Table of Contents
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-K
| x | ANNUAL REPORT PURSUANT TO SECTION 13 or 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For the fiscal year ended December 31, 2008
Commission file number 1-812
UNITED TECHNOLOGIES CORPORATION
(Exact name of registrant as specified in its charter)
| DELAWARE | 06 0570975 | |
| (State or other jurisdiction of incorporation or organization) |
(I.R.S. Employer Identification No.) |
| One Financial Plaza, Hartford, Connecticut | 06103 | |
| (Address of principal executive offices) | (Zip Code) |
Registrant’s telephone number, including area code: (860) 728-7000
Securities registered pursuant to Section 12(b) of the Act:
| Title of each class |
Name of each exchange on which registered | |
| Common Stock ($1 par value) | New York Stock Exchange | |
| (CUSIP 913017 10 9) |
Indicate by check mark if the Registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes x. No ¨.
Indicate by check mark if the Registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act. Yes ¨. No x.
Indicate by check mark whether the Registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes x. No ¨.
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K (§229.405 of this chapter) is not contained herein, and will not be contained, to the best of Registrant’s knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. ¨
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act.
| Large accelerated filer | x | Accelerated filer | ¨ | |||
| Non-accelerated filer | ¨ (Do not check if a smaller reporting company) | Smaller reporting company | ¨ | |||
Indicate by check mark whether the Registrant is a shell company (as defined in Rule 12b-2 of the Act). Yes ¨ No x.
The aggregate market value of the voting and non-voting common equity held by non-affiliates at June 30, 2008 was approximately $59,346,468,617, based on the New York Stock Exchange closing price for such shares on that date. For purposes of this calculation, the Registrant has assumed that its directors and executive officers are affiliates.
At January 31, 2009, there were 942,294,242 shares of Common Stock outstanding.
List hereunder documents incorporated by reference and the Part of the Form 10-K into which the document is incorporated: (1) portions of the United Technologies Corporation 2008 Annual Report to Shareowners for the fiscal year ended December 31, 2008 are incorporated by reference in Parts I, II and IV hereof; and (2) portions of the United Technologies Corporation Proxy Statement for the 2009 Annual Meeting of Shareowners are incorporated by reference in Part III hereof.
Table of Contents
UNITED TECHNOLOGIES CORPORATION
Index to Annual Report
on Form 10-K for
Year Ended December 31, 2008
2
Table of Contents
UNITED TECHNOLOGIES CORPORATION
Annual Report on Form 10-K for Year Ended December 31, 2008
Whenever reference is made in this Form 10-K to specific sections of UTC’s 2008 Annual Report to Shareowners (2008 Annual Report), those sections are incorporated herein by reference. United Technologies Corporation and its subsidiaries’ names, abbreviations thereof, logos, and product and service designators are all either the registered or unregistered trademarks or tradenames of United Technologies Corporation and its subsidiaries. As used herein, the terms “we,” “us,” “our” or “UTC,” unless the context requires otherwise, mean United Technologies Corporation and its subsidiaries.
| Item 1. | Business |
General
United Technologies Corporation was incorporated in Delaware in 1934. UTC provides high technology products and services to the building systems and aerospace industries worldwide. Growth is attributable to acquisitions and the internal development of our existing businesses. The following description of our business should be read in conjunction with “Management’s Discussion and Analysis of Financial Condition and Results of Operations” in our 2008 Annual Report, especially the information contained therein under the heading “Business Overview.”
Our operating units include businesses with operations throughout the world. Otis, Carrier and UTC Fire & Security (collectively referred to as the commercial businesses) serve customers in the commercial and residential property industries worldwide. Carrier also serves commercial, industrial, transport refrigeration and food service equipment customers. Pratt & Whitney, Hamilton Sundstrand and Sikorsky (collectively referred to as the aerospace businesses) primarily serve commercial and government customers in both the original equipment and aftermarket parts and services markets of the aerospace industry. Hamilton Sundstrand and Pratt & Whitney also serve customers in certain industrial markets. For 2008, our commercial and industrial revenues (generated principally by our commercial businesses) were approximately 62 percent of our consolidated revenues, and commercial aerospace and military aerospace revenues were approximately 21 percent and 17 percent, respectively, of our consolidated revenues. Revenues for 2008 from outside the United States, including U.S. export sales, were 64 percent of our total segment revenues.
This Form 10-K and our quarterly reports on Form 10-Q, current reports on Form 8-K and all amendments to those reports are available free of charge through the Investor Relations section of our Internet website (http://www.utc.com) under the heading “SEC Filings” as soon as reasonably practicable after these reports are electronically filed with, or furnished to, the Securities and Exchange Commission (SEC). Our SEC filings are also available for reading and copying at the SEC’s Public Reference Room at 100 F Street, NE, Washington, D.C. 20549. Information on the operation of the Public Reference Room may be obtained by calling the SEC at 1-800-SEC-0330. In addition, the SEC maintains an Internet site (http://www.sec.gov) containing reports, proxy and information statements, and other information regarding issuers that file electronically with the SEC.
3
Table of Contents
Description of Business by Segment
We conduct our business through six principal segments: Otis, Carrier, UTC Fire & Security, Pratt & Whitney, Hamilton Sundstrand and Sikorsky. Each segment groups similar operating companies and the management organization of each segment has general operating autonomy over a range of products and services. The principal products and services of each segment are as follows:
| Otis | —elevators, escalators, moving walkways and service. | |
| Carrier | —residential, commercial and industrial heating, ventilating, air conditioning (HVAC) and refrigeration systems and equipment, food service equipment, building automation and controls, HVAC and refrigeration components and installation, retrofit and aftermarket services. | |
| UTC Fire & Security | —fire and special hazard detection and suppression systems and fire fighting equipment, electronic security, monitoring and rapid response systems and service and security personnel services. | |
| Pratt & Whitney | —commercial, military, business jet and general aviation aircraft engines, parts and services, industrial gas turbines and space propulsion. | |
| Hamilton Sundstrand | —aerospace products and aftermarket services, including power generation, management and distribution systems, flight systems, engine control systems, environmental control systems, fire protection and detection systems, auxiliary power units, propeller systems and industrial products, including air compressors, metering pumps and fluid handling equipment. | |
| Sikorsky | —military and commercial helicopters, aftermarket helicopter and aircraft parts and services. | |
UTC is in the process of incorporating UTC Power’s combined cooling, heating and power systems business within Carrier’s businesses, its geothermal power systems business within Pratt & Whitney’s power systems business, and its space and defense fuel cell power plant business within Hamilton Sundstrand’s energy, space and defense business. These transitions are expected to be completed during the first half of 2009.
Segment financial data for the years 2006 through 2008, including financial information about foreign and domestic operations and export sales, appears in Note 16 to the Consolidated Financial Statements in our 2008 Annual Report.
Otis
Otis is the world’s largest elevator and escalator manufacturing, installation and service company. Otis designs, manufactures, sells and installs a wide range of passenger and freight elevators for low-, medium- and high-speed applications, as well as a broad line of escalators and moving walkways. In addition to new equipment, Otis provides modernization products to upgrade elevators and escalators as well as maintenance services for both its products and those of other manufacturers. Otis serves customers in the commercial and residential property industries around the world. Otis sells directly to the end customer and, to a limited extent, through sales representatives and distributors.
Revenues generated by Otis’ international operations were 80 percent and 81 percent of total Otis segment revenues in 2008 and 2007, respectively. At December 31, 2008, Otis’ backlog was $15,025 million as compared to $14,146 million at December 31, 2007. Of the total Otis backlog at December 31, 2008, approximately $8,476 million is expected to be realized as sales in 2009.
Carrier
Carrier is the world’s largest manufacturer and distributor of HVAC and refrigeration systems. It also produces food service equipment and HVAC and refrigeration-related controls for residential, commercial, industrial and transportation applications. Carrier also provides installation, retrofit and aftermarket services and components for the products it sells and those of other manufacturers in the HVAC and refrigeration industries. Carrier’s products and services are sold under Carrier and other brand names to building contractors and owners, homeowners, transportation companies, retail stores and food service companies. Carrier sells directly to the end customer and through manufacturers’ representatives, distributors, wholesalers, dealers and retail outlets. Certain of Carrier’s HVAC businesses are seasonal and can be impacted by weather. Carrier customarily offers its customers incentives to purchase products to ensure an adequate supply of its products in the distribution channels.
4
Table of Contents
Revenues generated by Carrier’s international operations, including U.S. export sales, were 60 percent and 59 percent of total Carrier segment revenues in 2008 and 2007, respectively. At December 31, 2008, Carrier’s business backlog was $1,996 million as compared to $2,097 million at December 31, 2007. Substantially all the business backlog at December 31, 2008 is expected to be realized as sales in 2009.
UTC Fire & Security
UTC Fire & Security is a global provider of security and fire safety products and services. We created the UTC Fire & Security segment in the second quarter of 2005 upon acquiring Kidde and adding the Kidde industrial, retail and commercial fire safety businesses to the former Chubb segment. In the electronic security industry, UTC Fire & Security provides system integration, installation and service of intruder alarms, access control systems and video surveillance systems under several brand names including Chubb. In the fire safety industry, UTC Fire & Security designs, manufactures, integrates, installs, sells and services a wide range of specialty hazard detection and fixed suppression products and systems and manufactures, sells and services portable fire extinguishers and other fire fighting equipment under several brand names, including Kidde. UTC Fire & Security also provides monitoring, response and security personnel services, including cash-in-transit security, to complement its electronic security and fire safety businesses. Its products and services are used by governments, financial institutions, architects, building owners and developers, security and fire consultants and other end-users requiring a high level of security and fire protection for their businesses and residences.
UTC Fire & Security provides its products and services under Chubb, Kidde and other brand names and sells directly to the customer as well as through manufacturer representatives, distributors, dealers and U.S. retail distribution. Revenues generated by UTC Fire & Security’s international operations were 83 percent and 82 percent of total UTC Fire & Security segment revenues in 2008 and 2007, respectively. At December 31, 2008, UTC Fire & Security’s business backlog was $1,064 million as compared to $1,084 million at December 31, 2007. Substantially all the business backlog at December 31, 2008 is expected to be realized as sales in 2009.
Pratt & Whitney
Pratt & Whitney is among the world’s leading suppliers of aircraft engines for the commercial, military, business jet and general aviation markets. Pratt & Whitney’s Global Services provides maintenance, repair and overhaul services, including the sale of spare parts, as well as fleet management services for large commercial engines. Pratt & Whitney produces families of engines for wide and narrow body aircraft in the commercial and military markets. Pratt & Whitney also sells engines for industrial applications and space propulsion systems. Pratt & Whitney Canada (P&WC) is a world leader in the production of engines powering business, regional, light jet, utility and military aircraft and helicopters. Pratt & Whitney Rocketdyne (PWR) is a leader in the design, development and manufacture of sophisticated aerospace propulsion systems for military and commercial applications, including the U.S. space shuttle. Pratt & Whitney’s Global Material Solutions (GMS) is in the process of engineering, certifying, manufacturing and selling new parts, including life limited parts, for CFM56®-3 engines.
In view of the risks and costs associated with developing new engines, Pratt & Whitney has entered into collaboration arrangements in which revenues, costs and risks are shared. At December 31, 2008, the interests of participants in new and existing Pratt & Whitney-directed commercial jet engine production programs ranged from 14 percent to 29 percent. In addition, Pratt & Whitney has interests in other engine programs, including a 33 percent interest in the International Aero Engines (IAE) collaboration that sells and supports V2500® engines for the Airbus A320 family of aircraft. At December 31, 2008, a portion of Pratt & Whitney’s interests in IAE (equivalent to 4 percent of the overall IAE collaboration) were held by Pratt & Whitney sub-partners. Pratt & Whitney also has a 50 percent interest in the Engine Alliance (EA), a joint venture with GE Aviation, undertaken to develop, market and manufacture the GP7000® engine for the Airbus A380 aircraft. This engine entered into service with its first revenue service flight in August 2008. At December 31, 2008, 40 percent of Pratt & Whitney’s 50 percent interest in the EA was held by other participants. Pratt & Whitney is also pursuing additional collaboration partners.
In terms of engine development programs, Pratt & Whitney is under contract with the U.S. Air Force to develop the F135 engine, a derivative of Pratt & Whitney’s F119 engine, to power the single-engine F-35 Lightning II aircraft being developed by Lockheed Martin. In addition, Pratt & Whitney is currently developing technology intended to enable it to power proposed and future aircraft, including testing of the PurePower PW1000G geared turbofan engine. The technology demonstrator of the PurePower PW1000G engine completed flight testing in 2008. Pratt & Whitney has also received Federal Aviation Authority (FAA) certification for the Advantage 70 upgrade to its PW4000 engine for Airbus A330 aircraft. The Advantage 70 upgrade is intended to reduce maintenance and fuel costs and increase thrust. Certifications for the Advantage 70 from the European Aviation Safety Agency (EASA) are anticipated in 2009. PWR is developing a liquid fuel J-2X engine to support NASA’s vision for space exploration. PWR is also upgrading the performance of the RS68 engine to support U.S. Air Force launch requirements and NASA requirements. P&WC is developing the PW600 engine series for the
5
Table of Contents
very light jet market. In 2008, P&WC received FAA and EASA certification for the PW600. PW600 engine models have been selected by engine manufacturers such as Cessna Aircraft and Embraer. P&WC is also developing the PW210 engine for Sikorsky’s S-76D helicopter and the PurePower PW800 for the new generation of long-range business jets. In 2008, IAE received EASA and FAA aircraft certification for its SelectOneTM upgrade to the V2500 engine for the Airbus A320 family of aircraft. The first of these upgraded engines entered into revenue service in October 2008. The SelectOne upgrade is part of IAE’s V2500SelectSM program of product and service enhancements launched in November 2005. In 2008, GMS received supplemental type certifications from the FAA and EASA for all of the CFM56-3 engine life limited parts being developed by GMS. Pratt & Whitney continues to enhance its programs through performance improvement measures and product base expansion.
Pratt & Whitney’s products are sold principally to aircraft manufacturers, airlines and other aircraft operators, aircraft leasing companies, space launch vehicle providers and the U.S. and foreign governments. Pratt & Whitney’s products and services must adhere to strict regulatory and market-driven safety and performance standards. The frequently changing nature of these standards, along with the long duration of aircraft engine programs, create uncertainty regarding engine program profitability. The vast majority of sales are made directly to the end customer and, to a limited extent, through independent distributors and foreign sales representatives. Sales to Airbus and Boeing were 11.7 and 6.5 percent, respectively, of total Pratt & Whitney revenues in 2008, before taking into account discounts or financial incentives offered to customers. Sales to the U.S. government were 27.4 percent of total Pratt & Whitney segment revenues in 2008.
Revenues from Pratt & Whitney’s international operations, including U.S. exports, were 60 percent and 56 percent of total Pratt & Whitney segment revenues in 2008 and 2007, respectively. At December 31, 2008, Pratt & Whitney’s business backlog was $23,570 million, including $5,871 million of U.S. government-funded contracts and subcontracts, as compared to $23,607 million and $5,334 million, respectively, at December 31, 2007. Of the total Pratt & Whitney backlog at December 31, 2008, approximately $8,975 million is expected to be realized as sales in 2009. Pratt & Whitney’s backlog includes certain contracts for which actual costs may ultimately exceed total revenues from these contracts. See Note 1 to the Consolidated Financial Statements in our 2008 Annual Report for a description of our accounting for long-term contracts.
Hamilton Sundstrand
Hamilton Sundstrand is among the world’s leading suppliers of technologically advanced aerospace and industrial products and aftermarket services for diversified industries worldwide. Hamilton Sundstrand’s aerospace products, such as power generation, management and distribution systems, flight systems, engine control systems, environmental control systems, fire protection and detection systems, auxiliary power units and propeller systems, serve commercial, military, regional, business and general aviation, as well as space and undersea applications. Aftermarket services include spare parts, overhaul and repair, engineering and technical support and fleet maintenance programs. Hamilton Sundstrand sells aerospace products to airframe manufacturers, the U.S. and foreign governments, aircraft operators and independent distributors. Hamilton Sundstrand sales of aerospace products to Boeing, Airbus and Pratt & Whitney, collectively, including sales where the U.S. government was the ultimate customer, were 17.3 percent of Hamilton Sundstrand segment sales in 2008.
Hamilton Sundstrand is engaged in development programs for the Boeing 787 aircraft, the Lockheed Martin F-35 Lightning II military aircraft and the Airbus A400M military aircraft, and has developed and delivered systems for the Airbus A380 aircraft. Hamilton Sundstrand is also the prime contractor for NASA’s space suit/life support system and produces environmental monitoring and control, life support, mechanical systems and thermal control systems for the U.S. space shuttle program, the international space station and the Orion crew exploration vehicle.
Hamilton Sundstrand’s principal industrial products, such as air compressors, metering pumps and fluid handling equipment, serve industries involved with raw material processing, bulk material handling, construction, hydrocarbon and chemical processing, and water and wastewater treatment. Hamilton Sundstrand sells these products under the Sullair, Sundyne, Milton Roy and other brand names directly to end-users, and through manufacturer representatives and distributors.
Revenues generated by Hamilton Sundstrand’s international operations, including U.S. export sales, were 51 percent and 50 percent of total Hamilton Sundstrand segment revenues in 2008 and 2007, respectively. At December 31, 2008, Hamilton Sundstrand’s business backlog was $5,226 million, including $913 million under U.S. government-funded contracts and subcontracts, as compared to $5,152 million and $823 million, respectively, at December 31, 2007. Of the total Hamilton Sundstrand backlog at December 31, 2008, approximately $2,543 million is expected to be realized as sales in 2009.
Sikorsky
Sikorsky is one of the world’s largest manufacturers of military and commercial helicopters and also provides aftermarket helicopter and aircraft parts and services.
6
Table of Contents
Current major production programs at Sikorsky include the UH-60M Black Hawk medium-transport helicopters and HH-60M Medevac helicopters for the U.S. and foreign governments, the S-70 Black Hawk for foreign governments, the MH-60S and MH-60R helicopters for the U.S. Navy, the International Naval Hawk for multiple naval missions, and the S-76 and S-92 helicopters for commercial operations. The UH-60M helicopter is the latest and most modern in a series of Black Hawk variants that Sikorsky has been delivering to the U.S. Army since 1978 and requires significant additional assembly hours relative to the previous variants. In December 2007, the U.S. government and Sikorsky signed a five-year multi-service contract for 537 H-60 helicopters to be delivered to the U.S. Army and U.S. Navy, which include the UH-60M, HH-60M, MH-60S and MH-60R. The contract includes options for an additional 263 aircraft, spares, and kits, potentially making it the largest contract in UTC and Sikorsky history. Actual production quantities will be determined year-by-year over the life of the program based on funding allocations set by Congress and Pentagon acquisition priorities. The deliveries of the aircraft are scheduled to be made through 2012. Sikorsky is also developing the CH-53K next generation heavy lift helicopter for the U.S. Marine Corps and the CH-148, a derivative of the H-92, a military variant of the S-92, for the Canadian government. The latter is being developed under a fixed-price contract that provides for the development, production, and 20-year logistical support of 28 helicopters. This is the largest and most expansive fixed-price development contract in Sikorsky’s history. In December 2008, Sikorsky and the Canadian government executed amendments to the contract that revised the delivery schedule and contract specifications. The first test flight was successfully conducted in November 2008 and delivery of the first helicopter is scheduled for the fourth quarter of 2010.
Sikorsky’s aftermarket business includes spare parts sales, overhaul and repair services, maintenance contracts and logistics support programs for helicopters and other aircraft. Sales are made directly by Sikorsky and by its subsidiaries and joint ventures. Sikorsky is increasingly engaging in logistics support programs and partnering with its government and commercial customers to manage and provide maintenance and repair services.
Revenues generated by Sikorsky’s international operations, including U.S. export sales, were 36 percent and 34 percent of total Sikorsky revenues in 2008 and in 2007, respectively. At December 31, 2008, Sikorsky’s business backlog was $13,167 million, including $6,725 million under U.S. government-funded contracts and subcontracts, as compared to $11,445 million and $5,180 million, respectively, at December 31, 2007. Of the total Sikorsky backlog at December 31, 2008, approximately $6,055 million is expected to be realized as sales in 2009.
Other
UTC Power has developed products and services for commercial buildings using 200kW phosphoric acid fuel cell and microturbine-driven absorption chilling systems. These systems are highly efficient combined cooling, heating and power systems. In addition, UTC Power has developed a geothermal power system capable of producing power from the lowest temperature geothermal water used to date to produce electricity. UTC Power is the world leader in the application of fuel cell technology to transportation applications, including automobiles, transit buses and the U.S. space shuttle program. UTC Power is also a provider of energy advisory and consulting services aimed at making commercial buildings more energy efficient.
UTC Power is the world leader in stationary fuel cell power with more than 260 200kW phosphoric acid fuel cell power plants sold since 1992. UTC Power has also developed a 400kW fuel cell which is scheduled to be placed into service in 2009. This new fuel cell is expected to have greater durability than any other large stationary fuel cell currently available in the market. UTC Power’s automotive and bus transportation fuel cell power plants are based on proton exchange membrane (PEM) technology, including its PureMotion 120 power plant, which is currently used in revenue service in transit bus applications in Connecticut, California and Europe. UTC Power is currently developing PEM fuel cells for submarine applications. In addition, UTC Power is a maker of alkaline-based fuel cells used to provide electricity and drinking water to the U.S. space shuttle.
Although fuel cells are believed to be superior to conventional power generation technologies in terms of total system efficiency and environmental characteristics, the technology is still in either early commercialization or development. Continued technology advancement and cost reduction are required to achieve wide-scale market acceptance. Government support is needed to fully commercialize fuel cell technology. There is still significant uncertainty as to whether and when commercially viable fuel cells will be produced.
UTC Power merged with UTC Fuel Cells, effective January 1, 2007, with UTC Power continuing as the surviving entity. UTC is in the process of incorporating UTC Power’s combined cooling, heating and power systems business within Carrier’s businesses, its geothermal power systems business within Pratt & Whitney’s power systems business, and its space and defense fuel cell power plant business within Hamilton Sundstrand’s energy, space and defense business. These transitions are expected to be completed during the first half of 2009. The results of UTC Power and UTC Fuel Cells are included in the “Eliminations and Other” category in the segment financial data in Note 16 to the Consolidated Financial Statements in our 2008 Annual Report.
7
Table of Contents
Other Matters Relating to Our Business as a Whole
Competition and Other Factors Affecting Our Businesses
As worldwide businesses, our operations can be affected by a variety of economic and other factors, including those described in this section, in “Management’s Discussion and Analysis of Financial Condition and Results of Operations” included in our 2008 Annual Report, in Item 1, “Cautionary Note Concerning Factors That May Affect Future Results,” and in Item 1A, “Risk Factors” in this Form 10-K. Each business unit is subject to significant competition from a large number of companies in the United States and other countries, and each competes on the basis of price, delivery schedule, product performance and service.
Our aerospace businesses are subject to substantial competition from domestic manufacturers, foreign manufacturers (whose governments sometimes provide research and development assistance, marketing subsidies and other assistance for their national commercial products) and companies that obtain regulatory agency approval to manufacture spare parts. In particular, Pratt & Whitney experiences intense competition for new commercial airframe/engine combinations. Engine suppliers may offer substantial discounts and other financial incentives, performance and operating cost guarantees, participation in financing arrangements and maintenance agreements. Customer selections of engines and components can also have a significant impact on later sales of parts and services. In addition, the U.S. government’s and other governments’ policies of purchasing parts from suppliers other than the original equipment manufacturer affect military spare parts sales. Significant elements of our aerospace businesses, such as spare parts sales for engines and aircraft in service, have short lead times. Therefore, backlog information may not be indicative of future demand. Pratt & Whitney’s major competitors in the sale of engines are GE Aviation, Rolls-Royce, Honeywell and Turbomeca. For information regarding customer financing commitments, participation in guarantees of customer financing arrangements and performance and operating cost guarantees, see Notes 4 and 13 to the Consolidated Financial Statements in our 2008 Annual Report.
Research and Development
Since changes in technology can have a significant impact on our operations and competitive position, we spend substantial amounts of our own funds on research and development. These expenditures, which are charged to expense as incurred, were $1,771 million or 3.1 percent of total sales in 2008, as compared with $1,678 million or 3.1 percent of total sales in 2007 and $1,529 million or 3.2 percent of total sales in 2006. We also perform research and development work under contracts funded by the U.S. government and other customers. This contract research and development, which is performed principally in the Pratt & Whitney segment and to a lesser extent in the Hamilton Sundstrand and Sikorsky segments, amounted to $2,101 million in 2008, as compared to $2,123 million in 2007 and $1,952 million in 2006. These contract research and development costs include amounts that are expensed as incurred, through cost of products sold, and amounts that are capitalized into inventory to be subsequently recovered through production aircraft shipments. Of the totals, $2,008 million, $1,872 million and $1,621 million were expensed in 2008, 2007 and 2006, respectively. The remaining costs have been capitalized.
U.S. Government Contracts
U.S. government contracts are subject to termination by the government, either for the convenience of the government or for default as a result of our failure to perform under the applicable contract. In the case of a termination for convenience, we would normally be entitled to reimbursement for our allowable costs incurred, plus termination costs and a reasonable profit. If terminated by the government as a result of our default, we could be liable for additional costs the government incurs in acquiring undelivered goods or services from another source and any other damages it suffers. Most of our U.S. government sales are made under fixed-price type contracts, while approximately $2,721 million or 4.6 percent of our total sales for 2008 were made under cost-reimbursement type contracts.
Our contracts with the U.S. government are also subject to audits. Like many defense contractors, we have received audit reports from the U.S. government which recommend that we reduce certain contract prices because cost or pricing data we submitted in negotiation of the contract prices or cost accounting practices may not have conformed to government regulations. Some of these audit reports have involved substantial reductions. We have made voluntary refunds in those cases we believe appropriate, have settled some allegations and continue to litigate certain cases. For further discussion of risks related to government contracting, see the discussion in Item 1A, “Risk Factors” and Item 3, “Legal Proceedings,” in this Form 10-K and Note 15 to the Consolidated Financial Statements in our 2008 Annual Report for further discussion.
Compliance with Environmental and Other Government Regulations
Our operations are subject to and affected by environmental regulation by federal, state and local authorities in the United States and regulatory authorities with jurisdiction over our foreign operations. We have incurred and will likely continue to incur liabilities under various government statutes for the cleanup of pollutants previously released into the
8
Table of Contents
environment. We do not anticipate that compliance with current provisions relating to the protection of the environment or that any payments we may be required to make for cleanup liabilities will have a material adverse effect upon our cash flows, competitive position, financial condition or results of operations. Environmental matters are further addressed in “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and Notes 1 and 15 to the Consolidated Financial Statements in our 2008 Annual Report.
Most of the U.S. laws governing environmental matters include criminal provisions. If we were convicted of a violation of the federal Clean Air Act or Clean Water Act, the facility or facilities involved in the violation would be ineligible to be used in performing any U.S. government contract we are awarded until the Environmental Protection Agency certified that the condition giving rise to the violation had been corrected.
We conduct our businesses through subsidiaries and affiliates worldwide. Changes in legislation or government policies can affect our worldwide operations. For example, governmental regulation of refrigerants and energy efficiency standards, elevator safety codes and fire safety regulations are important to the businesses of Carrier, Otis and UTC Fire & Security respectively, while government safety and performance regulations, restrictions on aircraft engine noise and emissions and government procurement practices can impact our aerospace businesses.
Intellectual Property and Raw Materials
We maintain a portfolio of patents, trademarks, licenses and franchises related to our businesses. While this portfolio is cumulatively important to our business, we do not believe that the loss of any one or group of related patents, trademarks, licenses or franchises would have a material adverse effect on our overall business or on any of our operating segments.
We believe we have adequate sources for our purchases of materials, components, services and supplies used in our manufacturing. We work continuously with our supply base to ensure an adequate source of supply and to reduce costs. We pursue cost reductions through a number of mechanisms, including consolidating our purchases, reducing the number of suppliers, strategic global sourcing and using online bidding competitions among potential suppliers. In some instances, we depend upon a single source of supply or participate in commodity markets that may be subject to allocations of limited supplies by suppliers. Like other users in the United States, we are largely dependent upon foreign sources for certain raw materials requirements such as cobalt (Finland, Norway, Russia and Canada), tantalum (Australia and Canada), chromium (South Africa, Kazakhstan, Zimbabwe and Russia) and rhenium (Chile, Kazakhstan and Germany). We have a number of ongoing programs to manage this dependence and the accompanying risk, including long-term agreements and the conservation of materials through scrap reclamation and new manufacturing processes. We believe that our supply management practices are based on an appropriate balancing of the foreseeable risks and the costs of alternative practices. Although recent high prices for some raw materials important to some of our businesses (steel, copper, aluminum, titanium and nickel) have caused margin and cost pressures, we do not foresee any near term unavailability of materials, components or supplies that would have an adverse effect on our overall business or on any of our business segments. For further discussion of the possible effects of the cost and availability of raw materials on our business, see Item 1A, “Risk Factors” in this Form 10-K.
Employees and Employee Relations
At December 31, 2008, our total employment was approximately 223,100, approximately 65 percent of which represents employees based outside the United States. During 2008, we renegotiated thirteen multi-year collective bargaining agreements, the largest of which covered certain workers at Carrier, Hamilton Sundstrand, and Sikorsky. In 2009, numerous collective bargaining agreements are subject to renegotiation, the largest of which cover certain workers at Sikorsky and Carrier. We do not anticipate any problems in renegotiating these contracts that would either individually or in the aggregate have a material adverse effect on our financial condition or results of operations. For discussion of the effects of our restructuring actions on employment, see “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and Note 11 to the Consolidated Financial Statements in our 2008 Annual Report.
For a discussion of other matters which may affect our financial condition, results of operations or cash flows, including the risks of our international operations, see the further discussion under the headings “General” and “Description of Business by Segment” in this section, Item 1A, “Risk Factors” in this Form 10-K, and under “Management’s Discussion and Analysis of Financial Condition and Results of Operations” in our 2008 Annual Report.
Cautionary Note Concerning Factors That May Affect Future Results
This Form 10-K contains statements which, to the extent they are not statements of historical or present fact, constitute “forward-looking statements” under the securities laws. From time to time, oral or written forward-looking statements may also be included in other materials released to the public. These forward-looking statements are intended to provide management’s current expectations or plans for our future operating and financial performance, based on assumptions
9
Table of Contents
currently believed to be valid. Forward-looking statements can be identified by the use of words such as “believe,” “expect,” “plans,” “strategy,” “prospects,” “estimate,” “project,” “target,” “anticipate,” “guidance” and other words of similar meaning in connection with a discussion of future operating or financial performance. These include, among others, statements relating to:
| • | future revenues, earnings, cash flow, uses of cash and other measures of financial performance; |
| • | the effect of economic conditions in the United States and globally, including the financial condition of our customers and suppliers; |
| • | new business opportunities; |
| • | restructuring costs and savings; |
| • | the scope, nature or impact of acquisition activity and integration into our businesses; |
| • | the development, production and support of advanced technologies and new products and services; |
| • | the anticipated benefits of diversification and balance of operations across product lines, regions and industries; |
| • | the impact of the negotiation of collective bargaining agreements; |
| • | the outcome of contingencies; |
| • | future repurchases of common stock; |
| • | future levels of indebtedness and capital spending; and |
| • | pension plan assumptions and future contributions. |
All forward-looking statements involve risks and uncertainties that may cause actual results to differ materially from those expressed or implied in the forward-looking statements. This Annual Report on Form 10-K for 2008 includes important information as to these factors that may cause actual results to vary materially from those stated in the forward-looking statements in the “Business” section under the headings “General,” “Description of Business by Segment” and “Other Matters Relating to Our Business as a Whole,” and in the “Risk Factors” and “Legal Proceedings” sections. Additional important information as to these factors is included in our 2008 Annual Report in the section titled “Management’s Discussion and Analysis of Financial Condition and Results of Operations” under the headings “Business Overview,” “Critical Accounting Estimates,” “Environmental Matters” and “Restructuring and Other Costs.” For additional information identifying factors that may cause actual results to vary materially from those stated in the forward-looking statements, see our reports on Forms 10-K, 10-Q and 8-K filed with the SEC from time to time.
| Item 1A. | Risk Factors |
Our business, financial condition, operating results and cash flows can be impacted by a number of factors, including, but not limited to, those set forth below, any one of which could cause our actual results to vary materially from recent results or from our anticipated future results. For a discussion identifying additional risk factors and important factors that could cause actual results to differ materially from those anticipated, see the discussion in the “Business” section under the headings “Other Matters Relating to Our Business as a Whole” and “Cautionary Note Concerning Factors That May Affect Future Results” in this Form 10-K and in “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and “Notes to Consolidated Financial Statements” in our 2008 Annual Report.
Our Global Growth is Subject to a Number of Economic Risks
As widely reported, financial markets in the United States, Europe and Asia have been experiencing extreme disruption in recent months, including, among other things, extreme volatility in security prices, severely diminished liquidity and credit availability, rating downgrades of certain investments and declining valuations of others. Governments have taken unprecedented actions intended to address extreme market conditions that include severely restricted credit and declines in real estate values. While currently these conditions have not impaired our ability to access credit markets and finance our operations, there can be no assurance that there will not be a further deterioration in financial markets and confidence in major economies. These economic developments affect businesses such as ours in a number of ways. The current tightening of credit in financial markets adversely affects the ability of our customers to obtain financing for significant purchases and operations and could result in a decrease in or cancellation of orders for our products and services as well as impact the ability of our customers to make payments. Similarly, this tightening of credit may adversely affect our supplier base and increase the potential for one or more of our suppliers to experience financial distress or bankruptcy. Our global business is also adversely affected by decreases in the general level of economic activity, such as decreases in business and consumer spending, air travel, construction activity, financial strength of airline customers and government procurement. Strengthening of the rate of exchange for the U.S. Dollar against certain major currencies such as the Euro, the Canadian Dollar and other currencies also adversely affects our results. We are unable to predict the likely duration and severity of the current disruption in financial markets and adverse economic conditions in the U.S. and other countries.
10
Table of Contents
Our Financial Performance Is Dependent on the Conditions of the Construction and Aerospace Industries
The results of our commercial and industrial businesses, which generated approximately 62 percent of our revenues in 2008, are influenced by a number of external factors including fluctuations in residential and commercial construction activity, regulatory changes, interest rates, labor costs, foreign currency exchange rates, customer attrition, raw material and energy costs, the tightening of the U.S. credit markets and other global and political factors. In addition to these factors, Carrier’s financial performance can also be influenced by production and utilization of transport equipment and, in its residential business, weather conditions.
The results of our commercial and military aerospace businesses, which generated approximately 38 percent of our consolidated revenues in 2008, are directly tied to the economic conditions in the commercial aviation and defense industries, which are cyclical in nature. The challenging operating environment currently faced by commercial airlines is expected to continue. As a result, capital spending by commercial airlines and aircraft manufacturers may be influenced by a wide variety of factors, including current and predicted traffic levels, load factors, aircraft fuel pricing, labor issues, worldwide airline profits, airline consolidation, airline insolvencies, competition, the retirement of older aircraft, regulatory changes, terrorism and related safety concerns, general economic conditions, corporate profitability, and backlog levels, all of which could reduce both the demand for air travel and the aftermarket sales and margins of our aerospace businesses. Future terrorist actions or pandemic health issues could dramatically reduce both the demand for air travel and our aerospace businesses aftermarket sales and margins. Also, since a substantial portion of the backlog for commercial aerospace customers is scheduled for delivery beyond 2009, changes in economic conditions may cause customers to request that firm orders be rescheduled or canceled. At times, our aerospace businesses also enter into firm fixed-price development contracts, which may require us to bear cost overruns related to unforeseen technical and design challenges that arise during the development stage of the program. In addition, our aerospace businesses face intense competition from domestic and foreign manufacturers of new equipment and spare parts. The defense industry is also affected by a changing global political environment, continued pressure on U.S. and global defense spending and U.S. foreign policy and the level of activity in military flight operations. Spare parts sales and aftermarket service trends are affected by similar factors, including usage, pricing, technological improvements, regulatory changes and the retirement of older aircraft. Furthermore, because of the lengthy research and development cycle involved in bringing products in these business segments to market, we cannot predict the economic conditions that will exist when any new product is complete. A reduction in capital spending in the commercial aviation or defense industries could have a significant effect on the demand for our products, which could have an adverse effect on our financial performance or results of operations.
Our Business May Be Affected by Government Contracting Risks
U.S. government contracts are subject to termination by the government, either for the convenience of the government or for default as a result of our failure to perform under the applicable contract. If terminated by the government as a result of our default, we could be liable for additional costs the government incurs in acquiring undelivered goods or services from another source and any other damages it suffers. We are now, and believe that in light of the current U.S. government contracting environment we will continue to be, the subject of one or more U.S. government investigations. If we or one of our business units were charged with wrongdoing as a result of any U.S. government investigation (including violation of certain environmental or export laws), the U.S. government could suspend us from bidding on or receiving awards of new U.S. government contracts pending the completion of legal proceedings. If convicted or found liable, the U.S. government could subject us to fines, penalties, repayments and treble and other damages. The U.S. government could void any contracts found to be tainted by fraud. The U.S. government also reserves the right to debar a contractor from receiving new government contracts for fraudulent, criminal or other seriously improper conduct. Debarment generally does not exceed three years. Independently, failure to comply with U.S. laws and regulations related to the export of goods and technology outside the United States could result in civil or criminal penalties and suspension or termination of our export privileges. In addition, we are also sensitive to U.S. military budgets, which may fluctuate to reflect the policies of a new administration or Congress.
Our International Operations Subject Us to Economic Risk As Our Results of Operations May Be Adversely Affected by Changes in Economic Conditions, Foreign Currency Fluctuations and Changes in Local Government Regulation
We conduct our business on a global basis, with approximately 64 percent of our total 2008 segment revenues derived from operations outside of the United States and from U.S. export sales. Changes in local and regional economic conditions, including fluctuations in exchange rates, may affect product demand and reported profits in our non-U.S. operations (primarily the commercial businesses) where transactions are generally denominated in local currencies. In addition, currency
11
Table of Contents
fluctuations may affect the prices we pay suppliers for materials used in our products. As a result, our operating margins may also be negatively impacted by worldwide currency fluctuations that result in higher costs for cross border transactions. Our financial statements are denominated in U.S. dollars. Accordingly, fluctuations in exchange rates may also give rise to translation gains or losses when financial statements of non-U.S. operating units are translated into U.S. dollars. Given that the majority of our revenues are non-U.S. based, a strengthening of the U.S. dollar against other major foreign currencies could adversely affect our results of operations.
The majority of sales in the aerospace businesses is transacted in U.S. dollars, consistent with established industry practice, while the majority of costs at locations outside the United States is incurred in the applicable local currency (principally the Euro and the Canadian dollar). For operating units with U.S. dollar sales and local currency costs, there is a foreign currency exposure that could impact our results of operations depending on market changes in the exchange rate of the U.S. dollar against the applicable foreign currencies. To manage certain exposures, we employ long-term hedging strategies associated with U.S. dollar revenues. See Note 1 to the Consolidated Financial Statements in our 2008 Annual Report for a discussion of our hedging strategies.
Our international sales and operations are subject to risks associated with changes in local government laws, regulations and policies, including those related to tariffs and trade barriers, investments, taxation, exchange controls, employment regulations, and repatriation of earnings. Our international sales and operations are also sensitive to changes in foreign national priorities, including government budgets, as well as to political and economic instability. International transactions may involve increased financial and legal risks due to differing legal systems and customs in foreign countries. For example, as a condition of sale or award of a contract, some international customers require us to agree to offset arrangements, which may include in-country purchases, manufacturing and financial support arrangements. The contract may provide for penalties in the event we fail to perform in accordance with the offset requirements. In addition, as part of our globalization strategy, we have invested in certain countries, including Argentina, Brazil, China, India, Russia and South Africa that carry high levels of currency, political and economic risk.
While these factors or the impact of these factors are difficult to predict, any one or more of them could adversely affect our business, financial condition or operating results.
We Use a Variety of Raw Materials, Supplier-Provided Parts, Components, Sub-Systems and Third Party Contract Manufacturing Services in Our Businesses, and Significant Shortages, Supplier Capacity Constraints, Supplier Production Disruptions or Price Increases Could Increase Our Operating Costs and Adversely Impact the Competitive Positions of Our Products
Our reliance on suppliers, third party contract manufacturing and commodity markets to secure raw materials, parts, components and sub-systems used in our products exposes us to volatility in the prices and availability of these materials. In some instances, we depend upon a single source of supply, manufacturing or assembly or participate in commodity markets that may be subject to allocations of limited supplies by suppliers. A disruption in deliveries from our suppliers or third party contract manufacturers, supplier capacity constraints, supplier and third party contract manufacturer production disruptions, price increases, or decreased availability of raw materials or commodities, could have an adverse effect on our ability to meet our commitments to customers or increase our operating costs. We believe that our supply management and production practices are based on an appropriate balancing of the foreseeable risks and the costs of alternative practices. Nonetheless, price increases, supplier capacity constraints, supplier production disruptions or the unavailability of some raw materials may have an adverse effect on our results of operations or financial condition.
We Engage in Acquisitions, and May Encounter Difficulties Integrating Acquired Businesses with Our Current Operations; Therefore, We May Not Realize the Anticipated Benefits of the Acquisitions
We seek to grow through strategic acquisitions. In the past several years, we have made various acquisitions and entered into joint venture arrangements intended to complement and expand our businesses, and may continue to do so in the future. The success of these transactions will depend on our ability to integrate assets and personnel acquired in these transactions, apply our internal controls processes to these acquired businesses, and cooperate with our strategic partners. We may encounter difficulties in integrating acquisitions with our operations, applying our internal controls processes to these acquisitions, or in managing strategic investments. Furthermore, we may not realize the degree or timing of benefits we anticipate when we first enter into a transaction. Any of the foregoing could adversely affect our business and results of operations. In addition, the recent effectiveness of Statement of Financial Accounting Standards No. 141 (revised 2007), “Business Combinations,” which, among other things, requires companies to expense certain acquisition costs as incurred, may cause us to incur greater earnings volatility and generally lower earnings during periods in which we acquire new businesses.
