Nonemployee Director Stock Option Plan - United Technologies Corp.
UNITED TECHNOLOGIES CORPORATION
Nonemployee Director Stock Option Plan
The purpose of the Nonemployee Director Stock Option Plan (the 'Plan')
is to attract, retain and compensate the members of the Board of Directors
(the 'Board') of United Technologies Corporation (the 'Corporation') who are
not employees of the Corporation or any of its subsidiaries and to secure
for the Corporation and its shareholders the benefits associated with an
increased equity interest in the Corporation of such nonemployee directors.
The Plan shall be administered by a committee comprised of the Chief
Executive Officer, the Senior Vice President, Human Resources and
Organization and the Corporate Secretary (the 'Committee'). The Committee
shall have the full authority to construe the Plan, to determine all
questions arising under the Plan, and to adopt such rules and procedures for
the administration of the Plan as the Committee may deem necessary or
desirable. All decisions of the Committee in the administration of the Plan
shall be conclusive and binding on all parties concerned, including the
Corporation and the holders of options granted under the Plan. The Committee
may authorize any one or more members of the Committee, or any one or more
officers of the Corporation, to execute and deliver any documents that are
necessary or desirable for the proper administration of the Plan. To the
fullest extent permitted by law, no member of the Committee shall be liable,
except by reason of such member's willful misconduct, for anything that is
done or omitted by such member or by any other person in connection with the
administration of the Plan.
3. Stock Subject to the Plan.
The total number of shares of common stock of the Corporation ('Common
Stock') for which stock options may be granted under the Plan in any year
shall not exceed a number of shares equal to 1000 multiplied by the number
of Nonemployee Directors incumbent as of the date of the Corporation's
Annual Meeting of shareowners, subject to adjustment as provided in Section
8 below. Such shares of Common Stock may be either authorized and unissued
shares or previously issued shares that have been reacquired by the
Corporation or any of its subsidiaries.
Each member of the Board who is not an employee of the Corporation or
any of its subsidiaries (a 'Nonemployee Director') shall be eligible to
receive Options in accordance with Section 5.
5. Grant of Stock Options.
On the date of the Corporation's Annual Meeting of Shareowners in each
year for so long as the Plan remains in effect (the 'Grant Date'), each
nonemployee Director who is elected as a director at such meeting, or whose
term of office shall continue after the date of such meeting, automatically
shall be granted an option to purchase 1,000 shares of Common Stock (an
6. Terms and Conditions of Stock Options.
Each Option shall have the following terms and conditions:
(a) Exercise Price. The exercise price per share of Common Stock
of the Option shall be equal to the Fair Market Value of the Common Stock on
the Grant Date.
(b) Vesting. The Option shall vest and become exercisable on the
third anniversary of the Grant Date, except that, in the event the recipient
ceases to be a director by reason of Retirement, Disability, death, or if a
director leaves the Board to accept full time employment with a charity, a
not-for-profit institution or state, federal or local government, an Option
held for at least one year from the Grant Date shall become immediately
exercisable in full.
(c) Term. The Option shall have a term of ten years commencing on
the Grant Date, but shall expire earlier under the following circumstances:
(i) if the recipient shall cease to be a director of the Corporation for
reasons other than Retirement, Disability or death, a non-vested Option
shall be canceled without value and a vested Option shall continue to be
exercisable for 90 days following the date on which the recipient ceases to
be a director. An Option not exercised during this 90 day period shall
expire without value (unless the recipient dies within such 90 day period in
which event the Option shall expire in accordance with the provisions of
clause (ii) below); and (ii) in the event of the death of the recipient
(whether or not the recipient at the time is a director of the Corporation),
the Option shall expire one year following the date of death.
(d) Restrictions on Transfer. The Option shall not be transferable
by the recipient other than by will or by the laws of descent and
distribution, and shall be exercisable during the lifetime of the recipient
only by the recipient or the recipient's legal representative. In the event
that an Option is exercised by an executor, administrator, legatee or
distributee of the estate of a deceased recipient, the Corporation shall be
under no obligation to issue the shares of Common Stock being purchased
unless and until the Corporation is satisfied that the person or persons
exercising the Option are the duly appointed legal representatives of the
deceased recipient's estate or the proper legatees or distributees thereof.
