UNITED TECHNOLOGIES CORPORATION
DEFERRED COMPENSATION PLAN
(As amended and restated as of December 15, 1993)
ARTICLE I - PREAMBLE
United Technologies Corporation established the United Technologies Deferred
Compensation Plan effective April 1, 1985. Pursuant to such Plan, certain
eligible executives of the Corporation were permitted to defer all or a portion
of their compensation earned with respect to 1985 and 1986. No compensation
earned after 1986 has been deferred under the Plan. The Corporation has
determined to offer eligible executives the opportunity to defer under the Plan
all or a portion of compensation earned or otherwise payable in 1994 and
subsequent years. However, such deferrals will be subject to the terms and
conditions set forth herein, which terms and conditions differ from those that
applied to previous deferrals under the Plan. Accordingly, the Plan is hereby
restated in its entirety for the purpose of facilitating future elections to
defer compensation under the Plan. Any amounts previously deferred under the
Plan will continue to be maintained, administered and distributed in accordance
with the terms of the Plan as in effect prior to December 15, 1993.
ARTICLE II - DEFINITIONS
Beneficiary means the person, persons or entity designated by the
Participant to receive the value of the Plan Accounts credited to such
Participant in the event of the death of the Participant. If the Participant
fails to designate a Beneficiary, or if the Beneficiary (and any contingent
Beneficiary) does not survive the Participant, the value of all of the
Participant's Plan Accounts will be paid to the estate of the Participant.
Benefit Reduction means either a reduction in a Participant's (or the
Participant's beneficiary's) benefit under any of the Corporation's deferred
benefit pension plans, or a reduction in the value of employer matching
contributions under any of the Corporation's savings plans, as a result of the
reduction of such Participant's Compensation pursuant to the Plan.
Class Year means each calendar year for which compensation may be deferred
pursuant to the Plan.
Class Year Account means the Account established for each Participant for
each Class Year for which compensation is deferred pursuant to the Plan. Each
Class Year Account may consist of a Credited Interest Account and a UTC Stock
Unit Account credited with deferred amounts in accordance with the Participant's
election. A Supplemental Account is not a Class Year Account.
Committee means the United Technologies Corporation Deferred Compensation
Committee, which is responsible for the administration of the Plan. Members of
the Committee shall be appointed from time to time by the Corporation's Pension
Administration Committee.
Compensation means base salary and Incentive Compensation Payments paid to a
Participant with respect to a Class Year and considered to be wages for purposes
of federal income tax withholding, but before any deferral of Compensation
deferred pursuant to the Plan. Compensation does not include foreign service
premiums and allowances, compensation realized from Long Term Incentive Plan
Awards or other types of awards.
Corporation means United Technologies Corporation, its divisions, affiliates
and subsidiaries.
Credited Interest Account means the sub-account that is valued in the manner
set forth in Section 5.2.
Deferral Period means the period for which the receipt of compensation
deferred under the Plan shall be deferred.
Distribution Date means on or about April 1 of the year following the last
year of a Deferral Period.
Election Agreement means the Participation and Deferral Election Agreement
provided by the Committee to Participants for the purpose of deferring
compensation under the Plan. Each Participant's Election Agreement must specify
the amount to be deferred, the respective amounts to be allocated to the
Credited Interest and UTC Stock Unit Accounts and the Deferral Period. There
will be a separate Election Agreement for each Class Year.
Incentive Compensation Payment means amounts awarded to a Participant
pursuant to the Corporation's Annual Executive Incentive Compensation Plan.
Interim Valuation Date means the last business day of each month except
December.
Participant means an executive of the Corporation who files a U.S. income
tax return and who elects to defer Compensation under the Plan with respect to
any Class Year.
Plan means the United Technologies Corporation Deferred Compensation Plan as
amended and restated effective December 15, 1993, and as amended from time to
time thereafter.
Plan Account means the aggregate value of all Class Year Accounts, but
excluding accounts under the Prior Plan. Such accounts will be valued
separately in accordance with the terms and procedures in effect under the Prior
Plan.
Prior Plan means the United Technologies Corporation Deferred Compensation
Plan, as in effect prior to December 15, 1993. All amounts deferred and
credited under the Prior Plan shall continue to be subject to the terms and
conditions of the Prior Plan and shall not be affected by this amendment and
restatement.
