<PAGE>
[LOGO OF UNITED TECHNOLOGIES APPEARS HERE]
Dear Fellow Shareowner:
You are cordially invited to attend our 1995 Annual Meeting of Shareowners
of United Technologies Corporation to be held April 25, 1995 at THE DRAKE
HOTEL, 140 EAST WALTON PLACE, CHICAGO, ILLINOIS. The doors will open at 10:30
a.m. and the meeting will begin at 11:00 a.m.
At the meeting, we will report on the operations, progress and plans of the
Corporation, and give you an opportunity to ask questions. If you are unable
to attend, you may read a summary of the annual meeting proceedings in the
First Quarter Report to Shareowners.
The annual meeting is open to all shareowners or their authorized
representatives. To attend the meeting, complete and return the enclosed
postage-paid reservation card directly to the Corporation. An admission ticket
will be mailed to you.
If your shares are held of record by a broker or other nominee in street
name and you wish to attend the meeting, your broker or nominee must give
written notice to the Corporation that you are its authorized representative
for those shares.
Your vote is important, and we urge you to execute and return the proxy card
in the envelope provided whether or not you plan to attend the meeting. If you
decide to attend the annual meeting, you can still vote your shares in person,
if you wish.
We hope to see you on April 25th.
Robert F. Daniell
Chairman
George David
President and
Chief Executive Officer
Hartford, Connecticut
March 24, 1995
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TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Notice of Annual Meeting................................................. 1
Proxy Statement.......................................................... 2
General Information Concerning the Board of Directors.................... 2
Item No. 1--Election of Directors........................................ 4
Nominees for Board of Directors........................................ 4
Security Ownership of Directors and Executive Officers................. 7
Item No. 2--Appointment of General Auditor............................... 9
Item No. 3--Approval of an Amendment to the United Technologies
Corporation Annual Executive Incentive Compensation Plan............... 10
Item No. 4--Approval of an Amendment to the United Technologies
Corporation Long Term Incentive Plan................................... 13
Item No. 5--Shareowner Proposal regarding Executive Compensation......... 15
Report of the Committee on Compensation and Executive Development........ 17
Compensation of Executive Officers....................................... 21
Other Business........................................................... 25
Proxies and Voting....................................................... 25
Annual Report............................................................ 27
Appendix A............................................................... 28
Appendix B............................................................... 30
</TABLE>
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[LOGO OF UNITED TECHNOLOGIES APPEARS HERE]
NOTICE OF ANNUAL MEETING
APRIL 25, 1995
To the Owners of Common and Preferred Stock:
The Annual Meeting of Shareowners of United Technologies Corporation will be
held at THE DRAKE HOTEL, 140 EAST WALTON PLACE, CHICAGO, ILLINOIS at 11:00
a.m. on Tuesday, April 25, 1995 to consider and take action on the following
items:
1. Election of twelve directors.
2. Appointment of General Auditor.
3. Approval of an Amendment to the Corporation's Annual Executive
Incentive Plan.
4. Approval of an Amendment to the Corporation's Long Term Incentive
Plan.
5. A shareowner proposal regarding executive compensation.
6. Such other business as may properly come before the meeting or any
adjournment thereof.
Only owners of Common and Series A ESOP Convertible Preferred Stock of
record at the close of business on March 10, 1995 are entitled to notice of
and to vote at the meeting. A list of such shareowners will be available at
the time and place of the meeting and during the ten days prior to the meeting
at the offices of Bartlit Beck Herman Palenchar & Scott, 54 West Hubbard
Street, Chicago, Illinois.
We urge you to sign and date the enclosed proxy card and return it at once
in the enclosed envelope.
William H. Trachsel
Vice President and Secretary
March 24, 1995
<PAGE>
UNITED TECHNOLOGIES CORPORATION
PROXY STATEMENT
This Proxy Statement is first being mailed to shareowners on or about March
24, 1995 soliciting proxies by the Board of Directors of United Technologies
Corporation, One Financial Plaza, Hartford, Connecticut 06101, for the Annual
Meeting of Shareowners of the Corporation to be held on Tuesday, April 25,
1995, at the time and place and for the purposes set forth in the Notice of
Annual Meeting.
RECORD DATE AND OUTSTANDING SHARES
The record date for determining those shareowners entitled to vote at the
Annual Meeting was March 10, 1995. At that date, the Corporation had
outstanding 141,484,923 shares of stock consisting of 127,851,410 shares of
Common Stock and 13,633,513 shares of Series A ESOP Convertible Preferred
Stock. Each share of Common Stock is entitled to one vote. Each share of
Series A ESOP Preferred Stock is entitled to 1.3 votes. The total number of
votes entitled to be cast at the meeting is 145,574,977.
The Capital Group Companies, Inc., 333 South Hope Street, Los Angeles, CA
90071, has advised the Corporation that certain of its operating subsidiaries
exercised as of December 31, 1994, investment discretion with respect to
8,338,400 shares, or 6.69% of Common Stock of the Corporation.
The FMR Corporation, 82 Devonshire Street, Boston, MA 02109, has advised the
Corporation that it exercised as of December 31, 1994, investment discretion
with respect to 7,693,253 shares, or 6.17% of the Common Stock of the
Corporation.
The Corporation knows of no other person who is the beneficial owner of over
5% of its Common Stock. All Series A ESOP Preferred Stock is held by Bankers
Trust Company, One Bankers Trust Plaza, New York, New York 10006, trustee on
behalf of employees of the Corporation who participate in the Corporation's
Employee Savings Plan.
CUMULATIVE VOTING
In the election of directors of the Corporation, each owner of Common Stock
is entitled to as many votes as equal the number of shares of his or her stock
multiplied by the number of directors to be elected and the owners of the
Series A ESOP Preferred are entitled to as many votes as equal 1.3 times the
number of shares of stock multiplied by the number of directors to be elected.
By giving written instructions to the Corporation, shareowners may cast all
such votes for a single director or may distribute such votes among any two or
more of the nominees, as they see fit. If no written instruction is given, the
votes will be evenly distributed among all the management nominees. A
shareowner may withhold a vote for a particular management nominee by writing
the nominee's name on the proxy card in the space provided. Under those
circumstances, unless other instructions are given in writing, the
shareowner's votes will then be evenly cast among the remaining management
nominees.
GENERAL INFORMATION CONCERNING THE BOARD OF DIRECTORS
Board of Directors--Directors are elected annually by the shareowners.
Nominees are selected by the Board upon recommendation of its Nominating
Committee and are chosen for their ability and integrity. As a group, they are
expected to bring to the Board experience in national and international
business matters, an awareness of the appropriate role of the Corporation in
society, and a diversity of opinion and insight. The Board met nine times
during 1994 with an average attendance of 95%. All incumbent directors
attended more than 75% of the aggregate total number of meetings of the Board
and the Committees on which he or she served.
2
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The Board has established six permanent committees to assist it in the
discharge of its responsibilities. Their functions are described below:
Executive Committee--The Executive Committee may exercise all powers of the
Board of Directors in the management of the Corporation except those powers
that the Bylaws specifically reserve to the entire Board (e.g., amend the
Bylaws, declare dividends). Although the Executive Committee has very broad
powers, in practice it meets only when it would be inconvenient to call a
meeting of the Board. The members of the Executive Committee, which met once
during 1994, are Robert F. Daniell, Chairman; Antonia Handler Chayes, George
David, Robert H. Malott and Jacqueline G. Wexler.
Audit Review Committee--The Audit Review Committee recommends to the Board a
nominee for General Auditor of the Corporation, approves services rendered by
and meets with the General Auditor and with the Corporation's internal
auditors to receive reports with regard to all auditing matters. The members
of the Audit Review Committee, which met five times during 1994, are Howard H.
Baker, Jr., Chairman; Antonia Handler Chayes, Robert F. Dee, Pehr G.
Gyllenhammar, Robert H. Malott, and Jacqueline G. Wexler.
Committee on Compensation and Executive Development--The Committee on
Compensation and Executive Development makes recommendations to the Board on
compensation actions involving senior executives of the Corporation. The
Committee approves compensation actions involving all elected officers of the
Corporation, and periodically reviews in the aggregate, annual salaries of all
executives. The Committee approves long term incentive awards for elected
officers and certain key executives of the Corporation, and reviews and
administers the incentive compensation, long term incentive and other
compensation plans of the Corporation. It also reviews and makes
recommendations to the Board on policies and programs for the development of
management personnel and management structure and organization. The members of
the Committee on Compensation and Executive Development, which met nine times
during 1994, are Robert F. Dee, Chairman; Howard H. Baker, Jr., Charles W.
Duncan, Jr., Charles R. Lee, Harold A. Wagner, and Jacqueline G. Wexler.
Finance Committee--The Finance Committee is responsible for reviewing and
making recommendations to the Board on the management of the financial
resources of the Corporation. This Committee also reviews such major financial
strategies and transactions and major acquisitions and divestitures as may be
referred to it by the Chief Executive Officer of the Corporation. The members
of the Finance Committee, which met five times during 1994, are Charles W.