12
Table of Contents
We Design, Manufacture and Service Products that Incorporate Advanced Technologies; The Introduction of New Products and Technologies Involves Risks and We May Not Realize the Degree or Timing of Benefits Initially Anticipated
We seek to achieve growth through the design, development, production, sale and support of innovative products that incorporate advanced technologies. We regularly invest substantial amounts in research and development efforts that pursue advancements in a wide range of technologies, products and services. Our ability to realize the anticipated benefits of these advancements depends on a variety of factors, including meeting development, production, certification and regulatory approval schedules; execution of internal and external performance plans; availability of internal and supplier-produced parts and materials; performance of suppliers and subcontractors; achieving cost and production efficiencies, validation of innovative technologies and the level of customer interest in new technologies and products. These factors involve significant risks and uncertainties. We may encounter difficulties in developing and producing these new products and services, and may not realize the degree or timing of benefits initially anticipated. In particular, we cannot predict with certainty whether, when and in what quantities Pratt & Whitney or its affiliates will produce aircraft engines currently in development or pending required certifications. Any of the foregoing could adversely affect our business and results of operations.
We Are Subject to Litigation and Legal Compliance Risks That Could Adversely Affect Our Operating Results
We are subject to a variety of litigation and legal compliance risks. These risks include, among other things, litigation concerning product liability matters, personal injuries, intellectual property rights, government contracts, taxes, environmental matters and compliance with U.S. and foreign export laws, competition laws and sales and trading practices. We or one of our business units could be charged with wrongdoing as a result of such litigation. If convicted or found liable, we could be subject to fines, penalties, repayments, other damages (in certain cases, treble damages), or suspension or debarment from government contracts. Independently, failure of us or one of our business units to comply with applicable export and trade practice laws could result in civil or criminal penalties and suspension or termination of export privileges. While we believe we have adopted appropriate risk management and compliance programs to address and reduce these risks, the global and diverse nature of our operations means that these risks will continue to exist and additional legal proceedings and contingencies will arise from time to time. Our results may be affected by the outcome of legal proceedings and other contingencies that cannot be predicted with certainty. For non-income tax risks, we estimate material loss contingencies and establish reserves as required by generally accepted accounting principles based on our assessment of contingencies where liability is deemed probable and reasonably estimable in light of the facts and circumstances known to us at a particular point in time. Subsequent developments in legal proceedings may affect our assessment and estimates of the loss contingency recorded as a liability or as a reserve against assets in our financial statements and could result in an adverse effect on our results of operations in the period in which a liability would be recognized or cash flows for the period in which damages would be paid. For a description of current legal proceedings, see Part I, Item 3, “Legal Proceedings,” in this Form 10-K. For income tax risks, we recognize tax benefits based on our assessment that a tax benefit has a greater than 50% likelihood of being sustained upon ultimate settlement with the applicable taxing authority that has full knowledge of all relevant facts. For those income tax positions where we assess that there is not a greater than 50% likelihood that such tax benefit will be sustained, we do not recognize a tax benefit in our financial statements. Subsequent events may cause us to change our assessment of the likelihood of sustaining a previously-recognized benefit which could result in an adverse effect on our results of operations in the period in which such event occurs or on our cash flows in the period in which the ultimate settlement with the applicable taxing authority occurs.
13
Table of Contents
| Item 1B. | Unresolved Staff Comments |
None.
| Item 2. | Properties |
| Number of Facilities - Owned | ||||||||||||||||
| Location |
Otis | Carrier | UTC Fire & Security |
Pratt & Whitney |
Hamilton Sundstrand |
Sikorsky | Other | Total | ||||||||
| Manufacturing: |
||||||||||||||||
| North America |
— | 13 | 7 | 36 | 22 | 8 | — | 86 | ||||||||
| Europe & Middle East |
7 | 7 | 12 | 2 | 18 | — | — | 46 | ||||||||
| Asia |
4 | 3 | — | 6 | 2 | — | — | 15 | ||||||||
| Emerging Markets* |
10 | 19 | 7 | 12 | 5 | 2 | — | 55 | ||||||||
| 21 | 42 | 26 | 56 | 47 | 10 | — | 202 | |||||||||
| Non-Manufacturing: |
||||||||||||||||
| North America |
4 | 5 | 1 | 28 | 4 | — | 13 | 55 | ||||||||
| Europe & Middle East |
16 | 12 | 2 | — | 1 | — | — | 31 | ||||||||
| Asia |
2 | 2 | 5 | 1 | — | — | — | 10 | ||||||||
| Emerging Markets* |
7 | 7 | 5 | 3 | — | — | — | 22 | ||||||||
| 29 | 26 | 13 | 32 | 5 | — | 13 | 118 | |||||||||
| Number of Facilities - Leased | ||||||||||||||||
| Location |
Otis | Carrier | UTC Fire & Security |
Pratt & Whitney |
Hamilton Sundstrand |
Sikorsky | Other | Total | ||||||||
| Manufacturing: |
||||||||||||||||
| North America |
1 | 5 | 7 | 24 | 8 | 7 | 2 | 54 | ||||||||
| Europe & Middle East |
3 | 3 | 16 | 1 | 12 | 1 | — | 36 | ||||||||
| Asia |
— | 2 | — | 4 | 3 | — | — | 9 | ||||||||
| Emerging Markets* |
2 | 6 | 6 | — | 4 | — | — | 18 | ||||||||
| 6 | 16 | 29 | 29 | 27 | 8 | 2 | 117 | |||||||||
| Number of Facilities - Leased | ||||||||||||||||
| Location |
Otis | Carrier | UTC Fire & Security |
Pratt & Whitney |
Hamilton Sundstrand |
Sikorsky | Other | Total | ||||||||
| Non-Manufacturing: |
||||||||||||||||
| North America |
4 | 93 | 16 | 14 | 3 | 6 | 4 | 140 | ||||||||
| Europe & Middle East |
10 | 22 | 13 | — | — | — | — | 45 | ||||||||
| Asia |
8 | 3 | 7 | 1 | 1 | 1 | — | 21 | ||||||||
| Emerging Markets* |
9 | 11 | 6 | — | — | — | — | 26 | ||||||||
| 31 | 129 | 42 | 15 | 4 | 7 | 4 | 232 | |||||||||
| * |
For purposes of this table, emerging markets is based on the countries included in the Morgan Stanley Capital International Emerging Markets Global IndexSM. |
Our fixed assets as of December 31, 2008 include manufacturing facilities and non-manufacturing facilities such as warehouses set forth in the tables above and a substantial quantity of machinery and equipment, most of which are general purpose machinery and equipment using special jigs, tools and fixtures and in many instances having automatic control features and special adaptations. The facilities, warehouses, machinery and equipment in use as of December 31, 2008 are in good operating condition, are well-maintained and substantially all are in regular use.
14
Table of Contents
Our management believes that the fixed assets capitalized and the facilities in operation at December 31, 2008 for the production of our products are suitable and adequate for the business conducted therein in the current business environment and have sufficient production capacity for their present intended purposes. Utilization of the facilities varies based on demand for the products. We continuously review our anticipated requirements for facilities and, based on that review, may from time to time adjust our facility needs.
For discussion of the effect of our restructuring actions on manufacturing facilities, see “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and Note 11 to the Consolidated Financial Statements in our 2008 Annual Report.
| Item 3. | Legal Proceedings |
As previously disclosed, the Department of Justice (DOJ) sued us in 1999 in the U.S. District Court for the Southern District of Ohio, claiming that Pratt & Whitney violated the civil False Claims Act and common law. This lawsuit relates to the “Fighter Engine Competition” between Pratt & Whitney’s F100 engine and General Electric’s F110 engine. The DOJ alleges that the government overpaid for F100 engines under contracts awarded by the U.S. Air Force in fiscal years 1985 through 1990 because Pratt & Whitney inflated its estimated costs for some purchased parts and withheld data that would have revealed the overstatements. At trial of this matter, completed in December 2004, the government claimed Pratt & Whitney’s liability to be $624 million. On August 1, 2008, the trial court judge held that the Air Force had not suffered any actual damages because Pratt & Whitney had made significant price concessions. However, the trial court judge found that Pratt & Whitney violated the False Claims Act due to inaccurate statements contained in the 1983 offer. In the absence of actual damages, the trial court judge awarded the DOJ the maximum civil penalty of $7.09 million, or $10,000 for each of the 709 invoices Pratt & Whitney submitted in 1989 and later under the contracts. Both the DOJ and UTC have appealed the decision. Should the government ultimately prevail, the outcome of this matter could result in a material effect on our results of operations in the period in which a liability would be recognized or cash flows for the period in which damages would be paid.
As previously disclosed, on February 21, 2007, the European Commission’s Competition Directorate (EU Commission) ruled that Otis’ subsidiaries in Belgium, Luxembourg and the Netherlands, and a portion of the business of Otis’ German subsidiary, violated European Union (EU) competition rules and assessed a €225 million (approximately $300 million) civil fine against Otis, its relevant local entities, and UTC, which was paid during 2007. In May 2007, we filed an appeal of the decision before the EU’s European Court of First Instance. Resolution of the matter is not expected within the next twelve months.
As previously disclosed, during the first quarter of 2007, the Austrian Federal Competition Authority (Competition Authority) filed a complaint with the Cartel Court in Austria (Cartel Court) against Otis’ Austrian subsidiary in connection with an investigation of unlawful collusive arrangements in the Austrian elevator and escalator industry. On December 14, 2007, the Cartel Court, at the request of the Competition Authority, assessed civil fines against the participants in the collusive arrangements, including a fine of €18.2 million (approximately $26 million) against Otis’ Austrian subsidiary, which fine was fully provided for as of December 31, 2007. Otis Austria appealed this ruling in January 2008. In October 2008, the Cartel Court denied the appeal and in December 2008, this fine was paid in full.
As previously disclosed, in 2005 the Korean Fair Trade Commission (KFTC) conducted an inspection at the offices of Otis Korea and its Korean competitors with respect to collusive activities in the market for new equipment sales, and in May 2007 expanded its investigation to include pricing of subcontracts for elevator installation. In September 2008, the KFTC assessed a fine against Otis Korea of South Korean Won 17.3 billion (approximately $15 million) with respect to the new equipment sales investigation, which we previously accrued. In November 2008, this fine was paid in full. In October 2008, the KFTC notified us that the installation subcontractor pricing investigation had been closed without action.
In December 2008, the Department of Defense (DOD) issued a contract claim against Sikorsky to recover overpayments the DOD alleges it has incurred since January 2003 in connection with cost accounting changes approved by the DOD and implemented by Sikorsky in 1999 and 2006. These changes relate to the calculation of material overhead rates in government contracts. The DOD claimed that Sikorsky’s liability is approximately $80 million (including interest). We believe this claim is without merit and intend to appeal.
Like many other industrial companies in recent years, we or our subsidiaries are named as a defendant in lawsuits alleging personal injury as a result of exposure to asbestos integrated into certain of our products or premises. While we have never manufactured asbestos and no longer incorporate it in any currently-manufactured products, certain of our historical products, like those of many other manufacturers, have contained components incorporating asbestos. A substantial majority of these asbestos-related claims have been covered by insurance or other forms of indemnity or have been dismissed without payment. The remainder of the closed cases have been resolved for amounts that are not material individually or in the aggregate. Based on the information currently available, we do not believe that resolution of these asbestos-related matters will have a material adverse effect upon our competitive position, results of operations, cash flows or financial condition.
15
Table of Contents
Except as otherwise noted above, we do not believe that resolution of any of the legal matters discussed above will have a material adverse effect upon our competitive position, results of operations, cash flows or financial condition. A further discussion of government contracts and related investigations, as well as a discussion of our environmental liabilities, can be found under the heading “Other Matters Relating to Our Business as a Whole – Compliance with Environmental and Other Government Regulations” in Item 1, “Business,” and in Item 1A, “Risk Factors,” in this Form 10-K.
| Item 4. | Submission of Matters to a Vote of Security Holders |
No matters were submitted to security holders for a vote during the quarter ended December 31, 2008.
| Item 5. | Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities |
The Performance Graph and Comparative Stock Data appearing in our 2008 Annual Report containing the following data relating to our Common Stock: shareholder return, principal market, quarterly high and low sales prices, approximate number of shareowners and frequency and amount of dividends are hereby incorporated by reference. The information required by Item 5 with respect to securities authorized for issuance under equity compensation plans is incorporated by reference in Part III, Item 12 of this Form 10-K.
Issuer Purchases of Equity Securities
The following table provides information about our purchases of equity securities that are registered by us pursuant to Section 12 of the Exchange Act during the quarter ended December 31, 2008.
| 2008 |
Total Number of Shares Purchased (000’s) |
Average Price Paid per Share |
Total Number of Shares Purchased as Part of a Publicly Announced Program (000’s) |
Maximum Number of Shares that may yet be Purchased Under the Program (000’s) | ||||
| October 1 – October 31 |
2,883 | 51.22 | 2,879 | 39,082 | ||||
| November 1 – November 30 |
5,185 | 48.83 | 5,184 | 33,898 | ||||
| December 1 – December 31 |
5,462 | 48.98 | 5,460 | 28,438 | ||||
| Total |
13,530 | 49.40 | 13,523 | 28,438 | ||||
We repurchase shares under a program announced on June 11, 2008, which authorized the repurchase of up to 60 million shares of our common stock. This new authorization replaced a previous program, approved in December 2006, which was nearing completion. Under the current program, shares may be purchased on the open market, in privately negotiated transactions and under plans complying with Rules 10b5-1 and 10b-18 under the Exchange Act, as amended. These repurchases are included within the scope of our overall repurchase program discussed above. We may also reacquire shares outside of the program from time to time in connection with the surrender of shares to cover taxes on vesting of restricted stock. Approximately 7,000 shares were reacquired in transactions outside the program during the quarter.
| Item 6. | Selected Financial Data |
The Five Year Summary appearing in our 2008 Annual Report, containing revenues, net income, basic and diluted earnings per share, cash dividends per common share, total assets and long-term debt is hereby incorporated by reference. See “Notes to Consolidated Financial Statements” in our 2008 Annual Report for a description of any accounting changes and acquisitions or dispositions of businesses materially affecting the comparability of the information reflected in the Five Year Summary.
| Item 7. | Management’s Discussion and Analysis of Financial Condition and Results of Operations |
We hereby incorporate by reference in this Form 10-K the section titled “Management’s Discussion and Analysis of Financial Condition and Results of Operations” in our 2008 Annual Report.
16
Table of Contents
| Item 7A. | Quantitative and Qualitative Disclosures About Market Risk |
For information concerning market risk sensitive instruments, see discussion under the heading “Market Risk and Risk Management” in “Management’s Discussion and Analysis of Financial Condition and Results of Operations” in our 2008 Annual Report and under the heading “Foreign Exchange and Hedging Activity” in Note 1 and Note 12 to the Consolidated Financial Statements in our 2008 Annual Report.
| Item 8. | Financial Statements and Supplementary Data |
The 2008 and 2007 Consolidated Balance Sheet, and other financial statements for the years 2008, 2007 and 2006, together with the report thereon of PricewaterhouseCoopers LLP dated February 11, 2009 in our 2008 Annual Report are incorporated by reference in this Form 10-K. The 2008 and 2007 unaudited Selected Quarterly Financial Data appearing in our 2008 Annual Report is incorporated by reference in this Form 10-K.
| Item 9. | Changes in and Disagreements with Accountants on Accounting and Financial Disclosure |
None.
| Item 9A. | Controls and Procedures |
As required by Rule 13a-15 under the Securities Exchange Act of 1934, as amended, we carried out an evaluation under the supervision and with the participation of our management, including the President and Chief Executive Officer (CEO), the Senior Vice President and Chief Financial Officer (CFO) and the Vice President, Controller (Controller), of the effectiveness of the design and operation of our disclosure controls and procedures. There are inherent limitations to the effectiveness of any system of disclosure controls and procedures, including the possibility of human error and the circumvention or overriding of the controls and procedures. Accordingly, even effective disclosure controls and procedures can only provide reasonable assurance of achieving their control objectives. Based upon our evaluation, our CEO, our CFO and our Controller concluded that our disclosure controls and procedures were effective to provide reasonable assurance that information required to be disclosed by us in the reports that we file or submit under the Securities Exchange Act of 1934, as amended, is recorded, processed, summarized and reported within the time periods specified in the applicable rules and forms, and that it is accumulated and communicated to our management, including our CEO, our CFO and our Controller, as appropriate, to allow timely decisions regarding required disclosure.
Our management is responsible for establishing and maintaining adequate internal control over financial reporting. Internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external reporting purposes in accordance with accounting principles generally accepted in the United States of America. Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Our management has assessed the effectiveness of our internal control over financial reporting as of December 31, 2008. In making its assessment, management has utilized the criteria set forth by the Committee of Sponsoring Organizations of the Treadway Commission in Internal Control—Integrated Framework. Our management concluded that based on its assessment, our internal control over financial reporting was effective as of December 31, 2008. The effectiveness of our internal control over financial reporting as of December 31, 2008 has been audited by PricewaterhouseCoopers LLP, an independent registered public accounting firm, as stated in their report which appears in our 2008 Annual Report.
There has been no change in our internal control over financial reporting during the quarter ended December 31, 2008 that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.
| Item 10. | Directors, Executive Officers and Corporate Governance |
The information required by Item 10 with respect to directors, the Audit Committee of the Board of Directors and audit committee financial experts is incorporated herein by reference to the section of our Proxy Statement for the 2009 Annual Meeting of Shareowners titled “General Information Concerning the Board of Directors,” under the headings “Nominees,” “The Audit Committee,” and “The Committee on Nominations and Governance.”
17
Table of Contents
Executive Officers of the Registrant
The following persons are executive officers of United Technologies Corporation:
| Name |
Title |
Other Business Experience Since 1/1/2004 |
Age 2/11/09 | |||
| Alain Bellemare | President, Hamilton Sundstrand Corporation (since January 2009) | President, Pratt & Whitney Canada | 47 | |||
| Ari Bousbib | President, Commercial Companies and Executive Vice President (since May 2008) | President, Otis Elevator | 47 | |||
| J. Thomas Bowler, Jr. | Senior Vice President, Human Resources and Organization (since 2007) | Vice President, Human Resources, United Technologies Corporation; Vice President, Human Resources and Organization, Pratt & Whitney | 56 | |||
| William M. Brown | President, UTC Fire & Security (since 2006) | President, Asia Pacific, Carrier Corporation | 46 | |||
| Louis R. Chênevert | Director (since April 2008), President (since 2006) and Chief Executive Officer (since April 2008) | President and Chief Operating Officer, United Technologies Corporation; President, Pratt & Whitney | 51 | |||
| Geraud Darnis | President, Carrier Corporation (since 2001) |
— | 49 | |||
| George David | Director (since 1992) and Chairman (since 1997) | Director, Chairman and Chief Executive Officer, United Technologies Corporation; Director, Chairman, President and Chief Executive Officer, United Technologies Corporation | 66 | |||
| James E. Geisler | Vice President, Corporate Strategy & Planning (since September 2008) | Vice President, Finance, United Technologies Corporation; Director, Financial Planning and Analysis, United Technologies Corporation | 42 | |||
| Charles D. Gill | Senior Vice President and General Counsel (since 2007) | Vice President and General Counsel, and Secretary, Carrier Corporation; Executive Assistant to Chairman and Chief Executive Officer, United Technologies Corporation | 44 | |||
| Gregory J. Hayes | Senior Vice President and Chief Financial Officer (since September 2008) | Vice President, Accounting and Finance, United Technologies Corporation; Vice President, Accounting and Control, United Technologies Corporation; Vice President, Controller, United Technologies Corporation | 48 | |||
| David P. Hess | President, Pratt & Whitney (since January 2009) | President, Hamilton Sundstrand Corporation; President, Hamilton Sundstrand Aerospace Power Systems | 53 | |||
| Didier Michaud-Daniel | President, Otis Elevator (since May 2008) | President, Otis United Kingdom and Central Europe Area, Otis Elevator | 51 | |||
18
Table of Contents
| Name |
Title |
Other Business Experience Since 1/1/2004 |
Age 2/11/09 | |||
| Jeffrey P. Pino | President, Sikorsky Aircraft (since 2006) | Senior Vice President, Corporate Strategy, Marketing & Commercial Programs, Sikorsky Aircraft | 54 | |||
| Thomas I. Rogan | Vice President, Treasurer (since 2001) | — | 56 | |||
| Margaret M. Smyth | Vice President, Controller (since 2007) | Vice President and Chief Accounting Officer, 3M Co.; Managing Partner, Deloitte & Touche | 45 | |||
All of the officers serve at the pleasure of the Board of Directors of United Technologies Corporation or the subsidiary designated.
Information concerning Section 16(a) compliance is incorporated herein by reference to the section of our Proxy Statement for the 2009 Annual Meeting of Shareowners titled “Section 16(a) Beneficial Ownership Reporting Compliance.” We have adopted a code of ethics that applies to all our directors, officers, employees and representatives. This code is publicly available on our website at http://www.investors.utc.com/utc/Static%20files/Governance/coe_english.pdf. Amendments to the code of ethics and any grant of a waiver from a provision of the code requiring disclosure under applicable SEC rules will be disclosed on our website. Our Corporate Governance Guidelines and the charters of our Board of Directors’ Audit Committee, Finance Committee, Committee on Nominations and Governance, Public Issues Review Committee and Committee on Compensation and Executive Development are available on our website at http://www.investors.utc.com/utc/Governance/Board_Committee_Charters.html. These materials may also be requested in print free of charge by writing to our Investor Relations Department at United Technologies Corporation, United Technologies Building, Investor Relations, Hartford, CT 06101.
| Item 11. | Executive Compensation |
The information required by Item 11 is incorporated herein by reference to the sections of our Proxy Statement for the 2009 Annual Meeting of Shareowners titled “Executive Compensation” and “Director Compensation.”
| Item 12. | Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters |
The information relating to security ownership of certain beneficial owners and management required by Item 12 is incorporated herein by reference to the sections of our Proxy Statement for the 2009 Annual Meeting titled “Security Ownership of Directors, Executive Officers and Certain Beneficial Owners.” The Equity Compensation Plan Information required by Item 12 is set forth in the table below.
EQUITY COMPENSATION PLAN INFORMATION
The following table provides information as of December 31, 2008 concerning common stock issuable under equity compensation plans.
| (a) Number of securities to be issued upon exercise of outstanding options, warrants and rights |
(b) Weighted-average exercise price of outstanding options, warrants and rights |
(c) | ||||||||
| Plan category |
Number of securities remaining available for future issuance under equity compensation plans (excluding securities reflected in column (a)) (1) |
|||||||||
| Equity compensation plans approved by security holders |
65,318,000 | (2) | $ | 48.72 | 43,300,000 | (3) | ||||
| Equity compensation plans not approved by security holders |
9,539,000 | (4) | $ | 39.40 | 0 | |||||
| Total |
74,857,000 | $ | 47.53 | (5) | 43,300,000 | |||||
19
Table of Contents
| (1) |
Consists of shares of UTC Common Stock or units equal in value to a share of UTC Common Stock (e.g., restricted stock, restricted stock units, performance share units) (Full Share Award) available for future issuance under the terms of the 2005 Long-Term Incentive Plan, as amended (2005 LTIP). Full Share Awards will result in a reduction in the number of shares of UTC Common Stock available for delivery under the 2005 LTIP in an amount equal to 3.1 times the number of shares to which the award corresponds. Stock options and stock appreciation rights do not constitute Full Share Awards and will result in a reduction in the number of shares of UTC Common Stock available for delivery under the 2005 LTIP on a one-for-one basis. |
| (2) |
Consists of options awarded under the 1989 Long Term Incentive Plan (1989 LTIP), the 2005 LTIP and the Non-Employee Director Stock Option Plan (Non-Employee Director Plan). Options issued under the 1989 LTIP include options that resulted from the conversion of awards granted under equity compensation plans of Sundstrand Corporation at the time it was merged into Hamilton Sundstrand. This amount includes 281,000 restricted shares and restricted share units and 2,991,000 performance share units at the target level. Up to an additional 2,991,000 could be issued if performance goals are achieved above target. |
| (3) |
Represents the maximum number of shares of common stock available to be awarded as of December 31, 2008. |
| (4) |
Consists of options awarded under the UTC Employee Stock Option Plan. This Plan authorized the award of non-qualified stock options to employees below the executive level considered to have the potential to contribute to the long-term success of UTC. These options consisted of rights to purchase a specified number of shares of UTC Common Stock at a fixed option price equal to the fair market value of UTC Common Stock on the date the stock option was granted. Options vested three years after the grant date and have a ten-year term. Effective April 14, 2005, all equity compensation awards are now provided under the shareowner-approved 2005 LTIP. |
| (5) |
Weighted-average calculation does not include restricted shares and performance share units because they have no exercise price. |
| Item 13. | Certain Relationships and Related Transactions, and Director Independence |
The information required by Item 13 is incorporated herein by reference to the sections of our Proxy Statement for the 2009 Annual Meeting titled “Transactions with Related Persons” and “General Information Concerning the Board of Directors.”
| Item 14. | Principal Accounting Fees and Services |
The information required by Item 14 is incorporated by reference to the section of our Proxy Statement for the 2009 Annual Meeting titled “Appointment of a Firm of Independent Registered Public Accountants to Serve as Independent Auditors for 2009,” including information provided with “Audit Fees,” “Audit Related Fees,” “Tax Fees” and “All Other Fees.”
| Item 15. | Exhibits and Financial Statement Schedules |
| (a) | Financial Statements, Financial Statement Schedules and Exhibits |
| (1) | Financial Statements (incorporated by reference from the 2008 Annual Report): |
| Page Number in Annual Report | ||
| Report of Independent Registered Public Accounting Firm |
24 | |
| Consolidated Statement of Operations for the three years ended December 31, 2008 |
25 | |
| Consolidated Balance Sheet—December 31, 2008 and 2007 |
26 | |
| Consolidated Statement of Cash Flows for the three years ended December 31, 2008 |
27 | |
| Notes to Consolidated Financial Statements |
29 | |
| Selected Quarterly Financial Data (Unaudited) |
51 | |
| (2) | Financial Statement Schedule for the three years ended December 31, 2008: |
| Page Number in Form 10-K | ||
| SCHEDULE I—Report of Independent Registered Public Accounting Firm on Financial Statement Schedule |
S-I | |
| S-II | ||
20
Table of Contents
All other schedules are omitted because they are not applicable or the required information is shown in the financial statements or the notes thereto.
| (3) | Exhibits: |
The following list of exhibits includes exhibits submitted with this Form 10-K as filed with the SEC and those incorporated by reference to other filings.
| Exhibit Number |
||
| 3(i) |
Restated Certificate of Incorporation, restated as of May 8, 2006, incorporated by reference to Exhibit 3(i) to UTC’s Annual Report on Form 10-K (Commission file number 1-812) for fiscal year ended December 31, 2006. | |
| 3(ii) |
Bylaws as amended and restated effective December 10, 2008, incorporated by reference to Exhibit 3(ii) to UTC’s Current Report on Form 8-K (Commission file number 1-812) filed with the SEC on December 12, 2008. | |
| 4.1 |
Amended and Restated Indenture, dated as of May 1, 2001, between UTC and The Bank of New York, as trustee (incorporated by reference to Exhibit 4(a) to UTC’s Registration Statement on Form S-3 (Commission file number 333-60276) filed with the SEC on May 4, 2001). UTC hereby agrees to furnish to the Commission upon request a copy of each other instrument defining the rights of holders of long-term debt of UTC and its consolidated subsidiaries and any unconsolidated subsidiaries. | |
| 10.1 |
United Technologies Corporation Annual Executive Incentive Compensation Plan, incorporated by reference to Exhibit 10.1 to UTC’s Annual Report on Form 10-K (Commission file number 1-812) for fiscal year ended December 31, 1995 as amended January 1, 2009.* | |
| 10.2 |
United Technologies Corporation Executive Estate Preservation Program, incorporated by reference to Exhibit 10(iv) to UTC’s Annual Report on Form 10-K (Commission file number 1-812) for fiscal year ended December 31, 1992. | |
| 10.3 |
United Technologies Corporation Pension Preservation Plan, as amended and restated, effective January 1, 2005.* | |
| 10.4 |
United Technologies Corporation Senior Executive Severance Plan, incorporated by reference to Exhibit 10(vi) to UTC’s Annual Report on Form 10-K (Commission file number 1-812) for fiscal year ended December 31, 1992, and Amendment thereto, effective December 10, 2003, incorporated by reference to Exhibit 10.4 of UTC’s Annual Report on Form 10-K (Commission file number 1-812) for fiscal year ended December 31, 2003 and Amendment thereto, effective June 11, 2008, incorporated by reference to Exhibit 10.4 of UTC’s Report on Form 10-Q (Commission file number 1-812) for the quarterly period ended June 30, 2008. | |
| 10.5 |
United Technologies Corporation Deferred Compensation Plan, as amended and restated, effective January 1, 2005.* | |
| 10.6 |
United Technologies Corporation Long Term Incentive Plan, as amended, incorporated by reference to Exhibit 10.11 to UTC’s Annual Report on Form 10-K (Commission file number 1-812) for fiscal year ended December 31, 1989, as amended by Amendment No. 1 filed as Exhibit 10.6 to UTC’s Annual Report on Form 10-K (Commission file number 1-812) for fiscal year ended December 31, 1995 and Amendment No. 2 filed as Exhibit 10.6 to UTC’s Annual Report on Form 10-K (Commission file number 1-812) for fiscal year ended December 31, 2003. | |
| 10.7 |
United Technologies Corporation Executive Leadership Program, incorporated by reference to Exhibit 10.7 to UTC’s Quarterly Report on Form 10-Q (Commission file number 1-812) for the quarterly period ended September 30, 2004, as amended. | |
| 10.8 |
United Technologies Corporation Directors’ Restricted Stock/Unit Program, incorporated by reference to Exhibit 10(xiii) to UTC’s Annual Report on Form 10-K (Commission file number 1-812) for fiscal year ended December 31, 1992. | |
| 10.9 |
United Technologies Corporation Board of Directors Deferred Stock Unit Plan, as amended and restated October 8, 2008, incorporated by reference to Exhibit 10.9 to UTC’s Report on Form 10-Q (Commission file number 1-812) for the quarterly period ended September 30, 2008. | |
21
Table of Contents
| 10.10 |
United Technologies Corporation Special Retention and Stock Appreciation Program, incorporated by reference to Exhibit 10(xvi) to UTC’s Report on Form 10-Q (Commission file number 1-812) for the quarterly period ended September 30, 1995. | |
| 10.11 |
United Technologies Corporation Nonemployee Director Stock Option Plan, incorporated by reference to Exhibit 10.12 to UTC’s Annual Report on Form 10-K (Commission file number 1-812) for fiscal year ended December 31, 1995, Amendment 1 thereto, incorporated by reference to Exhibit 10(iii)(A)(2) to UTC’s Report on Form 10-Q for the quarterly period ended June 30, 2000, Amendment 2 thereto, incorporated by reference to Exhibit 10(iii)(A)(1) to UTC’s Report on Form 10-Q for the quarterly period ended June 30, 2001, Amendment 3 thereto, incorporated by reference to Exhibit 10.17 to UTC’s Annual Report on Form 10-K for fiscal year ending December 31, 2001, Amendment 4 thereto, incorporated by reference to Exhibit 10.12 to UTC’s Annual Report on Form 10-K (Commission file number 1-812) for fiscal year ending December 31, 2002 and Amendment 5 thereto, incorporated by reference to Exhibit 10.12 to UTC’s Annual Report on Form 10-K (Commission file number 1-812) for fiscal year ended December 31, 2003. | |
| 10.12 |
United Technologies Corporation Employee Stock Option Plan, incorporated by reference to Exhibit 10.13 to UTC’s Annual Report on Form 10-K (Commission file number 1-812) for fiscal year ended December 31, 2002, and Amendment 1 thereto, incorporated by reference to Exhibit 10.13 to UTC’s Annual Report on Form 10-K (Commission file number 1-812) for fiscal year ended December 31, 2003. | |
| 10.13 |
United Technologies Corporation Employee Scholar Program, as amended and restated on June 27, 2003, incorporated by reference to Exhibit 10.14 of UTC’s Annual Report on Form 10-K (Commission file number 1-812) for fiscal year ended December 31, 2003. | |
| 10.14 |
Nonqualified Stock Option and Dividend Equivalent Award Schedule of Terms relating to the United Technologies Corporation Long Term Incentive Plan (previously filed as Exhibit 10.11 to UTC’s Annual Report on Form 10-K (Commission file number 1-812) for fiscal year ended December 31, 1989, as amended by Amendment No. 1 filed as Exhibit 10.6 to UTC’s Annual Report on Form 10-K (Commission file number 1-812 ) for fiscal year ended December 31, 1995 and Amendment No. 2 filed as Exhibit 10.6 to UTC’s Annual Report on Form 10-K (Commission file number 1-812) for fiscal year ended December 31, 2003), incorporated by reference to Exhibit 10.15 to UTC’s Annual Report on form 10-K (Commission file number 1-812) for fiscal year ended December 31, 2004. | |
| 10.15 |
Restricted Stock Award Schedule of Terms and Form of Award relating to the United Technologies Corporation Long Term Incentive Plan (previously filed as Exhibit 10.11 to the Corporation’s Annual Report on Form 10-K (Commission file number 1-812) for fiscal year ended December 31, 1989, as amended by Amendment No. 1 filed as Exhibit 10.6 to the Corporation’s Annual Report on Form 10-K (Commission file number 1-812) for fiscal year ended December 31, 1995 and Amendment No. 2 filed as Exhibit 10.6 to the Corporation’s Annual Report on Form 10-K (Commission file number 1-812) for fiscal year ended December 31, 2003), incorporated by reference to Exhibit 10.1 to UTC’s Quarterly Report on Form 10-Q (Commission file number 1-812) for the quarterly period ended September 30, 2004. | |
| 10.16 |
Nonqualified Stock Option Award Schedule of Terms and Form of Award relating to the United Technologies Corporation Long-Term Incentive Plan (previously filed as Exhibit 10.11 to the Corporation’s Annual Report on Form 10-K (Commission file number 1-812) for fiscal year ended December 31, 1989, as amended by Amendment No. 1 filed as Exhibit 10.6 to the Corporation’s Annual Report on Form 10-K (Commission file number 1-812) for fiscal year ended December 31, 1995 and Amendment No. 2 filed as Exhibit 10.6 to the Corporation’s Annual Report on Form 10-K (Commission file number 1-812) for fiscal year ended December 31, 2003), incorporated by reference to Exhibit 10.2 to UTC’s Quarterly Report on Form 10-Q (Commission file number 1-812) for the quarterly period ended September 30, 2004. | |
| 10.17 |
Restricted Stock Unit Award relating to the United Technologies Corporation Directors’ Restricted Stock/Unit Program (previously filed as Exhibit 10(xiii) to the Corporation’s Annual Report on Form 10-K (Commission file number 1-812) for fiscal year ended December 31, 1992), incorporated by reference to Exhibit 10.3 to UTC’s Quarterly Report on Form 10-Q (Commission file number 1-812) for the quarterly period ended September 30, 2004. | |
22
Table of Contents
| 10.18 | Form of Award relating to the United Technologies Corporation Nonemployee Director Stock Option Plan (previously filed as Exhibit 10.17 to the Corporation’s Annual Report on Form 10-K (Commission file number 1-812) for fiscal year ended December 31, 1995, as amended by Amendment 1 thereto (previously filed as Exhibit 10(iii)(A)(2) to the Corporation’s Report on Form 10-Q for quarterly period ended June 30, 2000), Amendment 2 thereto (previously filed as Exhibit 10(iii)(A)(1) to the Corporation’s Report on Form 10-Q (Commission file number 1-812) for quarterly period ended June 30, 2001), Amendment 3 thereto (previously filed as Exhibit 10.17 to the Corporation’s Annual Report on Form 10-K (Commission file number 1-812) for fiscal year ending December 31, 2001), Amendment 4 thereto (previously filed as Exhibit 10.12 to the Corporation’s Annual Report on Form 10-K for fiscal year ending December 31, 2002) and Amendment 5 thereto (previously filed as Exhibit 10.12 to the Corporation’s Annual Report on Form 10-K (Commission file number 1-812) for fiscal year ending December 31, 2003)), incorporated by reference to Exhibit 10.4 to UTC’s Quarterly Report on Form 10-Q (Commission file number 1-812) for the quarterly period ended September 30, 2004. | |
| 10.19 | Recognition Stock Option Program Prospectus and Statement of Award relating to the United Technologies Corporation Employee Stock Option Plan (previously filed as Exhibit 10.13 to the Corporation’s Annual Report on Form 10-K (Commission file number 1-812) for fiscal year ended December 31, 2002, as amended by Amendment 1, filed as Exhibit 10.13 to the Corporation’s Annual Report on Form 10-K (Commission file number 1-812) for fiscal year ended December 31, 2003), incorporated by reference to Exhibit 10.5 to UTC’s Quarterly Report on Form 10-Q (Commission file number 1-812) for the quarterly period ended September 30, 2004. | |
| 10.20 | Continuous Improvement Incentive Program Non-qualified Stock Option and Dividend Equivalent Award Schedule of Terms and Forms of Award relating to the United Technologies Corporation Long Term Incentive Plan (previously filed as Exhibit 10.11 to the Corporation’s Annual Report on Form 10-K (Commission file number 1-812) for fiscal year ended December 31, 1989, as amended by Amendment No. 1 filed as Exhibit 10.6 to the Corporation’s Annual Report on Form 10-K (Commission file number 1-812) for fiscal year ended December 31, 1995 and Amendment No. 2 filed as Exhibit 10.6 to the Corporation’s Annual Report on Form 10-K (Commission file number 1-812) for fiscal year ended December 31, 2003), incorporated by reference to Exhibit 10.6 to UTC’s Quarterly Report on Form 10-Q (Commission file number 1-812) for the quarterly period ended September 30, 2004. | |
| 10.21 | Retainer Payment Election Form relating to the United Technologies Corporation Board of Directors Deferred Stock Unit Plan (previously filed as Exhibit 10.14 to the Corporation’s Annual Report on Form 10-K (Commission file number 1-812) for fiscal year ended 1995, as amended by Amendment No. 1 thereto (incorporated by reference to Exhibit 10(iii)(A)(1) to the Corporation’s Report on Form 10-Q (Commission file number 1-812) for quarterly period ended June 30, 2000)), incorporated by reference to Exhibit 10.8 to UTC’s Quarterly Report on Form 10-Q (Commission file number 1-812) for the quarterly period ended September 30, 2004. | |
| 10.22 | United Technologies Corporation 2005 Long-Term Incentive Plan, as amended and restated effective April 9, 2008, incorporated by reference to Exhibit 10.1 to UTC’s Current Report on Form 8-K (Commission file number 1-812) filed with the SEC on April 11, 2008. | |
| 10.23 | Schedule of Terms for restricted stock awards relating to the United Technologies Corporation 2005 Long-Term Incentive Plan (previously filed as Exhibit 10.1 to UTC’s Current Report on Form 8-K (Commission file number 1-812) filed with the SEC on April 11, 2008), incorporated by reference to Exhibit 10.1 to UTC’s Current Report on Form 8-K (Commission file number 1-812) filed with the SEC on September 20, 2005. | |
| 10.24 | Form of Award Agreement for restricted stock awards relating to the United Technologies Corporation 2005 Long-Term Incentive Plan (previously filed as Exhibit 10.1 to UTC’s Current Report on Form 8-K (Commission file number 1-812) filed with the SEC on April 11, 2008), incorporated by reference to Exhibit 10.2 to UTC’s Current Report on Form 8-K (Commission file number 1-812) filed with the SEC on September 20, 2005. | |
| 10.25 | Schedule of Terms for non-qualified stock option awards relating to the United Technologies Corporation 2005 Long-Term Incentive Plan (previously filed as Exhibit 10.1 to UTC’s Current Report on Form 8-K (Commission file number 1-812) filed with the SEC on April 11, 2008), incorporated by reference to Exhibit 10.3 to UTC’s Current Report on Form 8-K (Commission file number 1-812) filed with the SEC on September 20, 2005. | |
| 10.26 | Form of Award Agreement for non-qualified stock option awards relating to the United Technologies Corporation 2005 Long-Term Incentive Plan (previously filed as Exhibit 10.1 to UTC’s Current Report on Form 8-K (Commission file number 1-812) filed with the SEC on April 11, 2008), incorporated by reference to Exhibit 10.4 to UTC’s Current Report on Form 8-K (Commission file number 1-812) filed with the SEC on September 20, 2005. | |
23
Table of Contents
| 10.27 | Form of Award Agreement for performance share unit and stock appreciation rights awards relating to the United Technologies Corporation 2005 Long-Term Incentive Plan (previously filed as Exhibit 10.1 to UTC’s Current Report on Form 8-K (Commission file number 1-812) filed with the SEC on April 11, 2008), incorporated by reference to Exhibit 10.1 to UTC’s Current Report on Form 8-K (Commission file number 1-812) filed with the SEC on December 20, 2005. | |
| 10.28 | Schedule of Terms for performance share unit awards relating to the United Technologies Corporation 2005 Long-Term Incentive Plan (previously filed as Exhibit 10.1 to UTC’s Current Report on Form 8-K (Commission file number 1-812) filed with the SEC on April 11, 2008).* | |
| 10.29 | Schedule of Terms for stock appreciation rights awards relating to the United Technologies Corporation 2005 Long-Term Incentive Plan (previously filed as Exhibit 10.1 to UTC’s Current Report on Form 8-K (Commission file number 1-812) filed with the SEC on April 11, 2008).* | |
| 10.30 | United Technologies Corporation Executive Leadership Group Agreement, as amended, incorporated by reference to Exhibit 10.1 to UTC’s Current Report on Form 8-K (Commission file number 1-812) filed with the SEC on March 24, 2006. | |
| 10.31 | Form of Agreement for Executive Leadership Group Restricted Share Unit Retention Awards, incorporated by reference to Exhibit 10.2 to UTC’s Current Report on Form 8-K (Commission file number 1-812) filed with the SEC on March 24, 2006. | |
| 10.32 | Schedule of Terms for Executive Leadership Restricted Share Unit Awards, incorporated by reference to Exhibit 10.3 to UTC’s Current Report on Form 8-K (Commission file number 1-812) filed with the SEC on March 24, 2006. | |
| 10.33 | United Technologies Corporation Board of Directors 2006 Retainer Payment Election Form, incorporated by reference to Exhibit 10.1 to UTC’s Current Report on Form 8-K (Commission file number 1-812) filed with the SEC on April 18, 2006. | |
| 10.34 | Form of Award Agreement for Performance Share Units and Stock Appreciation Rights Awards relating to the 2005 Long-Term Incentive Plan (previously filed as Exhibit 10.1 to UTC’s Current Report on Form 8-K (Commission file number 1-812) filed with the SEC on April 11, 2008), incorporated by reference to Exhibit 10.1 to UTC’s Current Report on Form 8-K filed with the SEC on October 16, 2006. | |
| 10.35 | United Technologies Corporation International Deferred Compensation Replacement Plan, effective January 1, 2005.* | |
| 10.36 | United Technologies Corporation LTIP Performance Share Unit Deferral Plan, relating to the 2005 Long-Term Incentive Plan (previously filed as Exhibit 10.1 to UTC’s Current Report on Form 8-K (Commission file number 1-812) filed with the SEC on April 11, 2008).* | |
| 11 | Statement Re: Computations of Per Share Earnings.* | |
| 12 | Statement Re: Computation of Ratios.* | |
| 13 | Annual Report for the year ended December 31, 2008 (except for the information therein expressly incorporated by reference in this Form 10-K, the Annual Report is provided solely for the information of the SEC and is not to be deemed “filed” as part of this Form 10-K).* | |
| 14 | Code of Ethics. The UTC Code of Ethics may be accessed via UTC’s website at http://www.investors.utc.com/utc/Static%20files/Governance/coe_english.pdf. | |
| 21 | Subsidiaries of the Registrant.* | |
24
Table of Contents
| 23 | Consent of PricewaterhouseCoopers LLP.* | |
| 24 | Powers of Attorney of John V. Faraci, Jean-Pierre Garnier, Jamie S. Gorelick, Edward A. Kangas, Charles R. Lee, Richard D. McCormick, Harold W. McGraw III, Richard B. Myers, H. Patrick Swygert, André Villeneuve and Christine Todd Whitman.* | |
| 31 | Rule 13a-14(a)/15d-14(a) Certifications.* | |
| 32 | Section 1350 Certifications.* | |
| 100.INS | XBRL Instance Document.* (File name: utx-20081231.xml) | |
| 100.SCH | XBRL Taxonomy Extension Schema Document.* (File name: utx-20081231.xsd) | |
| 100.PRE | XBRL Taxonomy Presentation Linkbase Document.* (File name: utx-20081231_pre.xml) | |
| 100.LAB | XBRL Taxonomy Label Linkbase Document.* (File name: utx-20081231_lab.xml) | |
| 100.CAL | XBRL Taxonomy Calculation Linkbase Document.* (File name: utx-20081231_cal.xml) | |
| 100.DEF | XBRL Taxonomy Definition Linkbase Document.* File name: utx-20081231_def.xml) | |
Notes to Exhibits List:
| * | Submitted electronically herewith. |
Exhibits 10.1 through 10.36 are contracts, arrangements or compensatory plans filed as exhibits pursuant to Item 15(b) of the requirements for Form 10-K reports.
