Assignor hereby sells and assigns to the Assignee, and the
Assignee hereby purchases and assumes from the Assignor, an interest in and to
the Assignor's rights and obligations under the Credit Agreement as of the date
hereof (other than in respect of Competitive Bid Advances and Competitive Bid
Notes) equal to the percentage interest specified on Schedule 1 hereto of all
outstanding rights and obligations under the Credit Agreement (other than in
respect of Competitive Bid Advances and Competitive Bid Notes). After giving
effect to such sale and assignment, the Assignee's Commitment and the amount of
the Revolving Credit Advances in each relevant currency owing to the Assignee
will be as set forth on Schedule 1 hereto.

          2. The Assignor (i) represents and warrants that it is the legal and
beneficial owner of the interest being assigned by it hereunder and that such
interest is free and clear of any adverse claim; (ii) makes no representation or
warranty and assumes no responsibility with respect to any statements,
warranties or representations made in or in connection with the Credit Agreement
or any other instrument or document furnished pursuant thereto or the execution,
legality, validity, enforceability, genuineness, sufficiency or value of the
Credit Agreement or any other instrument or document furnished pursuant thereto;
(iii) makes no representation or warranty and assumes no responsibility with
respect to the financial condition of any Borrower or the performance or
observance by such Borrower of any of its obligations under the Credit Agreement
or any other instrument or document furnished pursuant thereto; [and (iv)
attaches the Revolving Credit Note held by the Assignor and requests that the
Agent obtain from the Borrower a new Revolving Credit Note payable to the order
of the Assignee with respect to the aggregate principal amount of the Revolving
Credit Advances assumed by such Assignee pursuant hereto, substantially in the
form of Exhibit A-1 to the Credit Agreement].

          3. The Assignee (i) confirms that it has received a copy of the Credit
Agreement, together with copies of the financial statements referred to in
Section 4.01(e) thereof and such other documents and information as it has
deemed appropriate to make its own credit analysis and decision to enter into
this Assignment and Acceptance; (ii) agrees that it will, independently and
without reliance upon the Agent, the Assignor or any other Lender and based on
such documents and information as it shall deem appropriate at the time,
continue to make its own credit decisions in taking or not taking action under
the Credit Agreement; (iii) confirms

that it is an Eligible Assignee; (iv) appoints and authorizes the Agent to take
such action as agent on its behalf and to exercise such powers and discretion
under the Credit Agreement as are delegated to the Agent by the terms thereof,
together with such powers and discretion as are reasonably incidental thereto;
(v) agrees that it will perform in accordance with their terms all of the
obligations that by the terms of the Credit Agreement are required to be
performed 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 Assignment and Acceptance (the "Effective Date") shall
be the date of acceptance hereof by the Agent, unless otherwise specified on
Schedule 1 hereto.

          5. Upon such acceptance and recording by the Agent, as of the
Effective Date, (i) the Assignee shall be a party to the Credit Agreement and,
to the extent provided in this Assignment and Acceptance, have the rights and
obligations of a Lender thereunder and (ii) the Assignor shall, to the extent
provided in this Assignment and Acceptance, relinquish its rights and be
released from its obligations under the Credit Agreement, provided, however,
that the Assignor's rights under Sections 2.10, 2.13 and 9.04 of the Credit
Agreement, and its obligations under Section 8.05 of the Credit Agreement, shall
survive the assignment pursuant to this Assignment and Acceptance as to matters
occurring prior to the Effective Date.

          6. Upon such acceptance and recording by the Agent, from and after the
Effective Date, the Agent shall make all payments under the Credit Agreement and
the Revolving Credit Notes in respect of the interest assigned hereby
(including, without limitation, all payments of principal, interest and facility
fees with respect thereto) to the Assignee. The Assignor and Assignee shall make
all appropriate adjustments in payments under the Credit Agreement and any
Revolving Credit Notes for periods prior to the Effective Date directly between
themselves.

          7. This Assignment and Acceptance shall be governed by, and construed
in accordance with, the laws of the State of New York.

          8. This Assignment and Acceptance may be executed in any number of
counterparts and by different parties hereto in separate counterparts, each of
which when so executed shall be deemed to be an original and all of which taken
together shall constitute one and the same agreement. Delivery of an executed
counterpart of Schedule 1 to this Assignment and Acceptance by telecopier shall
be effective as delivery of a manually executed counterpart of this Assignment
and Acceptance.

          IN WITNESS WHEREOF, the Assignor and the Assignee have caused Schedule
1 to this Assignment and Acceptance to be executed by their officers thereunto
duly authorized as of the date specified thereon.

                                       2

                                   Schedule 1
                                       to
                           Assignment 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 of the United Kingdom of Great

          Britain and Northern Ireland assigned:                        'L'_____

          Aggregate outstanding principal amount of Revolving Credit

          Advances in lawful currency of Japan assigned:                'Y'_____

          Aggregate outstanding principal amount of Revolving Credit

          Advances in Euros assigned:                                   'E'_____

(b)  Retained Advances

          Aggregate outstanding principal amount of Revolving Credit

          Advances in Dollars retained:                                   $_____

          Aggregate outstanding principal amount of Revolving Credit

          Advances in lawful currency of the United Kingdom of Great

          Britain and Northern Ireland retained:                        'L'_____

          Aggregate outstanding principal amount of Revolving Credit

          Advances in lawful currency of Japan retained:                'Y'_____

                                       3

          Aggregate outstanding principal amount of Revolving Credit

          Advances in Euros retained:                                   'E'_____

          Effective Date(1): _______________

                                                 [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:

                    EXHIBIT D - FORM OF ASSUMPTION AGREEMENT

                                                                  Dated:________

Honeywell International Inc.
P.O. Box 12l9
101 Columbia Road

- ----------
(1)  This date should be no earlier than five Business Days after the delivery
     of this Assignment and Acceptance to the Agent.

                                       4

Morristown, New Jersey  07960

 Attention: Treasurer

Citibank, N.A.,
 as Agent
Two Penns Way
New Castle, Delaware 19720

 Attention: Bank Loan Syndication

Ladies and Gentlemen:

          Reference is made to the 364-Day Credit Agreement dated as of November
27, 2002 among Honeywell International Inc. (the "Company"), the Lenders parties
thereto, and Citibank, N.A. as Agent (the "Credit Agreement"; terms defined
therein being used herein as therein defined), for such Lenders.

          The undersigned ("Assuming Lender") proposes to become an Assuming
Lender pursuant to Section 2.16 of the Credit Agreement and, in that connection,
hereby agrees that it shall become a Lender for purposes of the Credit Agreement
on [applicable Extension Date], assuming on such date the Commitment (without
giving effect to assignments thereof which have not yet become effective and
without regard to any Competitive Bid Commitment Reduction) as in effect on
[applicable Extension Date] of [name of applicable Non-Consenting Lender] (the
"Assignor") in the amount of $____________ and the Advances (without giving
effect to assignments thereof which have not yet become effective) owing to the
Assignor on [applicable Extension Date] in the amount of [indicate amounts and
currencies of various assigned Advances].

          The Assignor (i) represents and warrants that as of the date hereof
its Commitment (without giving effect to assignments thereof which have not yet
become effective and without regard to any Competitive Bid Commitment Reduction)
is $______ and the outstanding principal amount of Advances owing to it (without
giving effect to assignments thereof which have not yet become effective) (A) in
Dollars is $______, (B) in lawful currency of Japan is 'Y'____, (C) in lawful
currency of the United Kingdom of Great Britain and Northern Ireland is
'L' ____, (D) in Euros is 'E' ____ [, and (F) indicate amounts of Advances
in other Foreign Currencies, if any]; (ii) represents and warrants that it is
the legal and beneficial owner of the interest being assigned by it hereunder
and that such interest is free and clear of any adverse claim; (iii) makes no
representation or warranty and assumes no responsibility with respect to any
statements, warranties or representations made in or in connection with the
Credit Agreement or any other instrument or document furnished pursuant thereto
or the execution, legality, validity, enforceability, genuineness, sufficiency
or value of the Credit Agreement or any other instrument or document furnished
pursuant thereto; and (iv) makes no representation or warranty and assumes no
responsibility with respect to the financial condition of the Company or any
other Borrower or the performance or observance by the Company or any other
Borrower

                                       2

of any of its obligations under the Credit Agreement or any other instrument or
document furnished pursuant thereto.

          The Assuming Lender (i) confirms that it has received a copy of the
Credit Agreement, together with copies of the financial statements referred to
in Section 4.01(e) thereof, the most recent financial statements referred to in
Section 5.01(h) thereof and such other documents and information as it has
deemed appropriate to make its own credit analysis and decision to enter into
this Assumption Agreement; (ii) agrees that it will, independently and without
reliance upon the Agent, the Assignor or any other Lender and based on such
documents and information as it shall deem appropriate at the time, continue to
make its own credit decisions in taking or not taking action under the Credit
Agreement; (iii) appoints and authorizes the Agent to take such action as agent
on its behalf and to exercise such powers under the Credit Agreement as are
delegated to the Agent by the terms thereof, together with such powers as are
reasonably incidental thereto; (iv) agrees that it will perform in accordance
with their terms all of the obligations which by the terms of the Credit
Agreement are required to be performed by it as a Lender; (v) specifies as its
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 deliver to the Agent (to
be promptly delivered to the Assuming Lender) Revolving Credit Notes payable to
the order of the Assuming Lender, dated as of the Extension Date and
substantially in the form of Exhibit A-1 to the Credit Agreement.

          The effective date for this Assumption Agreement shall be [applicable
Extension Date]. Upon delivery of this Assumption Agreement to the Company and
the Agent, and satisfaction of all conditions imposed under Section 2.16 as of
[date specified above], the undersigned shall be a party to the Credit Agreement
and have the rights and obligations of a Lender thereunder and the Assignor
shall relinquish its rights and be released from its obligations under the
Credit Agreement. As of [date specified above], the Agent shall make all
payments under the Credit Agreement in respect of the interest assigned hereby
(including, without limitation, all payments of principal, interest and
commitment fees) to the Assuming Lender.

          This Assumption Agreement may be executed in counterparts and by
different parties hereto in separate counterparts, each of which when so
executed shall be deemed to be an original and all of which taken together shall
constitute one and the same agreement. Delivery of an executed counterpart by
telecopier shall be effective as delivery of a manually executed counterpart of
this Assumption Agreement.

                                       3

          This Assumption Agreement shall be governed by, and construed in
accordance 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.

By
  ---------------------------------
  Name:
  Title:

- ----------
(2)  Use only in connection with Section 2.16.

                                       4

                     EXHIBIT E - FORM OF DESIGNATION LETTER
                                                                          [DATE]
To each of the Lenders
 parties to the
 Credit Agreement (as defined
 below) and to Citibank, N.A.,
 as Agent for such Lenders

Ladies and Gentlemen:

          Reference is made to the 364-Day Credit Agreement dated as of November
27, 2002 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 ascribed to such terms in the
Credit Agreement.

          Please be advised that the Company hereby designates its undersigned
Subsidiary, ____________ ("Designated Subsidiary"), as a "Designated Subsidiary"
under and for all purposes of the Credit Agreement.

          The Designated Subsidiary, in consideration of each Lender's agreement
to extend credit to it under and on the terms and conditions set forth in the
Credit Agreement, does hereby assume each of the obligations imposed upon a
"Designated Subsidiary" and a "Borrower" under the Credit Agreement and agrees
to be bound by the terms and conditions of the Credit Agreement. In furtherance
of the foregoing, the Designated Subsidiary hereby represents and warrants to
each Lenders as follows:

          1. The Designated Subsidiary is a corporation duly incorporated,
     validly existing and in good standing under the laws of __________________
     and is duly qualified to transact business in all jurisdictions in which
     such qualification is required.

          2. The execution, delivery and performance by the Designated
     Subsidiary of this Designation Letter, the Credit Agreement, its Notes and
     the consummation of the transactions contemplated thereby, are within the
     Designated Subsidiary'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 regulation or any provision of the
     charter or by-laws of the Designated Subsidiary or result in the breach of,
     or constitute a default or require any consent under, or result in the
     creation of any lien, charge or encumbrance upon any of the properties,
     revenues, or assets of the Designated Subsidiary pursuant to, any indenture
     or other agreement or instrument to which the Designated Subsidiary is a
     party or by which the Designated Subsidiary or its property may be bound or
     affected.

          3. This Designation Agreement and each of the Notes of the Designated
     Subsidiary, when delivered, will have been duly executed and delivered, and
     this

     Designation Letter, the Credit Agreement and each of the Notes of the
     Designated Subsidiary, when delivered, will constitute a legal, valid and
     binding obligation of the Designated Subsidiary enforceable against the
     Designated 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 limitation, any Environmental Action, pending or to the
     knowledge of the Designated Subsidiary Threatened affecting the Designated
     Subsidiary before any court, governmental agency or arbitration that (i) is
     reasonably likely to have a Material Adverse Effect, or (ii) purports to
     effect the legality, validity or enforceability of this Designation Letter,
     the Credit Agreement, any Note of the Designated Subsidiary or the
     consummation of the transactions contemplated thereby.

          5. No authorizations, consents, approvals, licenses, filings or
     registrations by or with any governmental authority or administrative body
     are required in connection with the execution, delivery or performance by
     the Designated Subsidiary of this Designation Letter, the Credit Agreement
     or the Notes of the Designated Subsidiary except for such authorizations,
     consents, approvals, licenses, filings or registrations as have heretofore
     been made, obtained or effected and are in full force and effect.

                                       2

          6. The Designated Subsidiary is not, and immediately after the
     application by the Designated Subsidiary of the proceeds of each 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 DESIGNATED SUBSIDIARY]

                                                    By
                                                       -------------------------
                                                       Name:
                                                       Title:

                                       3

                 EXHIBIT F - FORM OF ACCEPTANCE BY PROCESS AGENT
                          [Letterhead of Process Agent]

                                                                          [Date]

To each of the Lenders parties
to the Credit
Agreement (as defined
below) and to Citibank, N.A.,
as Agent for said Lenders

                         [Name of Designated Subsidiary]

Ladies and Gentlemen:

          Reference is made to (i) that certain 364-Day Credit Agreement dated
as of November 27, 2002 among Honeywell International Inc., the Lenders named
therein, and Citibank, N.A., as Agent (such Credit Agreement as it may hereafter
be amended, supplemented or otherwise modified from time to time, being the
"Credit Agreement"; the terms defined therein being used herein as therein
defined), and (ii) to the Designation Letter, dated _________, pursuant to which
__________ has become a Borrower.

          Pursuant to Section 9.13 of the Credit Agreement to which __________
has become subject pursuant to its Designation Letter, __________ has appointed
the undersigned (with an office on the date hereof at 1633 Broadway, New York,
New York 10019, United States) as Process Agent to receive on behalf of
______________ and its property service of copies of the summons and complaint
and any other process which may be served in any action or proceeding in any New
York State or Federal court sitting in New York City arising out of or relating
to the Credit Agreement.

          The undersigned hereby accepts such appointment as Process Agent and
agrees with each of you that (i) the undersigned will not terminate or abandon
the undersigned agency as such Process Agent without at least six months prior
notice to the Agent (and hereby acknowledges that the undersigned has been
retained for its services as Process Agent through __________ __, 2003), (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 of the undersigned,
(iii) the undersigned will perform its duties as Process Agent to receive on
behalf of ______________ and its property service of copies of the summons and
complaint and any other process which may be served in any action or proceeding
in any New York State or Federal court sitting in New York City arising out of
or relating to the Credit Agreement and (iv) the undersigned will forward
forthwith to ______________ at its address at ________________ or, if different,
its then current address, copies of any summons, complaint and other process
which the undersigned receives in connection with its appointment as Process
Agent.

          This acceptance and agreement shall be binding upon the undersigned
and all successors of the undersigned.

                                                    Very truly yours,

                                                    [PROCESS AGENT]

                                                    By
                                                       -------------------------

                                       2

                           EXHIBIT G - FORM OF OPINION
                               OF GAIL E. LEHMAN,
                    ASSISTANT GENERAL COUNSEL FOR THE COMPANY

                                                             __________ __, 2002

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 furnished to you pursuant to Section 3.01(e)(iv) of
the 364-Day Credit Agreement dated as of November 27, 2002 among Honeywell
International Inc. (the "Company"), the Lenders parties thereto, and Citibank,
N.A., as Agent for said Lenders (the "Credit Agreement"). Terms defined in the
Credit Agreement are, unless otherwise defined herein, used herein as therein
defined.

          I have acted as counsel for the Company in connection with the
preparation, execution and delivery of the Credit Agreement.

          In that connection I have examined:

          (1) The Credit Agreement.

          (2) The documents furnished by the Company pursuant to Article III of
     the Credit Agreement, including the Certificate of Incorporation of the
     Company and all amendments thereto (the "Charter") and the By-laws of the
     Company and all amendments thereto (the "By-laws").

          (3) A certificate of the Secretary of State of the State of Delaware,
     dated ____________, 2002, attesting to the continued corporate existence
     and good standing of the Company in that State.

I have also examined the originals, or copies certified to my satisfaction, of
such corporate records of the Company (including resolutions adopted by the
Board of Directors of the Company), certificates of public officials and of
officers of the Company, and agreements, instruments and documents, as I have
deemed necessary as a basis for the opinions hereinafter expressed. As to
questions of fact material to such opinions, I have, when relevant facts were
not

independently established by me, 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 be expert in, or to express any opinion herein concerning, any laws
other than the laws of the State of New York, the General Corporation Law of the
State of Delaware and the Federal laws of the United States.

          Based upon the foregoing and upon such investigation as I have deemed
necessary, I am of the following opinion:

          1. The Company (a) is a corporation duly organized, validly existing
     and in good standing under the laws of the State of Delaware, (b) is duly
     qualified as a foreign corporation in each other jurisdiction in which it
     owns or leases property or in which the conduct of its business requires it
     to so qualify or be licensed and (c) has all requisite corporate power and
     authority to own or lease and operate its properties and to carry on its
     business as now conducted and as proposed to be conducted.

          2. The execution, delivery and performance by the Company of the
     Credit Agreement and the Notes of the Company, and the consummation of the
     transactions contemplated thereby, are within the Company's corporate
     powers, have been duly authorized by all necessary corporate action, and do
     not (i) contravene the Charter or the By-laws or (ii) violate any law
     (including, without limitation, the Securities Exchange Act of 1934 and the
     Racketeer Influenced and Corrupt Organizations Chapter of the Organized
     Crime Control Act of 1970), rule, regulation (including, without
     limitation, Regulation X of the Board of Governors of the Federal Reserve
     System) or any material order, writ, judgment, decree, determination or
     award or (iii) conflict with or result in the breach of, or constitute a
     default under, any material indenture, loan or credit agreement, lease,
     mortgage, security agreement, bond, note or any similar document. The
     Credit Agreement and the Notes of the Company have been duly executed and
     delivered on behalf of the Company.

          3. No authorization, approval, or other action by, and no notice to or
     filing with, any governmental authority, administrative agency or
     regulatory body, or any third party is required for the due execution,
     delivery and performance by the Company of the Credit Agreement or the
     Notes of the Company, or for the consummation of the transactions
     contemplated thereby.

          4. The Credit Agreement is, and each Note of the Company when
     delivered under the Credit Agreement will be, the legal, valid and binding
     obligation of the Company enforceable against the Company in accordance
     with their respective terms, except as the enforceability thereof may be
     limited by bankruptcy, insolvency, reorganization or moratorium or other
     similar laws relating to the enforcement of creditors' rights generally or
     by the application of general principles of equity (regardless of whether
     such enforceability is considered in a proceeding in equity or at law), and

                                       2

     except that I express no opinion as to (i) the subject matter jurisdiction
     of the District Courts of the United States 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 the Notes of the Company may
     be sought which limits rates of interest which may be charged or collected
     by such Lender.

          5. There is no action, suit, investigation, litigation or proceeding
     against the Company or any of its Subsidiaries before any court,
     governmental agency or arbitrator now pending or, to the best of my
     knowledge, Threatened that is reasonably likely to have a Material Adverse
     Effect (other than the Disclosed Litigation) or that purports to affect the
     legality, validity or enforceability of the Credit Agreement or any Note of
     the Company or the consummation of the transactions contemplated thereby,
     and there has been no adverse change in the status, or financial effect on
     the Company or any of its Subsidiaries, of the Disclosed Litigation from
     that described on Schedule 3.01(b) of the Credit Agreement.

          6. The Company is not an "investment company" within the meaning of
     the Investment Company Act of 1940, as amended.

          7. The Company is not a "holding company" 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 4,
I wish to point out that (i) provisions of the Credit Agreement that permit the
Agent or any Lender to take action or make determinations may be subject to a
requirement that such action be taken or such determinations be made on a
reasonable basis and in good faith, (ii) that a party to whom an advance is owed
may, under certain circumstances, be called upon to prove the outstanding amount
of the Advances evidenced thereby and (iii) the rights of the Agent and the
Lenders provided for in Section 9.04(b) of the Credit Agreement may be limited
in certain circumstances.

                                                    Very truly yours,

                                       3

                     EXHIBIT H - FORM OF OPINION OF COUNSEL
                           TO A DESIGNATED SUBSIDIARY

                                                              ____________, 19__

To each of the Lenders parties
 to the Credit Agreement
 (as defined below),
 and to Citibank, N.A., as Agent
 for said Lenders

Ladies and Gentlemen:

          In my capacity as counsel to _____________________ ("Designated
Subsidiary"), I have reviewed that certain 364-Day Credit Agreement dated as of
November 27, 2002 among Honeywell International Inc., the Lenders named therein,
and Citibank, N.A., as Agent for such Lenders (the "Credit Agreement"). In
connection therewith, I have also examined the following documents:

          (i) The Designation Letter (as defined in the Credit Agreement)
     executed by the Designated Subsidiary.

          [such other documents as counsel may wish to refer to]

          I have also reviewed 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 respective meanings ascribed to them in
the Credit Agreement.

          Based upon the foregoing, I am of the opinion that:

          1. The Designated Subsidiary (a) is a corporation duly incorporated,
     validly existing and in good standing under the laws of
     _________________________, (b) is duly qualified in each other jurisdiction
     in which it owns or leases property or in which the conduct of its business
     requires it to so qualify or be licensed and (c) has all requisite
     corporate power and authority to own or lease and operate its properties
     and to carry on its business as now conducted and as proposed to be
     conducted.

          2. The execution, delivery and performance by the Designated
     Subsidiary of its Designation Letter, the Credit Agreement and its Notes,
     and the consummation of the transactions contemplated thereby, are within
     the Designated Subsidiary'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 regulation
     or any material order, writ, judgment, decree, determination or award or
     any provision of the charter or by-laws or other constituent documents of
     the Designated Subsidiary or result in the breach of, or constitute a
     default or require any consent under, or result in the creation of any
     lien, charge or encumbrance upon any of the properties, revenues, or assets
     of the Designated Subsidiary pursuant to, any material indenture or other
     agreement or instrument to which the Designated Subsidiary is a party or by
     which the Designated Subsidiary or its property may be bound or affected.
     The Designation Letter and each Note of the Designated Subsidiary has been
     duly executed and delivered on behalf of the Designated Subsidiary.

          3. The Credit Agreement and the Designation Letter of the Designated
     Subsidiary are, and each Note of the Designated Subsidiary when delivered
     under the Credit Agreement will be, the legal, valid and binding obligation
     of the Designated Subsidiary enforceable in accordance with their
     respective terms, except as the enforceability thereof may be limited by
     bankruptcy, insolvency, reorganization or moratorium or other similar laws
     relating to the enforcement of creditors' rights generally or by the
     application of general principles of equity (regardless of whether such
     enforceability is considered in a proceeding in equity or at law), and
     except that I express no opinion as to (i) the subject matter jurisdiction
     of the District Courts of the United States of America to adjudicate any
     controversy relating to the Credit Agreement, the Designation Letter of the
     Designated Subsidiary or the Notes of the Designated Subsidiary 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, the Designation Letter of the
     Designated Subsidiary or the Notes of the Designated Subsidiary may be
     sought which limits rates of interest which may be charged or collected by
     such Lender.

          4. There is no action, suit, investigation, litigation or proceeding
     at law or in equity before any court, governmental agency or arbitration
     now pending or, to the best of my knowledge and belief, Threatened against
     the Designated Subsidiary that is reasonably likely to have a Material
     Adverse Effect or that purports to affect the legality, validity or
     enforceability of the Designation Letter of the Designated Subsidiary, the
     Credit Agreement or any Note of the Designated Subsidiary or the
     consummation of the transactions contemplated thereby.

          5. No authorizations, consents, approvals, licenses, filings or
     registrations by or with any governmental authority or administrative body
     are required for the due execution, delivery and performance by the
     Designated Subsidiary of its Designation Letter, the Credit Agreement or
     the Notes of the Designated Subsidiary except for such authorizations,
     consents, approvals, licenses, filings or registrations as have heretofore
     been made, obtained or affected and are in full force and effect.

          6. The Designated Subsidiary is not an "investment company" within the
     meaning of the Investment Company Act of 1940, as amended.

                                       2

          7. The Designated Subsidiary is not a "holding company" 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 subject to a
requirement that such action be taken or such determinations be made on a
reasonable basis and in good faith, (ii) a party to whom an advance is owed may,
under certain circumstances, be called upon to prove the outstanding amount of
the Advances evidenced thereby and (iii) the rights of the Agent and the Lenders
provided for in Section 9.04(b) of the Credit Agreement may be limited in
certain circumstances.

                                                    Very truly yours,

                                       3

                           EXHIBIT I - FORM OF OPINION
                             OF SHEARMAN & STERLING,
                              COUNSEL TO THE AGENT

                                [S&S LETTERHEAD]

                                                             __________ __, 2002

To the Initial Lenders party to the
 Credit Agreement referred
 to below and to Citibank, N.A.,
 as Agent

Ladies and Gentlemen:

          We have acted as special New York counsel to Citibank, N.A., as Agent,
in connection with the preparation, execution and delivery of the 364-Day Credit
Agreement dated as of November 27, 2002 (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 therein defined.

          In that connection, we have examined a counterpart of the Credit
Agreement executed by the Company, the Revolving Credit Notes executed by the
Company and delivered on the date hereof (for purposes of this opinion letter,
the "Notes") and, to the extent relevant to our opinion expressed below, the
other documents delivered by the Company pursuant to Section 3.01 of the Credit
Agreement.

          In our examination of the Credit Agreement, the Notes and such other
documents, we have assumed, without independent investigation (a) the due
execution and delivery of the Credit Agreement by all parties thereto and of the
Notes by the Company, (b) the genuineness of all signatures, (c) the
authenticity of the originals of the documents submitted to us and (d) the
conformity to originals of any documents submitted to us as copies.

          In addition, we have assumed, without independent investigation, that
(i) the Company is duly organized and validly existing under the laws of the
jurisdiction of its organization and has full power and authority (corporate and
otherwise) to execute, deliver and perform the Credit Agreement and the Notes
and (ii) the execution, delivery and performance by the Company of the Credit
Agreement and the Notes have been duly authorized by all necessary action
(corporate or otherwise) and do not (A) contravene the certificate of
incorporation, bylaws or other constituent documents of the Company, (B)
conflict with or result in the breach of any document or instrument binding on
the Company or (C) violate or require any governmental or regulatory
authorization or other action under any law, rule or regulation applicable to
the Company other than New York law or United States federal law applicable to
borrowers generally or, assuming the correctness of the Company's statements
made as representations and

warranties in Section 4.01(c) of the Credit Agreement, applicable to the
Company. We have also assumed that the Credit Agreement is the legal, valid and
binding obligation of each Lender, enforceable against such Lender in accordance
with its terms.

          Based upon the foregoing examination and assumptions and upon such
other investigation as we have deemed necessary and subject to the
qualifications set forth below, we are of the opinion that the Credit Agreement
and each of the Notes are the legal, valid and binding obligations of the
Company, enforceable against the Company in accordance with their respective
terms.

          Our opinion above is subject to the following qualifications:

               (i) Our opinion above is subject to the effect of any applicable
          bankruptcy, insolvency (including, without limitation, all laws
          relating to fraudulent transfers), reorganization, moratorium or
          similar law affecting creditors' rights generally.

               (ii) Our opinion above is also subject to the effect of general
          principles of equity, including (without limitation) concepts of
          materiality, reasonableness, good faith and fair dealing (regardless
          of whether considered in a proceeding in equity or at law).

               (iii) We express no opinion as to the enforceability of the
          indemnification provisions set forth in Section 9.04 of the Credit
          Agreement to the extent enforcement thereof is contrary to public
          policy regarding the exculpation of criminal violations, intentional
          harm and acts of gross negligence or recklessness.

               (iv) We also express no opinion as to the enforceability of the
          provisions of Section 9.16 of the Credit Agreement (concerning
          currency conversion for judgments, and judgments in a currency other
          than that of the primary currency).

               (v) Our opinion above is limited to the law of the State of New
          York and the federal law of the United States of America and we do not
          express 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 be sought that limits the rates of
          interest legally chargeable or collectible.

          A copy of this opinion letter may be delivered by any of you to any
Person that becomes a Lender in accordance with the provisions of the Credit
Agreement. Any such Lender may rely on the opinion expressed above as if this
opinion letter were addressed and delivered to such Lender on the date hereof.

                                       2

          This opinion letter speaks only as of the date hereof. We expressly
disclaim any responsibility to advise you or any other Lender who is permitted
to rely on the opinion expressed herein as specified in the next preceding
paragraph of any development or circumstance of any kind including any change of
law or fact that may occur after the date of this opinion letter even though
such development, circumstance 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 truly yours,

                                       3

                                                                  EXECUTION COPY

                               U.S. $1,000,000,000

                            364-DAY CREDIT AGREEMENT

                          Dated as of November 27, 2002

                                      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
                        DEUTSCHE BANK AG, NEW YORK BRANCH
                              BANK OF AMERICA, N.A.
                                BARCLAYS BANK PLC

                              as Syndication Agents

                                       and

                            SALOMON SMITH BARNEY INC.

                        as Lead Arranger and Book Manager

                                TABLE OF CONTENTS
                                                                            Page

ARTICLE I

     SECTION 1.01.  Certain Defined Terms ....................................1

     SECTION 1.02.  Computation of Time Periods .............................16

     SECTION 1.03.  Accounting Terms ........................................16

ARTICLE II

     SECTION 2.01.  The Revolving Credit Advances ...........................17

     SECTION 2.02.  Making the Revolving Credit Advances ....................17

     SECTION 2.03.  The Competitive Bid Advances ............................19

     SECTION 2.04.  Fees ....................................................24

     SECTION 2.05.  Termination or Reduction of the Commitments .............24

     SECTION 2.06.  Repayment of Advances ...................................26

     SECTION 2.07.  Interest on Revolving Credit Advances ...................27

     SECTION 2.08.  Interest Rate Determination .............................27

     SECTION 2.09.  Prepayments of Revolving Credit Advances ................29

     SECTION 2.10.  Increased Costs .........................................30

     SECTION 2.11.  Illegality ..............................................31

     SECTION 2.12.  Payments and Computations ...............................31

     SECTION 2.13.  Taxes ...................................................33

     SECTION 2.14.  Sharing of Payments, Etc. ...............................35

     SECTION 2.15.  Use of Proceeds .........................................36

     SECTION 2.16.  Extension of Termination Date ...........................36

     SECTION 2.17.  Evidence of Debt ........................................37

                                        i

ARTICLE III

     SECTION 3.01.  Conditions Precedent to Effectiveness of
                       Sections 2.01 and 2.03 ...............................38

     SECTION 3.02.  Conditions Precedent to Initial Borrowing ...............39

     SECTION 3.03.  Initial Loan to Each Designated Subsidiary ..............40

     SECTION 3.04.  Conditions Precedent to Each Revolving
                        Credit Borrowing ....................................40

     SECTION 3.05.  Conditions Precedent to Each Competitive
                        Bid Borrowing .......................................41

     SECTION 3.06.  Determinations Under Section 3.01 .......................42

ARTICLE IV

     SECTION 4.01.  Representations and Warranties of the Company ...........42

ARTICLE V

     SECTION 5.01.  Affirmative Covenants ...................................45

     SECTION 5.02.  Negative Covenants ......................................48

ARTICLE VI

     SECTION 6.01.  Events of Default .......................................50

ARTICLE VII

     SECTION 7.01.  Unconditional Guarantee .................................54

     SECTION 7.02.  Guarantee Absolute ......................................54

     SECTION 7.03.  Waivers .................................................55

     SECTION 7.04.  Remedies ................................................55

     SECTION 7.05.  No Stay .................................................55

     SECTION 7.06.  Survival ................................................55

ARTICLE VIII

     SECTION 8.01.  Authorization and Action ................................56

     SECTION 8.02.  Agent's Reliance, Etc. ..................................56

     SECTION 8.03.  Citibank and Affiliates .................................57

                                       ii

     SECTION 8.04.  Lender Credit Decision ..................................57

     SECTION 8.05.  Indemnification .........................................57

     SECTION 8.06.  Successor Agent .........................................57

     SECTION 8.07.  Sub-Agent ...............................................58

ARTICLE IX

     SECTION 9.01.  Amendments, Etc. ........................................58

     SECTION 9.02.  Notices, Etc. ...........................................58

     SECTION 9.03.  No Waiver; Remedies .....................................59

     SECTION 9.04.  Costs and Expenses ......................................59

     SECTION 9.05.  Right of Set-off ........................................60

     SECTION 9.06.  Binding Effect ..........................................60

     SECTION 9.07.  Assignments and Participations ..........................61

     SECTION 9.08.  Designated Subsidiaries .................................63

     SECTION 9.09.  Confidentiality .........................................64

     SECTION 9.10.  Mitigation of Yield Protection ..........................64

     SECTION 9.11.  Governing Law ...........................................65

     SECTION 9.12.  Execution in Counterparts ...............................65

     SECTION 9.13.  Jurisdiction, Etc. ......................................65

     SECTION 9.14.  Substitution of Currency ................................66

     SECTION 9.15.  Final Agreement .........................................66

     SECTION 9.16.  Judgment ................................................66

     SECTION 9.17.  Waiver of Jury Trial ....................................67

                                       iii

SCHEDULES

Schedule I - List of Applicable Lending Offices

Schedule 3.01(b) - Disclosed Litigation

EXHIBITS

Exhibit A-1   -   Form of Revolving Credit Note

Exhibit A-2   -   Form of Competitive Bid Note

Exhibit B-1   -   Form of Notice of Revolving Credit Borrowing

Exhibit B-2   -   Form of Notice of Competitive Bid Borrowing

Exhibit C     -   Form of Assignment and Acceptance

Exhibit D     -   Form of Assumption Agreement

Exhibit E     -   Form of Designation Letter

Exhibit F     -   Form of Acceptance by Process Agent

Exhibit G     -   Form of Opinion of Gail E. Lehman, Assistant General Counsel
                     of the Company

Exhibit H     -   Form of Opinion of Counsel to a Designated Subsidiary

Exhibit I     -   Form of Opinion of Shearman & Sterling, Counsel to the Agent

                                       iv

                                                                   EXHIBIT 10.11

                             AMENDMENT NO. 1 TO THE
                                CREDIT AGREEMENT

                                                   Dated as of November 27, 2002

          AMENDMENT NO. 1 TO THE FIVE YEAR CREDIT AGREEMENT among HONEYWELL
INTERNATIONAL INC., a Delaware corporation (the "Company"), the banks, financial
institutions and other institutional lenders parties to the Credit Agreement
referred to below (collectively, the "Lenders") and Citibank, N.A., as agent
(the "Agent") for the Lenders.