Duncan, Jr., Chairman; Robert F. Daniell, George David, Pehr G. Gyllenhammar,
Gerald D. Hines, Charles R. Lee, and Robert H. Malott.
Nominating Committee--The Nominating Committee is responsible for making
recommendations to the Board on candidates for the Board and on the
qualifications and retirement of existing members of the Board. This Committee
also is responsible for other matters referred to it by the Board. The
Nominating Committee considers nominees recommended to it in writing by
shareowners. The members of the Nominating Committee, which met three times
during 1994, are Robert H. Malott, Chairman; Robert F. Dee and Charles W.
Duncan, Jr.
Public Issues Review Committee--The Public Issues Review Committee has
oversight responsibility for the Corporation's response to such public issues
as equal employment opportunity, the environment, and safety in the workplace.
In addition, the Committee has oversight responsibility for the Corporation's
contributions program and political action committees. The members of the
Public Issues Review Committee, which met six times during 1994, are
Jacqueline G. Wexler, Chairman; Howard H. Baker, Jr., Antonia Handler Chayes,
Robert F. Dee, Pehr G. Gyllenhammar, Gerald D. Hines and Harold A. Wagner.
3
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ITEM NO. 1
ELECTION OF DIRECTORS
BOARD OF DIRECTORS NOMINEES
Eleven of the nominees were elected directors at the 1994 Annual Meeting.
Mr. Wagner was elected a director in July 1994. Should any of these nominees
become unavailable to accept nomination or election as a director, the proxy
holders will, at their discretion, vote the shares that they represent for the
election of such other persons as the Board of Directors may recommend, unless
the Board reduces the number of directors. Information regarding each nominee
as of January 1, 1995, including their ownership of Common Stock and Series A
ESOP Preferred Stock of the Corporation, is presented below:
[PHOTO OF Howard H. Baker, Jr., Partner, Baker, Donelson, Bearman &
HOWARD H. BAKER, Caldwell (attorneys). Senator Baker was a member of the
JR. APPEARS United States Senate from 1967 through 1984, where he served
HERE] two terms as Minority Leader and two terms as Majority
Leader. He was the Chief of Staff for the President from
February 1987 to July 1988. Senator Baker is a director of
Federal Express Corporation, WMX Technologies, Inc., and
Pennzoil Company, and a trustee of the Mayo Clinic. He is 69
and has been a director since 1990.
[PHOTO OF ANTONIA Antonia Handler Chayes, President of the Consensus Building
HANDLER CHAYES Institute and Senior Consultant to Endispute Incorporated,
APPEARS HERE] Boston, Massachusetts (conflict prevention and alternative
dispute resolution). Ms. Chayes served as Assistant
Secretary of the United States Air Force from 1977 to 1979,
and as Under Secretary from 1979 to 1981. She is a member of
the DOD-CIA Joint Security Commission. She teaches at the
Kennedy School of Government and is Co-Director of the
Compliance Project of the Program on Negotiation at the
Harvard Law School. She is a member of the American Law
Institute and the Council on Foreign Relations. Ms. Chayes
also sits on the Advisory Board of the Columbia University
School of International and Public Affairs. She is 65 and
has been a director of the Corporation since 1981.
[PHOTO OF ROBERT Robert F. Daniell, Chairman, United Technologies
F. DANIELL Corporation. Mr. Daniell served as President of Sikorsky
APPEARS HERE] Aircraft from 1981 to 1983, and Vice President of United
Technologies from 1982 to 1983. He was elected Senior Vice
President--Defense Systems in 1983. Mr. Daniell was elected
President and Chief Operating Officer in 1984 and named to
the additional post of Chief Executive Officer, effective
January 1, 1986. He was elected Chairman, effective January
1, 1987. Mr. Daniell relinquished the offices of President
and Chief Operating Officer in February 1992 and the office
of Chief Executive Officer in April, 1994 upon the election
of Mr. George David to those posts. Mr. Daniell is a
director of Shell Oil Co. and The Travelers Inc. He is 61
and has been a director of the Corporation since 1984.
4
<PAGE>
[PHOTO OF GEORGE George David, President and Chief Executive Officer, United
DAVID APPEARS Technologies Corporation. Mr. David served as President and
HERE] Chief Executive Officer of Otis Elevator Company from 1986
through 1988, and as Chairman of Otis from 1987 through
today. He was elected to the office of Senior Vice President
of the Corporation in 1988, and Executive Vice President and
President, Commercial/ Industrial in 1989. In February 1992,
Mr. David was elected President and Chief Operating Officer
of the Corporation and in April 1994 he was elected Chief
Executive Officer. Mr. David is a director of Northeast
Utilities and President of the Board of Trustees of the
Graduate School of Business Administration at The University
of Virginia. He is 52 and has been a director of the
Corporation since 1992.
[PHOTO OF ROBERT Robert F. Dee, retired Chairman of the Board, SmithKline
F. DEE APPEARS Beckman Corporation, Philadelphia, PA (pharmaceuticals). Mr.
HERE] Dee served as Chief Executive Officer of SmithKline Beckman
Corporation from 1972 to 1982. He is a director of Air
Products and Chemicals, Inc., Health Trust, Inc., and Volvo
North America Corporation. He is a member of The Business
Council, The Conference Board and the Management Executives'
Society and serves on the Board of Trustees of The
Eisenhower Exchange Fellowship. He is 70 and has been a
director of the Corporation since 1981.
[PHOTO OF CHARLES Charles W. Duncan, Jr., Private Investor, Houston, Texas.
W. DUNCAN, JR. Mr. Duncan has been involved in private investments since
APPEARS HERE] 1981. Mr. Duncan served as Secretary of the United States
Department of Energy from 1979 to 1981. He is a director of
American Express Company, American Express Bank, Ltd., The
Coca-Cola Company, Newfield Exploration Co., Chemical
Banking Corporation, Panhandle Eastern Corporation and Texas
Commerce Bancshares, Inc. and is a member of the
International Advisory Board of Elf Aquitaine. Mr. Duncan is
68 and has been a director of the Corporation since 1981.
[PHOTO OF PEHR G. Pehr G. Gyllenhammar, Chairman of MC European Capital
GYLLENHAMMAR (Holdings) SA, London, England, and former Executive
APPEARS HERE] Chairman, AB Volvo, Goteborg, Sweden. Mr. Gyllenhammar
served as Managing Director and Chief Executive Officer of
AB Volvo from 1971 to 1983, as Chairman and Chief Executive
Officer until 1990, and as Executive Chairman from 1990 to
December 1993. He is a director of Kissinger Associates,
Inc., Pearson plc., Reuters Holdings plc. and Philips
Electronics NV. He is also Chairman of Swedish Ships'
Mortgage Bank. Mr. Gyllenhammar is 59 and has been a
director of the Corporation since 1981.
5
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[PHOTO OF GERALD Gerald D. Hines, Founder and Chairman of Hines Interests
D. HINES APPEARS Limited Partnership, an international real estate
HERE] development and management firm, in Houston, Texas. Mr.
Hines served on the Board of the Federal Reserve Bank of
Dallas from 1975 through 1983, and held the office of
Chairman of the Federal Reserve Bank of Dallas from 1981
through 1983. He is a trustee of the Urban Land Institute,
and is a director of the Urban Land Research Foundation. Mr.
Hines is 69 and has been a director of the Corporation since
1989.
[PHOTO OF CHARLES Charles R. Lee, Chairman and Chief Executive Officer of GTE
R. LEE APPEARS Corporation, Stamford, Connecticut (telecommunications). Mr.
HERE] Lee has served since 1992 as Chairman and Chief Executive
Officer of GTE. Since joining GTE in 1983, Mr. Lee served as
Senior Vice President of Finance from 1983 to 1986, Senior
Vice President Finance and Planning from 1986 to 1988, and
from 1988 to 1992 he served as President, Chief Operating
Officer and a director of GTE. He is a director of Contel
Cellular Inc., The Proctor & Gamble Company and USX
Corporation. He is a member of the Business Roundtable, a
Trustee Fellow of the Board of Trustees of Cornell
University, a trustee of the National Planning Association,
a director of the New American Schools Development
Corporation, a member of The Conference Board, Harvard
Business School's Board of Directors of the Associates, and
a director of the Stamford Hospital Foundation. He is 55 and
has been a director of the Corporation since 1994.
[PHOTO OF ROBERT Robert H. Malott, Chairman of the Executive Committee of the
H. MALOTT Board and former Chairman of the Board and Chief Executive
APPEARS HERE] Officer, FMC Corporation, Chicago, Illinois (manufacturer of
machinery and chemicals). He is on the Board of Amoco
Corporation, Rubatex Corporation, and Swiss Bank Corporation
(Council of International Advisors). He is on the Board of
the National Museum of Natural History (Chairman), the
National Park Foundation, The Aspen Institute, the Lyric
Opera of Chicago, the American Enterprise Institute, the
Hoover Institution, and Argonne National Laboratories, and
is a member of The Business Council and the Policy Committee
of the Illinois Business Roundtable. He is on the Board of
Trustees of the University of Chicago. Mr. Malott is 68 and
has been a director of the Corporation since 1980.