Attached as Exhibit 100 to this report are the following formatted in XBRL (Extensible Business Reporting Language) for the year ended December 31, 2008: (i) Consolidated Statement of Operations, (ii) Consolidated Balance Sheet, (iii) Consolidated Statement of Cash Flows, (iv) Consolidated Statement of Changes in Shareowners’ Equity, and (v) Notes to Consolidated Financial Statements tagged in Block Text format. Users of this data are advised pursuant to Rule 401 of Regulation S-T that the information contained in the XBRL documents is unaudited and these are not the official publicly filed financial statements of United Technologies Corporation. The purpose of submitting these XBRL formatted documents is to test the related format and technology and, as a result, investors should continue to rely on the official filed version of the furnished documents and not rely on this information in making investment decisions.
In accordance with Rule 402 of Regulation S-T, the XBRL related information in Exhibit 100 to this Annual Report on Form 10-K shall not be deemed to be “filed” for purposes of Section 18 of the Exchange Act, or otherwise subject to the liability of that section, and shall not be incorporated by reference into any registration statement or other document filed under the Securities Act or the Exchange Act, except as shall be expressly set forth by specific reference in such filing.
25
Table of Contents
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
| UNITED TECHNOLOGIES CORPORATION | ||
| (Registrant) | ||
| By: | /s/ GREGORY J. HAYES | |
| Gregory J. Hayes | ||
| Senior Vice President and Chief Financial Officer | ||
| By: | /s/ MARGARET M. SMYTH | |
| Margaret M. Smyth | ||
| Vice President, Controller | ||
Date: February 11, 2009
Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the Registrant and in the capacities and on the dates indicated.
| Signature |
Title |
Date | ||||
| /s/ GEORGE DAVID |
Director, Chairman | February 11, 2009 | ||||
| (George David) |
||||||
| /s/ LOUIS R. CHÊNEVERT |
Director, President and Chief Executive Officer | February 11, 2009 | ||||
| (Louis R. Chênevert) |
||||||
| /s/ GREGORY J. HAYES |
Senior Vice President and Chief Financial Officer | February 11, 2009 | ||||
| (Gregory J. Hayes) |
||||||
| /s/ MARGARET M. SMYTH |
Vice President, Controller | February 11, 2009 | ||||
| (Margaret M. Smyth) |
||||||
| /s/ JOHN V. FARACI* |
Director ) | |||||
| (John V. Faraci) |
||||||
| /s/ JEAN-PIERRE GARNIER* |
Director ) | |||||
| (Jean-Pierre Garnier) |
||||||
| /s/ JAMIE S. GORELICK * |
Director ) | |||||
| (Jamie S. Gorelick) |
||||||
| /s/ EDWARD A. KANGAS * |
Director ) | |||||
| (Edward A. Kangas ) |
||||||
| /s/ CHARLES R. LEE* |
Director ) | |||||
| (Charles R. Lee) |
||||||
| /s/ RICHARD D. MCCORMICK* |
Director ) | |||||
| (Richard D. McCormick) |
||||||
26
Table of Contents
| /s/ HAROLD W. MCGRAW III* |
Director ) | |||||
| (Harold W. McGraw III) |
||||||
| /s/ RICHARD B. MYERS* |
Director ) | |||||
| (Richard B. Myers) |
||||||
| /s/ H. PATRICK SWYGERT* |
Director ) | |||||
| (H. Patrick Swygert) |
||||||
| /s/ ANDRÉ VILLENEUVE* |
Director ) | |||||
| (André Villeneuve) |
||||||
| /s/ CHRISTINE TODD WHITMAN* |
Director ) | |||||
| (Christine Todd Whitman) |
||||||
| *By: | /s/ Charles D. Gill |
|||||
| Charles D. Gill | ||||||
| Senior Vice President and General Counsel, as Attorney-in-Fact |
||||||
Date: February 11, 2009
27
Table of Contents
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM ON
FINANCIAL STATEMENT SCHEDULE
To the Board of Directors
of United Technologies Corporation:
Our audits of the consolidated financial statements and of the effectiveness of internal control over financial reporting referred to in our report dated February 11, 2009 appearing in the 2008 Annual Report to Shareowners of United Technologies Corporation (which report and consolidated financial statements are incorporated by reference in this Annual Report on Form 10-K) also included an audit of the financial statement schedule listed in Item 15(a)(2) of this Form 10-K. In our opinion, this financial statement schedule presents fairly, in all material respects, the information set forth therein when read in conjunction with the related consolidated financial statements.
| /s/ PricewaterhouseCoopers LLP |
| Hartford, Connecticut |
| February 11, 2009 |
S-I
Table of Contents
UNITED TECHNOLOGIES CORPORATION AND SUBSIDIARIES
Valuation and Qualifying Accounts
Three Years Ended December 31, 2008
(Millions of Dollars)
Allowances for Doubtful Accounts and Other Customer Financing Activity:
| Balance December 31, 2005 |
$ | 426 | ||
| Provision charged to income |
71 | |||
| Doubtful accounts written off (net) |
(89 | ) | ||
| Other adjustments |
16 | |||
| Balance December 31, 2006 |
424 | |||
| Provision charged to income |
41 | |||
| Doubtful accounts written off (net) |
(101 | ) | ||
| Other adjustments |
4 | |||
| Balance December 31, 2007 |
368 | |||
| Provision charged to income |
159 | |||
| Doubtful accounts written off (net) |
(129 | ) | ||
| Other adjustments |
(12 | ) | ||
| Balance December 31, 2008 |
$ | 386 | ||
| Future Income Tax Benefits—Valuation allowance: |
||||
| Balance December 31, 2005 |
$ | 496 | ||
| Additions charged to income tax expense |
99 | |||
| Additions charged to goodwill, due to acquisitions |
24 | |||
| Reductions credited to income tax expense |
(92 | ) | ||
| Other adjustments |
15 | |||
| Balance December 31, 2006 |
542 | |||
| Additions charged to income tax expense |
131 | |||
| Additions charged to goodwill, due to acquisitions |
2 | |||
| Reductions credited to income tax expense |
(36 | ) | ||
| Other adjustments |
(94 | ) | ||
| Balance December 31, 2007 |
545 | |||
| Additions charged to income tax expense |
146 | |||
| Reductions charged to goodwill, due to acquisitions |
(152 | ) | ||
| Reductions credited to income tax expense |
(11 | ) | ||
| Other adjustments |
170 | |||
| Balance December 31, 2008 |
$ | 698 | ||
S-II
Exhibit 10.1
UNITED TECHNOLOGIES CORPORATION
ANNUAL EXECUTIVE INCENTIVE COMPENSATION PLAN
Amendment 2
The United Technologies Corporation Annual Executive Incentive Compensation Plan is hereby amended, effective January 1, 2009, by adding Article VII as follows:
VII. RECOUPMENT OF PAYMENTS
A. MANDATORY RECOUPMENT OF AWARD PAYMENTS. Any Employee or former Employee who received an award under this Plan shall be obligated to repay to the Corporation all or a portion of the amount received in connection with a fiscal year in which:
(i) there was a restatement of earnings for the Corporation or a business unit; or
(ii) there was a recalculation of a financial or other performance metric related to the determination of an annual incentive compensation award; and
(iii) the Employee was involved in the formulation of the incorrect statement of earnings or calculation of a performance metric; and
(iv) the inaccuracies were attributable, in whole or in part, to the Employee’s negligence or intentional misconduct; and
(v) the restated earnings or corrected performance measurement would have (or likely would have) resulted in a smaller award than the amount actually received by the Employee.
B. AMOUNT SUBJECT TO RECOUPMENT. The minimum amount subject to repayment by an award recipient under the circumstances described in Section A will equal the difference between the actual amount of an award and the amount that would have been paid, as determined by the Committee in its sole discretion, had the correct earnings or other performance measurement been utilized in the determination of the amount of the award. The Committee may require repayment of an amount greater than the calculated adjustment, based on its review of the facts involved.
C. DISCRETIONARY RECOUPMENT OF AWARD PAYMENTS. The Committee reserves the right to require repayment of awards from Employees who were not involved in a financial restatement or erroneous performance measurement
computation if the Committee determines that, as a result of the disparity between actual performance and inaccurate performance data used in determining awards, it would not be appropriate to maintain awards at the levels paid prior to the adjustment or re-calculation. Discretionary adjustments under this paragraph shall not be permitted after the occurrence of a “Change in Control,” as defined in the Corporation’s Long Term Incentive Plan.
D. ADMINISTRATION. The Committee shall be responsible for making determinations under this Article VII. Its decisions shall be binding and conclusive on all Award recipients. If an Employee refuses to repay all or a portion of an award, as requested by the Committee, such Employee shall be responsible for attorney’s fees and other costs incurred by the Corporation to secure the requested repayment amount.
Exhibit 10.3
UNITED TECHNOLOGIES CORPORATION
PENSION PRESERVATION PLAN
AS AMENDED AND RESTATED EFFECTIVE JANUARY 1, 2005
WHEREAS, United Technologies Corporation (the “Corporation”) established the United Technologies Corporation Pension Preservation Plan (the “Preservation Plan”) effective January 1, 1978 for the benefit of certain employees; and
WHEREAS, the Corporation established the United Technologies Corporation Pension Replacement Plan (the “Replacement Plan”) effective April 1, 1985 for the benefit of certain employees; and
WHEREAS, the Corporation reserved the right to amend the Preservation Plan through the action of its Pension Administration Committee (the “PAC”); and
WHEREAS, the Corporation reserved the right to terminate and amend the Replacement Plan through the action of the PAC; and
WHEREAS, at its meeting of December 8, 2006, the PAC approved the merger of the Replacement Plan into the Preservation Plan, effective December 31, 2006; and
WHEREAS, the merger is intended to simplify administration and communication of the programs operated under the respective Plans, which have effectively been, for all practical purposes, operated as a single program;
WHEREAS, Section 409A of the Internal Revenue Code requires the amendment of both the Replacement Plan and the Preservation Plan;
Page 1
WHEREAS, From January 1, 2005 through December 31, 2008, the Replacement Plan and the Preservation Plan have been operated in good faith compliance with Section 409A in accordance with guidance provided by the Internal Revenue Service;
NOW, THEREFORE, effective December 31, 2006, the Replacement Plan is hereby merged into the Preservation Plan, and the Preservation Plan is amended and restated; and
NOW, THEREFORE, effective January 1, 2005, the merged Preservation Plan is hereby amended and restated to reflect the requirements of Section 409A of the Internal Revenue Code as follows:
1. INTRODUCTION & PURPOSE
The United Technologies Corporation Pension Preservation Plan (the “Preservation Plan”) is maintained as an unfunded plan solely for the purpose of providing retirement benefits in excess of the retirement and survivor benefits that may be paid from tax-qualified retirement plans due to (i) benefit limitations imposed by Section 415 of the Internal Revenue Code of 1986, as amended from time to time (the “Code”) and (ii) the limitation imposed by Section 401(a)(17) of the Code on compensation that may be taken into account in computing retirement benefits under tax-qualified retirement plans (referred to collectively as the “Limits”). The Preservation Plan restores the amount of the retirement benefit or survivor benefit that may not be paid from the United Technologies Corporation Employee Retirement Plan (or any other tax-qualified defined benefit retirement plan sponsored by the Corporation) (the “Qualified Retirement Plan”) as a result of the Limits so that the total actuarial present value of the Qualified Retirement Plan and Pension Preservation Plan benefits equals the actuarial present value of the retirement benefit or survivor benefit that would be paid from the Qualified Retirement Plan if such Plan were administered without regard to the Limits. Effective with the merger of the Replacement Plan into this Plan, the amount of any reduction of Qualified Plan Retirement benefits resulting from the deferral of compensation that would otherwise be recognized under the Qualified Retirement Plans shall be provided under this Plan. The Preservation Plan shall be administered and construed to effectuate the foregoing intent.
Page 2
2. EFFECTIVE DATE
The Preservation Plan became effective on January 1, 1978. Except to the extent otherwise specifically provided herein, the Preservation Plan is hereby amended and restated, effective January 1, 2005, to reflect the requirements of Section 409A of the Internal Revenue Code. The Preservation Plan, as amended and restated, applies to amounts that were earned or vested after December 31, 2004 under the Preservation and Replacement Plans. Amounts that were earned and vested (within the meaning of Section 409A) under either the Preservation Plan or the Replacement Plan before January 1, 2005, and any subsequent increases in these amounts that are treated as grandfathered benefits under Section 409A, are subject to and shall continue to be governed by the terms of the Prior Plans as set forth in Appendix A and Appendix B as applicable. The Preservation Plan is further amended and restated effective December 31, 2006 to effectuate the merger of the Replacement Plan into the Preservation Plan effective December 31, 2006.
From January 1, 2005 through December 31, 2008, the Preservation Plan has been operated in good faith compliance with Section 409A in accordance with guidance provided by the Internal Revenue Service and provided for the following during this good faith compliance period:
| (a) | Continued commencement of benefits under this Plan and the Qualified Retirement Plan; |
| (b) | Allowance of new payment elections by participants to comply with 409A requirements; and |
| (c) | Prohibited acceleration of any payments that would otherwise have been made in a later year and prohibited deferral to a later year of a payment that would otherwise have been made in the current year. |
Page 3
3. DEFINITIONS
Any capitalized terms used herein that are not defined in this Section 3 shall have the meanings given to them by the United Technologies Corporation Employee Retirement Plan unless the context clearly indicates otherwise.
Beneficiary means the person, persons or entity designated in writing by a Participant to receive the value of his or her Current Plan Benefit in the event of the Participant’s death, , in accordance with the terms of this Plan. If a Participant fails to designate a Beneficiary under this Plan, the Beneficiary or Contingent Annuitant shall be determined under the Qualified Retirement Plan. If the Beneficiary (and any contingent Beneficiary) does not survive the Participant or if no Beneficiary is designated under the Qualified Retirement Plan, the value of the Participant’s Plan Benefit will be payable to the estate of the Participant, in accordance with the terms of this Plan.
Compensation Reduction means a reduction in compensation otherwise recognized under the Qualified Retirement Plan (without regard to the Limits) by reason of a Participant’s participation in the United Technologies Corporation Deferred Compensation Plan.
Code means the Internal Revenue Code of 1986, as amended from time to time, and any successor thereto. Reference to any section of the Internal Revenue Code shall include any final regulations or other published guidance interpreting that section.
Corporation means United Technologies Corporation.
Current Plan Benefit means amounts credited on or after January 1, 2005 under either the Preservation or Replacement Plans.
Page 4
Disability means permanent and total disability as determined under the Corporation’s long-term disability plan applicable to the Participant, or if there is no such plan applicable to the Participant, “Disability” means a determination of total disability by the Social Security Administration; provided that, in either case, the Participant’s condition also qualifies as a “disability” for purposes of Section 409A(a)(2)(C) of the Code.
Election Form means the form provided to Participants electronically or in paper form for the purpose of electing the form of payment for a Current Plan Benefit.
Prior Plans means the United Technologies Corporation Pension Preservation Plan, as in effect on December 31, 2004, as set forth in Appendix A and the United Technologies Corporation Pension Replacement Plan, as in effect on December 31, 2004, as set forth in Appendix B.
Prior Preservation Plan means the United Technologies Corporation Pension Preservation Plan, as in effect on December 31, 2004, as set forth in Appendix A. All amounts earned and vested under the Prior Preservation Plan as of December 31, 2004, and any subsequent increases in these amounts that are permitted to be treated as grandfathered benefits under Section 409A, shall continue to be subject to the terms and conditions of the Prior Preservation Plan and shall not be affected by this amendment and restatement.
Prior Replacement Plan means the United Technologies Corporation Pension Replacement Plan, as in effect on December 31, 2004, as set forth in Appendix B. All amounts earned and vested under the Prior Replacement Plan as of December 31, 2004, and any subsequent increases in these amounts that are permitted to be treated as grandfathered benefits under Section 409A, shall continue to be subject to the terms and conditions of the Prior Replacement Plan and shall not be affected by this amendment and restatement.
Prior Plan Benefit means the aggregate value of the Prior Preservation Plan Benefit and Prior Replacement Plan Benefit as identified in Section 6, which are valued and administered separately in accordance with the terms and procedures in effect under the Prior Plans.
Page 5
Qualified Retirement Plan means the United Technologies Corporation Employee Retirement Plan (or any other tax-qualified defined benefit retirement plan sponsored by the Corporation or a UTC Company).
Separation from Service means a Participant’s Termination of Employment with all UTC Companies, other than by reason of death or Disability, that qualifies as a “separation from service” for purposes of Section 409A of the Code. A Separation from Service will be deemed to occur where the Participant and the UTC Company that employs the Participant reasonably anticipate that the bona fide level of services the Participant will perform (whether as an employee or as an independent contractor) will be permanently reduced to a level that is less than thirty-seven and a half percent (37.5%) of the average level of bona fide services the Participant performed during the immediately preceding 36 months (or the entire period the Participant has provided services if the Participant has been providing services to the UTC Companies for less than 36 months.) A Participant shall not be considered to have had a Separation from Service as a result of a transfer from one UTC Company to another UTC Company.
Specified Employee means each of the 50 highest-paid executives of the Corporation and its Subsidiaries effective annually as of March 31st, based on annual salary and incentive compensation paid in the prior year. The term includes both U.S. and non-U.S. employees.
UTC Company means United Technologies Corporation or any entity controlled by or under common control with United Technologies Corporation within the meaning of Section 414(b) or (c) of the Code (but substituting “at least 20 percent” for “at least 80 percent” as the control threshold used in applying Sections 414(b) and (c)).
4. ELIGIBILITY
Each employee of a UTC Company who is a Participant in the Qualified Retirement Plan shall be eligible to participate in the Preservation Plan if and to the extent such employee’s compensation increases such that the Participant’s Accrued Benefit under the Qualified
Page 6
Retirement Plan is limited by (i) provisions of the Qualified Retirement Plan that are designed solely to comply with the Limits; or (ii) such employee experiences a Compensation Reduction. In no event shall any person who is not entitled to benefits under the Qualified Retirement Plan be eligible for retirement benefits or survivor benefits under this Preservation Plan. An employee of the UTC Companies who is eligible for retirement benefits under the Preservation Plan and has completed three years of “continuous service” (as defined in the UTC Employee Retirement Plan as in effect on January 1, 2008) shall be referred to herein as a “Participant.”
5. DETERMINATION OF PRESERVATION PLAN BENEFIT
The amount of the retirement benefit or survivor benefit payable from the Preservation Plan to or in respect of a Participant shall equal the excess, if any, of (a) over (b), and for purposes of this calculation, it shall be assumed that Qualified Retirement Plan Benefit and Preservation Plan Benefit commence at the same time, where
(a) equals the retirement benefit or survivor benefit that would be paid to such Participant (or on his or her behalf to his Contingent Annuitant or Beneficiary) under the Qualified Retirement Plan if the provisions of the Qualified Retirement Plan were administered without regard to the Limits and Compensation Reduction; and
(b) equals the retirement benefit or survivor benefit payable to such Participant (or on his or her behalf to his or her Contingent Annuitant or Beneficiary) under the Qualified Retirement Plan.
6. PLAN BENEFITS
(a) Prior Plan Benefit. Benefits accrued under the Prior Plan are not intended to be subject to Section 409A of the Code. No amendment to Appendix A or Appendix B that would constitute a “material modification” for purposes of Section 409A shall be effective unless the amending instrument states that it is intended to materially modify Appendix A and/or Appendix B and to cause the Prior Plan(s) to become subject to Section 409A. Although the Prior Plan
Page 7
Benefit is not intended to be subject to Section 409A, neither the UTC Companies nor any director, officer, or other representative of a UTC Company shall be liable for any adverse tax consequence suffered by a Participant or Beneficiary if a Prior Plan Benefit becomes subject to Section 409A.
(i) Prior Preservation Plan Benefit
Amounts that were credited before January 1, 2005, and any subsequent increases in these amounts that are permitted to be treated as grandfathered benefits under Section 409A of the Code, shall be maintained and accounted for separately and shall remain subject to the terms and conditions of the Prior Plan, as set forth in Appendix A.
(ii) Prior Replacement Plan Benefit
Amounts that were credited before January 1, 2005, and any subsequent increases in these amounts that are permitted to be treated as grandfathered benefits under Section 409A of the Code, shall be maintained and accounted for separately and shall remain subject to the terms and conditions of the Prior Plan, as set forth in Appendix B.
(b) Current Plan Benefit. Current Plan Benefit shall include amounts credited to Participants under either the Preservation or Replacement Plans on or after January 1, 2005.
7. FORM OF PRESERVATION PLAN BENEFIT
(a) The Committee shall determine, as of the earlier of the Participant’s Separation from Service or the Participant’s date of death, that portion of the Participant’s total retirement benefit or survivor benefit that is to be paid under the Preservation Plan, using the same formula that is used under the UTC Employee Retirement Plan to calculate such Participant’s benefit. The Committee will apply either the Final Average Earnings (FAE) formula, Cash Balance (CB) formula, or both as applicable to each Participant under the Qualified Retirement Plan. The Preservation Plan retirement benefit or survivor benefit shall be paid to the Participant, or on his
Page 8
or her behalf to any Contingent Annuitant or Beneficiary (as designated under the Qualified Retirement Plan), as a monthly annuity, unless a timely election is made in accordance with Subparagraph (c) of this Section 7.
(b) A Participant may elect separate payment methods for Prior and Current Plan Benefits. Prior Plan Benefit elections are administered separately in accordance with the terms and procedures in effect under the Prior Plans, as set forth in Appendices A and B.
(c) Unless a Participant elects a form of the benefit payment for Current Plan Benefit, benefits earned under the Preservation Plan will be paid as a single life annuity or actuarially equivalent life annuity. A Participant may elect to receive a single lump-sum payment or a series of 2 to 10 annual installment payments. A payment election under the Plan shall be made on an electronic or written Election Form, completed and submitted to the UTC Pension Service Center no later than December 31st of the calendar year prior to the year in which the period of service commences on which the benefit is based. A change in actuarially equivalent annuities shall not be deemed to be a change in payment election for purposes of this Plan. Except as provided below in Subsection (d), a Participant’s payment election shall become irrevocable on the election deadline date.
(d) Change in Payment Election. A Participant may make an election to change the form of payment that the Participant elected under Section 7(c), subject to the following requirements:
(i) The new election must be made at least twelve months prior to the date payments are scheduled to commence (and the new election shall be ineffective if the payment commencement date occurs within twelve months after the date of the new election);
(ii) The new election will not take effect until at least twelve months after the date when the Participant submits a new Election Form to the UTC Pension Service Center; and
Page 9
(iii) The new benefit payment commencement date must be five years later than the date on which payments commence under the current election.
(e) If a Participant’s benefit is calculated under the FAE formula and the Participant elects to have his or her Preservation Plan benefit paid in the form of a single lump-sum or annual installment distribution, the Actuarially Equivalent present value of the Preservation Plan retirement benefit or survivor benefit shall be determined using the RP-2000 Group Annuity Mortality Table and interest assumption equal to the average yield for tax-free municipal bonds of 10-year maturities, averaged over the prior 5 calendar years. For purposes of computing this interest assumption, the Actuary shall utilize the Barclays Capital 10-Year Municipal Bond Index, averaging the published yield for 10-year maturities (credit quality AA or above) on the last business day of the year over the most recent 5 consecutive full calendar year period. This rate shall be adjusted annually at the beginning of each calendar year.
(f) The payment of a monthly annuity, lump-sum or annual installment distribution in accordance with this Section 7 shall be in full satisfaction of all of the Corporation’s obligations with respect to the Participant under the Preservation Plan.
8. DISTRIBUTION OF BENEFIT
(a) Except as provided in Section 7(d) (concerning the five-year delay following a Change in Payment Election), Section 8(b) (concerning distributions to Specified Employees), the value of a Participant’s Preservation Plan Benefit will be distributed (or begin to be distributed) to the Participant as follows:
(i) If a Participant’s benefit is calculated under the FAE formula only, the benefit will be paid to Participant on the first of the month following the later of a Participant’s Separation from Service, or when the Participant reaches age 55;
Page 10
(ii) If a Participant’s benefit is calculated under the CB formula only, the benefit will be paid to Participant on the first of the month following the Participant’s Separation from Service;
(iii) If a Participant’s benefit is calculated under both the FAE and CB formulas, the benefit will be paid to the Participant according to the rules outlined above in Subsections (i) and (ii) for the corresponding portions of the benefit.
(b) Separation from Service of Specified Employees. If the Participant is a Specified Employee on the date of the Participant’s Separation from Service, distribution of the Participant’s Current Plan Benefit to the Participant that is made on account of the Participant’s Separation from Service will not be made or commence earlier than the first day of the seventh month following the date of Separation from Service.
(c) Administrative Adjustments in Payment Date. A payment is treated as being made on the date when it is due under the Plan if the payment is made on the due date specified by the Plan, or on a later date that is either (i) in the same calendar year (for a payment whose specified due date is on or before September 30), or (ii) by the 15th day of the third calendar month following the date specified by the Plan (for a payment whose specified due date is on or after October 1). A payment also is treated as being made on the date when it is due under the Plan if the payment is made not more than 30 days before the due date specified by the Plan. In no event, will a payment to a Specified Employee be made or commence earlier than the first day of the seventh month following the date of Separation from Service. A Participant may not, directly or indirectly, designate the taxable year of a payment made in reliance on the administrative rules in this Section 8(c).
9. DISTRIBUTION IN THE EVENT OF DEATH
(a) If a Participant’s benefit (or portion of a benefit) is calculated under the FAE formula and the Participant has not made an election to receive his or her Pension Preservation Plan Benefit in a lump sum or installments as of the date of death, any survivor benefits will be paid as a life annuity subject to the following:
(i) If death occurs prior to age 55 with five years of service, the spouse of the Participant shall receive a 50% Contingent Annuity Benefit beginning on the date the Participant would have attained his or her 55th birthday. If the Participant is unmarried, no Plan benefit is payable.
Page 11
(ii) If death occurs prior to age 55 with ten years of service, the spouse of the Participant shall receive a 100% Contingent Annuity Benefit beginning on the date the Participant would have attained his or her 55th birthday. If the Participant is unmarried, no Plan benefit is payable.
(iii) If death occurs on or after attainment of age 55 with ten years of service or attainment of age 65, survivor benefits shall be paid as a 100% Contingent Annuity Benefit beginning on the first business day of the month following the Participant’s death in the following order:
(1) to the Spouse of the Participant, if the Participant is married at the time of death;
(2) to the named Beneficiary or contingent annuitant, if the Participant is not married at the time of death;
(3) to the children of the Participant if the Participant has not designated a Beneficiary prior to his or her death; or
(4) to the estate of the Participant, if the Participant has no children at the time of his or her death.
If the Participant is not married at the time of death and the Participant has not designated a Beneficiary or contingent annuitant, the benefit shall be payable as:
(1) a 10-year certain actuarially equivalent annuity to the children of the Participant; or
Page 12
(2) a 5-year certain actuarially equivalent annuity to the estate of the Participant.
(b) If a Participant’s benefit (or portion of a benefit) is calculated under the FAE formula and the Participant has made an election to receive his or her Preservation Plan Benefit in a lump sum or annual installments in accordance with Section 7(c) herein, such Participant shall have survivor benefits paid to his or her Beneficiary as follows: If death occurs prior to age 55, the Preservation Plan accrued benefit shall be paid in a lump sum payment as of the date the Participant would have attained his or her 55th birthday. If death occurs after the benefit commencement date but before all annual installments have been paid, the remaining installments will be paid to his or her Beneficiary as scheduled.
(c) If a Participant’s benefit (or portion of a benefit) is calculated under the CB formula, the Participant shall have survivor benefits paid in a lump sum on the first business day of the month following the Participant’s death as follows:
(i) to the Spouse of the Participant, if the Participant is married at the time of death;
(ii) to the named Beneficiary or contingent annuitant, if the Participant is not married at the time of death;
(iii) to the children of the Participant if the Participant has not designated a Beneficiary prior to his or her death; or
(iv) to the estate of the Participant, if the Participant has no children at the time of his or her death.
10. DISABILITY
In the event of the disability of a Participant, the Participant’s Plan Benefit will be maintained and distributed in accordance with the Participant’s elections on file.
Page 13
11. MINIMUM BALANCE PAYOUT PROVISION
If the value of a Participant’s Current Plan Benefit, determined at the time of the Participant’s Separation From Service is less than one-hundred thousand dollars ($100,000), the Committee will distribute the Participant’s entire Current Plan Benefit in a lump sum on the first business day following the Participant’s Separation From Service, notwithstanding a Participant’s election to receive a different form of distribution.
12. FUNDING
The Preservation Plan shall be maintained as an unfunded Plan that is not intended to meet the qualification requirements of Section 401 of the Code. Except in the event of a Change in Control of the Corporation (as described in Section 13 hereof), all benefits under the Preservation Plan shall be payable solely from the general assets of the Corporation. In this regard, the rights of each Participant, Contingent Annuitant and Beneficiary under the Preservation Plan with respect to his or her Preservation Plan retirement benefit or survivor benefit shall be those of a general unsecured creditor of the Corporation. No Participant, Contingent Annuitant or Beneficiary hereunder shall be entitled to receive any benefits payable under the Preservation Plan from the assets of the Qualified Retirement Plan, nor shall the Corporation undertake to set aside assets in trust or otherwise segregate assets to fund its obligations under the Preservation Plan except as provided in Section 13 hereof.
13. CHANGE OF CONTROL
In the event of a Change of Control of the Corporation, the Corporation shall immediately fully fund the value of all Accrued Benefit under the Preservation Plan, determined by the Actuary as of the date of the Change of Control, provided the funding is not proximate to a downturn in the Corporation’s financial health within the meaning of Treas. Reg. Section 1.409A-3(j)(4)(ix)(C)(1). The required proceeds will be contributed to the United Technologies Corporation Pension Preservation Plan Retirement Security Trust, a rabbi trust, and such proceeds will be held and maintained in the United States. In addition, if the United
Page 14
Technologies Corporation Board of Directors Committee on Compensation and Executive Development takes any action under the United Technologies Corporation Long Term Incentive Plan (the “LTIP”), including, without limitation, the accelerated vesting or other adjustment to outstanding LTIP awards in anticipation of (i) a Change of Control (ii) an event, which if consummated, would constitute a Change of Control or (iii) any other significant change pertaining to the ownership of the Corporation, the Corporation shall then also immediately fund the United Technologies Corporation Pension Preservation Plan Retirement Security Trust, a rabbi trust, provided the funding is not proximate to a downturn in the Corporation’s financial health within the meaning of Treas. Reg. Section 1.409A-3(j)(4)(ix)(C)(1); and further provided such funds are held and maintained in the United States. For purposes of this Section 13, “Change of Control” shall have the meaning given to that term under the LTIP.
14. NONASSIGNABILITY
No Participant, Contingent Annuitant or Beneficiary or any other person shall have the right to sell, assign, transfer, pledge, or otherwise encumber any interest in the Preservation Plan. All Preservation Plan benefits are unassignable and non-transferable and shall not be subject to attachment or seizure for the payment of any debts, judgments or other obligations. No Preservation Plan interest shall be transferred by operation of law in the event of the bankruptcy or insolvency of a Participant, Contingent Annuitant, or Beneficiary.
15. NO CONTRACT OF EMPLOYMENT
Participation in the Preservation Plan shall not be construed to constitute a direct or indirect contract of employment between the Corporation and the Participant. Nothing in the Preservation Plan shall be deemed to give a Participant the right to be retained in the service of the Corporation for any length of time. Participants, Contingent Annuitants and Beneficiaries shall have no rights against the Corporation resulting from participation in the Preservation Plan other than as specifically provided herein.
Page 15
16. OPERATION AND ADMINISTRATION
The Preservation Plan shall be administered by the Pension Administration and Investment Committee of United Technologies Corporation (the “Committee”). The Committee shall have the right to delegate its responsibilities hereunder to sub-committees and individuals. Any question of administration or interpretation arising under the Preservation Plan shall be determined by the Committee (or its delegate) in its full discretion, and its decision shall be final and binding upon all parties.
17. TAXES/WITHHOLDING
The Corporation shall have the right to withhold taxes from Preservation Plan benefit accruals and payments to the extent it reasonably determines such withholding to be required by law to be withheld from such credits and payments.
18. GOVERNING LAW
The Preservation Plan shall be construed, administered and enforced in accordance with the Employee Retirement Income Security Act of 1974, as amended (“ERISA”), and to the extent not preempted thereby, the laws of the State of Connecticut (disregarding its choice-of-law rules).
19. AMENDMENT AND TERMINATION
(a) The Corporation expects to continue the Preservation Plan indefinitely, but reserves the right, by action of the Committee, to amend or terminate the Preservation Plan at any time, provided, however, that no such action shall decrease any benefits accrued under the Preservation Plan as of the date of such action. Although the benefits accrued under the Preservation Plan are not subject to the restrictions imposed by Section 204(g) of ERISA, the proviso in the preceding sentence shall be construed in a manner consistent with Section 204(g) of ERISA. As a result, the proviso referred to in the preceding sentence imposes restrictions identical with the restrictions that would be imposed on the Preservation Plan if the Preservation Plan were subject to Section 204(g) of ERISA.
Page 16
(b) Upon the termination of the Plan with respect to all Participants, and termination of all arrangements sponsored by the Corporation or its affiliates that would be aggregated with the Plan under Section 409A of the Code, the Corporation shall have the right, in its sole discretion, and notwithstanding any elections made by the Participant, to pay the Participant’s vested Benefit in a lump sum, to the extent permitted under Section 409A. All payments that may be made pursuant to this Section 19(b) shall be made no earlier than the thirteenth month and no later than the twenty-fourth month after the termination of the Plan. The Corporation may not accelerate payments pursuant to this Section 19(b) if the termination of the Plan is proximate to a downturn in the Corporation’s financial health within the meaning of Treas. Reg. Section 1.409A-3(j)(4)(ix)(C)(1). If the Corporation exercises its discretion to accelerate payments under this Section 19(b), it shall not adopt any new arrangement that would have been aggregated with this Plan under Section 409A within three years following the date of the Plan’s termination.
20. COMPLIANCE WITH SECTION 409A
To the extent that rights or payments under this Plan are subject to Section 409A of the Internal Revenue Code, the Preservation Plan shall be construed and administered in compliance with the conditions of Section 409A and regulations and other guidance issued pursuant to Section 409A for deferral of income taxation until the time the compensation is paid. Any distribution election that would not comply with Section 409A of the Code shall not be effective for purposes of this Plan. To the extent that a provision of this Plan does not comply with Section 409A of the Code, such provision shall be void and without effect. The Corporation does not warrant that the Preservation Plan will comply with Section 409A of the Code with respect to any Participant or with respect to any payment. In no event shall a UTC Company; any director, officer, or employee of a UTC Company (other than the Participant); or any member of the Committee be liable for any additional tax, interest, or penalty incurred by a Participant or Beneficiary as a result of the Preservation Plan’s failure to satisfy the requirements of Section 409A of the Code, or as a result of the Plan’s failure to satisfy any other requirements of applicable tax laws.
Page 17
21. SUCCESSORS
The provisions of the Preservation Plan shall bind and inure to the benefit of the Corporation, and its successors and assigns. The term successors shall include any corporate or other business entity that 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 entity.
22. BENEFIT CLAIMS PROCEDURE
(a) The Committee shall establish and communicate procedures for Participants to obtain forms required to effect elections and designations under the Plan. The Committee may establish a telephonic communication system to facilitate the administration of the Plan and to provide information to Participants, provided that any estimate of a Participant’s current or projected accrued benefit shall in no event be binding on the Committee in the event of any discrepancy between such estimate and a Participant’s actual accrued benefit, which, in all cases, shall control. Upon notification of the death of any Participant while in the employment of the Employer, the Committee may initiate any claim on behalf of the Spouse, Contingent Annuitant, or Beneficiary.
(b) A Participant or Beneficiary who believes that he or she has been denied a benefit to which he or she is entitled under the Plan (referred to in this Section 22 as a “Claimant”) may file a written request with the Committee setting forth the claim. The Committee shall consider and resolve the claim as set forth below.
(i) Upon receipt of a claim, the Committee or its designated agent shall advise the Claimant that a response will be forthcoming within 90 days. The Committee may, however, extend the response period for up to an additional 90
Page 18
days for reasonable cause, and shall notify the Claimant of the reason for the extension and the expected response date. The Committee or its designated agent shall respond to the claim within the specified period.
(ii) If the claim is denied in whole or part, the Committee shall provide the Claimant with a written decision, using language calculated to be understood by the Claimant, setting forth (1) the specific reason or reasons for such denial; (2) the specific reference to relevant provisions of this Plan on which such denial is based; (3) a description of any additional material or information necessary for the Claimant to perfect his or her claim and an explanation why such material or such information is necessary; (4) appropriate information as to the steps to be taken if the Claimant wishes to submit the claim for review; (5) the time limits for requesting a review of the claim; and (6) the Claimant’s right to bring an action for benefits under Section 502(a) of ERISA.
(iii) Within 60 days after the Claimant’s receipt of the written decision denying the claim in whole or in part, the Claimant may request a review of such determination by filing a notice of appeal in writing with the Benefit Claims Appeal Committee (the “Benefits Appeal Committee”). Such notice must set forth all relevant factors upon which the appeal is based. The Claimant or his or her duly authorized representative may, but need not, review the relevant documents and submit issues and comment in writing for consideration by the Benefits Appeal Committee. If the Claimant does not request a review of the initial determination within such 60-day period, the Claimant shall be barred from challenging the determination.
(iv) Within 60 days after the Benefits Appeal Committee receives a request for review, it will review the initial determination. If special circumstances require that the 60-day time period be extended, the Benefits Appeal Committee will so notify the Claimant and will render the decision as soon as possible, but no later than 120 days after receipt of the request for review.
