UNITED TECHNOLOGIES CORPORATION BOARD OF DIRECTORS DEFERRED STOCK UNIT PLAN Effective January 1, 1996 UNITED TECHNOLOGIES CORPORATION DEFERRED STOCK UNIT PLAN Table of Contents Page ARTICLE I INTRODUCTION 1.01 Purpose of Plan 1 1.02 Effective Date of Plan 1 ARTICLE II DEFINITIONS 2 ARTICLE III CREDITS 3.01 Transition Credits 4 3.02 Automatic Credits 4 3.03 Elective Credits 4 ARTICLE IV ACCOUNTS AND INVESTMENTS 4.01 Accounts 6 4.02 Stock Units 6 4.03 Hypothetical Nature of Accounts and 8 Investments ARTICLE V PAYMENTS 5.01 Entitlement to Payment 9 5.02 Payment Commencement Date 9 5.03 Form and Amount of Payment 9 ARTICLE VI ADMINISTRATION 6.01 In General 11 6.02 Plan Amendment and Termination 11 6.03 Reports to Participants 12 6.04 Delegation of Authority 12 ARTICLE VII MISCELLANEOUS 7.01 Rights Not Assignable 13 7.02 Certain Rights Reserved 13 7.03 Withholding Taxes 14 7.04 Incompetence 14 7.05 Inability to Locate Participants 14 and Beneficiaries 7.06 Successors 15 7.07 Usage 15 7.08 Severability 15 7.09 Governing Law 16 ARTICLE I INTRODUCTION 1.01 Purpose of Plan The purpose of the Plan is to enhance the Company's ability to attract and retain nonemployee members of the Board whose training, experience and ability will promote the interests of the Company and to directly align the interests of such nonemployee Directors with the interests of the Company's shareowners by providing compensation based on the value of UTC Common Stock. The Plan is designed to permit such nonemployee directors to defer the receipt of all or a portion of the cash compensation otherwise payable to them for services to the Company as members of the Board. 1.02 Effective Date of Plan Except as otherwise provided by Section 3.01, the Plan shall apply only to a Participant's annual Director's retainer Fees with respect to service on and after January 1, 1996. ARTICLE II DEFINITIONS Unless the context clearly indicates otherwise, the following terms, when used in capitalized form in the Plan, shall have the meanings set forth below: Account shall mean a bookkeeping account established for a Participant under Section 4.01. Article shall mean an article of the Plan. Beneficiary shall mean a Participant's beneficiary, designated in writing and in a form and manner satisfactory to the Committee, or if a Participant fails to designate a beneficiary, or if the Participant's designated Beneficiary predeceases the Participant, the Participant's estate. Board shall mean the Board of Directors of the Company. Closing Price shall mean, with respect to any date specified by the Plan, the closing price of UTC Common Stock on the composite tape of New York Stock Exchange issues (or if there was no reported sale of UTC Common Stock on such date, on the next preceding day on which there was such a reported sale). Committee shall mean the Nominating Committee of the Board. Company shall mean United Technologies Corporation. Director's Fees shall mean the annual retainer fee payable to a Participant for services to the Company as a member of the Board. Director's Fees do not include special meeting fees. Participant shall mean each member of the Board (other than a member of the Board who is also an employee of the Company or a subsidiary thereof) who is or becomes a member of the Board on or after January 1, 1996. Payment Anniversary Date shall mean an anniversary of the Payment Commencement Date. Payment Commencement Date shall mean the first business day of the first month following the month in which the Participant terminates service as a member of the Board. Plan shall mean this United Technologies Corporation Board of Directors Deferred Stock Unit Plan, as set forth herein and as amended from time to time. Plan Year shall mean the calendar year. Section shall mean a section of the Plan. Stock Unit shall mean a hypothetical share of UTC Common Stock as described in Section 4.02. UTC Common Stock shall mean the common stock of the Company. ARTICLE III CREDITS 3.01 Transition Credits As soon as practicable on or after January 1, 1996, the Company shall credit to the Account of each Participant a number of Stock Units determined in accordance with the schedules set forth in Appendix I and Appendix II to the Plan. The credits set forth in Appendix I shall be provided in lieu of any benefits to which the Participant otherwise would have been entitled under the United Technologies Corporation Directors Retirement Plan as of its termination on December 31, 1995. The credits set forth in Appendix II shall be provided in lieu of any benefits to which the Participant otherwise would be entitled under certain deferred compensation arrangements entered into prior to January 1, 1996. The number of units set forth in Appendix II shall equal the number of tax deferred stock units (if any) credited to the Participant under any such prior deferred compensation arrangement, determined as of December 31, 1995. 