[PHOTO OF HAROLD Harold A. Wagner, Chairman, President and Chief Executive
A. WAGNER APPEARS Officer, Air Products and Chemicals, Inc., Allentown,
HERE] Pennsylvania (industrial gases and chemicals). Mr. Wagner
served as President, Air Products and Chemicals, Europe
1988-1990, Executive Vice President, Gases and Equipment
1990-1991, President and Chief Operating Officer 1991-1992
and Chairman, President and Chief Executive Officer since
1992. He is a director of Daido-Hoxan, a member of the
Business Council, the Policy Committee of the Business
Roundtable, and vice-chairman of the Pennsylvania Business
Roundtable. Mr. Wagner also serves on the Board of Trustees
of Lehigh University and the Committee for Economic
Development. Mr. Wagner is 59 and has been a director of the
Corporation since 1994.
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[PHOTO OF Jacqueline G. Wexler retired as President of the National
JACQUELINE G. Conference of Christians and Jews, New York, New York, on
WEXLER APPEARS December 31, 1990. Mrs. Wexler is a former President of
HERE] Hunter College of the City University of New York. Mrs.
Wexler joined Academic Consulting Associates as a Senior
Associate in 1980 and was named President the same year.
Mrs. Wexler served in that capacity until 1982. She is a
director of Interpublic Group of Companies, Incorporated.
Mrs. Wexler is 68 and has been a director of the Corporation
since 1978.
SECURITY OWNERSHIP OF DIRECTORS AND EXECUTIVE OFFICERS
The following table lists all stock based holdings at January 1, 1995 for
each current director, each of the Corporation's executive officers named in
the Summary Compensation Table and all directors and executive officers as a
group. At January 1, 1995, none of such directors or executive officers owned
or had the right to acquire under employee stock options exercisable within 60
days, more than 1% of the Common Stock of the Corporation. Directors and
executive officers as a group owned or had the right to acquire under employee
stock options exercisable within 60 days, 1.7% of the Common Stock of the
Corporation.
<TABLE>
<CAPTION>
CLASS OF SHARES BENEFICIALLY
NAME SECURITIES OWNED (1) TOTAL (2)
---- ------------------------ ------------------- ---------
<S> <C> <C> <C>
Howard H. Baker, Jr. ... Common 2,000 2,257
Antonia Handler Chayes.. Common 1,850 1,850
Robert F. Daniell....... Common 503,472 563,768
Series A ESOP Preferred 634 634
George David............ Common 435,380 759,349
Series A ESOP Preferred 618 618
Robert F. Dee........... Common 1,400 1,657
Charles W. Duncan, Jr. . Common (3) 10,400 10,657
Pehr G. Gyllenhammar.... Common 200 1,457
Gerald D. Hines......... Common 5,250 5,250
Charles R. Lee.......... Common 3,225 3,225
Robert H. Malott........ Common 1,400 1,657
Harold A. Wagner........ Common 1,115 1,115
Jacqueline G. Wexler.... Common 1,650 1,650
Karl J. Krapek.......... Common 136,580 291,580
Series A ESOP Preferred 631 631
Stephen F. Page......... Common 17,980 64,843
Series A ESOP Preferred 111 111
Irving B. Yoskowitz..... Common 153,485 172,463
Series A ESOP Preferred 636 636
Directors & Executive
Officers as a Group
(30)................... Common 2,050,001 2,858,600
</TABLE> Series A ESOP Preferred 10,000 10,000
-------
(1) Included in the number of shares beneficially owned by Messrs. Daniell,
David, Krapek, Page and Yoskowitz and all directors and executive officers as
a group are 379,474; 371,805; 100,330; 6,384; 117,724 and 1,589,180 shares,
respectively, as to which such persons have the right to acquire within 60
days pursuant to employee stock options; 110,073; 51,442; 23,665; 2,500;
27,881 and 323,954 shares, respectively, as to which such persons have sole
voting and investment powers; and 13,925; 12,133; 12,585; 9,096; 7,880, and
129,810
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shares, respectively, as to which such persons have sole voting but no
investment powers. Executive officers as a group have shared voting and
investment power with respect to 3,057 shares of Common Stock and 10,000
shares of Series A ESOP Preferred Stock. The following directors have sole
voting but no investment powers with respect to the following number of
shares: Ms. Chayes, Mrs. Wexler, Messrs. Baker, Hines, Lee, Malott and
Wagner--1000 shares, and Mr. Dee--800 shares. These directors, as well as Mr.
Gyllenhammar, have sole voting and investment power with respect to the
balance of their holdings of Common Stock.
(2) This column shows the individual's stock based holdings at January 1,
1995, including the equity securities in the Securities Beneficially Owned
column and described in footnote (1). The value of these holdings will
increase or decrease with the price of the Corporation's stock. The figures
also include, as appropriate, stock options that are not exercisable within 60
days, deferred stock units of executives who elect to defer a portion of
compensation in the UTC Stock Unit Account under the Deferred Compensation
Program, restricted share units of directors who are foreign nationals, and
directors deferred stock units which will be converted to Common Stock of the
Corporation upon a director's termination of board service as to all of which
there is no voting or investment power.
(3) Includes 5,400 shares owned directly by Mr. Duncan as to which he has
sole voting and investment powers; 4,000 shares owned by a partnership in
which Mr. Duncan is both a Limited Partner and a General Partner, as to which
he has shared voting and investment powers; and 1,000 shares as to which he
has sole voting but no investment powers.
CERTAIN FILINGS
As required by Securities and Exchange Commission Rules, the Corporation
notes that one retired officer, Frank W. McAbee, Jr., did not timely file a
Form 4 covering two transactions that occurred in February 1994, involving
shares of the Corporation's Common Stock. An amended Form 4 was filed in June
1994 when the oversight was discovered.
CERTAIN TRANSACTIONS
The law firm of Baker, Donelson, Bearman, & Caldwell (formerly Baker,
Worthington, Crossley, Stansberry & Woolf), of which Senator Baker is a
partner, is retained from time to time for legal services.
The Corporation and its subsidiaries have transactions in the ordinary
course of business with other unaffiliated corporations of which certain of
the non-employee directors are officers or directors. The Corporation does not
consider the amounts involved in such transactions material in relation to its
business and believes that such amounts are not material in relation to the
businesses of such other corporations or the interests of the directors
involved.
COMPENSATION OF DIRECTORS
Fees and other benefits are provided to directors who are not employees of
the Corporation. The aggregate amount of directors' fees paid for the fiscal
year ended December 31, 1994 was $566,750. No fees or other benefits are
provided to employees of the Corporation for serving as directors. Fees paid
to non-employee directors consist of a basic annual retainer of $25,000,
additional retainers of $3,000 for each Committee chairmanship and $2,500 for
each Committee membership, and a fee of $1,000 for each Board and Committee
meeting attended. Beginning with calendar year 1994, sixty percent of each
non-employee director's basic annual retainer is paid, at the election of such
director, either in shares of Common Stock of the Corporation or in deferred
stock units which automatically convert to shares of Common Stock upon
termination of service on the Board.
Under the Directors' Deferred Compensation Plan, non-employee directors may
make an irrevocable election each year to defer receipt of all or a portion of
the following year's annual retainer and fees that
8
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would be paid in cash. This deferred remuneration is credited with interest at
a rate that is at least equal to the rate being paid from time to time on the
income fund under the Corporation's Savings Plan. Amounts deferred and the
earnings thereon are paid to the participant in cash in one or more annual
installments, following termination of service as a director. One non-employee
director is participating in the Directors' Deferred Compensation Plan.
As part of a program intended to promote a closer identity between
shareowners and the directors, non-employee directors receive a grant of
United Technologies Corporation restricted Common Stock equal to 200 shares
for each year of service remaining between the grant date and their scheduled
retirement date, but in no case exceeding 1,000 shares per director. The
shares vest in increments of 200 shares on the date of each Annual Meeting of
Shareowners, but may not be transferred to the director until such director
retires or resigns from the Board. Should the director leave the Board before
all restricted shares vest, the non-vested shares will be forfeited, except
that in the event of the death or disability of the director, a change in
control, or when a director retires or resigns to accept full time employment
with a charity, a not-for-profit institution or the state, federal or local
government, all shares not previously vested, will vest immediately. In lieu
of Common Stock, any foreign national who serves as a director is eligible to
receive a one-time grant of restricted share units, each unit being equal in
value to a share of Common Stock. Vesting provisions for units are the same as
restricted stock. At retirement, a cash payment equal to the then-current
value of a share of Common Stock will be paid to the foreign director for each
vested unit. Each unit and share of restricted stock will generate a quarterly
cash payment to the holder equal to the dividend paid on a share of Common
Stock.