Retirement Date means the date a Participant terminates employment from the
Corporation and qualifies for either a normal retirement benefit, early
retirement benefit or rule of 65 retirement benefit under one of the
Corporation's tax-qualified deferred benefit retirement plans.
Supplemental Account means the Account established by the Committee for the
purpose of providing the amount of any Benefit Reduction incurred by a
Participant under a deferred benefit retirement plan as a result of
participating in the Plan.
Except where indicated otherwise, all references herein to 'Section' or
Sections are to a Section or Sections of the Plan.
UTC Stock Unit Account means the sub-account that is valued in the manner
set forth in Section 5.3.
Valuation Date means the last business day of each calendar year.
UTC Common Stock means the common stock of United Technologies Corporation.
ARTICLE III - ELIGIBILITY AND PARTICIPATION
Section 3.1 - Eligibility
Each employee of the Corporation who is classified as a UTC executive as
of December 31 prior to a Class Year and who is required to file a U.S.
income tax return for such Class Year will be eligible to elect to defer
Compensation under the Plan for such Class Year.
Section 3.2 - Participation
Each eligible executive may elect to participate in the Plan with
respect to any Class Year for which the Committee offers the opportunity to
defer Compensation by timely filing with the Committee an Election
Agreement, properly completed and signed, in accordance with Section 4.1
hereof. Participation in the Plan is entirely voluntary.
ARTICLE IV - PARTICIPATION ELECTIONS
Section 4.1 - Election Agreement
Each eligible executive will be furnished with an Election Agreement
prior to the beginning of each Class Year for which Compensation may be
deferred. An eligible executive may participate by executing the Election
Agreement and by designating the dollar amount (if any) of base salary that
will be deferred during such Class Year, and the percentage or dollar amount
(if any) of any Incentive Compensation Payment otherwise payable during such
Class Year that will be deferred under the Plan. The minimum dollar amount
that a Participant may defer under the Plan for any Class Year is $5,000.
Any deferral election made under the Election Agreement is irrevocable and
must be completed and returned to the Committee no later than the December
31 immediately preceding such Class Year or such earlier date as the
Committee may specify. If an eligible executive fails to sign and return a
properly completed Election Agreement by such date, the executive will be
ineligible to defer compensation under the Plan for the following Class
Year.
Section 4.2 - Allocation of Deferred Amounts
When completing the Election Agreement, the Participant must allocate
the amounts to be deferred, in integral multiples of 25% between the
Credited Interest Account and the UTC Stock Unit Account.
Section 4.3 - Designation of Beneficiary
Each Participant shall designate a Beneficiary on a form provided by the
Committee. Any such designation may be changed in writing on a form
acceptable to the Committee at any time by the Participant. In the event
that no Beneficiary Designation Form is filed with the Committee or if the
Beneficiary (and contingent beneficiary) does not survive the Participant,
all amounts deferred hereunder will be paid to the estate of the
Participant. If a Participant designates the Participant's spouse as the
Participant's Beneficiary, that designation shall not be revoked or
otherwise altered or affected by any (a) change in the marital status of the
Participant and such spouse, (b) agreement between the Participant and such
spouse, or (c) judicial decree (such as a divorce decree) affecting any
rights that the Participant and such spouse might have as a result of their
marriage, separation, or divorce, it being the intent of the Plan that any
change in the designation of a Beneficiary hereunder may be made by the
Participant only in accordance with the provisions of this paragraph. In
the event of the death of a Participant, Class Year Accounts shall be
distributed in accordance with Section 6.4.
Section 4.4 - Deferral Period
Each Participant shall specify on the Election Agreement the Deferral
Period for amounts to be deferred in the following Class Year. The minimum
Deferral Period is five (5) years following the end of Class Year in which
the compensation is deferred. Participants may elect to defer compensation
until their Retirement Date or until a specific year. Amounts deferred to a
specific year will be distributed on the Distribution Date in that year.
Section 4.5 - Distribution Schedule
Each Participant shall specify on the Election Agreement whether the
value of the Participant's Class Year Account shall be distributed in a
single lump-sum cash payment or in a series of annual cash installment
payments for a specified number of years (not to exceed 15 years) in
accordance with Sections 6.2 and 6.4. If the Participant fails to make
such a specification, the Participant shall be deemed to have elected to
have the distribution made in a single lump-sum cash payment.