          PRELIMINARY STATEMENTS:

          (1) The Company, the Lenders and the Agent have entered into a Five
Year Credit Agreement dated as of December 2, 1999 (the "Credit Agreement").
Capitalized terms not otherwise defined in this Amendment have the same meanings
as specified in the Credit Agreement.

          (2) The Company and the Required Lenders have agreed to amend the
Credit Agreement as hereinafter set forth.

          SECTION 1. Amendments to Credit Agreement . The Credit Agreement is,
effective as of the date hereof and subject to the satisfaction of the
conditions precedent set forth in Section 4, hereby amended as follows:

          (a) The definition of "Base Rate" in Section 1.01 is amended by adding
at the end of clause (b) the word "and", by inserting a period after the phrase
"Federal Funds Rate" in clause (c), deleting the word "and" at the end of clause
(c) and deleting clause (d).

          (b) The parenthetical clause in the definition of "Business Day" in
Section 1.01 is amended in full to read "(or, in the case of an Advance
denominated in Euros, on which the Trans-European Automated Real-Time Gross
Settlement Express Transfer (TARGET) System is open)".

          (c) The definition of "Change of Control" in Section 1.01 is amended
by deleting from clause (ii) the phrase "the effective time of the merger of
Honeywell Inc. and a wholly owned Subsidiary of the Company as contemplated by
the Merger Agreement" and substituting therefor the phrase "the Effective Date".

          (d) Clause (a)(ii) of the definition of "ERISA Event" in Section 1.01
is amended in full to read as follows:

               (ii) the requirements of subsection (1) of Section 4043(b) of
     ERISA are met with respect to a contributing sponsor, as defined in Section
     4001(a)(13) of ERISA,

     of a Plan of such Person or any of its ERISA Affiliates, and an event
     described in paragraph (9), (10), (11), (12) or (13) of Section 4043(c) of
     ERISA is reasonably expected to occur with respect to such Plan within the
     following 30 days;

          (e) The following new definitions are added to Section 1.01
immediately after the defined term "Escrow":

               "EURIBO Rate" means, for any Interest Period for each
     Eurocurrency Rate Advance comprising part of the same Borrowing, the rate
     per annum appearing on Page 248 of the Telerate Service (or on any
     successor or substitute page of such Service, or any successor to or
     substitute for such Service, providing rate quotations comparable to those
     currently provided on such page of such Service, as determined by the Agent
     from time to time for purposes of providing quotations of interest rates
     applicable to deposits in Euros by reference to the Banking Federation of
     the European Union Settlement Rates for deposits in Euros) at approximately
     10:00 a.m., London time, two Business Days prior to the commencement of
     such Interest Period, as the rate for deposits in Euros with a maturity
     comparable to such Interest Period or, if for any reason such rate is not
     available, the average (rounded upward to the nearest whole multiple of
     1/16 of 1% per annum, if such average is not such 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 in an amount
     substantially equal to such Reference Bank's Eurocurrency Rate Advance
     comprising part of such Borrowing to be outstanding during such Interest
     Period andfor a period equal to such Interest Period (subject, however, to
     the provisions of Section 2.07).

               "Euro" means the lawful currency of the European Union as
     constituted by the Treaty of Rome which established the European Community,
     as such treaty may be amended from time to time and as referred to in the
     EMU legislation.

          (f) The definition of "Eurocurrency Rate" in Section 1.01 is amended
by (i) inserting immediately after the phrase "by dividing (a)" the phrase "(i)
in the case of any Advance denominated in Dollars or any Major Currency other
than Euros," and (ii) by inserting immediately before the phrase " by (b) a
percentage equal to 100%" the phrase " or (ii) in the case of any Advance
denominated in Euros, the EURIBO Rate".

          (g) The definition of "LIBO Rate" in Section 1.01 is amended by (i)
inserting immediately after the phrase "by dividing (a)" the phrase "(i) in the
case of any Advance denominated in Dollars or any Foreign Currency other than
Euros," and (ii) by inserting immediately before the phrase " by (b) a
percentage equal to 100%" the phrase " or (ii) in the case of any Advance
denominated in Euros, the EURIBO Rate".

          (h) The definition of "Major Currencies" in Section 1.01 is amended in
full to read as follows:

          "Major Currencies" means lawful currency of the United Kingdom of
     Great Britain and Northern Ireland, lawful currency of Japan and Euros.

          (i) The definition of "Merger Agreement" in Section 1.01 is deleted in
full.

          (j) The definition of "Reference Banks" in Section 1.01 is amended in
full to read as follows:

          "Reference Banks" means Citibank, Bank of America, N.A., JPMorgan
     Chase Bank and Deutsche Bank AG New York Branch.

          (k) Section 2.13(e) is amended in by replacing the phrase "1001 or
4224" with the phrase "W-8ECI or W-8BEN" in both places where such phrase
appears.

          (l) Section 4.01(o) is deleted in full.

          SECTION 2. Conditions of Effectiveness. This Amendment shall become
effective as of the date first above written when, and only when, the Agent
shall have received counterparts of this Amendment executed by the Company and
the Required Lenders or, as to any of the Lenders, advice satisfactory to the
Agent that such Lender has executed this Amendment. This Amendment is subject to
the provisions of Section 8.01 of the Credit Agreement.

          SECTION 3. Representations and Warranties of the Company . The Company
represents and warrants as follows:

               (a) Each of the representations and warranties set forth in
     Section 4.01 of the Credit Agreement (except the representations set forth
     in the last sentence of subsection (e) thereof and in subsections (f),
     (h)-(l) and (n) thereof), as amended hereby, are true and correct as of the
     date hereof.

               (b) The execution, delivery and performance by the Company of
     this Amendment and the Credit Agreement and the Notes, as amended hereby,
     to which it is or is to be a party 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
     regulation or any provision of the Certificate of Incorporation or By-Laws
     of the Company or result in the breach of, or constitute a default or
     require any consent under, or result in the creation of any lien, charge or
     encumbrance upon any of the properties, revenues, or assets of the Company
     pursuant to, any indenture or other agreement or instrument to which the
     Company is a party or by which the Company or its property may be bound or
     affected.

               (c) No authorization, consent or approval (including any exchange
     control approval), license or other action by, and no notice to or filing
     or registration with, any governmental authority, administrative agency or
     regulatory body or any other third party is required for the due execution,
     delivery and performance by the Company of this Amendment or the Credit
     Agreement or the Notes, as amended hereby, to which it is or is to be a
     party.

               (d) This Amendment has been duly executed and delivered by the
     Company. This Amendment and each of the Credit Agreement and the Notes, as
     amended hereby, to which the Company is a party are legal, valid and
     binding obligations of the Company, enforceable against the Company 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.

               (e) There is no action, suit, investigation, litigation or
     proceeding, including, without limitation, any Environmental Action,
     pending or to the knowledge of the Company, threatened affecting the
     Company or any of its Subsidiaries before any court, governmental agency or
     arbitrator that purports to affect the legality, validity or enforceability
     of this Amendment or the Credit Agreement or any Note or the consummation
     of the transactions contemplated hereby.

          SECTION 4. Reference to and Effect on the Credit Agreement and the
Notes. (a) On and after the effectiveness of this Amendment, each reference in
the Credit Agreement to "this Agreement", "hereunder", "hereof" or words of like
import referring to the Credit Agreement, and each reference in the Notes to
"the Credit Agreement", "thereunder", "thereof" or words of like import
referring to the Credit Agreement, shall mean and be a reference to the Credit
Agreement, as amended by this Amendment.

          (b) The Credit Agreement and the Notes, as specifically amended by
this Amendment, are and shall continue to be in full force and effect and are
hereby in all respects ratified and confirmed.

          (c) The execution, delivery and effectiveness of this Amendment shall
not, except as expressly provided herein, operate as a waiver of any right,
power or remedy of any Lender or the Agent under the Credit Agreement, nor
constitute a waiver of any provision of the Credit Agreement.

          SECTION 5. Costs and Expenses The Company agrees to pay on demand all
costs and expenses of the Agent in connection with the preparation, execution,
delivery and administration, modification and amendment of this Amendment and
the other instruments and documents to be delivered hereunder (including,
without limitation, the reasonable fees and expenses of counsel for the Agent)
in accordance with the terms of Section 8.04 of the Credit Agreement.

          SECTION 6. Execution in Counterparts. This Amendment may be executed
in any number of counterparts and by different parties hereto in separate
counterparts, each of which when so executed shall be deemed to be an original
and all of which taken together shall constitute but one and the same agreement.
Delivery of an executed counterpart of a signature page to this Amendment by
telecopier shall be effective as delivery of a manually executed counterpart of
this Amendment.

          SECTION 7. Governing Law. This Amendment shall be governed by, and
construed in accordance with, the laws of the State of New York.

          IN WITNESS WHEREOF, the parties hereto have caused this Amendment to
be executed by their respective officers thereunto duly authorized, as of the
date first above written.

                                         HONEYWELL INTERNATIONAL INC.

                                         By: /s/ James V. Gelly
                                             -----------------------------------
                                             Name: James V. Gelly
                                             Title: Vice President and Treasurer

                                         CITIBANK, N.A., as Agent

                                         By: /s/ Carolyn A. Kee
                                             -----------------------------------
                                             Name: Carolyn A. Kee
                                             Title: Vice President

                                         BANK OF AMERICA, N.A.

                                         By: /s/ John W. Pocalyko
                                             -----------------------------------
                                             Name: John W. Pocalyko
                                             Title: Managing Director

                                         JPMORGAN CHASE BANK

                                         By: /s/ Randolph Cates
                                             -----------------------------------
                                             Name: Randolph Cates
                                             Title: Vice President

                                         DEUTSCHE BANK AG, NEW YORK BRANCH

                                         By:
                                             -----------------------------------
                                             Name:
                                             Title:

                                         By:
                                             -----------------------------------
                                             Name:
                                             Title:

                                         BARCLAYS BANK PLC

                                         By: /s/ Douglas Bernegger
                                             -----------------------------------
                                             Name: Douglas Bernegger
                                             Title: Director

                                         BANCA NAZIONALE DE LAVORO S.p.A.-NEW
                                         YORK BRANCH

                                         By:
                                             -----------------------------------
                                             Name:
                                             Title:

                                         THE BANK OF NEW YORK

                                         By:
                                             -----------------------------------
                                             Name:
                                             Title:

                                         BANK OF TOKYO-MITSUBISHI TRUST COMPANY

                                         By: /s/ Spencer Hughes
                                             -----------------------------------
                                             Name: Spencer Hughes
                                             Title: Vice President

                                         BANK ONE, NA

                                         By: /s/ Mahua Thakurta
                                             -----------------------------------
                                             Name: Mahua Thakurta
                                             Title: Associate Director

                                         HSBC BANK USA

                                         By: /s/ Diane M. Zieske
                                             -----------------------------------
                                             Name: Diane M. Zieske
                                             Title: First Vice President

                                         MELLON BANK, N.A.

                                         By:
                                             -----------------------------------
                                             Name:
                                             Title:

                                         REVOLVING COMMITMENT VEHICLE
                                         CORPORATION

                                         By:
                                             -----------------------------------
                                             Name:
                                             Title:

                                         ABN AMRO BANK N.V.

                                         By: /s/ James S. Kreitler
                                             -----------------------------------
                                             Name: James S. Kreitler
                                             Title: Senior Vice President

                                         By: /s/ Todd J. Miller
                                             -----------------------------------
                                             Name: Todd J. Miller
                                             Title: Assistant Vice President

                                         BANCA DI ROMA

                                         By:
                                             -----------------------------------
                                             Name:
                                             Title:

                                         By:
                                             -----------------------------------
                                             Name:
                                             Title:

                                         BNP PARIBAS

                                         By: /s/ Christopher Criswell
                                             -----------------------------------
                                             Name: Christopher Criswell
                                             Title: Managing Director

                                         By: /s/ Bruno Lavole
                                             -----------------------------------
                                             Name: Bruno Lavole
                                             Title: Managing Director

                                         NORTHERN TRUST COMPANY

                                         By:
                                             -----------------------------------
                                             Name:
                                             Title:

                                         SUMITOMO MITSUI BANKING CORPORATION

                                         By: /s/ Robert H. Riley III
                                             -----------------------------------
                                             Name: Robert H. Riley III
                                             Title: Senior Vice President

                                         WELLS FARGO BANK, NATIONAL ASSOCIATION

                                         By: /s/ Peter M. Angelica
                                             -----------------------------------
                                             Name: Peter M. Angelica
                                             Title: Vice President

                                         BANCO BILBAO VIZCAYA

                                         By: /s/ Miguel Lara
                                             -----------------------------------
                                             Name: Miguel Lara
                                             Title: VP, Global Corporate Banking

                                         By: /s/ Phillip Paddack
                                             -----------------------------------
                                             Name: Phillip Paddack
                                             Title: Senior VP, Branch Manager

                                         BANK OF MONTREAL

                                         By:
                                             -----------------------------------
                                             Name:
                                             Title:

                                         THE FUJI BANK, LIMITED  (see Mizuho)

                                         By:
                                             -----------------------------------
                                             Name:
                                             Title:

                                         THE INDUSTRIAL BANK OF JAPAN (see
                                         Mizuho)

                                         By:
                                             -----------------------------------
                                             Name:
                                             Title:

                                         ROYAL BANK OF CANADA

                                         By: /s/ Scott Umbs
                                             -----------------------------------
                                             Name: Scott Umbs
                                             Title: Manager

                                         STANDARD CHARTERED

                                         By:
                                             -----------------------------------
                                             Name:
                                             Title:

                                         UNICREDITO ITALIANO

                                         By: /s/ Christopher Eldin
                                             -----------------------------------
                                             Name: Christopher Eldin
                                             Title: FVP & Deputy Manager

                                         By: /s/ Charles Michael
                                             -----------------------------------
                                             Name: Charles Michael
                                             Title: Vice President

                                         MIZUHO CORPORATE BANK, LTD

                                         By: /s/ Naoki Yamamori
                                             -----------------------------------
                                             Name: Naoki Yamamori
                                             Title: Deputy General Manager

                                                                   EXHIBIT 10.19

                          HONEYWELL INTERNATIONAL INC.
                  Severance Plan for Corporate Staff Employees
            (Involuntary Termination Following a Change in Control)
                           Effective February 6, 1988

                  Amended and Restated as of December 20, 2001

                          HONEYWELL INTERNATIONAL INC.
                  SEVERANCE PLAN FOR CORPORATE STAFF EMPLOYEES
            (Involuntary Termination Following a Change in Control)

                                    ARTICLE I

                                     PURPOSE

1.1 The purpose of this Plan is to provide severance benefits to Plan
Participants in the event of the Involuntary Termination of their employment
following a Change in Control. This Plan constitutes the amendment and
restatement, as of December 20, 2001, of the Severance Plan for Corporate Staff
Employees (Involuntary Termination following a Change in Control) established by
Honeywell International Inc. (formerly AlliedSignal Inc.) as of February 6,
1988, and amended and restated effective October 21, 1988, April 1, 1999 and
October 24, 2000.

                                   ARTICLE II

                                   DEFINITIONS

2.1 Affiliated Company - means (a) any member of a controlled group of
corporations as defined in Section 414(b) of the Code of which Honeywell
International Inc. or a predecessor of Honeywell International Inc. is or was a
member, (b) any unincorporated trade or business which is under common control
with Honeywell International Inc. as determined under Section 414(c) of the
Code, or (c) any organization, employment with which is counted as employment
with Honeywell International Inc. or a predecessor of Honeywell International
Inc. under the provisions of Section 414(m), (n), or (o) of the Code.

2.2 Honeywell International Inc. - means Honeywell International Inc., a
Delaware corporation, and its subsidiaries, and any successors thereto.

2.3 Annual Incentive Compensation - means the product of (a) times (b) where (a)
is a Participant's target award level under the AlliedSignal Inc. Incentive
Compensation Plan for Executive Employees, or any successor plan, for the most
recent incentive period ended prior to the Change in Control, and (b) is Base
Salary. Long-term performance incentive awards shall not be considered in
determining Annual Incentive Compensation.

2.4 Base Salary - means the annual base salary, exclusive of bonus, incentive or
other extra compensation, but inclusive of overtime (in the case of non-exempt
Participants), being paid to a Participant at the time of Involuntary
Termination of employment, but in no event less than the annual base

                                      -2-

salary being paid to the Participant on the day prior to a Change in Control.

2.5 Board of Directors - means the Board of Directors of Honeywell International
Inc.

2.6 Change in Control - is deemed to occur at the time (a) when any entity,
person or group (other than Honeywell International Inc., any subsidiary or any
savings, pension or other benefit plan for the benefit of employees of Honeywell
International Inc.) which theretofore beneficially owned less than 30% of the
Common Stock then outstanding acquires shares of Common Stock in a transaction
or series of transactions that results in such entity, person or group directly
or indirectly owning beneficially 30% or more of the outstanding Common Stock,
(b) of the purchase of shares of Common Stock pursuant to a tender offer or
exchange offer (other than any offer by Honeywell International Inc.) for all,
or any part of, the Common Stock, (c) of a merger in which Honeywell
International Inc. will not survive as an independent, publicly owned
corporation, a consolidation, or a sale, exchange or other disposition of all or
substantially all of Honeywell International Inc.'s assets, (d) of a substantial
change in the composition of the Board of Directors during any period of two
consecutive years such that individuals who at the beginning of such period were
members of the Board of Directors cease for any reason to constitute at least a
majority thereof, unless the election, or the nomination for election by the
stockholders of Honeywell International Inc., of each new director was approved
by a vote of at least two-thirds of the directors then still in office who were
directors at the beginning of the period, or (e) of any transaction or other
event which the Management Development and Compensation Committee of the Board
of Directors, in its discretion, determines to be a change in control for
purposes of this Plan.

2.7 Code - means the Internal Revenue Code of 1986, as amended from time to
time.

2.8 Common Stock - means the Common Stock of Honeywell International Inc. or
such other stock into which the Common Stock may be changed as a result of
split-ups, recapitalizations, reclassifications and the like.

2.9 Corporate Staff Employee - means a salaried or non-union hourly employee of
Honeywell International Inc. employed in Career Bands 1 through 7 who, during a
Potential Change In Control Period and/or at the time of a Change in Control,
(a) is not associated with (i) an operating business of Honeywell International
Inc. or (ii) Business Services or any successor organization, and (b) (i) has a
reporting relationship, prior to a

                                      -3-

Change in Control, either direct or through one or more other employees, to
one of the then Senior Vice Presidents of Honeywell International Inc., (ii)
prior to a Change in Control, held a position similar to a position which on
April 1, 1999 had a reporting relationship, either direct or indirect or
through one or more other employees, to one of the then Senior Vice Presidents
of Honeywell International Inc., or (iii) reported prior or subsequent to a
Change in Control directly to the Chairman and Chief Executive Officer of
Honeywell International Inc. For purposes of subsection (a) above, an employee
(x) whose work is not primarily associated with business operations or
supportive of one or more particular businesses, (y) who is a functional
leader, and (z) who has corporate-wide strategic responsibilities or whose
role is to coordinate cross-business unit functions (whether or not located in
the United States), as well as such employee's direct reports, shall be
considered a Corporate Staff Employee. The Plan Administrator's final
determination as to whether an employee satisfies the definition of Corporate
Staff Employee shall be deemed to be conclusive and binding. Corporate Staff
Employee shall not include any 1988 Plan Employee.

2.10 ERISA - means the Employee Retirement Income Security Act of 1974, as
amended from time to time.

2.11 Gross Cause - means fraud, misappropriation of Honeywell International Inc.
property or intentional misconduct damaging to such property or business of
Honeywell International Inc., or the commission of a crime.

2.12 Hour of Service - means each hour for which a Participant is directly or
indirectly paid by Honeywell International Inc., a predecessor of Honeywell
International Inc. or an Affiliated Company for performance of duties and for
reasons other than performance of duties and includes regular time, overtime,
vacations, holidays, sickness, disability, paid layoff, and similar paid
periods. Hours of Service shall be computed and credited in accordance with
Department of Labor Regulation Section 2530.200b-2(b) and (c), as amended from
time to time.

Involuntary Termination - means (a) termination by Honeywell International Inc.
of the Participant's employment during the Protected Period, other than upon
mandatory retirement in compliance with applicable law, death or for Gross
Cause, or (b) termination of employment by a Participant during the Protected
Period following (i) a reduction in the Participant's Pay or employee benefits
other than a reduction which is generally applicable to all salaried and
non-union hourly employees of Honeywell International Inc., (ii) permanent
elimination of the Participant's position, not including transfer pursuant to
the sale of a facility or line of business in which the Participant is offered

                                      -4-

substantially comparable employment with the new employer, (iii) in the case of
a Band 5 or above Participant or a Participant who met the definition of
Corporate Staff Employee immediately prior to the December 20, 2001 amendment
and restatement of the Plan, a material change in one or more of the following
factors: the Participant's position, function, responsibilities or reporting
level or in the standard of performance required of the Participant, as
determined immediately prior to a Change in Control), (iv) any geographic
relocation of a Participant's position (as determined immediately prior to a
Change in Control) to a new location, or (v) an action by Honeywell
International Inc. that under applicable law constitutes constructive discharge.
In evaluating whether a Participant has incurred an Involuntary Termination
pursuant to subsection (b) above, the Plan Administrator shall consider the
specific facts and circumstances of each Participant's claim.

2.14 1988 Plan Employee - means an individual who (i) met the definition of
Corporate Staff Employee under the Plan immediately prior to its amendment and
restatement on April 1, 1999 (the "1988 Plan Definition"), (ii) who ceased to
meet the Plan's definition of Corporate Staff Employee solely by reason of the
April 1, 1999 amendment of such definition, and (iii) satisfies the 1988 Plan
Definition as of the Change in Control. 1988 Plan Employees shall have their
benefits, if any, determined solely with reference to the Plan as amended and
restated effective October 21, 1988, a copy of which is attached hereto as
Exhibit A.

2.15 Participant - means a Corporate Staff Employee and such other key
management personnel, and their direct reports, who (i) have corporate-wide
responsibilities; (ii) hold positions likely to be eliminated upon a Change in
Control and (iii) are designated as Plan Participants by the Senior Vice
President-Human Resources and Communications, in his sole discretion, based on
the relevant facts and circumstances; provided, however, that in no event shall
the number of such Participants designated by the Senior Vice President-Human
Resources and Communications increase the total number of Participants by more
than 5%.

2.16 Pay - means Base Salary and, as to a Participant employed in Band 5 or
above, Annual Incentive Compensation.

2.17 Plan - means the Honeywell International Inc. Severance Plan for Corporate
Staff Employees (Involuntary Termination Following a Change in Control).

2.18 Plan Administrator - means the person or entity identified in Section 5.01
to administer the terms and conditions of the Plan.

                                      -5-

2.19 Plan Sponsor - means Honeywell International Inc. Any successor to
Honeywell International Inc. (or a principal subsidiary) shall be deemed a Plan
Sponsor.

2.20 Protected Period - means, with respect to each Participant, the period
beginning on the date of a Change in Control that occurs after he or she becomes
a Participant and ending at the expiration of twenty-four (24) months following
such Change in Control.

2.21 Severance Pay Period - means the applicable severance period specified in
Schedule A attached hereto.

2.22 Year of Service - means any consecutive 12-month period commencing on a
Participant's date of hire or rehire with Honeywell International Inc., any
predecessor of Honeywell International Inc. or an Affiliated Company, and
anniversaries thereof during which the Participant has completed at least 1,000
Hours of Service.

                                  ARTICLE III

                                 PARTICIPATION

3.1 The benefits provided under the Plan are limited solely to Participants.

                                   ARTICLE IV

               ELIGIBILITY FOR AND CONTINUATION OF PAY, BENEFITS
                              AND PENSION SERVICE

4.1 Eligibility for Pay, Benefit and Pension Service Continuation

In the event of the Involuntary Termination of a Participant's employment during
the Protected Period, Pay, benefit and pension service continuation shall be
provided to the Participant by Honeywell International Inc. (or any successor to
Honeywell International Inc.) in accordance with this Article IV.

4.2 Pay, Benefit and Pension Service Continuation

     A) Pay Continuation - A Participant shall receive Base Salary, paid in
accordance with his or her normal payroll period, and, as to Participants
employed in Career Band 5 or above, Annual Incentive Compensation, paid pro-rata
during the Severance Pay Period, in accordance with the Participant's normal pay
period.

     B) Benefit Continuation - For the period of Pay continuation, Honeywell
International Inc. will continue the Participant's

                                      -6-

employee benefits, including, without limitation, vacation accruals,
continuation of the Participant's savings plan participation (to the extent
permissible under Section 401(a) of the Code), basic and contributory life and
medical insurance (including qualified dependents) at the active employee
coverage level and prevailing employee contribution rate, if any; provided,
however, that (a) such level of continued benefits shall not exceed the level
of benefits in effect on the date of the Participant's Involuntary
Termination, prior to any reduction thereto, (b) such continuation of life
and medical benefits will cease on the date similar benefits are provided the
Participant by a subsequent employer, and (c) the executive flex-perk
allowance will be continued during the entire severance pay period.

     C) Pension Service Continuation - Participants entitled to benefits under
the Plan shall become 100% vested in their defined benefit pension plan
benefits (all defined benefit plans, whether qualified or non-qualified, in
which a Participant has accrued a benefit are collectively referred to as the
"DB Plans"). During their Pay continuation period, Participants shall continue
to be credited with additional age and service credit for purposes of benefit
accrual (up to a maximum of twelve (12) months of a Participant's Pay
continuation period), vesting and eligibility under the DB Plans in which they
participate. At the end of a Participant's Pay continuation period, Participants
shall immediately be credited with three (3) years of age and service,
respectively, for purposes of benefit accruals, vesting and eligibility under
the DB Plans; provided, however, that such three (3) years of additional age
shall be credited only if such additional age credits would (either alone or in
conjunction with a bridge leave of absence) enable a Participant to be eligible
for immediate payment of an early or normal retirement benefit under the
applicable defined benefit pension plan in which the Participant participates.
The normal policy for qualifying bridge leaves of absence, as reflected in the
applicable defined benefit pension plan in which the Participant participates,
shall remain applicable thereafter.

     D) 280G Gross-Up - If any payment to a Participant made pursuant to the
terms of this Plan (including payments from any benefit or compensation plan or
program sponsored or funded by Honeywell International Inc. but excluding
payments and benefits provided upon a change in control under the AlliedSignal
Severance Plan for Senior Executives, Honeywell Inc. Tier 1A and Tier 1B
agreements, and any similar plan or arrangement under which participants have
their benefits increased because of taxes under

                                      -7-

Section 4999 of the Code) is determined to be an "excess parachute payment"
within the meaning of Section 280G or any successor or substitute provision of
the Code, with the effect that either the Participant is liable for the
payment of the tax described in Section 4999 or any successor or substitute
provision of the Code (hereafter the "Section 4999 tax") or Honeywell
International Inc. has withheld the amount of the Section 4999 tax, an
additional benefit shall be paid pursuant to this Plan to such affected
Participant, in an amount, which when added to all payments constituting
"parachute payments" for purposes of Section 280G or any successor or
substitute provision of the Code, is sufficient to cause the remainder of (i)
the sum of the "parachute payments", including any payments made pursuant to
this subparagraph D), less (ii) the amount of all state, local and federal
income taxes and the Section 4999 tax attributable to such payments and
penalties and interest on any amount of Section 4999 tax, other than penalties
and interest on any amount of Section 4999 tax with respect to which such
payment was paid to the Participant on or before the due date of the
Participant's federal income tax return on which such Section 4999 tax should
have been paid, to be equal to the remainder of (iii) sum of the "parachute
payments", excluding any payments made pursuant to this subparagraph D), less
(iv) the amount of all state, local and federal income taxes attributable to
such payments determined as though the Section 4999 tax and penalties and
interest on any amount of Section 4999 tax, other than penalties and interest on
any amount of Section 4999 tax with respect to which a payment made pursuant to
this subparagraph D) was paid to the Participant on or before the due date of
the Participant's federal income tax return on which such Section 4999 tax
should have been paid, did not apply.

4.3 Benefit Limitations

Subject to Section 14.3, to avoid duplication of benefits, the amount of any
similar benefits under this Plan shall be offset and reduced by the amount of
any similar benefit provided the Participant under other severance plans
sponsored by Honeywell International Inc. for which the Participant may be
eligible, regardless of whether the payments under this Plan are made at an
earlier or a later date than payments under a similar plan would have been made.
In addition, notwithstanding any plan provisions to the contrary, to the extent
a Participant who was a former employee of Honeywell Inc. would be eligible for
benefits under both this Plan and another severance plan sponsored by Honeywell
Inc., such Participant shall only be entitled to benefits under this Plan to the
extent such

                                      -8-

Participant waives his or her rights to benefits under such other severance
plan.

4.4 Incentive Compensation During Notice and Vacation

In the event of the Involuntary Termination of a Participant's employment during
the Protected Period, the Participant shall be paid an additional amount, with
respect to any notice period (whether provided under this Plan or pursuant to
applicable law and whether working or non-working) ("Notice Period"), if any,
and any periods of accrued and unused vacation time (not including any
'grandfathered' transitional vacation credited to a Participant, but including
any vacation deemed to be accrued by the Participant with respect to the
Participant's severance pay period) ("Vacation Period"), equal to the product of
(a) such Participant's Annual Incentive Compensation, and (b) a fraction, the
numerator of which is the sum of the number of days in the Participant's Notice
Period and Vacation Period, and the denominator of which is 365. Any amounts
paid pursuant to this Section 4.4 shall be paid in accordance with the
Participant's normal payroll period.

4.5 Potential Change in Control Period

In the event a Potential Participant is involuntarily terminated by Honeywell
International Inc. (i) during a Potential Change in Control Period, and (ii)
under circumstances described in clause (a) of Section 2.13 that are related to
the Potential Change in Control, the Plan Administrator may, in his sole and
absolute discretion, provide that following the consummation of the Change in
Control to which the Potential Change in Control relates, severance benefits
payable to such Potential Participants under the severance pay plan then in
effect with respect to such individual (the "Base Severance Amount") shall be
supplemented by an amount equal to the difference between such Base Severance
Amount and the benefits including, without limitation, the special vesting and
pension enhancement provisions of Section 4.2(C) that would have been provided
under this Plan had a Change in Control occurred immediately prior to such
involuntary termination.

For purposes of this Section 4.5, "Potential Participant" means an employee who
would satisfy the definition of Participant if a Change in Control had occurred
at the beginning of the Potential Change in Control Period.

For purposes of this Section 4.5, a "Potential Change in Control Period" shall
commence when (a) Honeywell International Inc. enters into an agreement, the
consummation of which would result in the occurrence of a

                                      -9-

Change in Control, (b) Honeywell International Inc. or any person or group
publicly announces an intention to take or to consider taking actions which,
if consummated, would constitute a Change in Control, (c) any person or group
(other than Honeywell International Inc., any Affiliated Company or any
savings, pension or other benefit plan for the benefit of employees of
Honeywell International Inc. or its Affiliated Companies) becomes the
beneficial owner, directly or indirectly, of securities of Honeywell
International Inc. representing 15% or more of either the then outstanding
shares of common stock of Honeywell International Inc. or the combined voting
power of Honeywell International Inc.'s then outstanding securities (not
including in the securities beneficially owned by such person or group any
securities acquired directly from Honeywell International Inc. or its
Affiliated Companies), or (d) the Board of Directors of Honeywell International
Inc. adopts a resolution to the effect that, for purposes of the Plan, a
Potential Change in Control Period has commenced. The Potential Change in
Control Period shall continue until the earlier of (i) the occurrence of a
Change in Control, or (ii) the adoption by the Board of Directors of a
resolution stating that, for purposes of the Plan, the Potential Change in
Control Period has expired.

                                    ARTICLE V

                                 ADMINISTRATION

5.1 Plan Administrator

Prior to the occurrence of a Change in Control, the Senior Vice President-Human
Resources and Communications of Honeywell International Inc. shall be the Plan
Administrator within the meaning of ERISA Section 3(16)(A), and the named
fiduciary within the meaning of ERISA Section 402. During a Potential Change in
Control Period, Honeywell International Inc.'s Senior Vice President-Human
Resources and Communications shall appoint a person independent of Honeywell
International Inc. or persons operating under its control or on its behalf
(hereafter, the "Corporation") to be the new Plan Administrator effective upon
the occurrence of a Change in Control and the Senior Vice President-Human
Resources and Communications shall immediately provide to the new Plan
Administrator such information with respect to each Participant as shall be
necessary to enable the new Plan Administrator to determine the amount of any
benefit which is then or may thereafter become payable to such Participant.
Honeywell International Inc. shall pay the new Plan Administrator reasonable
compensation for services rendered and shall reimburse such new Plan
Administrator for all reasonable expenses incurred in discharging his duties
hereunder.

