We are subject to various federal, state, local, and foreign government requirements relating to the protection of the environment and accrue costs related to environmental matters when it is probable that we have incurred a liability related to a contaminated site and the amount can be reasonably estimated. Environment-related expenses for sites owned and operated by us are presented within Cost of goods sold for operating sites. For the three and nine months ended October 1, 2022 and October 2, 2021, environmental expenses related to these operating sites were not material. Liabilities for environmental costs were $22 million for both October 1, 2022 and December 31, 2021.

The indemnification and reimbursement agreement (the “Reimbursement Agreement”) and the tax matters agreement (the “Tax Matters Agreement”) (collectively, the “Indemnification Agreements”) are described below.

In connection with the Spin-Off, we entered into the Reimbursement Agreement with Honeywell that obligates us to make cash payments to Honeywell in amounts equal to 90% of payments for certain Honeywell environmental-liability payments, which include amounts billed (“payments”), less 90% of Honeywell’s net insurance receipts relating to such liabilities, and less 90% of the net proceeds received by Honeywell in connection with (i) affirmative claims relating to such liabilities, (ii) contributions by other parties relating to such liabilities and (iii) certain property sales (the “recoveries”). The amount payable by us in respect of such liabilities arising in respect of any given year is subject to a cap of $140 million. Refer to Note 17. Commitments and Contingencies in the Company’s 2021 Annual Report on Form 10-K for further discussion.

In connection with the Spin-Off, we entered into the Tax Matters Agreement with Honeywell that obligates us to indemnify Honeywell for certain taxes, including certain income taxes, sales taxes, VAT and payroll taxes, relating to the business for all periods, including periods prior to the consummation of the Spin-Off. In addition, the Tax Matters Agreement addresses the allocation of liability for taxes that are incurred as a result of restructuring activities undertaken to effectuate the Spin-Off.

The following table summarizes information concerning the Indemnification Agreements’ liabilities:


	Reimbursement			Tax Matters
	Agreement			Agreement			Total
Beginning Balance, December 31, 2021	$	597		$	128		$	725
Accruals for liabilities deemed probable and reasonably estimable (1)		116			(2	)		114
Payments to Honeywell		(105	)		(19	)		(124	)
Balance as of October 1, 2022	$	608		$	107		$	715

(1)

Reimbursement Agreement liabilities deemed probable and reasonably estimable, however, it is possible we could pay $140 million per year (exclusive of any late payment fees up to 5% per annum) until the earlier of (1) December 31, 2043; or (2) December 31 of the third consecutive year during which the annual reimbursement obligation (including in respect of deferred payment amounts) has been less than $25 million.

The liabilities related to the Indemnification Agreements are included in the following balance sheet accounts:


	October 1, 2022		December 31, 2021
Accrued liabilities	$	140	$	140
Obligations payable under Indemnification Agreements		575		585
	$	715	$	725

For the three and nine months ended October 1, 2022, net expenses related to the Reimbursement Agreement were $30 million and $116 million, respectively, and for the three and nine months ended October 2, 2021, net expenses related to the Reimbursement Agreement were $39 million and $111 million, respectively, and are recorded in Other expense, net.

We do not currently possess sufficient information to reasonably estimate the amounts of indemnification 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 such indemnification liability payments can be determined although they could be material to our unaudited consolidated results of operations and operating cash flows in the periods recognized or paid.

The Company is subject to lawsuits, investigations, and disputes arising out of the conduct of its business, including matters relating to commercial transactions, government contracts, product liability, prior acquisitions and divestitures, employee matters, intellectual property, 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 adverse judgments or outcomes in these matters, as well as potential ranges of possible losses (taking into consideration any insurance recoveries), based on a careful analysis of each matter with the assistance of outside legal counsel and, if applicable, other experts. No such matters are material to the Company’s Financial Statements.

Certain current or former directors and officers of the Company were defendants in a consolidated derivative action In re Resideo Technologies, Inc. Derivative Litigation (the “Consolidated Federal Derivative Action”) and was stayed pending entry of final judgement in the Securities Litigation and the Delaware Chancery Derivative Action. An additional suit was filed in the Court of Chancery of the State of Delaware in 2021 and not consolidated with the Federal Derivative Suits. On October 4, 2022, we reached an agreement in principle to resolve all of the pending lawsuits. Under the terms of the settlement, we have agreed to implement or codify certain corporate governance reforms and reimburse the plaintiffs’ attorneys’ fees of $1.6 million. The proposed settlement is subject to, among other things, the execution of definitive settlement documentation and court approval. The settlement liability is included in the Accrued liabilities in the Consolidated Balance Sheets, the expected insurance recovery of approximately $0.6 million is included in Accounts receivable, net.

On September 16, 2022, Salvatore Badalamenti (“Plaintiff”) filed a putative class action lawsuit (the “Badalamenti Lawsuit”) in the United States District Court for the District of New Jersey against Honeywell International Inc. and the Company. Plaintiff alleges, among other things, that the Company violated certain consumer protection laws by falsely advertising the Company’s combination-listed single data-bus burglar and fire alarms system control units (the “Products”) as conforming to Underwriters Laboratories, Inc. (the “UL”) or the National Fire Protection Association (“NFPA”) standards and/or failing to disclose such non-nonconformance. Plaintiff further alleges that the Company’s Products are defective because they do not conform to the UL and NFPA industry standards. Plaintiff does not allege that he, or anyone else, has experienced any adverse event due to the alleged product defect or that the Products did not work. Plaintiff alleges causes of action for violation of the New Jersey Consumer Fraud Act, fraud, negligent misrepresentation, breach of express and implied warranties, violation of the Magnuson-Moss Warranty Act, unjust enrichment, and violation of the Truth-in-Consumer Contract, Warranty, and Notice Act.

Plaintiff seeks to represent a putative class of other persons in the United States who purchased the Products. Plaintiff, on behalf of himself and the putative class, seeks damages in an unknown amount, which he describes as the cost to repair and/or replace the Products and/or the diminution in value of the Products.

We believe we have strong defenses against the allegations and claims asserted in the Badalamenti Lawsuit. We intend to defend the matter vigorously; however, there can be no assurance that we will be successful in such defense. In light of the early stage of the Badalamenti Lawsuit, we are unable to estimate the total costs to defend the matter or the potential liability to us in the event that we are not successful in our defense.

In the normal course of business, we issue product warranties and product performance guarantees. We accrue for the estimated cost of product warranties and product 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 to the obligations become reasonably estimable. Product warranties and product performance guarantees are included in Accrued liabilities.

The following table summarizes information concerning recorded obligations for product warranties and product performance guarantees:


	Nine Months Ended
	October 1, 2022			October 2, 2021
Beginning of period	$	23		$	22
Accruals for warranties/guarantees issued during the period		15			12
Additions from acquisitions		14			-
Settlements and adjustments		(17	)		(14	)
End of period	$	35		$	20