ARTICLE V
Section 5.1 - Accounts
The Committee will establish a Class Year Account for each Participant
with respect to each Class Year for which the Participant elects to defer
compensation under the Plan. Class Year Accounts will be maintained
separately from Class Year Accounts maintained with respect to amounts
deferred during other Class Years. Deferred amounts will be allocated to a
Credited Interest Account, to a UTC Stock Unit Account, or to a combination
of both, which sub-accounts will be part of the Class Year Account.
Credited Interest and UTC Stock Unit Accounts will be valued as set forth in
Sections 5.3 and 5.4. The value of each Class Year Account will equal the
sum of the values of the Credited Interest and UTC Stock Unit Accounts
established with respect to such Class Year.
Section 5.2 - Valuation of Credited Interest Account
Amounts allocated to the Credited Interest Account will be credited with
a rate of interest equal to the average interest rate on 10-Year Treasury
Bonds plus 1% (ie. 100 basis points) as of the January through October
Interim Valuation Dates in the year prior to the Class Year in which the
deferral occurs. This rate will be credited for all amounts deferred in the
Class Year and allocated to the Credited Interest Account. The amount of
interest credited will be adjusted each year to equal the average 10-Year
Treasury Bond rate plus 1% for the prior calendar year, determined in the
same manner as described above.
Section 5.3 - UTC Stock Unit Account
Deferred Compensation allocated to the UTC Stock Unit Account will be
converted to 'Stock Units' or fractional Stock Units. The number of Stock
Units will be calculated by dividing the amount of Compensation deferred
each month during the Class Year in which the deferral occurs by the closing
price of UTC Common Stock on each Interim Valuation or Valuation Date. Each
Stock Unit will have a value equivalent to one share of UTC Common Stock.
Stock Units held in the UTC Stock Unit Account will be credited with a
dividend payment equal to the Corporation's declared dividend on Common
Stock (if any), as of the date such dividends are paid. Such dividend
equivalent payments will be converted to additional Stock Units or
fractional units on the Interim Valuation or Valuation Date of the month in
which the dividend was paid, determined on the basis of the closing price of
UTC Common Stock on that date. During the Deferral Period, the value of a
Stock Unit will be equal to the closing price of a share of Common Stock as
of the most recent Interim Valuation Date or Valuation Date, and therefore
is variable.
The closing price of UTC Common Stock on the last business day prior to
the Distribution Date (i.e., the March Interim Valuation Date, except for
hardship distributions which may be made at other times during the year
where the closing price on the most recent Interim Valuation date will
apply) will be used to value the Stock Units included in the distribution.
Section 5.4 - Allocation to Accounts
During the year of deferral, deferred amounts will be allocated to the
Class Year Account as of each Interim Valuation Date (or if applicable, the
Valuation Date) for the month in which the deferred amounts otherwise would
have been paid. With respect to the Credited Interest Account during the
initial Class Year, interest will be credited to deferred amounts for the
period from the Interim Valuation Date when amounts are first allocated to
the class year account until the Valuation Date for such Class Year. With
respect to the UTC Stock Unit Account, Stock Units will be credited and will
accumulate each month in accordance with Section 5.3.
ARTICLE VI - DISTRIBUTION OF ACCOUNTS
Section 6.1 - Timing of Plan Distributions
Accounts will be distributed (or begin to be distributed) on or about
April 1 of the year following the last year of the Deferral Period. This
means that, for example, if a deferral election specifies a Deferral Period
until 2005, distribution will occur on or about April 1, 2005. In the case
of termination or death during the Deferral Period, amounts will be
distributed on the Distribution Date next following the date of termination
or the date of death.
Section 6.2 - Method of Distribution
Each Class Year Account will be distributed in a single lump-sum cash
payment, or in a series of annual cash installment payments, in accordance
with the method set forth on the Election Agreement with respect to each
Class Year. In the case of an installment distribution, the balance
credited to the Participant's Account during the installment period will be
credited with interest at the applicable Credited Interest Account rate.
Such amounts will not be subject to the UTC Stock Unit rate of return, even
if such amounts had been in the UTC Stock Unit Account prior to the initial
distribution date. All Stock Units will automatically be converted to their
equivalent cash value as of the Interim Valuation Date preceding the initial
Distribution Date, and the equivalent cash value will then be allocated to
the Credited Interest Account.