                                     -10-

5.2 Powers and Duties of Plan Administrator

Except as otherwise provided in this Section, the Plan Administrator shall have
the full discretionary power and authority to (i) determine the amount and
timing of any benefit payable under the Plan, (ii) construe and interpret the
Plan (including, without limitation, supplying omissions from, correcting
deficiencies in, or resolving inconsistencies or ambiguities in, the language of
the Plan), (iii) determine all questions of fact arising under the Plan,
including questions as to eligibility for and the amount of benefits, (iv)
establish such rules and regulations (consistent with the terms of the Plan) as
it deems necessary or appropriate for administration of the Plan, (v) delegate
responsibilities to others to assist it in administering the Plan, and (vi)
perform all other acts it believes reasonable and proper in connection with the
administration of the Plan. The Plan Administrator shall be entitled to rely on
the records of the Corporation in determining any Participant's entitlement to
and the amount of benefits payable under the Plan.

5.3 Benefit Claims and Appeals

Any request or claim for Plan benefits shall be deemed to be filed when a
written request is made by the claimant or the claimant's authorized
representative which is reasonably calculated to bring the claim to the
attention of the Plan Administrator.

The Plan Administrator shall provide notice in writing to any claimant when a
claim for benefits under the Plan has been denied in whole or in part. Such
notice shall be provided within 90 days of the receipt by the Plan Administrator
of the claimant's claim or, if special circumstances require, and the claimant
is so notified in writing, within 180 days of the receipt by the Plan
Administrator of the claimant's claim. The notice shall be written in a manner
calculated to be understood by the claimant and shall:

(i) set forth the specific reasons for the denial of benefits;

(ii) contain specific references to Plan provisions relative to the denial;

(iii) describe any material and information, if any, necessary for the claim for
benefits to be allowed, that had been requested, but not received by the Plan
Administrator; and

(iv) advise the claimant that any appeal of the Plan Administrator's adverse
determination must be made in

                                     -11-

writing to the Plan Administrator within 60 days after receipt of the initial
denial notification, and must set forth the facts upon which the appeal is
based.

If notice of the denial of a claim is not furnished within the time periods set
forth above, the claim shall be deemed denied and the claimant shall be
permitted to proceed to the review procedures set forth below. If the claimant
fails to appeal the Plan Administrator's denial of benefits in writing and
within 60 days after receipt by the claimant of written notification of denial
of the claim (or within 60 days after a deemed denial of the claim), the Plan
Administrator's determination shall become final and conclusive.

If the claimant appeals the Plan Administrator'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
representative may review any pertinent documents, as determined by the Plan
Administrator, and submit in writing any issues or comments to be addressed on
appeal.

The Plan Administrator shall advise the claimant and such individual's
representative of its decision, which shall be written in a manner calculated to
be understood by the claimant, and include specific references to the pertinent
Plan provisions on which the decision is based. Such response shall be made
within 60 days of receipt of the written appeal, unless special circumstances
require an extension of such 60-day period for not more than an additional 60
days. Where such extension is necessary, the claimant shall be given written
notice of the delay. If the decision on review is not furnished within the time
set forth above, the claim shall be deemed denied on review.

5.4 Prior Determination

A Participant wishing to terminate employment pursuant to Section 2.13(b)
following a Change in Control may file a request for a prior determination as to
whether his or her termination at any time within two years following a Change
in Control would satisfy the conditions of Section 2.13(b) based on the
individual facts and circumstances at the time of such request. Such request for
a prior determination shall be made in the same manner as a request for benefits
in accordance with the procedures described in Section 5.3. A Participant filing
a request under this Section 5.4 shall not be required to terminate employment
with Honeywell International Inc. as a prerequisite to filing such request. If a
claim or appeal under this Section 5.4 is pending at the expiration of the
Protected Period, or if a claim is made after the Protected Period relating

                                     -12-

to events or circumstances occurring during the Protected Period, the
Participant shall nevertheless be entitled to benefits under the Plan if the
Plan Administrator ultimately determines that the facts and circumstances
presented to the Plan Administrator would have constituted an Involuntary
Termination under Section 2.13(b), provided such Participant resigns from
Honeywell International Inc. within ten (10) days of the receipt of such
determination. Submission of a request for prior determination under this
Section 5.4 shall not preclude a subsequent request made in good faith
provided that any subsequent request is based on facts and circumstances that
are substantially different than any prior request.

5.5 Plan Year

The plan year shall be the calendar year.

5.6 Indemnification

To the extent permitted by law, the Corporation shall indemnify the Plan
Administrator from all claims for liability, loss, or damage (including payment
of expenses in connection with defense against such claims) arising from any act
or failure to act in connection with the Plan.

                                   ARTICLE VI

                              UNFUNDED OBLIGATION

6.1 All benefits payable under this Plan shall constitute an unfunded obligation
of the Corporation. Payments shall be made, as due, from the general funds of
Corporation. This Plan shall constitute solely an unsecured promise by the
Corporation to pay severance benefits to participants to the extent provided
herein.

                                  ARTICLE VII

                           INALIENABILITY OF BENEFITS

7.1 No Participant shall have the power to transfer, assign, anticipate,
mortgage or otherwise encumber any rights or any amounts payable under this
Plan; nor shall any such rights or amounts payable under this Plan be subject to
seizure, attachment, execution, garnishment or other legal or equitable process,
or for the payment of any debts, judgments, alimony, or separate maintenance, or
be transferable by operation of law in the event of bankruptcy, insolvency, or
otherwise. In the event a person who is receiving or is entitled to receive
benefits under the Plan attempts to assign, transfer or dispose of such right,
or if an attempt is made to subject such right to such process, such assignment,
transfer or disposition shall be null and void.

                                     -13-

                                  ARTICLE VIII

                                  WITHHOLDING

8.1 The Corporation shall have the right to withhold any taxes required to be
withheld with respect to any payments due under this Plan.

                                   ARTICLE IX

                            AMENDMENT OR TERMINATION

9.1 Plan Amendments

The Board of Directors reserves the right to amend the Plan from time to time
prior to a Change in Control. However, no amendment shall reduce any benefit
being paid or then payable to a Participant. Further, no amendment shall reduce
the benefits provided by the Plan to persons who were Participants as of the
date of such amendment or adversely affect in any manner the rights of persons
who were Participants as of the date of such amendment to benefits provided
under this Plan. This Plan may not be amended or terminated after a Change in
Control; provided, however, the Plan may be amended if the purpose of the
amendment is to increase benefits hereunder.

     Notwithstanding anything in this Plan to the contrary, the Senior Vice
President-Human Resources and Communications shall be permitted to amend the
Plan to reflect changes in Honeywell International Inc.'s organization;
provided, however, that no such amendment (i) shall increase or decrease
benefits under the Plan, or (ii) increase the total number of Participants by
more than five percent (5%) during any twelve month period.

9.2 Plan Termination

The Board of Directors reserves the right to terminate the Plan. However, such
termination shall not adversely affect the rights of persons who were
Participants as of the date of such termination.

                                   ARTICLE X

                       PLAN NOT A CONTRACT OF EMPLOYMENT;
                HONEYWELL INTERNATIONAL INC.'S POLICIES CONTROL

10.1 Nothing contained in this Plan shall give an employee the right to be
retained in the employment of Honeywell International Inc. This Plan is not a
contract of employment between Honeywell International Inc. and any employee.
Any dispute involving issues of employment, other than

                                     -14-

claims for benefits under this Plan, shall be governed by the appropriate
employment dispute resolution policies and procedures of Honeywell
International Inc.

                                   ARTICLE XI

                     ACTION BY HONEYWELL INTERNATIONAL INC.

11.1 Unless expressly indicated to the contrary herein, any action required to
be taken by Honeywell International Inc. may be taken by action of its Board of
Directors 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 of directors or any such officer.

                                   ARTICLE XII

                                  GOVERNING LAW

12.1 The Plan is an employee welfare benefit plan within the meaning of Section
3(1) of ERISA, and will be construed in accordance to ERISA's requirements.

                                  ARTICLE XIII

                                  SEVERABILITY

13.1 If any provision of this Plan shall be held illegal or invalid for any
reason, said illegality or invalidity shall not affect the remaining parts of
this Plan, but this Plan shall be construed and enforced as if said illegal or
invalid provision had never been included herein.

                                   ARTICLE XIV

                                  MISCELLANEOUS

14.1 Legal Fees

After the Plan Administrator has determined that (i) an employee satisfies the
definition of Participant, and (ii) such Participant is entitled to benefits
under the Plan, Honeywell International Inc. shall reimburse such Plan
Participant for all reasonable legal fees and expenses incurred by the
Participant after a Change in Control in seeking to obtain or enforce the
payment of benefits payable after a Change in Control under this Plan if payment
of benefits due and payable is not made within ten (10) days after written
request by the Participant. Such payments of legal fees shall be made within
thirty (30) business days after delivery of the Participant's written request
for payment accompanied with such evidence of fees and expenses incurred.

                                     -15-

14.2 No Waiver

No waiver by a Participant at any time of any breach by Honeywell International
Inc. of, or of any lack of compliance with, any condition or provision of this
Plan to be performed by Honeywell International Inc. shall be deemed a waiver of
similar or dissimilar provisions or conditions at the same or at any prior or
subsequent time. In no event shall the failure by a Participant to assert any
right under the Plan (including, but not limited to, failure to assert the
existence of conditions which would constitute an Involuntary Termination under
Section 2.13(b) be deemed a waiver of such right or any other right provided
under the Plan, unless the Participant affirmatively elects, in writing, to
waive such right.

14.3 Coordination of Benefits

In the event that (i) a Participant in the Plan is covered by another severance
plan of Honeywell International Inc. or an affiliate which provides benefits
similar to those provided under the Plan, and (ii) such Participant becomes
entitled to benefits under the Plan and such other plan, then, subject to
Section 4.3, each benefit to which the Participant is entitled shall contain
those rights and features which combine the most favorable rights and features
of such benefit under the Plan and such other plan; provided, however, that in
no event shall there be any duplication of such benefit.

                                     -16-

                                   SCHEDULE A

Bands        Severance Pay Period
- -----        --------------------
5 and 6      18 months Base Salary and Annual Incentive Compensation

4I           One month notice, plus

             Years of Service   Base Salary

              0-4                  6 months
              5-9                  9 months
             10-19                12 months
              20+                 15 months

4            One month notice, plus

             Years of Service   Base Salary

              0-4                  6 months
              5-9                  9 months
             10-19                12 months
              20+                 15 months

3            One month notice, plus

             Years of Service   Base Salary

              0-9                  3 months
             10-25                 6 months
              26+                  9 months

Non-exempt   One month notice, plus

             Years of Service    Base Salary

              0-12                3 months
             13-25                6 months
              26+                 9 months

                                     -17-

                                                                      EXHIBIT 12

                          HONEYWELL INTERNATIONAL INC.
        STATEMENT RE: COMPUTATION OF RATIO OF EARNINGS TO FIXED CHARGES

                                                       2002     2001     2000    1999    1998
                                                       ----     ----     ----    ----    ----
                                                                    (IN MILLIONS)
                                                                          
DETERMINATION OF EARNINGS:
Income (loss) before taxes...........................   (945)    (422)   2,398   2,248   2,772
Add (Deduct):
    Amortization of capitalized interest.............     24       25       25      25      25
    Fixed charges....................................    435      512      583     362     362
    Equity income, net of distributions..............    (42)     199      132     (46)    (44)
                                                       -----    -----    -----   -----   -----
        Total earnings, as defined...................   (528)     314    3,138   2,589   3,115
                                                       -----    -----    -----   -----   -----
                                                       -----    -----    -----   -----   -----

FIXED CHARGES:
Rents(a).............................................     91      107      102      97      87
Interest and other financial charges.................    344      405      481     265     275
                                                       -----    -----    -----   -----   -----
                                                         435      512      583     362     362
Capitalized interest.................................     21       17       16      22      25
                                                       -----    -----    -----   -----   -----
        Total fixed charges..........................    456      529      599     384     387
                                                       -----    -----    -----   -----   -----
                                                       -----    -----    -----   -----   -----
Ratio of earnings to fixed charges...................  (1.16)(b)  0.59(b)  5.24   6.74    8.05
                                                       -----    -----    -----   -----   -----
                                                       -----    -----    -----   -----   -----

- ---------

 (a) Denotes the equivalent of an appropriate portion of rentals representative
     of the interest factor on all rentals other than for capitalized leases.

 (b) The ratio of earnings to fixed charges was less than 1:1 for the years
     ended December 31, 2002 and 2001. In order to have achieved a ratio of
     earnings to fixed charges of 1:1, we would have had to have generated an
     additional $984 and $215 million of earnings, respectively, in the years
     ended December 31, 2002 and 2001, respectively.

                            SELECTED FINANCIAL DATA
                          Honeywell International Inc.

                                                                Years Ended December 31,
                                                  ---------------------------------------------------------
(Dollars in Millions, Except Per Share Amounts)     2002      2001      2000      1999      1998      1997
- -----------------------------------------------------------------------------------------------------------
                                                                                  
RESULTS OF OPERATIONS
Net sales .....................................   $22,274   $23,652   $25,023   $23,735   $23,555   $22,499
Net income (loss)(1)...........................      (220)      (99)    1,659     1,541     1,903     1,641
PER COMMON SHARE
Net earnings (loss):
   Basic ......................................     (0.27)    (0.12)     2.07      1.95      2.38      2.04
   Assuming dilution ..........................     (0.27)    (0.12)     2.05      1.90      2.34      2.00
Dividends .....................................      0.75      0.75      0.75      0.68      0.60      0.52
FINANCIAL POSITION AT YEAR-END
Property, plant and equipment -- net ..........     4,055     4,933     5,230     5,630     5,600     5,380
Total assets ..................................    27,559    24,226    25,175    23,527    22,738    20,118
Short-term debt ...............................       370       539     1,682     2,609     2,190     1,238
Long-term debt ................................     4,719     4,731     3,941     2,457     2,776     2,394
Total debt ....................................     5,089     5,270     5,623     5,066     4,966     3,632
Shareowners' equity ...........................     8,925     9,170     9,707     8,599     8,083     6,775
===========================================================================================================

Note: Commencing January 1, 2002, we ceased amortization of goodwill and
indefinite-lived intangible assets. See Note 13 of Notes to Financial Statements
for further details.

(1)  In 2002, includes net repositioning, litigation, business impairment and
     other charges and gains on sales of non-strategic businesses resulting in a
     net after-tax charge of $1,864 million, or $2.27 per share. In 2001,
     includes net repositioning, litigation, business impairment and other
     charges resulting in an after-tax charge of $1,771 million, or $2.18 per
     share. In 2000, includes net repositioning, litigation, business impairment
     and other charges and a gain on the sale of the TCAS product line of
     Honeywell Inc. resulting in a net after-tax charge of $634 million, or
     $0.78 per share. In 1999, includes merger, repositioning and other charges
     and gains on the sales of our Laminate Systems business and our investment
     in AMP Incorporated common stock resulting in a net after-tax charge of
     $624 million, or $0.78 per share. In 1998, includes repositioning charges,
     a gain on settlement of litigation claims and a tax benefit resulting from
     the favorable resolution of certain prior-year research and development tax
     claims resulting in a net after-tax charge of $4 million, with no impact on
     the per share amount. In 1997, includes repositioning and other charges,
     gains on the sales of our automotive Safety Restraints and certain
     Industrial Control businesses and a charge related to the 1996 sale of our
     automotive Braking Systems business resulting in a net after-tax charge of
     $5 million, with no impact on the per share amount.

                                                                             25

                      MANAGEMENT'S DISCUSSION AND ANALYSIS
                          Honeywell International Inc.

RESULTS OF OPERATIONS

Net sales in 2002 were $22,274 million, a decrease of $1,378 million, or 6
percent compared with 2001. Net sales in 2001 were $23,652 million, a decrease
of $1,371 million, or 5 percent compared with 2000. The change in net sales in
2002 and 2001 is attributable to the following:

                                            2002     2001
                                           Versus   Versus
                                            2001     2000
- ----------------------------------------------------------
                                               
Acquisitions ...........................    --%       1%
Divestitures ...........................    (3)      (2)
Price ..................................    (2)      (1)
Volume .................................    (2)      (2)
Foreign Exchange .......................     1       (1)
- ----------------------------------------------------------
                                            (6)%     (5)%
==========================================================

Cost of goods sold of $17,615, $20,125 and $18,673 million in 2002, 2001 and
2000, respectively, included net repositioning and other charges of $561, $2,134
and $413 million in 2002, 2001 and 2000, respectively. See the repositioning,
litigation, business impairment and other charges section of this Management's
Discussion and Analysis of Financial Condition and Results of Operations (MD&A)
for further details. Cost of goods sold in 2001 and 2000 also included $204 and
$206 million, respectively, of amortization of goodwill and indefinite-lived
intangible assets. Such amortization expense was excluded from cost of goods
sold in 2002 in conformity with Statement of Financial Accounting Standards No.
142, "Goodwill and Other Intangible Assets" (SFAS No. 142), which we adopted
January 1, 2002. See Note 1 and 13 of Notes to Financial Statements for further
discussion of the adoption of SFAS No. 142. The decrease in cost of goods sold
of $2,510 million in 2002 compared with 2001 resulted from a $1,573 million
reduction in repositioning and other charges, a $733 million reduction due
principally to lower sales in our Aerospace segment and lower costs due to the
benefits of repositioning actions, mainly workforce reductions, and the
elimination of goodwill and indefinite-lived intangible asset amortization of
$204 million. The increase in cost of goods sold of $1,452 million in 2001
compared with 2000 resulted from a $1,721 million increase in repositioning and
other charges partially offset by a $269 million decrease in cost of goods sold
due principally to lower sales in our Specialty Materials and Aerospace segments
and lower costs due to the benefits of repositioning actions, mainly workforce
reductions.

Selling, general and administrative expenses were $2,757, $3,064 and $3,134
million in 2002, 2001 and 2000, respectively. Selling, general and
administrative expenses included net repositioning and other charges of $45 and
$151 million in 2002 and 2001, respectively. See the repositioning, litigation,
business impairment and other charges section of this MD&A for further details.
The decrease in selling, general and administrative expenses of $307 million in
2002 compared with 2001 resulted from a $106 million reduction in repositioning
and other charges, as well as a $201 million reduction due to lower sales in
2002 and lower costs due to the benefits of repositioning actions, mainly
workforce reductions. The decrease in selling, general and administrative
expenses of $70 million in 2001 compared with 2000 resulted from a $221 million
reduction due to lower sales in 2001 and lower costs due to the benefits of
repositioning actions, mainly workforce reductions, partially offset by a $151
million increase in repositioning and other charges.

Retirement benefit (pension and other postretirement) plans income was $27
million in 2002 compared with income of $165 million in 2001. The decrease in
income of $138 million was due principally to the poor investment performance of
our U.S. pension fund assets since 2000. Retirement benefit plans income was
$165 million in 2001 compared with income of $282 million in 2000. The decrease
in income of $117 million was mainly due to the poor investment performance of
our U.S. pension fund assets and higher retiree medical costs. See Note 22 of
Notes to Financial Statements for further details on our pension and
postretirement plans. Future effects on operating results will principally
depend on pension plan investment performance and other economic conditions. See
Critical Accounting Policies section of this MD&A for a further discussion of
our U.S. pension plans and their impact on our consolidated results of
operations and financial position.

Loss on sale of non-strategic businesses of $124 million in 2002 represented the
pretax loss on the dispositions of Specialty Chemical's Pharmaceutical Fine
Chemicals (PFC) and Advanced Circuits businesses and Automation and Control
Solutions Consumer Products business totaling $249 million, partially offset by
the pretax gain on the disposition

26

of our Bendix Commercial Vehicle Systems (BCVS) business of $125 million. The
divestitures of these businesses reduced net sales and increased segment profit
in 2002 compared with 2001 by approximately $500 and $31 million, respectively.
Aggregate sales proceeds were approximately $435 million consisting of cash and
investment securities. (Gain) on sale of non-strategic businesses of $112
million in 2000 represented the pretax gain on the government-mandated
divestiture of the TCAS product line of Honeywell Inc. (the former Honeywell) in
connection with the merger of AlliedSignal Inc. and the former Honeywell in
December 1999.

Asbestos related litigation charges, net of insurance totaled $1,548, $159 and
$7 million in 2002, 2001 and 2000, respectively, related mainly to costs
associated with asbestos claims of North American Refractories Company (NARCO).
See Asbestos Matters in Note 21 of Notes to Financial Statements for further
discussion.

Business impairment charges of $877, $145 and $410 million in 2002, 2001 and
2000, respectively, related principally to the write-down of property, plant and
equipment in businesses in our Specialty Materials segment and in our Friction
Materials business. See the repositioning, litigation, business impairment and
other charges section of this MD&A for further details.

Equity in (income) loss of affiliated companies was income of $42 million in
2002 and losses of $193 and $89 million in 2001 and 2000, respectively. Equity
in (income) loss of affiliated companies included repositioning and other
charges of $13, $200 and $136 million in 2002, 2001 and 2000, respectively. See
the repositioning, litigation, business impairment and other charges section of
this MD&A for further details. The increase in equity in (income) loss of
affiliated companies of $235 million in 2002 compared with 2001 resulted from a
$187 million decrease in repositioning and other charges. The increase also
resulted from exiting a joint venture in our Aerospace segment ($9 million), an
improvement in earnings from joint ventures in our Specialty Materials and
Automation and Control Solutions segments ($23 million), and accounting for the
first quarter of 2002 operating results of our BCVS business using the equity
method since control of the business was transferred to Knorr-Bremse AG in
January 2002 ($6 million). The decrease in equity in (income) loss of affiliated
companies of $104 million in 2001 compared with 2000 resulted from a $64 million
increase in repositioning and other charges, as well as a gain on the sale of
our interest in an automotive aftermarket joint venture in 2000.

Other (income) expense was income of $4, $17 and $57 million in 2002, 2001 and
2000, respectively. Other (income) expense included other charges of $15 million
in 2002 related to an other than temporary decline in value of cost basis equity
investments, and a $6 million loss in 2001 related to the early redemption of
our $200 million 5 3/4% dealer remarketable securities. Other (income) expense
in 2001 also included a $1 million credit recognized upon the adoption of
Statement of Financial Accounting Standards No. 133, "Accounting for Derivative
Instruments and Hedging Activities", as amended (SFAS No. 133). The decrease in
other (income) expense of $13 million in 2002 compared with 2001 resulted from a
decrease in benefits from foreign exchange hedging ($47 million) and an increase
in other charges ($9 million) largely offset by a partial settlement of a patent
infringement lawsuit with an automotive supplier ($15 million), lower minority
interests ($16 million) and higher interest income ($13 million). The decrease
in other (income) expense of $40 million in 2001 compared with 2000 resulted
primarily from a decrease in benefits from foreign exchange hedging ($21
million) and lower interest income ($18 million), partially offset by lower
minority interests ($10 million).

Interest and other financial charges of $344 million in 2002 decreased by $61
million, or 15 percent compared with 2001. Interest and other financial charges
of $405 million in 2001 decreased by $76 million, or 16 percent compared with
2000. The decrease in interest and other financial charges in 2002 compared with
2001 and 2001 compared with 2000 was due mainly to lower average debt
outstanding and lower average interest rates in both years.

The effective tax (benefit) rate was (76.7), (76.6) and 30.8 percent in 2002,
2001 and 2000, respectively. The effective tax (benefit) rate in 2002 was
substantially higher than the statutory rate of 35 percent principally due to
the higher deductible tax basis than book basis on the dispositions of our
Advanced Circuits, PFC and Consumer Products businesses, tax benefits on export
sales and favorable tax audit settlements. The effective tax (benefit) rate in
2001 was substantially higher than the statutory rate of 35 percent principally
due to tax benefits on export sales, U.S. tax credits and favorable tax audit
settlements. The impact of tax benefits on export sales, U.S. tax credits and
favorable audit settlements had a more favorable impact on our effective tax
(benefit) rates in 2002 and 2001 than in prior years principally due to the
relative amount of these benefits in comparison to the amount of our pretax
losses in 2002 and 2001. See Note 7 of Notes to Financial Statements for further
information.

Net loss was $(220) million, or $(0.27) per share, in 2002, net loss was $(99)
million, or $(0.12) per share, in 2001, and net income was $1,659 million, or
$2.05 per share, in 2000. The net losses in 2002 and 2001 were due to the
repositioning, litigation, business impairment and other charges recognized in
2002 and 2001. Those charges are described in

                                                                              27

detail in the repositioning, litigation, business impairment and other charges
section of this MD&A.

Review of Business Segments

(Dollars in millions)                       2002      2001      2000
- ---------------------------------------------------------------------
                                                     
Net Sales
Aerospace..............................   $ 8,855   $ 9,653   $ 9,988
Automation and Control Solutions.......     6,978     7,185     7,384
Specialty Materials....................     3,205     3,313     4,055
Transportation and Power Systems.......     3,184     3,457     3,527
Corporate..............................        52        44        69
- ---------------------------------------------------------------------
                                          $22,274   $23,652   $25,023
=====================================================================

Segment Profit
Aerospace..............................   $ 1,358   $ 1,741   $ 2,195
Automation and Control Solutions.......       890       819       986
Specialty Materials....................        57        52       334
Transportation and Power Systems.......       357       289       274
Corporate..............................      (154)     (153)     (160)
- ---------------------------------------------------------------------
                                          $ 2,508   $ 2,748   $ 3,629
=====================================================================

A reconciliation of segment profit to consolidated income (loss) before taxes is
as follows:

(Dollars in millions)                      2002      2001      2000
- --------------------------------------------------------------------
                                                     
Segment profit.........................   $2,508    $2,748    $3,629
(Loss) gain on sale of non-strategic
   businesses..........................     (124)       --       112
Asbestos related litigation charges,
   net of insurance....................   (1,548)     (159)       (7)
Business impairment charges............     (877)     (145)     (410)
Repositioning and other charges........     (634)   (2,490)     (549)
Equity in income of affiliated
   companies...........................       55         7        47
Other income...........................       19        22        57
Interest and other financial charges...     (344)     (405)     (481)
- --------------------------------------------------------------------
Income (loss) before taxes.............   $ (945)   $ (422)   $2,398
====================================================================

See Note 23 of Notes to Financial Statements for further information on our
reportable segments and our definition of what constitutes segment profit.
Segment profit for 2001 and 2000 includes pretax amortization of goodwill and
indefinite-lived intangible assets of $204 and $206 million, respectively
(Aerospace -- $60 and $60 million, Automation and Control Solutions -- $92 and
$86 million, Specialty Materials -- $32 and $40 million and Transportation and
Power Systems -- $20 and $20 million, respectively). Such amortization expense
is excluded from the 2002 results, in conformity with SFAS No. 142.

Aerospace sales in 2002 were $8,855 million, a decrease of $798 million, or 8
percent compared with 2001. This decrease resulted mainly from a decline of 20
percent in sales by our commercial air transport segment due primarily to
continued general weakness in the economy and the financial difficulties being
encountered by the airline industry. Sales by our commercial air transport
segment in 2002 continued to be adversely impacted from the abrupt downturn in
the aviation industry following the terrorist attacks on September 11, 2001.
Sales to our commercial air transport aftermarket customers declined by 13
percent as passenger traffic declined significantly in 2002 compared with the
prior year. Demand for our aftermarket products and services declined in 2002
due to reduced flying hours by the airlines and the deteriorating financial
condition of many of the U.S. commercial airlines. Sales to our air transport
original equipment (OE) customers declined by 32 percent reflecting dramatically
lower projected deliveries by our OE customers (primarily Boeing and Airbus).
Sales to our business and general aviation OE customers decreased by 27 percent
reflecting a decline in deliveries of regional and business jet airplanes. This
decrease was partially offset by higher sales in our defense and space segment,
with OE sales up by 13 percent and aftermarket sales higher by 12 percent,
resulting primarily from increased military activity and growth in precision
guidance and spare parts. Sales to our business and general aviation aftermarket
customers also increased by 7 percent largely due to increases in engine
maintenance because of higher flying hours by fractional jets. Aerospace sales
in 2001 were $9,653 million, a decrease of $335 million, or 3 percent compared
with 2000. This decrease principally reflected a decrease of 10 percent in sales
by our commercial air transport aftermarket and OE segments and the impact of
prior year divestitures. The lower commercial sales resulted mainly from the
impact of the terrorist attacks on September 11, 2001 and the already weak
economy. Sales to our business and general aviation OE customers were also lower
by 12 percent. This decrease was partially offset by higher sales in our defense
and space segment, with OE sales up by 11 percent and aftermarket sales higher
by 5 percent, resulting primarily from increased military activity. Sales to our
business and general aviation aftermarket customers also increased by 7 percent.

Aerospace segment profit in 2002 was $1,358 million, a decrease of $383 million,
or 22 percent compared with 2001. This decrease was due mainly to substantially
lower sales of higher-margin commercial aftermarket products such as avionics
upgrades and spare parts. Also, higher retirement benefit costs and contract
losses contributed to this decline in segment profit. This decrease was
partially offset by lower costs primarily from workforce reductions and a
decline in discretionary spending. Aerospace segment profit in 2001 was $1,741
million, a decrease of $454 million, or 21 percent compared with 2000. This
decrease related principally to lower sales of higher-margin aftermarket
products, higher retirement benefit costs, engineering and development costs
related to new products and the impact of prior year divestitures. This decrease
was partially offset by the impact of cost-reduction actions, primarily
workforce reductions.

28

Automation and Control Solutions sales in 2002 were $6,978 million, a decrease
of $207 million, or 3 percent compared with 2001. Sales declined by 3 percent
for our Automation and Control Products business primarily due to the
disposition of our Consumer Products business and softness in capital spending
partially offset by increased demand for security-related products. Sales for
our Industry Solutions business declined by 4 percent resulting from ongoing
softness in industrial production and capital spending. Sales for our Service
business also decreased by 3 percent due primarily to general weakness in the
economy. Automation and Control Solutions sales in 2001 were $7,185 million, a
decrease of $199 million, or 3 percent compared with 2000. Excluding the impact
of foreign exchange, acquisitions and divestitures, sales decreased
approximately 2 percent. This decrease resulted primarily from lower sales for
our Automation and Control Products business primarily due to weakness in key
end-markets partially offset by higher sales for our security related products
due principally to our acquisition of Pittway in the prior year. Our Service
business also had lower sales due primarily to weakness in our security
monitoring business. This decrease was partially offset by higher sales for our
Industry Solutions business.

Automation and Control Solutions segment profit in 2002 was $890 million, an
increase of $71 million, or 9 percent compared with 2001. Excluding goodwill
amortization expense in 2001, segment profit in 2002 decreased by 2 percent
compared with 2001. This decrease resulted primarily from the impact of lower
sales volumes and pricing pressures, mainly in our Automation and Control
Products and Service businesses. This decrease was partially offset by lower
costs due to the benefits of repositioning actions, mainly workforce reductions.
Automation and Control Solutions segment profit in 2001 was $819 million, a
decrease of $167 million, or 17 percent compared with 2000. This decrease
resulted principally from lower sales for our Automation and Control Products
and Service businesses, higher raw material costs and pricing pressures across
the segment, higher retirement benefit costs and the impact of prior year
divestitures. This decrease was partially offset by the impact of cost-reduction
actions, primarily workforce reductions.

Specialty Materials sales in 2002 were $3,205 million, a decrease of $108
million, or 3 percent compared with 2001. This decrease was driven by a 44
percent decline in sales for our Advanced Circuits business due to weakness in
the telecommunications industry and the divestiture of our PFC business. Sales
declined by 7 percent for our Performance Fibers business mainly due to weak
demand. Sales for our Fluorines business also declined by 2 percent generally
due to lower demand and pricing pressures. This decrease was partially offset by
higher sales for our Electronic Materials and Nylon System businesses of 8 and 5
percent, respectively, due principally to increased demand. Specialty Materials
sales in 2001 were $3,313 million, a decrease of $742 million, or 18 percent
compared with 2000. Excluding the effect of divestitures, sales decreased by 13
percent. This decrease was driven by a decline in sales for our Electronic
Materials and Advanced Circuits businesses of 36 and 34 percent, respectively,
due to weakness in the electronics and telecommunications markets. Sales also
declined for our Performance Fibers and Nylon System businesses by 18 and 8
percent, respectively, due to weakness in the automotive and carpet end-markets.

Specialty Materials segment profit in 2002 was $57 million, an increase of $5
million, or 10 percent compared with 2001. Excluding goodwill amortization
expense in 2001, segment profit in 2002 decreased by 32 percent compared with
2001. Segment profit in 2002 was negatively impacted by significant pricing
pressures in many of our markets and by start-up costs for our new Fluorines
plant. This decrease in segment profit was partially offset by the impact of
higher volumes in our Electronic Materials and Nylon System businesses, lower
raw material costs, and lower costs resulting from plant shutdowns and workforce
reductions. Specialty Materials segment profit in 2001 was $52 million, a
decrease of $282 million, or 84 percent compared with 2000. This decrease
resulted primarily from lower volumes and price declines, principally in our
Electronic Materials, Nylon System and Performance Fibers businesses. Higher
energy and raw material costs principally in our Nylon System and Performance
Fibers businesses and the impact of prior year divestitures also contributed to
the decrease in segment profit. This decrease in segment profit was partially
offset by the impact of cost-reduction actions, principally plant shutdowns and
workforce reductions.

Transportation and Power Systems sales in 2002 were $3,184 million, a decrease
of $273 million, or 8 percent compared with 2001. Excluding the effect of the
disposition of our BCVS business, sales increased by 3 percent. This increase
was due mainly to a 6 percent increase in sales for our Garrett Engine Boosting
Systems business 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 2 percent due to higher demand and
favorable foreign exchange. Transportation and Power Systems sales in 2001 were
$3,457 million, a decrease of $70 million, or 2 percent compared with 2000.
Excluding the effects of foreign exchange, acquisitions and divestitures, sales
were flat. Sales increased by 13 percent for our Garrett Engine Boosting Systems
business due to continued strong demand for turbochargers in the European
diesel-powered passenger car market. This increase was offset by a 16 percent
decrease in sales for our BCVS business due to decreased heavy-duty truck builds
in North

                                                                              29

America. Sales also declined by 4 percent for both our Friction Materials and
Consumer Products Group businesses due to weakness in automotive end-markets.