Under the Directors' Retirement Plan, a non-employee director who has served
as a director for five or more years receives an annual retirement benefit
equal to the highest annual Board retainer in effect for directors of the
Corporation during the director's years of service. The benefit is payable for
a period equal to the director's years of service or 15 years, whichever is
shorter.
Effective January 1, 1995, as part of its overall program of support for
charitable institutions and to attract and retain qualified Directors, the
Board of Directors established the Directors' Charitable Gift Program funded
by life insurance on the lives of the members of the Board of Directors. Under
this Program the Corporation, following the death of a director, intends to
make charitable contributions of up to a total of $1 million, with such
contributions to be allocated among up to four charitable organizations. At
this date all current Directors are participants in this Program. Beneficiary
organizations are recommended by Directors and must be tax-exempt under
Section 501(c)(3) of the Internal Revenue Code. Donations ultimately paid by
the Corporation are expected to be deductible from taxable income for purposes
of federal and other income taxes payable by the Corporation in accordance
with the tax laws applicable at the time. Directors derive no financial
benefit from the Program since all insurance proceeds and charitable
deductions accrue solely to the Corporation.
ITEM NO. 2
APPOINTMENT OF GENERAL AUDITOR
The Audit Review Committee has nominated the firm of Price Waterhouse LLP to
be General Auditor of the Corporation, to act until the 1996 Annual Meeting.
During 1994, Price Waterhouse LLP provided the Corporation with audit and
related services, as well as certain non-auditing services. Fees for services
provided totaled approximately $19,967,900. Services rendered by Price
Waterhouse LLP are approved by the Audit Review Committee and reviewed for any
possible effect on independence; whenever possible, this approval is obtained
prior to the rendering of the service and in other cases as soon thereafter as
practicable.
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Representatives of Price Waterhouse LLP are expected to be present at the
annual meeting with the opportunity to make such statements as they desire.
They will also be available to respond to appropriate questions from
shareowners.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR APPROVAL OF PRICE WATERHOUSE
LLP AS GENERAL AUDITOR OF THE CORPORATION.
ITEM NO. 3
APPROVAL OF AN AMENDMENT TO THE UNITED TECHNOLOGIES
CORPORATION ANNUAL EXECUTIVE INCENTIVE COMPENSATION PLAN
On February 6, 1995, the Board of Directors authorized an amendment to the
Corporation's Annual Executive Incentive Compensation Plan (the "Annual
Incentive Compensation Plan"), effective January 1, 1995, to add a new
incentive performance pool from which future awards may be paid to certain
covered employees (the "Covered Employee Performance Pool"). The Board of
Directors is submitting the amendment which establishes a Covered Employee
Performance Pool to shareowners for approval at the Annual Meeting. The text
of the amendment is set forth in Appendix A hereto. The purpose of the
amendment is to make Annual Incentive Compensation Plan awards to the covered
employees contingent on a specific corporate performance measurement (as
described below). This is intended to preserve the Corporation's federal tax
deductions with respect to award payments that might otherwise not be
deductible as a result of recent changes in the Internal Revenue Code. The
summary below is merely a description of the Annual Incentive Compensation
Plan and the Covered Employee Performance Pool and is subject in its entirety
to the actual terms thereof.
CURRENT PROVISIONS OF THE ANNUAL INCENTIVE COMPENSATION PLAN
The purpose of the Annual Incentive Compensation Plan is to provide
incentive for those employees of the Corporation whose efforts and
accomplishments contribute to the successful management of the Corporation and
its businesses. The Annual Incentive Compensation Plan is an important
component of the Corporation's executive compensation program. The Annual
Incentive Compensation Plan provides that the Board of Directors, acting upon
the recommendation of the Committee on Compensation and Executive Development
(the "Committee"), may set aside a Corporate Annual Incentive Compensation
Fund (the "Corporate Fund") for each fiscal year of the Corporation during
which an aggregate Common Stock dividend of not less than $1.00 is paid. The
Committee may authorize the Chief Executive Officer of the Corporation to set
aside for each fiscal year one or more Operating Unit Annual Incentive
Compensation Funds (the "Operating Unit Funds").
The Board of Directors, acting upon the recommendation of the Committee,
determines the amount set aside in the Corporate Fund, as well as the amount
of individual incentive compensation payments to be made to executives from
that fund. Subject to such limitations and standards as may from time to time
be established by the Committee, the Chief Executive Officer of the
Corporation determines the amount set aside in the Operating Unit Funds for
any fiscal year, as well as the amount of individual payments to be made to
executives from the Operating Unit Funds.
ADDITION OF NEW COVERED EMPLOYEE PERFORMANCE POOL TO THE ANNUAL INCENTIVE
COMPENSATION PLAN
GENERAL. Section 162(m) of the Internal Revenue Code provides that,
effective for tax years beginning on or after January 1, 1994, a publicly
owned corporation may not deduct compensation in excess of $1 million per year
paid to the Corporation's Chief Executive Officer and its four other most
highly paid executive officers, subject to certain exceptions. One such
exception is for performance-based compensation paid
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pursuant to a shareowner-approved plan that satisfies certain conditions of
Section 162(m). The proposed Covered Employee Performance Pool portion of the
Annual Incentive Compensation Plan provides for the award of annual bonuses to
the Chief Executive Officer and the four other most highly compensated
executives of the Corporation based on the Corporation's "Adjusted Net Income"
for each such year. Consistent with the purpose of the Annual Incentive
Compensation Plan, the Covered Employee Performance Pool is intended to: (i)
promote the interest of the Corporation by providing incentives and awards to
its most senior executive officers on the basis of overall corporate financial
performance as measured by "Adjusted Net Income"; and (ii) qualify their
awards as performance-based and tax deductible under Section 162(m).
ELIGIBILITY. In each year, the only individuals eligible to participate in
the Covered Employee Performance Pool will be those individuals who are, on
the last day of the year, the Corporation's Chief Executive Officer and the
four other most highly-paid officers of the Corporation and its subsidiaries
(such individuals being referred to herein as "Participants"). Individuals who
are Participants will not receive any other award under the Annual Incentive
Compensation Plan. Annual Incentive Compensation Plan participants who do not
participate in the Covered Employee Performance Pool will be eligible to
receive awards under the Plan, determined without regard to the Covered
Employee Performance Pool.
DETERMINATION AND ALLOCATION OF THE COVERED EMPLOYEE PERFORMANCE
POOL. Bonuses under the Covered Employee Performance Pool will be allocated to
the Participants in each year out of a pool equal to 0.75% of the
Corporation's "Adjusted Net Income" for such year. The Corporation's "Adjusted
Net Income" for a year is the Corporation's net income reported on its
consolidated financial statement included in its Annual Report on Form 10-K
for such year, adjusted to eliminate: (i) restructuring charges to the extent
they are separately disclosed in the Corporation's Annual Report; (ii) the
effects of changes in accounting principles; and (iii) "extraordinary items"
determined under generally accepted accounting principles.
Subject to the Committee's right to reduce any Participant's award as
described below, the amount set aside under the Covered Employee Performance
Pool will be allocated to each Participant as follows: 30 percent of the pool
to the Chief Executive Officer and 17.5 percent of the pool to each of the
four other Participants. Awards allocated to a Participant will be paid to the
Participant in cash or partly in cash and partly in stock, as determined by
the Committee.
ADMINISTRATION. The Covered Employee Performance Pool portion of the Annual
Incentive Compensation Plan will be administered by the Committee, which shall
have sole authority thereunder to interpret any provision of the Covered
Employee Performance Pool portion of the Annual Incentive Compensation Plan.
The amount of the bonus pool in any year and the allocation thereof to the
Participants will be certified by the Committee as soon as practicable after
the Corporation closes its financial books for the year and prior to any
payment of an award for such year.
The Committee may reduce, but not increase, a Participant's award under the
Covered Employee Performance Pool in its sole discretion, based on the
Committee's evaluation of the performance of the Corporation or the executive,
the relationship of the award to other elements of the Corporation's executive
compensation program and based on such other factors as the Committee may deem
appropriate. The reduction of one Participant's award will not cause an
increase or a decrease in any other Participant's award. As described in the
report of the Committee on page 17, the Committee frequently utilizes
information about certain competitor companies' compensation practices,
including information provided by outside consultants, in setting the
compensation of the Corporation's senior executive officers. While the Covered
Employee Performance Pool is designed to make annual bonuses paid to
Participants contingent on Adjusted Net Income and to preserve the
Corporation's compensation deduction in respect of such bonuses, the Committee
believes that competitive compensation practices should continue to be an
important factor in determining
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the appropriate level of compensation of its executive officers. Accordingly,
the Committee anticipates that if the allocation of an award to any
Participant would result in the Participant receiving a total amount of
compensation in excess of an amount the Committee believes to be competitive,
the Committee will likely exercise its discretion to reduce the Participant's
award under the Covered Employee Performance Pool for the purpose of effecting
an aggregate executive compensation package that is consistent with the
objective of providing a competitive executive compensation program.