Section 6.3 - Termination of Employment
In the event of termination of employment prior to a Participant's
Retirement Date, during or after the Deferral Period with respect to any
Class Year, the full value of the Participant's Plan Accounts will be
distributed in a lump-sum cash payment on the Distribution Date following
the year of termination, regardless of the distribution option elected.
Section 6.4 - Distribution in the Event of Death
In the event of the death of a Participant before the end of the
Deferral Period with respect to any Class Year, the full value of the
Participant's Class Year Account for that Class Year will be distributed to
the designated Beneficiary or to the estate of the Participant in a lump-sum
on the Distribution Date following the date of death. In the event of death
after the end of a Deferral Period with respect to any Class Year (or after
attaining eligibility for retirement), the full value of the Participant's
Class Year Accounts for that Class Year will be distributed to the
Beneficiary in accordance with the Participant's election in the Election
Agreement with respect to the Class Year.
Section 6.5 - Hardship Distribution
The Committee may, in its sole discretion, upon finding that the
Participant has suffered an unforeseen, severe and immediate financial
emergency, permit such Participant to withdraw a portion of the value of the
Participant's Plan Account in an amount sufficient to eliminate the
hardship. Financial hardship distributions will be made only if the
Committee determines that the Participant is unable to resolve the financial
emergency through other means reasonably available to the Participant.
Financial hardship distributions will be made following the Committee's
determination of a qualifying financial emergency on the basis of the value
of the Participant's Plan Account as of the most recent Interim Valuation
Date. The Committee will determine from which Class Year Account and
Credited Interest and UTC Stock Unit sub-accounts hardship distributions
shall be made.
Section 6.6 - Disability
In the event of the disability of a Participant, as determined under the
Corporation's Long Term Disability Plan, Class Year Accounts will be
maintained and distributed in accordance with the Participant's Election
Agreement.
Section 6.7 - Valuation on Distribution Date
All Plan Accounts will be valued on the basis of the Interim Valuation
Date prior to the Distribution Date.
Section 6.8 - Distribution from Supplemental Account
The Committee will effect distributions from Supplemental Accounts with
respect to Benefit Reductions incurred in any of the Corporation's defined
benefit pension plans at the same time, in the same manner and in the
required amounts such that when combined with amounts distributed from the
Pension Plans in which a Participant incurred a Benefit Reduction, the total
amount received by a Participant (or beneficiary) will equal the amount of
pension benefit that would otherwise have been paid had the Participant not
participated in this Plan. Each Class Year the Committee will determine if
any Benefit Reduction has been incurred with respect to any of the
Corporation's Savings Plans and will credit the amount of such Benefit
Reduction to the affected Participant's Class Year Account as of the
Valuation Date for such Class Year. Any such amounts will be allocated to
the Participant's Credited Interest and UTC Stock Unit Accounts in
accordance with the Election Agreement for such Class Year.
ARTICLE VII - AMENDMENT AND TERMINATION OF PLAN
Section 7.1 - Amendment
The Corporation may, at any time, amend the Plan in whole or in part,
provided that no amendment may decrease the balance in any Plan Account as
of the date of such amendment.
Section 7.2 - Plan Suspension and Termination
The Corporation's Pension Administration Committee may, at any time,
suspend or terminate the Plan with respect to new or existing Election
Agreements if, in its sole judgment, the continuance of the Plan, the tax,
accounting, or other effects thereof, or potential payments thereunder would
not be in the best interests of the Corporation or for any other reason. In
the event of the suspension of the Plan, no additional deferral shall be
made under the Plan, but all previous deferrals shall accumulate and be
distributed in accordance with the otherwise applicable provisions of the
Plan and the applicable Election Agreements. In the event of the
termination of the Plan, each Participant will receive, in a lump sum, the
balance of all Class Year Accounts.
Section 7.3 - No Consent Required
The consent of any Participant, Beneficiary, or other person shall not
be a requisite to such amendment, suspension, or termination of the Plan.
ARTICLE VIII - GENERAL PROVISIONS
Article 8.1 - Unsecured General Creditor
The Corporation will not establish a trust or otherwise set aside or
segregate assets from other assets of the Corporation or otherwise fund its
obligations under the Plan for the benefit of Participants and
Beneficiaries. The Corporation's obligations under the Plan constitute an
unfunded and unsecured promise to pay money in the future. Participants'
and Beneficiaries' rights under the Plan are those of a general unsecured
creditor of the Corporation.