Page 19
(v) The Benefits Appeal Committee shall have the greatest discretion permitted by law in making decisions pursuant to this Section 22. All decisions on review shall be final and binding with respect to all concerned parties. The decision on review shall set forth, in a manner calculated to be understood by the Claimant, (1) the specific reasons for the decision, including references to the relevant Plan provisions upon which the decision is based; (2) the Claimant’s right to receive, upon request and free of charge, reasonable access to and copies of all documents, records, and other information, relevant to his or her benefits; and (3) the Claimant’s right to bring an action for benefits under Section 502(a) of ERISA
Page 20
Appendix A
This Appendix A sets forth the United Technologies Corporation Pension Preservation Plan, as in effect on December 31, 2004 (“Prior Preservation Plan”), and as modified thereafter from time to time in a manner that does not constitute a “material modification” for purposes of Section 409A. Amounts that were earned and vested (within the meaning of Section 409A) prior to January 1, 2005, and any subsequent increases in these amounts that are permitted to be treated as grandfathered benefits under Section 409A, are generally subject to and shall continue to be governed by the terms of this Prior Preservation Plan.
Page 21
UNITED TECHNOLOGIES CORPORATION
PENSION PRESERVATION PLAN
AS AMENDED AND RESTATED EFFECTIVE JANUARY 1, 1996
1. INTRODUCTION & PURPOSE
The United Technologies Corporation Pension Preservation Plan (the “Preservation Plan”) is maintained as an unfunded plan solely for the purpose of providing retirement benefits in excess of the retirement and survivor benefits that may be paid from tax-qualified retirement plans due to (i) benefit limitations imposed by Section 415 of the Internal Revenue Code of 1986, as amended from time to time (the “Code”) and (ii) the limitation imposed by Section 401(a)(17) of the Code on compensation that may be taken into account in computing retirement benefits under tax-qualified retirement plans (referred to collectively as the “Limits”). The Preservation Plan restores the amount of the retirement benefit or survivor benefit that is not paid from the United Technologies Corporation Employee Retirement Plan (or any other tax-qualified defined benefit retirement plan sponsored by the Corporation) (the “Qualified Retirement Plan”) as a result of the Limits so that the total actuarial present value of the Qualified Retirement Plan and Pension Preservation Plan benefits equals the actuarial present value of the retirement benefit or survivor benefit that would be paid from the Qualified Retirement Plan if such Plan were administered without regard to the Limits. The Preservation Plan shall be administered and construed to effectuate the foregoing intent.
The capitalized terms used herein shall have the meanings given to them by the United Technologies Corporation Employee Retirement Plan unless the context clearly indicates otherwise.
Page 22
2. EFFECTIVE DATE
The Preservation Plan became effective on January 1, 1978. This amendment and restatement of the Preservation Plan shall be effective January 1, 1996, except to the extent otherwise specifically provided herein.
3. ELIGIBILITY
An employee of United Technologies Corporation (the “Corporation”) or an affiliate thereof who is a Participant in the Qualified Retirement Plan shall be eligible to participate in the Preservation Plan if and to the extent the Participant’s Accrued Benefit under the Qualified Retirement Plan is reduced or limited by provisions of the Qualified Retirement Plan that are designed solely to comply with the Limits. In no event shall any person who is not entitled to benefits under the Qualified Retirement Plan be eligible for retirement benefits or survivor benefits under the Preservation Plan. An employee of the Corporation or an affiliate thereof who is eligible for retirement benefits under the Preservation Plan shall be referred to herein as a “Participant.”
4. DETERMINATION OF PRESERVATION PLAN BENEFIT
The amount of the retirement benefit or survivor benefit payable from the Preservation Plan to or in respect of a Participant shall equal the excess, if any, of (a) over (b), where
| (a) | equals the retirement benefit or survivor benefit that would be paid to such Participant (or on his or her behalf to his Contingent Annuitant or Beneficiary) under the Qualified Retirement Plan if the provisions of the Qualified Retirement Plan were administered without regard to the Limits; and |
| (b) | equals the retirement benefit or survivor benefit payable to such Participant (or on his or her behalf to his or her Contingent Annuitant or Beneficiary) under the Qualified Retirement Plan. |
Page 23
5. FORM OF PRESERVATION PLAN BENEFIT
| (a) | The Plan Administrator shall determine, as of the earlier of the Participant’s Retirement Date or the Participant’s date of death, that portion of the Participant’s total retirement benefit or survivor benefit that is to be paid under the Preservation Plan. The Preservation Plan retirement benefit or survivor benefit shall be paid to the Participant, or on his or her behalf to any Contingent Annuitant or Beneficiary (as designated under the Qualified Retirement Plan), in the form of distribution that applies to the benefit payments made to, or on behalf of, the Participant under the Qualified Retirement Plan unless the Participant has made a timely election to receive his or her Preservation Plan retirement benefit in a single lump-sum payment or in a series of 2 to 10 annual installment payments in accordance with this Section 5. |
| (b) | If— |
| (i) | the Participant qualifies for an Early Retirement Annuity or a Normal Retirement Annuity or satisfies the Rule of 65 under Section 5.4 of the United Technologies Corporation Employee Retirement Plan (or dies after qualifying for an Early Retirement Annuity or a Normal Retirement Annuity or satisfying such Rule of 65, but before the date as of which retirement benefits under the Qualified Retirement Plan are scheduled to begin), and |
| (ii) | terminates, or retires from, employment with the Corporation and its affiliates after December 31, 1995, |
the Participant may elect, in accordance with Section 5(c) hereof, to have his or her Preservation Plan retirement benefit or survivor benefit paid in a lump-sum or in annual installments, payable (or commencing) as of the Participant’s Retirement Date. Subject to the provisions of Section 5(c) hereof, a Participant may revoke any such election at any time. A Participant shall have no right under the Preservation Plan to have his or her Qualified Retirement Plan benefit paid in a lump sum or in annual installments. Distributions from the Qualified Retirement Plan shall be governed solely by the terms of the Qualified Retirement Plan.
Page 24
| (c) | An election to have a lump-sum or installment distribution paid pursuant to Section 5(b) hereof (or a revocation of any such election) shall be disregarded unless it is filed at least one year before the Participant’s Retirement Date (or, if earlier, the first day of the month next following the Participant’s date of death), except that |
| (i) | If such an election or revocation is filed on or before October 30, 1996, the election or revocation shall be given effect only if the Participant consents to a distribution (or the commencement of distributions) under the Preservation Plan as of a date occurring on or after January 1, 1997; and |
| (ii) | If such an election or revocation is filed on or after November 1, 1996, and on or before December 31, 1996, the election or revocation shall be given effect only if the Participant consents to a distribution (or the commencement of distributions) under the Preservation Plan as of a date occurring on or after April 1, 1997. |
| (d) | If a Participant elects to have his or her Preservation Plan benefit paid in the form of a single lump-sum or annual installment distribution, the Actuarially Equivalent present value of the Preservation Plan retirement benefit or survivor benefit shall be determined using the 1983 Group Annuity Mortality Table and an interest assumption equal to the average yield for tax-free municipal bonds of 10-year maturities, averaged over the prior 5 calendar years. For purposes of computing this interest assumption, the Actuary shall utilize the Lehman Bros. Municipal Bond Index, averaging the published yield for 10-year maturities (credit quality AA or above) on the last business day of the year over the most recent 5 consecutive full calendar year period. This rate shall be adjusted annually at the beginning of each calendar year. |
| (e) | The payment of a lump-sum or annual installment distribution in accordance with this Section 5 shall be in full satisfaction of all of the Corporation’s obligations with respect to the Participant under the Preservation Plan. |
Page 25
6. DEATH BENEFITS
A Participant who has made an election to receive Pension Preservation Plan benefits in a lump sum or annual installments in accordance with Section 5 herein shall have survivor benefits paid to his or her Pension Preservation Plan beneficiary as follows. If death occurs prior to age 55, the Pension Preservation Plan accrued benefit shall be paid in a lump sum payment as of the date the Participant would have attained his or her 55th birthday. If death occurs after retirement but before all annual installments have been paid, the remaining installments will be paid to his or her Beneficiary as scheduled unless the estate of the Participant is the Beneficiary in which case the commuted value of the remaining payments will be paid in a lump sum.
If no election to receive Pension Preservation Plan benefits in a lump sum or installments is in effect as of the date of death, any survivor benefits will be paid in accordance with the distribution option in effect and to the Beneficiary or Contingent Annuitant designated under the Qualified Retirement Plan.
7. FUNDING
The Preservation Plan shall be maintained as an unfunded Plan that is not intended to meet the qualification requirements of Section 401 of the Code. Except in the event of a Change in Control of the Corporation (as described in Section 7 hereof), all benefits under the Preservation Plan shall be payable solely from the general assets of the Corporation. In this regard, the rights of each Participant, Contingent Annuitant and Beneficiary under the Preservation Plan with respect to his or her Preservation Plan retirement benefit or survivor benefit shall be those of a general unsecured creditor of the Corporation. No Participant, Contingent Annuitant or Beneficiary hereunder shall be entitled to receive any benefits payable under the Preservation Plan from the assets of the Qualified Retirement Plan, nor shall the Corporation undertake to set aside assets in trust or otherwise segregate assets to fund its obligations under the Preservation Plan except as provided in Section 7 hereof.
Page 26
8. CHANGE OF CONTROL
In the event of a Change of Control of the Corporation, the Corporation shall immediately fully fund the value of all Accrued Benefits under the Preservation Plan, determined by the Actuary as of the date of the Change of Control. The required proceeds will be contributed to the United Technologies Corporation Pension Preservation Plan Retirement Security Trust. In addition, if the United Technologies Corporation Board of Directors Committee on Compensation and Executive Development takes any action under the United Technologies Corporation Long Term Incentive Plan (the “LTIP”), including, without limitation, the accelerated vesting or other adjustment to outstanding LTIP awards in anticipation of (i) a Change of Control (ii) an event, which if consummated, would constitute a Change of Control or (iii) any other significant change pertaining to the ownership of the Corporation, the Corporation shall then also immediately fund the United Technologies Corporation Pension Preservation Plan Retirement Security Trust. For purposes of this Section 7, “Change of Control” shall have the meaning given to that term under the LTIP.
9. NONASSIGNABILITY
No Participant, Contingent Annuitant or Beneficiary or any other person shall have the right to sell, assign, transfer, pledge, or otherwise encumber any interest in the Preservation Plan. All Preservation Plan benefits are unassignable and non-transferable and shall not be subject to attachment or seizure for the payment of any debts, judgments or other obligations. No Preservation Plan interest shall be transferred by operation of law in the event of the bankruptcy or insolvency of a Participant, Contingent Annuitant, or Beneficiary.
10. NO CONTRACT OF EMPLOYMENT
Participation in the Preservation Plan shall not be construed to constitute a direct or indirect contract of employment between the Corporation and the Participant. Nothing in the Preservation Plan shall be deemed to give a Participant the right to be retained in the service of the Corporation for any length of time. Participants, Contingent Annuitants and Beneficiaries shall have no rights against the Corporation resulting from participation in the Preservation Plan other than as specifically provided herein.
Page 27
11. OPERATION AND ADMINISTRATION
The Preservation Plan shall be administered by the Pension Administration and Investment Committee of United Technologies Corporation (the “Committee”). The Committee shall have the right to delegate its responsibilities hereunder to sub-committees and individuals. Any question of administration or interpretation arising under the Preservation Plan shall be determined by the Committee (or its delegate) in its full discretion, and its decision shall be final and binding upon all parties.
12. TAXES/WITHHOLDING
The Corporation shall have the right to withhold taxes from Preservation Plan benefit payments to the extent it reasonably determines such withholding to be required by law.
13. GOVERNING LAW
The Preservation Plan shall be construed, administered and enforced in accordance with the Employee Retirement Income Security Act of 1974, as amended (“ERISA”), and to the extent not preempted thereby, the laws of the State of Connecticut (disregarding its choice-of-law rules).
14. AMENDMENT AND DISCONTINUANCE
The Corporation expects to continue the Preservation Plan indefinitely, but reserves the right, by action of the Committee, to amend or discontinue the Preservation Plan at any time, provided, however, that no such action shall decrease any benefits accrued under the Preservation Plan as of the date of such action. Although the benefits accrued under the Preservation Plan are not subject to the restrictions imposed by Section 204(g) of ERISA, the proviso in the preceding
Page 28
sentence shall be construed in a manner consistent with Section 204(g) of ERISA. As a result, the proviso referred to in the preceding sentence imposes restrictions identical with the restrictions that would be imposed on the Preservation Plan if the Preservation Plan were subject to Section 204(g) of ERISA.
15. SUCCESSORS
The provisions of the Preservation Plan shall bind and inure to the benefit of the Corporation, and its successors and assigns. The term successors shall include any corporate or other business entity that 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 entity.
16. BENEFIT CLAIMS PROCEDURE
| (a) | The Plan Administrator shall establish and communicate procedures for Participants to obtain forms required to effect elections and designations under the Plan. The Plan Administrator may establish a telephonic communication system to facilitate the administration of the Plan and to provide information to Participants, provided that any estimate of a Participant’s current or projected accrued benefit shall in no event be binding on the Plan Administrator in the event of any discrepancy between such estimate and a Participant’s actual Accrued Benefit, which, in all cases, shall control. Upon notification of the death of any Participant while in the employment of the Employer, the Plan Administrator may initiate any claim on behalf of the Spouse, Contingent Annuitant, or Beneficiary. |
| (b) | If a claim is denied, the Plan Administrator or its designated agent shall give the claimant notice in writing of such denial, which notice shall set forth (i) the specific reason(s) for the denial; (ii) specific reference to pertinent Plan provisions on which the denial is based; (iii) a description of any additional material or information necessary for the claimant to perfect the claim and an explanation of why such materials or information are necessary; and (iv) an explanation of the Plan’s claim review procedure. |
Page 29
| (c) | Within 60 days after receipt of the notice of denial described above, the claimant may request a review of such denial by filing a notice of appeal in writing with the Benefit Claims Appeal Committee (the “Benefits Appeal Committee”). Such notice must set forth all relevant factors upon which the appeal is based. The Benefits Appeal Committee shall decide the issues raised by the appeal, either with or without holding a hearing, and shall issue to the claimant a written notice setting forth its decision and the reasons for the decision. The Benefits Appeal Committee’s decision shall be made not more than 60 days after it has received the claimant’s request for review, unless the Benefits Appeal Committee determines that special circumstances require an extension of time and so notifies the claimant, in which case a decision shall be made not more than 120 days after it has received the request for review. The Benefits Appeal Committee shall have the greatest discretion permitted by law in making decisions pursuant to this Section 16. All interpretations, determinations, and decisions of the Benefits Appeal Committee in respect of any claim shall be conclusive and binding upon all persons having or claiming to have any interest or right under the Plan. |
Page 30
Appendix B
This Appendix B sets forth the United Technologies Corporation Pension Replacement Plan, as in effect on December 31, 2004 (“Prior Replacement Plan”), and as modified thereafter from time to time in a manner that does not constitute a “material modification” for purposes of Section 409A. Amounts that were earned and vested (within the meaning of Section 409A) prior to January 1, 2005, and any subsequent increases in these amounts that are permitted to be treated as grandfathered benefits under Section 409A, are generally subject to and shall continue to be governed by the terms of this Prior Replacement Plan.
Page 31
UNITED TECHNOLOGIES CORPORATION
PENSION REPLACEMENT PLAN
AS AMENDED AND RESTATED EFFECTIVE JANUARY 1, 1996
1. INTRODUCTION & PURPOSE
The United Technologies Corporation Pension Replacement Plan (the “Replacement Plan”) is maintained as an unfunded plan solely for the purpose of providing retirement benefits in excess of the retirement and survivor benefits that may be paid from the United Technologies Corporation Employee Retirement Plan (or any other tax-qualified defined benefit retirement plan sponsored by the Corporation) (the “Qualified Retirement Plan”) and the United Technologies Corporation Pension Preservation Plan as a result of any reduction in a Participant’s compensation that would otherwise be utilized in computing accrued benefits under such Plans where the reduction results from participation in the Corporation’s Deferred Compensation Plan.
The capitalized terms used herein shall have the meanings given to them by the United Technologies Corporation Employee Retirement Plan unless the context clearly indicates otherwise.
2. EFFECTIVE DATE
The Replacement Plan became effective on April 1, 1985 as the United Technologies Corporation Supplemental Plan, which was subsequently renamed the United Technologies Corporation Pension Replacement Plan. This amendment and restatement of the Replacement Plan shall be effective January 1, 1996, except to the extent otherwise specifically provided herein.
Page 32
3. ELIGIBILITY
An employee of United Technologies Corporation (the “Corporation”) or an affiliate thereof who is a Participant in the Qualified Retirement Plan and the Pension Preservation Plan (if applicable) shall be eligible to participate in the Replacement Plan if and to the extent the Participant’s Accrued Benefit under the Qualified Retirement Plan or the Pension Preservation Plan is reduced as a result of participation in the United Technologies Corporation Deferred Compensation Plan or other similar deferred compensation arrangement if the Corporation authorizes the replacement of pension benefits in such arrangement (the “Deferred Compensation Plan”). In no event shall any person who is not entitled to benefits under the Qualified Retirement Plan be eligible for retirement benefits or survivor benefits under the Replacement Plan. An employee of the Corporation or an affiliate thereof who is eligible for retirement benefits under the Replacement Plan shall be referred to herein as a “Participant.”
4. DETERMINATION OF REPLACEMENT PLAN BENEFIT
The amount of the retirement benefit or survivor benefit payable from the Replacement Plan to or in respect of a Participant shall equal the excess, if any, of (a) over (b), where
(a) equals the retirement benefit or survivor benefit that would be paid to such Participant (or on his or her behalf to his Contingent Annuitant or Beneficiary) under the Qualified Retirement Plan and the Pension Preservation Plan if the provisions of such Plans were administered by taking into account any compensation that was deferred under the Deferred Compensation Plan; and
(b) equals the retirement benefit or survivor benefit payable to such Participant (or on his or her behalf to his or her Contingent Annuitant or Beneficiary) under the Qualified Retirement Plan and the Pension Preservation Plan.
Page 33
5. FORM OF PRESERVATION PLAN BENEFIT
(a) The Plan Administrator shall determine, as of the earlier of the Participant’s Retirement Date or the Participant’s date of death, that portion of the Participant’s total retirement benefit or survivor benefit that is to be paid under the Replacement Plan. The Replacement Plan retirement benefit or survivor benefit shall be paid to the Participant, or on his or her behalf to any Contingent Annuitant or Beneficiary (as designated under the Qualified Retirement Plan), in the form of distribution that applies to the benefit payments made to, or on behalf of, the Participant under the Qualified Retirement Plan unless the Participant has made a timely election to receive his or her Replacement Plan retirement benefit in a single lump-sum payment or in a series of 2 to 10 annual installment payments in accordance with this Section 5.
(b) If—
(i) the Participant qualifies for an Early Retirement Annuity or a Normal Retirement Annuity or satisfies the Rule of 65 under Section 5.4 of the United Technologies Corporation Employee Retirement Plan (or dies after qualifying for an Early Retirement Annuity or a Normal Retirement Annuity or satisfying such Rule of 65, but before the date as of which retirement benefits under the Qualified Retirement Plan are scheduled to begin), and
(ii) terminates, or retires from, employment with the Corporation and its affiliates after December 31, 1995,
the Participant may elect, in accordance with Section 5(c) hereof, to have his or her Replacement Plan retirement benefit or survivor benefit paid in a lump sum or in annual installments, payable (or commencing) as of the Participant’s Retirement Date. Subject to the provisions of Section 5(c) hereof, a Participant may revoke any such election at any time. A Participant shall have no right under the Replacement Plan to have his or her Qualified Retirement Plan benefit paid in a lump sum or in annual installments. Distributions from the Qualified Retirement Plan shall be governed solely by the terms of the Qualified Retirement Plan.
Page 34
(c) An election to have a lump-sum or installment distribution paid pursuant to Section 5(b) hereof (or a revocation of any such election) shall be disregarded unless it is filed at least one year before the Participant’s Retirement Date (or, if earlier, the first day of the month next following the Participant’s date of death), except that
(i) If such an election or revocation is filed on or before October 30, 1996, the election or revocation shall be given effect only if the Participant consents to a distribution (or the commencement of distributions) under the Replacement Plan as of a date occurring on or after January 1,1997; and
(ii) If such an election or revocation is filed on or after November 1, 1996, and on or before December 31, 1996, the election or revocation shall be given effect only if the Participant consents to a distribution (or the commencement of distributions) under the Replacement Plan as of a date occurring on or after April 1, 1997.
(d) If a Participant elects to have his or her Replacement Plan benefit paid in the form of a single lump-sum or annual installment distribution, the Actuarially Equivalent present value of the Replacement Plan retirement benefit or survivor benefit shall be determined using the 1983 Group Annuity Mortality Table and an interest assumption equal to the average yield for tax-free municipal bonds of 10-year maturities, averaged over the prior 5 calendar years. For purposes of computing this interest assumption, the Actuary shall utilize the Lehman Bros. Municipal Bond Index, averaging the published yield for 10-year maturities (credit quality AA or above) on the last business day of the year over the most recent 5 consecutive full calendar year period. This rate shall be adjusted annually at the beginning of each calendar year.
(e) The payment of a lump sum or annual installment distribution in accordance with this Section 5 shall be in full satisfaction of all of the Corporation’s obligations with respect to the Participant under the Replacement Plan.
Page 35
6. DEATH BENEFITS
A Participant who has made an election to receive Replacement Plan benefits in a lump sum or annual installments in accordance with Section 5 herein and such election is effective as of the date of the Participant’s death shall have survivor benefits paid to his or her Replacement Plan Beneficiary as follows. If death occurs prior to age 55, the Replacement Plan benefits shall be paid in a lump sum payment as of the date the Participant would have attained his or her 55th birthday. If death occurs after retirement but before all annual installments have been paid, the remaining installments will be paid to his or her Beneficiary as scheduled unless the estate of the Participant is the Beneficiary in which case the commuted value of the remaining payments will be paid in a lump sum.
If no election to receive Replacement Plan benefits in a lump sum or installments is in effect as of the date of death, any survivor benefits will be paid in accordance with the distribution option in effect and to the Beneficiary or Contingent Annuitant designated under the Qualified Retirement Plan.
7. FUNDING
The Replacement Plan shall be maintained as an unfunded Plan that is not intended to meet the qualification requirements of Section 401 of the Code. Except in the event of a Change in Control of the Corporation (as described in Section 7 hereof), all benefits under the Replacement Plan shall be payable solely from the general assets of the Corporation. In this regard, the rights of each Participant, Contingent Annuitant and Beneficiary under the Replacement Plan with respect to his or her Preservation Plan retirement benefit or survivor benefit shall be those of a general unsecured creditor of the Corporation. No Participant, Contingent Annuitant or Beneficiary hereunder shall be entitled to receive any benefits payable under the Replacement Plan from the assets of the Qualified Retirement Plan, nor shall the Corporation undertake to set aside assets in trust or otherwise segregate assets to fund its obligations under the Replacement Plan except as provided in Section 7 hereof.
Page 36
8. CHANGE OF CONTROL
In the event of a Change of Control of the Corporation, the Corporation shall immediately fully fund the value of all Accrued Benefits under the Replacement Plan, determined by the Actuary as of the date of the Change of Control. The required proceeds will be contributed to the United Technologies Corporation Pension Replacement Plan Retirement Security Trust. In addition, if the United Technologies Corporation Board of Directors Committee on Compensation and Executive Development takes any action under the United Technologies Corporation Long Term Incentive Plan (the “LTIP”) including, without limitation, the accelerated vesting or other adjustment to outstanding LTIP awards in anticipation of (i) a Change of Control (ii) an event, which if consummated, would constitute a Change of Control or (iii) any other significant change pertaining to the ownership of the Corporation, the Corporation shall then also immediately fund the United Technologies Corporation Pension Replacement Plan Retirement Security Trust. For purposes of this Section 7, “Change of Control” shall have the meaning given to that term under the LTIP.
9. NONASSIGNABILITY
No Participant, Contingent Annuitant or Beneficiary or any other person shall have the right to sell, assign, transfer, pledge, or otherwise encumber any interest in the Replacement Plan. All Replacement Plan benefits are unassignable and non-transferable and shall not be subject to attachment or seizure for the payment of any debts, judgments or other obligations. No Replacement Plan interest shall be transferred by operation of law in the event of the bankruptcy or insolvency of a Participant, Contingent Annuitant, or Beneficiary.
Page 37
10. NO CONTRACT OF EMPLOYMENT
Participation in the Replacement Plan shall not be construed to constitute a direct or indirect contract of employment between the Corporation and the Participant. Nothing in the Replacement Plan shall be deemed to give a Participant the right to be retained in the service of the Corporation for any length of time. Participants, Contingent Annuitants and Beneficiaries shall have no rights against the Corporation resulting from participation in the Replacement Plan other than as specifically provided herein.
11. OPERATION AND ADMINISTRATION
The Replacement Plan shall be administered by the Pension Administration and Investment Committee of United Technologies Corporation (the “Committee”). The Committee shall have the right to delegate its responsibilities hereunder to sub-committees and individuals. Any question of administration or interpretation arising under the Replacement Plan shall be determined by the Committee (or its delegate) in its full discretion, and its decision shall be final and binding upon all parties.
12. TAXES/WITHHOLDING
The Corporation shall have the right to withhold taxes from Replacement Plan benefit payments to the extent it reasonably determines such withholding to be required by law.
13. GOVERNING LAW
The Replacement Plan shall be construed, administered and enforced in accordance with the Employee Retirement Income Security Act of 1974, as amended (“ERISA”), and to the extent not preempted thereby, the laws of the State of Connecticut (disregarding its choice-of-law rules).
Page 38
14. AMENDMENT AND DISCONTINUANCE
The Corporation expects to continue the Replacement Plan indefinitely, but reserves the right, by action of the Committee, to amend or discontinue the Replacement Plan at any time, provided, however, that no such action shall decrease any benefits accrued under the Replacement Plan as of the date of such action. Although the benefits accrued under the Replacement Plan are not subject to the restrictions imposed by Section 204(g) of ERISA, the proviso in the preceding sentence shall be construed in a manner consistent with Section 204(g) of ERISA. As a result, the proviso referred to in the preceding sentence imposes restrictions identical with the restrictions that would be imposed on the Replacement Plan if the Replacement Plan were subject to Section 204(g) of ERISA.
15. SUCCESSORS
The provisions of the Replacement Plan shall bind and inure to the benefit of the Corporation, and its successors and assigns. The term successors shall include any corporate or other business entity that 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 entity.
16. BENEFIT CLAIMS PROCEDURE
(a) The Plan Administrator shall establish and communicate procedures for Participants to obtain forms required to effect elections and designations under the Plan. The Plan Administrator may establish a telephonic communication system to facilitate the administration of the Plan and to provide information to Participants, provided that any estimate of a Participant’s current or projected accrued benefit shall in no event be binding on the Plan Administrator in the event of any discrepancy between such estimate and a Participant’s actual Accrued Benefit, which, in all cases, shall control. Upon notification of the death of any Participant while in the employment of the Employer, the Plan Administrator may initiate any claim on behalf of the Spouse, Contingent Annuitant, or Beneficiary.
(b) If a claim is denied, the Plan Administrator or its designated agent shall give the claimant notice in writing of such denial, which notice shall set forth (i) the specific reason(s) for
Page 39
the denial; (ii) specific reference to pertinent Plan provisions on which the denial is based; (iii) a description of any additional material or information necessary for the claimant to perfect the claim and an explanation of why such materials or information are necessary; and (iv) an explanation of the Plan’s claim review procedure.
(c) Within 60 days after receipt of the notice of denial described above, the claimant may request a review of such denial by filing a notice of appeal in writing with the Benefit Claims Appeal Committee (the “Benefits Appeal Committee”). Such notice must set forth all relevant factors upon which the appeal is based. The Benefits Appeal Committee shall decide the issues raised by the appeal, either with or without holding a hearing, and shall issue to the claimant a written notice setting forth its decision and the reasons for the decision. The Benefits Appeal Committee’s decision shall be made not more than 60 days after it has received the claimant’s request for review, unless the Benefits Appeal Committee determines that special circumstances require an extension of time and so notifies the claimant, in which case a decision shall be made not more than 120 days after it has received the request for review. The Benefits Appeal Committee shall have the greatest discretion permitted by law in making decisions pursuant to this Section 16. All interpretations, determinations, and decisions of the Benefits Appeal Committee in respect of any claim shall be conclusive and binding upon all persons having or claiming to have any interest or right under the Plan.
Page 40
Exhibit 10.5
UNITED TECHNOLOGIES CORPORATION
DEFERRED COMPENSATION PLAN
(As amended and restated effective January 1, 2005)
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, its Subsidiaries and Affiliates deferred all or a portion of their compensation earned with respect to 1985 and 1986. No compensation earned after 1986 was deferred under the Plan until the Plan was amended and restated effective December 15, 1993 to offer eligible executives the opportunity to defer all or a portion of Compensation earned or otherwise payable in 1994 and subsequent years. The Plan has been amended from time to time since 1993.
The Plan is hereby amended and restated, effective January 1, 2005, to reflect the requirements of Section 409A of the Internal Revenue Code. The Plan, as amended and restated, applies to deferrals that were earned or vested after December 31, 2004. Amounts that were earned and vested (within the meaning of Section 409A) before January 1, 2005, and any subsequent increases in these amounts that are permitted to be treated as grandfathered benefits under Section 409A, are subject to and shall continue to be governed by the terms of the Prior Plan as set forth in Appendix A.
From January 1, 2005 through December 31, 2008, the Plan has been operated in good faith compliance with Section 409A in accordance with guidance provided by the Internal Revenue Service.
Page 1
ARTICLE II—DEFINITIONS
Beneficiary means the person, persons or entity designated on an electronic or written form by the Participant to receive the value of his or her Plan Account in the event of the Participant’s death. If the Participant fails to designate a Beneficiary, or the Beneficiary (and any contingent Beneficiary) does not survive the Participant, the value of the Participant’s Plan Account will be paid to the estate of the Participant.
Benefit Reduction Contribution means a contribution by the Corporation to the Participant’s Plan Account to recognize the reduction in the value of employer matching or other contributions under any of the Corporation’s savings or other tax qualified defined contribution retirement plans as a result of the reduction of such Participant’s Compensation pursuant to this Plan.
Code means the Internal Revenue Code of 1986, as amended from time to time, and any successor thereto. Reference to any section of the Internal Revenue Code shall include any final regulations or other published guidance interpreting that section.
Committee means the United Technologies Corporation Deferred Compensation Committee, which is responsible for the administration of the Plan. The Corporation’s Pension Administration Committee shall appoint the Committee’s members.
Compensation means base salary and Incentive Compensation Payments otherwise payable to a Participant by a UTC Company and considered to be wages for purposes of federal income tax withholding, but before any deferral of Compensation 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.
Page 2
Corporation means United Technologies Corporation.
Credited Interest Account means the Investment Fund that is valued in the manner set forth in Section 5.2.
Deferral Period means the period prior to the receipt of Compensation deferred hereunder.
“Disability” means permanent and total disability as determined under the Corporation’s long-term disability plan applicable to the Participant, or if there is no such plan applicable to the Participant, “Disability” means a determination of total disability by the Social Security Administration; provided that, in either case, the Participant’s condition also qualifies as a “disability” for purposes of Section 409A(a)(2)(C) of the Code.
Election Form means the enrollment form provided by the Committee to Participants electronically or in paper form for the purpose of deferring Compensation under the Plan. Each Participant’s Election Form must specify: the amount to be deferred from base salary and/or from any Incentive Compensation Payment with respect to the following calendar year; the respective amounts to be allocated to the Participant’s Retirement Account and/or Special Purpose Account or Accounts; the percentage allocation among the Investment Funds with respect to each such Account; and if not previously elected for an Account, the method of distribution of each such Account; and the Deferral Period for each Special Purpose Account. There will be a separate Election Form for each calendar year.
Incentive Compensation Payment means amounts awarded to a Participant pursuant to the Corporation’s Annual Executive Incentive Compensation Plan.
Page 3
Investment Fund means the Credited Interest Account, the S&P 500 Account, the UTC Stock Unit Account or such other investment option as may be established by the Committee from time to time. The value of Participants’ Accounts shall be adjusted to replicate the performance of the applicable Investment Funds. Amounts allocated to any Investment Fund do not result in any investment in actual assets corresponding to the Investment Fund.
Participant means an executive of a UTC Company who is paid from a US payroll, files a U.S. income tax return, and who elects to defer Compensation under the Plan.
Plan means the United Technologies Corporation Deferred Compensation Plan as amended and restated effective September 1, 2002, and as amended from time to time thereafter.
Plan Account means the aggregate value of all Special Purpose Accounts and the Retirement Account, but excluding accounts under the Prior Plan. Accounts under the Prior Plan will be valued and administered 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 on October 3, 2004, as set forth in Appendix A. All amounts earned and vested under the Prior Plan, and any subsequent increases in these amounts that are permitted to be treated as grandfathered benefits under Section 409A, 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 Account means a Plan Account maintained on behalf of the Participant that is targeted for distribution following the Participant’s Retirement.
Page 4
Retirement means Separation from Service on or after age 50 and attainment of age 65; Separation from Service on or after age 50 and attainment of at least age 55 and a minimum of 10 or more years of “continuous service” (as defined in the UTC Employee Retirement Plan as in effect on January 1, 2008); or a Rule of 65 termination.
Retirement Date means the date of a Participant’s Retirement.
“Rule of 65” Termination means Separation from Service on or after age 50 and before age 55, with a combination of age and years of “continuous service” (as defined in the UTC Employee Retirement Plan as in effect on January 1, 2008) equal to at least 65.
Separation from Service means a Participant’s termination of employment with all UTC Companies, other than by reason of death, or Disability that qualifies as a “separation from service” for purposes of Section 409A of the Code. A Separation from Service will be deemed to occur where the Participant and the UTC Company that employs the Participant reasonably anticipate that the bona fide level of services the Participant will perform (whether as an employee or as an independent contractor) for UTC Companies will be permanently reduced to a level that is less than thirty-seven and a half percent (37.5%) of the average level of bona fide services the Participant performed during the immediately preceding 36 months (or the entire period the Participant has provided services if the Participant has been providing services to the UTC Companies for less than 36 months). A Participant shall not be considered to have had a Separation from Service as a result of a transfer from one UTC Company to another UTC Company.
S&P 500 Account means an Investment Fund that is valued in the manner set forth in Section 5.4.
Page 5
Special Purpose Account means a Plan Account maintained on behalf of the Participant with a targeted distribution date in the calendar year specified by the Participant. The minimum Deferral Period is five (5) calendar years following the end of the calendar year in which the Account is established; and the first payment from an Account must commence no later than in the calendar year in which the Participant attains age 72.
Specified Employee means each of the 50 highest-paid executives of the Corporation and its Subsidiaries, effective annually as of March 31st, based on annual salary and incentive compensation paid in the prior year. The term includes both U.S. and non-U.S. employees.
UTC Common Stock means the common stock of United Technologies Corporation.
UTC Company means United Technologies Corporation or any entity controlled by or under common control with United Technologies Corporation within the meaning of Section 414(b) or (c) of the Code (but substituting “at least 20 percent” for “at least 80 percent” as the control threshold used in applying Sections 414(b) and (c)).
UTC Stock Unit Account means the Investment Fund that is valued in the manner set forth in Section 5.3.
ARTICLE III—ELIGIBILITY AND PARTICIPATION
Section 3.1—Eligibility
Each employee of a UTC Company who is classified as an eligible Participant as of December 31 of the current year will be eligible to elect to defer Compensation under the Plan in respect of the immediately following calendar year in accordance with the terms of the Plan and the rules and
Page 6
procedures established by the Committee. Newly hired executives (or employees promoted to executive level) are eligible to elect to defer base salary during the current calendar year if they make an election within 30 calendar days from their hire date or promotion date.
Section 3.2—Participation
Each eligible Participant may elect to participate in the Plan with respect to any calendar year for which the Committee offers the opportunity to defer Compensation by timely filing with the Committee an Election Form, properly completed in accordance with Section 4.1. Participation in the Plan is entirely voluntary.
ARTICLE IV—PARTICIPANT ELECTIONS AND DESIGNATIONS
Section 4.1—Election
An eligible Participant may,, on or before the election deadline established by the Committee, make an electronic or written election on the Election Form provided by the Committee to defer Compensation for the immediately following calendar year.
Section 4.2—Election Amount
An eligible Participant must designate in the Election Form the dollar amount of base salary that will be deferred during such calendar year, and/or the percentage or dollar amount of any Incentive Compensation Payment otherwise payable with respect to services performed during such calendar year that will be deferred under the Plan. The minimum dollar amount that a Participant may defer under the Plan for any calendar year is $5,000. The maximum amount that a Participant may defer under the Plan for any calendar year is 70% of base salary and/or 100% of any Incentive Compensation Payment.
Page 7
Section 4.3—Election Date
For an election to defer base salary, an electronic or written Election Form must be completed and submitted to the Committee no later than the December 31 immediately preceding the calendar year to which the election applies, or such earlier date as the Committee may specify. A deferral election shall be effective only if the individual making the election is still an eligible Participant at the election deadline. Except as provided below in Section 4.8 (Change in Election), the choices reflected on the Participant’s Election Form shall be irrevocable on the election deadline. If an eligible executive fails to submit a properly completed Election Form by the election deadline, the executive will be ineligible to defer base salary under the Plan for the immediately following calendar year.
For an election to defer any Incentive Compensation Payment with respect to services to be performed in the current calendar year and otherwise payable in the immediately following calendar year, an electronic or written Election Form must be completed and submitted to the Committee no later than the June 30 of the current calendar year, or such earlier date as the Committee may specify. A deferral election shall be effective only if the individual making the election is still an eligible Participant as of the election deadline. Except as provided below in Section 4.8 (Change in Election), the choices reflected on the Participant’s Election Form shall be irrevocable on the election deadline. If an eligible executive fails to submit a properly completed Election Form by the election deadline, the executive will be ineligible to defer Incentive Compensation under the Plan with respect to services to be performed in the current calendar year.
Page 8
Section 4.4—Deferral Period
Each Participant shall specify in the Election Form, in whole percentages, how the amounts to be deferred in the immediately following calendar year are to be allocated among the Participant’s Retirement Account and any Special Purpose Accounts established for the Participant. To the extent that the Participant fails to make an effective allocation among the available accounts, the deferral shall be allocated entirely to the Participant’s Retirement Account. A Participant may elect to defer into a Special Purpose Account that has not previously been established, with a Deferral Period ending on a Specific Deferral Date that is at least five (5) calendar years following the end of the calendar year in which the Account is established (but not later than the Participant’s 72nd birthday). If the Participant’s 72nd birthday falls prior to the completion of this five (5) year period, the Participant must defer into the Retirement Account only.
Section 4.5—Distribution Election
At the time the Participant first elects to defer an amount to the Participant’s Retirement Account or to a Special Purpose Account, the Participant must further make an election to have the Participant’s Retirement or Special Purpose Account distributed in a lump sum or in two to fifteen annual installments. The Participant may elect a different form of distribution for the Retirement Account and for each Special Purpose Account. If no distribution election is made with respect to a Participant’s Retirement Account or Special Purpose Account, the Account will be distributed in a lump sum.
Page 9
Section 4.6—Investment Fund Allocations
When completing the Election Form, the Participant must allocate the amounts to be deferred, in whole percentages, among the available Investment Funds. To the extent that the Participant fails to make an effective allocation among the available Investment Funds, the deferral shall be allocated entirely to the Credited Interest Account.
Participants may reallocate their existing Plan Accounts among the available Investment Funds as permitted by the Committee, generally once per year. Such reallocations shall be in whole percentages and, unless otherwise specified by the Committee, shall be effective the first business day of the calendar year following the date of the reallocation election.
Section 4.7—Change in Election
A Participant who has made an election to defer Compensation under the Plan may make a one time irrevocable election to extend the Deferral Period for a Retirement Account and/or any Special Purpose Account. A Participant may also make a one time irrevocable election to change the form of distribution for the Retirement and/or any Special Purpose Account. A Participant may change his or her election, as provided in this Section 4.8, for some accounts and not for others; provided that the Participant may change his or her election only once for the Retirement Account and only once for each Special Purpose Account. With respect to each Special Purpose Account, the extended Deferral Period shall end not less than five (5) years following the date on which distribution would otherwise have occurred. With respect to the Retirement Account, the extended Deferral Period is five years form the date on which the Retirement Account would otherwise have commenced payment.
Page 10
A deferral extension election and/or change to the form of distribution must meet all of the following requirements:
(a) The new election must be made at least twelve months prior to the date on which payments will commence under the current election (and the new election shall be ineffective if the payment commencement date under the current election occurs within twelve months after the date of the new election);
(b) The new election will not take effect until at least twelve months after the date when the new election is submitted in a manner acceptable to the Committee;
(c) The new payment commencement date must be five years later than the date on which payments would commence under the current election; and
(d) In no case may a Participant extend the Deferral Period for a Special Purpose Account beyond the Participant’s 72nd birthday. If the Participant’s 72nd birthday falls less than five (5) years after the date on which payments would commence under the current election, the Participant is not eligible to extend his or her Deferral Period or to change the form of distribution for the Special Purpose Account.
Section 4.8—Designation of Beneficiary
Each Participant shall designate a Beneficiary for his or her Plan Account on an electronic or written form provided by the Committee. A Participant may change such designation on an electronic or written form acceptable to the Committee and received by the Committee at any time before the Participant’s death. In the event that no Beneficiary designation is filed with the Committee, or if the
Page 11
Beneficiary (and any 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; (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 procedures set forth in this Section 4.8. In the event of the death of a Participant, distributions shall be made in accordance with Section 6.5.