Similarly, the Committee may exercise its right to reduce a Participant's
award that otherwise would be payable under the Covered Employee Performance
Pool based on its subjective evaluation of the Participant's performance as
well as its evaluation of overall corporate and applicable business unit
performance.
AMENDMENT AND TERMINATION. The Committee may discontinue or terminate the
Covered Employee Performance Pool in whole or in part at any time and may
amend the Covered Employee Performance Pool in any respect at any time,
subject to certain restrictions.
PLAN BENEFITS. Because awards under the Covered Employee Performance Pool
portion of the Annual Incentive Compensation Plan are determined based on the
Corporation's annual Adjusted Net Income, it is not currently possible to
determine the amounts that will be payable under the Annual Incentive
Compensation Plan for 1995. Further, because the amounts payable to any
Participant under the Covered Employee Performance Pool may be reduced by the
Committee in its discretion, the amount that would have been paid in 1994 had
the Covered Employee Performance Pool been in effect likewise is not
determinable. The table below reflects the amounts that would have been
allocated under the Covered Employee Performance Pool for 1994, PRIOR TO ANY
REDUCTION BY THE COMMITTEE, had the Covered Employee Performance Pool been in
effect for such year.
MAXIMUM NEW PLAN BENEFIT
<TABLE>
<CAPTION>
NAME AND POSITION DOLLAR VALUE
----------------- ------------
<S> <C>
G. David, President and Chief Executive Officer........... $1,572,600
R. Daniell, Chairman...................................... $ 917,350
K. Krapek, President, Pratt & Whitney..................... $ 917,350
S. Page, Executive Vice President and Chief Financial $ 917,350
Officer..................................................
I. Yoskowitz, Executive Vice President and General $ 917,350
Counsel..................................................
Executive Group........................................... $5,242,000
Non-Executive Officer Director Group...................... $ 0
Non-Executive Officer Employee Group...................... $ 0
</TABLE>
VOTE REQUIRED. Approval of the amendment establishing a Covered Employee
Performance Pool requires that a majority of the votes present in person or by
proxy which are entitled to be voted at the Annual Meeting be cast in favor of
the amendment. If the amendment to the Incentive Compensation Plan adding the
Covered Employee Performance Pool portion thereto is not so approved, then the
amendment will be of no force or effect.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR THIS PROPOSAL.
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ITEM NO. 4
APPROVAL OF AN AMENDMENT TO THE UNITED TECHNOLOGIES CORPORATION
LONG TERM INCENTIVE PLAN
On February 6, 1995, the Board of Directors authorized an amendment to the
Corporation's Long Term Incentive Plan (the "LTIP"), effective January 1,
1995, to add an individual share award limitation and to specify certain
performance measures to be applied to the vesting of dividend equivalent
awards under the LTIP. The Board of Directors is submitting the amendment to
shareowners for approval at the Annual Meeting. The text of the amendment is
set forth in Appendix B hereto. Making the payment of dividend equivalent
awards contingent on the achievement of specific corporate or business unit
performance targets and adding an individual share award limitation to the
LTIP are intended to preserve the Corporation's federal tax deductions with
respect to certain LTIP awards that might otherwise not be deductible as a
result of recent changes in the Internal Revenue Code. The summary below is
merely a description of the LTIP and the proposed amendment thereto and is
subject in its entirety to the actual terms thereof.
CURRENT PROVISIONS OF THE LONG TERM INCENTIVE PLAN
The purpose of the LTIP is to provide incentives to those individuals whose
judgment, initiative, efforts and accomplishments are key to the success of
the Corporation and its businesses by granting awards that are designed to
increase the proprietary interest of such individuals in the Corporation's
growth and success. Awards under the LTIP are based on the Corporation's
Common Stock and, accordingly, directly align the interests of the
Corporation's management with its shareowners. Awards under the LTIP include
(but are not limited to) stock options and dividend equivalents. Stock options
granted under the terms of the LTIP have an exercise price that is not less
than the fair market value of the Corporation's Common Stock on the date of
grant. The vesting of LTIP awards often is contingent upon individual business
unit or overall corporate performance, or a combination thereof.
Under the terms of the LTIP, no more than two percent of the shares of the
Corporation's Common Stock reported as outstanding in the Annual Report on
Form 10-K for the preceding year may be awarded in any Plan Year. The
Committee on Compensation and Executive Development (the "Committee") is
responsible for administering and interpreting the LTIP and for granting
awards under the LTIP. Subject to certain limitations, the Committee has
authority to delegate certain responsibilities under the LTIP, except that no
authority may be delegated with respect to awards to persons who are subject
to Section 16 of the Securities Exchange Act of 1934. The LTIP provides that
awards will be adjusted in the event of a recapitalization of the Corporation
affecting the number of shares outstanding. The LTIP also provides that the
Board of Directors may take certain actions upon the recommendation of the
Committee in the event of a change of control of the Corporation (as defined
therein) for the purpose of assuring fair and equitable treatment of LTIP
participants.
The Committee has established the Continuous Improvement Incentive Program
(the "CIIP"), a performance-based program of dividend equivalent awards under
the LTIP. A dividend equivalent is the right to receive a payment equal to the
amount of dividends declared and paid on the Corporation's Common Stock with
respect to each share subject to a CIIP stock option award. Under the CIIP,
financial performance targets are established for the Corporation and each of
its major business units. The vesting of dividend equivalent awards granted
under the CIIP is contingent on corporate and/or business unit achievement
measured against CIIP performance targets. Upon vesting, dividend equivalent
payments are paid for a specified period of time (up to seven years for the
Corporation's most senior executives) following achievement of CIIP
performance targets or until the associated stock option is exercised, if
sooner.
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The Committee has the right in its discretion to amend or terminate the
LTIP. However the Committee may not increase the maximum number of shares that
may be subject to awards under the LTIP or take certain other specified
actions without approval of the full Board of Directors and, if required by
Rule 16b-3 under the Securities Exchange Act of 1934, the shareowners of the
Corporation.
ADDITION OF NEW INDIVIDUAL SHARE AWARD LIMITATION TO THE LTIP
GENERAL. Section 162(m) of the Internal Revenue Code provides that,
effective for tax years beginning on or after January 1, 1994, a publicly
owned corporation may not deduct compensation in excess of $1 million per year
paid to its chief executive officer or to any of its four other most highly
paid executive officers, subject to certain exceptions. One such exception is
that compensation realized from stock option awards granted under shareowner-
approved plans that contain individual share award limitations will be
deductible. The proposed amendment to the LTIP establishes an individual award
limit under the plan of 1.5 million shares over any consecutive 36-month
period. This limit applies cumulatively to awards of shares of stock, awards
of options to purchase shares of stock and any other awards payable in shares
of Common Stock. This award limitation is intended to achieve compliance with
Section 162(m) while preserving the flexibility the Committee requires to
design LTIP awards for the Corporation's most senior executives consistent
with LTIP objectives of directly aligning senior executive and shareowner
interests and providing an executive compensation program that is fully
competitive.
The proposed limitation is intended to prevent the $1 million limit from
causing the Corporation to lose tax deductions with respect to gains realized
under LTIP stock option awards. However, the limit is also consistent with the
Committee's established practices and objectives with respect to the LTIP and
awards thereunder, which will not otherwise be affected by the addition of
this limitation to the LTIP. Accordingly, the new share award limitation will
apply to all LTIP participants.
ADJUSTMENT TO ALLOCATION. The 1.5 million thirty-six month share award
limitation will be adjusted in the event that there is a recapitalization of
the Corporation or other event that otherwise requires adjustment to
outstanding LTIP awards.
ADDITION OF SPECIFIED PERFORMANCE GOALS APPLICABLE TO THE VESTING OF DIVIDEND
EQUIVALENT AWARDS
Section 162(m) provides that performance-based compensation paid pursuant to
a shareowner-approved plan that satisfies certain conditions will be exempt
from the $1 million limitation on deductible compensation. In particular,
compensation payments that are contingent upon the achievement of pre-
established objective performance goals are exempt from the $1 million limit.
Under the CIIP, the Committee has the authority to grant dividend equivalent
awards that are subject to vesting based on the achievement of performance
targets. The purpose of the proposed amendment is to specify the performance
goals applicable to the vesting of future dividend equivalent awards under the
CIIP so that any compensation realized from such awards will qualify as
performance-based compensation within the meaning of Section 162(m).
Effective for years beginning on or after January 1, 1995, the vesting of
CIIP dividend equivalent awards will be subject to one or more of the
following performance measurements, as determined by the Committee: earnings
per share ("EPS"); total shareholder return ("TSR"); return on equity ("ROE");
return on sales ("ROS"); return on net operating assets ("RNOA"); and working
capital turnover ("WCT"). Performance targets for ROS, RNOA and WCT may be
established specifically for each business unit. Performance targets will have
a measurement period of not less than one year. Vesting for business unit
participants may be based in part on the applicable business unit performance
targets and in part on corporate performance targets. If vesting is subject to
more than one performance target, the relative weighting of each such target
to be used for determining the cumulative vesting percentage will be
determined by the Committee.