(e) Exercise Notice and Payment. The Option may be exercised, in
whole or in part, by delivery to the Secretary of the Corporation of a
written notice specifying the number of shares to be purchased and by
payment in full of the aggregate exercise price of the shares of Common
Stock being purchased. Payment of the exercise price shall be made (i) in
United States dollars by check or bank draft, (ii) by tendering to the
Corporation shares of Common Stock owned by the person exercising the Option
having a Fair Market Value (determined as of the date of exercise) equal to
the aggregate exercise price, (iii) by a combination of United States
dollars and Common Stock; or (iv) by such other methods as the Committee
(f) Definitions. As used in the Plan:
(i) the term 'Disability' means a medical condition or physical
limitation affecting the Nonemployee Director that (A) is expected to be of
long and continued duration and (B) renders the Nonemployee Director unable
to perform his or her duties.
(ii) the term 'Fair Market Value' means the closing price of the
Common Stock as reported on the New York Stock Exchange Composite
Transactions Tape or, if the New York Stock Exchange is closed or there are
no reported transactions on the date of determination, then Fair Market
Value shall mean the closing price on the last preceding date on which a
closing price is so reported.
(iii) the term 'Retirement' means termination of service on the
Board by reason of resignation from the Board or by reason of not standing
for reelection on or after age 55 with five or more years of service, but
shall not include (A) the removal of the individual as a director for cause,
or (B) any other termination of service on the Board resulting from an act
of fraud, misrepresentation, embezzlement, misappropriation or conversion of
assets or opportunities of the Corporation or any subsidiary of the
7. Stock Option Agreements.
Each Option shall be evidenced by a written agreement between the
Corporation and the recipient of the Option in such form as the Committee
8. Adjustments for Changes in Outstanding Common Stock or a Restructuring
(a) In the event of any change in the outstanding shares of Common
Stock by reason of any stock split, stock dividend, recapitalization,
combination or exchange of shares or any other material change in the
capital structure of the Corporation resulting from: the payment of a
special dividend (other than regular quarterly dividends) or other
distributions to shareowners without the Corporation receiving
consideration therefor; the spin-off of a subsidiary; the sale of a
substantial portion of the Corporation's assets; a merger or consolidation
in which the Corporation is the surviving entity; or other extraordinary,
non-recurring events affecting the Corporation's capital structure or the
value of the Common Stock, equitable adjustments shall be made in the terms
of the Plan and outstanding Options , including an adjustment in the maximum
number of shares referred to in Section 3 and the number of shares of Common
Stock subject to an Option, as the Committee, in its sole discretion,
determines are necessary or appropriate to prevent the dilution or
enlargement of the rights of Plan participants.
(b) In the event that the Corporation enters into an agreement to
merge or consolidate with another company and the Corporation is not the
surviving entity, the Corporation effects a sale of all or substantially all
of its assets or the Corporation dissolves and liquidates, then the
Committee, in its sole discretion, may (i) cause the Corporation to offer to
acquire any or all vested Options at a price per underlying share of Common
Stock equal to the difference between the exercise price per share and the
Fair Market Value per share of the Common Stock or (ii) make such other
modifications to outstanding Options as the Committee deems necessary or
appropriate to maintain and protect the rights and benefits of the holders
9. Change of Control.
Notwithstanding any other provision herein to the contrary, in the
event of a Change of Control of the Corporation, all outstanding Options
shall become immediately exercisable for the remainder of their respective
terms as provided in Section 6(c). The term 'Change of Control' shall mean:
(i) the acquisition by any person of voting shares of the Corporation if, as
a result of the acquisition, such person, or any 'group' as defined in
Section 13 (d) (3) of the Securities Exchange Act of 1934 of which such
person is a part, owns at least 20% of the outstanding voting shares of the
Corporation, or (ii) a change in the composition of the Board such that,
within any period of two consecutive years, persons who (A) at the beginning
of such period constitute the Board or (B) become directors after the
beginning of such period and whose election, or nomination for election by
the shareholders of the Corporation, was approved by a vote of at least two-
thirds of the persons who were either directors at the beginning of such
period or whose subsequent election or nomination was previously approved in
accordance with this clause (B) cease to constitute at least a majority of
10. Miscellaneous Provisions.
(a) No Right to Continue as Director. Neither the existence of the
Plan nor any action taken under the Plan shall be construed as giving any
Nonemployee Director any right to continue to serve as a director of the
(b) Restrictions on Assignment. The rights and benefits of a
Nonemployee Director under the Plan may not be assigned or transferred in
whole or in part, whether directly, by operation of law or otherwise
(except, in the event of a Nonemployee Director's death, by will or the laws
of descent and distribution), including by execution, levy, garnishment,
attachment, pledge, bankruptcy or in any other manner. Any attempt to
assign a recipient's interest in any Option (whether voluntary or
involuntary) shall be void and shall be without force or effect.
(c) Restriction of Issuance of Common Stock. No shares of Common
Stock shall be issued under the Plan unless counsel for the Corporation
shall be satisfied that such issuance will comply with all applicable laws,
including federal and state securities laws and regulations.
(d) Tax Withholding. It shall be a condition to the obligation of
the Corporation to issue shares of Common Stock upon exercise of an Option
that the Nonemployee Director (or other person permitted to exercise the
Option) pay to the Corporation, upon demand, such amount as may be requested
by the Corporation for the purpose of satisfying any obligation of the
Corporation to withhold federal, state, local or foreign income or other
taxes. The Committee shall prescribe the manner in which such payment shall
be made, which may include payment by means of the delivery or withholding
of shares of Common Stock valued at the Fair Market Value thereof. If the
amount requested is not paid in such manner as the Committee shall
prescribe, the Corporation may refuse to issue the shares of Common Stock.
(e) No Funding Requirement. The Plan shall be unfunded. The
Corporation shall not be required to establish any special or separate fund
or to make any other segregation of assets to assure the issuance of shares
of Common Stock upon exercise of any Option. No obligation under the Plan
shall be deemed to be secured by any pledge or other encumbrance on any
property of the Corporation.
(f) Acceptance and Ratification. By accepting an Option or other
benefit under the Plan, each Nonemployee Director (and each person claiming
under or through such Nonemployee Director) shall be conclusively deemed to
have indicated his or her acceptance and ratification of, and consent to,
any action taken under the Plan by the Corporation, the Board or the
(g) Notices. Any notice to the Corporation required or permitted
under any provision of the Plan shall be in writing addressed to the
Secretary of the Corporation and shall be effective when it is received.
(h) No Shareholder Rights. A recipient of an Option shall have no
rights as a shareholder with respect to any shares of Common Stock issued
upon the exercise of an Option until such time as the Option is exercised
and such shares of Common Stock are issued.
(I) 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 and, to the extent
applicable, the laws of the United States.
11. Amendment of Plan.
The Plan may be amended by the Board from time to time as the Board
shall deem advisable; provided, however, that (i) no amendment shall become
effective without the approval of the shareowners of the Corporation if such
shareowner approval is required by law and (ii) to the extent required by
Rule 16b-3, as in effect from time to time under Section 16 of the
Securities Exchange Act of 1934, as amended, the Plan provisions governing
the amount, price and timing of Options granted under the Plan shall not be
amended more frequently than once every six months, other than to comport
with changes in the Internal Revenue Code of 1986, or the rules thereunder,
as in effect from time to time. No amendment of the Plan not required by
law shall adversely affect the rights of any holder with respect to any
outstanding Option without such holder's written consent.
12. Effective Date of Plan.
The Plan shall become effective upon the approval of the Plan by the
shareowners of the Corporation by the holders of a majority of the shares of
Common Stock present and entitled to vote at a meeting of shareowners called
for such purpose.
13. Termination of Plan.
The Plan shall continue in effect until such time as the Board acts to
terminate the Plan.