ARTICLE V—PLAN ACCOUNTS
Section 5.1—Accounts
Deferred amounts that were earned and vested before January 1, 2005, and any subsequent increases in these amounts that are permitted to be treated as grandfathered benefits under Section 409A of the Code, shall be maintained in separate accounts and shall remain subject to the terms and conditions of the Prior Plan. The Prior Plan accounts are not intended to be subject to Section 409A of the Code. No amendment to Appendix A that would constitute a “material modification” for purposes of Section 409A shall be effective unless the amending instrument states that it is intended to materially modify Appendix A and to cause the Prior Plan to become subject to Section 409A. Although the Prior Plan accounts are not intended to be subject to Section 409A, neither the UTC Companies nor any director, officer, or other representative of a UTC Company shall be liable for any adverse tax consequence suffered by a Participant or Beneficiary if a Prior Plan account becomes subject to Section 409A.
Page 12
Deferred amounts that were earned or vested after December 31, 2004, will be allocated to a Retirement Account and/or one or more Special Purpose Accounts as elected by the Participant. The Committee will establish the maximum number of Special Purpose Accounts.
Participants’ Plan Accounts shall be allocated or reallocated among Investment Funds in accordance with each Participant’s instructions in the manner set forth in Section 4.6.
Section 5.2—Valuation of Credited Interest Account
Deferred amounts allocated to the Credited Interest Account will be credited daily with a rate of interest equal to the average interest rate on 10-Year Treasury Bonds as of the last business day of each month from January through October in the calendar year prior to the calendar year in which the interest is credited, plus 1%.
Section 5.3—Valuation of UTC Stock Unit Account
Deferred Compensation allocated to the UTC Stock Unit Account will be converted to Stock Units, including fractional Stock Units. A UTC Stock Unit is equal to the closing price of one share of UTC Common Stock as reported on the composite tape of the New York Stock Exchange. The number of Stock Units will be calculated by dividing the amount of Compensation deferred by the closing price of UTC Common Stock on the date when the deferred amount is credited to the Participant’s UTC Stock Unit Account. UTC Stock Units held in the UTC Stock Unit Account on a dividend payment date will be credited with dividend equivalent payments equal to the Corporation’s declared dividend on UTC Common Stock (if any). Such dividend equivalent payments will be converted to additional UTC Stock Units and fractional units using the closing price of UTC Common Stock as of the date such dividends are credited to the Participant’s UTC Stock Unit Account.
Page 13
Section 5.4—Valuation of S&P 500 Account
Deferred amounts allocated to the S&P 500 Account will be converted to S&P Account units based on the closing share price of the Vanguard 500 Index Fund as of date the deferred amount is credited to the Participant’s S&P 500 Account. The value of the S&P 500 Account units will fluctuate on each business day based on the performance of the Vanguard 500 Index Fund.
Section 5.5—Allocation to Accounts
During the year of deferral, deferred amounts will be allocated to the Participant’s Plan Account and Investment Funds as of the date the deferred amounts would otherwise have been paid to the Participant.
Section 5.6—Crediting of Benefit Reduction Contribution
At the end of each calendar year, the Committee will determine if any Benefit Reduction has been incurred with respect to any of the Corporation’s savings plans or other tax qualified defined contribution retirement plans, and will credit the amount of such Benefit Reduction to the affected Participant’s Plan Account as of the last business day of the calendar year. Any such amounts will be allocated on a pro-rata basis to the Participant’s Retirement Account and Special Purpose Accounts and Investment Funds in accordance with the Participant’s deferral elections on file for that calendar year.
Section 5.7—Reports to Participants
The Committee will provide or make available detailed information to Participants regarding the value of Plan Accounts, distribution elections, Beneficiary designations, Investment Fund allocations and credited values for Retirement and Special Purpose Accounts, not less than once per year. Such information may be provided via electronic media as determined by the Committee.
Page 14
ARTICLE VI—DISTRIBUTION OF ACCOUNTS
Section 6.1—Timing of Plan Distributions
Except as provided in Section 4.8 (concerning the five-year delay following a Change in Election), Section 6.3 (concerning Separation from Service before Attaining Age Fifty), and Section 6.4 (concerning distributions to Specified Employees), the value of a Participant’s Retirement Account will be distributed (or begin to be distributed) to the Participant in April of the calendar year following the Retirement Date. The value of a Participant’s Special Purpose Account will be distributed (or begin to be distributed) to the Participant in April of the year specified in the Participant’s initial election or in any change in election under Section 4.8. This means, for example, that if a deferral election specifies a Deferral Period until 2015, distribution will occur in April of 2015.
Section 6.2—Method of Distribution
Except as provided in Section 6.3 (concerning Separation from Service before Attaining Age Fifty), each Retirement and Special Purpose Account will be distributed to the Participant in a single lump-sum cash payment, or in a series of annual cash installment payments, in accordance with the Participant’s election with respect to each such account. Annual installments shall be payable to the Participant beginning as of the payment commencement date and continuing as of each anniversary of the payment commencement date thereafter until all installments have been paid. To determine the amount of each installment, the value of the Participant’s Plan Account on the payment date will be multiplied by a fraction, the numerator of which is one and the denominator of which is the number of scheduled installments that remain unpaid.
Page 15
Section 6.3—Separation from Service before Attaining Age Fifty
If a Participant’s Separation from Service occurs before the Participant attains age fifty (50), the full value of the Participant’s Plan Account will be distributed to the Participant in a lump-sum payment in April following the Participant’s Separation from Service (or, if the Participant is a Specified Employee at the time of his or her Separation from Service, on the date provided in Section 6.4, below, if later) regardless of the distribution option elected.
If a Participant has a Separation from Service and is later re-hired by a UTC Company, the Participant’s age at the time of the Participant’s first Separation from Service will determine how the Participant’s Plan Account at the time of the first Separation from Service is distributed. If the Participant accumulates any additional deferrals after the Participant is re-hired, the Plan shall separately account for the additional deferrals (and related investment gains or losses), and the Participant’s age at the time of the Participant’s second Separation from Service will determine how the additional amounts are distributed.
Section 6.4—Separation from Service of Specified Employees
If the Participant is a Specified Employee on the date of the Participant’s Separation from Service, any distribution of the Participant’s Plan Account to the Participant that is made on account of the Participant’s Separation from Service will not be made or commence earlier than the first day of the seventh month following the date of Separation from Service. The Plan Account shall continue to accrue hypothetical investment gains and losses as provided in Article V until the distribution date.
Page 16
Section 6.5—Distribution in the Event of Death
In the event of the death of a Participant, the full value of the Participant’s Plan Account will be distributed to the designated Beneficiary in a lump sum on the first business day of the month following the Participant’s death.
Section 6.6—Accelerated Distribution in the Case of an Unforeseeable Emergency
(a) Unforeseeable Emergency. The Committee may, upon a Participant’s written application, agree to an accelerated distribution of some or all of the value of Participant’s Plan Account upon the showing of an unforeseeable emergency. An “unforeseeable emergency” is a severe financial hardship to the Participant resulting from (1) an illness or accident of the Participant, the Participant’s spouse, the Participant’s Beneficiary, or the Participant’s dependent (as defined in IRC Section 152, without regard to Section 152(b)(1), (b)(2), and (d)(1)(B)); (2) loss of the Participant’s property due to casualty; or (3) other similar extraordinary and unforeseeable circumstances arising as a result of events beyond the control of the Participant. Whether a Participant is faced with an unforeseeable emergency permitting a distribution is to be determined based on the relevant facts and circumstances of each case. Acceleration will not be granted if the emergency is or may be relieved through reimbursement or compensation from insurance or otherwise, by liquidation of the Participant’s assets (to the extent the liquidation of such assets would not cause severe financial hardship), or by cessation of deferrals under the Plan.
(b) Amount of Distribution Permitted Upon an Unforeseeable Emergency. Distributions on account of an unforeseeable emergency, as defined in Section 6.6(a), shall be limited to the amount reasonably necessary to satisfy the emergency need. Such amount may include amounts necessary to pay any Federal, state, local, or foreign income taxes or penalties reasonably anticipated to result from the distribution.
Page 17
(c) The Committee will determine from which Special Purpose or Retirement Accounts and associated Investment Funds hardship distributions will be made. Any Participant who is an officer or director of the Corporation within the meaning of Section 16 of the Securities Exchange Act of 1934 is not eligible for distributions on account of unforeseeable emergency.
Section 6.7—Disability
In the event of the Disability of a Participant, the Participant’s Plan Accounts will be maintained and distributed in accordance with the Participant’s elections on file.
Section 6.8—Administrative Adjustments in Payment Date
A payment is treated as being made on the date when it is due under the Plan if the payment is made on the due date specified by the Plan, or on a later date that is either (a) in the same calendar year (for a payment whose specified due date is on or before September 30), or (b) by the 15th day of the third calendar month following the date specified by the Plan (for a payment whose specified due date is on or after October 1). A payment also is treated as being made on the date when it is due under the Plan if the payment is made not more than 30 days before the due date specified by the Plan. In no event will a payment to a Specified Employee be made or commence earlier than the first day of the seventh month following the date of Separation from Service. A Participant may not, directly or indirectly, designate the taxable year of a payment made in reliance on the administrative rules in this Section 6.9.
Page 18
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 value of any Plan Accounts as of the date of such amendment. In the event of any change in law or regulation relating to the Plan and the tax treatment of Plan Accounts, the Plan shall, without further action by the Committee, be deemed to be amended to comply with any such change in law or regulation effective as of the first date necessary to prevent the taxation, constructive receipt or deemed distribution of Plan Accounts prior to the date Plan Accounts would be distributed under the provisions of Article VI.
Section 7.2—Plan Suspension and Termination
(a) The Corporation’s Pension Administration Committee, may, at any time, suspend or terminate the Plan with respect to new or existing Election Forms 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 interest of the Corporation or for any other reason.
(b) In the event of the suspension of the Plan, no additional deferrals 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 elections on file.
(c) Upon the termination of the Plan with respect to all Participants, and the termination of all arrangements sponsored by the Corporation or its affiliates that would be aggregated with the Plan under Section 409A of the Code, the Corporation shall have the right, in its sole discretion, and
Page 19
notwithstanding any elections made by the Participant, to pay the Participant’s Plan Account in a lump sum, to the extent permitted under Section 409A. All payments that may be made pursuant to this Section 7.2 shall be made no earlier than the thirteenth month and no later than the twenty-fourth month after the termination of the Plan. The Corporation may not accelerate payments pursuant to this Section 7.2 if the termination of the Plan is proximate to a downturn in the Corporation’s financial health within the meaning of Treas. Reg. section 1.409A-3(j)(4)(ix)(C)(1). If the Corporation exercises its discretion to accelerate payments under this Section 7.2, it shall not adopt any new arrangement that would have been aggregated with the Plan under Section 409A within three years following the date of the Plan’s termination.
Section 7.3—No Consent Required
The consent of any Participant, Beneficiary, or other person shall not be required with respect to any amendment, suspension, or termination of the Plan.
ARTICLE VIII—GENERAL PROVISIONS
Section 8.1—Unsecured General Creditor
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 solely those of a general unsecured creditor of the Corporation. No assets will be placed in trust, set aside or otherwise segregated to fund or offset liabilities in respect of the Plan or Participants’ Plan Accounts.
Page 20
Section 8.2—Nonassignability
No Participant or Beneficiary or any other person shall have the 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. Plan Accounts or payment hereunder, prior to actual payment, will not be subject to attachment or seizure for the payment of any debts, judgments or other obligations. Plan Accounts or other Plan benefit will not 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 any UTC Company and the Participant. Participants and Beneficiaries will have no rights against any UTC Company resulting from participation in the Plan other than as specifically provided herein. Nothing in the Plan shall be deemed to give a Participant the right to be retained in the service of any UTC Company for any length of time or to interfere with the right of any UTC Company to terminate a Participant’s employment prior to the end of any Deferral Period.
Section 8.4—Governing Law
The provisions of the Plan will be construed and interpreted according to the laws of the State of Connecticut, to the extent not preempted by federal law.
Page 21
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 the Plan shall be sufficient if sent by first-class mail, to the United Technologies Corporation Deferred Compensation Committee, 1 Financial Plaza, Hartford, Connecticut 06101, Attn: 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 provided either electronically, hand-delivered, or mailed to the address (or email address, as the case may be) 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 or email system.
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.
Page 22
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 his or her affairs because of illness or accident, any payment due (unless prior claim therefore 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.
Section 8.9—Section 409A Compliance.
To the extent that rights or payments under this Plan are subject to Section 409A of the Internal Revenue Code, the Plan shall be construed and administered in compliance with the conditions of Section 409A and regulations and other guidance issued pursuant to Section 409A for deferral of income taxation until the time the compensation is paid. Any distribution election that would not comply with Section 409A of the Code shall not be effective for purposes of this Plan. To the extent that a provision of this Plan does not comply with Section 409A of the Code, such provision shall be void and without effect. The Corporation does not warrant that the Plan will comply with Section 409A of the Code with respect to any Participant or with respect to any payment In no event shall any UTC Company; any director, officer, or employee of a UTC Company (other than the Participant); or any member of the Committee be liable for any additional tax, interest, or penalty incurred by a Participant or Beneficiary as a result of the Plan’s failure to satisfy the requirements of Section 409A of the Code, or as a result of the Plan’s failure to satisfy any other requirements of applicable tax laws.
Page 23
Section 8.10—Withholding Taxes
The Committee may make any appropriate arrangements to deduct from all deferrals 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.
ARTICLE IX—ADMINISTRATION AND CLAIMS
Section 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 at United Technologies Corporation, 1 Financial Plaza, Hartford, Connecticut 06101, Attn: Deferred Compensation Committee. The Committee shall respond in writing as soon as practicable.
Section 9.2—Claim Procedures
A Participant or Beneficiary who believes that he or she has been denied a benefit to which he or she is entitled under the Plan (referred to in this Section 9.2 as a “Claimant”) may file a written request with the Committee setting forth the claim. The Committee shall consider and resolve the claim as set forth below.
Page 24
(a) Upon receipt of a claim, the Committee shall advise the Claimant that a response will be forthcoming within 90 days. The Committee may, however, extend the response period for up to an additional 90 days for reasonable cause, and shall notify the Claimant of the reason for the extension and the expected response date. The Committee shall respond to the claim within the specified period.
(b) If the claim is denied in whole or part, the Committee shall provide the Claimant with a written decision, using language calculated to be understood by the Claimant, setting forth (1) the specific reason or reasons for such denial; (2) the specific reference to relevant provisions of this Plan on which such denial is based; (3) a description of any additional material or information necessary for the Claimant to perfect his or her claim and an explanation why such material or such information is necessary; (4) appropriate information as to the steps to be taken if the Claimant wishes to submit the claim for review; (5) the time limits for requesting a review of the claim; and (6) the Claimant’s right to bring an action for benefits under Section 502(a) of ERISA.
(c) Within 60 days after the Claimant’s receipt of the written decision denying the claim in whole or in part, the Claimant may request in writing that the Committee review the determination. The Claimant or his or her duly authorized representative may, but need not, review the relevant documents and submit issues and comment in writing for consideration by the Committee. If the Claimant does not request a review of the initial determination within such 60-day period, the Claimant shall be barred from challenging the determination.
(d) Within 60 days after the Committee receives a request for review, it will review the initial determination. If special circumstances require that the 60-day time period be extended, the Committee will so notify the Claimant and will render the decision as soon as possible, but no later than 120 days after receipt of the request for review.
Page 25
(e) All decisions on review shall be final and binding with respect to all concerned parties. The decision on review shall set forth, in a manner calculated to be understood by the Claimant, (1) the specific reasons for the decision, including references to the relevant Plan provisions upon which the decision is based; (2) the Claimant’s right to receive, upon request and free of charge, reasonable access to and copies of all documents, records, and other information, relevant to his or her benefits; and (3) the Claimant’s right to bring an action for benefits under Section 502(a) of ERISA.
CERTAIN REGULATORY MATTERS
The Plan is subject to the Employee Retirement Income Security Act of 1974, as amended (“ERISA”). Because the Plan is an unfunded plan maintained by an employer primarily for the purpose of providing deferred compensation for a select group of management or highly compensated employees, the Plan is exempt from most of ERISA’s requirements. Although the Plan is subject to Part 1 (Reporting and Disclosure) and Part 5 (Administration and Enforcement) of Title I, Subtitle B of ERISA, the Department of Labor has issued a regulation that exempts the Plan from most of ERISA’s reporting and disclosure requirements.
Page 26
TO WHOM SHOULD QUESTIONS CONCERNING THE PLAN BE DIRECTED?
All questions concerning the operation of the Plan (including information concerning the administrators of the Plan) should be directed to:
Director, Compensation
United Technologies Corporation
1 Financial Plaza, MS 504
Hartford, Connecticut 06101
Telephone: 860-728-6381
Page 27
Appendix A
This Appendix A sets forth the United Technologies Corporation Deferred Compensation Plan, as in effect on October 4, 2004 (“Prior Plan”), and as modified thereafter from time to time in a manner that does not constitute a “material modification” for purposes of Section 409A. Amounts that were earned and vested (within the meaning of Section 409A) prior to January 1, 2005, and any subsequent increases in these amounts that are permitted to be treated as grandfathered benefits under Section 409A, are generally subject to and shall continue to be governed by the terms of this Prior Plan.
Page 28
UNITED TECHNOLOGIES CORPORATION
DEFERRED COMPENSATION PLAN
(As amended and restated effective September 1, 2002)
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 deferred all or a portion of their compensation earned with respect to 1985 and 1986. No compensation earned after 1986 was deferred under the Plan until the Plan was amended and restated effective December 15, 1993 to offer eligible executives the opportunity to defer all or a portion of Compensation earned or otherwise payable in 1994 and subsequent years. The Plan is hereby amended and restated, effective September 1, 2002, to reflect administrative changes and enhancements.
ARTICLE II—DEFINITIONS
Beneficiary means the person, persons or entity designated by the Participant to receive the value of his or her Plan Accounts in the event of the Participant’s death. If the Participant fails to designate a Beneficiary, or the Beneficiary (and any contingent Beneficiary) does not survive the Participant, the value 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 defined benefit pension plans or a reduction in the value of employer matching or other contributions under any of the Corporation’s savings or other tax qualified defined contribution retirement plans as a result of the reduction of such Participant’s Compensation pursuant to this Plan.
Class Year means each calendar year for which Compensation has been deferred pursuant to the Plan prior to 2003.
Page 29
Class Year Account means the account established for each Participant for each Class Year for which Compensation has been deferred under the Plan prior to January 1, 2003.
Committee means the United Technologies Corporation Deferred Compensation Committee, which is responsible for the administration of the Plan. The Corporation’s Pension Administration Committee shall appoint the Committee’s members.
Compensation means base salary and Incentive Compensation Payments otherwise payable to a Participant and considered to be wages for purposes of federal income tax withholding, but before any deferral of Compensation 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 Investment Fund that is valued in the manner set forth in Section 5.2.
Deferral Period means the period prior to the receipt of Compensation deferred hereunder.
Election Form means the enrollment form provided by the Committee to Participants electronically or in paper form for the purpose of deferring Compensation under the Plan. Each Participant’s Election Form must specify: the amount to be deferred from base salary and/or from any Incentive Compensation Payment with respect to the following calendar year; the respective amounts to be allocated to the Participant’s Retirement Account and/or Special Purpose Account or Accounts; the percentage allocation among the Investment Funds with respect to each such Account; the method of distribution of each such Account; and the Deferral Period for each Special Purpose Account. There will be a separate Election Form for each calendar year.
Page 30
Incentive Compensation Payment means amounts awarded to a Participant pursuant to the Corporation’s Annual Executive Incentive Compensation Plan.
Investment Fund means the Credited Interest Account, the S&P 500 Account, the UTC Stock Unit Account or such other investment option as may be established by the Committee from time to time. The value of Participants’ Accounts shall be adjusted to replicate the performance of the applicable Investment Fund. Amounts allocated to any Investment Fund do not result in any investment in actual assets corresponding to the Investment Fund.
Participant means an executive of the Corporation who is paid from a US payroll, files a U.S. income tax return, and who elects to defer Compensation under the Plan.
Plan means the United Technologies Corporation Deferred Compensation Plan as amended and restated effective September 1, 2002, and as amended from time to time thereafter.
Plan Accounts means the aggregate value of all Class Year Accounts, Special Purpose Accounts, and Retirement Account, but excluding accounts under the Prior Plan. Accounts under the Prior Plan will be valued and administered 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.
Page 31
Retirement Account means a Plan Account maintained on behalf of the Participant that will be distributed in the manner elected by the Participant commencing in April of the calendar year following the Participant’s Retirement Date.
Retirement means attainment of age 65; attainment of at least age 55 and a minimum of 10 or more years of “continuous service” (as defined in one of the Corporation’s retirement plans); or termination of employment on or after age 50 and before age 55, with a combination of age and years of service equal to at least 65 (the “Rule of 65”).
Retirement Date means the date a Participant terminates employment from the Corporation on or after attaining eligibility for Retirement.
S&P 500 Account means an Investment Fund that is valued in the manner set forth in Section 5.4.
Special Purpose Account means a Plan Account maintained on behalf of the Participant that will be distributed in the manner elected by the Participant commencing in April of the calendar year specified by the Participant. The minimum Deferral Period is five (5) calendar years following the end of the calendar year for which the Account is established.
UTC Common Stock means the common stock of United Technologies Corporation.
UTC Stock Unit Account means the Investment Fund that is valued in the manner set forth in Section 5.3.
Page 32
ARTICLE III—ELIGIBILITY AND PARTICIPATION
Section 3.1—Eligibility
Each employee of the Corporation who is classified as an eligible Participant as of December 31 will be eligible to elect to defer Compensation under the Plan in respect of the subsequent calendar year in accordance with the terms of the Plan and the rules and procedures established by the Committee.
Section 3.2—Participation
Each eligible Participant may elect to participate in the Plan with respect to any calendar year for which the Committee offers the opportunity to defer Compensation by timely filing with the Committee an Election Form, properly completed in accordance with Section 4.1. Participation in the Plan is entirely voluntary.
ARTICLE IV—PARTICIPANT ELECTIONS
Section 4.1—Election
An eligible Participant may participate in the Plan by executing the Election Form provided by the Committee for the subsequent calendar year. The eligible Participant must designate the dollar amount of base salary that will be deferred during such calendar year, and/or the percentage or dollar amount of any Incentive Compensation Payment otherwise payable during such calendar year that will be deferred under the Plan. The minimum dollar amount that a Participant may defer under the Plan for any calendar year is $5,000. Any deferral election made in the Election Form is irrevocable and must be completed and returned to the Committee no later than the December 31 immediately preceding the calendar year to which the election applies, or such earlier date as the Committee may specify. If an eligible executive fails to return a properly completed Election Form by such date, the executive will be ineligible to defer Compensation under the Plan for the following calendar year.
Page 33
Section 4.2—Investment Fund Allocations
When completing the Election Form, the Participant must allocate the amounts to be deferred, in whole percentages divisible by 10, among the available Investment Funds.
Participants may reallocate their existing post-1993 Class Year Accounts, Special Purpose Accounts and Retirement Account among the available Investment Funds as permitted by the Committee, generally once per year. Such reallocations shall be in whole percentages divisible by 10 and, unless otherwise specified by the Committee, shall be effective January 1 of the calendar year following the date of the reallocation election.
Section 4.3—Designation of Beneficiary
Each Participant shall designate a Beneficiary for his or her Plan Accounts on a form provided by the Committee. Such designation may be changed on a form acceptable to the Committee at any time by the Participant. In the event that no Beneficiary designation 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 in a lump sum. 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; (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 procedures set forth in this Section 4.3. In the event of the death of a Participant, distributions shall be made in accordance with Section 6.4.
Page 34
Section 4.4—Deferral Period
Each Participant shall specify in the Election Form the Deferral Period for amounts to be deferred in the following calendar year. The minimum Deferral Period for a Special Purpose Account is five (5) calendar years following the end of the calendar year in which the Account is established. Participants may defer Compensation into a Retirement Account until April of the calendar year following their Retirement Date.
Section 4.5—Distribution Schedule
Each Participant shall specify in the Election Form whether the value of the Participant’s Retirement or Special Purpose 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).
ARTICLE V—PLAN ACCOUNTS
Section 5.1—Accounts
Prior to 2003, the Committee established a Class Year Account for each Participant with respect to each Class Year for which the Participant elected to defer Compensation under the Plan. Each Class Year Account will be maintained separately.
Amounts deferred in 2003 and subsequent calendar years will be allocated to a Retirement Account and/or one or more Special Purpose Accounts as elected by the Participant. The Committee will establish the maximum number of Special Purpose Accounts.
Page 35
Participants’ Plan Accounts shall be allocated or reallocated among Investment Funds in accordance with each Participant’s instructions in the manner set forth in Section 4.2.
Section 5.2—Valuation of Credited Interest Account
Deferred 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 as of the last business day of each month from January through October in the prior calendar year, plus 1%.
Section 5.3—Valuation of UTC Stock Unit Account
Deferred Compensation allocated to the UTC Stock Unit Account will be converted to Stock Units, or fractional Stock Units. A UTC Stock Unit is equal to the closing price of one share of UTC Common Stock as reported on the composite tape of the New York Stock Exchange. The number of Stock Units will be calculated by dividing the amount of Compensation deferred by the closing price of UTC Common Stock on the date the deferred amounts otherwise would have been paid. Stock Units held in the UTC Stock Unit Account will be credited with a dividend payment equal to the Corporation’s declared dividend on UTC Common Stock (if any). Such dividend equivalent payments will be converted to additional Stock Units or fractional units using the closing price of UTC Common Stock as of the date such dividends are credited to the Participant’s UTC Stock Unit Account.
Section 5.4—Valuation of S&P 500 Account
Deferred amounts allocated to the S&P 500 Account will be converted to S&P Account units based on the closing share price of the Vanguard 500 Index Fund as of date the deferred amount is credited to the Participant’s S&P 500 Account. The value of the S&P 500 Account units will fluctuate on a daily basis based on the performance of the Vanguard 500 Index Fund.
Page 36
Section 5.5—Allocation to Accounts
During the year of deferral, deferred amounts will be allocated to the Participant’s Plan Accounts and Investment Funds as of the date the deferred amounts would otherwise have been paid.
Section 5.6—Reports to Participants
The Committee will provide or make available detailed information to Participants regarding the value of Plan Accounts, distribution elections, Beneficiary designations, Investment Fund allocations and credited values for Class Year, Retirement and Special Purpose Accounts, not less than once per year. Such information may be provided via electronic media as determined by the Committee.
Page 37
ARTICLE VI—DISTRIBUTION OF ACCOUNTS
Section 6.1—Timing of Plan Distributions
The value of a Participant’s Retirement Account will be distributed (or begin to be distributed) in April of the calendar year following the Retirement Date. The value of a Participant’s Special Purpose Account will be distributed (or begin to be distributed) in April of the specified year. This means, for example, that if a deferral election specifies a Deferral Period until 2015, distribution will occur in April of 2015.
The value of a Participant’s Class Year Account will be distributed (or begin to be distributed) in April of the last year of the Deferral Period. Upon Retirement, the value of a Participant’s Class Year Account will be distributed (or begin to be distributed) in April next following the Retirement Date, or in April of the calendar year following the Retirement Date, as elected.
Section 6.2—Method of Distribution
Each Class Year, Retirement and Special Purpose Account will be distributed in a single lump-sum cash payment, or in a series of annual cash installment payments, in accordance with the Participant’s election with respect to each such 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, Retirement or Special Purpose Account, the full value of the Participant’s Plan Accounts will be distributed in a lump-sum cash payment in April following the date of termination, regardless of the distribution option elected.
Page 38
Section 6.4—Distribution in the Event of Death
In the event of the death of a Participant prior to attaining eligibility for Retirement, and before the end of the Deferral Period with respect to any Plan Account, the full value of such Plan Accounts will be distributed to the designated Beneficiary in a lump sum as soon as administratively feasible.
In the event of the death of a Participant prior to attaining eligibility for Retirement, but after the end of the Deferral Period with respect to any Plan Account, the full value of such Plan Accounts will be distributed to the designated Beneficiary in accordance with the Participant’s distribution election on file.
In the event of death of a Participant after attaining eligibility for Retirement, the full value of the Participant’s Plan Accounts will be distributed to the Beneficiary in accordance with the Participant’s distribution elections on file.
If the Beneficiary is the Participant’s estate, the full value of the Participant’s Plan Accounts will be paid in a single lump sum as soon as administratively feasible following the Participant’s date of death.
In the event of the death of the Beneficiary (and any contingent Beneficiary) while receiving distributions from the Plan, the full value of the applicable Plan Accounts will be paid in a single lump sum to such Beneficiary’s estate as soon as administratively feasible.
Page 39
Section 6.5—Hardship Distribution
The Committee may, in its sole discretion, upon finding that the Participant (or Beneficiary in the event of a Participant’s death) has suffered an unforeseen, severe and immediate financial emergency, permit such Participant to withdraw a portion of the value of the Participant’s Plan Accounts 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 Accounts as of the most recent date available. The Committee will determine from which Special Purpose, Retirement or Class Year Accounts and associated Investment Funds hardship distributions will be made. Any Participant who is an officer or director of the Corporation within the meaning of Section 16 of the Securities Exchange Act of 1934 is not eligible for financial hardship distributions.
Section 6.6—Disability
In the event of the disability of a Participant, as determined under the Corporation’s Long Term Disability Plan, the Participant’s Plan Accounts will be maintained and distributed in accordance with the Participant’s elections on file.
Section 6.7—Distribution from Supplemental Account
The Committee will effect distributions from supplemental retirement plans 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 benefits provided by the defined benefit pension plans in which a Participant incurred a Benefit
Page 40
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.
At the end of each calendar year, the Committee will determine if any Benefit Reduction has been incurred with respect to any of the Corporation’s savings plans or other tax qualified defined contribution retirement plans, and will credit the amount of such Benefit Reduction to the affected Participant’s Plan Accounts as of the last business day of the calendar year. Any such amounts will be allocated on a pro-rata basis to the Participant’s Plan Accounts and Investment Funds in accordance with the Participant’s deferral elections on file for that calendar 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 value of any Plan Accounts as of the date of such amendment. In the event of any change in law or regulation relating to the Plan and the tax treatment of Plan Accounts, the Plan shall, without further action by the Committee, be deemed to be amended to comply with any such change in law or regulation effective the first date necessary to prevent the taxation, constructive receipt or deemed distribution of Plan Accounts prior to the date Plan Accounts would be distributed under the provisions of Article VI.
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 Forms if, in its sole judgment, the
Page 41
continuance of the Plan, the tax, accounting, or other effects thereof, or potential payments hereunder would not be in the best interest 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 elections on file. In the event of the termination of the Plan, each Participant will receive, in a lump-sum cash payment, the value of his or her Plan Accounts.
Section 7.3—No Consent Required
The consent of any Participant, Beneficiary, or other person shall not be required with respect to any amendment, suspension, or termination of the Plan.
ARTICLE VIII—GENERAL PROVISIONS
Section 8.1—Unsecured General Creditor
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 solely those of a general unsecured creditor of the Corporation. No assets will be placed in trust, set aside or otherwise segregated to fund or offset liabilities in respect of the Plan or Participants’ Plan Accounts.
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
Page 42
payments are unassignable and non-transferable. Plan Accounts or payment hereunder, prior to actual payment, will not be subject to attachment or seizure for the payment of any debts, judgments or other obligations. Plan Accounts or other Plan benefit will not 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. Participants and Beneficiaries will have no rights against the Corporation resulting from participation in the Plan other than as specifically provided herein. Nothing in the 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 the Plan will be construed and interpreted according to the laws of the State of Connecticut, to the extent not preempted by federal law.
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.
Page 43
Section 8.6—Notice
Any notice or filing required or permitted to be given to the Committee under the Plan shall be sufficient if sent by first-class mail, to the United Technologies Corporation Deferred Compensation Committee, 1 Financial Plaza, Hartford, Connecticut 06101, Attn: R. Larry Acorn, 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 provided either electronically, hand-delivered, or mailed to the address (or email address, as the case may be) 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 or email system.
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 therefore 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 Accounts shall be a complete discharge of any liability under the Plan with respect to the amount so paid.
Page 44
ARTICLE IX—ADMINISTRATION AND CLAIMS
Section 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.
Section 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 the Participant or Beneficiary receives no response within 60 days, the Participant or Beneficiary may request review by writing to the Committee. The Committee will review the claim or request, and may request additional information or materials that it deems appropriate to the resolution of any issues presented. The decision on
Page 45
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.
Page 46
Exhibit 10.28
United Technologies Corporation
Long Term Incentive Plan
Performance Share Unit Award
Schedule of Terms
This Schedule of Terms describes the material features of the recipient’s Performance Share Unit Award (“Award”) granted under the United Technologies Corporation 2005 Long Term Incentive Plan as amended and restated on April 9, 2008 (the “LTIP”). The Award is subject to this Schedule of Terms and the terms, definitions, and provisions of the LTIP. The LTIP Prospectus contains detailed information about the LTIP and this Award.
1
Performance Share Unit
A Performance Share Unit (a “PSU”) is equal in value to one share of common stock of the Corporation (“Common Stock”). PSUs are generally convertible into shares of Common Stock if and to the extent the associated pre-established performance targets are achieved (see “Vesting” below).
Acknowledgement of Award
The number of PSUs awarded is set forth in the Statement of Award. The recipient must acknowledge and accept the terms and conditions of the PSU Award by signing and returning the designated portion of the Statement of Award to the Stock Plan Administrator by the specified due date.
Vesting
PSUs vest only if pre-established three year performance targets are achieved. Performance targets include: (i) diluted earnings per share; (ii) total shareowner return; (iii) working capital and gross inventory turnover; and (iv) revenue growth. A PSU Award may be subject to a single or multiple performance targets. The Statement of Award will specify the applicable performance targets, the performance period and vesting date, the minimum performance required for vesting, the range of vesting relative to measured performance and, if multiple performance targets apply, the relative weighting of each.
In the event of certain types of misconduct, Awards may be forfeited, including vested Awards and gains realized from prior Awards. See “Forfeiture of Interest and Recoupment of Gains Realized from Prior Awards” on page 3.
No shareowner rights
A PSU is the right to receive a share of Common Stock in the future, subject to continued employment and achievement of performance targets. The holder of a PSU has no voting, dividend or other rights accorded to owners of Common Stock.
Payment/Conversion of PSUs
PSUs will generally be converted into shares of Common Stock, effective as of the vesting date, when the Committee on Compensation and Executive Development of the Corporation’s Board of Directors (the “Committee”) determines if, and to what extent, PSUs have vested as a result of the achievement of performance targets. If performance targets are not met, the PSUs that do not vest will be cancelled without value. PSUs may be paid in cash where local law restricts the distribution of Common Stock.
Termination of Employment
If the recipient terminates employment prior to the end of the performance measurement period for any reason other than death, disability, or retirement (including if the recipient meets the “Rule of 65”, below), unvested PSUs will be cancelled as of the termination date.
Retirement. The recipient is eligible for retirement (including “Rule of 65”) under this Award if the recipient is:
(i) age 65 on date of termination;
(ii) at least age 55 with 10 or more years of continuous service as of the date of termination; or
(iii) meets the “Rule of 65.” The recipient qualifies for the Rule of 65 if termination of employment occurs after age 50, but before age 55, and the sum of age and continuous service adds up to 65 or more.
2
Following retirement, including termination under the Rule of 65, the unvested PSUs that have been held for at least one year prior to the date of retirement will remain outstanding and eligible to vest as scheduled, if and to the extent the Committee determines that performance targets have been achieved.
In all cases, PSUs held for less than one year prior to retirement or termination under the Rule of 65 will be cancelled without value.
Service used to determine eligibility for retirement or the “Rule of 65” will be based on continuous service recognized under the recipient’s UTC retirement plan.
Disability. If employment terminates by reason of disability, unvested PSUs will not be forfeited. As long as recipient the recipient remains disabled under the recipient’s UTC disability plan, PSUs not yet vested will remain eligible to vest per the terms of the Award.
Death. The number of PSUs awarded will vest and be converted to shares of Common Stock (at target) effective as of the date of death. The shares will be delivered to the estate of the recipient as soon as administratively practicable.
Rehire. If the recipient terminates employment and is then rehired by the Corporation before the end of the 90 day period immediately following the date of termination, unvested PSUs that were cancelled because of the termination of employment will be reinstated. If the recipient is rehired by the Corporation after the 90 day period immediately following the date of termination, the recipient will be treated as a new employee and cancelled PSUs will not be reinstated.
Forfeiture of Interests and Recoupment of Gains Realized from Prior Awards
PSUs shall be forfeited and the recipient will be obligated to repay the value realized from the conversion of PSUs into shares of unrestricted Common Stock under the following circumstances:
| (i) | Termination of Employment for Cause; |
| (ii) | A restatement of financial results attributable to the recipient’s actions, whether intentional or negligent; |
| (iii) | The Committee determines that Award vesting was based on incorrect performance measurement calculations. In such event, vesting (and recoupment, if applicable) will be adjusted consistent with the actual, corrected results; |
| (iv) | If within three years following any Termination of Employment, the Committee or the Corporation determines that the recipient engaged in conduct before the recipient’s termination date that would have constituted the basis for a Termination of Employment for Cause; |
| (v) | If at any time during the twenty-four month period immediately following any Termination of Employment, the recipient: |
| (A) | solicits for employment or otherwise attempts to retain the professional services of any individual then employed or engaged by the Corporation (other than a person performing secretarial or similar services) or who was so employed or engaged during the three month period preceding such solicitation; or |
| (B) | publicly disparages the Corporation or any of its officers, directors or senior executive employees or otherwise makes any public statement that is materially detrimental to the interests of the Corporation or such individuals; or |
3
| (vi) | If at any time during the twelve month period following any Termination of Employment, the recipient becomes employed by, consults for or otherwise renders services to any business entity or person engaged in activities that compete with the Corporation or the business unit that employed the recipient, unless the recipient has first obtained the consent of the Committee. A recipient shall be deemed to have been employed by each business unit that employed the recipient within the two-year period immediately prior to the date of the Termination of Employment. |
Adjustments
If the Corporation effects a subdivision or consolidation of shares of Common Stock or other capital adjustment, the number of PSUs (and the number of shares of Common Stock that will be issued upon conversion) shall be adjusted in the same manner and to the same extent as all other shares of Common Stock of the Corporation. In the event of material changes 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 receiving consideration therefore; the spin-off of a subsidiary; the sale of a substantial portion of the Corporation’s assets; in the event of a merger or consolidation in which the Corporation is not the surviving entity; or other extraordinary non-recurring events affecting the Corporation’s capital structure and the value of Common Stock, equitable adjustments shall be made in the terms of outstanding Awards, including the number of PSUs and underlying shares of Common Stock as the Committee determines are necessary or appropriate to prevent an increase or decrease in the value of PSUs relative to Common Stock or the dilution or enlargement of the rights of recipients.
Change of Control
In the event of a change of control or restructuring of the Corporation, the Committee may take certain actions with respect to outstanding Awards to assure fair and equitable treatment of LTIP recipients. Such actions may include: acceleration of the vesting date; offering to purchase an outstanding Award from the holder for its equivalent cash value (as determined by the Committee); or providing for other adjustments or modifications to outstanding Awards as the Committee may deem appropriate.
Awards Not to Affect or Be Affected by Certain Transactions
PSU Awards shall not in any way affect the right or power of the Corporation or its shareowners to effect: (a) any or all adjustments, recapitalizations, reorganizations or other changes in the Corporation’s capital structure or its business; (b) any merger or consolidation of the Corporation; (c) any issue of bonds, debentures, shares of stock preferred to, or otherwise affecting the Common Stock of the Corporation or the rights of the holders of such Common Stock; (d) the dissolution or liquidation of the Corporation; (e) any sale or transfer of all or any part of its assets or business; or (f) any other corporate act or proceeding.
Taxes/Withholding
Recipients are responsible for any income or other tax liability attributable to any Award. The closing price of UTC’s Common Stock on the New York Stock Exchange on the vesting date will be used to calculate income realized from the vesting of PSUs. The Corporation shall take such steps as are appropriate to assure compliance with applicable federal, state and local tax withholding requirements. The Corporation shall, to the extent required by law, have the right to deduct directly from any payment or delivery of shares due to a recipient or from the recipient’s regular compensation, all federal, state and local taxes of any kind required by law to be withheld with respect to the vesting of any PSU. Recipients not based in the United States and foreign nationals who are not permanent residents of the United States must pay the appropriate taxes as required by any country where they are subject to tax. A discussion of U.S. Federal tax treatment of PSUs may be found in the LTIP prospectus.
4
Deferral of Gain (U.S. based executives)
A recipient who qualifies as a Participant under the LTIP PSU Deferral Plan may irrevocably elect to defer the conversion of vested PSUs into shares of Common Stock to a date that is at least five years after the scheduled vesting date. The election to defer the conversion of shares must be made no later than the end of the second year of the performance measurement period, or such earlier date as may be specified by the Committee. Vested PSUs subject to a deferral election will be converted to unfunded deferred share units that will convert into shares of Common Stock on the distribution date as specified in the deferral election and the LTIP PSU Deferral Plan. Deferred share units will be credited with dividend equivalents. Under U.S. income tax law, a recipient will generally not be taxed until the resulting deferred share units are converted to shares of Common Stock and distributed. Deferred share units will not be funded by the Corporation. In this regard, a recipient’s rights to deferred share units are those of a general unsecured creditor of the Corporation. Details of the deferral of PSUs into deferred share units will be provided with the election materials. The opportunity to make such an election is subject to changes in Federal tax law. The Committee reserves the right to discontinue offering PSU deferral elections at any time for any reason it deems appropriate in its sole discretion.
Nonassignability
Unless otherwise prescribed by the Committee, no assignment or transfer of any right or interest of an recipient in any PSU, whether voluntary or involuntary, by operation of law or otherwise, shall be permitted except by will or the laws of descent and distribution. Any attempt to assign such rights or interest shall be void and without force or effect.