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CIIP dividend equivalent awards will vest in their entirety if 100%
achievement of the applicable performance targets occurs. If aggregate
achievement of the applicable targets is 90%, 50% of the dividend equivalents
will vest. Vesting will be prorated between 50% and 100% if achievement is
greater than 90% but less than 100% of target. There will be no vesting of
dividend equivalent awards if aggregate achievement of the applicable
performance targets is less than 90% at the end of the performance measurement
period.
For purposes of determining achievement of CIIP performance targets,
calculations will be adjusted to eliminate: (i) restructuring charges to the
extent they are separately disclosed in the Corporation's Annual Report on
Form 10K; (ii) the effects of changes in accounting methods; (iii) the
translation impact of changes in foreign currency exchange rates; and (iv)
"extraordinary items" determined under generally accepted accounting
principles. EPS means primary or fully diluted earnings per share as
determined under generally accepted accounting principles. ROE will equal net
income available to Common Stock owners divided by average equity. RNOA will
be calculated by dividing operating profit before interest expense and income
taxes by average net operating assets. ROS will be calculated by dividing
operating profit before interest expense and income taxes by sales. TSR will
equal the percentage change in the value of a share of Common Stock between
the beginning and end of the measurement period, including the amount of
dividends paid during the measurement period. WCT will equal the ratio
obtained by dividing sales by average working capital. Working capital means
external accounts receivable plus net inventory less external accounts payable
and advances on sales contracts. The Committee will certify to the achievement
of all CIIP performance targets.
ADMINISTRATION. The establishment of CIIP performance targets applicable to
dividend equivalent awards is solely the responsibility of the Committee. CIIP
awards and performance targets will be established not later than 90 days
after the beginning of the performance measurement period. The terms of a
dividend equivalent award may not be amended following such 90 day period. It
is the responsibility of the Committee to determine the extent to which LTIP
participants vest in dividend equivalent awards as a result of the achievement
of CIIP performance targets. In making such determinations, the Committee is
entitled to rely on audited consolidated financial statements and such other
financial reports and information as it deems necessary and appropriate to
certify to the achievement of the CIIP performance targets.
AMENDMENT AND TERMINATION. The Committee may discontinue or terminate the
CIIP in whole or in part at any time and may amend the CIIP in any respect at
any time, subject to certain restrictions.
VOTE REQUIRED. Approval of the foregoing amendment to the LTIP requires that
a majority of votes present in person or by proxy which are entitled to be
voted at the Annual Meeting be cast in favor of the amendment. If the
amendment to the LTIP is not so approved, then the amendment will be of no
force or effect.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR THIS PROPOSAL.
ITEM NO. 5
SHAREOWNER PROPOSAL
The Corporation has been informed that a shareowner intends to introduce a
proposal for adoption at the Annual Meeting which recommends that future proxy
statements list the names, titles and compensation amounts for each executive
with a base salary of more than $100,000.
THE BOARD OF DIRECTORS' STATEMENT IN OPPOSITION
The Securities and Exchange Commission, after two years of intensive study,
adopted new rules for proxy disclosure of executive compensation. Public
companies now provide significant additional compensation information
concerning the Chief Executive Officer and the next four most highly
compensated executive officers. This information is provided to shareowners in
easy to read charts rather than by narrative description, as previously
required. This simplified format allows shareowners to better understand the
compensation paid to those senior executives most responsible for the
Corporation's performance.
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The Board does not agree that providing further information on compensation
paid to executives beyond the five most highly compensated executives would be
of material assistance to shareowners in making voting and investment
decisions. Further, the Corporation could be put at a competitive disadvantage
were it required to make more extensive disclosures on compensation than other
public corporations. Therefore, the Board recommends that the shareowners cast
their votes against this resolution.
TEXT OF SHAREOWNER PROPOSAL
"RESOLVED: That the shareholders recommend that the Board take the
necessary step that United Technologies specifically identify by name and
corporate title in all future proxy statements those executive officers,
not otherwise so identified, who are contractually entitled to receive in
excess of $100,000 annually as a base salary, together with whatever other
additional compensation bonuses and other cash payments were due them."
SUPPORTING STATEMENT OF SHAREOWNER
"REASONS: In support of such proposed Resolution it is clear that the
shareholders have a right to comprehensively evaluate the management in the
manner in which the Corporation is being operated and its resources
utilized. At present only a few of the most senior executive officers are
so identified, and not the many other senior executive officers who should
contribute to the ultimate success of the Corporation. Through such
additional identification the shareholders will then be provided an
opportunity to better evaluate the soundness and efficacy of the overall
management.
Last year, the owners of 21,462,220 shares, representing approximately
19.4% of shares voting, voted FOR this proposal.
If you AGREE, please mark your proxy FOR this proposal."
THE BOARD OF DIRECTORS RECOMMENDS THAT SHAREOWNERS VOTE AGAINST THIS
PROPOSAL.
SUBMISSION OF SHAREOWNER PROPOSALS
Proposals of shareowners intended to be presented at the 1996 annual meeting
must be received by the Corporation no later than November 24, 1995. Such
proposals may be included in next year's Proxy Statement if they comply with
certain rules and regulations established by the Securities and Exchange
Commission.
The Board of Directors carefully considers all proposals and suggestions
from shareowners. When adoption is clearly in the best interest of the
Corporation and the shareowners, and can be accomplished without shareowner
approval, the proposal is implemented without inclusion in the proxy material.
However, the Board of Directors does not agree with all shareowner proposals
submitted and must oppose those with which it disagrees to fulfill the Board's
obligations to represent and safeguard the best interests of shareowners as a
whole.
The name, address and number of shares held by all shareowners submitting
proposals will be furnished to any person upon request to the Corporation.
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REPORT OF THE COMMITTEE ON COMPENSATION AND EXECUTIVE DEVELOPMENT
The following report is provided by the Board of Directors' Committee on
Compensation and Executive Development (the "Committee"). The Committee
consists of six outside directors who are not eligible to participate in any
executive compensation programs. The Committee met nine times during the year.
The Committee supervises the Corporation's Executive Compensation Program (the
"Program") and is directly responsible for all compensation actions affecting
the Corporation's most senior executives.
COMPENSATION PHILOSOPHY AND OBJECTIVES
Objectives
The Program is designed and administered to achieve two principal
objectives. First, the Program is intended to be fully competitive for the
purpose of assuring that the Corporation is able to attract, motivate and
retain talented executives. Second, the Program is intended to create an
alignment of interests between the Corporation's executives and shareowners so
that a significant portion of each executive's compensation varies with
individual and corporate performance. Consistent with this objective, the
total compensation mix has been designed with a significant emphasis on the
long term and at-risk components of compensation. The Committee encourages and
regularly reviews stock ownership by the Corporation's most senior executives.
Compensation Peer Group
The Committee utilizes information about other companies' compensation
practices, including data provided by outside consultants. These companies are
not necessarily the same companies that are most appropriate for comparing
shareowner returns in the corporate performance graph. Accordingly, the
competitive information considered by the Committee includes fifteen of the
companies included in the Dow Jones Industrial Average as shown on the
Corporation's performance graph on page 24, as well as twenty-one other
companies (the "Compensation Peer Group"). Compensation Peer Group companies
have characteristics similar to the Corporation such as diversified product
lines, global operations and sales volumes. Such companies often compete with
the Corporation for executive talent. The Corporation targets the value of the
Program for its most senior executives, including the named executive
officers, to be between the 50th and the 75th percentile of the Compensation
Peer Group.
Deductibility of Compensation
The Committee has reviewed Section 162(m) of the Internal Revenue Code which
generally prevents the Corporation from claiming a tax deduction for
compensation in excess of $1 million paid to the Chief Executive Officer or to
the four other most highly-paid executives of the Corporation and its
subsidiaries. This deduction limitation however, does not apply to performance
based compensation that satisfies certain requirements. The Committee has
determined that it is in the best interests of the Corporation and its
shareowners to structure the compensation of executive officers, to the extent
practicable, so that compensation will not be subject to the deduction limit.
Accordingly, amendments to both the Annual Executive Incentive Compensation
Plan and the Long Term Incentive Plan are submitted for shareowner approval.
However, because the Internal Revenue Service has not yet promulgated its
final regulations under Section 162(m), there can be no assurance that the
proposed amendments will satisfy final Internal Revenue Service regulations.
Base Salary
Executive base salaries are designed to be competitive with salaries paid
for similar positions at Compensation Peer Group companies. Individual
executive performance is evaluated annually against a number of job specific
competencies. This performance evaluation serves as the key element in
determining the amount and timing of any base salary increase. Compensation
Peer Group competitive information is also considered.