3.02 Automatic Credits As of the beginning of each Plan Year, the Company shall credit Stock Units to each Participant's Account equal in value to 60% of the Participant's Director's Fees for the Plan Year, as determined in accordance with Section 4.02(a)(1). 3.03 Elective Credits A Participant may elect, with respect to each Plan Year, to defer the entire portion (but not a partial portion) of the 40% of the Participant's Director's Fees that are not automatically deferred in accordance with Section 3.02 and that otherwise would be paid to the Participant in cash. If the Participant makes such an election, the Company shall credit Stock Units to the Participant's Account equal in value to 40% of the Participant's Director's Fees for the Plan Year, as determined in accordance with Section 4.02(a)(1), as of the beginning of the Plan Year with respect to which the election is made (or, if later, as of the first day in the Plan Year on which the individual becomes a Participant). An election under this Section 3.03 shall be made in a form and manner satisfactory to the Committee and shall be effective for a Plan Year only if made before the beginning of the Plan Year; provided that an individual who becomes a Participant after the first day of a Plan Year may make the election for that Plan Year within 30 days of becoming a Participant. ARTICLE IV ACCOUNTS AND INVESTMENTS 4.01 Accounts A separate Account under the Plan shall be established for each Participant. Such Account shall be (a) credited with the amounts credited in accordance with Article Ill, (b) credited (or charged, as the case may be) with the investment results determined in accordance with Section 4.02, and (c) charged with the amounts paid by the Plan to or on behalf of the Participant in accordance with Article V. Within each Participant's Account, separate subaccounts shall be maintained to the extent the Committee determines them to be necessary or useful in the administration of the Plan. 4.02 Stock Units (a) Deemed Investment in UTC Common Stock. Except as provided in subsection (b), below, a Participant's Account shall be treated as if it were invested in Stock Units that are equivalent in value to the fair market value of shares of UTC Common Stock in accordance with the following rules: (1) Conversion into Stock Units. Any Director's Fees credited to a Participant's Account for a Plan Year under Section 3.02 or 3.03 shall be converted into Stock Units (including fractional Stock Units) by dividing the amount credited by the Closing Price on the first business day of the Plan Year; provided that in the case of an individual who becomes a Participant after the first day of a Plan Year, the Closing Price shall be determined as of the day on which the individual becomes a Participant. (2) Deemed Reinvestment Of Dividends. The number of Stock Units credited to a Participant's Account shall be increased on each date on which a dividend is paid on UTC Common Stock. The number of additional Stock Units credited to a Participant's Account as a result of such increase shall be determined by (i) multiplying the total number of Stock Units (excluding fractional Stock Units) credited to the Participant's Account immediately before such increase by the amount of the dividend paid per share of UTC Common Stock on the dividend payment date, and (ii) dividing the product so determined by the Closing Price on the dividend payment date. (3) Conversion Out of Stock Units. The dollar value of the Stock Units credited to a Participant's Account on any date shall be determined by multiplying the number of Stock Units (including fractional Stock Units) credited to the Participant's Account by the Closing Price on that date. (4) Effect of Recapitalization. In the event of a transaction or event described in this paragraph (4), the number of Stock Units credited to a Participant's Account shall be adjusted in such manner as the Committee, in its sole discretion, deems equitable. A transaction or event is described in this paragraph (4) if (i) it is a dividend (other than regular quarterly dividends) or other distribution (whether in the form of cash, shares, other securities, or other property), extraordinary cash dividend, recapitalization, stock split, reverse stock split reorganization, merger, consolidation, split-up, spin-off, repurchase, or exchange of shares or other securities, the