Section 8.2 - Nonassignability
No Participant or Beneficiary or any other person shall have right to
sell, assign, transfer, pledge, or otherwise encumber any interest in the
Plan. All Plan Accounts and the rights to all payments are unassignable and
non-transferable. No Plan Account or payment hereunder, prior to actual
payment, will be subject to attachment or seizure for the payment of any
debts, judgments or other obligations. No Plan Account or other Plan
benefit will be transferred by operation of law in the event of a
Participant's or any Beneficiary's bankruptcy or insolvency.
Section 8.3 - No Contract of Employment
Participation in the Plan shall not be construed to constitute a direct
or indirect contract of employment between the Corporation and the
Participant. The Participants and Beneficiaries will have no rights against
the Corporation resulting from participation in this Plan other than as
specifically provided herein. Nothing in this Plan shall be deemed to give
a Participant the right to be retained in the service of the Corporation for
any length of time or to interfere with the right of the Corporation to
terminate a Participant's employment prior to the end of any Deferral
Period.
Section 8.4 - Governing Law
The provisions of this Plan will be construed and interpreted according
to the Employee Retirement Income Security Act of 1974, as amended from time
to time, other applicable federal laws, and to the extent not preempted by
federal law, the laws of the State of Connecticut.
Section 8.5 - Validity
If any provision of the Plan is held to be illegal or invalid for any
reason, the remaining provisions of the Plan will be construed and enforced
as if such illegal and invalid provision had never been inserted herein.
Section 8.6 - Notice
Any notice or filing required or permitted to be given to the Committee
under this Plan shall be sufficient if in writing and hand delivered, or sent by
first class mail, to the United Technologies Corporation Deferred Compensation
Committee, UTC Building, Hartford, Connecticut 06101, Attn: Michael D. Smith,
Director, Compensation, MS-504. Any notice or filing required or permitted to
be given to any Participant or Beneficiary under the Plan shall be sufficient if
given in writing and hand-delivered, or, if sent by first-class mail, mailed to
the address of the Participant or Beneficiary then listed on the records of the
Corporation. Any such notice will be deemed given as of the date of delivery
or, if delivery is made by mail, as of the date shown on the postmark.
Section 8.7 - Successors
The provisions of the Plan shall bind and inure to the benefit of the
Corporation and its successors and assigns. The term successors as used
herein shall include any corporate or other business entity which by merger,
consolidation, purchase or otherwise acquires all or substantially all of
the business and assets of the Corporation, and successors of any such
corporation or other business entity.
Section 8.8 - 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 their affairs because of illness or
accident, any payment due (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 Corporation, to
the Spouse of the Participant 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 from a Participant's Plan Account shall be
a complete discharge of any liability under the Plan with respect to the
amount so paid.
ARTICLE IX - ADMINISTRATION and CLAIMS
9.1 - Plan Administration
The Committee shall be solely responsible for the administration and
operation of the Plan. The Committee shall have full and exclusive
authority and discretion to interpret the provisions of the Plan and to
establish such administrative procedures as it deems necessary and
appropriate to carry out the purposes of the Plan.
Any person claiming a benefit, requesting an interpretation or ruling
under the Plan, or requesting information under the Plan shall present the
request in writing to the Committee which shall respond in writing as soon
as practicable.
9.2 - Claim Procedures
If a Participant or Beneficiary requests a benefit or payment under the
Plan and such claim or request is denied, the Committee will provide a
written notice of denial which will specify (a) the reason for denial, with
specific reference to the Plan provisions on which the denial is based, and
(b) a description of any additional material or information that may be
required with respect to the claim and an explanation of why such
information is necessary.
If a claim or request is denied or if no response is received by the
Participant or Beneficiary within 60 days, the Participant or Beneficiary
may request review by writing to the Committee. The claim or request will
be reviewed by the Committee, which may request additional information or
materials which it deems appropriate to the resolution of any issues
presented. The decision on review will normally be made by the Committee
within 60 days of its receipt of the request for review but may be extended
up to 120 days from such date. The Committee's decision will be in writing
and will state the basis for its decision and shall be conclusive and
binding on all parties.
Deferred Compensation Plan - United Technologies Corp.
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