Transportation and Power Systems segment profit in 2002 was $357 million, an
increase of $68 million, or 24 percent compared with 2001. This increase
resulted primarily from higher sales and the effects of cost-structure
improvements, mainly workforce reductions and low-cost sourcing, in all of the
segment's businesses. The shutdown of our Turbogenerator product line in 2001
also contributed to higher segment profit. This increase was partially offset by
the absence of segment profit from our BCVS business which was sold in the first
quarter of 2002. Transportation and Power Systems segment profit in 2001 was
$289 million, an increase of $15 million, or 5 percent compared with 2000 due to
higher sales in our Garrett Engine Boosting Systems business and the impact of
repositioning actions across all businesses. The shutdown of our Turbogenerator
product line in 2001 and the fact that the prior year included costs associated
with a product recall in our BCVS business also contributed to an improvement in
segment profit in 2001. This increase was partially offset by the impact of
lower sales in our BCVS, Consumer Products Group and Friction Materials
businesses.

Repositioning, Litigation, Business Impairment and Other Charges

A summary of repositioning, litigation, business impairment and other charges
follows:

(Dollars in millions)                               2002     2001    2000
- --------------------------------------------------------------------------
                                                             
Severance .......................................   $  270   $  727   $157
Asset impairments ...............................      121      194    141
Exit costs ......................................       62       95     40
Reserve adjustments .............................      (76)    (119)   (46)
- --------------------------------------------------------------------------
   Total net repositioning charge. ..............      377      897    292
- --------------------------------------------------------------------------
Asbestos related litigation charges,
   net of insurance .............................    1,548      159      7
Litton litigation settlement ....................       --      440     --
Probable and reasonably estimable legal
   and environmental liabilities ................       30      249     80
Business impairment charges .....................      877      145    410
Customer claims and settlements
   of contract liabilities ......................      152      310     93
Write-offs of receivables, inventories
   and other assets .............................       60      335     84
Investment impairment charges ...................       15      112     --
Aerospace jet engine contract cancellation ......       --      100     --
General Electric merger expenses ................       --       42     --
Debt extinguishment loss ........................       --        6     --
- --------------------------------------------------------------------------
   Total repositioning, litigation, business
      impairment and other charges ..............   $3,059   $2,795   $966
==========================================================================

The following table summarizes the pretax distribution of total repositioning,
litigation, business impairment and other charges by income statement
classification:

(Dollars in millions)                    2002     2001    2000
- --------------------------------------------------------------
                                                 
Cost of goods sold ..................   $  561   $2,134   $413
Selling, general and administrative
   expenses .........................       45      151     --
Asbestos related litigation charges,
   net of insurance .................    1,548      159      7
Business impairment charges .........      877      145    410
Equity in (income) loss of affiliated
   companies ........................       13      200    136
Other (income) expense ..............       15        6     --
- --------------------------------------------------------------
                                        $3,059   $2,795   $966
==============================================================

In 2002, we recognized a repositioning charge of $453 million for workforce
reductions across all of our reportable segments and our UOP process technology
joint venture. The charge also related to costs for the planned shutdown and
consolidation of manufacturing plants in our Specialty Materials and Automation
and Control Solutions reportable segments. Severance costs were related to
announced workforce reductions of approximately 8,100 manufacturing and
administrative positions of which approximately 2,900 positions have been
eliminated as of December 31, 2002. These actions are expected to be completed
by December 31, 2003. Asset impairments principally related to manufacturing
plant and equipment held for sale and capable of being taken out of service and
actively marketed in the period of impairment. Exit costs related principally to
incremental costs to exit facilities, including lease termination losses
negotiated or subject to reasonable estimation related mainly to closed
facilities in our Automation and Control Solutions and Specialty Materials
reportable segments. Also, $76 million of previously established severance
accruals were returned to income in 2002, due to fewer employee separations than
originally anticipated and higher than expected voluntary employee attrition
resulting in reduced severance liabilities in our Aerospace, Automation and
Control Solutions and Specialty Materials reportable segments.

In 2001, we recognized a repositioning charge of $1,016 million for the cost of
actions designed to reduce our cost structure and improve our future
profitability. These actions consisted of announced global workforce reductions
of approximately 20,000 manufacturing and administrative positions across all of
our reportable segments, which are substantially complete. The repositioning
charge also included asset impairments and other exit costs related to plant
closures and the rationalization of manufacturing capacity and infrastructure,
principally in our Specialty Materials, Engines, Systems and Services and
Transportation and Power Systems businesses, including the shutdown of our
Turbogenerator product line. Other exit costs consisted of

30

contract cancellations and penalties, including lease terminations, negotiated
or subject to reasonable estimation. Also, $119 million of previously
established accruals, mainly for severance, were returned to income in 2001 due
principally to higher than expected voluntary employee attrition resulting in
reduced severance liabilities, principally in our Aerospace and Automation and
Control Solutions reportable segments.

In 2000, we recognized a repositioning charge of $338 million related to
announced global workforce reductions across all of our reportable segments,
costs to close a chip package manufacturing plant and related workforce
reductions. The charge also included asset impairments principally associated
with the completion of previously announced plant shutdowns in our Specialty
Materials reportable segment and the closure of an affiliate's chemical
manufacturing operations, and other environmental exit costs and period
expenses. The announced workforce reductions consisted of approximately 2,800
manufacturing and administrative positions, which are complete. Asset
impairments were principally related to manufacturing plant and equipment held
for sale and capable of being taken out of service and actively marketed in the
period of impairment. Also, $46 million of previously established accruals,
principally for severance, were returned to income in 2000 due to higher than
expected voluntary employee attrition resulting in reduced severance
liabilities, principally in our Automation and Control Solutions and Aerospace
reportable segments.

These repositioning actions are expected to generate incremental pretax savings
of approximately $400 million in 2003 compared with 2002 principally from
planned workforce reductions and facility consolidations. Cash expenditures for
severance and other exit costs necessary to execute these actions were $447,
$422 and $344 million in 2002, 2001 and 2000, respectively. Such expenditures
for severance and other exit costs have been funded principally through
operating cash flows. Cash expenditures for severance and other exit costs
necessary to execute the remaining 2002 actions will approximate $350 million in
2003 and will be funded principally through operating cash flows.

In 2002, we recognized business impairment charges of $877 million related to
businesses in our Specialty Materials and Automation and Control Solutions
segments, as well as our Friction Materials business. Based on current operating
losses and deteriorating economic conditions in certain chemical and
telecommunications end-markets, we performed impairment tests and recognized
impairment charges of $785 million in 2002 principally related to the write-down
of property, plant and equipment held for use in our Nylon System, Performance
Fibers and Metglas Specialty Materials businesses, as well as an Automation and
Control Solutions communication business. We also recognized impairment charges
of $92 million related principally to the write-down of property, plant and
equipment of our Friction Materials business, which is classified as assets held
for disposal in Other Current Assets (a plan of disposal of Friction Materials
was adopted in 2001; in January 2003, we entered into a letter of intent to sell
this business to Federal-Mogul Corp. --see Note 21 of Notes to Financial
Statements for further discussion). In 2002, we recognized asbestos related
litigation charges of $1,548 million principally related to costs associated
with the potential resolution of asbestos claims of NARCO (see Note 21 of Notes
to Financial Statements for further discussion). In 2002, we also recognized
other charges consisting of customer claims and settlements of contract
liabilities of $152 million and write-offs of receivables, inventories and other
assets of $60 million. These other charges related mainly to our Advanced
Circuits business, bankruptcy of a customer in our Aerospace reportable segment,
and customer claims in our Aerospace and Automation and Control Solutions
reportable segments. Additionally, we recognized other charges consisting of
probable and reasonably estimable environmental liabilities of $30 million and
write-offs related to an other than temporary decline in the value of certain
cost investments of $15 million.

In 2001, we recognized other charges consisting of a settlement of the Litton
Systems, Inc. litigation for $440 million, probable and reasonably estimable
legal and environmental liabilities of $249 million (see Note 21 of Notes to
Financial Statements for further discussion), asbestos related litigation
charges of $159 million (see Note 21 of Notes to Financial Statements for
further discussion), customer claims and settlements of contract liabilities of
$310 million and write-offs of receivables, inventories and other assets of $335
million. Our Friction Materials business was designated as held for disposal,
and we recognized an impairment charge of $145 million related to the write-down
of property, plant and equipment, goodwill and other identifiable intangible
assets to their fair value less costs to sell. We recognized charges of $112
million related to an other than temporary decline in the value of an equity
investment and an equity investee's loss contract, and a $100 million charge for
write-off of investments, including inventory, related to a regional jet engine
contract cancellation. We also recognized $42 million of transaction expenses
related to the proposed merger with GE and redeemed our $200 million 5 3/4%
dealer remarketable securities due 2011, resulting in a loss of $6 million.

In 2000, we identified certain business units and manufacturing facilities as
non-core to our business strategy. As a result of this assessment, we
implemented cost reduction initiatives and conducted discussions with potential
acquirers of these businesses and assets. As part of this process, we evaluated
the businesses and assets for possible impairment. As a result of our analysis,
we recognized impairment charges in 2000 of $245 and $165 million principally
related to the write-down of property, plant and equipment, goodwill and other
identifiable

                                                                              31

intangible assets of our Friction Materials business and a chemical
manufacturing facility, respectively. We recognized other charges consisting of
probable and reasonably estimable environmental liabilities of $80 million,
customer claims and settlements of contract liabilities of $93 million,
write-offs of receivables, inventories and other assets of $84 million and
asbestos related litigation charges of $7 million.

The following tables provide details of the pretax impact of total net
repositioning, litigation, business impairment and other charges by reportable
business segment.

Aerospace

(Dollars in millions)                                         2002   2001   2000
- --------------------------------------------------------------------------------
                                                                    
Net repositioning charge ..................................   $ 15   $198    $ 6
Litton litigation settlement ..............................     --    440     --
Probable and reasonably estimable legal and environmental
   liabilities ............................................     --      2     --
Customer claims and settlements of contract liabilities ...     99    111     52
Write-offs of receivables, inventories and other assets ...     21     44     33
Investment impairment charges .............................     11     --     --
Aerospace jet engine contract cancellation ................     --    100     --
- --------------------------------------------------------------------------------
                                                              $146   $895    $91
================================================================================

Automation and Control Solutions

(Dollars in millions)                                         2002   2001   2000
- --------------------------------------------------------------------------------
                                                                   
Net repositioning charge ..................................   $131   $289   $ 87
Probable and reasonably estimable legal and environmental
   liabilities ............................................     --     53     --
Business impairment charges ...............................     22     --     --
Customer claims and settlements of contract liabilities ...     42    114     --
Write-offs of receivables, inventories and other assets ...     17    236     21
Investment impairment charges .............................     --     93     --
- --------------------------------------------------------------------------------
                                                              $212   $785   $108
================================================================================

Specialty Materials

(Dollars in millions)                                         2002   2001   2000
- --------------------------------------------------------------------------------
                                                                   
Net repositioning charge ..................................   $167   $172   $186
Probable and reasonably estimable legal and environmental
   liabilities ............................................     23     --     --
Business impairment charges ...............................    763     --    165
Customer claims and settlements of contract liabilities ...     11     29     39
Write-offs of receivables, inventories and other assets ...     12     22      9
Investment impairment charges .............................     --     19     --
- --------------------------------------------------------------------------------
                                                              $976   $242   $399
================================================================================

Transportation and Power Systems

(Dollars in millions)                                         2002   2001   2000
- --------------------------------------------------------------------------------
                                                                   
Net repositioning charge ..................................   $ 26   $133   $  5
Asbestos related litigation charges, net of insurance .....    167     --     --
Probable and reasonably estimable legal and environmental
   liabilities ............................................     --      2     --
Business impairment charges ...............................     92    145    245
Customer claims and settlements of contract liabilities ...     --     56     --
Write-offs of receivables, inventories and other assets ...     10     31     13
- --------------------------------------------------------------------------------
                                                              $295   $367   $263
================================================================================

Corporate

(Dollars in millions)                                        2002    2001   2000
- --------------------------------------------------------------------------------
                                                                   
Net repositioning charge ................................   $   38   $105   $  8
Asbestos related litigation charges, net of insurance ...    1,381    159      7
Probable and reasonably estimable legal and environmental
   liabilities ..........................................        7    192     80
Customer claims and settlements of contract
   liabilities ..........................................       --     --      2
Write-offs of receivables, inventories and other
   assets ...............................................       --      2      8
Investment impairment charges ...........................        4     --     --
Debt extinguishment loss ................................       --      6     --
General Electric merger expenses ........................       --     42     --
- --------------------------------------------------------------------------------
                                                            $1,430   $506   $105
================================================================================

FINANCIAL CONDITION, LIQUIDITY AND CAPITAL RESOURCES

Financial Condition

Total assets at December 31, 2002 were $27,559 million, an increase of $3,333
million, or 14 percent compared with December 31, 2001. This increase resulted
mainly from the recognition of probable recoveries from insurance carriers
related to asbestos claims of approximately $2.0 billion, a higher prepaid
pension asset due to the voluntary contribution to our U.S. defined benefit
pension plans of $830 million in 2002 and an increase in cash of $628 million.
This increase was also due to an increase in deferred tax assets of $712 million
due to the repositioning, litigation, business impairment and other charges and
net operating tax losses in 2002. This increase was partially offset by a
decrease in trade accounts receivables and inventories of $506 million in 2002
due to improved working capital turnover and a decline in property, plant and
equipment of $878 million due to write-downs in connection with our business
impairments and plant closures. Total assets at December 31, 2001 were $24,226
million, a decrease of $949 million, or 4 percent compared with December 31,
2000. Inventories and accounts

32

receivable were lower compared with the prior year-end driven by an improvement
in working capital turnover. The decrease also resulted from asset writedowns in
connection with our repositioning actions.

Cash Flow Summary

Cash provided by operating activities of $2,380 million during 2002 increased by
$384 million compared with 2001 mainly due to an improvement in working capital
(receivables and inventories) turnover and lower tax payments. This increase was
partially offset by a cash contribution to our U.S. defined benefit pension
plans of $130 million and higher spending for repositioning actions, mainly
severance. Cash provided by operating activities of $1,996 million during 2001
increased by $7 million compared with 2000. This increase was driven by an
improvement in working capital turnover offset by lower earnings.

Cash used for investing activities of $870 million during 2002 decreased by $36
million compared with 2001 due to higher proceeds from sales of businesses and
lower capital spending. During 2002, we realized proceeds from the sales of our
BCVS, PFC and Consumer Products businesses. The decrease in capital spending
reflected the completion in 2002 of a major plant in our Fluorines business and
our intention to limit capital spending at non-strategic businesses. This
decrease in cash used for investing activities also reflects the proceeds from
the disposition of an equity investment in our Automation and Control Solutions
reportable segment. The decrease in cash used for investing activities was
partially offset by an increase in spending for acquisitions, principally
reflecting the acquisition of Invensys Sensor Systems in October 2002. Cash used
for investing activities of $906 million during 2001 decreased by $1,808 million
compared with 2000 due principally to our acquisition of Pittway in 2000. This
decrease was partially offset by lower proceeds from sales of businesses and
property, plant and equipment and a slight increase in capital spending.

Cash used for financing activities of $882 million during 2002 decreased by $11
million compared with 2001 mainly due to lower net debt repayments in the
current year partially offset by a decrease in proceeds from issuance of common
stock. Total debt of $5,089 million at December 31, 2002 was $181 million, or 3
percent lower than at December 31, 2001 principally reflecting scheduled
repayments of long-term debt. Cash used for financing activities of $893 million
during 2001 increased by $823 million compared with 2000. This increase resulted
principally from reduced long-term borrowings in 2001. During 2001, we issued
$500 million of 5 1/8% Notes due 2006, $500 million of 6 1/8% Notes due 2011 and
$247 million of 5.25% Notes due 2006. During 2000, we issued $1 billion of 7.50%
Notes due 2010 and $750 million of 6.875% Notes due 2005. Total debt of $5,270
million at December 31, 2001 was $353 million, or 6 percent lower than at
December 31, 2000. This decrease resulted from lower levels of commercial paper
outstanding at year-end. The increase in cash used for financing activities also
resulted from lower proceeds from issuances of common stock partially offset by
lower repurchases of common stock.

Liquidity

We manage our businesses to maximize operating cash flows as the principal
source of our liquidity. Operating cash flows were $2.4 billion in 2002. We have
approximately $6.0 billion in working capital (trade receivables and
inventories) and each of our businesses has developed a strategic plan to
further improve working capital turnover in 2003 to increase operating cash
flows. Considering the current economic environment in which each of our
businesses operate and our business plans and strategies, including our focus on
cost reduction and productivity initiatives, we believe that our operating cash
flows will remain our principal source of liquidity. In addition to our
operating cash flows and available cash, additional sources of liquidity include
committed credit lines, access to the public debt markets using debt securities
and commercial paper, as well as our ability to sell trade accounts receivables.

A source of liquidity is our short-term borrowings in the commercial paper
market. Our ability to access the commercial paper market and the related cost
of these borrowings is affected by the strength of our credit ratings and our $2
billion committed bank revolving credit facility (Revolving Credit Facility).
Our credit ratings are periodically reviewed by the major credit rating
agencies. Our current ratings as provided by Moody's 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 credit rating agencies reflect a "negative outlook" due
principally to the lower operating results for our Aerospace segment due to the
depressed market conditions in the commercial air transport industry. The
"negative outlook" ratings have not impaired, nor do we expect it to impair, our
access to the commercial paper markets.

We may from time to time issue unsecured short-term promissory notes in the
commercial paper market. The commercial paper notes may bear interest or may be
sold at a discount and have a maturity of not more than 364 days from date of
issuance. Borrowings under the commercial paper program are available for
general corporate purposes. There was $201 and $3 million of commercial paper
outstanding at year-end 2002 and 2001, respectively.

                                                                              33

We maintain a Revolving Credit Facility which is comprised of (a) a $1 billion
Five-Year Credit Agreement terminating in December 2004; and, (b) a $1 billion
364-Day Credit Agreement terminating on November 26, 2003. If the credit
facility is drawn, any outstanding balance on November 26, 2003 may be converted
to a one-year term loan at our option. The Revolving Credit Facility was
established principally to support our commercial paper program, but the
Revolving Credit Facility is available to us should our access to the commercial
paper market be impaired or eliminated. There are no financial covenants under
the Revolving Credit Facility and it does not contain any credit ratings
downgrade triggers that would accelerate the maturity of our indebtedness. We
had no balance outstanding under the Revolving Credit Facility at December 31,
2002. See Note 15 of Notes to Financial Statements for details of long-term debt
and a description of our Revolving Credit Facility.

We also have a shelf registration statement filed with the Securities and
Exchange Commission which allows us to issue up to $3 billion in debt
securities, common stock and preferred stock that may be offered in one or more
offerings on terms to be determined at the time of the offering. Net proceeds of
any offering would be used for general corporate purposes, including repayment
of existing indebtedness, capital expenditures and acquisitions.

We also sell interests in designated pools of trade accounts receivables to
third parties. The sold receivables are over-collateralized by $120 million at
December 31, 2002 and we retain a subordinated interest in the pool of
receivables representing that over-collateralization as well as an undivided
interest in the balance of the receivable pools. New receivables are sold under
the agreement as previously sold receivables are collected. The retained
interests in the receivables are shown at the amounts expected to be collected
by us, and such carrying value approximates the fair value of our retained
interests. The sold receivables were $500 million at both December 31, 2002 and
2001.

Our principal future cash requirements will be to fund capital expenditures,
debt repayments, employee benefit obligations, asbestos claims, severance and
exit costs related to repositioning actions taken in 2002 and any strategic
acquisitions. Our total capital expenditures in 2003 are currently projected at
approximately $700 million which represents a slight increase over our 2002
expenditures. These expenditures are primarily intended for maintenance,
replacement, production capacity expansion and cost reduction. There are no
significant long-term debt repayments scheduled for 2003. Assuming that actual
pension plan returns are consistent with our assumed rate of return in 2003 and
interest rates remain constant, we would not be required to make any
contributions to our U.S. pension plans in 2003. Cash expenditures for severance
and other exit costs necessary to execute the remaining 2002 repositioning
actions will approximate $350 million in 2003. Assuming the successful
completion of ongoing negotiations regarding asbestos related claims, we expect
our cash expenditures for asbestos claims before insurance recoveries in 2003 to
be approximately $610 million. Based on these assumptions, we believe that our
existing cash and 2003 operating cash flows will be sufficient to meet these
needs. However, there is no assurance that ongoing negotiations will be
successfully completed. See Asbestos Matters in Note 21 of Notes to Financial
Statements for further discussion.

We continuously assess the relative strength of each business in our portfolio
as to strategic fit, market position, profit and cash flow contribution in order
to upgrade our combined portfolio and identify business units that will most
benefit from increased investment. We identify acquisition candidates that will
further our strategic plan and strengthen our existing core businesses. We also
identify business units that do not fit into our long-term strategic plan based
on their market position, relative profitability or growth potential. These
business units are considered for potential divestiture, restructuring or other
repositioning actions subject to regulatory constraints. In 2002, we realized
$183 million in cash proceeds from sales of non-strategic businesses. Total
proceeds in 2002, including cash and investment securities, were approximately
$435 million.

We believe that our operating cash flows will be sufficient to meet our future
cash needs. Our available cash, committed credit lines, access to the public
debt markets using debt securities and commercial paper, as well as our ability
to sell trade accounts receivables, provide additional sources of short-term and
long-term liquidity to fund current operations and future investment
opportunities. Based on our current financial position and expected economic
performance, we do not believe that our liquidity will be adversely impacted by
an inability to access our sources of financing.

34

Contractual Obligations and Probable Asbestos Payments

Following is a summary of our contractual obligations and probable asbestos
payments at December 31, 2002:

                                              Payments by Period
                               -----------------------------------------------
                                                   2004-    2006-
(Dollars in millions)           Total     2003     2005     2007    Thereafter
- ------------------------------------------------------------------------------
                                                       
Long-term debt, including
   capitalized leases(1) ...   $ 4,828   $  109   $  955   $1,255     $2,509
Minimum operating lease
   payments ................     1,374      310      469      264        331
Purchase obligations(2) ....     2,605      708      853      366        678
Probable asbestos related
   liability payments(3) ...     3,310      610    1,175      656        869
- ------------------------------------------------------------------------------
                                12,117    1,737    3,452    2,541      4,387
- ------------------------------------------------------------------------------
Asbestos insurance
   recoveries(4) ...........    (1,956)    (277)    (941)    (421)      (317)
- ------------------------------------------------------------------------------
                               $10,161   $1,460   $2,511   $2,120     $4,070
==============================================================================

(1)  Assumes all long-term debt is outstanding until scheduled maturity.

(2)  Purchase obligations are entered into with various vendors in the normal
     course of business and are consistent with our expected requirements.

(3)  These amounts are estimates of probable asbestos related cash payments
     based on the terms and conditions, including evidentiary requirements,
     specified in the definitive agreements or agreements in principle and
     pursuant to Trust Distribution Procedures. Projecting future events is
     subject to many uncertainties that could cause the NARCO related asbestos
     liabilities to be higher or lower than those projected and recorded. There
     is no assurance that ongoing settlement negotiations will be successfully
     completed, that a plan of reorganization will be proposed or confirmed,
     that insurance recoveries will be timely or whether there will be any NARCO
     related asbestos claims beyond 2018. See Asbestos Matters in Note 21 of
     Notes to Financial Statements.

(4)  These amounts represent probable insurance recoveries through 2018. See
     Asbestos Matters in Note 21 of Notes to Financial Statements.

Off-Balance Sheet Arrangements

Following is a summary of our off-balance sheet arrangements:

Guarantees

We have issued or are a party to the following direct and indirect guarantees at
December 31, 2002:

                                            Maximum
                                           Potential
                                             Future
(Dollars in millions)                       Payments
- ----------------------------------------------------
                                           
Operating lease residual values ........      $340
Other third parties' financing .........       181
Unconsolidated affiliates' financing ...        37
Customer and vendor financing ..........        29
- ----------------------------------------------------
                                              $587
====================================================

In connection with our disposition of BCVS we guaranteed $172 million of its
debt (included in other third parties' financing). Any payment we might make
under this guarantee is recoverable from the acquirer of BCVS, whose payment is
backed by a letter of credit issued by a commercial bank.

At December 31, 2002, no amounts were recorded related to these guarantees. We
do not expect that these guarantees will have a material adverse effect on our
consolidated results of operations, financial position or liquidity.

In connection with the disposition of certain businesses and facilities we have
indemnified the purchasers for the expected cost of remediation of environmental
contamination, if any, existing on the date of disposition. Such expected costs
are accrued when environmental assessments are made or remedial efforts are
probable and the costs can be reasonably estimated.

Retained Interests in Factored Pools of Trade Accounts Receivables

As a source of liquidity, we sell interests in designated pools of trade
accounts receivables to third parties. The sold receivables ($500 million at
December 31, 2002) are over-collateralized and we retain a subordinated interest
in the pool of receivables representing that over-collateralization as well as
an undivided interest in the balance of the receivables pools. The
over-collateralization 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, 2002, our retained
subordinated and undivided interests at risk were $120 and $291 million,
respectively. Based on the underlying credit quality of the receivables placed
into the designated pools of receivables being sold, we do not expect that any
losses related to our retained interests at risk will have a material adverse
effect on our consolidated results of operations, financial position or
liquidity.

Variable Interest Entities

We have entered into agreements to lease land, equipment and buildings.
Principally all of our operating leases have initial terms of up to 25 years and
some contain renewal options subject to customary conditions. At any time during
the terms of some of our leases, we may at our option purchase the leased assets
for amounts that approximate fair value. In certain instances, to obtain
favorable financing terms from lessors, we used variable interest entities as
defined in Financial Accounting Standards Board Interpretation No. 46 (FIN 46)
to finance leased property. At December 31, 2002, we were leasing aircraft,
equipment, land and buildings with related liabilities of approximately $320
million on which we provided residual value guarantees on the leased assets of
approximately $265 million. Pursuant to FIN 46 we must consolidate all variable
interest entities in which we are the primary beneficiary no later than July 1,
2003. Minimum operating lease payments are reflected in the table of contractual
obligations and residual value guarantees are reflected in the table of
guarantees. We do not expect any of our off-balance sheet arrangements to have a
material adverse effect on our consolidated results of operations, financial
position or liquidity.

                                                                              35

Environmental Matters

We are subject to various federal, state and local government requirements
relating to the protection of employee health and safety and the environment. We
believe that, as a general matter, our policies, practices and procedures are
properly designed to prevent unreasonable risk of environmental damage and
personal injury to our employees and employees of our customers and that our
handling, manufacture, use and disposal of hazardous or toxic substances are in
accord with environmental laws and regulations. However, mainly because of past
operations and operations of predecessor companies, we, like other companies
engaged in similar businesses, have incurred remedial response and voluntary
cleanup costs for site contamination and are a party to lawsuits and claims
associated with environmental matters, including past production of products
containing toxic substances. Additional lawsuits, claims and costs involving
environmental matters are likely to continue to arise in the future.

With respect to environmental matters involving site contamination, we
continually conduct studies, individually at our owned sites, and jointly as a
member of industry groups at non-owned sites, to determine the feasibility of
various remedial techniques to address environmental matters. It is our policy
(see Note 1 of Notes to Financial Statements) to record appropriate liabilities
for environmental matters when environmental assessments are made or remedial
efforts or damage claim payments are probable and the costs can be reasonably
estimated. With respect to site contamination, the timing of these accruals is
generally no later than the completion of feasibility studies. We expect to fund
expenditures for these matters from operating cash flow. The timing of cash
expenditures depends on a number of factors, including the timing of litigation
and settlements of personal injury and property damage claims, regulatory
approval of cleanup projects, remedial techniques to be utilized and agreements
with other parties.

Remedial response and voluntary cleanup expenditures were $81, $82 and $75
million in 2002, 2001 and 2000, respectively, and are currently estimated to be
approximately $75 million in 2003. We expect to fund such expenditures from
operating cash flow.

Remedial response and voluntary cleanup costs charged against pretax earnings
were $60, $152 and $110 million in 2002, 2001 and 2000, respectively. At
December 31, 2002 and 2001, the recorded liability for environmental matters was
$435 and $456 million, respectively. In addition, in both 2002 and 2001 we
incurred operating costs for ongoing businesses of approximately $75 million
relating to compliance with environmental regulations.

Although we do not currently possess sufficient information to reasonably
estimate the amounts of liabilities to be recorded upon future completion of
studies, litigation or settlements, and neither the timing nor the amount of the
ultimate costs associated with environmental matters can be determined, they
could be material to our consolidated results of operations. However,
considering our past experience and existing reserves, we do not expect that
environmental matters will have a material adverse effect on our consolidated
financial position.

See Note 3 of Notes to Financial Statements for a discussion of our legal and
environmental charges and Note 21 of Notes to Financial Statements for a
discussion of our commitments and contingencies, including those related to
environmental matters and toxic tort litigation.

Financial Instruments

As a result of our global operating and financing activities, we are exposed to
market risks from changes in interest and foreign currency exchange rates and
commodity prices, which may adversely affect our operating results and financial
position. We minimize our risks from interest and foreign currency exchange rate
and commodity price fluctuations through our normal operating and financing
activities and, when deemed appropriate, through the use of derivative financial
instruments. We do not use derivative financial instruments for trading or other
speculative purposes and do not use leveraged derivative financial instruments.
A summary of our accounting policies for derivative financial instruments is
included in Note 1 of Notes to Financial Statements.

We conduct our business on a multinational basis in a wide variety of foreign
currencies. Our exposure to market risk for changes in foreign currency exchange
rates arises from international financing activities between subsidiaries,
foreign currency denominated monetary assets and liabilities and anticipated
transactions arising from international trade. Our objective is to preserve the
economic value of cash flows in non-functional currencies. We attempt to have
all transaction exposures hedged with natural offsets to the fullest extent
possible and, once these opportunities have been exhausted, through foreign
currency forward and option agreements with third parties. Our principal
currency exposures relate to the Euro, the British pound, the Canadian dollar,
and the U.S. dollar.

Our exposure to market risk from changes in interest rates relates primarily to
our debt obligations. As described in Notes 15 and 17 of Notes to Financial
Statements, we issue both fixed and variable rate debt and use interest rate
swaps to manage our exposure to interest rate movements and reduce overall
borrowing costs.

Financial instruments, including derivatives, expose us to counterparty credit
risk for nonperformance 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-

36

parties, and procedures to monitor concentrations of credit risk. Our
counterparties are substantial investment and commercial banks with significant
experience using such derivative instruments. We monitor the impact of market
risk on the fair value and cash flows of our derivative and other financial
instruments considering reasonably possible changes in interest and currency
exchange rates and restrict the use of derivative financial instruments to
hedging activities.

The following table illustrates the potential change in fair value for interest
rate sensitive instruments based on a hypothetical immediate
one-percentage-point increase in interest rates across all maturities, the
potential change in fair value for foreign exchange rate sensitive instruments
based on a 10 percent increase in U.S. dollar per local currency exchange rates
across all maturities, and the potential change in fair value of contracts
hedging commodity purchases based on a 20 percent decrease in the price of the
underlying commodity across all maturities at December 31, 2002 and 2001.

                                                                                   Estimated
                                                                                   Increase
                                                 Face or                         (Decrease)
                                                Notional   Carrying     Fair      In Fair
(Dollars in millions)                            Amount    Value(1)   Value(1)      Value
- --------------------------------------------------------------------------------------------
                                                                        
December 31, 2002
Interest Rate Sensitive Instruments
Long-term debt (including current
   maturities)(2) ....................           $(4,764)   $(4,812)   $(5,261)     $(247)
Interest rate swap agreements ................     1,132         76         76        (40)
Foreign Exchange Rate Sensitive Instruments
Foreign currency exchange contracts(3) .......     1,203         (8)        (8)       (36)
Commodity Price Sensitive Instruments
Forward commodity contracts(4) ...............        --          5          5        (10)
December 31, 2001
Interest Rate Sensitive Instruments
Long-term debt (including current
   maturities)(2) ............................   $(5,133)   $(5,121)   $(5,407)     $(250)
Interest rate swap agreements ................     1,096         (5)        (5)       (37)
Foreign Exchange Rate Sensitive Instruments
Foreign currency exchange contracts(3) .......     1,507         (6)        (6)        (8)
Commodity Price Sensitive Instruments
Forward commodity contracts(4) ...............        --         (6)        (6)        (4)

(1)  Asset or (liability).

(2)  Excludes capitalized leases.

(3)  Changes in the fair value of foreign currency exchange contracts are offset
     by changes in the fair value or cash flows of underlying hedged foreign
     currency transactions.

(4)  Changes in the fair value of forward commodity contracts are offset by
     changes in the cash flows of underlying hedged commodity transactions.

The above discussion of our procedures to monitor market risk and the estimated
changes in fair value resulting from our sensitivity analyses are
forward-looking statements of market risk assuming certain adverse market
conditions occur. Actual results in the future may differ materially from these
estimated results due to actual developments in the global financial markets.
The methods used by us to assess and mitigate risk discussed above should not be
considered projections of future events.

OTHER MATTERS

Litigation

See Note 21 of Notes to Financial Statements for a discussion of litigation
matters.

Critical Accounting Policies

The preparation of our consolidated financial statements in accordance with
generally accepted accounting principles is based on the selection and
application of accounting policies that require us to make significant estimates
and assumptions about the effect of matters that are inherently uncertain. We
consider the accounting policies discussed below to be critical to the
understanding of our financial statements. Actual results could differ from our
estimates and assumptions, and any such differences could be material to our
consolidated financial statements.