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Annual Incentive Compensation
The Annual Executive Incentive Compensation Plan is designed to reward
performance relating to annual goals of the Corporation and the business
units. Objectives are established for the corporate headquarters and each
business unit. For 1994, the corporate objectives were net income and cash
flow, weighted 60% and 40%, respectively. The business units' objectives were
earnings before interest and taxes, and cash flow, weighted 60% and 40%,
respectively. The Committee determines the amount available for annual
incentive cash awards at the corporate headquarters based on achievement of
the objectives described above and an overall judgment of corporate
performance. The Chief Executive Officer ("CEO") determines the amount
available for annual incentive cash awards at each business unit. Individual
awards are determined on the basis of performance measured against objectives
and a subjective assessment of the individuals overall contribution to
business unit or corporate results.
Long Term Incentive Compensation
The Corporation's Long Term Incentive Plan is designed to provide the
opportunity for competitive financial awards to key employees whose efforts
and achievements contribute to the long term success of the Corporation. Under
the 1994 Continuous Improvement Incentive Program (the "CIIP"), as approved by
the Committee, two award vehicles are available: Stock Options and Dividend
Equivalents. These equity-based awards are consistent with the Corporation's
compensation philosophy of aligning the interests of executives with those of
the Corporation's shareowners.
Stock Option awards emphasize long term increase in shareowner value.
Executives will become vested in stock options three years from the date of
grant. The options will remain exercisable for a period of seven years once
vested. The exercise price of the options is the closing price of the
Corporation's stock on the date of the grant.
Dividend Equivalents ("DEs") reinforce the importance of meeting key long-
term financial objectives. A dividend equivalent is the right to receive
payments equal to the quarterly dividend paid to the Corporation's
shareowners. Under the CIIP, executives are awarded one DE for each stock
option granted. DEs become vested and payable solely on the basis of
achievement of previously established corporate and/or business unit financial
targets measured over a three-year period, as determined by the Committee. For
1994, the Corporate headquarters targets are earnings per share (EPS) and
return on equity (ROE), weighted equally. Each business unit has a financial
target of either return on net operating assets (RNOA) or return on sales
(ROS). No vesting of DEs occurs if aggregate achievement of performance
targets is less than 90%. Payment of vested DEs awarded in 1994 will begin in
March of 1997, and will continue for two to seven years depending upon an
executive's level. DE payments end when the DE term expires or the associated
stock option is exercised, if sooner.
Individual CIIP grants are based largely on a subjective evaluation of
demonstrated performance, potential and ability to contribute to the
achievement of CIIP targets. The Committee also considers information on long
term grants at the Compensation Peer Group companies provided by outside
consultants to insure that the award opportunity is within a competitive
range.
Chief Executive Officer Compensation
The Committee considered a number of specific factors both quantitative and
qualitative, as described in this report, in determining compensation awards
for George David, President & Chief Executive Officer. The Committee assessed
his performance relative to the Corporation's financial and operating results
as well as achievements related to long term corporate performance and does
not employ a specific formula in its compensation decisions.
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During 1994, under Mr. David's leadership and direction, the Corporation
continued to enhance its competitiveness through ongoing productivity gains,
cost reduction and financial performance improvements. The 1994 restructuring
program objectives established in August 1991 were successfully achieved. As a
result of this achievement, Mr. David vested in 20,000 performance-based
restricted shares. A number of factors in 1994, including growth in the
Corporation's commercial businesses, recovery in its important Pratt & Whitney
unit and continued expansion of the Corporation's international presence,
indicate that the Corporation is well positioned for future growth and
profitability.
The Corporation's EPS increased 33% over 1993, from $3.30 to $4.40, on
approximately the same revenue base. The Corporation's commercial businesses
performed exceptionally well in 1994, with Otis, Carrier and UT Automotive
posting record profits and revenues. The Corporation continues its strategic
focus on international growth, with these revenues now accounting for 55% of
total revenues.
The aerospace and defense industry recession continued in 1994. However,
despite lower revenues, profits increased at Pratt & Whitney. The PW4084
engine, which will power the new Boeing 777, received FAA certification on
schedule. Sikorsky improved its margins as a percentage of sales and achieved
record profits despite a reduction in revenue. Hamilton Standard results were
disappointing. The Committee believes Mr. David took decisive actions to
recover from the effects on Hamilton Standard of a weak aerospace market and
to reposition Hamilton Standard for the future.
Mr. David continued to focus on the critical measures of cash flow and
working capital turnover. Cash flow measured as a change in net debt, was
favorable at $481 million for 1994, approximately twice the 1993 level.
Working capital turnover was 5.01 turns compared to 4.79 turns in 1993.
The Committee also considered that Mr. David implemented a series of
strategic initiatives, including the divestitures of Norden and the
Corporation's Westland Group plc holdings, a share repurchase program, an
11.1% Common Stock dividend increase which enhanced shareowner value and a
number of tax and debt management programs designed to strengthen the
Corporation's finances over the long term.
Robert F. Daniell served as Chief Executive Officer until Mr. David assumed
the post in April. Mr. Daniell continues as Chairman of the Board. The
Committee considered a number of factors relative to compensation decisions
affecting Mr. Daniell in 1994. As with Mr. David, the Committee did not use a
specific formula in its compensation decisions. During 1994, Mr. Daniell
achieved a smooth transition of Chief Executive Officer responsibilities to
Mr. David. Progress on the Corporation's financial and strategic objectives
continued on pace. Since the initiation by Mr. Daniell of the restructuring
program in August 1991 through the end of February 1995, the Corporation's
share price has increased 44.7%, compared with 33.4% for the Dow Jones
Industrial Average. As a result of the successful achievement of this
program's objectives, Mr. Daniell vested in 12,500 performance-based
restricted shares. Mr. Daniell's experience and judgment continue to be an
important resource for the Corporation, providing guidance on longer term
strategic and policy issues.
Base Salary
Mr. David was promoted to President & Chief Executive Officer from President
& Chief Operating Officer on April 18, 1994. His salary was increased to
reflect the Committee's favorable view of Mr. David's performance and to
recognize his increased responsibilities. This increase brings his salary to a
level slightly below the 50th percentile of salaries paid to CEO's of
Compensation Peer Group companies. Mr. Daniell's base salary was reduced to
reflect his transfer of Chief Executive Officer responsibilities to Mr. David.
19
<PAGE>
Annual Incentive Compensation
Mr. David's 1994 incentive compensation award was $700,000. The Committee
took into consideration the Corporation's improved net income and positive
cash flow, as well as the other factors noted above. This places Mr. David's
total cash compensation slightly below the 50th percentile of the Compensation
Peer Group Chief Executive Officers. Mr. Daniell's 1994 incentive compensation
award was $500,000. The Committee considered the successful transition of CEO
responsibilities to Mr. David and Mr. Daniell's continued involvement in major
strategic issues.
Long Term Incentive Compensation
Mr. David's and Mr. Daniell's long term CIIP awards were determined using
the same guidelines used for the executive population as described above. Mr.
David and Mr. Daniell were granted 65,000 and 50,000 stock options and
associated dividend equivalents, respectively, in 1994 under the CIIP.
Mr. David was granted a one-time special award of 250,000 stock options to
recognize his promotion to CEO and to align clearly the CEO's long term
incentive opportunity with shareowner interests. These options vest after a
three-year holding period and are exercisable for seven (7) years from the
date of vesting.
COMMITTEE ON COMPENSATION AND EXECUTIVE DEVELOPMENT
Robert F. Dee, Chairman Charles R. Lee
Howard H. Baker, Jr. Harold A. Wagner
Charles W. Duncan, Jr. Jacqueline G. Wexler
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
Senator Howard H. Baker, Jr. serves as a member of the Committee on
Compensation and Executive Development of the Board of Directors. As noted
previously, Senator Baker is also a partner in the law firm of Baker,
Donelson, Bearman & Caldwell (formerly Baker, Worthington, Crossley,
Stansberry & Woolf). This firm is retained from time to time to provide legal
services; fees paid during 1994 were not material to total revenues for either
the law firm or the Corporation.
20
<PAGE>
COMPENSATION OF EXECUTIVE OFFICERS
The following Summary Compensation Table sets forth for the Corporation's
Chief Executive Officer and the other four most highly compensated executive
officers of the Corporation and its subsidiaries in 1994 (the "named executive
officers") the compensation earned by such persons for services rendered in
all capacities to the Corporation during the three fiscal years ended December
31, 1994.