Nature of Payments
All Awards made pursuant to the LTIP are in consideration of services performed for the Corporation or the business unit employing the recipient. Any gains realized pursuant to such Awards constitute a special incentive payment to the recipient and shall not be taken into account as compensation for purposes of any of the employee benefit plans of the Corporation or any business unit.
Administration
Under the LTIP, subject to certain limitations, the Committee has delegated to the Chief Executive Officer the authority to grant PSU Awards, and has further delegated the authority to administer and interpret such Awards to the Senior Vice President, Human Resources and Organization, and to such subordinates as he or she may further delegate. Awards to employees of the Corporation who are either reporting persons under Section 16 of the Securities Exchange Act of 1934 (“Insiders”) or members of the Corporation’s Executive Leadership Group will be granted, administered, and interpreted exclusively by the Committee.
Data Privacy
The Corporation maintains electronic records for the purpose of administering the LTIP and individual Awards. In the normal course of plan administration, electronic data may be transferred to different sites within the Corporation and to outside service providers. Acceptance of an Award constitutes consent by the recipient to the transmission of information related to the administration of Awards and the LTIP.
5
Government Contract Compliance
The “UTC Policy Statement on Business Ethics and Conduct in Contracting with the United States Government” calls for compliance with the letter and spirit of government contracting laws and regulations. In the event of a violation of government contracting laws or regulations, the Committee reserves the right to revoke any outstanding Award.
Interpretations
This Schedule of Terms and each Statement of Award are subject in all respects to the terms of the LTIP. In the event that any provision of this Schedule of Terms or any Statement of Award is inconsistent with the terms of the LTIP, the terms of the LTIP shall govern. Any question concerning administration or interpretation arising under the Schedule of Terms or any Statement of Award shall be determined by the Committee or its delegate, and such determination to be final and conclusive upon all parties in interest.
Additional Information
Questions concerning the Plan or Awards and requests for Plan documents can be directed to:
Stock Plan Administrator
United Technologies Corporation
1 Financial Plaza, MS 504
Hartford, CT 06101
stockoptionplans@utc.com
The Corporation and/or its approved Stock Plan Administrator will send any Award-related communications to the recipient’s email address or physical address on record. It is the responsibility of the recipient to ensure the address on record is up-to-date and accurate at all times to ensure delivery of Award-related communications.
6
Exhibit 10.29
United Technologies Corporation
Long Term Incentive Plan
Stock Appreciation Right
Schedule of Terms
This Schedule of Terms describes the material features of the recipient’s Stock Appreciation Right Award (“Award”) granted under the United Technologies Corporation 2005 Long Term Incentive Plan as amended and restated on April 9, 2008 (the “LTIP”). The Award is subject to this Schedule of Terms and the terms, definitions, and provisions of the LTIP. The LTIP Prospectus contains detailed information about the LTIP and this Award.
1
Stock Appreciation Right Award
A Stock Appreciation Right (a “SAR”) provides the recipient with the right to the appreciation in the common stock of the Corporation (“Common Stock”) measured from the date of grant to the date of exercise.
Acknowledgement of Award
The number of SARs awarded and the SAR grant price are set forth in the Statement of Award. The recipient must acknowledge and accept the terms and conditions of the SAR Award by signing and returning the designated portion of the Statement of Award to the Stock Plan Administrator by the specified due date.
Exercise Price (or “Grant Price”)
The Grant Price represents the Fair Market Value of the Corporation’s Common Stock on the date of grant. Fair Market Value means, as of any given date, the closing price of the Corporation’s Common Stock on the New York Stock Exchange.
Vesting and Expiration
The vesting and expiration dates are each set forth in the Statement of Award. SARs may be exercised on or after the vesting date until the earlier of:
| (i) | the expiration date specified in the Statement of Award, at which time the SARs and all associated rights lapse; or |
| (ii) | the last day permitted following termination of employment as specified in “Termination of Employment” (see next page). |
In the event of certain types of misconduct, awards may be forfeited, including vested awards and prior gains realized from exercises. See “Forfeiture of Interest and Recoupment of Gains Realized from Prior Awards” on page 4.
Exercise and Payment
While employed, SARs may be exercised on or after the vesting date until the expiration date using the method prescribed by the Corporation. Unexercised SARs will expire without value on the expiration date. The gross value realized upon the exercise of a SAR will equal the difference between the price at the time of exercise, and the Grant Price. The recipient will generally receive shares of Common Stock upon exercise. SARs may be paid in cash where local law restricts the distribution of Common Stock.
It is the responsibility of the recipient, or a designated representative, to track the expiration of their Award and exercise SARs in a timely manner. The Corporation assumes no responsibility for and will make no adjustments with respect to SARs that expire unexercised. Any communication from the Plan Administrator or the Corporation to the recipient with respect to expiration is provided as a courtesy only.
2
Termination of Employment
There are different provisions based on the circumstances associated with the recipient’s termination of employment.
Retirement. The recipient is eligible for retirement (including “Rule of 65”) under this Award if the recipient is:
(i) age 65 on date of termination;
(ii) at least age 55 with 10 or more years of continuous service as of the date of termination; or
(iii) meets the “Rule of 65.” The recipient qualifies for the Rule of 65 if termination of employment occurs after age 50, but before age 55, and the sum of age and continuous service adds up to 65 or more.
Following retirement, including termination under the Rule of 65, vested SARs (i.e., those held for at least three years while continuously employed) may be exercised for three years following the date of retirement or until the expiration of the SAR, whichever is earlier. Unvested SARs that have been held for at least one year prior to the date of retirement will vest as of the date of retirement and may be exercised for three years thereafter (but not beyond the expiration date).
However, if retirement occurs on or after age 55 and the Corporation consents to the recipient’s retirement, vested SARs may be exercised SARs for their full term until the expiration date. Such consent will be at the sole discretion of the Corporation based on its ability to effectively transition the recipient’s responsibilities as of the retirement date and such other factors as it may deem appropriate.
Service used to determine eligibility for retirement or the Rule of 65 will be based on continuous service recognized under the rules of the UTC retirement plan.
In all cases, SARs held for less than one year as of the date of retirement or termination under the Rule of 65 will be cancelled without value.
Termination. If termination occurs before retirement or reaching the Rule of 65, vested SARs may be exercised for up to 90 days (or until the expiration of the SAR, if earlier) from the date employment with UTC is terminated, whether voluntary or involuntary, including layoff. All unvested SARs are cancelled as of the termination date.
Disability. If employment terminates by reason of disability, vested SARs may be exercised for up to three years from the date of termination (or until the expiration of the SAR, if earlier). Unvested SARs will vest as scheduled and may then be exercised for three years following the vesting date.
Death*. If the recipient dies while an active employee, all unvested SARs immediately vest. The estate will have one year from the date of death to exercise all outstanding SARs. If death occurs following termination of employment, the estate has one year from the date of death in which to exercise all SARs outstanding as of the date of death.
*Different tax rules may apply when the estate or heir exercises the deceased employee’s SARs.
Rehire. If the recipient terminates employment and is then rehired by the Corporation within 90 days, unexercised vested SARs and unvested SARs that were cancelled because of the termination of employment will be reinstated. Unexercised SARs that received accelerated vesting at termination will be subject to the original vesting schedule upon rehire. If the recipient is rehired by the Corporation after the 90 day period immediately following the date of termination, cancelled SARs will not be reinstated.
3
Forfeiture of Interests and Recoupment of Gains Realized from Prior Awards
SARs, whether or not vested, shall be forfeited and the recipient will be obligated to repay gains realized from the exercise of SARs under the following circumstances:
| (i) | Termination of Employment for Cause; |
| (ii) | A restatement of financial results attributable to the recipient’s actions, whether intentional or negligent; |
| (iii) | If within three years following any Termination of Employment, the Committee on Compensation and Executive Development of the Corporation’s Board of Directors (the “Committee”) or the Corporation determines that the recipient engaged in conduct before the recipient’s termination date that would have constituted the basis for a Termination of Employment for Cause; |
| (iv) | If at any time during the twenty-four month period immediately following any Termination of Employment, the recipient: |
| (A) | solicits for employment or otherwise attempts to retain the professional services of any individual then employed or engaged by the Corporation (other than a person performing secretarial or similar services) or who was so employed or engaged during the three month period preceding such solicitation; or |
| (B) | publicly disparages the Corporation or any of its officers, directors or senior executive employees or otherwise makes any public statement that is materially detrimental to the interests of the Corporation or such individuals; or |
| (v) | If at any time during the twelve month period following any Termination of Employment, the recipient becomes employed by, consults for or otherwise renders services to any business entity or person engaged in activities that compete with the Corporation or the business unit that employed the recipient, unless the recipient has first obtained the consent of the Committee. A recipient shall be deemed to have been employed by each business unit that employed the recipient within the two-year period immediately prior to the date of the Termination of Employment. |
Adjustments
If the Corporation effects a Common Stock split or other capital adjustment, the number of SARs (and, if applicable, the exercise price) will be adjusted in the same manner and to the same extent as shares of Common Stock of the Corporation. In the event of material changes in the capital structure of the Corporation such as the payment of a special dividend (other than regular quarterly dividends); the spin-off of a subsidiary; a merger; or other extraordinary non-recurring events affecting the Corporation’s capital structure and the value of Common Stock, equitable adjustments will be made to the terms of outstanding awards as the Committee determines to be necessary or appropriate to prevent either an increase or decrease in the value of SARs relative to Common Stock or the dilution or enlargement of the rights of recipients.
Change of Control
In the event of a change of control or restructuring of the Corporation, the Committee may (in its sole discretion) take actions to assure fair and equitable treatment of LTIP recipients. Such actions may include acceleration of the Vesting Date or offering to purchase an Award for its equivalent cash value (as determined by the Committee).
4
Awards Not to Affect or Be Affected by Certain Transactions
SAR Awards do not limit the right or power of the Corporation or its shareowners to enter into transactions that may affect Common Stock and the value of this Award; examples include: (a) changes in the Corporation’s capital structure or its business; (b) any merger or consolidation of the Corporation; (c) any issue of bonds, debentures, shares of stock preferred to, or otherwise affecting the Common Stock of the Corporation or the rights of the holders of such Common Stock; (d) the dissolution or liquidation of the Corporation; (e) any sale or transfer of all or any part of its assets or business; or (f) any other corporate act or proceeding.
Taxes/Withholding
Recipients are responsible for any income or other tax liability attributable to any Award. Additional details on tax treatment are provided in the LTIP Prospectus. The recipients are encouraged to consult with their personal tax advisor(s). The Corporation will comply with all tax reporting and withholding requirements and has the right to deduct tax withholding from any payment or delivery of shares due to the recipient or from a recipient’s regular compensation.
Nonassignability
No assignment or transfer of any right or interest of a recipient in any SAR, whether voluntary or involuntary, by operation of law or otherwise, will be permitted except by will or the laws of descent and distribution.
Nature of Payments
All Awards made pursuant to the LTIP are in consideration of services performed for the Corporation or the business unit employing the recipient. Any gains realized pursuant to such Awards constitute a special incentive payment to the recipient and will not be taken into account as compensation for purposes of any of the employee benefit plans of the Corporation or any business unit.
Administration
Under the LTIP, subject to certain limitations, the Committee has delegated to the Chief Executive Officer the authority to grant SAR Awards, and has further delegated the authority to administer and interpret such Awards to the Senior Vice President, Human Resources and Organization, and to such subordinates as he or she may further delegate. Awards to employees of the Corporation who are either reporting persons under Section 16 of the Securities Exchange Act of 1934 (“Insiders”) or members of the Corporation’s Executive Leadership Group will be granted, administered, and interpreted exclusively by the Committee.
Data Privacy
The Corporation maintains electronic records for the purpose of administering the LTIP and individual Awards. In the normal course of plan administration, electronic data may be transferred to different sites within the Corporation and to outside service providers. Acceptance of an Award constitutes consent by the recipient to the transmission of information related to the administration of Awards and the LTIP.
Government Contract Compliance
The “UTC Policy Statement on Business Ethics and Conduct in Contracting with the United States Government” calls for compliance with the letter and spirit of government contracting laws and regulations. In the event of a violation of government contracting laws or regulations, the Committee reserves the right to revoke any outstanding Award.
5
Interpretations
This Schedule of Terms and each Statement of Award are subject in all respects to the terms of the LTIP. Any question concerning administration or interpretation arising under the Schedule of Terms or any Statement of Award will be determined by the Committee or the Senior Vice President, Human Resources and Organization, and their determination will be final and conclusive upon all parties in interest.
Additional Information
Questions concerning the Plan or awards and requests for Plan documents can be directed to:
Stock Plan Administrator
United Technologies Corporation
1 Financial Plaza, MS 504
Hartford, CT 06101
stockoptionplans@utc.com
The Corporation and/or its approved Stock Plan Administrator will send any Award-related communications to the recipient’s email address or physical address on record. It is the responsibility of the recipient to ensure the address on record is up-to-date and accurate at all times to ensure delivery of Award-related communications.
6
Exhibit 10.35
UNITED TECHNOLOGIES CORPORATION
INTERNATIONAL DEFERRED COMPENSATION
REPLACEMENT PLAN
ARTICLE I – PREAMBLE
United Technologies Corporation hereby establishes the United Technologies International Deferred Compensation Replacement Plan (“the Plan”), effective January 1, 2005, for the purpose of complying with the requirements of Section 409A of the Internal Revenue Code. The Plan applies to any amounts credited or accrued, after December 31, 2004, to an employee of a UTC Company who accrues benefits or has amounts credited under a deferred compensation plan or arrangement outside the United States, where such amounts are or become subject to Section 409A. Such amounts shall automatically be credited and deferred under and distributed from this Plan in lieu of the Non-US Plan. This Plan shall be administered and construed to effectuate the foregoing intent.
From January 1, 2005 through December 31, 2008, the Plan has been operated in good faith compliance with Section 409A in accordance with guidance provided by the Internal Revenue Service.
1. INTRODUCTION & PURPOSE
The Plan shall be maintained as an unfunded plan solely for the purpose of deferring compensation and providing retirement benefits to certain employees who have deferred income or are eligible for benefits under a Non-US Plan, where such amounts would be deemed to be “deferred compensation” within the meaning of and subject to Section 409A. The amount of deferred income, retirement benefit or survivor benefit shall be credited under this Plan, in lieu of the Non-US Plan.
2. EFFECTIVE DATE
The Plan shall be effective January 1, 2005.
PAGE 1
3. DEFINITIONS
Beneficiary means the person, persons or entity designated in writing by a Participant to receive the value of his or her Plan Account in the event of the Participant’s death, , in accordance with the terms of this Plan. If a Participant fails to designate a Beneficiary under this Plan, the Beneficiary or Contingent Annuitant shall be determined under the Non-US Plan. If the Beneficiary (and any contingent Beneficiary) does not survive the Participant or if no Beneficiary is designated under the Non-US Plan, the value of the Participant’s Plan Account will be payable to the estate of the Participant, in accordance with the terms of this Plan.
Code means the Internal Revenue Code of 1986, as amended from time to time, and any successor thereto. Reference to any section of the Internal Revenue Code shall include any final regulations or other published guidance interpreting that section.
Corporation means United Technologies Corporation.
Committee means the United Technologies Corporation Deferred Compensation Committee, which is responsible for the administration of the Plan. The Corporation’s Pension Administration Committee shall appoint the Committee’s members.
Covered Participant means an employee who participates in a Non-US Plan who is subject to Section 409A of the Code.
Disability means permanent and total disability as determined under the Corporation’s long-term disability plan applicable to the Participant, or if there is no such plan applicable to the Participant, “Disability” means a determination of total disability by the Social Security Administration; provided that, in either case, the Participant’s condition also qualifies as a “disability” for purposes of Section 409A(a)(2)(C) of the Code.
Election Form means the form provided to Participants electronically or in paper form for the purpose of electing the timing and form of payment for a Plan Account.
PAGE 2
Non-US Plan means a deferred compensation plan or arrangement or defined benefit retirement benefit plan maintained the Corporation or a UTC Company outside of the United States. All amounts credited or deferred under the Non-US Plan prior to December 31, 2004 and amounts credited or deferred under the Non-US Plan which would not be deemed to be subject to 409A, and any subsequent increases in these amounts, shall continue to be subject to the terms and conditions of the Non-US Plan and shall not be affected by this Plan.
Plan Account means an account maintained for Covered Participants with respect to 409A Amounts credited or accrued under the Plan.
Retirement means Separation from Service on or after age 50 and attainment of age 65; Separation from Service on or after age 50 and attainment of at least age 55 and a minimum of 10 or more years of “continuous service” (as defined in the UTC Employee Retirement Plan as in effect on January 1, 2008); or a Rule of 65 termination.
Retirement Date means the date of a Participant’s Retirement.
“Rule of 65” Termination means Separation from Service on or after age 50 and before age 55, with a combination of age and years of “continuous service” (as defined in the UTC Employee Retirement Plan as in effect on January 1, 2008) equal to at least 65.
Separation from Service means a Participant’s Termination of Employment with all UTC Companies, other than by reason of death or Disability that qualifies as a “separation from service” for purposes of Section 409A of the Code. A Separation from Service will be deemed to occur where the Participant and the UTC Company that employs the Participant reasonably anticipate that the bona fide level of services the Participant will perform (whether as an employee or as an independent contractor) will be permanently reduced to a level that is less than thirty-seven and a half percent (37.5%) of the average level of bona fide services the Participant performed during the immediately preceding 36 months (or the entire period the Participant has provided services if the Participant has been providing services to the UTC Companies for less than 36 months.) A Participant shall not be considered to have had a Separation from Service as a result of a transfer from one UTC Company to another UTC Company.
PAGE 3
Specified Employee means each of the 50 highest-paid executives of the Corporation and its Subsidiaries, effective annually as of March 31st, based on annual salary and incentive compensation paid in the prior year. The term includes both U.S. and non-U.S. employees.
UTC Company means United Technologies Corporation or any entity controlled by or under common control with United Technologies Corporation within the meaning of Section 414(b) or (c) of the Code (but substituting “at least 20 percent” for “at least 80 percent” as the control threshold used in applying Sections 414(b) and (c)).
409A Amount means the amount credited, or the actuarial present value of a benefit accrued under a Non-US Plan that is or becomes subject to Section 409A of the Code.
4. ELIGIBILITY
Each employee of a UTC Company who is a Participant in a Non-US Plan shall be become a Covered Participant under this Plan if and to the extent the Participant’s Accrued Benefit under a Non-US Plan is subject to 409A. Participation shall commence automatically without any election or other action required of the employee to become a Covered Participant. In no event shall any person who is not entitled to benefits under a Non-US Plan be eligible for benefits under this Plan. An employee of the UTC Companies who becomes a Covered Participant under this Plan shall be referred to herein as a “Participant.”
5. DETERMINATION OF PLAN BENEFIT
The amount of the benefit payable from this Plan to or in respect of a Participant shall equal the 409A Amount credited or accrued under any Non-US Plan in which the employee participates.
6. PLAN ACCOUNTS
Plan Accounts shall include amounts credited or accrued to Participants’ Accounts under the Plan on or after January 1, 2005.
PAGE 4
7. FORM OF PLAN BENEFIT
(a) Plan benefits shall be paid to the Participant, or on his or her behalf to any Contingent Annuitant or Beneficiary (as designated under the Non-US Plan), as a single life annuity or actuarially equivalent life annuity, unless the Participant timely makes an election for an alternative form of payment in accordance with Subparagraph (c) of this Section 7.
(b) A Participant may elect separate payment methods for benefits payable under the Non-US Plan and this Plan.
(c) Unless a Participant elects an alternative form of the benefit payment, benefits earned under the Plan will be paid as a single life annuity or actuarially equivalent life annuity. A Participant may elect to receive a single lump-sum payment or a series of 2 to 10 annual installment payments. A payment election under the Plan shall be made on an electronic or written Election Form, completed and submitted to the Committee no later than December 31st of the calendar year prior to the year in which the period of service commences on which the benefit is based. A change in actuarially equivalent annuities shall not be deemed to be a change in payment election for purposes of this Plan. Except as provided below in Subsection (d), a Participant’s payment election shall become irrevocable on the election deadline date.
(d) Change in Payment Election. A Participant may make a one-time irrevocable election to change the form of payment that the Participant elected under Section 7(c), subject to the following requirements:
(i.) The new election must be made at least twelve months prior to the date payments are scheduled to commence (and the new election shall be ineffective if the payment commencement date occurs within twelve months after the date of the new election);
(ii.) The new election will not take effect until at least twelve months after the date when the Participant submits a new Election Form to the Committee; and
(iii.) The new benefit payment commencement date must be at least five years later than the date on which payments commence under the current election.
PAGE 5
(e) The payment of a monthly annuity, lump-sum or annual installment distribution in accordance with this Section 7 shall be in full satisfaction of all of the Corporation and/or any UTC Company’s obligations with respect to the Participant under the Plan.
8. DISTRIBUTION OF ACCOUNTS
(a) Except as provided in Section 7(d) (concerning the five-year delay following a Change in Payment Election), Section 8(b) (concerning Separation from Service before Attaining Age Fifty), and 8(c) (concerning distributions to Specified Employees), the value of a Participant’s Plan Accounts will be distributed (or begin to be distributed) to the Participant in April of the calendar year following the Retirement Date, if the benefit is a retirement benefit. If the benefit is income deferred until a set year, the value of a Participant’s Plan Account will be distributed (or begin to be distributed) to the Participant in April of the set year. This means, for example, that if a deferral election specifies a Deferral Period until 2015, distribution will occur in April of 2015.
(b) Separation from Service before Attaining Age Fifty. If a Participant’s Separation from Service occurs before the Participant attains age fifty (50), the full value of the Participant’s Plan Account will be distributed to the Participant in a lump-sum payment in April following the Participant’s Separation from Service (or, if the Participant is a Specified Employee at the time of his or her Separation from Service, on the date provided in Subsection 8(c), below, if later) regardless of the distribution option elected.
If a Participant has a Separation from Service and is later re-hired by a UTC Company, the Participant’s age at the time of the Participant’s first Separation from Service will determine how the Participant’s Plan Account at the time of the first Separation from Service is distributed. If the Participant accumulates any additional deferrals after the Participant is re-hired, the Plan shall separately account for the additional deferrals (and related investment gains or losses), and the Participant’s age at the time of the Participant’s second Separation from Service will determine how the additional amounts are distributed.
PAGE 6
(c) Separation from Service of Specified Employees. If the Participant is a Specified Employee on the date of the Participant’s Separation from Service, distribution of the Participant’s Plan Account to the Participant that is made on account of the Participant’s Separation from Service will not be made or commence earlier than the first day of the seventh month following the date of Separation from Service.
(d) Administrative Adjustments in Payment Date. A payment is treated as being made on the date when it is due under the Plan if the payment is made on the due date specified by the Plan, or on a later date that is either (i) in the same calendar year (for a payment whose specified due date is on or before September 30), or (ii) by the 15th day of the third calendar month following the date specified by the Plan (for a payment whose specified due date is on or after October 1). A payment also is treated as being made on the date when it is due under the Plan if the payment is made not more than 30 days before the due date specified by the Plan. In no event, will a payment to a Specified Employee be made or commence earlier than the first day of the seventh month following the date of Separation from Service. A Participant may not, directly or indirectly, designate the taxable year of a payment made in reliance on the administrative rules in this Section 8(c).
9. DESIGNATION OF BENEFICIARY
Each Participant shall designate a Beneficiary for his or her Plan Account on an electronic or written form provided by the Committee. A Participant may change such designation on an electronic or written form acceptable to the Committee and received by the Committee at any time before the Participant’s death. If a Participant fails to designate a Beneficiary under this Plan, the Beneficiary or Contingent Annuitant shall be determined under the Non-US Plan. If the Beneficiary (and any contingent Beneficiary) does not survive the Participant or if no Beneficiary is designated under the Non-US Plan, the value of the Participant’s Plan Account will be payable to the estate of the Participant, in accordance with the terms of this Plan.
PAGE 7
10. DISTRIBUTION IN THE EVENT OF DEATH
In the event of the death of a Participant, the full value of the Participant’s Plan Account will be distributed to the designated Beneficiary in a lump sum on the first business day of the month following the Participant’s death.
11. DISABILITY
In the event of the disability of a Participant, the Participant’s Plan Accounts will be maintained and distributed in accordance with the Participant’s elections on file.
12. MINIMUM BALANCE PAYOUT PROVISION
If a Participant’s Plan Account balances under this Plan (and under all other nonqualified deferred compensation plans of the Corporation that are required to be aggregated with this Plan under Section 409A of the Code), determined at the time of the Participant’s Separation From Service, is less than the amount set as the limit on elective deferrals under Section 402(g)(1)(B) of the Code in effect for the year in which the Participant’s Separation From Service occurs, the Committee may distribute the Participant’s entire Plan Account balances in a lump sum on the first business day following the Participant’s Separation From Service, notwithstanding a Participant’s election to receive a different form of distribution.
13. FUNDING
The Plan shall be maintained as an unfunded Plan that is not intended to meet the qualification requirements of Section 401 of the Code. All benefits under the Plan shall be payable solely from the general assets of the Corporation. In this regard, the rights of each Participant, Contingent Annuitant and Beneficiary under the Plan with respect to his or her Plan benefit shall be those of a general unsecured creditor of the Corporation. The Corporation shall not undertake to set aside assets in trust or otherwise segregate assets to fund its obligations under the Plan.
PAGE 8
14. NONASSIGNABILITY
No Participant, Contingent Annuitant or Beneficiary or any other person shall have the right to sell, assign, transfer, pledge, or otherwise encumber any interest in the Plan. All Plan benefits are unassignable and non-transferable and shall not be subject to attachment or seizure for the payment of any debts, judgments or other obligations. No Plan interest shall be transferred by operation of law in the event of the bankruptcy or insolvency of a Participant, Contingent Annuitant, or Beneficiary.
15. NO CONTRACT OF EMPLOYMENT
Participation in the Plan shall not be construed to constitute a direct or indirect contract of employment between any UTC Company and the Participant. Nothing in the Plan shall be deemed to give a Participant the right to be retained in the service of a UTC Company for any length of time. Participants, Contingent Annuitants and Beneficiaries shall have no rights against any UTC Company resulting from participation in the Plan other than as specifically provided herein.
16. OPERATION AND 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 question of administration or interpretation arising under the Plan shall be determined by the Committee (or its delegate) in its full discretion, and its decision shall be final and binding upon all parties.
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 at United Technologies Corporation, 1 Financial Plaza, Hartford, Connecticut 06101, Attn: Deferred Compensation Committee. The Committee shall respond in writing as soon as practicable.
PAGE 9
17. TAXES/WITHHOLDING
The Corporation shall have the right to withhold any federal, state, local or foreign taxes of any kind required to be withheld from all deferrals and distributions under the Plan that the Corporation reasonably determines to be required by law to be withheld from such deferrals and distributions.
18. GOVERNING LAW
The provisions of the Plan will be construed and interpreted according to the laws of the State of Connecticut, to the extent not preempted by federal law.
19. AMENDMENT
The Corporation may, at any time, amend the Plan in whole or in part, provided that no amendment may decrease the value of any Plan Accounts as of the date of such amendment. In the event of any change in law or regulation relating to the Plan and the tax treatment of Plan Accounts, the Plan shall, without further action by the Committee, be deemed to be amended to comply with any such change in law or regulation effective as of the first date necessary to prevent the taxation, constructive receipt or deemed distribution of Plan Accounts prior to the date Plan Accounts would be distributed under the provisions of Section 8.
20. PLAN SUSPENSION AND TERMINATION
(a) The Committee, may, at any time, suspend or terminate the Plan with respect to new or existing Election Forms 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 interest of the Corporation or for any other reason.
PAGE 10
(b) In the event of the suspension of the Plan, no additional deferrals 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 elections on file.
(c) Upon the termination of the Plan with respect to all Participants, and the termination of all arrangements sponsored by the Corporation or its affiliates that would be aggregated with the Plan under Section 409A of the Code, the Corporation shall have the right, in its sole discretion, and notwithstanding any elections made by the Participant, to pay the Participant’s Plan Account in a lump sum, to the extent permitted under Section 409A. All payments that may be made pursuant to this Section 19 shall be made no earlier than the thirteenth month and no later than the twenty-fourth month after the termination of the Plan. The Corporation may not accelerate payments pursuant to this Section 19 if the termination of the Plan is proximate to a downturn in the Corporation’s financial health within the meaning of Treas. Reg. section 1.409A-3(j)(4)(ix)(C)(1). If the Corporation exercises its discretion to accelerate payments under this Section 19, it shall not adopt any new arrangement that would have been aggregated with the Plan under Section 409A within three years following the date of the Plan’s termination.
21. COMPLIANCE WITH SECTION 409A
To the extent that rights or payments under this Plan are subject to Section 409A of the Internal Revenue Code, the Plan shall be construed and administered in compliance with the conditions of Section 409A and regulations and other guidance issued pursuant to Section 409A for deferral of income taxation until the time the compensation is paid. Any distribution election that would not comply with Section 409A of the Code shall not be effective for purposes of this Plan. To the extent
PAGE 11
that a provision of this Plan does not comply with Section 409A of the Code, such provision shall be void and without effect. The Corporation does not warrant that the Plan will comply with Section 409A of the Code with respect to any Participant or with respect to any payment. In no event shall UTC Company; any director, officer, or employee of a UTC Company (other than the Participant); or any member of the Committee be liable for any additional tax, interest, or penalty incurred by a Participant or Beneficiary as a result of the Plan’s failure to satisfy the requirements of Section 409A of the Code, or as a result of the Plan’s failure to satisfy any other requirements of applicable tax laws.
22. NO CONSENT REQUIRED
The consent of any Participant, Beneficiary, or other person shall not be required with respect to any amendment, suspension, or termination of the Plan.
23. 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.
24. NOTICE
Any notice or filing required or permitted to be given to the Committee under the Plan shall be sufficient if sent by first-class mail, to the United Technologies Corporation Deferred Compensation Committee, 1 Financial Plaza, Hartford, Connecticut 06101, Attn: Director, Compensation, MS-504. Any notice or filing required or permitted to be given to any Participant or Beneficiary under the Plan
PAGE 12
shall be sufficient if provided either electronically, hand-delivered, or mailed to the address (or email address, as the case may be) 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 or email system.
25. SUCCESSORS
The provisions of the Plan shall bind and inure to the benefit of the Corporation, and its successors and assigns. The term successors shall include any corporate or other business entity that 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 entity.
26. BENEFIT CLAIMS PROCEDURE
A Participant or Beneficiary who believes that he or she has been denied a benefit to which he or she is entitled under the Plan (referred to in this Section 26 as a “Claimant”) may file a written request with the Committee setting forth the claim. The Committee shall consider and resolve the claim as set forth below.
(a) Upon receipt of a claim, the Committee shall advise the Claimant that a response will be forthcoming within 90 days. The Committee may, however, extend the response period for up to an additional 90 days for reasonable cause, and shall notify the Claimant of the reason for the extension and the expected response date. The Committee shall respond to the claim within the specified period.
(b) If the claim is denied in whole or part, the Committee shall provide the Claimant with a written decision, using language calculated to be understood by the Claimant, setting forth (1) the
PAGE 13
specific reason or reasons for such denial; (2) the specific reference to relevant provisions of this Plan on which such denial is based; (3) a description of any additional material or information necessary for the Claimant to perfect his or her claim and an explanation why such material or such information is necessary; (4) appropriate information as to the steps to be taken if the Claimant wishes to submit the claim for review; (5) the time limits for requesting a review of the claim; and (6) the Claimant’s right to bring an action for benefits under Section 502(a) of ERISA.
(c) Within 60 days after the Claimant’s receipt of the written decision denying the claim in whole or in part, the Claimant may request in writing that the Committee review the determination. The Claimant or his or her duly authorized representative may, but need not, review the relevant documents and submit issues and comment in writing for consideration by the Committee. If the Claimant does not request a review of the initial determination within such 60-day period, the Claimant shall be barred from challenging the determination.
(d) Within 60 days after the Committee receives a request for review, it will review the initial determination. If special circumstances require that the 60-day time period be extended, the Committee will so notify the Claimant and will render the decision as soon as possible, but no later than 120 days after receipt of the request for review.
(e) All decisions on review shall be final and binding with respect to all concerned parties. The decision on review shall set forth, in a manner calculated to be understood by the Claimant, (1) the specific reasons for the decision, including references to the relevant Plan provisions upon which the decision is based; (2) the Claimant’s right to receive, upon request and free of charge, reasonable access to and copies of all documents, records, and other information, relevant to his or her benefits; and (3) the Claimant’s right to bring an action for benefits under Section 502(a) of ERISA.
PAGE 14
Exhibit 10.36
UNITED TECHNOLOGIES CORPORATION
LTIP PERFORMANCE SHARE UNIT DEFERRAL PLAN
ARTICLE I—PREAMBLE
The United Technologies Corporation LTIP Performance Share Unit Deferral Plan (the “Plan”) was adopted pursuant to Section 13(f) of the United Technologies Corporation 2005 Long Term Incentive Plan (the “LTIP”) approved by the shareholders in April 2005. The purpose of this Plan is to provide eligible Participants with the opportunity to defer receipt of shares of Common Stock in respect of Performance Share Units (“PSUs”) awarded under the LTIP. In addition to the terms and conditions set forth below, the Plan is subject to the provisions of the LTIP, which are incorporated herein by this reference.
This Plan incorporates the requirements of Section 409A of the Internal Revenue Code. From January 1, 2007 through December 31, 2008, the Plan has been operated in good faith compliance with Section 409A in accordance with guidance provided by the Internal Revenue Service.
ARTICLE II—DEFINITIONS
Except as defined in this Article II, terms used in this Plan have the definitions of the terms as set forth in Section 2 of the LTIP:
a) Beneficiary means the person, persons or entity designated on an electronic or written form by the Participant to receive the value of his or her Plan Account in the event of the Participant’s death. If the Participant fails to designate a Beneficiary, or the Beneficiary (and any contingent Beneficiary) does not survive the Participant, the value of the Participant’s Plan Account will be paid to the estate of the Participant.
1
b) Code means the Internal Revenue Code of 1986, as amended from time to time, and any successor thereto. References to any section of the Internal Revenue Code shall include any final regulations or other published guidance interpreting that section.
c) Committee means the Committee on Compensation and Executive Development of the Corporation’s Board of Directors, except to the extent that said Committee has delegated authority to administer this Plan to the Corporation’s Deferred Compensation Committee.
d) Corporation means United Technologies Corporation.
e) Deferral Period means the period designated (or deemed to be designated) by the Participant in accordance with this Plan that ends on the Participant’s Retirement Date or on a Specific Deferral Date.
f) Deferred Share Units means PSUs which have been deferred pursuant to the terms of this Plan, and dividend equivalents that are credited and invested pursuant to Section 7.1.
g) Default Deferral Period means the minimum Deferral Period of five (5) years following the date on which the Performance Cycle Account is established.
h) Default Distribution means payment in a lump sum distribution.
i) Disability means permanent and total disability as determined under the Corporation’s long-term disability plan applicable to the Participant, or if there is no such plan applicable to the Participant, “Disability” means a determination of total disability by the Social Security Administration; provided that, in either case, the Participant’s condition also qualifies as a “disability” for purposes of Section 409A(a)(2)(C) of the Code.
2
j) Distribution Date means the date on which distributions commence following the Valuation Date.
k) Election Form means the enrollment form provided to Participants electronically or in paper form for the purpose of deferring PSUs under the Plan. Each Participant’s Election Form must specify the percentage of the Award to be deferred with respect to the applicable Performance Cycle, the form of distribution elected, and the distribution start date (see also Default Deferral Period and Default Distribution). There will be a separate Election Form for each Performance Cycle.
l) Participant means an executive of a UTC Company who is paid from a U.S. payroll, files a U.S. income tax return, has been awarded PSUs and elects to defer a portion of such PSUs pursuant to the terms of this Plan.
m) Performance Cycle means the three-year performance measurement period during which the pre-established performance targets are measured for each PSU Award.
n) Performance Cycle Account means the account established for each Participant for each Performance Cycle for which PSUs have been deferred under the Plan. The Performance Cycle Account shall be established on the date when the PSUs vest.
o) Plan means the United Technologies Corporation LTIP Performance Share Unit Deferral Plan, as amended from time to time hereafter.
3
p) Plan Account means the aggregate value of all Performance Cycle Accounts.
q) Retirement means Separation From Service on or after age 50 and attainment of age 65; Separation From Service on or after age 50 and attainment of at least age 55 and a minimum of 10 or more years of “continuous service” (as defined in the UTC Employee Retirement Plan as in effect on January 1, 2008); or a “Rule of 65” Termination.
r) Retirement Date means the date of a Participant’s Retirement.
s) “Rule of 65” Termination means Separation From Service on or after age 50 and before age 55, with a combination of age and years of “continuous service” (as defined in the UTC Employee Retirement Plan as in effect on January 1, 2008) equal to at least 65.
t) Separation from Service means a Participant’s Termination of Employment with all UTC Companies, other than by reason of death or Disability that qualifies as a “separation from service” for purposes of Section 409A of the Code. A Separation from Service will be deemed to occur where the Participant and the UTC Company that employs the Participant reasonably anticipate that the bona fide level of services the Participant will perform (whether as an employee or as an independent contractor) for UTC Companies will be permanently reduced to a level that is less than thirty-seven and a half percent (37.5%) of the average level of bona fide services the Participant performed during the immediately preceding 36 months (or the entire period the Participant has provided services if the Participant has been providing services to UTC Companies for less than 36 months.) A Participant shall not be considered to have had a Separation from Service as a result of a transfer from one UTC Company to another UTC Company.
4
u) Specific Deferral Date means a specified date, not less than five (5) years following the date on which the Performance Cycle Account is established.
v) Specified Employee means each of the 50 highest-paid executives of the Corporation and its Subsidiaries, effective annually as of March 31st, based on annual salary and incentive compensation paid in the prior year. The term includes both U.S. and non-U.S. employees.
w) Share means a share of UTC Common Stock.
x) UTC Common Stock means the common stock of United Technologies Corporation.
y) UTC Company means United Technologies Corporation or any entity controlled by or under common control with United Technologies Corporation within the meaning of Section 414(b) or (c) of the Code (but substituting “at least 20 percent” for “at least 80 percent” as the control threshold used in applying Sections 414(b) and (c)).
z) Valuation Date means the date on which Deferred Share Units included in a Participant’s Performance Cycle Account are valued prior to distribution. If the distribution is made because of the Participant’s Separation from Service prior to attaining age 50, the Valuation Date for the lump sum distribution will be the date of Separation from Service. If the distribution is made because of the Participant’s Retirement, or attainment of Separation from Service after attaining age 50, and the distribution is a lump sum, the Valuation Date will be the date of Separation from Service. If the distribution is made because of the Participant’s Retirement, or attainment of Separation from Service after attaining age 50, and the distribution is installments, the Valuation Date will be the July 31 st following the Separation from Service Date and each subsequent July 31st thereafter for the remaining installments. If the distribution is made because the Deferral
5
Period has ended on a Specific Deferral Date, the Valuation Date for the lump sum or initial installment distribution will be the July 31st following the Specific Deferral Date and each subsequent July 31st thereafter. If the distribution is made as a result of the death of the Participant, the Valuation Date will be the date of death. In the event that the New York Stock Exchange is closed on any of the foregoing days, the Valuation Date will be the next business day.
ARTICLE III—ELIGIBILITY AND PARTICIPATION
Section 3.1—Eligibility
Each employee of a UTC Company who is classified as an eligible Participant at the time of the deferral election will be eligible to participate in the Plan in respect of that Performance Cycle in accordance with the terms of the Plan.
Section 3.2—Participation
Each eligible Participant may elect to participate in the Plan with respect to any Performance Cycle for which he/she receives an award of PSUs, and for which the opportunity to defer PSUs is offered, by timely filing an Election Form, properly completed in accordance with Section 4.1. Participation in the Plan is entirely voluntary.
6
ARTICLE IV—PARTICIPANT ELECTIONS AND DESIGNATIONS
Section 4.1—Election
An eligible Participant who has been awarded PSUs may, on or before the election deadline established by the Committee, make an electronic or written election on the Election Form provided by the Committee to defer the Participant’s vested PSUs.
Section 4.2—Election Amount
An eligible Participant must designate in the Election Form the percentage of vested PSUs (rounded down to the nearest whole share) that will be deferred under the Plan for the Performance Cycle. The minimum percentage of vested PSUs that a Participant may defer under the Plan for any Performance Cycle is 10% and the maximum is 100%.
Section 4.3—Election Date
An electronic or written Election Form must be completed and submitted to the Committee no later than the election deadline for that Performance Cycle. If the PSUs qualify as “performance-based compensation” for purposes of Section 409A of the Code when they are awarded, the election deadline shall be no later than December 31st of the second year of the Performance Cycle, provided that the compensation provided under the PSUs has not become reasonably ascertainable by the election deadline, and provided further that the Participant has performed services continuously from the beginning of the Performance Cycle (or, if later, the date when the performance criteria were established if the award is made after the beginning of the Performance Cycle) until the election deadline. The Committee may specify an election
7
deadline for any Performance Cycle that is earlier than the latest permissible deadline described in this paragraph, or may specify before the election deadline that particular PSUs are not eligible for deferral. Except as provided below in Section 4.6 (Change in Election) and Section 7.2 (Unforeseeable Emergency), the choices reflected in the Participant’s Election Form shall become irrevocable on the election deadline (subject, however, to the provisions of the Plan that provide for non-elective payments in the event of death, change in control, small account balances, and other special circumstances). If an eligible executive fails to submit a properly completed Election Form by the election deadline, the executive will be ineligible to participate in the Plan for the applicable Performance Cycle.