We have discussed the selection, application and disclosure of these critical
accounting policies with the Audit Committee of our Board of Directors. We did
not initially adopt any accounting policies with a material impact during 2002
other than the required adoption of SFAS No. 142 (see Note 1 of Notes to
Financial Statements for additional details).

Contingent Liabilities

We are subject to a number of lawsuits, investigations and claims (some of which
involve substantial dollar amounts) that arise out of the conduct of our global
business operations. These contingencies relate to product liabilities,
including asbestos, commercial transactions, government contracts and
environmental health and safety matters. We recognize a liability for any
contingency that is probable of occurrence and reasonably estimable. We
continually assess the likelihood of any adverse judgments or outcomes to our
contingencies, as well as potential ranges of probable losses, and recognize a
liability, if any, for these contingencies based on a careful analysis of each
individual issue with the assistance of outside legal counsel and other experts.
Such analysis includes making judgments concerning matters such as the costs
associated with environmental matters, the outcome of negotiations, the number
of future asbestos claims and the impact of evidentiary requirements. Because
most contingencies are resolved over long periods of time, liabilities may
change in the future due to new developments or changes in our settlement
strategy. For information on our contingencies, including recognized
liabilities, see Notes 1 and 21 of Notes to Financial Statements.

                                                                             37

Insurance for Asbestos Related Liabilities

Upon recognizing a liability for asbestos related matters, we recorded asbestos
related insurance recoveries that are deemed probable. We have made judgments
concerning insurance coverage that we believe are reasonable and consistent with
our historical dealings with our insurers, our knowledge of any pertinent
solvency issues surrounding insurers and various judicial determinations
relevant to our insurance programs. We have approximately $2 billion in
insurance coverage remaining that can be specifically allocated to NARCO related
asbestos liability. We also have $2 billion in coverage remaining for the Bendix
related asbestos liability. This insurance is with both the domestic insurance
market and the London excess market. While the substantial majority of our
insurance carriers are solvent, some of our individual carriers are insolvent,
which has been considered in our analysis of probable recoveries. Some of our
insurance carriers have challenged our right to enter into settlement agreements
resolving all NARCO related asbestos claims against Honeywell. However, we
believe there is no factual or legal basis for such challenges and that it is
probable that we will prevail in the resolution of, or in any litigation that is
brought regarding these disputes and have recognized approximately $900 million
in probable insurance recoveries from these carriers. Based on our analysis, we
have recorded asbestos related insurance recoveries that are deemed probable
through 2018 of approximately $2.0 billion. Projecting future events is subject
to various uncertainties that could cause the insurance recovery on asbestos
related liabilities to be higher or lower than that projected and recorded.
Given the inherent uncertainty in making future projections, we reevaluate our
projections concerning our probable insurance recoveries in light of any changes
to the projected liability, our recovery experience or other relevant factors
that may impact future insurance recoveries. See Asbestos Matters in Note 21 of
Notes to Financial Statements.

Defined Benefit Pension Plans

We maintain defined benefit pension plans covering a majority of our employees
and retirees. For financial reporting purposes, net periodic pension cost
(income) is calculated based upon a number of actuarial assumptions including a
discount rate for plan obligations and an assumed rate of return on plan assets.
We consider current market conditions, including changes in investment returns
and interest rates, in making these assumptions. We determine the expected
long-term rate of return on plan assets based on the building block method which
consists of aggregating the expected rates of return for each component of the
plans' asset mix. We use historic plan asset returns combined with current
market conditions to estimate the rate of return. The expected rate of return on
plan assets is a long-term assumption and generally does not change annually.
The discount rate reflects the market rate for high-quality fixed income debt
instruments on our annual measurement date (December 31) and is subject to
change each year. Changes in net periodic pension cost (income) may occur in the
future due to changes in these assumptions resulting from economic events. For
example, holding all other assumptions constant, a one percentage point increase
or decrease in the assumed rate of return on plan assets would decrease or
increase, respectively, 2003 net periodic pension expense by approximately $100
million. Likewise, a one-quarter percentage point increase or decrease in the
discount rate would decrease or increase, respectively, 2003 net periodic
pension expense by approximately $40 million.

The key assumptions used in developing our 2002 net periodic pension income was
a 10 percent expected return on plan assets and a 7.25 percent discount rate.
These assumptions were consistent with our assumptions used to develop 2001 net
periodic pension income except that the discount rate was reduced by one-half
percentage point for 2002 due to financial market rates at December 31, 2001.
Net periodic pension income in 2002 was lower by $163 million compared with
2001. Net periodic pension expense for 2003 is expected to be $174 million, a
$321 million reduction from 2002, primarily as a result of a lower
market-related value of plan assets, a reduction in the discount rate from 7.25
to 6.75 percent, a reduction in the assumed rate of return on plan assets from
10 to 9 percent, and the systematic recognition of unrecognized net losses
principally resulting from actual plan asset returns below assumed rates of
return. Since the year 2000, actual plan asset returns have been less than our
assumed rate of return on plan assets contributing to unrecognized net losses of
$3.8 billion at December 31, 2002. These unrecognized losses will be
systematically recognized as an increase in future net periodic pension expense
in accordance with Statement of Financial Accounting Standards No. 87,
"Employers Accounting for Pensions" (SFAS No. 87). Under SFAS No. 87, we use the
market-related value of plan assets reflecting changes in the fair value over a
three-year period. Further, unrecognized losses in excess of 10 percent of the
greater of the market-related value of plan assets or the plans' projected
benefit obligation are recognized over a six-year period.

Due to the continued poor performance of the equity markets throughout 2002, we
made voluntary contributions of $830 million ($700 million in Honeywell common
stock and $130 million in cash) to our U. S. pension plans in 2002. Future plan
contributions are dependent upon actual plan asset returns and interest rates.
Assuming that actual plan returns are consistent with our assumed plan return of
9 percent in 2003 and beyond, and that interest rates remain constant, we would
not be required to make any contributions in 2003.

SFAS No. 87 requires recognition 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.

38

Based on the December 31, 2002 plan asset values of $3.1 billion and an
accumulated benefit obligation of $4.0 billion, we recognized an additional
minimum pension liability resulting in a decrease in Accumulated Other Nonowner
Changes in Shareowners' Equity of approximately $606 million after-tax in 2002.
Equity market returns and interest rates significantly impact the funded status
of our pension plans. Based on future plan asset performance and interest rates,
additional charges to equity might be required.

Long-Lived Assets (including Tangible and Definite-Lived Intangible Assets)

To conduct our global business operations and execute our business strategy, we
acquire tangible and intangible assets. We periodically evaluate the
recoverability of the carrying amount of our long-lived assets (including
property, plant and equipment and definite-lived intangible assets) whenever
events or changes in circumstances indicate that the carrying amount of a
long-lived asset group may not be fully recoverable. These events or changes in
circumstances include business plans and forecasts, economic or competitive
positions within an industry, as well as current operating performance and
anticipated future performance based on a business' competitive position. An
impairment is assessed when the undiscounted expected future cash flows derived
from an asset are less than its carrying amount. Impairment losses are measured
as the amount by which the carrying value of a long-lived asset exceeds its fair
value and are recognized in earnings. We continually apply our best judgment
when applying the impairment rules to determine the timing of the impairment
test, the undiscounted cash flows used to assess impairment, and the fair value
of an impaired long-lived asset group. The dynamic economic environment in which
each of our businesses operate and the resulting assumptions used to estimate
future cash flows impact the outcome of all impairment tests. For information on
recognized impairment charges see the repositioning, litigation, business
impairment and other charges section of this MD&A.

Sales Recognition on Long-Term Contracts

Sales under long-term contracts (primarily in our Aerospace and Automation and
Control Solutions segments) are recorded on a percentage-of-completion method.
This requires us to make judgments in estimating contract revenues, contract
costs and progress toward completion. These judgments form the basis for our
determinations regarding overall contract value, contract profitability and
timing of revenue recognition. Revenue and cost estimates are monitored on an
ongoing basis and revised based on changes in circumstances. Anticipated losses
on long-term contracts are recognized when such losses become evident.

Aerospace Customer Incentives

Similar to most suppliers to commercial aircraft manufacturers and airlines, we
offer sales incentives to commercial aircraft manufacturers and airlines in
connection with their selection of our products. These incentives may consist of
free products, credits, discounts or upfront cash payments. The cost of these
incentives is recognized in the period incurred unless the incentive is subject
to recovery through a long-term product maintenance requirement mandated by the
Federal Aviation Administration for certified replacement equipment and service.
Amounts capitalized at December 31, 2002, 2001 and 2000 were $662, $607 and $507
million, respectively, and are being recognized over the estimated minimum life
of the aircraft (up to 25 years) as a reduction in future sales or increases in
cost of goods sold based on the type of incentive granted. We routinely evaluate
the recoverability of these amounts based on forecasted replacement equipment
sales over the estimated minimum life of the aircraft. For additional
information see Notes 1 and 13 of Notes to Financial Statements.

Sales to the U.S. Government

Sales to the U.S. Government, acting through its various departments and
agencies and through prime contractors, amounted to $2,277, $2,491 and $2,219
million in 2002, 2001 and 2000, respectively. This included sales to the
Department of Defense (DoD), as a prime contractor and subcontractor, of $1,833,
$1,631 and $1,548 million in 2002, 2001 and 2000, respectively. Sales to the DoD
accounted for 8.2, 6.9 and 6.2 percent of our total sales in 2002, 2001 and
2000, respectively. U.S. defense spending increased in 2002 and is also expected
to increase in 2003.

Backlog

Our total backlog at year-end 2002 and 2001 was $7,332 and $7,178 million,
respectively. We anticipate that approximately $6,194 million of the 2002
backlog will be filled in 2003. We believe that backlog is not necessarily a
reliable indicator of our future sales because a substantial portion of the
orders constituting this backlog may be canceled 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. 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
accounting pronouncements.

                                                                              39

                      CONSOLIDATED STATEMENT OF OPERATIONS
                          Honeywell International Inc.

                                                                     Years Ended December 31,
                                                                   ---------------------------
(Dollars in Millions, Except Per Share Amounts)                      2002      2001      2000
- ----------------------------------------------------------------------------------------------
                                                                              
Net sales ......................................................   $22,274   $23,652   $25,023
- ----------------------------------------------------------------------------------------------
Costs, expenses and other
   Cost of goods sold ..........................................    17,615    20,125    18,673
   Selling, general and administrative expenses ................     2,757     3,064     3,134
   (Gain) loss on sale of non-strategic businesses .............       124        --      (112)
   Asbestos related litigation charges, net of insurance .......     1,548       159         7
   Business impairment charges .................................       877       145       410
   Equity in (income) loss of affiliated companies .............       (42)      193        89
   Other (income) expense ......................................        (4)      (17)      (57)
   Interest and other financial charges ........................       344       405       481
- ----------------------------------------------------------------------------------------------
                                                                    23,219    24,074    22,625
- ----------------------------------------------------------------------------------------------
Income (loss) before taxes .....................................      (945)     (422)    2,398
Tax expense (benefit) ..........................................      (725)     (323)      739
- ----------------------------------------------------------------------------------------------
Net income (loss) ..............................................   $  (220)  $   (99)  $ 1,659
==============================================================================================
Earnings (loss) per share of common stock--basic ...............   $ (0.27)  $ (0.12)  $  2.07
==============================================================================================
Earnings (loss) per share of common stock--assuming dilution ...   $ (0.27)  $ (0.12)  $  2.05
==============================================================================================

The Notes to Financial Statements are an integral part of this statement.

40

                           CONSOLIDATED BALANCE SHEET
                          Honeywell International Inc.

                                                                    December 31,
                                                                 -----------------
(Dollars in Millions)                                              2002      2001
- ----------------------------------------------------------------------------------
                                                                     
ASSETS
Current assets:
   Cash and cash equivalents .................................   $ 2,021   $ 1,393
   Accounts, notes and other receivables .....................     3,264     3,440
   Inventories ...............................................     2,953     3,355
   Deferred income taxes .....................................     1,296       972
   Other current assets ......................................       661       734
- ----------------------------------------------------------------------------------
      Total current assets ...................................    10,195     9,894
Investments and long-term receivables ........................       624       466
Property, plant and equipment -- net .........................     4,055     4,933
Goodwill -- net ..............................................     5,698     5,441
Other intangible assets -- net ...............................     1,074       915
Insurance recoveries for asbestos related liabilities ........     1,636        --
Deferred income taxes ........................................       533       145
Prepaid pension benefit cost .................................     2,675     1,643
Other assets .................................................     1,069       789
- ----------------------------------------------------------------------------------
      Total assets ...........................................   $27,559   $24,226
==================================================================================
LIABILITIES
Current liabilities:
   Accounts payable ..........................................   $ 1,912   $ 1,862
   Short-term borrowings .....................................        60       120
   Commercial paper ..........................................       201         3
   Current maturities of long-term debt ......................       109       416
   Accrued liabilities .......................................     4,292     3,819
- ----------------------------------------------------------------------------------
      Total current liabilities ..............................     6,574     6,220
Long-term debt ...............................................     4,719     4,731
Deferred income taxes ........................................       419       875
Postretirement benefit obligations other than pensions .......     1,684     1,845
Asbestos related liabilities .................................     2,700        --
Other liabilities ............................................     2,538     1,385

CONTINGENCIES
SHAREOWNERS' EQUITY
Capital -- common stock -- Authorized 2,000,000,000 shares
   (par value $1 per share):
   -- issued 957,599,900 shares ..............................       958       958
   -- additional paid-in capital .............................     3,409     3,015
Common stock held in treasury, at cost:
   2002 -- 103,106,750 shares; 2001 -- 142,633,419 shares ....    (3,783)   (4,252)
Accumulated other nonowner changes ...........................    (1,109)     (835)
Retained earnings ............................................     9,450    10,284
- ----------------------------------------------------------------------------------
      Total shareowners' equity ..............................     8,925     9,170
- ----------------------------------------------------------------------------------
      Total liabilities and shareowners' equity ..............   $27,559   $24,226
==================================================================================

The Notes to Financial Statements are an integral part of this statement.

                                                                              41

                      CONSOLIDATED STATEMENT OF CASH FLOWS
                          Honeywell International Inc.

                                                                            Years Ended December 31,
                                                                           --------------------------
(Dollars in Millions)                                                       2002      2001      2000
- -----------------------------------------------------------------------------------------------------
                                                                                     
CASH FLOWS FROM OPERATING ACTIVITIES
   Net income (loss) ...................................................   $ (220)  $   (99)  $ 1,659
   Adjustments to reconcile net income (loss) to net cash provided
      by operating activities:
         (Gain) loss on sale of non-strategic businesses ...............      124        --      (112)
         Repositioning and other charges ...............................      634     2,491       549
         Litton settlement payment, net of tax refund of $58 in 2002 ...     (162)     (220)       --
         Asbestos related litigation charges, net of insurance .........    1,548       159         7
         Business impairment charges ...................................      877       145       410
         Depreciation ..................................................      671       724       791
         Goodwill and indefinite-lived intangible asset amortization ...       --       204       206
         Undistributed earnings of equity affiliates ...................      (55)       (1)       (4)
         Deferred income taxes .........................................     (793)     (456)      414
         Net taxes paid on sales of businesses .........................       --       (42)      (97)
         Retirement benefit plans ......................................     (408)     (380)     (509)
         Other .........................................................      (46)     (178)     (201)
         Changes in assets and liabilities, net of the effects of
            acquisitions and divestitures:
               Accounts and notes receivable ...........................      181       651      (560)
               Inventories .............................................      333       168       (45)
               Other current assets ....................................       51        51       (73)
               Accounts payable ........................................       63      (400)      186
               Accrued liabilities .....................................     (418)     (821)     (632)
- -----------------------------------------------------------------------------------------------------
                  Net cash provided by operating activities ............    2,380     1,996     1,989
- -----------------------------------------------------------------------------------------------------
CASH FLOWS FROM INVESTING ACTIVITIES
   Expenditures for property, plant and equipment ......................     (671)     (876)     (853)
   Proceeds from disposals of property, plant and equipment ............       41        46       127
   Decrease in investments .............................................       91        --        88
   (Increase) in investments ...........................................       --        --        (3)
   Cash paid for acquisitions ..........................................     (520)     (122)   (2,523)
   Proceeds from sales of businesses ...................................      183        44       467
   Decrease (increase) in short-term investments .......................        6         2       (17)
- -----------------------------------------------------------------------------------------------------
                  Net cash (used for) investing activities .............     (870)     (906)   (2,714)
- -----------------------------------------------------------------------------------------------------
CASH FLOWS FROM FINANCING ACTIVITIES
   Net (decrease) increase in commercial paper .........................      198    (1,189)     (831)
   Net (decrease) increase in short-term borrowings ....................      (46)        9      (191)
   Proceeds from issuance of common stock ..............................       41        79       296
   Proceeds from issuance of long-term debt ............................        6     1,237     1,810
   Payments of long-term debt ..........................................     (428)     (390)     (389)
   Repurchases of common stock .........................................       --       (30)     (166)
   Cash dividends on common stock ......................................     (614)     (609)     (599)
   Other ...............................................................      (39)       --        --
- -----------------------------------------------------------------------------------------------------
                  Net cash (used for) financing activities .............     (882)     (893)      (70)
- -----------------------------------------------------------------------------------------------------
Net increase (decrease) in cash and cash equivalents ...................      628       197      (795)
Cash and cash equivalents at beginning of year .........................    1,393     1,196     1,991
- -----------------------------------------------------------------------------------------------------
Cash and cash equivalents at end of year ...............................   $2,021   $ 1,393   $ 1,196
=====================================================================================================

The Notes to Financial Statements are an integral part of this statement.

42

                 CONSOLIDATED STATEMENT OF SHAREOWNERS' EQUITY
                          Honeywell International Inc.

                                             Common                      Common Stock     Accumulated
                                         Stock Issued    Additional   Held in Treasury      Other                   Total
(In Millions, Except Per               ---------------    Paid-in    ----------------    Non-owner    Retained   Shareowners'
    Share Amounts)                      Shares   Amount   Capital     Shares    Amount     Changes     Earnings    Equity
- ----------------------------------------------------------------------------------------------------------------------------
                                                                                              
Balance at December 31, 1999.........    957.6    $958      $2,318     (162.4)  $(4,254)    $  (355)     $ 9,932      $8,599
Net income ..........................                                                                      1,659       1,659
Foreign exchange translation
   adjustments ......................                                                          (377)                    (377)
Unrealized holding gain on marketable
   securities .......................                                                             3                        3
                                                                                                                      ------
Nonowner changes in shareowners'
   equity ...........................                                                                                  1,285
Common stock issued for employee
   savings and option plans (including
   related tax benefits of $139).....                          464       16.0       120                                  584
Repurchases of common stock..........                                    (4.3)     (166)                                (166)
Cash dividends on common stock
   ($.75 per share) .................                                                                       (599)       (599)
Other owner changes .................                                     0.4         4                                    4
- ----------------------------------------------------------------------------------------------------------------------------
Balance at December 31, 2000.........    957.6     958       2,782     (150.3)   (4,296)       (729)      10,992       9,707
Net loss.............................                                                                        (99)        (99)
Foreign exchange translation
   adjustments.......................                                                           (51)                     (51)
Minimum pension liability
   adjustment........................                                                           (47)                     (47)
Unrealized holding loss on marketable
   securities........................                                                            (3)                      (3)
Change in fair value of effective cash
   flow hedges ......................                                                            (5)                      (5)
                                                                                                                      ------
Nonowner changes in shareowners'
   equity ...........................                                                                                   (205)
Common stock issued for employee
   savings and option plans (including
   related tax benefits of $38)......                          225        8.1        71                                  296
Repurchases of common stock .........                                    (0.8)      (30)                                 (30)
Cash dividends on common stock
   ($.75 per share) .................                                                                       (609)       (609)
Other owner changes .................                            8        0.4         3                                   11
- ----------------------------------------------------------------------------------------------------------------------------
Balance at December 31, 2001 ........    957.6     958       3,015     (142.6)   (4,252)       (835)      10,284       9,170
Net loss ............................                                                                       (220)       (220)
Foreign exchange translation
   adjustments ......................                                                           310                      310
Minimum pension liability
   adjustment .......................                                                          (606)                    (606)
Change in fair value of effective
   cash flow hedges .................                                                            22                       22
                                                                                                                      ------
Nonowner changes in shareowners'
   equity ...........................                                                                                   (494)
Common stock issued for employee
   savings and option plans (including
   related tax expense of $28) ......                          138        7.7        54                                  192
Common stock contributed to
   pension plans ....................                          286       31.5       414                                  700
Cash dividends on common stock
   ($.75 per share) .................                                                                       (614)       (614)
Other owner changes .................                          (30)        .3         1                                  (29)
- ----------------------------------------------------------------------------------------------------------------------------
Balance at December 31, 2002 ........    957.6    $958      $3,409     (103.1)  $(3,783)    $(1,109)     $ 9,450      $8,925
============================================================================================================================

The Notes to Financial Statements are an integral part of this statement.

                                                                              43

                          NOTES TO FINANCIAL STATEMENTS
                          Honeywell International Inc.

(Dollars in Millions, Except Per Share Amounts)
- --------------------------------------------------------------------------------

NOTE 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Honeywell International Inc. is a diversified 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. The following is a description of the significant accounting policies
of Honeywell International Inc.

Principles of Consolidation

The consolidated financial statements include the accounts of Honeywell
International Inc. and all of its subsidiaries in which a controlling interest
is maintained. All intercompany transactions and balances are eliminated in
consolidation.

Cash and Cash Equivalents

Cash and cash equivalents includes cash on hand and on deposit and highly
liquid, temporary cash investments with an original maturity of three months or
less.

Inventories

Inventories are valued at the lower of cost or market using the first-in,
first-out or the average cost method and the last-in, first-out (LIFO) method
for certain qualifying domestic inventories.

Investments

Investments in affiliates over which we have a significant influence, but not a
controlling interest, are accounted for using the equity method of accounting.
Other investments are carried at market value, if readily determinable, or cost.
All equity investments are periodically reviewed to determine if declines in
fair value below cost basis are other-than-temporary. Significant and sustained
decreases in quoted market prices and a series of historic and projected
operating losses by investees are considered in the review. If the decline in
fair value is determined to be other-than-temporary, an impairment loss is
recorded and the investment is written down to a new cost basis.

Property, Plant and Equipment

Property, plant and equipment are recorded at cost less accumulated
depreciation. For financial reporting, the straight-line method of depreciation
is used over the estimated useful lives of 10 to 40 years for buildings and
improvements and 3 to 15 years for machinery and equipment.

Goodwill and Indefinite-Lived Intangible Assets

Goodwill represents the excess of acquisition costs over the fair value of net
assets of businesses acquired and, prior to January 1, 2002, was amortized on a
straight-line basis over appropriate periods up to 40 years. Effective January
1, 2002, we adopted Statement of Financial Accounting Standards No. 142,
"Goodwill and Other Intangible Assets" (SFAS No. 142). SFAS No. 142 requires
that goodwill and certain other intangible assets having indefinite lives no
longer be amortized to income, but instead be replaced with periodic testing for
impairment. Intangible assets determined to have definite lives will continue to
be amortized over their useful lives. With the adoption of SFAS No. 142, we
reassessed the useful lives and residual values of all acquired intangible
assets to make any necessary amortization period adjustments. Based on that
assessment, an amount related to a trademark in our automotive consumer products
business was determined to be an indefinite-lived intangible asset because it is
expected to generate cash flows indefinitely. There were no other adjustments
made to the amortization period or residual values of other intangible assets.
We also completed our goodwill impairment testing during the three months ended
March 31, 2002 and determined that there was no impairment as of January 1,
2002. Additionally, we have elected to make March 31 the annual impairment
assessment date for our reporting units and will perform additional impairment
tests when events or changes in circumstances occur. See Note 13 for additional
details.

Other Intangible Assets with Determinable Lives

Other intangible assets with determinable lives are amortized on a straight-line
basis over the expected period benefited by future cash inflows up to 25 years.

Long-Lived Assets

We periodically evaluate the recoverability of the carrying amount of long-lived
assets (including property, plant and equipment, and intangible assets with
determinable lives) whenever events or changes in circumstances indicate that
the carrying amount of an asset may not be fully recoverable. We evaluate events
or changes in circumstances based on a number of factors including operating
results, business plans and

44

forecasts, general and industry trends and, economic projections and anticipated
cash flows. An impairment is assessed when the undiscounted expected future cash
flows derived from an asset are less than its carrying amount. Impairment losses
are measured as the amount by which the carrying value of an asset exceeds its
fair value and are recognized in earnings. We also continually evaluate the
estimated useful lives of all long-lived assets and periodically revise such
estimates based on current events.

Sales Recognition

Product and service sales are recognized when persuasive evidence of an
arrangement exists, product delivery has occurred or services have been
rendered, pricing is fixed or determinable, and collection is reasonably
assured. Sales under long-term contracts in the Aerospace and Automation and
Control Solutions segments are recorded on a percentage-of-completion method
measured on the cost-to-cost basis for engineering-type contracts and the
units-of-delivery basis for production-type contracts. Provisions for
anticipated losses on long-term contracts are recorded in full when such losses
become evident. Revenues from contracts with multiple element arrangements are
recognized as each element is earned based on the relative fair value of each
element and when there are no undelivered elements that are essential to the
functionality of the delivered elements. Amounts allocated to each element are
based on its objectively determined fair value, such as the sales price for the
product or service when it is sold separately or competitor prices for similar
products or services.

Aerospace Customer Incentives

We offer sales incentives to commercial aircraft manufacturers and airlines in
connection with their selection of our products. These incentives may consist of
free products, credits, discounts or upfront cash payments. The cost of these
incentives is recognized in the period incurred unless the incentive is subject
to recovery through a long-term product maintenance requirement mandated by the
Federal Aviation Administration for certified replacement equipment and service.
Amounts capitalized at December 31, 2002 and 2001 were $662 and $607 million,
respectively, and are being recognized over the estimated minimum life of the
aircraft (up to 25 years) as a reduction in future sales or increase in cost of
goods sold based on the type of incentive granted. We routinely evaluate the
recoverability of these amounts based on forecasted replacement equipment sales
over the estimated minimum life of the aircraft. 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
caused by past operations, and that do not provide future benefits, are expensed
as incurred. Liabilities are recorded when environmental assessments are made or
remedial efforts are probable and the costs can be reasonably estimated. The
timing of these accruals is generally no later than the completion of
feasibility studies. The liabilities for environmental costs recorded in Accrued
Liabilities and Other Liabilities at December 31, 2002 were $75 and $360
million, respectively, and at December 31, 2001 were $81 and $375 million,
respectively.

Research and Development

Research and development costs for company-sponsored research and development
projects are expensed as incurred. Such costs are classified as part of Cost of
Goods Sold and were $757, $832 and $818 million in 2002, 2001 and 2000,
respectively.

Stock-Based Compensation Plans

We account for our fixed stock option plans under Accounting Principles Board
Opinion No. 25, "Accounting for Stock Issued to Employees" (APB No. 25).
Accordingly, no compensation cost is recognized for our fixed stock option
plans. Statement of Financial Accounting Standards No. 123, "Accounting for
Stock-Based Compensation" (SFAS No. 123) allows, but does not require, companies
to record compensation cost for fixed stock option plans using a fair value
based method. As permitted by SFAS No. 123, we elected to continue to account
for compensation cost for our fixed stock option plans using the intrinsic value
based method under APB No. 25. The following table sets forth pro forma
information as if compensation cost had been determined consistent with the
requirements of SFAS No. 123.

                                                    2002     2001     2000
- ---------------------------------------------------------------------------
                                                            
Net income (loss), as reported..................   $ (220)  $  (99)  $1,659
Deduct: Total stock-based employee
   compensation cost determined under fair
   value method for fixed stock option
   plans, net of related tax effects............      (64)     (85)     (75)
- ---------------------------------------------------------------------------
Pro forma net income (loss).....................   $ (284)  $ (184)  $1,584
===========================================================================
Earnings (loss) per share of common stock:
   Basic-- as reported..........................   $(0.27)  $(0.12)  $ 2.07
===========================================================================
   Basic-- pro forma............................   $(0.35)  $(0.23)  $ 1.98
===========================================================================
Earnings (loss) per share of common stock:
   Assuming dilution -- as reported.............   $(0.27)  $(0.12)  $ 2.05
===========================================================================
   Assuming dilution-- pro forma................   $(0.35)  $(0.23)  $ 1.96
===========================================================================

Foreign Currency Translation

Assets and liabilities of subsidiaries operating outside the United States with
a functional currency other than U.S.

                                                                              45

dollars are translated into U.S. dollars using year-end exchange rates. Sales,
costs and expenses are translated at the average exchange rates effective during
the year. Foreign currency translation gains and losses are included as a
component of Accumulated Other Nonowner Changes. For subsidiaries operating in
highly inflationary environments, inventories and property, plant and equipment,
including related expenses, are remeasured at the exchange rate in effect on the
date the assets were acquired, while monetary assets and liabilities are
remeasured at year-end exchange rates. Remeasurement adjustments for these
operations are included in earnings.

Derivative Financial Instruments

Derivative financial instruments are accounted for under Statement of Financial
Accounting Standards No. 133, "Accounting for Derivative Instruments and Hedging
Activities", as amended (SFAS No. 133). Under SFAS No. 133, all derivatives are
recorded on the balance sheet as assets or liabilities and measured at fair
value. For derivatives designated as hedges of the fair value of assets or
liabilities, the changes in fair values of both the derivatives and the hedged
items are recorded in current earnings. For derivatives designated as cash flow
hedges, the effective portion of the changes in fair value of the derivatives
are recorded in Accumulated Other Nonowner Changes and subsequently recognized
in earnings when the hedged items impact income. Changes in the fair value of
derivatives not designated as hedges and the ineffective portion of cash flow
hedges are recorded in current earnings.

Transfers of Financial Instruments

Sales, transfers and securitization of financial instruments are accounted for
under Statement of Financial Accounting Standards No. 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 our subordinated interests and
undivided interests retained in trade receivables sold is based on the relative
fair values of the interests retained and sold. The carrying value of the
retained interests approximates fair value due to the short-term nature of the
receivable collection period.

Income Taxes

Deferred tax liabilities or assets reflect temporary differences between amounts
of assets and liabilities for financial and tax reporting. Such amounts are
adjusted, as appropriate, to reflect changes in tax rates expected to be in
effect when the temporary differences reverse. A valuation allowance is
established to offset any net deferred tax assets if, based upon the available
evidence, it is more likely than not that some or all of the deferred tax assets
will not be realized.

Earnings Per Share

Basic earnings per share is based on the weighted average number of common
shares outstanding. Diluted earnings per share is based on the weighted average
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 amounts in the financial statements and
related disclosures in the accompanying notes. Actual results could differ from
those estimates. Estimates and assumptions are periodically reviewed and the
effects of revisions are reflected in the consolidated financial statements in
the period they are determined to be necessary.

Reclassifications

Certain prior year amounts have been reclassified to conform with the current
year presentation.

Recent Accounting Pronouncements

In June 2002, the Financial Accounting Standards Board (FASB) issued Statement
of Financial Accounting Standards No. 146, "Accounting for Costs Associated with
Exit or Disposal Activities" (SFAS No. 146), the provisions of which are
effective for any exit or disposal activities initiated by us after December 31,
2002. SFAS No. 146 provides guidance on the recognition and measurement of
liabilities associated with exit or disposal activities and requires that such
liabilities be recognized when incurred. The adoption of the provisions of SFAS
No. 146 will impact the measurement and timing of costs associated with any exit
and disposal activities initiated after December 31, 2002.

In June 2001, the FASB issued Statement of Financial Accounting Standards No.
143, "Accounting for Asset Retirement Obligations" (SFAS No. 143), the
provisions of which are effective for us on January 1, 2003. SFAS No. 143
requires entities to recognize the fair value of a liability for tangible
long-lived asset retirement obligations in the period incurred, if a reasonable
estimate of fair value can be made. We estimate that our adoption of SFAS No.
143 as of January 1, 2003 will result in a cumulative effect expense adjustment
of approximately $35 million.

In November 2002, The FASB issued FASB Interpretation No. 45, "Guarantor's
Accounting and Disclosure Requirements for Guarantees, Including Indirect
Guarantees of Indebtedness of Others" (FIN 45), which expands previously issued
accounting guidance and disclosure requirements for certain guarantees. FIN 45
requires us to recognize an initial liability for the fair value of an
obligation assumed by issuing a guarantee. The disclosure provisions of FIN 45
are

46

effective as of December 31, 2002 (see Note 21 for additional details). The
provisions for initial recognition and measurement of the liability are
effective on a prospective basis for guarantees that are issued or modified
after December 31, 2002. We do not expect the adoption of the provisions of FIN
45 will have a material effect on our consolidated results of operations and
financial position.

In January 2003, the FASB issued FASB Interpretation No. 46, "Consolidation of
Variable Interest Entities" (FIN 46), which requires that the primary
beneficiary of a variable interest entity (VIE) consolidate the VIE. We do not
expect the adoption of the provisions of FIN 46 will have a material effect on
our consolidated results of operations and financial position.

NOTE 2. ACQUISITIONS

We acquired businesses for an aggregate cost of $520, $122 and $2,646 million in
2002, 2001 and 2000, respectively. All our acquisitions were accounted for under
the purchase method of accounting, and accordingly, the assets and liabilities
of the acquired businesses were recorded at their estimated fair values at the
dates of acquisition. Significant acquisitions made in these years are discussed
below.

In October 2002 we acquired Invensys Sensor Systems (ISS) for approximately $416
million in cash with $115 million allocated to tangible net assets, $206 million
allocated to goodwill and $95 million allocated to other intangible assets. ISS
is a global supplier of sensors and controls used in the medical, office
automation, aerospace, HVAC, automotive, off-road vehicle and consumer appliance
industries. ISS is part of our Automation and Control Products business in our
Automation and Control Solutions reportable segment and is expected to
strengthen our product offerings in the high-growth medical and
automotive-onboard segments. ISS had sales of approximately $253 million in
2002.

