UNITED TECHNOLOGIES CORPORATION LONG TERM INCENTIVE PLAN
AMENDMENT 1
The United Technologies Corporation Long Term Incentive Plan (the
'LTIP') is hereby amended, effective January 1, 1995, subject to the
approval of shareowners at the Corporation's Annual Meeting to be held
April 25, 1995.
1. Section 5(e) is amended and restated as follows:
Dividend Equivalents. A Dividend Equivalent is the right to receive a
cash payment equal to the amount of dividends paid on Common Stock for a
period of time, as specified in the Award Agreement. Dividend
Equivalent Awards are subject to performance based vesting criteria.
2. Section 6, 'Limitation on Number of Shares' is amended by adding the
following sub-section (c) thereto:
(c) The Plan shall be subject to an individual share award limitation of
1.5 million shares over any consecutive 36 month period. For
purposes of this limitation, all awards of shares of stock, options
to acquire shares of stock or any other award which can be converted
into shares shall be subject to this limit, determined in a manner
consistent with Section 6(b) hereof. Any award that is forfeited
or canceled within a thirty-six month period shall continue to count
against this limitation for the remainder of the thirty-six month
period.
3. Section 17 is hereby added to the Plan as follows:
17. Continuous Improvement Incentive Plan.
(a) Introduction. The Committee has approved the Continuous
Improvement Incentive Program (the 'CIIP'), a performance based
program of Plan Awards. Under the CIIP, Dividend Equivalent
Awards ('DEs') are granted subject to performance based vesting
criteria related to key financial performance measurements of the
Corporation and the business units. Non-qualified stock options
awarded along with DEs become exercisable three years after the
date of grant. Exercisability of stock options is not contingent
upon achievement of CIIP performance based vesting criteria
because the value of stock option awards is directly linked to
share price appreciation measured from the date of grant and is
therefore performance based independent of CIIP vesting criteria.
(b) Performance Targets. Under the CIIP, Participants shall be
eligible to receive awards of dividend equivalents ('DEs'), with
one DE granted for each stock option granted. A DE is the right
to receive a cash payment equal to the amount of dividends paid
on Common Stock for a period of time as specified in the Award
Agreement, but in no event more than seven years, provided,
however, that DE payments will cease if the stock option
associated with the vested DE is exercised. The vesting of DEs
shall be contingent upon the achievement of certain minimum
performance targets measured over a period of time of not less
than one year, as established by the Committee. DEs that do not
vest will be forfeited without value. The vesting of each years
award shall be based upon the achievement of pre-established
performance targets as established by the Committee for one or
more of the following performance measurements: earnings per
share ('EPS'); total shareholder return ('TSR'); return on equity
('ROE'); return on sales ('ROS'); return on net operating asset
('RNOA') and working capital turnover ('WCT'). ROS, RNOA and WCT
targets may be specifically formulated for each business unit.
Business unit Participants may be subject to performance targets
specifically applicable to their business unit or to a
combination of corporate and business unit performance targets.
If vesting is subject to more than one performance target, the
relative weighting of each performance target to be used for
determining the cumulative vesting percentage shall be as
determined by the Committee.
Performance targets shall be measured on the basis of audited
consolidated financial statements of the Corporation and financial
statements of the business units which are used in the audited
consolidated financial statements of the Corporation. For purposes of
this Section 17, performance targets shall be defined as follows:
Earnings Per Share means primary or fully diluted earnings per share
determined under generally accepted accounting principles.
Return on Equity means net income available to Common Stock owners
divided by average equity.
Return on Sales means operating profit before interest expense and
income taxes divided by sales.
Return on Net Operating Assets means operating profit before interest
expense and income taxes divided by average net operating assets.
Total Shareholder Return means the percentage change in the value of a
share of Common Stock between the beginning and end of the measurement
period, including the amount of dividends paid during the measurement
period.
Working Capital Turnover means the ratio obtained by dividing sales by
average working capital. For purposes of this definition, working
capital means external accounts receivable plus net inventory less
external accounts payable and advances on sales contracts.
(c) Establishment of Performance Targets. The Committee shall be
exclusively responsible for establishing performance targets
applicable to CIIP Awards with respect to EPS, ROE, ROS, RNOA, TSR,
and WCT, as the case may be. The Committee shall grant CIIP awards
and establish performance targets no later than 90 days following
the commencement of the performance measurement period. The
Committee shall also establish the relative weightings of multiple
performance targets no later than 90 days following the commencement
of the performance measurement period.
(d) Measurement of Achievement of Performance Targets. The Committee
shall certify to the measurement of performance by the Corporation
and the business units relative to CIIP performance targets and the
resulting vesting percentage. The Committee shall rely on such
financial information and other materials as it deems necessary and
appropriate to enable it to certify to the percentage of achievement
of CIIP performance targets. Performance targets will be adjusted
by the Committee to eliminate: (i) restructuring charges to the
extent they are separately disclosed in the Corporation's Annual
Report on Form 10K; (ii) the effects of changes in accounting
methods; (iii) the translation impact of changes in foreign
currency exchange rates; and (iv) 'extraordinary items' determined
under generally accepted accounting principles. The Committee shall
make its vesting determination not later than the end of the first
quarter following the end of the performance measurement period.
(e) Vesting Schedule. DE payments will commence following the vesting
determination date. CIIP Participants shall vest in 100% of their
DEs if 100% of their applicable CIIP performance targets are
achieved as of the end of the three year performance measurement
period. If the cumulative weighted achievement equals 90% of
target, 50% of associated DEs will vest. To the extent that
cumulative weighted achievement is greater than 90% but less than
100%, the vesting percentage will be determined in accordance with
the following formula:
Vesting Percentage = (Cumulative Weighted Performance Achievement
Percentage -90) X 5 + 50
If the cumulative weighted performance achievement percentage is
less than 90, all DEs will be forfeited without value.
(f) Transfers. If a Participant transfers from one business unit to
another business unit (for this purpose including Corporate
Headquarters as a business unit) after the date of a CIIP Award but
before the end of the three-year measurement period applicable to
the Award, the number of vested DE's will equal the sum of (i) plus
(ii) where:
(i) equals DEs granted, multiplied by a fraction, where the numerator
equals the number of months in the unit where the Participant was
employed at the time the Award was granted and the denominator
equals 36, multiplied by the performance achievement percentage
applicable to such business unit; and
(ii) equals DEs granted, multiplied by a fraction where the
numerator equals the number of months employed in the unit to
which the Participant was transferred and the denominator equals
36, multiplied by the performance achievement percentage
applicable to such business unit.
If there are subsequent transfers to other business units, vesting
calculations will be done using the same formula.
(g) Amendment. The Committee shall have the authority to amend the
CIIP, provided however, that the Committee may not amend the CIIP
after the first 90 days of a performance measurement period in a
manner that would, directly or indirectly: (i) change the method
of measuring performance for that year's CIIP award; (ii) increase
the maximum amount payable to any CIIP Participant for that year; or
(iii) remove the amendment restriction set forth in this sentence
with respect to that year.