UNITED TECHNOLOGIES CORPORATION Nonemployee Director Stock Option Plan 1. Purpose. 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. 2. Administration. 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. 4. Eligibility 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 'Option') . 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 shall authorize. (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 Corporation. 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 shall prescribe. 8. Adjustments for Changes in Outstanding Common Stock or a Restructuring Event. (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 of Options. 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 the Board. 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 Corporation. (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 Committee. (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.
Nonemployee Director Stock Option Plan - United Technologies Corp.
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