Section 4.4—Deferral Period
Each Participant shall specify in the Election Form the Deferral Period for amounts to be deferred. Failure to specify a deferral period shall result in a deferral for the Default Deferral Period. A Participant may elect a Deferral Period that ends either (1) on a Specific Deferral Date that is at least five (5) years following the date on which the Performance Cycle Account is established (but not later than the Participant’s 72nd birthday), or (2) on the Participant’s Retirement Date. If the Participant’s 72nd birthday falls less than five (5) years after the date on which the Performance Cycle Account is established, the Participant’s Deferral Period will end on the Participant’s Retirement Date.
Section 4.5—Distribution Election
At the time the Participant first elects to defer his or her vested PSUs under Section 4.1, the Participant must further make an election to have the Performance Cycle Account distributed
8
in a lump sum or in two to fifteen annual installments. If no distribution election is made, the Participant’s Performance Cycle Account will be distributed in a lump sum. If a Participant elects to receive the Performance Cycle Account in installments, the amount of each installment shall be determined by dividing the total Performance Cycle Account Balance on each Valuation Date by the number of installments remaining, rounded down to the nearest whole share.
Section 4.6—Change in Election
A Participant who has made an election to defer PSUs under the Plan may make a one time irrevocable election to extend the Deferral Period and/or change the form of distribution for a Performance Cycle Account. With respect to each Performance Cycle Account, the extended Deferral Period shall not be less than five (5) years following the date on which distribution would otherwise have occurred. A deferral extension election and/or change to the form of distribution must meet all of the following requirements:
| i. | The new election must be made at least twelve months prior to the date on which payments will commence under the current election (and the new election shall be ineffective if the payment commencement date under the current election occurs within twelve months after the date of the new election); |
| ii. | The new election will not take effect until at least twelve months after the date when the new election is submitted in a manner acceptable to the Committee; |
9
| iii. | The new payment commencement date must be at least five years later than the date on which payments would commence under the current election; and |
| iv. | In no case, may a Participant extend the Deferral Period beyond the Participant’s 72nd birthday. If the Participant’s 72nd birthday falls less than five (5) years after the date on which payments would commence under the current election, the Participant is not eligible to extend his or her Deferral Period or to change the form of distribution. |
Section 4.7—Designation of Beneficiary
Each Participant shall designate a Beneficiary for his or her Plan Account on an electronic or written form provided by the Committee. A Participant may change such designation on an electronic or written form acceptable to the Committee and received by the Committee at any time before the Participant’s death. In the event that no Beneficiary designation is filed with the Committee, or if the Beneficiary (and any 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; (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 procedures set forth in this Section 4.7. In the event of the death of a Participant, distributions shall be made in accordance with Section 5.5.
10
ARTICLE V—VALUATION & DISTRIBUTION OF ACCOUNTS
Section 5.1—Valuation of Performance Cycle Accounts
Deferred Share Units included in a Participant’s Performance Cycle Account are valued prior to distribution on the applicable Valuation Date as defined in this Plan. Except in the case of distributions made after Deferred Share Units have been converted to cash as a result of a Committee action upon a Change of Control, one share of UTC Common Stock will be distributed for each Deferred Share Unit. If the distribution includes a fractional Unit, the number of Units will be rounded down to the next whole Unit for purposes of calculating the number of shares of Stock to be exchanged in the distribution, and the value of the fractional Unit will be paid in cash. See Section 7.3 of this Plan regarding satisfaction of Participant’s withholding tax obligation. The Deferred Share Unit shall be valued based on the closing price of UTC Common Stock as reported on the composite tape of the New York Stock Exchange on the Valuation Date, or if the Stock is not traded on that day, on the next trading day.
Section 5.2—Timing of Plan Distributions
Except as provided in Section 4.6 (concerning the five-year delay following a Change in Election), Section 5.3 (concerning Separation from Service before Attaining Age Fifty), and Section 5.4 (concerning distributions to Specified Employees), the value of a Participant’s
11
Performance Cycle Account will be distributed (or begin to be distributed) according to the distribution election on file to the Participant as of the first business day following the Valuation Date associated with (1) the Participant’s Retirement (if the Participant’s Deferral Period ends on the Retirement Date) or (2) the Specific Deferral Period (if the Participant’s Deferral Period ends on a Specific Deferral Date).
Section 5.3—Separation from Service before Attaining Age 50.
If a Participant’s Separation From Service occurs before the Participant attains age fifty (50), the full value of Participant’s entire Plan Account will be distributed in a lump sum on the first business day following a Participant’s Separation From Service (or, if the Participant is a Specified Employee at the time of his or her Separation from Service, on the date provided in Section 5.4, below) regardless of the distribution election on file.
Section 5.4—Separation from Service of Specified Employees
If the Participant is a Specified Employee on the date of the Participant’s Separation from Service, any distribution of the Participant’s Plan Account that is made on account of the Participant’s Retirement or other Separation from Service will not be made or commence earlier than the first day of the seventh month following the date of Retirement or Separation from Service. The Plan Account shall be valued as if the Valuation Date were the last business day of the month preceding the distribution date.
12
Section 5.5—Death
In the event of the death of a Participant, the full value of the Participant’s Plan Account will be distributed to the designated Beneficiary in a lump sum on the first business day of the month following the Participant’s death.
Section 5.6—Disability
In the event of the Disability of a Participant, the Participant’s Performance Cycle Accounts that are designated to be deferred to a Specific Deferral Date will be maintained and distributed in accordance with the Participant’s elections on file. The Participant’s Performance Cycle Accounts that are designated to be deferred to the Participant’s Retirement Date will be distributed as if the Participant had retired on the date of the Participant’s Disability, but without applying the six-month delay in Section 5.4, above.
Section 5.7—Distribution upon a Change in Control
In the event of a Change in Control or restructuring of the Corporation, the Participant’s entire Plan Account will be converted to cash and distributed in a lump sum on the first business day following the Change in Control event. The cash amount per Unit will equal the closing price of UTC Common Stock on the New York Stock Exchange on the date the Change in Control occurs or, if the Stock is not traded on that day, on the trading day immediately preceding the Change in Control. For purposes of the Plan, a “Change in Control” means (i) the acquisition by one person, or more than one person acting as a group, of stock possessing 30 percent or more of the total voting power of the stock of the United Technologies Corporation during the 12-month period ending on the date of the most recent acquisition; (ii) the
13
replacement of a majority of members of United Technologies Corporation’s board of directors during any 12-month period by directors whose appointment or election is not endorsed by a majority of the members of United Technologies Corporation’s board of directors as constituted immediately prior to the date of such appointment or election; (iii) the acquisition by one person, or more than one person acting as a group, of more than 50% of the total fair market value or total voting power of the stock of United Technologies Corporation; (iv) a change in the ownership of a substantial portion of the Corporation’s assets such that one person, or more than one person acting as a group, acquires assets of the Corporation with a total gross fair market value equal to or more than 40 percent of the total gross fair market value of all of the assets of the Corporation determined immediately prior to such acquisition; (v) a dissolution or liquidation of the Corporation.
Section 5.8—Accelerated Distribution in the Case of an Unforeseeable Emergency
(a) Unforeseeable Emergency. The Committee may, upon a Participant’s written application, agree to an accelerated distribution of some or all of the value of Participant’s Plan Accounts upon the showing of an unforeseeable emergency. An “unforeseeable emergency” is a severe financial hardship to the Participant resulting from (1) an illness or accident of the Participant, the Participant’s spouse, the Participant’s Beneficiary, or the Participant’s dependent (as defined in IRC Section 152, without regard to Section 152(b)(1), (b)(2), and (d)(1)(B)); (2) loss of the Participant’s property due to casualty; or (3) other similar extraordinary and unforeseeable circumstances arising as a result of events beyond the control of the Participant. Whether a Participant is faced with an unforeseeable emergency permitting a distribution is to be determined based on the relevant facts and circumstances of each case. Acceleration will not be
14
granted if the emergency is or may be relieved through reimbursement or compensation from insurance or otherwise, by liquidation of the Participant’s assets (to the extent the liquidation of such assets would not cause severe financial hardship), or by cessation of deferrals under the Plan.
(b) Amount of Distribution Permitted upon an Unforeseeable Emergency. Distributions on account of an unforeseeable emergency, as defined in Section 5.8(a), shall be limited to the amount reasonably necessary to satisfy the emergency need. Such amount may include amounts necessary to pay any Federal, state, local, or foreign income taxes or penalties reasonably anticipated to result from the distribution.
(c) The Committee will determine from which Performance Cycle Accounts hardship distributions will be made. Any Participant who is an officer or director of the Corporation within the meaning of Section 16 of the Securities Exchange Act of 1934 is not eligible for distributions on account of unforeseeable emergency.
Section 5.9—Administrative Adjustments in Payment
A payment under this Section 5.9 is treated as being made on the date when it is due under the Plan if the payment is made on the due date specified by the Plan, or on a later date that is either (a) in the same calendar year (for a payment whose specified due date is on or before September 30), or (b) by the 15th day of the third calendar month following the date specified by the Plan (for a payment whose specified due date is on or after October 1). A payment also is treated as being made on the date when it is due under the Plan if the payment is made not more than 30 days before the due date specified by the Plan. In no event will a
15
payment to a Specified Employee be made or commence earlier than the first day of the seventh month following the date of Separation from Service. A Participant may not, directly or indirectly, designate the taxable year of a payment made in reliance on the administrative rules in this Section 5.9.
Section 5.10—Minimum Balance Payout Provision
If a Participant’s Plan Account balance under this Plan (and under all other nonqualified deferred compensation plans of the Corporation that are required to be aggregated with this Plan under Section 409A of the Code), determined at the time of the Participant’s Separation From Service, is less than the amount set as the limit on elective deferrals under Section 402(g)(1)(B) of the Code in effect for the year in which the Participant’s Separation From Service occurs, the Committee retains discretion to distribute the Participant’s entire Plan Account (and the Participant’s entire interest in any other nonqualified deferred compensation plan that is required to be aggregated with this Plan) in a lump sum on the first business day following the Participant’s Separation From Service, even if the Participant has elected to receive a different form of distribution.
ARTICLE VI—AMENDMENT AND TERMINATION OF PLAN
Section 6.1—Amendment
The Corporation may, at any time, amend the Plan in whole or in part, provided that no amendment may decrease the value of any Plan Accounts as of the date of such amendment. In
16
the event of any change in law or regulation relating to the Plan and the tax treatment of Plan Accounts, the Plan shall, without further action by the Committee, be deemed to be amended to comply with any such change in law or regulation effective the first date necessary to prevent the taxation, constructive receipt or deemed distribution of Plan Accounts prior to the date Plan Accounts would be distributed under the provisions of Article V.
Section 6.2—Plan Suspension and Termination
(a) The Corporation’s Pension Administration Committee, may, at any time, suspend or terminate the Plan with respect to new or existing Election Forms 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 interest of the Corporation or for any other reason.
(b) In the event of suspension of the Plan, no additional deferrals 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 elections on file.
(c) Upon the termination of the Plan with respect to all Participants, and the termination of all arrangements sponsored by the Corporation that would be aggregated with the Plan under Section 409A, , the Corporation shall have the right, in its sole discretion, and notwithstanding any elections made by the Participant, to pay the Participant’s Plan Account in a lump sum, to the extent permitted under Section 409A of the Code. All payments that may be made pursuant to this Section 6.2 shall be made no earlier than the thirteenth month and no later than the twenty-fourth month after the termination of the Plan. The Corporation may not accelerate payments pursuant to this Section 6.2 if the termination of the Plan is proximate to a downturn in
17
the Corporation’s financial health within the meaning of Treas. Reg. section 1.409A-3(j)(4)(ix)(C)(1). If the Corporation exercises its discretion to accelerate payments under this Section 6.2, it shall not adopt any new arrangement that would have been aggregated with the Plan under Section 409A of the Code within three years following the date of the Plan’s termination.
Section 6.3—No Consent Required
The consent of any Participant, Beneficiary, or other person shall not be required with respect to any amendment, suspension, or termination of the Plan.
ARTICLE VII—MISCELLANEOUS PROVISIONS
Section 7.1—Reinvestment of Dividend Equivalents
Deferred Share Units shall be credited with dividend equivalents at the same time and in the same amount that cash dividends would be paid with respect to an equal number of shares of UTC Common Stock. At the time the election under Section 4.1 is made, the Participant agrees to have dividend equivalents deferred and invested in additional Deferred Share Units based upon the number of whole and fractional Units which the dollar dividend amount would purchase, using the closing price of UTC Common Stock on the New York Stock Exchange on each dividend payment date. Dividend equivalents that are deferred and invested pursuant to this Section 7.1 shall be credited to the same Performance Cycle Account as the Deferred Share Units for which the dividend equivalents are paid, and shall be distributed at the time and in the form applicable to that Performance Cycle Account.
18
Section 7.2—Required Taxes
No later than the date Deferred Share Units are no longer subject to a substantial risk of forfeiture (as defined in the Internal Revenue Code, as time to time amended) or first become includible in gross income, Participant must pay to the Corporation, or make arrangements satisfactory to the Corporation regarding the payment of, any federal, state, local or foreign taxes of any kind required to be withheld with respect to such amount. Unless otherwise determined by the Corporation, withholding obligations may be settled with UTC Common Stock (including UTC Common Stock that is distributed under the terms of the Plan) or with Deferred Share Units that are deducted from the Participant’s Plan Account under the Plan; provided, however, that not more than the legally required minimum withholding may be settled with Deferred Share Units or UTC Common Stock. The obligations of the Corporation under the Plan shall be conditional on such payment or arrangement, and the Corporation shall, to the extent permitted by law, have the right to make any appropriate arrangements to deduct any such taxes from all deferrals and distribution under the Plan that the Corporation reasonably determines to be required by law to be withheld from such deferrals and distributions.
Section 7.3—Adjustment of Deferred Share Units
In the event of any change in the outstanding shares of Common Stock, by reason of a stock dividend or split, recapitalization, merger, consolidation, combination, exchange of shares, or other similar corporate change, the number of Deferred Share Units may be adjusted appropriately by the Committee, whose determination shall be conclusive.
19
Section 7.4—Section 409A Compliance
To the extent that rights or payments under this Plan are subject to Section 409A of the Internal Revenue Code, the Plan shall be construed and administered in compliance with the conditions of Section 409A and regulations and other guidance issued pursuant to Section 409A for deferral of income taxation until the time the compensation is paid. Any distribution election that would not comply with Section 409A of the Code shall not be effective for purposes of this Plan. To the extent that a provision of this Plan does not comply with Section 409A of the Code, such provision shall be void and without effect. The Corporation does not warrant that the Plan will comply with Section 409A of the Code with respect to any Participant or with respect to any payment. In no event shall any UTC Company; any director, officer, or employee of a UTC Company (other than the Participant); or any member of the Committee be liable for any additional tax, interest, or penalty incurred by a Participant or Beneficiary as a result of the Plan’s failure to satisfy the requirements of Section 409A of the Code, or as a result of the Plan’s failure to satisfy any other requirements of applicable tax laws.
ARTICLE VIII—GENERAL PROVISIONS
Section 8.1—Unsecured General Creditor
The Corporation’s obligations under the Plan constitute an unfunded and unsecured promise to distribute shares in the future. Participants’ and Beneficiaries’ rights under the Plan
20
are solely those of a general unsecured creditor of the Corporation. No assets will be placed in trust, set aside or otherwise segregated to fund or offset liabilities in respect of the Plan or Participants’ Plan Accounts.
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 distributions are unassignable and non-transferable. Plan Accounts or distributions hereunder, prior to actual distribution, will not be subject to attachment or seizure for the payment of any debts, judgments or other obligations. Plan Accounts or other Plan benefit will not 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 any UTC Company and the Participant. Participants and Beneficiaries will have no rights against any UTC Company resulting from participation in the Plan other than as specifically provided herein. Nothing in the Plan shall be deemed to give a Participant the right to be retained in the service of any UTC Company for any length of time or to interfere with the right of any UTC Company to terminate a Participant’s employment prior to the end of any Deferral Period.
Section 8.4—Governing Law
The provisions of the Plan will be construed and interpreted according to the laws of the State of Connecticut, to the extent not preempted by federal law.
21
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 the Plan shall be sufficient if sent by first-class mail, to the United Technologies Corporation Deferred Compensation Committee, 1 Financial Plaza, Hartford, Connecticut 06101, Attn: 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 provided either electronically, hand-delivered, or mailed to the address (or email address, as the case may be) 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 or email system.
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.
22
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 therefore 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 Accounts shall be a complete discharge of any liability under the Plan with respect to the amount so paid.
ARTICLE IX—ADMINISTRATION AND CLAIMS
Section 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 at United Technologies Corporation, 1 Financial Plaza, Hartford, Connecticut 06101, Attn: Deferred Compensation Committee. The Committee shall respond in writing as soon as practicable.
23
Section 9.2—Claim Procedures
A Participant or Beneficiary who believes that he or she has been denied a benefit to which he or she is entitled under the Plan (referred to in this Section 9.2 as a “Claimant”) may file a written request with the Committee setting forth the claim. The Committee shall consider and resolve the claim as set forth below.
(a) Upon receipt of a claim, the Committee shall advise the Claimant that a response will be forthcoming within 90 days. The Committee may, however, extend the response period for up to an additional 90 days for reasonable cause, and shall notify the Claimant of the reason for the extension and the expected response date. The Committee shall respond to the claim within the specified period.
(b) If the claim is denied in whole or part, the Committee shall provide the Claimant with a written decision, using language calculated to be understood by the Claimant, setting forth (1) the specific reason or reasons for such denial; (2) the specific reference to relevant provisions of this Plan on which such denial is based; (3) a description of any additional material or information necessary for the Claimant to perfect his or her claim and an explanation why such material or such information is necessary; (4) appropriate information as to the steps to be taken if the Claimant wishes to submit the claim for review; (5) the time limits for requesting a review of the claim; and (6) the Claimant’s right to bring an action for benefits under Section 502(a) of ERISA.
24
(c) Within 60 days after the Claimant’s receipt of the written decision denying the claim in whole or in part, the Claimant may request in writing that the Committee review the determination. The Claimant or his or her duly authorized representative may, but need not, review the relevant documents and submit issues and comment in writing for consideration by the Committee. If the Claimant does not request a review of the initial determination within such 60-day period, the Claimant shall be barred from challenging the determination.
(d) Within 60 days after the Committee receives a request for review, it will review the initial determination. If special circumstances require that the 60-day time period be extended, the Committee will so notify the Claimant and will render the decision as soon as possible, but no later than 120 days after receipt of the request for review.
(e) All decisions on review shall be final and binding with respect to all concerned parties. The decision on review shall set forth, in a manner calculated to be understood by the Claimant, (1) the specific reasons for the decision, including references to the relevant Plan provisions upon which the decision is based; (2) the Claimant’s right to receive, upon request and free of charge, reasonable access to and copies of all documents, records, and other information, relevant to his or her benefits; and (3) the Claimant’s right to bring an action for benefits under Section 502(a) of ERISA.
25
Exhibit 11
UNITED TECHNOLOGIES CORPORATION
AND SUBSIDIARIES
STATEMENT RE: COMPUTATION OF PER SHARE EARNINGS
| Full year | |||||||||||||||
| (in millions of dollars, except per share amounts) |
2008 | 2007 | 2006 | 2005 | 2004 | ||||||||||
| Net income |
$ | 4,689 | $ | 4,224 | $ | 3,732 | $ | 3,069 | $ | 2,673 | |||||
| Basic earnings for period |
$ | 4,689 | $ | 4,224 | $ | 3,732 | $ | 3,069 | $ | 2,673 | |||||
| Diluted earnings for period |
$ | 4,689 | $ | 4,224 | $ | 3,732 | $ | 3,069 | $ | 2,673 | |||||
| Basic average number of shares outstanding |
937,800 | 963,900 | 980,000 | 991,200 | 992,800 | ||||||||||
| Stock awards (thousands) |
18,600 | 24,900 | 25,700 | 23,300 | 18,000 | ||||||||||
| Diluted average number of shares outstanding |
956,400 | 988,800 | 1,005,700 | 1,014,500 | 1,010,800 | ||||||||||
| Basic earnings per common share |
$ | 5.00 | $ | 4.38 | $ | 3.81 | $ | 3.10 | $ | 2.69 | |||||
| Diluted earnings per common share |
$ | 4.90 | $ | 4.27 | $ | 3.71 | $ | 3.03 | $ | 2.64 | |||||
Exhibit 12
UNITED TECHNOLOGIES CORPORATION
AND SUBSIDIARIES
STATEMENT RE: COMPUTATION OF RATIO OF EARNINGS TO FIXED CHARGES
| Full year | ||||||||||||||||||||
| (in millions of dollars) |
2008 | 2007 | 2006 | 2005 | 2004 | |||||||||||||||
| Fixed Charges: |
||||||||||||||||||||
| Interest expense1 |
$ | 689 | $ | 666 | $ | 606 | $ | 498 | $ | 363 | ||||||||||
| Interest capitalized |
19 | 16 | 19 | 16 | 11 | |||||||||||||||
| One-third of rents2 |
168 | 146 | 96 | 100 | 107 | |||||||||||||||
| Total fixed charges |
$ | 876 | $ | 828 | $ | 721 | $ | 614 | $ | 481 | ||||||||||
| Earnings: |
||||||||||||||||||||
| Income before income taxes and minority interests |
$ | 6,936 | $ | 6,384 | $ | 5,492 | $ | 4,684 | $ | 3,938 | ||||||||||
| Fixed charges per above |
876 | 828 | 721 | 614 | 481 | |||||||||||||||
| Less: capitalized interest |
(19 | ) | (16 | ) | (19 | ) | (16 | ) | (11 | ) | ||||||||||
| 857 | 812 | 702 | 598 | 470 | ||||||||||||||||
| Amortization of interest capitalized |
9 | 8 | 8 | 10 | 3 | |||||||||||||||
| Total earnings |
$ | 7,802 | $ | 7,204 | $ | 6,202 | $ | 5,292 | $ | 4,411 | ||||||||||
| Ratio of earnings to fixed charges |
8.91 | 8.70 | 8.60 | 8.62 | 9.17 | |||||||||||||||
| 1 |
Effective January 1, 2007, we adopted the provisions of Financial Accounting Standards Board Interpretation No. 48, “Accounting for Uncertainty in Income Taxes.” As disclosed in Note 9 to our Consolidated Financial Statements, interest related to unrecognized tax benefits was $39 million, $56 million, $38 million, and $25 million for the years 2008, 2007, 2006 and 2005, respectively. The ratio of earnings to fixed charges would have been 9.32, 9.33, 9.08, and 8.98 for the years 2008, 2007, 2006 and 2005, respectively, if such interest is excluded from the calculation. |
| 2 |
Reasonable approximation of the interest factor. |
Exhibit 13
Five-Year Summary
| (in millions, except per share amounts) | 2008 | 2007 | 2006 | 2005 | 2004 | |||||||||||
| For the year |
||||||||||||||||
| Revenues |
$ | 58,681 | $ | 54,759 | $ | 47,829 | $ | 42,725 | $ | 37,445 | ||||||
| Research and development |
1,771 | 1,678 | 1,529 | 1,367 | 1,267 | |||||||||||
| Income before cumulative effect of a change in accounting principle 1 |
4,689 | 4,224 | 3,732 | 3,164 | 2,673 | |||||||||||
| Net income |
4,689 | 4,224 | 3,732 | 3,069 | 2,673 | |||||||||||
| Earnings per share: |
||||||||||||||||
| Basic: |
||||||||||||||||
| Income before cumulative effect of a change in accounting principle 1 |
5.00 | 4.38 | 3.81 | 3.19 | 2.69 | |||||||||||
| Cumulative effect of a change in accounting principle 1 |
— | — | — | (.09 | ) | — | ||||||||||
| Net income |
5.00 | 4.38 | 3.81 | 3.10 | 2.69 | |||||||||||
| Diluted: |
||||||||||||||||
| Income before cumulative effect of a change in accounting principle 1 |
4.90 | 4.27 | 3.71 | 3.12 | 2.64 | |||||||||||
| Cumulative effect of a change in accounting principle 1 |
— | — | — | (.09 | ) | — | ||||||||||
| Net income |
4.90 | 4.27 | 3.71 | 3.03 | 2.64 | |||||||||||
| Cash dividends per common share |
1.35 | 1.17 | 1.02 | .88 | .70 | |||||||||||
| Average number of shares of Common Stock outstanding: |
||||||||||||||||
| Basic |
938 | 964 | 980 | 991 | 993 | |||||||||||
| Diluted |
956 | 989 | 1,006 | 1,014 | 1,011 | |||||||||||
| Cash flow from operations |
6,161 | 5,330 | 4,803 | 4,334 | 3,596 | |||||||||||
| Capital expenditures |
1,216 | 1,153 | 954 | 929 | 795 | |||||||||||
| Acquisitions, including debt assumed |
1,448 | 2,336 | 1,049 | 4,583 | 1,295 | |||||||||||
| Share repurchase |
3,160 | 2,001 | 2,068 | 1,181 | 992 | |||||||||||
| Dividends on Common Stock 2 |
1,210 | 1,080 | 951 | 832 | 660 | |||||||||||
| At year end |
||||||||||||||||
| Working capital |
$ | 4,665 | $ | 4,602 | $ | 3,636 | $ | 1,861 | $ | 2,575 | ||||||
| Total assets 3 |
56,469 | 54,575 | 47,141 | 45,925 | 40,441 | |||||||||||
| Long-term debt, including current portion 4 |
10,453 | 8,063 | 7,074 | 6,628 | 4,271 | |||||||||||
| Total debt 4 |
11,476 | 9,148 | 7,931 | 8,240 | 5,591 | |||||||||||
| Debt to total capitalization 3,4 |
42% | 30% | 31% | 33% | 28% | |||||||||||
| Shareowners’ equity 3,4 |
15,917 | 21,355 | 17,297 | 16,991 | 14,266 | |||||||||||
| Number of employees |
223,100 | 225,600 | 214,500 | 218,200 | 209,700 | |||||||||||
| ¡ | During 2005, we acquired Kidde, which in conjunction with Chubb (acquired during 2003) forms the UTC Fire & Security segment. |
| ¡ | During 2005, a 2-for-1 split of our common stock was effected in the form of a share dividend. All common share and per share amounts for periods prior to the split have been adjusted to reflect the split. |
| Note 1 | During 2005, we adopted the provisions of Financial Accounting Standards Board (FASB) Interpretation No. 47, “Accounting for Conditional Asset Retirement Obligations (an interpretation of FASB Statement No. 143)” (FIN 47) and Statement of Financial Accounting Standards (SFAS) 123R, “Share-Based Payment.” |
| Note 2 | Excludes dividends paid on Employee Stock Ownership Plan common stock. |
| Note 3 | During 2006, we adopted the provisions of SFAS No. 158, “Employers’ Accounting for Defined Benefit Pension and Other Postretirement Plans – an amendment of SFAS Nos. 87, 88, 106 and 132(R),” (SFAS 158) which resulted in an approximately $1.8 billion non-cash charge to equity and a $2.4 billion non-cash reduction to total assets. In addition, we early-adopted the measurement date provisions of SFAS 158 effective January 1, 2007, which increased shareowners’ equity by approximately $425 million and decreased long-term liabilities by approximately $620 million. |
| Note 4 | The increase in the 2008 debt to total capitalization ratio reflects unrealized losses of approximately $4.2 billion, net of taxes, associated with the effect of market conditions on our pension plans, and the 2008 debt issuances totaling $2.25 billion. |
1
Management’s Discussion and Analysis
2
3
4
5
6
7
Segment Review
| Revenues | Operating Profits | Operating Profit Margin | ||||||||||||||||||||||
| (in millions of dollars) | 2008 | 2007 | 2006 | 2008 | 2007 | 2006 | 2008 | 2007 | 2006 | |||||||||||||||
| Otis |
$ | 12,949 | $ | 11,885 | $ | 10,290 | $ | 2,477 | $ | 2,321 | $ | 1,888 | 19.1% | 19.5% | 18.3% | |||||||||
| Carrier |
14,944 | 14,644 | 13,481 | 1,316 | 1,381 | 1,237 | 8.8% | 9.4% | 9.2% | |||||||||||||||
| UTC Fire & Security |
6,462 | 5,754 | 4,747 | 542 | 443 | 301 | 8.4% | 7.7% | 6.3% | |||||||||||||||
| Pratt & Whitney |
12,965 | 12,129 | 11,112 | 2,122 | 2,011 | 1,817 | 16.4% | 16.6% | 16.4% | |||||||||||||||
| Hamilton Sundstrand |
6,207 | 5,636 | 4,995 | 1,099 | 967 | 832 | 17.7% | 17.2% | 16.7% | |||||||||||||||
| Sikorsky |
5,368 | 4,789 | 3,230 | 478 | 373 | 173 | 8.9% | 7.8% | 5.4% | |||||||||||||||
8
9
10
11
12
13
14
15
16
17
18
19
20
21
22
23
Report of Independent Registered Public Accounting Firm
24
CONSOLIDATED STATEMENT OF OPERATIONS
| (in millions of dollars, except per share amounts) | 2008 | 2007 | 2006 | ||||||
| Revenues |
|||||||||
| Product sales |
$ | 42,175 | $ | 39,240 | $ | 34,271 | |||
| Service sales |
15,868 | 14,679 | 12,847 | ||||||
| Other income, net |
638 | 840 | 711 | ||||||
| 58,681 | 54,759 | 47,829 | |||||||
| Costs and Expenses |
|||||||||
| Cost of products sold |
31,774 | 29,927 | 26,089 | ||||||
| Cost of services sold |
10,787 | 9,995 | 8,651 | ||||||
| Research and development |
1,771 | 1,678 | 1,529 | ||||||
| Selling, general and administrative |
6,724 | 6,109 | 5,462 | ||||||
| Operating profit |
7,625 | 7,050 | 6,098 | ||||||
| Interest |
689 | 666 | 606 | ||||||
| Income before income taxes and minority interests |
6,936 | 6,384 | 5,492 | ||||||
| Income taxes |
1,883 | 1,836 | 1,494 | ||||||
| Minority interests in subsidiaries’ earnings |
364 | 324 | 266 | ||||||
| Net Income |
$ | 4,689 | $ | 4,224 | $ | 3,732 | |||
| Earnings per Share of Common Stock |
|||||||||
| Basic |
$ | 5.00 | $ | 4.38 | $ | 3.81 | |||
| Diluted |
$ | 4.90 | $ | 4.27 | $ | 3.71 | |||
See accompanying Notes to Consolidated Financial Statements
25
CONSOLIDATED BALANCE SHEET
| (in millions of dollars, except per share amounts—shares in thousands) | 2008 | 2007 | ||||||
| Assets |
||||||||
| Cash and cash equivalents |
$ | 4,327 | $ | 2,904 | ||||
| Accounts receivable (net of allowance for doubtful accounts of $332 and $298) |
9,112 | 8,844 | ||||||
| Inventories and contracts in progress |
8,340 | 8,101 | ||||||
| Future income tax benefits |
1,551 | 1,267 | ||||||
| Other current assets |
769 | 955 | ||||||
| Total Current Assets |
24,099 | 22,071 | ||||||
| Customer financing assets |
1,002 | 963 | ||||||
| Future income tax benefits |
3,633 | 1,126 | ||||||
| Fixed assets |
6,348 | 6,296 | ||||||
| Goodwill |
15,363 | 16,120 | ||||||
| Intangible assets |
3,443 | 3,757 | ||||||
| Other assets |
2,581 | 4,242 | ||||||
| Total Assets |
$ | 56,469 | $ | 54,575 | ||||
| Liabilities and Shareowners’ Equity |
||||||||
| Short-term borrowings |
$ | 1,023 | $ | 1,085 | ||||
| Accounts payable |
5,226 | 5,059 | ||||||
| Accrued liabilities |
12,069 | 11,277 | ||||||
| Long-term debt currently due |
1,116 | 48 | ||||||
| Total Current Liabilities |
19,434 | 17,469 | ||||||
| Long-term debt |
9,337 | 8,015 | ||||||
| Future pension and postretirement benefit obligations |
6,574 | 2,562 | ||||||
| Other long-term liabilities |
4,198 | 4,262 | ||||||
| Total Liabilities |
39,543 | 32,308 | ||||||
| Commitments and Contingent Liabilities (Notes 4 and 15) Minority interests in subsidiary companies |
1,009 | 912 | ||||||
| Shareowners’ Equity: |
||||||||
| Capital Stock: |
||||||||
| Preferred Stock, $1 par value; Authorized—250,000 shares; None issued or outstanding |
— | — | ||||||
| Common Stock, $1 par value; Authorized—4,000,000 shares; Issued 1,370,054 and 1,364,791 shares |
11,179 | 10,572 | ||||||
| Treasury Stock—426,113 and 381,244 common shares at cost |
(14,316 | ) | (11,338 | ) | ||||
| Retained earnings |
25,159 | 21,751 | ||||||
| Unearned ESOP shares |
(200 | ) | (214 | ) | ||||
| Accumulated other non-shareowners’ changes in equity: |
||||||||
| Foreign currency translation |
(612 | ) | 1,355 | |||||
| Other |
(5,293 | ) | (771 | ) | ||||
| Total Accumulated Other Non-Shareowners’ Changes in Equity |
(5,905 | ) | 584 | |||||
| Total Shareowners’ Equity |
15,917 | 21,355 | ||||||
| Total Liabilities and Shareowners’ Equity |
$ | 56,469 | $ | 54,575 | ||||
See accompanying Notes to Consolidated Financial Statements
26
CONSOLIDATED STATEMENT OF CASH FLOWS
| (in millions of dollars) | 2008 | 2007 | 2006 | |||||||||
| Operating Activities |
||||||||||||
| Net income |
$ | 4,689 | $ | 4,224 | $ | 3,732 | ||||||
| Adjustments to reconcile net income to net cash flows provided by operating activities: |
||||||||||||
| Depreciation and amortization |
1,321 | 1,173 | 1,033 | |||||||||
| Deferred income tax provision (benefit) |
45 | 58 | (214 | ) | ||||||||
| Minority interests in subsidiaries’ earnings |
364 | 324 | 266 | |||||||||
| Stock compensation cost |
211 | 198 | 180 | |||||||||
| Change in: |
||||||||||||
| Accounts receivable |
(491 | ) | (462 | ) | (35 | ) | ||||||
| Inventories and contracts in progress |
(562 | ) | (1,111 | ) | (789 | ) | ||||||
| Other current assets |
35 | 44 | 25 | |||||||||
| Accounts payable and accrued liabilities |
788 | 1,561 | 990 | |||||||||
| Other, net |
(239 | ) | (679 | ) | (385 | ) | ||||||
| Net Cash Provided by Operating Activities |
6,161 | 5,330 | 4,803 | |||||||||
| Investing Activities |
||||||||||||
| Capital expenditures |
(1,216 | ) | (1,153 | ) | (954 | ) | ||||||
| Increase in customer financing assets |
(285 | ) | (411 | ) | (314 | ) | ||||||
| Decrease in customer financing assets |
138 | 272 | 382 | |||||||||
| Investments in businesses |
(1,252 | ) | (2,037 | ) | (911 | ) | ||||||
| Dispositions of businesses |
337 | 298 | 451 | |||||||||
| Other, net |
(58 | ) | (151 | ) | 85 | |||||||
| Net Cash Used in Investing Activities |
(2,336 | ) | (3,182 | ) | (1,261 | ) | ||||||
| Financing Activities |
||||||||||||
| Issuance of long-term debt |
2,248 | 1,032 | 1,109 | |||||||||
| Repayment of long-term debt |
(48 | ) | (330 | ) | (825 | ) | ||||||
| Increase (decrease) in short-term borrowings |
91 | 191 | (817 | ) | ||||||||
| Common Stock issued under employee stock plans |
163 | 415 | 346 | |||||||||
| Dividends paid on Common Stock |
(1,210 | ) | (1,080 | ) | (951 | ) | ||||||
| Repurchase of Common Stock |
(3,160 | ) | (2,001 | ) | (2,068 | ) | ||||||
| Dividends to minority interests and other |
(322 | ) | (182 | ) | (136 | ) | ||||||
| Net Cash Used in Financing Activities |
(2,238 | ) | (1,955 | ) | (3,342 | ) | ||||||
| Effect of foreign exchange rate changes on Cash and cash equivalents |
(164 | ) | 165 | 99 | ||||||||
| Net increase in Cash and cash equivalents |
1,423 | 358 | 299 | |||||||||
| Cash and cash equivalents, beginning of year |
2,904 | 2,546 | 2,247 | |||||||||
| Cash and cash equivalents, end of year |
$ | 4,327 | $ | 2,904 | $ | 2,546 | ||||||
| Supplemental Disclosure of Cash Flow Information: |
||||||||||||
| Interest paid, net of amounts capitalized |
$ | 659 | $ | 629 | $ | 575 | ||||||
| Income taxes paid, net of refunds |
$ | 1,912 | $ | 1,818 | $ | 1,347 | ||||||
| Non-cash investing and financing activities include: |
||||||||||||
| Contributions of UTC common stock of $250 during 2008 and $150 each in 2007 and 2006 to domestic defined benefit pension plans |
||||||||||||
See accompanying Notes to Consolidated Financial Statements
27
CONSOLIDATED STATEMENT OF CHANGES IN SHAREOWNERS’ EQUITY
| (in millions of dollars, except per share amounts) | Common Stock |
Treasury Stock |
Retained Earnings |
Unearned ESOP Shares |
Accumulated Other Non-Shareowners’ Changes in Equity |
Non-Shareowners’ Changes in Equity for the Period |
|||||||||||||||||
| December 31, 2005 |
$ | 8,793 | $ | (7,418 | ) | $ | 16,051 | $ | (241 | ) | $ | (194 | ) | $ | 4,027 | ||||||||
| Common Stock issued under employee plans (12.6 million shares), including tax benefit of $101 |
738 | 14 | (34 | ) | 14 | ||||||||||||||||||
| Common Stock contributed to defined benefit pension plans (2.5 million shares) |
91 | 59 | |||||||||||||||||||||
| Common Stock repurchased (33.3 million shares) |
(2,068 | ) | |||||||||||||||||||||
| Dividends on Common Stock ($1.02 per share) |
(951 | ) | |||||||||||||||||||||
| Dividends on ESOP Common Stock ($1.02 per share) |
(44 | ) | |||||||||||||||||||||
| Adjustments to initially apply SFAS No. 158, including tax benefit of $1,145 |
(1,831 | ) | |||||||||||||||||||||
| Non-Shareowners’ Changes in Equity: |
|||||||||||||||||||||||
| Net income |
3,732 | 3,732 | |||||||||||||||||||||
| Foreign currency translation adjustments |
613 | 613 | |||||||||||||||||||||
| Minimum pension liability adjustments, net of income taxes of $8 |
20 | 20 | |||||||||||||||||||||
| Unrealized holding gain on marketable equity securities, net of income taxes of $4 |
6 | 6 | |||||||||||||||||||||
| Unrealized cash flow hedging loss, including tax benefit of $28 |
(53 | ) | (53 | ) | |||||||||||||||||||
| December 31, 2006 |
$ | 9,622 | $ | (9,413 | ) | $ | 18,754 | $ | (227 | ) | $ | (1,439 | ) | $ | 4,318 | ||||||||
| Effect of changing pension plan measurement date pursuant to SFAS No. 158, net of taxes of $193 |
(45 | ) | 470 | ||||||||||||||||||||
| Adoption of FASB Interpretation No. 48 |
(19 | ) | |||||||||||||||||||||
| Opening balance at January 1, 2007, as adjusted |
$ | 9,622 | $ | (9,413 | ) | $ | 18,690 | $ | (227 | ) | $ | (969 | ) | $ | 4,318 | ||||||||
| Common Stock issued under employee plans (13.8 million shares), including tax benefit of $130 |
863 | 13 | (36 | ) | 13 | ||||||||||||||||||
| Common Stock contributed to defined benefit pension plans (2.3 million shares) |
87 | 63 | |||||||||||||||||||||
| Common Stock repurchased (28.3 million shares) |
(2,001 | ) | |||||||||||||||||||||
| Dividends on Common Stock ($1.17 per share) |
(1,080 | ) | |||||||||||||||||||||
| Dividends on ESOP Common Stock ($1.17 per share) |
(47 | ) | |||||||||||||||||||||
| Non-Shareowners’ Changes in Equity: |
|||||||||||||||||||||||
| Net income |
4,224 | 4,224 | |||||||||||||||||||||
| Foreign currency translation adjustments |
722 | 722 | |||||||||||||||||||||
| Change in pension and post-retirement benefit plans, net of income taxes of $419 |
776 | 776 | |||||||||||||||||||||
| Adjustment for sale of securities, including tax benefit of $50 |
(84 | ) | (84 | ) | |||||||||||||||||||
| Unrealized cash flow hedging gain, net of income taxes of $58 |
139 | 139 | |||||||||||||||||||||
| December 31, 2007 |
$ | 10,572 | $ | (11,338 | ) | $ | 21,751 | $ | (214 | ) | $ | 584 | $ | 5,777 | |||||||||
| Common Stock issued under employee plans (5.7 million shares), including tax benefit of $32 |
525 | 14 | (19 | ) | 14 | ||||||||||||||||||
| Common Stock contributed to defined benefit pension plans (5.0 million shares) |
82 | 168 | |||||||||||||||||||||
| Common Stock repurchased (50.4 million shares) |
(3,160 | ) | |||||||||||||||||||||
| Dividends on Common Stock ($1.35 per share) |
(1,210 | ) | |||||||||||||||||||||
| Dividends on ESOP Common Stock ($1.35 per share) |
(52 | ) | |||||||||||||||||||||
| Non-Shareowners’ Changes in Equity: |
|||||||||||||||||||||||
| Net income |
4,689 | 4,689 | |||||||||||||||||||||
| Foreign currency translation adjustments |
(1,967 | ) | (1,967 | ) | |||||||||||||||||||
| Change in pension and post-retirement benefit plans, including tax benefit of $2,512 |
(4,153 | ) | (4,153 | ) | |||||||||||||||||||
| Adjustment for sale of securities, including tax benefit of $41 |
(59 | ) | (59 | ) | |||||||||||||||||||
| Unrealized cash flow hedging loss, including tax benefit of $127 |
(310 | ) | (310 | ) | |||||||||||||||||||
| December 31, 2008 |
$ | 11,179 | $ | (14,316 | ) | $ | 25,159 | $ | (200 | ) | $ | (5,905 | ) | $ | (1,800 | ) | |||||||
See accompanying Notes to Consolidated Financial Statements
28
Notes to Consolidated Financial Statements
29
30
31
32
33
34
35
36
37
38
39
40
41
42
A summary of the transactions under all long-term incentive plans for the three years ended December 31, 2008 follows:
| Stock Options | Stock Appreciation Rights | Performance Share Units | Other Incentive Shares / Units |
||||||||||||||||||
| (shares and units in thousands) | Shares | Average Price* |
Shares | Average Price* |
Units | Average Price** |
|||||||||||||||
| Outstanding at: |
|||||||||||||||||||||
| December 31, 2005 |
85,786 | $ | 36.37 | — | — | — | — | 586 | |||||||||||||
| Granted |
220 | 56.46 | 7,110 | $ | 56.78 | 1,185 | $ | 56.53 | 234 | ||||||||||||
| Exercised/earned |
(13,069 | ) | 28.47 | — | — | — | — | (234 | ) | ||||||||||||
| Cancelled |
(961 | ) | 47.76 | (250 | ) | 56.78 | (44 | ) | 56.53 | (37 | ) | ||||||||||
| December 31, 2006 |
71,976 | $ | 37.71 | 6,860 | $ | 56.78 | 1,141 | $ | 56.53 | 549 | |||||||||||
| Granted |
275 | 64.49 | 7,578 | 65.33 | 1,085 | 62.81 | 125 | ||||||||||||||
| Exercised/earned |
(14,458 | ) | 31.39 | (61 | ) | 45.16 | — | — | (85 | ) | |||||||||||
| Cancelled |
(782 | ) | 39.35 | (491 | ) | 60.22 | (69 | ) | 59.63 | (2 | ) | ||||||||||
| December 31, 2007 |
57,011 | $ | 39.42 | 13,886 | $ | 61.37 | 2,157 | $ | 59.59 | 587 | |||||||||||
| Granted |
192 | 74.57 | 7,221 | 74.23 | 948 | 75.21 | 174 | ||||||||||||||
| Exercised/earned |
(6,095 | ) | 32.65 | (14 | ) | 47.34 | — | — | (144 | ) | |||||||||||
| Cancelled |
(110 | ) | 44.75 | (798 | ) | 66.57 | (111 | ) | 64.59 | (55 | ) | ||||||||||
| December 31, 2008 |
50,998 | $ | 40.35 | 20,295 | $ | 65.75 | 2,994 | $ | 64.35 | 562 | |||||||||||
| * | weighted-average exercise price |
| ** | weighted-average grant stock price |
The following table summarizes information about equity awards outstanding that are expected to vest and equity awards outstanding that are exercisable at December 31, 2008:
| Equity Awards Outstanding Expected to Vest | Equity Awards Outstanding That Are Exercisable | |||||||||||||||||||
| (shares thousands, aggregate intrinsic value in millions) | Awards | Average Price* |
Aggregate Intrinsic Value |
Remaining Term** |
Awards | Average Price* |
Aggregate Intrinsic Value |
Remaining Term** | ||||||||||||
| Stock Options/Stock Appreciation Rights |
70,879 | $ | 47.24 | $ | 451 | 5.1 | 51,160 | $ | 40.24 | $ | 683 | 3.9 | ||||||||
| Performance Share Units/Restricted Stock |
3,166 | — | $ | 170 | 1.0 | |||||||||||||||
| * | weighted-average exercise price per share |
| ** | weighted-average contractual remaining term in years |
43
44
45
46
47
48
Segment Revenues and Operating Profit. Total revenues by segment include intersegment sales, which are generally made at prices approximating those that the selling entity is able to obtain on external sales. Segment information for the years ended December 31 is as follows:
| Total Revenues | Operating Profits | |||||||||||||||||||||||
| (in millions of dollars) | 2008 | 2007 | 2006 | 2008 | 2007 | 2006 | ||||||||||||||||||
| Otis |
$ | 12,949 | $ | 11,885 | $ | 10,290 | $ | 2,477 | $ | 2,321 | $ | 1,888 | ||||||||||||
| Carrier |
14,944 | 14,644 | 13,481 | 1,316 | 1,381 | 1,237 | ||||||||||||||||||
| UTC Fire & Security |
6,462 | 5,754 | 4,747 | 542 | 443 | 301 | ||||||||||||||||||
| Pratt & Whitney |
12,965 | 12,129 | 11,112 | 2,122 | 2,011 | 1,817 | ||||||||||||||||||
| Hamilton Sundstrand |
6,207 | 5,636 | 4,995 | 1,099 | 967 | 832 | ||||||||||||||||||
| Sikorsky |
5,368 | 4,789 | 3,230 | 478 | 373 | 173 | ||||||||||||||||||
| Total segment |
58,895 | 54,837 | 47,855 | 8,034 | 7,496 | 6,248 | ||||||||||||||||||
| Eliminations & Other |
(214 | ) | (78 | ) | (26 | ) | (1 | ) | (60 | ) | 187 | |||||||||||||
| General corporate expenses |
— | — | — | (408 | ) | (386 | ) | (337 | ) | |||||||||||||||
| Consolidated |
$ | 58,681 | $ | 54,759 | $ | 47,829 | $ | 7,625 | $ | 7,050 | $ | 6,098 | ||||||||||||
49
| Total Assets | Capital Expenditures | Depreciation & Amortization | ||||||||||||||||||||||||||
| (in millions of dollars) | 2008 | 2007 | 2006 | 2008 | 2007 | 2006 | 2008 | 2007 | 2006 | |||||||||||||||||||
| Otis |
$ | 7,731 | $ | 7,721 | $ | 6,973 | $ | 150 | $ | 136 | $ | 93 | $ | 203 | $ | 186 | $ | 183 | ||||||||||
| Carrier |
10,810 | 10,335 | 10,127 | 191 | 181 | 148 | 194 | 188 | 157 | |||||||||||||||||||
| UTC Fire & Security |
10,022 | 11,143 | 8,518 | 95 | 101 | 106 | 238 | 202 | 176 | |||||||||||||||||||
| Pratt & Whitney |
9,650 | 9,273 | 9,828 | 412 | 384 | 335 | 368 | 307 | 280 | |||||||||||||||||||
| Hamilton Sundstrand |
8,648 | 8,965 | 9,418 | 141 | 160 | 142 | 178 | 163 | 142 | |||||||||||||||||||
| Sikorsky |
3,985 | 3,412 | 3,145 | 165 | 128 | 66 | 62 | 52 | 47 | |||||||||||||||||||
| Total segment |
50,846 | 50,849 | 48,009 | 1,154 | 1,090 | 890 | 1,243 | 1,098 | 985 | |||||||||||||||||||
| Eliminations & Other1 |
5,623 | 3,726 | (868 | ) | 62 | 63 | 64 | 78 | 75 | 48 | ||||||||||||||||||
| Consolidated |
$ | 56,469 | $ | 54,575 | $ | 47,141 | $ | 1,216 | $ | 1,153 | $ | 954 | $ | 1,321 | $ | 1,173 | $ | 1,033 | ||||||||||
| 1 |
The asset increase from 2007 to 2008 primarily reflects the increase in cash and cash equivalents held at UTC Corporate. The asset increase from 2006 to 2007 reflects management’s decision to transfer domestic pension asset and liability balances from the segments to UTC Corporate. |
Geographic External Revenues and Operating Profit. Geographic external revenues and operating profits are attributed to the geographic regions based on their location of origin. U.S. external revenues include export sales to commercial customers outside the United States and sales to the U.S. government, commercial and affiliated customers, which are known to be for resale to customers outside the United States. Long-lived assets are net fixed assets attributed to the specific geographic regions.