In February 2000 we acquired Pittway Corporation (Pittway) for approximately
$2.2 billion in cash and the assumption of net debt with $652 million allocated
to tangible net assets, $1.5 billion allocated to goodwill and $17 million
allocated to other intangible assets. Pittway is a manufacturer and distributor
of security and fire systems and other low-voltage products for homes and
buildings. Its systems and products are marketed globally under the Ademco,
Notifier, System Sensor, ADI, Northern Computers and other brand names. Pittway
is part of our Security and Fire Solutions business in our Automation and
Control Solutions reportable segment and gives us access to the higher growth
security and fire systems business and allows us to offer integrated solutions
combining climate controls with security and fire systems. Pittway had sales of
approximately $1.6 billion in 1999.

In connection with all acquisitions in 2002, 2001 and 2000, the amounts recorded
for transaction costs and the costs of integrating the acquired businesses into
Honeywell were not material. The results of operations of all acquired
businesses have been included in the consolidated results of Honeywell from
their respective acquisition dates. The pro forma results for 2002, 2001 and
2000, assuming these acquisitions had been made at the beginning of the year,
would not be materially different from reported results.

NOTE 3. REPOSITIONING, LITIGATION, BUSINESS IMPAIRMENT AND OTHER CHARGES

A summary of repositioning, litigation, business impairment and other charges
follows:

                                                          2002     2001    2000
- --------------------------------------------------------------------------------
                                                                  
Severance ............................................   $  270   $  727   $157
Asset impairments ....................................      121      194    141
Exit costs ...........................................       62       95     40
Reserve adjustments ..................................      (76)    (119)   (46)
- --------------------------------------------------------------------------------
   Total net repositioning charge ....................      377      897    292
- --------------------------------------------------------------------------------
Asbestos related litigation charges, net of
   insurance .........................................    1,548      159      7
Litton litigation settlement .........................       --      440     --
Probable and reasonably estimable legal and
   environmental liabilities .........................       30      249     80
Business impairment charges ..........................      877      145    410
Customer claims and settlements of contract
   liabilities .......................................      152      310     93
Write-offs of receivables, inventories and other
   assets ............................................       60      335     84
Investment impairment charges ........................       15      112     --
Aerospace jet engine contract cancellation ...........       --      100     --
General Electric merger expenses .....................       --       42     --
Debt extinguishment loss .............................       --        6     --
- --------------------------------------------------------------------------------
   Total repositioning, litigation, business
      impairment and other charges ...................   $3,059   $2,795   $966
================================================================================

The following table summarizes the pretax distribution of total repositioning,
litigation, business impairment and other charges by income statement
classification.

                                                          2002     2001    2000
- --------------------------------------------------------------------------------
                                                                   
Cost of goods sold ...................................   $  561   $2,134    $413
Selling, general and administrative expenses .........       45      151      --
Asbestos related litigation charges, net of
   insurance .........................................    1,548      159       7
Business impairment charges ..........................      877      145     410
Equity in (income) loss of affiliated  companies .....       13      200     136
Other (income) expense ...............................       15        6      --
- --------------------------------------------------------------------------------
                                                         $3,059   $2,795    $966
================================================================================

                                                                              47

The following table summarizes the pretax impact of total repositioning,
litigation, business impairment and other charges by reportable business
segment.

                                                          2002     2001    2000
- --------------------------------------------------------------------------------
                                                                   
Aerospace ............................................   $  146   $  895    $ 91
Automation and Control Solutions .....................      212      785     108
Specialty Materials ..................................      976      242     399
Transportation and Power Systems .....................      295      367     263
Corporate ............................................    1,430      506     105
- --------------------------------------------------------------------------------
                                                         $3,059   $2,795    $966
================================================================================

In 2002, we recognized a repositioning charge of $453 million for workforce
reductions across all of our reportable segments and our UOP process technology
joint venture. The charge also related to costs for the planned shutdown and
consolidation of manufacturing plants in our Specialty Materials and Automation
and Control Solutions reportable segments. Severance costs were related to
announced workforce reductions of approximately 8,100 manufacturing and
administrative positions of which approximately 2,900 positions have been
eliminated as of December 31, 2002. These actions are expected to be completed
by December 31, 2003. Asset impairments principally related to manufacturing
plant and equipment held for sale and capable of being taken out of service and
actively marketed in the period of impairment. Exit costs related principally to
incremental costs to exit facilities, including lease termination losses
negotiated or subject to reasonable estimation related mainly to closed
facilities in our Automation and Control Solutions and Specialty Materials
reportable segments. Also, $76 million of previously established severance
accruals were returned to income in 2002, due to fewer employee separations than
originally anticipated and higher than expected voluntary employee attrition
resulting in reduced severance liabilities in our Aerospace, Automation and
Control Solutions and Specialty Materials reportable segments.

In 2001, we recognized a repositioning charge of $1,016 million for the cost of
actions designed to reduce our cost structure and improve our future
profitability. These actions consisted of announced global workforce reductions
of approximately 20,000 manufacturing and administrative positions across all of
our reportable segments, which are substantially complete. The repositioning
charge also included asset impairments and other exit costs related to plant
closures and the rationalization of manufacturing capacity and infrastructure,
principally in our Specialty Materials, Engines, Systems and Services and
Transportation and Power Systems businesses, including the shutdown of our
Turbogenerator product line. Other exit costs consisted of contract
cancellations and penalties, including lease terminations, negotiated or subject
to reasonable estimation. Also, $119 million of previously established accruals,
mainly for severance, were returned to income in 2001 due principally to higher
than expected voluntary employee attrition resulting in reduced severance
liabilities, principally in our Aerospace and Automation and Control Solutions
reportable segments.

In 2000, we recognized a repositioning charge of $338 million related to
announced global workforce reductions across all of our reportable segments,
costs to close a chip package manufacturing plant and related workforce
reductions. The charge also included asset impairments principally associated
with the completion of previously announced plant shutdowns in our Specialty
Materials reportable segment and closure of an affiliate's chemical
manufacturing operations, and other environmental exit costs and period
expenses. The announced workforce reductions consisted of approximately 2,800
manufacturing and administrative positions, which are complete. Asset
impairments were principally related to manufacturing plant and equipment held
for sale and capable of being taken out of service and actively marketed in the
period of impairment. Also, $46 million of previously established accruals,
principally for severance, were returned to income in 2000 due to higher than
expected voluntary employee attrition resulting in reduced severance
liabilities, principally in our Automation and Control Solutions and Aerospace
reportable segments.

The following table summarizes the status of our total repositioning costs.

                                                                        Merger
                                     Severance      Asset       Exit   Fees and
                                       Costs     Impairments   Costs   Expenses    Total
- ----------------------------------------------------------------------------------------
                                                                   
Balance at December 31, 1999 .....     $ 424        $  --       $ 85     $ 58     $  567
- ----------------------------------------------------------------------------------------
2000 charges .....................       157          141         40       --        338
2000 usage .......................      (303)        (141)       (41)     (58)      (543)
Adjustments ......................       (42)          --         (4)      --        (46)
- ----------------------------------------------------------------------------------------
Balance at December 31, 2000 .....       236           --         80       --        316
- ----------------------------------------------------------------------------------------
2001 charges .....................       727          194         95       --      1,016
2001 usage .......................      (364)        (194)       (58)      --       (616)
Adjustments ......................      (115)          --         (4)      --       (119)
- ----------------------------------------------------------------------------------------
Balance at December 31, 2001 .....       484           --        113       --        597
- ----------------------------------------------------------------------------------------
2002 charges .....................       270          121         62       --        453
2002 usage .......................      (355)        (121)       (92)      --       (568)
Adjustments ......................       (74)          --         (2)      --        (76)
- ----------------------------------------------------------------------------------------
Balance at December 31, 2002 .....     $ 325        $  --       $ 81     $ --     $  406
========================================================================================

In 2002, we recognized business impairment charges of $877 million related to
businesses in our Specialty Materials and Automation and Control Solutions
segments, as well as our Friction Materials business. Based on current operating
losses and deteriorating economic conditions in certain chemical and
telecommunications end markets, we performed impairment tests and recognized
impairment charges of $785 million in 2002 principally related to the write-down
of property, plant and equipment held for use in our Nylon System, Performance
Fibers and Metglas Specialty Materials businesses, as well as an

48

Automation and Control Solutions communication business. We also recognized
impairment charges of $92 million related principally to the write-down of
property, plant and equipment of our Friction Materials business, which is
classified as assets held for disposal in Other Current Assets (a plan of
disposal of Friction Materials was adopted in 2001; in January 2003, we entered
into a letter of intent to sell this business to Federal-Mogul Corp. -- See Note
21). In 2002, we recognized asbestos related litigation charges of $1,548
million principally related to costs associated with the potential resolution of
asbestos claims of North American Refractories Company (see Note 21). In 2002,
we also recognized other charges consisting of customer claims and settlements
of contract liabilities of $152 million and write-offs of receivables,
inventories and other assets of $60 million. These other charges related mainly
to our Advanced Circuits business, bankruptcy of a customer in our Aerospace
reportable segment, and customer claims in our Aerospace and Automation and
Control Solutions reportable segments. Additionally, we recognized other charges
consisting of probable and reasonably estimable environmental liabilities of $30
million and write-offs related to an other than temporary decline in the value
of certain equity cost investments of $15 million.

In 2001, we recognized other charges consisting of a settlement of the Litton
Systems, Inc. litigation for $440 million, probable and reasonably estimable
legal and environmental liabilities of $249 million (see Note 21), asbestos
related litigation charges of $159 million (see Note 21), customer claims and
settlements of contract liabilities of $310 million and write-offs of
receivables, inventories, and other assets of $335 million. Our Friction
Materials business was designated as held for disposal, and we recognized an
impairment charge of $145 million related to the write-down of property, plant
and equipment, goodwill and other identifiable intangible assets to their fair
value less costs to sell. We recognized charges of $112 million related to an
other than temporary decline in the value of an equity investment and an equity
investee's loss contract and a $100 million charge for write-off of investments,
including inventory, related to a regional jet engine contract cancellation. We
also recognized $42 million of transaction expenses related to the proposed
merger with General Electric and redeemed our $200 million 5 3/4% dealer
remarketable securities due 2011, resulting in a loss of $6 million.

In 2000, we identified certain business units and manufacturing facilities as
non-core to our business strategy. As a result of this assessment, we
implemented cost reduction initiatives and conducted discussions with potential
acquirers of these businesses and assets. As part of this process, we evaluated
the businesses and assets for possible impairment. As a result of our analysis,
we recognized impairment charges in 2000 of $245 and $165 million principally
related to the write-down of property, plant and equipment, goodwill and other
identifiable intangible assets of our Friction Materials business and a chemical
manufacturing facility, respectively. We recognized other charges consisting of
probable and reasonably estimable environmental liabilities of $80 million,
asbestos related litigation charges of $7 million, customer claims and
settlements of contract liabilities of $93 million and write-offs of
receivables, inventories and other assets of $84 million.

NOTE 4. GAIN (LOSS) ON SALE OF NON-STRATEGIC BUSINESSES

In 2002, we sold the following businesses:

                                                         Pretax       After-tax
                                                       gain (loss)   gain (loss)
- --------------------------------------------------------------------------------
                                                                   
Automation and Control Solutions --
   Consumer Products ...............................      $(131)         $(10)
Specialty Materials -- Advanced Circuits ...........        (83)           18
Specialty Materials -- Pharmaceutical Fine
   Chemicals (PFC) .................................        (35)          108
Transportation and Power Systems -- Bendix
   Commercial Vehicle Systems (BCVS) ...............        125            79
- --------------------------------------------------------------------------------
                                                          $(124)         $195
================================================================================

We realized proceeds of approximately $435 million in cash and investment
securities on the sale of these businesses in 2002. Our Advanced Circuits and
PFC businesses had a higher deductible tax basis than book basis which resulted
in an after-tax gain. The divestitures of these businesses reduced net sales and
increased segment profit in 2002 compared with 2001 by approximately $500 and
$31 million, respectively.

In 2000, as a result of a government mandate in connection with the merger of
AlliedSignal and the former Honeywell, we sold the TCAS product line of the
former Honeywell. We received approximately $215 million in cash resulting in a
pretax gain of $112 million. The TCAS product line had annual sales of
approximately $100 million.

NOTE 5. OTHER (INCOME) EXPENSE

                                                       Years Ended December 31,
                                                       ------------------------
                                                          2002   2001   2000
- -------------------------------------------------------------------------------
                                                               
Interest income and other ..........................      $(68)  $(50)  $(79)
Minority interests .................................         8     24     34
Foreign exchange (gain) loss .......................        56      9    (12)
- -------------------------------------------------------------------------------
                                                          $ (4)  $(17)  $(57)
===============================================================================

                                                                              49

NOTE 6. INTEREST AND OTHER FINANCIAL CHARGES

                                                       Years Ended December 31,
                                                       ------------------------
                                                          2002   2001   2000
- -------------------------------------------------------------------------------
                                                               
Total interest and other financial
   charges .........................................      $365   $422   $497
Less -- capitalized interest .......................       (21)   (17)   (16)
- -------------------------------------------------------------------------------
                                                          $344   $405   $481
===============================================================================

Cash payments of interest during the years 2002, 2001 and 2000 were $352, $297
and $573 million, respectively.

The weighted average interest rate on short-term borrowings and commercial paper
outstanding at December 31, 2002 and 2001 was 1.23 and 7.46 percent,
respectively.

NOTE 7. INCOME TAXES

Income (loss) before taxes

                                                       Years Ended December 31,
                                                       ------------------------
                                                         2002     2001    2000
- -------------------------------------------------------------------------------
                                                                
United States ..... ................................   $(1,262)  $(751)  $1,842
Foreign ........... ................................       317     329      556
- -------------------------------------------------------------------------------
                                                       $  (945)  $(422)  $2,398
===============================================================================

Tax expense (benefit)

                                                       Years Ended December 31,
                                                       ------------------------
                                                          2002    2001   2000
- -------------------------------------------------------------------------------
                                                                
United States ......................................     $(894)  $(472)  $508
Foreign ............................................       169     149    231
- -------------------------------------------------------------------------------
                                                         $(725)  $(323)  $739
===============================================================================

                                                       Years Ended December 31,
                                                       ------------------------
                                                          2002    2001   2000
- -------------------------------------------------------------------------------

Tax expense (benefit) consist of:
Current:
   United States ...................................     $(128)  $ (33)  $126
   State ...........................................        28      (1)     2
   Foreign .........................................       168     167    197
- -------------------------------------------------------------------------------
                                                            68     133    325
- -------------------------------------------------------------------------------
Deferred:
   United States ...................................      (726)   (350)   325
   State ...........................................       (68)    (88)    55
   Foreign .........................................         1     (18)    34
- -------------------------------------------------------------------------------
                                                          (793)   (456)   414
- -------------------------------------------------------------------------------
                                                         $(725)  $(323)  $739
===============================================================================

                                                       Years Ended December 31,
                                                       ------------------------
                                                         2002     2001    2000
- -------------------------------------------------------------------------------
                                                                
The U.S. statutory federal income tax rate is
   reconciled to our effective income tax rate as
   follows:
   Statutory U.S. federal income tax rate ..........    (35.0)%  (35.0)% 35.0%
   Taxes on foreign earnings over
      (under) U.S. tax rate(1) .....................     10.0     15.3    (.7)
   Asset basis differences .........................    (33.1)   (18.5)   2.5
   Nondeductible amortization ......................      2.4     13.4    2.8
   State income taxes(1) ...........................     (2.6)    (9.3)   1.3
   Tax benefits on export sales ....................     (8.5)   (25.4)  (5.0)
   ESOP dividend tax benefit .......................     (1.9)    (4.3)   (.7)
   Tax credits .....................................     (1.5)    (7.7)  (3.5)
   Equity income ...................................     (1.7)    (3.6)   (.4)
   All other items -- net ..........................     (4.8)    (1.5)   (.5)
- -------------------------------------------------------------------------------
                                                        (76.7)%  (76.6)% 30.8%
===============================================================================

(1)  Net of changes in valuation allowance.

Deferred tax assets (liabilities)

                                                                  December 31,
                                                                 --------------
                                                                  2002     2001
- -------------------------------------------------------------------------------
                                                                    
The principal components of deferred tax assets and
   (liabilities) are as follows:
   Property, plant and equipment basis differences ..........    $ (572)  $(878)
   Postretirement benefits other than pensions
      and postemployment benefits ...........................       781     828
   Investment and other asset basis differences .............      (192)   (219)
   Other accrued items ......................................       796     376
   Net operating losses .....................................       863     597
   U.S. net capital loss ....................................       196      --
   Tax credits ..............................................       253     167
   Undistributed earnings of subsidiaries ...................       (33)    (54)
   All other items -- net ...................................      (491)   (466)
- -------------------------------------------------------------------------------
                                                                  1,601     351
   Valuation allowance ......................................      (191)   (111)
- -------------------------------------------------------------------------------
                                                                 $1,410   $ 240
===============================================================================

50

The amount of federal tax net operating losses available for carryback or
carryforward at December 31, 2002 was $1.1 billion, including $987 million
generated in 2002. The current year's loss can be carried back five years or
carried forward twenty years. Also, included are $118 million of loss
carryforwards that were generated by certain subsidiaries prior to their
acquisition and have expiration dates through 2019. The use of pre-acquisition
operating losses is subject to limitations imposed by the Internal Revenue Code.
We do not anticipate that these limitations will affect utilization of the
carryforwards prior to their expiration. Various subsidiaries have state tax net
operating loss carryforwards of $4.2 billion at December 31, 2002 with varying
expiration dates through 2022. We also have foreign net operating losses of $1.2
billion which are available to reduce future income tax payments in several
countries, subject to varying expiration rules.

In 2002, we reported a U.S. net capital loss of $559 million. This loss will be
carried back to 1999 and 2000 where there are sufficient capital gains to absorb
this loss.

We have U.S. tax credit carryforwards of $101 million at December 31, 2002,
including carryforwards of $71 million with various expiration dates through
2022, and tax credits of $30 million which are not subject to expiration. In
addition, we have $152 million of foreign tax credits available for carryback
or carryforward at December 31, 2002.

The increase in the valuation allowance of $80 million in 2002 was primarily due
to foreign tax credits which are not expected to be realized and state tax net
operating loss carryforwards (net of federal impact) which we believe will
expire unutilized. The portion of the valuation allowance charged to contributed
capital was $18 million (net of federal impact), therefore the future
realization of any of these tax benefits will be allocated to contributed
capital.

Deferred income taxes have not been provided on approximately $2.2 billion of
undistributed earnings of foreign affiliated companies, which are considered to
be permanently reinvested. It is not practicable to estimate the amount of tax
that might be payable on the eventual remittance of such earnings.

Cash payments (refunds) of income taxes during the years 2002, 2001 and 2000
were $(14), $79 and $442 million, respectively.

NOTE 8. EARNINGS (LOSS) PER SHARE

The following table sets forth the computations of basic and diluted earnings
(loss) per share:

                                              Net          Average     Per Share
                                         Income (Loss)      Shares       Amount
- --------------------------------------------------------------------------------
                                                                
2002
Earnings (loss) per share of common
   stock -- basic ....................       $ (220)     820,292,870     $(0.27)
Dilutive securities issuable in
   connection with stock plans .......                            --
- --------------------------------------------------------------------------------
Earnings (loss) per share of common
   stock -- assuming dilution ........       $ (220)     820,292,870     $(0.27)
================================================================================

2001
Earnings (loss) per share of common
   stock -- basic ....................       $  (99)     812,273,417     $(0.12)
Dilutive securities issuable in
   connection with stock plans .......                            --
- --------------------------------------------------------------------------------
Earnings (loss) per share of common
   stock -- assuming dilution ........       $  (99)     812,273,417     $(0.12)
================================================================================

2000
Earnings per share of common
   stock -- basic ....................       $1,659      800,317,543     $ 2.07
Dilutive securities issuable in
   connection with stock plans .......                     9,149,959
- --------------------------------------------------------------------------------
Earnings per share of common
   stock -- assuming dilution ........       $1,659      809,467,502     $ 2.05
================================================================================

As a result of the net loss for 2002 and 2001, 2,527,229 and 4,269,601,
respectively, of dilutive securities issuable in connection with stock plans
have been excluded from the diluted loss per share calculations because their
effect would reduce the loss per share. In 2000, 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 2000, the number of stock options not included in the computation was
14,563,673. These stock options were outstanding at the end of 2000.

NOTE 9. ACCOUNTS, NOTES AND OTHER RECEIVABLES

                                                                   December 31,
                                                                 ---------------
                                                                  2002     2001
- --------------------------------------------------------------------------------
                                                                    
Trade ........................................................   $3,064   $3,168
Other ........................................................      347      400
- --------------------------------------------------------------------------------
                                                                  3,411    3,568
Less -- Allowance for doubtful accounts ......................     (147)    (128)
- --------------------------------------------------------------------------------
                                                                 $3,264   $3,440
================================================================================

We sell interests in designated pools of trade accounts receivables to third
parties. The sold receivables are over-collateralized by $120 million at
December 31, 2002 and we

                                                                              51

retain a subordinated interest in the pool of receivables representing that
over-collateralization as well as an undivided interest in the balance of the
receivables pools. New receivables are sold under the agreement as previously
sold receivables are collected. Losses are recognized when our interest in the
receivables are sold. The retained interests in the receivables are shown at the
amounts expected to be collected by us, and such carrying value approximates the
fair value of our retained interests. We are compensated for our services in the
collection and administration of the receivables.

                                                                    December 31,
                                                                   -------------
                                                                    2002    2001
- --------------------------------------------------------------------------------
                                                                     
Designated pools of trade receivables ..........................   $ 911   $ 803
Interest sold to third parties .................................    (500)   (500)
- --------------------------------------------------------------------------------
Retained interest ..............................................   $ 411   $ 303
================================================================================

Losses on sales of receivables were $10, $22 and $34 million in 2002, 2001 and
2000, respectively. No credit losses were incurred during those years.

NOTE 10. INVENTORIES

                                                                   December 31,
                                                                 ---------------
                                                                  2002     2001
- --------------------------------------------------------------------------------
                                                                    
Raw materials ................................................   $  936   $1,024
Work in process ..............................................      804      869
Finished products ............................................    1,361    1,603
- --------------------------------------------------------------------------------
                                                                  3,101    3,496
Less --
Progress payments ............................................      (28)     (25)
Reduction to LIFO cost basis .................................     (120)    (116)
- --------------------------------------------------------------------------------
                                                                 $2,953   $3,355
================================================================================

Inventories valued at LIFO amounted to $146 and $136 million at December 31,
2002 and 2001, respectively. Had such LIFO inventories been valued at current
costs, their carrying values would have been approximately $120 and $116 million
higher at December 31, 2002 and 2001, respectively.

NOTE 11. INVESTMENTS AND LONG-TERM RECEIVABLES

                                                                    December 31,
                                                                    ------------
                                                                     2002   2001
- --------------------------------------------------------------------------------
                                                                      
Investments .....................................................    $160   $312
Long-term receivables ...........................................     464    154
- --------------------------------------------------------------------------------
                                                                     $624   $466
================================================================================

There were no equity securities classified as available-for-sale at December 31,
2002. The fair value and cost basis of equity securities classified as
available-for-sale at December 31, 2001 was $92 million.

NOTE 12. PROPERTY, PLANT AND EQUIPMENT

                                                                  December 31,
                                                               -----------------
                                                                 2002      2001
- --------------------------------------------------------------------------------
                                                                   
Land and improvements ......................................   $   297   $   316
Machinery and equipment ....................................     8,646     8,874
Buildings and improvements .................................     1,836     1,968
Construction in progress ...................................       378       523
- --------------------------------------------------------------------------------
                                                                11,157    11,681
Less -- Accumulated depreciation and amortization ..........    (7,102)   (6,748)
- --------------------------------------------------------------------------------
                                                               $ 4,055   $ 4,933
================================================================================

Depreciation expense was $671, $724 and $791 million in 2002, 2001 and 2000,
respectively.

NOTE 13. GOODWILL AND OTHER INTANGIBLES -- NET

The change in the carrying amount of goodwill for the year ended December 31,
2002 by reportable segment is as follows:

                                                                          Currency
                           December 31,                                 Translation  December 31,
                               2001       Acquisitions   Divestitures    Adjustment       2002
- -------------------------------------------------------------------------------------------------
                                                                          
Aerospace ..............      $1,595          $ 46           $ --           $ 3          $1,644
Automation and
   Control Solutions ...       2,461           211            (13)           19           2,678
Specialty Materials ....         861            --            (24)           12             849
Transportation and
   Power Systems .......         524            --             --             3             527
- -------------------------------------------------------------------------------------------------
                              $5,441          $257           $(37)          $37          $5,698
=================================================================================================

Intangible assets are comprised of:

                                                         December 31, 2002
                                                ----------------------------------
                                                  Gross                      Net
                                                Carrying    Accumulated   Carrying
                                                 Amount    Amortization    Amount
- ----------------------------------------------------------------------------------
                                                                  
Intangible assets with determinable lives:
   Investments in Aerospace customer
      incentives ............................    $  769        $(107)      $  662
   Patents and trademarks ...................       411         (286)         125
   Other ....................................       433         (183)         250
- ----------------------------------------------------------------------------------
                                                  1,613         (576)       1,037
- ----------------------------------------------------------------------------------
Trademark with indefinite life ..............        46           (9)          37
- ----------------------------------------------------------------------------------
                                                 $1,659        $(585)      $1,074
==================================================================================

52

                                              December 31, 2001
                                     ----------------------------------
                                       Gross                      Net
                                     Carrying    Accumulated   Carrying
                                      Amount    Amortization    Amount
- -----------------------------------------------------------------------
                                                        
Intangible assets with
   determinable lives:
   Investments in Aerospace
      customer incentives ........    $  685        $ (78)       $607
   Patents and trademarks ........       412         (276)        136
   Other .........................       320         (185)        135
- -----------------------------------------------------------------------
                                       1,417         (539)        878
- -----------------------------------------------------------------------
Trademark with indefinite life ...        46           (9)         37
- -----------------------------------------------------------------------
                                      $1,463        $(548)       $915
=======================================================================

Intangible assets amortization expense was $59, $56 and $60 million in 2002,
2001 and 2000, respectively. Estimated intangible assets amortization expense
for each of the five succeeding years approximates $60 million.

In accordance with SFAS No. 142, prior year amounts were not restated. A
reconciliation of the previously reported net income (loss) and earnings (loss)
per share to the amounts adjusted for the reduction of amortization expense, net
of the related income tax effect, is as follows:

                                                    Years Ended
                                                    December 31,
                                                  ---------------
                                                   2001     2000
- -----------------------------------------------------------------
                                                     
Net Income (Loss)
Reported net income (loss) ....................   $  (99)  $1,659
Amortization adjustment .......................      196      197
- -----------------------------------------------------------------
Adjusted net income ...........................   $   97   $1,856
=================================================================
Earnings (loss) per share of common
   stock-- basic
Reported earnings (loss) per share -- basic ...   $(0.12)  $ 2.07
Amortization adjustment .......................     0.24     0.25
- -----------------------------------------------------------------
Adjusted earnings per share -- basic ..........   $ 0.12   $ 2.32
=================================================================
Earnings (loss) per share of common
   stock -- assuming dilution
Reported earnings (loss) per
   share -- assuming dilution .................   $(0.12)  $ 2.05
Amortization adjustment .......................     0.24     0.24
- -----------------------------------------------------------------
Adjusted earnings per share --
   assuming dilution ..........................   $ 0.12   $ 2.29
=================================================================

NOTE 14. ACCRUED LIABILITIES

                                                      December 31,
                                                    ---------------
                                                     2002     2001
- -------------------------------------------------------------------
                                                       
Compensation and benefit costs ..................   $  440   $  638
Customer advances ...............................      458      489
Income taxes ....................................       56       31
Environmental costs .............................       75       81
Asbestos related liabilities ....................      741      182
Litton litigation settlement ....................       --      220
Severance .......................................      325      484
Product warranties and performance guarantees ...      179      178
Other ...........................................    2,018    1,516
- -------------------------------------------------------------------
                                                    $4,292   $3,819
===================================================================

NOTE 15. LONG-TERM DEBT AND CREDIT AGREEMENTS

                                                      December 31,
                                                    ---------------
                                                     2002     2001
- -------------------------------------------------------------------
                                                       
6.875% notes due 2005 ...........................   $  750   $  750
5.25% notes due 2006 ............................      282      247
8 5/8% debentures due 2006 ......................      100      100
5 1/8% notes due 2006 ...........................      500      500
7.0% notes due 2007 .............................      350      350
7 1/8% notes due 2008 ...........................      200      200
6.20% notes due 2008 ............................      200      200
Zero coupon bonds and money multiplier notes,
   13.0% - 14.26%, due 2009 .....................      100      100
7.50% notes due 2010 ............................    1,000    1,000
6 1/8% notes due 2011 ...........................      500      500
Industrial development bond obligations,
   4.40% - 6.75%, maturing at various dates
   through 2036 .................................       86       80
6 5/8% debentures due 2028 ......................      216      216
9.065% debentures due 2033 ......................       51       51
Other (including capitalized leases),
   1.54% - 12.50%, maturing at various
   dates through 2033 ...........................      384      437
- -------------------------------------------------------------------
                                                    $4,719   $4,731
===================================================================

The schedule of principal payments on long-term debt is as follows:

                                     At December 31,
                                     ---------------
                                           2002
- ----------------------------------------------------
                                       
2003 .............................        $  109
2004 .............................            30
2005 .............................           925
2006 .............................           899
2007 .............................           356
Thereafter                                 2,509
- ----------------------------------------------------
                                           4,828
Less-- current portion ...........          (109)
- ----------------------------------------------------
                                          $4,719
====================================================

                                                                              53

We maintain $2 billion of bank revolving credit facilities with a group of banks
which are comprised of: (a) a $1 billion Five-Year Credit Agreement and (b) a $1
billion 364-Day Credit Agreement. The credit agreements are maintained for
general corporate purposes including support for the issuance of commercial
paper. We had no balance outstanding under either agreement at December 31,
2002.

Neither of the credit agreements restricts our ability to pay dividends and
neither contains financial covenants. The failure to comply with customary
conditions or the occurrence of customary events of default contained in the
credit agreements would prevent any further borrowings and would generally
require the repayments of any outstanding borrowings under such credit
agreements. Such events of default include (a) non-payment of credit agreement
debt and interest, (b) noncompliance with the terms of the credit agreement
covenants, (c) default on other debt in certain circumstances, (d) bankruptcy
and (e) defaults upon obligations under the Employee Retirement Income Security
Act. Additionally, each of the banks has the right to terminate its commitment
to lend under the credit agreements if any person or group acquires beneficial
ownership of 30 percent or more of our voting stock or, during any 12-month
period, individuals who were directors of Honeywell at the beginning of the
period cease to constitute a majority of the Board of Directors (the Board).

Loans under the Five-Year Credit Agreement are required to be repaid no later
than December 2, 2004. We have agreed to pay a facility fee of 0.065 percent per
annum on the aggregate commitment for the Five-Year Credit Agreement.

Interest on borrowings under the Five-Year Credit Agreement would be determined,
at our option, by (a) an auction bidding procedure; (b) the highest of the
floating base rate of the agent bank, 0.5 percent above the average CD rate, or
0.5 percent above the Federal funds rate or (c) the Eurocurrency rate plus 0.135
percent (applicable margin).

The commitments under the 364-Day Credit Agreement terminate on November 26,
2003. If the credit facility is drawn, any outstanding balance on November 26,
2003 may be converted to a one year term loan at our option. We have agreed to
pay a facility fee of 0.06 percent per annum on the aggregate commitment for the
364-Day Credit Agreement, and we have paid upfront fees of 0.04 percent.

Interest on borrowings under the 364-Day Credit Agreement would be determined,
at our option, by (a) an auction bidding procedure; (b) the highest of the
floating base rate of the agent bank, 0.5 percent above the average CD rate, or
0.5 percent above the Federal funds rate or (c) the Eurocurrency rate plus 0.24
percent (applicable margin). The applicable margin on and after the term loan
conversion is 0.60 percent.

The facility fee and the applicable margin over the Eurocurrency rate on both
the Five-Year Credit Agreement and the 364-Day Credit Agreement are subject to
increase or decrease if our long-term debt ratings change, but the revolving
credit facilities are not subject to termination based on a decrease in our debt
ratings.

NOTE 16. LEASE COMMITMENTS

Future minimum lease payments under operating leases having initial or remaining
noncancellable lease terms in excess of one year are as follows:

                                     At December 31,
                                     ---------------
                                           2002
- ----------------------------------------------------
                                       
2003 .............................        $  310
2004 .............................           265
2005 .............................           204
2006 .............................           145
2007 .............................           119
Thereafter .......................           331
- ----------------------------------------------------
                                          $1,374
====================================================

We have entered into agreements to lease land, equipment and buildings.
Principally all our operating leases have initial terms of up to 25 years, and
some contain renewal options subject to customary conditions. At any time during
the terms of some of our leases, we may at our option purchase the leased assets
for amounts that approximate fair value. In certain instances, to obtain
favorable financing terms from lessors, we used variable interest entities (as
defined in FIN 46) to finance leased property. At December 31, 2002, we were
leasing aircraft, equipment, land and buildings with related liabilities of
approximately $320 million on which we provided residual value guarantees on the
leased assets of approximately $265 million. Pursuant to FIN 46, we must
consolidate all variable interest entities in which we are the primary
beneficiary no later than July 1, 2003. We do not expect that any of our
commitments under the lease agreements will have a material adverse effect on
our consolidated results of operations, financial position or liquidity.

Rent expense was $274, $321 and $306 million in 2002, 2001 and 2000,
respectively.

NOTE 17. FINANCIAL INSTRUMENTS

As a result of our global operating and financing activities, we are exposed to
market risks from changes in interest and foreign currency exchange rates and
commodity prices, which may adversely affect our operating results and financial
position. We minimize our risks from interest and foreign currency exchange rate
and commodity price fluctuations

54

through our normal operating and financing activities and, when deemed
appropriate, through the use of derivative financial instruments.