issuance or exercisability of stock purchase rights, the issuance of warrants or other rights to purchase shares or other securities, or other similar corporate transaction or event and (ii) the Committee determines that such transaction or event affects the shares of UTC Common Stock, such that an adjustment pursuant to this paragraph (4) is appropriate to prevent dilution or enlargement of the benefits or potential benefits intended to be made available under the Plan. (b) Change in Deemed Investment Election. A Participant who elects to receive distribution of his or her Accounts in annual installments will continue to have such Account credited with Stock Units during the installment period unless the Participant irrevocably elects to have his or her Account treated, as of the Payment Commencement Date, as if the Account were invested in cash. If a Participant makes such election, the Account will be credited with a rate of interest equal to the average interest rate on 10-Year Treasury Bonds as of the January through October Period in the calendar year prior to the Plan Year in which the interest is credited, plus 1%. An election under this subsection (b) shall be made in a form and manner satisfactory to the Committee and shall be effective only if made before the Payment Commencement Date. 4.03 Hypothetical Nature of Accounts and Investments Each Account established under this Article IV shall be maintained for bookkeeping purposes only. Neither the Plan nor any of the Accounts established under the Plan shall hold any actual funds or assets. The Stock Units established hereunder shall be used solely to determine the amounts to be paid hereunder, shall not be or represent an equity security of the Company, shall not be convertible into or otherwise entitle a Participant to acquire an equity security of the Company and shall not carry any voting or dividend rights. ARTICLE V PAYMENTS 5.01 Entitlement to Payment Credits to a Participant's Account under Section 3.02 or 3.03 shall be in lieu of payment to the Participant of the related Director's Fees. Any payment under the Plan with respect to an Account shall be made solely in cash and as further provided in this Article V. The right of any person to receive one or more payments under the Plan shall be an unsecured claim against the general assets of the Company. 5.02 Payment Commencement Date Payments to a Participant with respect to the Participant's Account shall begin as of the Participant's Payment Commencement Date; provided that if a Participant dies before the Participant's Payment Commencement Date, payment of the entire value of the Participant's Account shall be made in a lump sum to the Participant's Beneficiary as soon as practicable after the Committee receives all documents and other information that it requests in connection with the payment. 5.03 Form and Amount of Payment (a) Fifteen Annual Installments. A Participant shall receive his or her benefits in 15 annual installments unless the Participant elects to receive his or her benefits under the Plan in the form of a lump-sum payment or in less than 15 annual installments in accordance with subsection (b), below. Annual installments shall be payable to the Participant in cash beginning as of the Payment Commencement Date and continuing as of each Payment Anniversary Date thereafter until all installments have been paid. The first annual installment shall equal one- fifteenth (1/15th) of the value of the Stock Units credited to the Participant's Account, determined as of the Payment Commencement Date. Each successive annual installment shall equal the value of the Stock Units credited to the Participant's Account, determined as of the Payment Anniversary Date, multiplied by a fraction, the numerator of which is one, and the denominator of which is the excess of 15 over the number of installment payments previously made (i.e., 1/14th, 1/13th, etc.). If the Participant dies after the Participant's Payment Commencement Date but before all 15 installments have been paid, the remaining installments shall be paid to the Participant's Beneficiary in accordance with the schedule in this subsection (a). (b) Lump Sum, or Less Than 15 Annual Installments. A Participant may elect to receive his or her benefits under the Plan in the form of a lump-sum payment or in two to fourteen installments in lieu of the fifteen installment payments determined under subsection (a), above. The lump sum shall be payable to the Participant in cash as of the Payment Commencement Date and shall equal the value of the Stock Units credited to the Participant's Account, determined as of the Payment