| External Revenues | Operating Profits | Long-Lived Assets | ||||||||||||||||||||||||||||
| (in millions of dollars) | 2008 | 2007 | 2006 | 2008 | 2007 | 2006 | 2008 | 2007 | 2006 | |||||||||||||||||||||
| United States Operations |
$ | 27,965 | $ | 26,462 | $ | 23,524 | $ | 3,945 | $ | 3,508 | $ | 3,067 | $ | 3,198 | $ | 3,109 | $ | 2,939 | ||||||||||||
| International Operations |
||||||||||||||||||||||||||||||
| Europe |
15,819 | 14,341 | 12,069 | 2,219 | 2,204 | 1,731 | 1,347 | 1,356 | 1,130 | |||||||||||||||||||||
| Asia Pacific |
8,212 | 7,991 | 7,056 | 1,037 | 1,041 | 814 | 800 | 762 | 717 | |||||||||||||||||||||
| Other |
6,416 | 5,605 | 4,809 | 833 | 743 | 637 | 671 | 803 | 698 | |||||||||||||||||||||
| Eliminations & Other |
269 | 360 | 371 | (409 | ) | (446 | ) | (151 | ) | 332 | 266 | 241 | ||||||||||||||||||
| Consolidated |
$ | 58,681 | $ | 54,759 | $ | 47,829 | $ | 7,625 | $ | 7,050 | $ | 6,098 | $ | 6,348 | $ | 6,296 | $ | 5,725 | ||||||||||||
50
Selected Quarterly Financial Data (Unaudited)
| 2008 Quarters | 2007 Quarters | |||||||||||||||||||||||
| (in millions of dollars, except per share amounts) | First | Second | Third | Fourth | First | Second | Third | Fourth | ||||||||||||||||
| Sales |
$ | 13,577 | $ | 15,535 | $ | 14,702 | $ | 14,229 | $ | 11,936 | $ | 13,766 | $ | 13,718 | $ | 14,499 | ||||||||
| Gross margin |
3,596 | 4,176 | 4,038 | 3,672 | 2,940 | 3,637 | 3,650 | 3,770 | ||||||||||||||||
| Net income |
1,000 | 1,275 | 1,269 | 1,145 | 819 | 1,148 | 1,197 | 1,060 | ||||||||||||||||
| Earnings per share of Common Stock: |
||||||||||||||||||||||||
| Basic—net income |
$ | 1.05 | $ | 1.35 | $ | 1.36 | $ | 1.24 | $ | .85 | $ | 1.19 | $ | 1.24 | $ | 1.11 | ||||||||
| Diluted—net income |
$ | 1.03 | $ | 1.32 | $ | 1.33 | $ | 1.23 | $ | .82 | $ | 1.16 | $ | 1.21 | $ | 1.08 | ||||||||
Comparative Stock Data (Unaudited)
| 2008 | 2007 | |||||||||||||||||
| Common Stock | High | Low | Dividend | High | Low | Dividend | ||||||||||||
| First quarter |
$ | 77.14 | $ | 65.20 | $ | .320 | $ | 69.49 | $ | 61.85 | $ | .265 | ||||||
| Second quarter |
$ | 75.86 | $ | 60.51 | $ | .320 | $ | 72.64 | $ | 63.65 | $ | .265 | ||||||
| Third quarter |
$ | 67.95 | $ | 56.15 | $ | .320 | $ | 80.98 | $ | 69.00 | $ | .320 | ||||||
| Fourth quarter |
$ | 59.96 | $ | 41.76 | $ | .385 | $ | 82.50 | $ | 72.60 | $ | .320 | ||||||
Our common stock is listed on the New York Stock Exchange. The high and low prices are based on the Composite Tape of the New York Stock Exchange. There were approximately 25,408 registered shareholders at December 31, 2008.
51
Performance Graph (Unaudited)
The following graph presents the cumulative total shareholder return for the five years ending December 31, 2008 for our common stock, as compared to the Standard & Poor’s 500 Stock Index and to the Dow Jones 30 Industrial Average. Our common stock price is a component of both indices. These figures assume that all dividends paid over the five-year period were reinvested, and that the starting value of each index and the investment in common stock was $100.00 on December 31, 2003.
| December | ||||||||||||||||||
| 2003 | 2004 | 2005 | 2006 | 2007 | 2008 | |||||||||||||
| United Technologies Corporation |
$ | 100.00 | $ | 110.73 | $ | 121.85 | $ | 138.50 | $ | 172.35 | $ | 123.35 | ||||||
| S&P 500 Index |
$ | 100.00 | $ | 110.88 | $ | 116.33 | $ | 134.70 | $ | 142.10 | $ | 89.53 | ||||||
| Dow Jones Industrial Average |
$ | 100.00 | $ | 105.56 | $ | 107.41 | $ | 127.84 | $ | 139.18 | $ | 93.93 | ||||||
52
53
54
| Corporate Office | Certifications | Additional Information | Direct Registration System | |||||||||
| United Technologies Corporation United Technologies Building Hartford, Connecticut 06101 Telephone: 860.728.7000
This report is made available to shareowners in advance of the annual meeting of shareowners to be held at 11:00 a.m., April 8, 2009, in Jupiter, Florida. The proxy statement will be made available to shareowners on or about February 20, 2009, at which time proxies for the meeting will be requested.
Information about UTC, including financial information, can be found at our Web site: www.utc.com.
Stock Listing New York Stock Exchange
Ticker Symbol UTX
Transfer Agent and Registrar Computershare Trust Company, N.A., is the transfer agent, registrar and dividend disbursing agent for UTC’s Common Stock. Questions and communications regarding transfer of stock, replacement of lost certificates, dividends and address changes, and the Direct Stock Purchase and Dividend Reinvestment Plan should be directed to:
Computershare Trust Company, N.A. 250 Royall Street Canton, Massachusetts 02021 Telephone: Within the U.S.: 1.800.488.9281 Outside the U.S.: 1.781.575.2724 Web site: www.computershare.com/investor
TDD: 1.800.952.9245 Telecommunications device for the hearing impaired. |
UTC has included as Exhibit 31 to its Annual Report on Form 10-K for fiscal year 2008 filed with the Securities and Exchange Commission certificates of its principal executive officers and principal financial officers certifying, among other things, the information contained in the Form 10-K.
Annually UTC submits to the New York Stock Exchange (NYSE) a certificate of UTC’s Chief Executive Officer certifying that he was not aware of any violation by UTC of NYSE corporate governance listing standards as of the date of the certification.
Dividends Dividends are usually paid on the 10th day of March, June, September and December.
Electronic Access Registered shareowners may sign up at the following Web site for electronic access to future annual reports and proxy materials, rather than receiving mailed copies: www.computershare.com/us/ecomms.
Your enrollment is revocable until each year’s record date for the annual meeting. Beneficial shareowners may be able to request electronic access by contacting their broker or bank, or Broadridge Financial Solutions at: http://enroll.icsdelivery.com/utc. |
Shareowners may obtain a copy of the UTC Annual Report on Form 10-K for 2008 filed with the Securities and Exchange Commission by writing to:
Corporate Secretary United Technologies Corporation United Technologies Building Hartford, Connecticut 06101
For additional information about UTC, please contact Investor Relations at the above corporate office address, or visit our Web site at: www.utc.com.
Shareowner Information Services Our Internet and telephone services give shareowners fast access to UTC financial results. The 24-hour-a-day, toll-free telephone service includes recorded summaries of UTC’s quarterly earnings information and other company news. Callers also may request copies of our quarterly earnings and news releases, by either fax or mail, and obtain copies of the UTC Annual Report and Form 10-K.
To access the service, dial 1.800.881.1914 from any touchtone phone and follow the recorded instructions. |
If your shares are held in street name through a broker and you are interested in participating in the Direct Registration System, you may have your broker transfer the shares to Computershare Trust Company, N.A., electronically through the Direct Registration System. Interested investors can request a description of this book-entry form of registration by calling Shareholder Direct at: 1.800.881.1914.
Environmentally Friendly Report This annual report is printed on recycled and recyclable paper.
www.utc.com www.carrier.com www.hamiltonsundstrand.com www.otis.com www.pw.utc.com www.sikorsky.com www.utcfireandsecurity.com www.utcpower.com |
Exhibit 21
United Technologies Corporation
Subsidiary and Affiliate Listing
December 31, 2008
| Entity Name |
State/Country of Incorporation | |
| 3206772 Nova Scotia Company |
Canada | |
| Australia Holdings Inc. |
Delaware | |
| Beesail Limited |
England | |
| Carrier Commercial Refrigeration, Inc. |
Delaware | |
| Carrier Corporation |
Delaware | |
| Carrier HVACR Investments B.V. |
Netherlands | |
| Carrier Kältetechnik Deutschland GmbH |
Germany | |
| Carrier Sales and Distribution, LLC |
Delaware | |
| Carrier Technologies ULC |
Canada | |
| Carrier Transicold Pte. Ltd |
Singapore | |
| Ceesail Limited |
England | |
| Chubb (UK) Limited |
England | |
| Chubb Group (International) Limited |
England | |
| Chubb Group Limited |
England | |
| Chubb Group Properties Limited |
England | |
| Chubb Group Security Limited |
England | |
| Chubb International (Netherlands) BV |
Netherlands | |
| Chubb International Holdings Limited |
England | |
| Chubb International Limited |
England | |
| Chubb Investments Limited |
England | |
| Chubb Limited |
England | |
| Chubb Nederland B.V. |
Netherlands | |
| Chubb Overseas Investments Limited |
England | |
| Chubb Security Holdings Australia Limited |
Australia | |
| Chubb White Peak (UK) Limited |
England | |
| Eagle Services Asia Private Limited |
Singapore | |
| Empresas Carrier, S. De R L.De C.V. |
Mexico | |
| Hamilton Sundstrand Corporation |
Delaware | |
| Hamilton Sundstrand Holdings, Inc. |
Delaware | |
| Helicopter Support, Inc. |
Connecticut | |
| International Comfort Products, LLC |
Delaware | |
| Kaysail Limited |
England | |
| Kidde America Inc. |
Delaware | |
| Kidde Finance Limited |
England | |
| Kidde Fire Protection Inc. |
Delaware | |
| Kidde Holdings Inc. |
Delaware | |
| Kidde Holdings Limited |
England | |
| Kidde International Limited |
England | |
| Kidde Limited |
England | |
| Kidde Technologies Inc. (*) |
Delaware | |
| Kidde UK |
England | |
| Kidde UK Holdings Limited |
England | |
| KNA Inc. |
Delaware | |
| Latin American Holding, Inc. |
Delaware | |
| Lenel Systems International, Inc. |
Delaware | |
| Moonless Limited |
England | |
| Nippon Otis Elevator Company |
Japan |
Exhibit 21
United Technologies Corporation
Subsidiary and Affiliate Listing
December 31, 2008
| Entity Name |
State/Country of Incorporation | |
| NSI, Inc. |
Delaware | |
| Otis Elevator Company |
New Jersey | |
| Otis Elevator Korea |
South Korea | |
| Otis Holdings GmbH & Co. OHG |
Germany | |
| Otis International Holdings UK Limited |
England | |
| Otis Limited |
England | |
| Otis Pacific Holdings B.V. |
Netherlands | |
| Otis S.C.S. |
France | |
| Parkview Treasury Services (UK) Limited |
England | |
| Pilgrim House Group Limited |
England | |
| Pratt & Whitney Canada Corp. |
Canada | |
| Pratt & Whitney Canada Holdings Corp. |
Canada | |
| Pratt & Whitney Canada Leasing, Limited Partnership |
Canada | |
| Pratt & Whitney Engine Leasing, LLC |
Delaware | |
| Pratt & Whitney Power Systems, Inc. |
Delaware | |
| Pratt & Whitney Rocketdyne, Inc. |
Delaware | |
| Pratt Aero Limited Partnership |
Canada | |
| Ratier-Figeac, SAS |
France | |
| SICLI Holding SAS |
France | |
| Sikorsky Aircraft Corporation |
Delaware | |
| Sirius Korea Limited |
England | |
| Sullair Corporation |
Indiana | |
| United Technologies Australia Holdings Limited |
Australia | |
| United Technologies Canada, Ltd |
Canada | |
| United Technologies Cortran, Inc. |
Delaware | |
| United Technologies Electronic Controls, Inc. |
Delaware | |
| United Technologies Far East Limited |
Hong Kong | |
| United Technologies Finance (U.K.) Limited |
England | |
| United Technologies France SAS |
France | |
| United Technologies Holding GmbH |
Germany | |
| United Technologies Holdings Limited |
England | |
| United Technologies Holdings S.A. |
France | |
| United Technologies International Corporation-Asia Private Limited |
Singapore | |
| United Technologies International SAS |
France | |
| United Technologies Luxembourg S.a.r.l. |
Luxembourg | |
| United Technologies Paris SNC |
France | |
| UT (UK) LIMITED |
England | |
| UT Finance Corporation |
Delaware | |
| UT Luxembourg Holding I S.a.r.l. |
Luxembourg | |
| UT Luxembourg Holding II S.a.r.l. |
Luxembourg | |
| UT Park View, Inc. |
Delaware | |
| UTC Canada Corporation |
Canada | |
| UTC Fire & Security Corporation |
Delaware | |
| UTC Investments Australia Pty Limited |
Australia | |
| UTCL Holdings, Limited |
Canada | |
| UTCL Investments B.V. |
Netherlands | |
| UTX Holdings S.C.S. |
France |
Exhibit 21
United Technologies Corporation
Subsidiary and Affiliate Listing
December 31, 2008
| Entity Name |
State/Country of Incorporation | |
| White Peak Finance Ireland Limited |
Ireland | |
| Wytwornia Sprzetu Komunikacyjnego PZL-Rzeszow S.A. |
Poland | |
| Xizi Otis Elevator Company Limited |
China | |
| Zardoya Otis, S.A. |
Spain |
| * | Kidde Technologies, Inc. also conducts business as Kidde Aerospace & Defense, Fenwal Safety Systems and Kidde Dual Spectrum. |
Other subsidiaries of the Registrant have been omitted from this listing since, considered in the aggregate as a single subsidiary, they would not constitute a significant subsidiary.
Exhibit 23
CONSENT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
We hereby consent to the incorporation by reference in the Registration Statement on Form S-3 (No. 333-144830), in the Registration Statement on Form S-4 (No. 333-77991) as amended by Post-Effective Amendment No. 1 on Form S-8 (No. 333-77991) and in the Registration Statements on Form S-8 (Nos. 333-156390, 333-156385, 333-150643, 333-150640, 333-150639, 333-125478, 333-125476, 333-125293, 333-110020, 333-100724, 333-100723, 333-100718, 333-82911, 333-77817, 333-21853, 333-21851, 033-58937, 033-57769 and 033-51385) of United Technologies Corporation of our report dated February 11, 2009 relating to the financial statements and the effectiveness of internal control over financial reporting, which appears in the Annual Report to Shareowners, which is incorporated in this Annual Report on Form 10-K. We also consent to the incorporation by reference of our report dated February 11, 2009 relating to the financial statement schedule, which appears on page S-I of this Form 10-K.
| /s/ PricewaterhouseCoopers LLP |
| Hartford, Connecticut |
| February 11, 2009 |
Exhibit 24
UNITED TECHNOLOGIES CORPORATION
Power of Attorney
The undersigned, as a member of the Board of Directors, or as an officer of UNITED TECHNOLOGIES CORPORATION, a Delaware corporation (the “Corporation”), or as a member of a committee of said Board, or in all of said capacities, hereby constitutes and appoints CHARLES D. GILL, KATHLEEN M. HOPKO and GREGORY J. HAYES, or any one of them, his or her true and lawful attorneys and agents to do any and all acts and things and execute any and all instruments which the said attorneys and agents may deem necessary or advisable to enable the Corporation to comply with the Securities Exchange Act of 1934 and any rules and regulations and requirements of the Securities and Exchange Commission in respect thereof in connection with the filing of the Annual Report of the Corporation on Form 10-K for the fiscal year ended December 31, 2008, including specifically, but without limiting the generality of the foregoing, the power and authority to sign the name of the undersigned, in the capacities aforesaid or in any other capacity, to such Form 10-K Annual Report filed or to be filed with the Securities and Exchange Commission, and any and all amendments to the said Form 10-K Annual Report, and any and all instruments and documents filed as a part of or in connection with the said Form 10-K Annual Report or any amendments thereto; hereby ratifying and confirming all that the said attorneys and agents, or any one of them, have done, shall do or cause to be done by virtue hereof.
IN WITNESS WHEREOF, the undersigned has signed this Power of Attorney this 9th day of February, 2009.
| /s/ John V. Faraci |
| John V. Faraci |
1
UNITED TECHNOLOGIES CORPORATION
Power of Attorney
The undersigned, as a member of the Board of Directors, or as an officer of UNITED TECHNOLOGIES CORPORATION, a Delaware corporation (the “Corporation”), or as a member of a committee of said Board, or in all of said capacities, hereby constitutes and appoints CHARLES D. GILL, KATHLEEN M. HOPKO and GREGORY J. HAYES, or any one of them, his or her true and lawful attorneys and agents to do any and all acts and things and execute any and all instruments which the said attorneys and agents may deem necessary or advisable to enable the Corporation to comply with the Securities Exchange Act of 1934 and any rules and regulations and requirements of the Securities and Exchange Commission in respect thereof in connection with the filing of the Annual Report of the Corporation on Form 10-K for the fiscal year ended December 31, 2008, including specifically, but without limiting the generality of the foregoing, the power and authority to sign the name of the undersigned, in the capacities aforesaid or in any other capacity, to such Form 10-K Annual Report filed or to be filed with the Securities and Exchange Commission, and any and all amendments to the said Form 10-K Annual Report, and any and all instruments and documents filed as a part of or in connection with the said Form 10-K Annual Report or any amendments thereto; hereby ratifying and confirming all that the said attorneys and agents, or any one of them, have done, shall do or cause to be done by virtue hereof.
IN WITNESS WHEREOF, the undersigned has signed this Power of Attorney this 9th day of February, 2009.
| /s/ Jean-Pierre Garnier |
| Jean-Pierre Garnier |
2
UNITED TECHNOLOGIES CORPORATION
Power of Attorney
The undersigned, as a member of the Board of Directors, or as an officer of UNITED TECHNOLOGIES CORPORATION, a Delaware corporation (the “Corporation”), or as a member of a committee of said Board, or in all of said capacities, hereby constitutes and appoints CHARLES D. GILL, KATHLEEN M. HOPKO and GREGORY J. HAYES, or any one of them, his or her true and lawful attorneys and agents to do any and all acts and things and execute any and all instruments which the said attorneys and agents may deem necessary or advisable to enable the Corporation to comply with the Securities Exchange Act of 1934 and any rules and regulations and requirements of the Securities and Exchange Commission in respect thereof in connection with the filing of the Annual Report of the Corporation on Form 10-K for the fiscal year ended December 31, 2008, including specifically, but without limiting the generality of the foregoing, the power and authority to sign the name of the undersigned, in the capacities aforesaid or in any other capacity, to such Form 10-K Annual Report filed or to be filed with the Securities and Exchange Commission, and any and all amendments to the said Form 10-K Annual Report, and any and all instruments and documents filed as a part of or in connection with the said Form 10-K Annual Report or any amendments thereto; hereby ratifying and confirming all that the said attorneys and agents, or any one of them, have done, shall do or cause to be done by virtue hereof.
IN WITNESS WHEREOF, the undersigned has signed this Power of Attorney this 9th day of February, 2009.
| /s/ Jamie S. Gorelick |
| Jamie S. Gorelick |
3
UNITED TECHNOLOGIES CORPORATION
Power of Attorney
The undersigned, as a member of the Board of Directors, or as an officer of UNITED TECHNOLOGIES CORPORATION, a Delaware corporation (the “Corporation”), or as a member of a committee of said Board, or in all of said capacities, hereby constitutes and appoints CHARLES D. GILL, KATHLEEN M. HOPKO and GREGORY J. HAYES, or any one of them, his or her true and lawful attorneys and agents to do any and all acts and things and execute any and all instruments which the said attorneys and agents may deem necessary or advisable to enable the Corporation to comply with the Securities Exchange Act of 1934 and any rules and regulations and requirements of the Securities and Exchange Commission in respect thereof in connection with the filing of the Annual Report of the Corporation on Form 10-K for the fiscal year ended December 31, 2008, including specifically, but without limiting the generality of the foregoing, the power and authority to sign the name of the undersigned, in the capacities aforesaid or in any other capacity, to such Form 10-K Annual Report filed or to be filed with the Securities and Exchange Commission, and any and all amendments to the said Form 10-K Annual Report, and any and all instruments and documents filed as a part of or in connection with the said Form 10-K Annual Report or any amendments thereto; hereby ratifying and confirming all that the said attorneys and agents, or any one of them, have done, shall do or cause to be done by virtue hereof.
IN WITNESS WHEREOF, the undersigned has signed this Power of Attorney this 9th day of February, 2009.
| /s/ Edward A. Kangas |
| Edward A. Kangas |
4
UNITED TECHNOLOGIES CORPORATION
Power of Attorney
The undersigned, as a member of the Board of Directors, or as an officer of UNITED TECHNOLOGIES CORPORATION, a Delaware corporation (the “Corporation”), or as a member of a committee of said Board, or in all of said capacities, hereby constitutes and appoints CHARLES D. GILL, KATHLEEN M. HOPKO and GREGORY J. HAYES, or any one of them, his or her true and lawful attorneys and agents to do any and all acts and things and execute any and all instruments which the said attorneys and agents may deem necessary or advisable to enable the Corporation to comply with the Securities Exchange Act of 1934 and any rules and regulations and requirements of the Securities and Exchange Commission in respect thereof in connection with the filing of the Annual Report of the Corporation on Form 10-K for the fiscal year ended December 31, 2008, including specifically, but without limiting the generality of the foregoing, the power and authority to sign the name of the undersigned, in the capacities aforesaid or in any other capacity, to such Form 10-K Annual Report filed or to be filed with the Securities and Exchange Commission, and any and all amendments to the said Form 10-K Annual Report, and any and all instruments and documents filed as a part of or in connection with the said Form 10-K Annual Report or any amendments thereto; hereby ratifying and confirming all that the said attorneys and agents, or any one of them, have done, shall do or cause to be done by virtue hereof.
IN WITNESS WHEREOF, the undersigned has signed this Power of Attorney this 9th day of February, 2009.
| /s/ Charles R. Lee |
| Charles R. Lee |
5
UNITED TECHNOLOGIES CORPORATION
Power of Attorney
The undersigned, as a member of the Board of Directors, or as an officer of UNITED TECHNOLOGIES CORPORATION, a Delaware corporation (the “Corporation”), or as a member of a committee of said Board, or in all of said capacities, hereby constitutes and appoints CHARLES D. GILL, KATHLEEN M. HOPKO and GREGORY J. HAYES, or any one of them, his or her true and lawful attorneys and agents to do any and all acts and things and execute any and all instruments which the said attorneys and agents may deem necessary or advisable to enable the Corporation to comply with the Securities Exchange Act of 1934 and any rules and regulations and requirements of the Securities and Exchange Commission in respect thereof in connection with the filing of the Annual Report of the Corporation on Form 10-K for the fiscal year ended December 31, 2008, including specifically, but without limiting the generality of the foregoing, the power and authority to sign the name of the undersigned, in the capacities aforesaid or in any other capacity, to such Form 10-K Annual Report filed or to be filed with the Securities and Exchange Commission, and any and all amendments to the said Form 10-K Annual Report, and any and all instruments and documents filed as a part of or in connection with the said Form 10-K Annual Report or any amendments thereto; hereby ratifying and confirming all that the said attorneys and agents, or any one of them, have done, shall do or cause to be done by virtue hereof.
IN WITNESS WHEREOF, the undersigned has signed this Power of Attorney this 9th day of February, 2009.
| /s/ Richard D. McCormick |
| Richard D. McCormick |
6
UNITED TECHNOLOGIES CORPORATION
Power of Attorney
The undersigned, as a member of the Board of Directors, or as an officer of UNITED TECHNOLOGIES CORPORATION, a Delaware corporation (the “Corporation”), or as a member of a committee of said Board, or in all of said capacities, hereby constitutes and appoints CHARLES D. GILL, KATHLEEN M. HOPKO and GREGORY J. HAYES, or any one of them, his or her true and lawful attorneys and agents to do any and all acts and things and execute any and all instruments which the said attorneys and agents may deem necessary or advisable to enable the Corporation to comply with the Securities Exchange Act of 1934 and any rules and regulations and requirements of the Securities and Exchange Commission in respect thereof in connection with the filing of the Annual Report of the Corporation on Form 10-K for the fiscal year ended December 31, 2008, including specifically, but without limiting the generality of the foregoing, the power and authority to sign the name of the undersigned, in the capacities aforesaid or in any other capacity, to such Form 10-K Annual Report filed or to be filed with the Securities and Exchange Commission, and any and all amendments to the said Form 10-K Annual Report, and any and all instruments and documents filed as a part of or in connection with the said Form 10-K Annual Report or any amendments thereto; hereby ratifying and confirming all that the said attorneys and agents, or any one of them, have done, shall do or cause to be done by virtue hereof.
IN WITNESS WHEREOF, the undersigned has signed this Power of Attorney this 9th day of February, 2009.
| /s/ Harold McGraw III |
| Harold McGraw III |
7
UNITED TECHNOLOGIES CORPORATION
Power of Attorney
The undersigned, as a member of the Board of Directors, or as an officer of UNITED TECHNOLOGIES CORPORATION, a Delaware corporation (the “Corporation”), or as a member of a committee of said Board, or in all of said capacities, hereby constitutes and appoints CHARLES D. GILL, KATHLEEN M. HOPKO and GREGORY J. HAYES, or any one of them, his or her true and lawful attorneys and agents to do any and all acts and things and execute any and all instruments which the said attorneys and agents may deem necessary or advisable to enable the Corporation to comply with the Securities Exchange Act of 1934 and any rules and regulations and requirements of the Securities and Exchange Commission in respect thereof in connection with the filing of the Annual Report of the Corporation on Form 10-K for the fiscal year ended December 31, 2008, including specifically, but without limiting the generality of the foregoing, the power and authority to sign the name of the undersigned, in the capacities aforesaid or in any other capacity, to such Form 10-K Annual Report filed or to be filed with the Securities and Exchange Commission, and any and all amendments to the said Form 10-K Annual Report, and any and all instruments and documents filed as a part of or in connection with the said Form 10-K Annual Report or any amendments thereto; hereby ratifying and confirming all that the said attorneys and agents, or any one of them, have done, shall do or cause to be done by virtue hereof.
IN WITNESS WHEREOF, the undersigned has signed this Power of Attorney this 9th day of February, 2009.
| /s/ Richard B. Myers |
| Richard B. Myers |
8
UNITED TECHNOLOGIES CORPORATION
Power of Attorney
The undersigned, as a member of the Board of Directors, or as an officer of UNITED TECHNOLOGIES CORPORATION, a Delaware corporation (the “Corporation”), or as a member of a committee of said Board, or in all of said capacities, hereby constitutes and appoints CHARLES D. GILL, KATHLEEN M. HOPKO and GREGORY J. HAYES, or any one of them, his or her true and lawful attorneys and agents to do any and all acts and things and execute any and all instruments which the said attorneys and agents may deem necessary or advisable to enable the Corporation to comply with the Securities Exchange Act of 1934 and any rules and regulations and requirements of the Securities and Exchange Commission in respect thereof in connection with the filing of the Annual Report of the Corporation on Form 10-K for the fiscal year ended December 31, 2008, including specifically, but without limiting the generality of the foregoing, the power and authority to sign the name of the undersigned, in the capacities aforesaid or in any other capacity, to such Form 10-K Annual Report filed or to be filed with the Securities and Exchange Commission, and any and all amendments to the said Form 10-K Annual Report, and any and all instruments and documents filed as a part of or in connection with the said Form 10-K Annual Report or any amendments thereto; hereby ratifying and confirming all that the said attorneys and agents, or any one of them, have done, shall do or cause to be done by virtue hereof.
IN WITNESS WHEREOF, the undersigned has signed this Power of Attorney this 9th day of February, 2009.
| /s/ H. Patrick Swygert |
| H. Patrick Swygert |
9
UNITED TECHNOLOGIES CORPORATION
Power of Attorney
The undersigned, as a member of the Board of Directors, or as an officer of UNITED TECHNOLOGIES CORPORATION, a Delaware corporation (the “Corporation”), or as a member of a committee of said Board, or in all of said capacities, hereby constitutes and appoints CHARLES D. GILL, KATHLEEN M. HOPKO and GREGORY J. HAYES, or any one of them, his or her true and lawful attorneys and agents to do any and all acts and things and execute any and all instruments which the said attorneys and agents may deem necessary or advisable to enable the Corporation to comply with the Securities Exchange Act of 1934 and any rules and regulations and requirements of the Securities and Exchange Commission in respect thereof in connection with the filing of the Annual Report of the Corporation on Form 10-K for the fiscal year ended December 31, 2008, including specifically, but without limiting the generality of the foregoing, the power and authority to sign the name of the undersigned, in the capacities aforesaid or in any other capacity, to such Form 10-K Annual Report filed or to be filed with the Securities and Exchange Commission, and any and all amendments to the said Form 10-K Annual Report, and any and all instruments and documents filed as a part of or in connection with the said Form 10-K Annual Report or any amendments thereto; hereby ratifying and confirming all that the said attorneys and agents, or any one of them, have done, shall do or cause to be done by virtue hereof.
IN WITNESS WHEREOF, the undersigned has signed this Power of Attorney this 9th day of February, 2009.
| /s/ André Villeneuve |
| André Villeneuve |
10
UNITED TECHNOLOGIES CORPORATION
Power of Attorney
The undersigned, as a member of the Board of Directors, or as an officer of UNITED TECHNOLOGIES CORPORATION, a Delaware corporation (the “Corporation”), or as a member of a committee of said Board, or in all of said capacities, hereby constitutes and appoints CHARLES D. GILL, KATHLEEN M. HOPKO and GREGORY J. HAYES, or any one of them, his or her true and lawful attorneys and agents to do any and all acts and things and execute any and all instruments which the said attorneys and agents may deem necessary or advisable to enable the Corporation to comply with the Securities Exchange Act of 1934 and any rules and regulations and requirements of the Securities and Exchange Commission in respect thereof in connection with the filing of the Annual Report of the Corporation on Form 10-K for the fiscal year ended December 31, 2008, including specifically, but without limiting the generality of the foregoing, the power and authority to sign the name of the undersigned, in the capacities aforesaid or in any other capacity, to such Form 10-K Annual Report filed or to be filed with the Securities and Exchange Commission, and any and all amendments to the said Form 10-K Annual Report, and any and all instruments and documents filed as a part of or in connection with the said Form 10-K Annual Report or any amendments thereto; hereby ratifying and confirming all that the said attorneys and agents, or any one of them, have done, shall do or cause to be done by virtue hereof.
IN WITNESS WHEREOF, the undersigned has signed this Power of Attorney this 9th day of February, 2009.
| /s/ Christine Todd Whitman |
| Christine Todd Whitman |
11
Exhibit 31.1
CERTIFICATION
I, Louis R. Chênevert, certify that:
| 1. | I have reviewed this annual report on Form 10-K of United Technologies Corporation; |
| 2. | Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report; |
| 3. | Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report; |
| 4. | The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have: |
| a) | Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared; |
| b) | Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles; |
| c) | Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and |
| d) | Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and |
| 5. | The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions): |
| a) | All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and |
| b) | Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting. |
| Date: February 11, 2009 | /s/ Louis R. Chênevert | |||
| Louis R. Chênevert President and Chief Executive Officer |
Exhibit 31.2
CERTIFICATION
I, Gregory J. Hayes, certify that:
| 1. | I have reviewed this annual report on Form 10-K of United Technologies Corporation; |
| 2. | Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report; |
| 3. | Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report; |
| 4. | The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have: |
| a) | Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared; |
| b) | Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles; |
| c) | Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and |
| d) | Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and |
| 5. | The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions): |
| a) | All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and |
| b) | Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting. |
| Date: February 11, 2009 | /s/ Gregory J. Hayes | |||
| Gregory J. Hayes Senior Vice President and Chief Financial Officer |
Exhibit 31.3
CERTIFICATION
I, Margaret M. Smyth, certify that:
| 1. | I have reviewed this annual report on Form 10-K of United Technologies Corporation; |
| 2. | Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report; |
| 3. | Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report; |
| 4. | The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have: |
| a) | Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared; |
| b) | Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles; |
| c) | Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and |
| d) | Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and |
| 5. | The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions): |
| a) | All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and |
| b) | Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting. |
| Date: February 11, 2009 | /s/ Margaret M. Smyth | |||
| Margaret M. Smyth Vice President, Controller |
Exhibit 32
Section 1350 Certifications
Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
(Subsections (a) and (b) of Section 1350, Chapter 63 of Title 18, United States Code)
Pursuant to section 906 of the Sarbanes-Oxley Act of 2002 (subsections (a) and (b) of section 1350, chapter 63 of title 18, United States Code), each of the undersigned officers of United Technologies Corporation, a Delaware corporation (the “Corporation”), does hereby certify that:
The Annual Report on Form 10-K for the year ended December 31, 2008 (the “Form 10-K”) of the Corporation fully complies with the requirements of section 13(a) or 15(d) of the Securities Exchange Act of 1934 and information contained in the Form 10-K fairly presents, in all material respects, the financial condition and results of operations of the Corporation.
| Date: February 11, 2009 | /s/ Louis R. Chênevert | |||
| Louis R. Chênevert | ||||
| President and Chief Executive Officer | ||||
| Date: February 11, 2009 | /s/ Gregory J. Hayes | |||
| Gregory J. Hayes | ||||
| Senior Vice President and Chief Financial Officer | ||||
| Date: February 11, 2009 | /s/ Margaret M. Smyth | |||
| Margaret M. Smyth | ||||
| Vice President, Controller | ||||