Credit and Market Risk

Financial instruments, including derivatives, expose us to counterparty credit
risk for nonperformance 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 counterparties,
and procedures to monitor concentrations of credit risk. Our counterparties are
substantial investment and commercial banks with significant experience using
such derivative instruments. We monitor the impact of market risk on the fair
value and cash flows of our derivative and other financial instruments
considering reasonably possible changes in interest and currency exchange rates
and restrict the use of derivative financial instruments to hedging activities.
We do not use derivative financial instruments for trading or other speculative
purposes and do not use leveraged derivative financial instruments.

We continually monitor the creditworthiness of our customers to which we grant
credit terms in the normal course of business. While concentrations of credit
risk associated with our trade accounts and notes receivable are considered
minimal due to our diverse customer base, a significant portion of our customers
are in the commercial air transport industry (aircraft manufacturers and
airlines) accounting for approximately 17 percent of our consolidated sales in
2002. Following the abrupt downturn in the aviation industry after the terrorist
attacks on September 11, 2001 and the already weak economy, we modified terms
and conditions of our credit sales to mitigate or eliminate concentrations of
credit risk with any single customer. Our sales are not materially dependent on
a single customer or a small group of customers.

Foreign Currency Risk Management

We conduct our business on a multinational basis in a wide variety of foreign
currencies. Our exposure to market risk for changes in foreign currency exchange
rates arises from international financing activities between subsidiaries,
foreign currency denominated monetary assets and liabilities and anticipated
transactions arising from international trade. Our objective is to preserve the
economic value of cash flows in non-functional currencies. We attempt to have
all transaction exposures hedged with natural offsets to the fullest extent
possible and, once these opportunities have been exhausted, through foreign
currency forward and option agreements with third parties. Our principal
currency exposures relate to the Euro, the British pound, the Canadian dollar,
and the U.S. dollar.

We hedge monetary assets and liabilities denominated in foreign currencies.
Prior to conversion into U.S dollars, these assets and liabilities are
remeasured at spot exchange rates in effect on the balance sheet date. The
effects of changes in spot rates are recognized in earnings and included in
Other (Income) Expense. We hedge our exposure to changes in foreign exchange
rates principally with forward contracts. Forward contracts are marked-to-market
with the resulting gains and losses similarly recognized in earnings offsetting
the gains and losses on the foreign currency denominated monetary assets and
liabilities being hedged.

We partially hedge forecasted 2003 sales and purchases denominated in foreign
currencies with currency forward contracts. When the dollar strengthens against
foreign currencies, the decline in value of forecasted foreign currency cash
inflows (sales) or outflows (purchases) is partially offset by the recognition
of gains (sales) and losses (purchases), respectively, in the value of the
forward contracts designated as hedges. Conversely, when the dollar weakens
against foreign currencies, the increase in value of forecasted foreign currency
cash inflows (sales) or outflows (purchases) is partially offset by the
recognition of losses (sales) and gains (purchases), respectively, in the value
of the forward contracts designated as hedges. Market value gains and losses on
these contracts are recognized in earnings when the hedged transaction is
recognized. Deferred gains and losses on forward contracts, used to hedge
forecasted sales and purchases, were $2 and $1 million, respectively, at
December 31, 2002. The deferred gains and losses are expected to be reclassified
into Sales and Cost of Goods Sold within the next twelve months. All open
forward contracts mature by December 31, 2003.

At December 31, 2002 and 2001, we had contracts with notional amounts of $1,203
and $1,507 million, respectively, to exchange foreign currencies, principally in
the Euro countries and Great Britain.

Commodity Price Risk Management

Our exposure to market risk for commodity prices arises from changes in our cost
of production. We mitigate our exposure to commodity price risk through the use
of long-term, firm-price contracts with our suppliers and forward commodity
purchase agreements with third parties hedging anticipated purchases of several
commodities (principally natural gas). Forward commodity purchase agreements are
marked-to-market, with the resulting gains and losses recognized in earnings
when the hedged transaction is recognized.

Interest Rate Risk Management

We use a combination of financial instruments, including medium-term and
short-term financing, variable-rate commercial paper, and interest rate swaps to
manage the interest rate mix of our total debt portfolio and related overall
cost of borrowing. At December 31, 2002 and 2001, interest rate swap agreements
designated as fair value hedges effectively

                                                                              55

changed $1,132 and $1,096 million, respectively, of fixed rate debt at an
average rate of 6.51 and 6.55 percent, respectively, to LIBOR based floating
rate debt. Our interest rate swaps mature through 2007.

Fair Value of Financial Instruments

The carrying value of cash and cash equivalents, trade accounts and notes
receivables, payables, commercial paper and short-term borrowings contained in
the Consolidated Balance Sheet approximates fair value. Summarized below are the
carrying values and fair values of our other financial instruments at December
31, 2002 and 2001. The fair values are based on the quoted market prices for the
issues (if traded), current rates offered to us for debt of the same remaining
maturity and characteristics, or other valuation techniques, as appropriate.

                                    December 31, 2002    December 31, 2001
- --------------------------------------------------------------------------
                                   Carrying     Fair    Carrying     Fair
                                     Value     Value      Value     Value
- --------------------------------------------------------------------------
                                                       
Assets
   Available-for-sale equity
      securities................    $    --   $    --    $    92   $    92
   Long-term receivables........        464       443        154       145
   Interest rate swap
      agreements................         76        76          5         5
   Foreign currency exchange
      contracts.................          8         8          5         5
   Forward commodity
      contracts.................          5         5          1         1
Liabilities
   Long-term debt and related
      current maturities
      (excluding capitalized
      leases)...................    $(4,812)  $(5,261)   $(5,121)  $(5,407)
   Interest rate swap
      agreements................         --        --        (10)      (10)
   Foreign currency exchange
      contracts.................        (16)      (16)       (11)      (11)
   Forward commodity
      contracts.................         --        --         (7)       (7)
==========================================================================

NOTE 18. CAPITAL STOCK

We are authorized to issue up to 2,000,000,000 shares of common stock, with a
par value of one dollar. Common shareowners are entitled to receive such
dividends as may be declared by the Board, are entitled to one vote per share,
and are entitled, in the event of liquidation, to share ratably in all the
assets of Honeywell which are available for distribution to the common
shareowners. Common shareowners do not have preemptive or conversion rights.
Shares of common stock issued and outstanding or held in the treasury are not
liable to further calls or assessments. There are no restrictions on us relative
to dividends or the repurchase or redemption of common stock.

We are authorized to issue up to 40,000,000 shares of preferred stock, without
par value, and can determine the number of shares of each series, and the
rights, preferences and limitations of each series. At December 31, 2002, there
was no preferred stock outstanding.

NOTE 19. OTHER NONOWNER CHANGES IN SHAREOWNERS' EQUITY

Total nonowner changes in shareowners' equity are included in the Consolidated
Statement of Shareowners' Equity. The components of Accumulated Other Nonowner
Changes are as follows:

                                                          After-
                                          Pretax    Tax     Tax
- ----------------------------------------------------------------
                                                  
Year Ended December 31, 2002
Unrealized gains on securities
   available-for-sale..................    $  --   $ --    $  --
Reclassification adjustment for gains
   on securities available-for-sale
   included in net income..............       --     --       --
- ----------------------------------------------------------------
Net unrealized gains arising
   during the year.....................       --     --       --
Foreign exchange translation
   adjustments.........................      310     --      310
Change in fair value of effective
   cash flow hedges....................       35    (13)      22
Minimum pension liability
   adjustment..........................     (956)   350     (606)
- ----------------------------------------------------------------
                                           $(611)  $337    $(274)
================================================================

Year Ended December 31, 2001
Unrealized losses on securities
   available-for-sale..................    $  (4)  $  1    $  (3)
Reclassification adjustment for losses
   on securities available-for-sale
   included in net income..............       --     --       --
- ----------------------------------------------------------------
Net unrealized losses arising
   during the year.....................       (4)     1       (3)
Foreign exchange translation
   adjustments.........................      (51)    --      (51)
Change in fair value of effective
   cash flow hedges....................       (8)     3       (5)
Minimum pension liability
   adjustment..........................      (78)    31      (47)
- ----------------------------------------------------------------
                                           $(141)  $ 35    $(106)
================================================================
Year Ended December 31, 2000
Unrealized gains on securities
   available-for-sale..................    $   4   $ (1)   $   3
Reclassification adjustment for gains
   on securities available-for-sale
   included in net income..............       --     --       --
- ----------------------------------------------------------------
Net unrealized gains arising
   during the year.....................        4     (1)       3
Foreign exchange translation
   adjustments.........................     (377)    --     (377)
- ----------------------------------------------------------------
                                           $(373)  $ (1)   $(374)
================================================================

56

The components of Accumulated Other Nonowner Changes are as follows:

                                                                     December 31,
                                                                -----------------------
                                                                  2002     2001    2000
- ---------------------------------------------------------------------------------------
                                                                         
Cumulative foreign exchange
   translation adjustment ...................................   $  (413)  $(723)  $(672)
Unrealized holding gains on securities
   available-for-sale .......................................        --      --       3
Change in fair value of effective
   cash flow hedges .........................................        17      (5)     --
Minimum pension liability ...................................      (713)   (107)    (60)
- ---------------------------------------------------------------------------------------
                                                                $(1,109)  $(835)  $(729)
=======================================================================================

NOTE 20. STOCK-BASED COMPENSATION PLANS

We have stock plans available to grant incentive 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 Committee of the Board. The options are granted at a price equal to
our stock's fair market value on the date of grant. The options generally become
exercisable over a three-year period and expire after ten years.

The following table summarizes information about stock option activity for the
three years ended December 31, 2002:

                                                    Weighted
                                                     Average
                                       Number of    Exercise
                                        Options      Price
- ------------------------------------------------------------
                                               
Outstanding at December 31, 1999 ..    56,040,503    $36.81
   Granted ........................     4,506,804     45.68
   Exercised ......................   (12,115,659)    23.22
   Lapsed or canceled .............    (2,431,324)    52.87
- ------------------------------------------------------------
Outstanding at December 31, 2000 ..    46,000,324     40.36
   Granted ........................    15,479,120     36.23
   Exercised ......................    (3,121,867)    21.49
   Lapsed or canceled .............    (4,477,952)    51.24
- ------------------------------------------------------------
Outstanding at December 31, 2001 ..    53,879,625     39.37
   Granted ........................     2,996,005     33.61
   Exercised ......................    (1,692,005)    18.15
   Lapsed or canceled .............    (3,168,916)    43.14
- ------------------------------------------------------------
Outstanding at December 31, 2002 ..    52,014,709     39.50
============================================================

The following table summarizes information about stock options outstanding at
December 31, 2002:

                                     Options Outstanding           Options Exercisable
                              ----------------------------------------------------------
                                                       Weighted                 Weighted
                                            Weighted    Average                  Average
                                 Number      Average   Exercise      Number     Exercise
Range of exercise prices      Outstanding    Life(1)     Price    Exercisable    Price
- ----------------------------------------------------------------------------------------
                                                                  
$16.00 - $29.79 ...........     8,796,515      2.3      $20.88      7,545,015    $20.76
$30.14 - $39.94 ...........    24,086,509      7.4       36.10     14,583,207     36.39
$40.02 - $49.97 ...........    10,265,929      6.0       43.39      9,286,785     43.09
$50.13 - $66.73 ...........     8,865,756      6.9       62.66      6,764,201     62.62
- ----------------------------------------------------------------------------------------
                               52,014,709      6.2       39.50     38,179,208     39.58
========================================================================================

(1)  Average remaining contractual life in years.

There were 30,142,728 and 26,998,346 options exercisable at weighted average
exercise prices of $37.66 and $32.06 at December 31, 2001 and 2000,
respectively. There were 19,524,057 shares available for future grants under the
terms of our stock option plans at December 31, 2002.

The following table sets forth fair value per share information, including
related assumptions, used to determine compensation cost (see Note 1) consistent
with the requirements of SFAS No. 123.

                                                        2002     2001     2000
- -------------------------------------------------------------------------------
                                                                
Weighted average fair value per share of options
   granted during the year(1) ......................   $12.64   $13.71   $18.21
Assumptions:
   Historical dividend yield .......................      1.9%     1.5%     1.4%
   Historical volatility ...........................     43.8%    40.9%    27.8%
   Risk-free rate of return ........................      4.2%     5.2%     6.4%
   Expected life (years) ...........................      5.0      5.0      5.0
===============================================================================

(1) Estimated on date of grant using Black-Scholes option-pricing model.

Restricted Stock Units

Restricted stock unit (RSU) awards entitle the holder to receive one share of
common stock for each unit when the units vest. RSU's are issued to certain key
employees as compensation and as incentives tied directly to the achievement of
certain performance objectives.

RSU's issued were 1,777,700, 186,500 and 1,374,640 in 2002, 2001 and 2000,
respectively. There were 2,342,960, 1,580,091 and 2,449,749 RSU's outstanding,
with a weighted average grant date fair value per share of $37.12, $43.49 and
$47.33 at December 31, 2002, 2001 and 2000, respectively.

Non-Employee Directors' Plan

We also have a Stock Plan for Non-Employee Directors (Directors' Plan) under
which restricted shares and options are granted. Each new director receives a
one-time grant of 3,000 shares of common stock, subject to specific
restrictions.

                                                                              57

The Directors' Plan provides for an annual grant to each director of options to
purchase 2,000 shares of common stock at the fair market value on the date of
grant. We have set aside 450,000 shares for issuance under the Directors' Plan.
Options generally become exercisable over a three-year period and expire after
ten years.

Employee Stock Match Plans

We sponsor employee savings plans under which we match, in the form of our
common stock, certain eligible U.S. employee savings plan contributions. Shares
issued under the stock match plans were 5.6, 4.9 and 3.9 million in 2002, 2001
and 2000, respectively, at a cost of $173, $185 and $161 million, respectively.

NOTE 21. COMMITMENTS AND CONTINGENCIES

Shareowner Litigation

Honeywell and seven of its current and former officers were named as defendants
in several purported class action lawsuits filed in the United States District
Court for the District of New Jersey (the Securities Law Complaints). The
Securities Law Complaints principally allege that the defendants violated
federal securities laws by purportedly making false and misleading statements
and by failing to disclose material information concerning Honeywell's financial
performance, thereby allegedly causing the value of Honeywell's stock to be
artificially inflated. On January 15, 2002, the District Court dismissed the
consolidated complaint against four of Honeywell's current and former officers.
The Court has granted plaintiffs' motion for class certification defining the
purported class as all purchasers of Honeywell stock between December 20, 1999
and June 19, 2000.

The parties have agreed to participate in a two day settlement mediation in
April, 2003 in an attempt to resolve the cases without resort to a trial. All
significant discovery in the cases has been stayed pending further order of the
court.

Notwithstanding our agreement to mediate, we believe there is no factual or
legal basis for the allegations in the Securities Law Complaints. Although it is
not possible at this time to predict the litigation outcome of these cases, we
expect to prevail if the cases are not resolved through mediation. However, an
adverse litigation outcome could be material to our consolidated financial
position or results of operations. As a result of the uncertainty regarding the
outcome of this matter no provision has been made in our financial statements
with respect to this contingent liability.

Environmental Matters

We are subject to various federal, state and local government requirements
relating to the protection of employee health and safety and the environment. We
believe that, as a general matter, our policies, practices and procedures are
properly designed to prevent unreasonable risk of environmental damage and
personal injury to our employees and employees of our customers and that our
handling, manufacture, use and disposal of hazardous or toxic substances are in
accord with environmental laws and regulations. However, mainly because of past
operations and operations of predecessor companies, we, like other companies
engaged in similar businesses, have incurred remedial response and voluntary
cleanup costs for site contamination and are a party to lawsuits and claims
associated with environmental matters, including past production of products
containing toxic substances. Additional lawsuits, claims and costs involving
environmental matters are likely to continue to arise in the future.

With respect to environmental matters involving site contamination, we
continually conduct studies, individually at our owned sites, and jointly as a
member of industry groups at non-owned sites, to determine the feasibility of
various remedial techniques to address environmental matters. It is our policy
to record appropriate liabilities for environmental matters when environmental
assessments are made or remedial efforts or damage claim payments are probable
and the costs can be reasonably estimated. With respect to site contamination,
the timing of these accruals is generally no later than the completion of
feasibility studies. We expect to fund expenditures for these matters from
operating cash flow. The timing of cash expenditures depends on a number of
factors, including the timing of litigation and settlements of personal injury
and property damage claims, regulatory approval of cleanup projects, remedial
techniques to be utilized and agreements with other parties.

Although we do not currently possess sufficient information to reasonably
estimate the amounts of liabilities to be recorded upon future completion of
studies, litigation or settlements, and neither the timing nor the amount of the
ultimate costs associated with environmental matters can be determined, they
could be material to our consolidated results of operations. However,
considering our past experience and existing reserves, we do not expect that
these matters will have a material adverse effect on our consolidated financial
position.

Asbestos Matters

Like many other industrial companies, Honeywell is a defendant in personal
injury actions related to asbestos. We did not mine or produce asbestos, nor did
we make or sell insulation products or other construction materials that have
been identified as the primary cause of asbestos related disease in the vast
majority of claimants. Rather, we made several products that contained small
amounts of asbestos.

Honeywell's Bendix Friction Materials business manufactured automotive brake
pads that included asbestos in an encapsu-

58

lated form. There is a group of potential claimants consisting largely of
professional brake mechanics. From 1981 through December 31, 2002, we have
resolved approximately 60,000 Bendix claims at an average indemnity cost per
claim of approximately two thousand dollars. Through the second quarter of 2002,
Honeywell had no out-of-pocket costs for these cases since its insurance
deductible was satisfied many years ago. Beginning with claim payments made in
the third quarter of 2002, Honeywell began advancing indemnity and defense claim
costs which amounted to approximately $70 million in payments in the second half
of 2002. A substantial portion of this amount is expected to be reimbursed by
insurance and $57 million has been recorded as a receivable. There are currently
approximately 50,000 claims pending and we have no reason to believe that the
historic rate of dismissal will change.

On January 30, 2003, Honeywell and Federal-Mogul Corp. (Federal-Mogul) entered
into a letter of intent (LOI) pursuant to which Federal-Mogul would acquire
Honeywell's automotive Bendix Friction Materials (Bendix) business, with the
exception of certain U.S. based assets. In exchange, Honeywell would receive a
permanent channeling injunction shielding it from all current and future
personal injury asbestos liabilities related to Honeywell's Bendix business.

Federal-Mogul, its U.S. subsidiaries and certain of its United Kingdom
subsidiaries voluntarily filed for financial restructuring under Chapter 11 of
the U.S. Bankruptcy Code in October 2001. Federal-Mogul will seek to establish
one or more trusts under Section 524(g) of the U.S. Bankruptcy Code as part of
its reorganization plan, including a trust for the benefit of Bendix asbestos
claimants. The reorganization plan to be submitted to the Bankruptcy Court for
approval will contemplate that the U.S. Bankruptcy Court in Delaware would issue
an injunction in favor of Honeywell that would channel to the Bendix 524(g)
trust all present and future asbestos claims relating to Honeywell's Bendix
business. The 524(g) trust created for the benefit of the Bendix claimants would
receive the rights to proceeds from Honeywell's Bendix related insurance
policies and would make these proceeds available to the Bendix claimants.
Honeywell would have no obligation to contribute any additional amounts toward
the settlement or resolution of Bendix related asbestos claims.

In the fourth quarter of 2002, we recorded a charge of $167 million consisting
of a $131 million reserve for the sale of Bendix to Federal-Mogul, our estimate
of asbestos related liability net of insurance recoveries and costs to complete
the anticipated transaction with Federal-Mogul. Completion of the transaction
contemplated by the LOI is subject to the negotiation of definitive agreements,
the confirmation of Federal-Mogul's plan of reorganization by the Bankruptcy
Court, the issuance of a final, non-appealable 524(g) channeling injunction
permanently enjoining any Bendix related asbestos claims against Honeywell, and
the receipt of all required governmental approvals. We do not believe that
completion of such transaction would have a material adverse impact on our
consolidated results of operations or financial position. There can be no
assurance, however, that the transaction contemplated by the LOI will be
completed. Honeywell presently has $2 billion of insurance coverage remaining
with respect to Bendix related asbestos claims. Although it is impossible to
predict the outcome of pending or future claims, in light of our potential
exposure, our prior experience in resolving 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 in the East and Midwest by North
American Refractories Company (NARCO), a business we owned from 1979 to 1986.
Less than 2 percent of NARCO's products contained asbestos.

When we sold the NARCO business in 1986, we agreed to indemnify NARCO with
respect to personal injury claims for products that had been discontinued prior
to the sale (as defined in the sale agreement). NARCO retained all liability for
all other claims. NARCO had resolved approximately 176,000 claims through
January 4, 2002, the date NARCO filed for reorganization under Chapter 11 of the
U.S. Bankruptcy Code, at an average cost per claim of two thousand two hundred
dollars. Of those claims, 43 percent were dismissed on the ground that there was
insufficient evidence that NARCO was responsible for the claimant's asbestos
exposure. As of the date of NARCO's bankruptcy filing, there were approximately
116,000 remaining claims pending against NARCO, including approximately 7
percent in which Honeywell was also named as a defendant. Since 1983, Honeywell
and our insurers have contributed to the defense and settlement costs associated
with NARCO claims. We have approximately $2 billion of insurance remaining that
can be specifically allocated to NARCO related liability.

As a result of the NARCO bankruptcy filing, all of the claims pending against
NARCO are automatically stayed pending the reorganization of NARCO. In addition,
because the claims pending against Honeywell necessarily will impact the
liabilities of NARCO, because the insurance policies held by Honeywell are
essential to a successful NARCO reorganization, and because Honeywell has
offered to commit the value of those policies to the reorganization, the
bankruptcy court has temporarily enjoined any claims against Honeywell, current
or future, related to NARCO. Although the stay has been extended eleven times
since January 4, 2002, there is no assurance that such stay will remain in
effect. In connection with NARCO's bankruptcy filing, we paid NARCO's parent

                                                                              59

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, and to forgive any outstanding NARCO
indebtedness, upon the confirmation and consummation of such a plan.

As a result of ongoing negotiations with counsel representing NARCO related
asbestos claimants regarding settlement of all pending and potential NARCO
related asbestos claims against Honeywell, we have reached definitive agreements
or agreements in principle with approximately 236,000 claimants, which
represents approximately 90 percent of the approximately 260,000 current
claimants who are now expected to file a claim as part of the NARCO
reorganization process. We are also in discussions with the NARCO Committee of
Asbestos Creditors on Trust Distribution Procedures for NARCO. We believe that,
as part of the NARCO plan of reorganization, a trust will be established
pursuant to these Trust Distribution Procedures for the benefit of all asbestos
claimants, current and future. If the trust is put in place and approved by the
court as fair and equitable, Honeywell as well as NARCO will be entitled to a
permanent channeling injunction barring all present and future individual
actions in state or federal courts and requiring all asbestos related claims
based on exposure to NARCO products to be made against the federally-supervised
trust. As part of its ongoing settlement negotiations, Honeywell is seeking to
cap its annual contributions to the trust with respect to future claims at a
level that would not have a material impact on Honeywell's operating cash flows.
Given the substantial progress of negotiations between Honeywell and NARCO
related asbestos claimants and between Honeywell and the Committee of Asbestos
Creditors during the fourth quarter of 2002, Honeywell has developed an
estimated liability for settlement of pending and future asbestos claims.

During the fourth quarter of 2002, Honeywell recorded a charge of $1.4 billion
for NARCO related asbestos litigation charges, net of insurance recoveries. This
charge consists of the estimated liability to settle current asbestos related
claims, the estimated liability related to future asbestos related 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 approximately 90 percent of current claimants. Once finalized,
settlement payments with respect to current claims are expected to be made over
approximately a four-year period.

The liability for future claims estimates the probable value of future asbestos
related bodily injury claims asserted against NARCO over a 15 year period and
obligations to NARCO's parent as discussed above. In light of the uncertainties
inherent in making long-term projections we do not believe that we have a
reasonable basis for estimating asbestos claims beyond 2018 under Statement of
Financial Accounting Standard No. 5 "Accounting for Contingencies." Honeywell
retained the expert services of Hamilton, Rabinovitz and Alschuler, Inc. (HR&A)
to project the probable number and value, including trust claim handling costs,
of asbestos related future liabilities. The methodology used to estimate the
liability for future claims has been commonly accepted by numerous courts and is
the same methodology that is utilized by the expert who is routinely retained by
the asbestos claimants committee in asbestos related bankruptcies. The valuation
methodology includes an analysis of the population likely to have been exposed
to asbestos containing products, epidemiological studies to estimate the number
of people likely to develop asbestos related diseases, NARCO claims filing
history and the pending inventory of NARCO asbestos related claims.

Honeywell has substantial insurance that reimburses it for portions of the costs
incurred to settle NARCO related claims and court judgments as well as defense
costs. This coverage is provided by a large number of insurance policies written
by dozens of insurance companies in both the domestic insurance market and the
London excess market. Over one-half of this coverage is with Equitas and other
London-based insurance companies with a majority of this coverage subject to a
coverage-in-place agreement. Coverage-in-place agreements are settlement
agreements between policyholders and the insurers specifying the terms and
conditions under which coverage will be applied as claims are presented for
payment. These agreements govern such things as what events will be deemed to
trigger coverage, how liability for a claim will be allocated among insurers and
what procedures the policyholder must follow in order to obligate the insurer to
pay claims. We conducted an analysis to determine the amount of insurance that
we estimate is probable that we will recover in relation to payment of current
and projected future claims. While the substantial majority of our insurance
carriers are solvent, some of our individual carriers are insolvent, which has
been considered in our analysis of probable recoveries. Some of our insurance
carriers have challenged our right to enter into settlement agreements resolving
all NARCO related asbestos claims against Honeywell. However, we believe there
is no factual or legal basis for such challenges and we believe that it is
probable that we will prevail in the resolution of, or in any litigation that is
brought regarding these disputes and have recognized approximately $900 million
in probable insurance recoveries from these carriers. We made judgments
concerning insurance coverage that we believe are reasonable and consistent with
our historical dealings with our insurers, our knowledge of any pertinent
solvency issues surrounding insurers and various judicial determinations
relevant to our

60

insurance programs. Based on our analysis, we recorded insurance recoveries that
are deemed probable through 2018 of $1.8 billion.

Projecting future events is subject to many uncertainties that could cause the
NARCO related asbestos liabilities to be higher or lower than those projected
and recorded. There is no assurance that ongoing settlement negotiations will be
successfully completed, that a plan of reorganization will be proposed or
confirmed, that insurance recoveries will be timely or whether there will be any
NARCO related asbestos claims beyond 2018. Given the inherent uncertainty in
predicting future events, we plan to review our estimates periodically, and
update them based on our experience and other relevant factors. Similarly we
will reevaluate our projections concerning our probable insurance recoveries in
light of any changes to the projected liability or other developments that may
impact insurance recoveries.

NARCO and Bendix asbestos related balances are included in the following balance
sheet accounts:

                                                December 31,
                                               -------------
                                                2002    2001
- ------------------------------------------------------------
                                                  
Other current assets .......................   $  320   $180
Insurance recoveries for asbestos related
   liabilities .............................    1,636     --
- ------------------------------------------------------------
                                               $1,956   $180
============================================================
Accrued liabilities ........................   $  741   $182
Asbestos related liabilities ...............    2,700     --
- ------------------------------------------------------------
                                               $3,441   $182
============================================================

Warranties and Guarantees

We have issued or are a party to the following direct and indirect guarantees at
December 31, 2002:

                                           Maximum
                                          Potential
                                            Future
                                           Payments
- ---------------------------------------------------
                                          
Operating lease residual values .......      $340
Other third parties' financing ........       181
Unconsolidated affiliates' financing ..        37
Customer and vendor financing .........        29
- ---------------------------------------------------
                                             $587
===================================================

In connection with our disposition of BCVS we guaranteed $172 million of its
debt (included in other third parties' financing). Any payment we might make
under this guarantee is recoverable from the acquirer of BCVS, whose payment is
backed by a letter of credit issued by a commercial bank.

At December 31, 2002, no amounts were recorded related to these guarantees. We
do not expect that these guarantees will have a material adverse effect on our
consolidated results of operations, financial position or liquidity.

In connection with the disposition of certain businesses and facilities we have
indemnified the purchasers for the expected cost of remediation of environmental
contamination, if any, existing on the date of disposition. Such expected costs
are accrued when environmental assessments are made or remedial efforts are
probable and the costs can be reasonably estimated.

In the normal course of business we issue product warranties and product
performance guarantees. We accrue for the estimated cost of product warranties
and performance guarantees based on contract terms and historical experience at
the time of sale. Adjustments to initial obligations for warranties and
guarantees are made as changes in the obligations become reasonably estimable.
The following table summarizes information concerning our recorded obligations
for product warranties and product performance guarantees:

                                                   December 31,
                                               ------------------
                                               2002   2001   2000
- -----------------------------------------------------------------
                                                    
Beginning of year ..........................   $217   $198   $187
Accruals for warranties/guarantees issued
   during the year .........................    158    216    197
Adjustment of pre-existing
   warranties/guarantees ...................    (18)    (3)    (3)
Settlement of warranty/guarantee
   claims ..................................   (140)  (194)  (183)
- -----------------------------------------------------------------
End of year                                    $217   $217   $198
=================================================================

Product warranties and product performance guarantees are included in the
following balance sheet accounts:

                          December 31,
                          ------------
                          2002   2001
- --------------------------------------
                           
Accrued liabilities ...   $179   $178
Other liabilities .....     38     39
- --------------------------------------
                          $217   $217
======================================

Other Matters

We are subject to a number of other lawsuits, investigations and claims (some of
which involve substantial amounts) arising out of the conduct of our business.
With respect to all these other matters, including those relating to commercial
transactions, government contracts, product liability and non-environmental
health and safety matters, while the ultimate results of these lawsuits,
investigations and claims cannot be determined, we do not expect that these
matters will have a material adverse effect on our consolidated results of
operations or financial position.

NOTE 22. PENSION AND OTHER POSTRETIREMENT BENEFITS

We maintain pension plans covering the majority of our employees and retirees,
and postretirement benefit plans for

                                                                              61

retirees that include health care benefits and life insurance coverage. Pension
benefits for substantially all U.S. employees are provided through
non-contributory, defined benefit pension plans. Employees in foreign countries,
who are not U.S. citizens, are covered by various retirement benefit
arrangements, some of which are considered to be defined benefit pension plans
for accounting purposes. Our retiree medical plans cover U.S. employees who
retire with pension eligibility for hospital, professional and other medical
services. Most of the U.S. retiree medical plans require deductibles and
copayments, and virtually all are integrated with Medicare. Retiree
contributions are generally required based on coverage type, plan and Medicare
eligibility. The retiree medical and life insurance plans are not funded. Claims
and expenses are paid from our general assets.

Net periodic pension and other postretirement benefit costs (income) for our
significant plans include the following components:

                                                    Pension Benefits
                                              ---------------------------
                                                2002      2001      2000
- -------------------------------------------------------------------------
                                                         
Service cost ..............................   $   201   $   194   $   193
Interest cost .............................       753       765       702
Assumed return on plan assets .............    (1,164)   (1,201)   (1,151)
Amortization of transition asset ..........        (7)      (11)      (13)
Amortization of prior service cost ........        43        49        53
Recognition of actuarial (gains) losses ...        13       (52)     (114)
Settlements and curtailments ..............        14       (54)      (50)
- -------------------------------------------------------------------------
Benefit (income) ..........................   $  (147)  $  (310)  $  (380)
=========================================================================

                                              Other Postretirement Benefits
                                              -----------------------------
                                                   2002   2001   2000
- ---------------------------------------------------------------------------
                                                        
Service cost ..............................        $ 21   $ 20   $ 23
Interest cost .............................         141    142    131
Assumed return on plan assets .............          --     --     --
Amortization of prior service (credit) ....         (22)   (19)   (18)
Recognition of actuarial (gains) losses ...          10      2     (4)
Settlements and curtailments ..............         (30)    --    (34)
- ---------------------------------------------------------------------------
Benefit cost ..............................        $120   $145   $ 98
===========================================================================

The following table summarizes the balance sheet impact, including the benefit
obligations, assets, funded status and actuarial assumptions associated with our
significant pension and other postretirement benefit plans.

                                                                   Other
                                                              Postretirement
                                         Pension Benefits        Benefits
                                        --------------------------------------
                                          2002      2001      2002       2001
- ------------------------------------------------------------------------------
                                                           
Change in benefit obligation:
   Benefit obligation at
      beginning of year .............   $10,952   $10,132   $  2,149   $ 1,952
   Service cost .....................       201       194         21        20
   Interest cost ....................       753       765        141       142
   Plan amendments ..................        25        37        (32)       (6)
   Actuarial losses .................       633       748        215       210
   Acquisitions (divestitures) ......      (105)       (7)        --        --
   Benefits paid ....................      (868)     (857)      (199)     (169)
   Settlements and curtailments .....       (48)      (49)       (34)       --
   Other ............................       117       (11)       (20)       --
- ------------------------------------------------------------------------------
   Benefit obligation at
      end of year ...................    11,660    10,952      2,241     2,149
- ------------------------------------------------------------------------------
Change in plan assets:
   Fair value of plan assets at
      beginning of year .............    11,051    12,264         --        --
   Actual return on plan assets .....      (912)     (383)        --        --
   Company contributions ............       885        46         --        --
   Acquisitions (divestitures) ......      (103)       (8)        --        --
   Benefits paid ....................      (868)     (857)        --        --
   Other ............................       125       (11)        --        --
- ------------------------------------------------------------------------------
   Fair value of plan assets at
      end of year ...................    10,178    11,051         --        --
- ------------------------------------------------------------------------------
   Funded status of plans ...........    (1,482)       99     (2,241)   (2,149)
   Unrecognized transition (asset) ..         1        (8)        --        --
   Unrecognized net loss ............     3,829     1,118        528       297
   Unrecognized prior service
      cost (credit) .................       193       239       (153)     (157)
- ------------------------------------------------------------------------------
Net amount recognized                   $ 2,541   $ 1,448   $ (1,866)  $(2,009)
==============================================================================
Actuarial assumptions at December 31:
   Discount rate ....................      6.75%     7.25%      6.75%     7.25%
   Assumed rate of return on
      plan assets ...................     10.00%    10.00%        --        --
   Assumed annual rate of
      compensation increase .........      4.00%     4.00%        --        --
==============================================================================

The assumed rate of return on plan assets used to determine pension income in
2002, 2001 and 2000 was 10 percent. Based on our historic plan asset returns and
the continued deterioration in financial market returns in 2002 we are reducing
the assumed rate of return on plan assets from 10 to 9 percent for purposes of
determining 2003 pension benefit cost (income).