Commencement Date. Installments shall be paid in the manner set forth in subsection (a) above, except that for purposes of determining the amount of the first annual installment, the denominator of the fraction shall equal the number of scheduled annual installments. An election under this subsection (b) shall be made in a form and manner satisfactory to the Committee and shall be effective only if made at least two years before the Participant's Payment Commencement Date. ARTICLE VI ADMINISTRATION 6.01 In General The Committee shall have the discretionary authority to interpret the Plan and to decide any and all matters arising under the Plan, including without limitation the right to determine eligibility for participation, benefits, and other rights under the Plan; the right to determine whether any election or notice requirement or other administrative procedure under the Plan has been adequately observed; the right to determine the proper recipient of any distribution under the Plan; the right to remedy possible ambiguities, inconsistencies, or omissions by general rule or particular decision; and the right otherwise to interpret the Plan in accordance with its terms. Except as otherwise provided in Section 6.03, the Committee's determination on any and all questions arising out of the interpretation or administration of the Plan shall be final, conclusive, and binding on all parties. 6.02 Plan Amendment and Termination The Committee may amend, suspend, or terminate the Plan at any time; provided that no amendment, suspension, or termination of the Plan shall, without a Participant's consent, reduce the Participant's benefits accrued under the Plan before the date of such amendment, suspension, or termination. If the Plan is terminated in accordance with this Section 6.02, the terms of the Plan as in effect immediately before termination shall determine the right to payment in respect of any amounts that remain credited to a Participant's or Beneficiary's Account upon termination. 6.03 Reports to Participants The Committee shall furnish an annual statement to each Participant (or Beneficiary) reporting the value of the Participant's (or Beneficiary's) Account as of the end of the most recent Plan Year. 6.04 Delegation of Authority The Committee may delegate to officers of the Company any and all authority with which it is vested under the Plan, and the Committee may allocate its responsibilities under the Plan among its member. ARTICLE VII MISCELLANEOUS 7.01 Rights Not Assignable No payment due under the Plan shall be subject in any manner to anticipation, alienation, sale, transfer, assignment, pledge, encumbrance, or charge in any other way. Any attempt to anticipate, alienate, sell, transfer, assign, pledge, encumber, or charge such payment in any other way shall be void. No such payment or interest therein shall be liable for or subject to the debts, contracts, liabilities, or torts of any Participant or Beneficiary. If any Participant or Beneficiary becomes bankrupt or attempts to anticipate, alienate, sell, transfer, assign, pledge, encumber, or charge in any other way any payment under the Plan, the Committee may direct that such payment be suspended and that all future payments to which such Participant or Beneficiary otherwise would be entitled be held and applied for the benefit of such person, the person's children or other dependents, or any of them, in such manner and in such proportions as the Committee may deem proper. 7.02 Certain Rights Reserved Nothing in the Plan shall confer upon any person the right to continue to serve as a member of the Board or to participate in the Plan other than in accordance with its terms. 7.03 Withholding Taxes The Committee may make any appropriate arrangements to deduct from all credits and payments under the Plan any taxes that the Committee reasonably determines to be required by law to be withheld from such credits and payments. 7.04 Incompetence If the Committee determines, upon evidence satisfactory to the Committee, that any Participant or Beneficiary to whom a benefit is payable under the Plan is unable to care for his or her affairs because of illness or accident or otherwise, any payment due under the Plan (unless prior claim therefor shall have been made by a duly authorized guardian or other legal representative) may be paid, upon appropriate indemnification of the Committee and the Company, to the spouse of the Participant or Beneficiary or other person deemed by the Committee to have incurred expenses for the benefit of and on behalf of such Participant or Beneficiary. Any such payment shall be a complete discharge of any liability