In 2002 we made voluntary contributions of $830 million to our U.S. defined
benefit pension plans to improve the funded status of our plans. The
contributions included $700 million of Honeywell common stock. We have appointed
an independent fiduciary to hold and make all investment decisions with respect
to the contributed shares. At December 31, 2002 and 2001, the fair value of our
pension plan assets invested in Honeywell common stock were $811 and $79
million, respectively.

The projected benefit obligation, accumulated benefit obligation and fair value
of plan assets for our pension plans with accumulated benefit obligations in
excess of plan assets

62

were $4,315, $4,036 and $3,109 million, respectively, at December 31, 2002 and
$1,296, $1,262 and $865 million, respectively, at December 31, 2001.

Due to the continued poor market performance of our pension fund assets and a
decline in the discount rate used to estimate our pension liabilities, we were
required to adjust the minimum pension liability recorded in our Consolidated
Balance Sheet at December 31, 2002. The effect of this adjustment was to
increase pension liabilities by $921 million (total minimum pension liability
included in other liabilities at December 31, 2002 was $1.2 billion), increase
intangible assets by $8 million, increase deferred income tax assets by $350
million, and increase accumulated other nonowner changes by $606 million ($956
million on a pretax basis).

For measurement purposes, we assumed an annual healthcare cost trend rate of 9
percent for covered healthcare benefits in 2003. The rate was assumed to
decrease gradually to 5 percent in 2007 and remain at that level thereafter.
Assumed health-care cost trend rates have a significant effect on the amounts
reported for our retiree health-care plan. A one-percentage-point change in
assumed health-care cost trend rates would have the following effects:

                                                      One-             One-
                                                   Percentage-      Percentage-
                                                 Point Increase   Point Decrease
- --------------------------------------------------------------------------------
                                                                 
Effect on total of service and interest cost
   components ................................        $  9             $  (8)
Effect on postretirement benefit obligation...        $124             $(111)
================================================================================

NOTE 23. SEGMENT FINANCIAL DATA

Statement of Financial Accounting Standards No. 131, "Disclosures about Segments
of an Enterprise and Related Information" (SFAS No. 131), establishes standards
for reporting information about operating segments. The following information is
provided in accordance with the requirements of SFAS No. 131 and is consistent
with how business results are reported internally to management.

We globally manage our business operations through strategic business units
(SBUs) serving customers worldwide with aerospace products and services,
control, sensing and security technologies for buildings, homes and industry,
automotive products and chemicals. Based on similar economic and operational
characteristics, our SBUs are aggregated into the following four reportable
segments:

o    Aerospace 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, navigation,
     radar and surveillance systems; aircraft and airfield lighting; management
     and technical services and advanced systems and instruments); and Aircraft
     Landing Systems (aircraft wheels and brakes).

o    Automation and Control Solutions 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 instruments for measuring pressure, air flow, temperature, electrical
     current and, security and fire detection, access control and video
     surveillance systems); Service (installs, maintains and upgrades systems
     that keep buildings safe, comfortable and productive); and Industry
     Solutions (provides full range of automation and control solutions for
     industrial plants, offering advanced software and automation systems that
     integrate, control and monitor complex processes in many types of
     industrial settings).

o    Specialty Materials includes fibers; specialty films; intermediate
     chemicals; fluorine-based products; pharmaceutical and agricultural
     chemicals; specialty waxes, adhesives and sealants; process technology;
     wafer fabrication materials and services; and amorphous metals.

o    Transportation and Power Systems includes Garrett Engine Boosting Systems
     (turbochargers and charge-air coolers); the Consumer Products Group (car
     care products including anti-freeze, filters, spark plugs, cleaners, waxes
     and additives); and Friction Materials (friction material and related brake
     system components).

The accounting policies of the segments are the same as those described in Note
1. We evaluate segment performance based on segment profit, which excludes
general corporate unallocated expenses, gains (losses) on sales of non-strategic
businesses, equity income, other (income) expense, interest and other financial
charges and repositioning, litigation, business impairment and other charges.
Intersegment sales approximate market and are not significant. Reportable
segment data were as follows:

                                                       2002      2001      2000
- --------------------------------------------------------------------------------
                                                                
Net sales
   Aerospace .....................................   $ 8,855   $ 9,653   $ 9,988
   Automation and Control Solutions ..............     6,978     7,185     7,384
   Specialty Materials ...........................     3,205     3,313     4,055
   Transportation and Power Systems ..............     3,184     3,457     3,527
   Corporate .....................................        52        44        69
- --------------------------------------------------------------------------------
                                                     $22,274   $23,652   $25,023
================================================================================

                                                                              63

                                                       2002      2001      2000
- --------------------------------------------------------------------------------
                                                                
Depreciation
   Aerospace .....................................   $   224   $   232   $   268
   Automation and Control Solutions ..............       167       178       178
   Specialty Materials ...........................       180       199       204
   Transportation and Power Systems ..............        66        78        89
   Corporate .....................................        34        37        52
- --------------------------------------------------------------------------------
                                                     $   671   $   724   $   791
================================================================================

Goodwill and indefinite-lived intangible asset
   amortization
   Aerospace .....................................   $    --   $    60   $    60
   Automation and Control Solutions ..............        --        92        86
   Specialty Materials ...........................        --        32        40
   Transportation and Power Systems ..............        --        20        20
- --------------------------------------------------------------------------------
                                                     $    --   $   204   $   206
================================================================================

Segment profit
   Aerospace .....................................   $ 1,358   $ 1,741   $ 2,195
   Automation and Control Solutions ..............       890       819       986
   Specialty Materials ...........................        57        52       334
   Transportation and Power Systems ..............       357       289       274
   Corporate .....................................      (154)     (153)     (160)
- --------------------------------------------------------------------------------
                                                     $ 2,508   $ 2,748   $ 3,629
================================================================================

Capital expenditures
   Aerospace .....................................   $   182   $   212   $   225
   Automation and Control Solutions ..............       106       154       193
   Specialty Materials ...........................       233       325       261
   Transportation and Power Systems ..............       108       172       145
   Corporate .....................................        42        13        29
- --------------------------------------------------------------------------------
                                                     $   671   $   876   $   853
================================================================================

Total assets
   Aerospace .....................................   $ 7,094   $ 8,003   $ 8,454
   Automation and Control Solutions ..............     7,044     6,827     7,510
   Specialty Materials ...........................     3,512     4,053     4,243
   Transportation and Power Systems ..............     2,201     2,195     2,792
   Corporate .....................................     7,708     3,148     2,176
- --------------------------------------------------------------------------------
                                                     $27,559   $24,226   $25,175
================================================================================

A reconciliation of segment profit to consolidated income (loss) before taxes is
as follows:

                                                       2002      2001     2000
- -------------------------------------------------------------------------------
                                                                
Segment profit....................................   $ 2,508   $ 2,748   $3,629
Gain (loss) on sale of non-strategic businesses...      (124)       --      112
Asbestos related litigation charges, net of
   insurance .....................................    (1,548)     (159)      (7)
Business impairment charges ......................      (877)     (145)    (410)
Repositioning and other charges(1) ...............      (634)   (2,490)    (549)
Equity in income of affiliated companies .........        55         7       47
Other income .....................................        19        22       57
Interest and other financial charges .............      (344)     (405)    (481)
- -------------------------------------------------------------------------------
Income (loss) before taxes .......................   $  (945)  $  (422)  $2,398
===============================================================================

(1)  In 2001 includes cumulative effect adjustment of $1 million of income
     related to adoption of SFAS No. 133.

NOTE 24. GEOGRAPHIC AREAS -- FINANCIAL DATA

                                                             Net Sales(1)
                                                     ---------------------------
                                                       2002       2001     2000
- --------------------------------------------------------------------------------
                                                                
United States ....................................   $15,522   $17,421   $18,007
Europe ...........................................     4,192     4,264     4,313
Other International ..............................     2,560     1,967     2,703
- --------------------------------------------------------------------------------
                                                     $22,274   $23,652   $25,023
================================================================================

                                                         Long-lived Assets(2)
                                                     ---------------------------
                                                       2002      2001      2000
- --------------------------------------------------------------------------------
                                                                
United States ....................................   $ 8,665   $ 9,402   $ 9,540
Europe ...........................................     1,756     1,491     1,617
Other International ..............................       406       396       517
- --------------------------------------------------------------------------------
                                                     $10,827   $11,289   $11,674
================================================================================

(1)  Sales between geographic areas approximate market and are not significant.
     Net sales are classified according to their country of origin. Included in
     United States net sales are export sales of $2,249, $3,074 and $3,194
     million in 2002, 2001 and 2000, respectively.

(2)  Long-lived assets are comprised of property, plant and equipment, goodwill
     and other intangible assets.

64

NOTE 25. UNAUDITED QUARTERLY FINANCIAL INFORMATION

                                                               2002
                                  ------------------------------------------------------------------
                                  MAR. 31(1)(2)   JUNE 30(3)(4)   SEPT. 30   DEC. 31(5)(6)     YEAR
                                  ------------------------------------------------------------------
                                                                              
Net sales ....................        $5,199          $5,651       $5,569       $ 5,855      $22,274
Gross profit .................         1,126           1,220        1,333           980        4,659
Net income (loss) ............           376             459          412        (1,467)        (220)
Earnings (loss) per share--
   basic .....................           .46             .56          .50         (1.78)        (.27)
Earnings (loss) per share--
   assuming dilution .........           .46             .56          .50         (1.78)(11)    (.27)(11)
Dividends paid ...............         .1875           .1875        .1875         .1875          .75
Market price(12)
   High ......................         40.37           40.76        36.50         27.08        40.76
   Low .......................         29.11           34.85        21.66         19.20        19.20
====================================================================================================

                                                              2001
                                  --------------------------------------------------------------
                                  MAR. 31(7)   JUNE 30(8)   SEPT. 30(9)    DEC. 31(10)     YEAR
                                  --------------------------------------------------------------
                                                                          
Net sales .....................     $5,944       $6,066      $5,789           $5,853     $23,652
Gross profit ..................        971        1,110         614              832       3,527
Net income (loss) .............         41           50        (308)             118         (99)
Earnings (loss) per share--
   basic ......................        .05          .06        (.38)             .14        (.12)
Earnings (loss) per share--
   assuming dilution ..........        .05          .06        (.38)(11)         .14        (.12)(11)
Dividends paid ................      .1875        .1875       .1875            .1875         .75
Market price(12)
   High .......................      49.42        53.50       38.95            34.50       53.50
   Low ........................      35.93        34.90       23.59            25.65       23.59
================================================================================================

Note: 2001 includes amortization of goodwill and indefinite-lived intangible
assets in the after-tax amount of $49 million, or $0.06 per share in each
quarter. See Note 13 for additional details.

(1)  Includes a $53 million net provision for 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 manufacturing facility.
     The total pretax charge was $96 million, after-tax $69 million, or $0.08
     per share. The total pretax charge included in gross profit was $46
     million.

(2)  Includes an after-tax gain of $79 million, or $0.09 per share, on the
     disposition of our Bendix Commercial Vehicle Systems business.

(3)  Includes a $137 million net provision for repositioning and other charges,
     after-tax $93 million, or $0.11 per share. The total pretax charge included
     in gross profit was $127 million.

(4)  Includes an after-tax gain of $98 million, or $0.12 per share, on the
     dispositions of our Pharmaceutical Fine Chemicals and Automation and
     Control's Consumer Products businesses.

(5)  Includes a $444 million net provision for repositioning and other charges,
     business impairment charges of $834 million and asbestos related litigation
     charges of $1,548 million. The total pretax charge was $2,826 million,
     after-tax $1,897 million, or $2.30 per share. The total pretax charge
     included in gross profit was $444 million.

(6)  Includes an after-tax gain of $18 million, or $0.02 per share, on the
     disposition of our Advanced Circuits business.

(7)  Includes a $495 million provision for repositioning and other charges, a
     charge of $95 million for the impairment of an equity investment and an
     equity investee's loss contract and a net provision of $5 million,
     consisting of $6 million for a charge related to the early extinguishment
     of debt and a $1 million benefit recognized upon the adoption of SFAS No.
     133. The total pretax charge was $595 million, after-tax $374 million, or
     $0.46 per share. The total pretax charge included in gross profit was $474
     million.

(8)  Includes a $462 million net provision for repositioning and other charges,
     asbestos related litigation charges of $111 million and a charge of $78
     million for the impairment of an equity investment. The total pretax charge
     was $651 million, after-tax $400 million, or $0.49 per share. The total
     pretax charge included in gross profit was $397 million.

(9)  Includes a $788 million net provision for repositioning and other charges,
     business impairment charges of $145 million, asbestos related litigation
     charges of $48 million and a charge of $27 million for the impairment of an
     equity investment. The total pretax charge was $1,008 million, after-tax
     $668 million, or $0.82 per share. The total pretax charge included in gross
     profit was $723 million.

(10) Includes a charge of $440 million for the Litton litigation settlement and
     a charge of $100 million for the write-off of investments related to an
     Aerospace regional jet engine contract cancellation. The total pretax
     charge was $540 million, all of which was included in gross profit,
     after-tax $329 million, or $0.40 per share.

(11) Dilutive securities issuable in connection with stock plans have been
     excluded from the calculation of loss per share because their effect would
     reduce the loss per share.

(12) From composite tape -- stock is primarily traded on the New York Stock
     Exchange.

                                                                              65

                          MANAGEMENT'S RESPONSIBILITY
                            FOR FINANCIAL STATEMENTS

- --------------------------------------------------------------------------------

The consolidated financial statements of Honeywell International Inc. and
subsidiaries are the responsibility of the Company's management and have been
prepared in accordance with generally accepted accounting principles in the
United States of America. Management is responsible for the integrity and
objectivity of the financial statements, including estimates and judgments
reflected in them, and fulfills this responsibility primarily by establishing
and maintaining accounting systems and practices supported by internal controls.

Our internal controls are designed to provide reasonable assurance as to the
integrity and reliability of our consolidated financial statements and to
adequately safeguard, verify and maintain accountability of assets. Our internal
controls include disclosure controls and procedures designed to ensure timely,
accurate and complete disclosure. These internal controls are based on
established written policies and procedures, are implemented by trained and
skilled personnel, and are monitored and evaluated by management.

PricewaterhouseCoopers LLP, independent accountants, are retained to audit
Honeywell International Inc.'s consolidated financial statements. Their
accompanying report is based on an audit conducted in accordance with auditing
standards generally accepted in the United States of America, which include the
consideration of the Company's internal controls to establish the basis for
determining the nature, timing and extent of audit tests to be applied.

Our Board of Directors exercises its responsibility for these financial
statements through its Audit Committee, which consists entirely of independent,
non-employee Directors. The Audit Committee meets regularly with the independent
auditors and with the Company's internal auditors, both privately and with
management present, to review accounting, auditing, internal control and
financial reporting matters.

/s/ David M. Cote                                      /s/ Richard F. Wallman
- ------------------                                     -------------------------
David M. Cote                                          Richard F. Wallman
Chairman and Chief                                     Senior Vice President and
Executive Officer                                      Chief Financial Officer

                        REPORT OF INDEPENDENT ACCOUNTANTS
- --------------------------------------------------------------------------------

TO THE BOARD OF DIRECTORS AND SHAREOWNERS OF
HONEYWELL INTERNATIONAL INC.

In our opinion, the accompanying consolidated balance sheets and the related
consolidated statements of operations, of shareowners' equity and of cash flows
present fairly, in all material respects, the financial position of Honeywell
International Inc. and its subsidiaries at December 31, 2002 and 2001, and the
results of their operations and their cash flows for each of the three years in
the period ended December 31, 2002 in conformity with accounting principles
generally accepted in the United States of America. These financial statements
are the responsibility of the Company's management; our responsibility is to
express an opinion on these financial statements based on our audits. We
conducted our audits of these statements in accordance with auditing standards
generally accepted in the United States of America, which require that we plan
and perform the audit to obtain reasonable assurance about whether the financial
statements are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements, assessing the accounting principles used and significant estimates
made by management, and evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.

As discussed in Note 1 to the consolidated financial statements, on January 1,
2002, the Company adopted the provisions of Statement of Financial Accounting
Standards No. 142, "Goodwill and Other Intangible Assets."

/s/ Pricewaterhouse Coopers LLP
- -------------------------------
PricewaterhouseCoopers LLP
Florham Park, New Jersey
February 6, 2003

66

                                                                      EXHIBIT 21

                         SUBSIDIARIES OF THE REGISTRANT

                                                                        SECURITIES OWNED
                                                       COUNTRY OR    -----------------------
                                                        STATE OF                    PERCENT
                        NAME                          INCORPORATION     CLASS      OWNERSHIP
                        ----                          -------------     -----      ---------
                                                                             
Honeywell International Finance Corporation.........  Delaware       Common Stock     100
Honeywell Technology Solutions Inc. ................  Delaware       Common Stock     100
Honeywell Intellectual Properties Inc. .............  Arizona        Common Stock     100
Honeywell Specialty Wax & Additives Inc. ...........  Delaware       Common Stock     100
ASI Specialty Chemicals, L.L.C. ....................  Delaware       Common Stock     100
Grimes Aerospace Company............................  Delaware       Common Stock     100
Pittway Corporation.................................  Delaware       Common Stock     100
Prestone Products Corporation.......................  Delaware       Common Stock     100

                              -------------------

    The names of Honeywell's other consolidated subsidiaries, which are
primarily totally-held by Honeywell, are not listed because all such
subsidiaries, considered in the aggregate as a single subsidiary, would not
constitute a significant subsidiary.

                                                                      EXHIBIT 23

                       CONSENT OF INDEPENDENT ACCOUNTANTS

    We hereby consent to the incorporation by reference in the Registration
Statements on Form S-8 (Nos. 33-09896, 33-51455, 33-55410, 33-58347, 333-57509,
333-57515, 333-57517, 333-57519, 333-83511, 333-34764, 333-49280, 333-57866,
333-57868, 333-91582 and 333-91736), and Form S-3 (Nos. 33-14071, 33-55425,
333-22355, 333-49455, 333-68847, 333-74075, 333-34760, 333-86874 and 333-101455)
and on Form S-4 (No. 333-82049) of our report dated February 6, 2003 relating to
the financial statements, which appears in the Annual Report to Shareowners,
which is incorporated in this Annual Report on Form 10-K. We also consent to the
incorporation by reference of our report dated February 6, 2003 relating to the
financial statement schedule, which appears in this Form 10-K.

/s/ PRICEWATERHOUSECOOPERS LLP

Florham Park, New Jersey
March 6, 2003

                                                                      EXHIBIT 24

                                POWER OF ATTORNEY

     I, David M. Cote, a director of Honeywell International Inc. (the
"Company"), a Delaware corporation, hereby appoint Peter M. Kreindler, Richard
F. Wallman, Thomas F. Larkins, John T. Tus and James V. Gelly, each with power
to act without the other and with power of substitution and resubstitution, as
my attorney-in-fact and agent for me and in my name, place and stead in any and
all capacities,

     (i) to sign the Company's Annual Report on Form 10-K under the Securities
Exchange Act of 1934 for the year ended December 31, 2002,

     (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) above and all
exhibits thereto and any and all other documents in connection therewith,

granting unto each said attorney and agent full power and authority to do and
perform every act and thing requisite, necessary or desirable to be done in
connection therewith, as fully to all intents and purposes as I might or could
do in person, hereby ratifying and confirming all that said attorneys-in-fact
and agents, or any of them, or their or his or her substitutes or substitute,
may lawfully do or cause to be done by virtue hereof.

                                            /s/ David M. Cote
                                            ------------------------------------
                                                David M. Cote

Dated: February 6, 2003

                                POWER OF ATTORNEY

     I, David M. Cote, a director of Honeywell International Inc. (the
"Company"), a Delaware corporation, hereby appoint Peter M. Kreindler, Richard
F. Wallman, Thomas F. Larkins, John T. Tus and James V. Gelly, each with power
to act without the other and with power of substitution and resubstitution, as
my attorney-in-fact to sign on my behalf in my capacity as a director of the
Company one or more registration statements under the Securities Act of 1933, or
any amendment or post-effective amendment to any registration statement
heretofore or hereafter filed by the Company:

          (a) on Form S-8 or other appropriate form for the registration of
shares of the Company's Common Stock (or participations where appropriate) to be
offered under the savings, stock or other benefit plans of the Company, its
affiliates or any predecessor thereof, including the Honeywell Savings and
Ownership Plan I, Honeywell Savings and Ownership Plan II, the Honeywell Truck
Brake Systems Company Savings Plan, the Vericor Power Systems Savings Plan, the
Data Instrument Inc. Employee Stock Ownership Plan, the Honeywell Supplemental
Savings Plan, the Honeywell Executive Supplemental Savings Plan, the UK Share
Purchase Plan of the Company, the Ireland Employees Share Ownership program of
the Company, the Employee Stock Purchase Plan of the Company, the Stock Plan for
Non-Employee Directors of the Company, the 1993 Honeywell Stock Plan for
Employees of the Company and its Affiliates, the 2003 Stock Incentive Plan of
Honeywell International Inc., and any plan which is a successor to such plans or
is a validly authorized plan pursuant to which securities of the Corporation are
issued to 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 and authority to perform
every act necessary to be done as fully as I might do in person.

     I hereby revoke any or all prior appointments of attorneys-in-fact to sign
the above-described documents.

                                            /s/ David M. Cote
                                            ------------------------------------
                                                David M. Cote

Dated: February 6, 2003

                                POWER OF ATTORNEY

     I, David M. Cote, a director of Honeywell International Inc. (the
"Company"), a Delaware corporation, hereby appoint Peter M. Kreindler, Richard
F. Wallman, Thomas F. Larkins, John T. Tus and James V. Gelly, each with power
to act without the other and with power of substitution and resubstitution, as
my attorney-in-fact to sign on my behalf in my capacity as a director of the
Company one or more registration statements under the Securities Act of 1933, or
any amendment or post-effective amendment to any registration statement
heretofore or hereafter filed by the Company on Form S-3 or other appropriate
form for the registration of:

     (i) debt securities of the Company (which may be convertible into or
exchangeable for 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 issued upon exercise of such warrants shall not exceed 25,000,000,
as adjusted for stock splits and dividends) with aggregate proceeds not to
exceed $3 billion (or the equivalent thereof in any foreign currency), including
any accompanying warrants and any guarantees by the Company of such debt
securities of its subsidiaries, joint ventures or affiliates;

     (ii) preferred stock of the Company (which may be convertible into or
redeemable or exchangeable for Common Stock or other securities or property of
the Company) with proceeds not to exceed $500 million;

     (iii) debt securities, Common Stock or preferred stock of the Company or
warrants to purchase such securities to be issued in exchange for debt or equity
securities of the Company, its subsidiaries, joint ventures or affiliates with
an aggregate principal amount, liquidation, preference or value not to exceed
$815,740,000;

     (iv) any securities into or for which any of the securities specified in
clauses (i), (ii) or (iii) are convertible or exchangeable or which may be
issued upon exercise thereof; and

     (v) shares of Common Stock of the Company sold or otherwise disposed of to
carry out transactions (a) which have been specifically authorized by the Board
of Directors, and any warrants to purchase such shares, or (b) not requiring
specific authorization by the Board of Directors (not to exceed in any one
transaction the lesser of (1) two percent of the Common Stock of the Company
issued and outstanding at the end of the preceding fiscal year, as adjusted for
stock splits and stock dividends, or (2) shares having a market value of
$200,000,000), and any warrants to purchase such shares.

     I hereby grant to each such attorney full power and authority to perform
every act necessary to be done as fully as I might do in person.

     I hereby revoke any or all prior appointments of attorneys-in-fact to the
extent that they confer authority to sign the above-described documents.

                                            /s/ David M. Cote
                                            ------------------------------------
                                                David M. Cote

Dated: February 6, 2003

                                                                      EXHIBIT 24

                                POWER OF ATTORNEY

     Each of the undersigned, as a director of Honeywell International Inc. (the
"Company"), a Delaware corporation, hereby appoint David M. Cote, Peter M.
Kreindler, Richard F. Wallman, Thomas F. Larkins, John T. Tus and James V.
Gelly, each with power to act without the other and with power of substitution
and resubstitution, as my attorney-in-fact and agent for me and in my name,
place and stead in any and all capacities,

     (i) to sign the Company's Annual Report on Form 10-K under the Securities
Exchange Act of 1934 for the year ended December 31, 2002,

     (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) above and all
exhibits thereto and any and all other documents in connection therewith,

granting unto each said attorney and agent full power and authority to do and
perform every act and thing requisite, necessary or desirable to be done in
connection therewith, as fully to all intents and purposes as I might or could
do in person, hereby ratifying and confirming all that said attorneys-in-fact
and agents, or any of them, or their or his or her substitutes or substitute,
may lawfully do or cause to be done by virtue hereof.

     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                                /s/ Bruce Karatz
- ----------------------------------                  ----------------------------
Hans W. Becherer, Director                          Bruce Karatz, Director

/s/ Gordon W. Bethune                               /s/ Robert P. Luciano
- ----------------------------------                  ----------------------------
Gordon W. Bethune, Director                         Robert P. Luciano, Director

/s/ Marshall N. Carter                              /s/ Russell E. Palmer
- ----------------------------------                  ----------------------------
Marshall N. Carter, Director                        Russell E. Palmer, Director

/s/ Jaime Chico Pardo                               /s/ Ivan G. Seidenberg
- ----------------------------------                  ----------------------------
Jaime Chico Pardo, Director                         Ivan G. Seidenberg, Director

/s/ Ann M.Fudge                                     /s/ John R. Stafford
- ----------------------------------                  ----------------------------
Ann M. Fudge, Director                              John R. Stafford, Director

/s/ James J. Howard                                 /s/ Michael W. Wright
- ----------------------------------                  ----------------------------
James J. Howard, Director                           Michael W. Wright, Director

Dated: February 6, 2003

                                POWER OF ATTORNEY

     Each of the undersigned, as a director of Honeywell International Inc. (the
"Company"), a Delaware corporation, hereby appoint David M. Cote, Peter M.
Kreindler, Richard F. Wallman, Thomas F. Larkins, John T. Tus and James V.
Gelly, each with power to act without the other and with power of substitution
and resubstitution, as my attorney-in-fact to sign on my behalf in my capacity
as a director of the Company one or more registration statements under the
Securities Act of 1933, or any amendment or post-effective amendment to any
registration statement heretofore or hereafter filed by the Company:

          (a) on Form S-8 or other appropriate form for the registration of
shares of the Company's Common Stock (or participations where appropriate) to be
offered under the savings, stock or other benefit plans of the Company, its
affiliates or any predecessor thereof, including the Honeywell Savings and
Ownership Plan I, Honeywell Savings and Ownership Plan II, the Honeywell Truck
Brake Systems Company Savings Plan, the Vericor Power Systems Savings Plan, the
Data Instrument Inc. Employee Stock Ownership Plan, the Honeywell Supplemental
Savings Plan, the Honeywell Executive Supplemental Savings Plan, the UK Share
Purchase Plan of the Company, the Ireland Employees Share Ownership program of
the Company, the Employee Stock Purchase Plan of the Company, the Stock Plan for
Non-Employee Directors of the Company, the 1993 Honeywell Stock Plan for
Employees of the Company and its Affiliates, the 2003 Stock Incentive Plan of
Honeywell International Inc., and any plan which is a successor to such plans or
is a validly authorized plan pursuant to which securities of the Corporation are
issued to 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 and authority to perform
every act necessary to be done as fully as I might do in person.

     I hereby revoke any or all prior appointments of attorneys-in-fact to sign
the above-described documents.

     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                                /s/ Bruce Karatz
- ----------------------------------                  ----------------------------
Hans W. Becherer, Director                          Bruce Karatz, Director

/s/ Gordon W. Bethune                               /s/ Robert P. Luciano
- ----------------------------------                  ----------------------------
Gordon W. Bethune, Director                         Robert P. Luciano, Director

/s/ Marshall N. Carter                              /s/ Russell E. Palmer
- ----------------------------------                  ----------------------------
Marshall N. Carter, Director                        Russell E. Palmer, Director

/s/ Jaime Chico Pardo                               /s/ Ivan G. Seidenberg
- ----------------------------------                  ----------------------------
Jaime Chico Pardo, Director                         Ivan G. Seidenberg, Director

/s/ Ann M.Fudge                                     /s/ John R. Stafford
- ----------------------------------                  ----------------------------
Ann M. Fudge, Director                              John R. Stafford, Director

/s/ James J. Howard                                 /s/ Michael W. Wright
- ----------------------------------                  ----------------------------
James J. Howard, Director                           Michael W. Wright, Director

Dated:  February 6, 2003

                                POWER OF ATTORNEY

     Each of the undersigned, as a director of Honeywell International Inc. (the
"Company"), a Delaware corporation, hereby appoint David M. Cote, Peter M.
Kreindler, Richard F. Wallman, Thomas F. Larkins, John T. Tus and James V.
Gelly, each with power to act without the other and with power of substitution
and resubstitution, as my attorney-in-fact to sign on my behalf in my capacity
as a director of the Company one or more registration statements under the
Securities Act of 1933, or any amendment or post-effective amendment to any
registration statement heretofore or hereafter filed by the Company on Form S-3
or other appropriate form for the registration of:

     (i) debt securities of the Company (which may be convertible into or
exchangeable for 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 issued upon exercise of such warrants shall not exceed 25,000,000,
as adjusted for stock splits and dividends) with aggregate proceeds not to
exceed $3 billion (or the equivalent thereof in any foreign currency), including
any accompanying warrants and any guarantees by the Company of such debt
securities of its subsidiaries, joint ventures or affiliates;

     (ii) preferred stock of the Company (which may be convertible into or
redeemable or exchangeable for Common Stock or other securities or property of
the Company) with proceeds not to exceed $500 million;

     (iii) debt securities, Common Stock or preferred stock of the Company or
warrants to purchase such securities to be issued in exchange for debt or equity
securities of the Company, its subsidiaries, joint ventures or affiliates with
an aggregate principal amount, liquidation, preference or value not to exceed
$815,740,000;

     (iv) any securities into or for which any of the securities specified in
clauses (i), (ii) or (iii) are convertible or exchangeable or which may be
issued upon exercise thereof; and

     (v) shares of Common Stock of the Company sold or otherwise disposed of to
carry out transactions (a) which have been specifically authorized by the Board
of Directors, and any warrants to purchase such shares, or (b) not requiring
specific authorization by the Board of Directors (not to exceed in any one
transaction the lesser of (1) two percent of the Common Stock of the Company
issued and outstanding at the end of the preceding fiscal year, as adjusted for
stock splits and stock dividends, or (2) shares having a market value of
$200,000,000), and any warrants to purchase such shares.

     I hereby grant to each such attorney full power and authority to perform
every act necessary to be done as fully as I might do in person.

     I hereby revoke any or all prior appointments of attorneys-in-fact to the
extent that they confer authority to sign the above-described documents.

     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                                /s/ Bruce Karatz
- ----------------------------------                  ----------------------------
Hans W. Becherer, Director                          Bruce Karatz, Director

/s/ Gordon W. Bethune                               /s/ Robert P. Luciano
- ----------------------------------                  ----------------------------
Gordon W. Bethune, Director                         Robert P. Luciano, Director

/s/ Marshall N. Carter                              /s/ Russell E. Palmer
- ----------------------------------                  ----------------------------
Marshall N. Carter, Director                        Russell E. Palmer, Director

/s/ Jaime Chico Pardo                               /s/ Ivan G. Seidenberg
- ----------------------------------                  ----------------------------
Jaime Chico Pardo, Director                         Ivan G. Seidenberg, Director

/s/ Ann M.Fudge                                     /s/ John R. Stafford
- ----------------------------------                  ----------------------------
Ann M. Fudge, Director                              John R. Stafford, Director

/s/ James J. Howard                                 /s/ Michael W. Wright
- ----------------------------------                  ----------------------------
James J. Howard, Director                           Michael W. Wright, Director

Dated: February 6, 2003

                                                           Exhibit 99.1

                            CERTIFICATION PURSUANT TO
                             18 U.S.C. SECTION 1350,
                             AS ADOPTED PURSUANT TO
                  SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

In connection with the Annual Report of Honeywell International Inc. (the
Company) on Form 10-K for the year ending December 31, 2002 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 18 U.S.C.
Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of
2002, that:

      (1)   The Report fully complies with the requirements of Section 13(a) or
            15(d) of the Securities Exchange Act of 1934; and

      (2)   The information contained in the Report fairly presents, in all
            material respects, the financial condition and results of
            operations of the Company.

By: /s/ David M. Cote
   -------------------------
David M. Cote
Chief Executive Officer
March 6, 2003

                                                                  Exhibit 99.2

                            CERTIFICATION PURSUANT TO
                             18 U.S.C. SECTION 1350,
                             AS ADOPTED PURSUANT TO
                  SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

In connection with the Annual Report of Honeywell International Inc. (the
Company) on Form 10-K for the year ending December 31, 2002 as filed with the
Securities and Exchange Commission on the date hereof (the Report), I, Richard
F. Wallman, Chief Financial Officer of the Company, certify, pursuant to 18
U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley
Act of 2002, that:

      (1)    The Report fully complies with the requirements of Section 13(a) or
             15(d) of the Securities Exchange Act of 1934; and

      (2)    The information contained in the Report fairly presents, in all
             material respects, the financial condition and results of
             operations of the Company.

By: /s/ Richard F. Wallman
    --------------------------
Richard F. Wallman
Chief Financial Officer
March 6, 2003