under the Plan with respect to the amount so paid. 7.05 Inability to Locate Participants and Beneficiaries Each Participant and Beneficiary entitled to receive a payment under the Plan shall keep the Committee advised of his or her current address. If the Committee is unable for a period of 36 months to locate a Participant or Beneficiary to whom a payment is due under the Plan, commencing with the first day of the month as of which such payment first comes due, the total amount payable to such Participant or Beneficiary shall be forfeited. Should such a Participant or Beneficiary subsequently contact the Committee requesting payment, the Committee shall, upon receipt of all documents and other information that it might request in connection with the payment, restore and pay the forfeited payment in a lump sum, the value of which shall not be adjusted to reflect any interest or other type of investment earnings or gains for the period of forfeiture. 7.06 Successors The provisions of the Plan shall bind and inure to the benefit of the Company and its successors and assigns. The term 'successors' as used in the preceding sentence shall include any corporation or other business entity that by merger, consolidation, purchase, or otherwise acquires all or substantially all of the business and assets of the Company, and any successors and assigns of any such corporation or other business entity. 7.07 Usage (a) Titles and Headings. The titles to Articles and the headings of Sections, subsections, and paragraphs in the Plan are placed herein for convenience of reference only and shall be of no force or effect in the interpretation of the Plan (b) Number. The singular form shall include the plural, where appropriate. 7.08 Severability If any provision of the Plan is held unlawful or otherwise invalid or unenforceable in whole or in part, such unlawfulness, invalidity, or unenforceability shall not affect any other provision of the Plan or part thereof, each of which shall remain in full force and effect. If the making of any payment or the provision of any other benefit required under the Plan is held unlawful or otherwise invalid or unenforceable, such unlawfulness, invalidity or unenforceability shall not prevent any other payment or benefit from being made or provided under the Plan, and if the making of any payment in full or the provision of any other benefit required under the Plan in full would be unlawful or otherwise invalid or unenforceable, then such unlawfulness, invalidity, or unenforceability shall not prevent such payment or benefit from being made or provided in part, to the extent that it would not be unlawful, invalid, or unenforceable, and the maximum payment or benefit that would not be unlawful, invalid, or unenforceable shall be made or provided under the Plan. 7.09 Governing Law The Plan and all determinations made and actions taken under the Plan shall be governed by and construed in accordance with the laws of the State of Connecticut. UNITED TECHNOLOGIES CORPORATION by __________________________ Attest: ____________________________ Date: ____________________________ UTC BOARD OF DIRECTORS STOCK UNIT PLAN - APPENDIX I PENSION BENEFIT CONVERSION TO STOCK UNITS EFFECTIVE DATE PRESENT VALUE NUMBER OF STOCK OF ELECTION OF ACCRUED UNITS (1) AT DIRECTOR AS DIRECTOR BENEFIT AS OF 12/31/95 12/31/95 CONVERSION (2) BAKER 1/29/90 $137,735 1821.2 CHAYES 2/2/81 $229,544 3035.2 DEE 2/2/81 $229,544 3035.2 DUNCAN 3/23/81 $229,544 3035.2 GYLLENHAMMAR 3/23/81 $229,544 3035.2 HINES 12/18/89 $137,735 1821.2 LEE 1/31/94 $34,963 462.3 MALOTT 10/20/80 $229,544 3035.2 WAGNER 7/1/94 $37,586 497.0 WEXLER 10/16/78 $229,544 3035.2 (1) Stock Units payable in Cash only (2) Number of Stock Units equals PV of accrued benefit divided by UTC daily average Closing Stock Price from 1/1/95 through 10/31/95. UTC BOARD OF DIRECTORS DEFERRED STOCK UNIT PLAN - APPENDIX II TRANSITION CREDITS: TAX DEFERRED STOCK UNITS AS OF JANUARY 1, 1996 (1) STOCK UNITS ATTRIBUTABLE TO COMPENSATION DEFERRED IN 1994 & 1995 NUMBER OF TAX DEFERRED DIRECTOR STOCK UNITS (2) BAKER 509.0 DEE 509.0 DUNCAN 509.0 GYLLENHAMMAR 509.0 LEE 244.8 MALOTT 264.3 (1) To be credited to the Director's Account in accordance with Plan Section 3.01, effective January 1, 1996. (2) Units to be distributed in Cash or Common Stock, at the election of the Director All deemed reinvestment of dividends attributable to these Units after January 1, to be reinvested in Stock Units as defined in Section 4.02 of the Plan and payable solely in Cash.
Board of Directors Deferred Stock Unit Plan - United Technologies Corp.
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