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
LONG TERM COMPENSATION
-------------------------------------
ANNUAL COMPENSATION AWARDS PAYOUTS
----------------------------------- -------------------------- ----------
OTHER LONG ALL
NAME ANNUAL SECURITIES TERM OTHER
AND COMPEN- RESTRICTED UNDERLYING INCENTIVE COMPEN-
PRINCIPAL SATION (2) STOCK OPTIONS PAYOUTS SATION (4)
POSITION YEAR SALARY ($) BONUS (1) ($) ($) AWARDS (3) ($) (#) ($) ($)
--------- ---- ---------- ------------- ---------- -------------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
R. Daniell, Chairman.... 1994 $922,916 $500,000 $190,052 $ 0 50,000 $ 863,807 $96,713
1993 $962,500 $800,000 $138,488 $ 0 25,000 $ 885,368 $77,453
1992 $879,167 $ 0 $132,209 $ 634,375(5) 150,000 $ 411,172 $65,985
G. David, President and 1994 $906,250 $700,000 $129,310 $ 0 315,000 $1,319,119 $27,484
Chief Executive 1993 $770,833 $600,000 $108,532 $ 0 20,000 $ 771,431 $25,566
Officer................ 1992 $603,854 $ 0 $ 84,596 $1,015,000(5) 120,000 $ 285,686 $21,365
K. Krapek, President 1994 $587,500 $400,000 $ 68,225 $ 0 80,000 $ 308,801 $18,170
Pratt & Whitney........ 1993 $533,333 $300,000 -- $ 0 12,000 $ 674,785 $16,879
1992 $360,000 $225,000 -- $ 822,850(6) 87,000 $ 294,239 $24,080
S. Page, Executive Vice
President and Chief 1994 $468,750 $315,000 $ 59,855 $ 0 15,000 $ 12,130 $44,614
Financial Officer...... 1993 $410,511 $385,000 $177,904 $ 473,750(7) 37,000 $ 212,667 $41,875
I. Yoskowitz, Executive 1994 $475,000 $315,000 $ 80,858 $ 0 15,000 $ 497,596 $16,760
Vice President and 1993 $450,000 $285,000 $ 66,697 $ 111,875(7) 8,500 $ 341,953 $17,304
General Counsel........ 1992 $404,167 $180,000 $ 59,877 $1,141,875(5) 8,500 $ 111,741 $14,652
</TABLE>
-------
(1) Incentive compensation shown in the Bonus column for Messrs. Daniell,
David, Krapek, Page, and Yoskowitz was paid under the Annual Executive
Incentive Compensation Plan. For 1994, $8,816,160 was the aggregate amount set
aside under the Annual Executive Incentive Compensation Plan with respect to
the Corporate Fund.
(2) In 1994, the amounts include: $36,412 for personal use of corporate
aircraft for security reasons by Mr. David and a perquisite allowance for
Messrs. Daniell, David, Krapek, Page and Yoskowitz of $41,703, $41,664,
$47,830, $56,250 and $45,226, respectively. For each year, amounts reported
under Other Annual Compensation include non-preferential dividends paid on
non-vested, performance-based restricted stock.
(3) No restricted stock awards were made to the named executive officers in
1994. Regular quarterly dividends are paid on all shares of restricted stock.
At the close of business on December 31, 1994, the following named executives
held total non-vested time-based and/or performance-based restricted shares as
follows: Mr. Krapek--4,200 shares valued at $264,075; Mr. Page--7,500 shares
valued at $471,563; and, Mr. Yoskowitz--2,500 shares valued at $157,188. The
foregoing values were calculated by multiplying the closing market price of
the Common Stock on December 31, 1994 by the number of restricted shares held.
(4) For 1994, consists of employer matching contributions in the Employee
Savings Plan of $7,034 for Mr. Page and $7,075 for Messrs. Daniell, David,
Krapek, and Yoskowitz, respectively, and life insurance premium payments of
$89,638, $20,409, $11,095, $37,580, and $9,685, respectively for Messrs.
Daniell, David, Krapek, Page and Yoskowitz.
21
<PAGE>
(5) Consists of 1992 grants of time-based restricted stock to Messrs.
Daniell, David and Yoskowitz of 12,500, 20,000, and 22,500 shares,
respectively. All shares held by Messrs. Daniell and David and 15,000 shares
held by Mr. Yoskowitz vested on December 31, 1992. 7,500 shares held by Mr.
Yoskowitz vested on December 31, 1994.
(6) Consists of a grant of 16,700 shares of time-based restricted stock to
Mr. Krapek. 6,250 of these shares vested on each of December 31, 1992 and
December 31, 1994. 4,200 performance-based restricted shares were converted to
a time-based award with vesting scheduled to occur September 1, 1995. This
change was authorized by the Committee on Compensation and Executive
Development because the original performance-based vesting criteria applied to
Carrier Corporation and are no longer applicable to Mr. Krapek in his current
position as President of Pratt & Whitney.
(7) Consists of 1993 grants of time-based restricted stock to Messrs. Page
and Yoskowitz of 10,000 and 2,500, respectively. Shares granted to Mr. Page
have vested or will vest in annual increments of 2,500 shares in January of
1994 through 1997. The 2,500 shares held by Mr. Yoskowitz are scheduled to
vest February 26, 1996.
The following table sets forth information concerning individual grants of
stock options made during the 1994 fiscal year to each named executive
officer. The Corporation did not grant any stock appreciation rights during
the 1994 fiscal year.
OPTION GRANTS IN LAST FISCAL YEAR
<TABLE>
<CAPTION>
INDIVIDUAL GRANTS (1)
---------------------------------------------------
NUMBER OF % OF TOTAL
SHARES OPTIONS
UNDERLYING GRANTED TO
OPTIONS EMPLOYEES IN EXERCISE PRICE EXPIRATION GRANT DATE
NAME GRANTED (#) FISCAL YEAR ($/SH) DATE PRESENT VALUE (2)
---- ----------- ------------ -------------- ---------- -----------------
<S> <C> <C> <C> <C> <C>
R. Daniell.............. 50,000(3) 2.3% $68.00 2/27/04 $1,026,800
G. David................ 65,000(3) 3.0% $68.00 2/27/04 $1,334,840
250,000(4) 11.4% $64.50 4/17/04 $4,869,750
K. Krapek............... 20,000(3) 0.9% $68.00 2/27/04 $ 410,720
50,000(4) 2.3% $64.50 4/17/04 $ 973,950
10,000(5) 0.5% $60.25 7/28/04 $ 181,955
S. Page................. 15,000(3) 0.7% $68.00 2/27/04 $ 308,040
I. Yoskowitz............ 15,000(3) 0.7% $68.00 2/27/04 $ 308,040
</TABLE>
-------
(1) Under certain circumstances involving a change of control or
restructuring, the Board of Directors, under the terms of the Corporation's
Long Term Incentive Plan, may accelerate the vesting of option grants,
purchase an outstanding grant for the cash value thereof or provide for other
adjustments or modifications to the outstanding grants. All stock options were
granted with an exercise price equal to the market price of the Common Stock
on the date of grant.
(2) The values listed in this column are based on the Black-Scholes option
pricing model. The estimated values are based on a number of variables and
include the following assumptions: interest rate of 7.0%, stock price
volatility of 0.2124, and future dividend yield of 3.0%. The estimated values
are not intended as a forecast of the future appreciation in the price of the
Corporation's stock. If the Corporation's stock does not increase in value
above the exercise price of the stock option, then the option grants described
in the table will be valueless. There is no assurance that the value realized
by an executive will be at or near the value estimated by the Black-Scholes
model or any other model applied to value the stock options.
22
<PAGE>
(3) These options were granted on February 28, 1994, and will become
exercisable on February 28, 1997. These grants include an equal number of
Dividend Equivalents, which entitle the holder to receive a payment equal to
the quarterly dividend amount paid on Common Stock for a stated period of
time. Dividend Equivalents will be paid if, and to the extent the executive
vests in the Dividend Equivalents at the end of the three-year performance
period as a result of achieving performance objectives.
(4) These options were granted on April 18, 1994, and will become
exercisable on April 18, 1997.
(5) These options were granted on July 29, 1994, and will become exercisable
on July 29, 1997. These grants include an equal number of Dividend
Equivalents, which entitle the holder to receive a payment equal to the
quarterly dividend amount paid on Common Stock for a stated period of time.
Dividend Equivalents will be paid if, and to the extent the executive vests in
the Dividend Equivalents at the end of the three-year performance period as a
result of achieving performance objectives.
The following table sets forth information concerning the exercise of stock
options during the 1994 fiscal year by each of the named executive officers
and the fiscal year end value of unexercised options. No stock appreciation
rights were exercised or outstanding in 1994.
AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR
AND FISCAL YEAR END OPTION VALUES
<TABLE>
<CAPTION>
VALUE OF
NUMBER OF SHARES UNEXERCISED
UNDERLYING IN-THE- MONEY
UNEXERCISED OPTIONS OPTIONS AT
AT FISCAL YEAR END (#) FISCAL YEAR END ($)(1)
------------------------- -------------------------
SHARES ACQUIRED VALUE
NAME ON EXERCISE (#) REALIZED ($) (1) EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
---- --------------- ---------------- ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
R. Daniell.............. 230,000 $5,971,250 254,474 185,296 $5,192,572 $1,702,240
G. David................ 6,381 $ 129,215 271,805 423,969 $4,689,542 $1,400,063
K. Krapek............... 3,381 $ 68,606 99,870 155,460 $1,790,287 $1,382,000
S. Page................. 0 $ 0 6,384 45,616 $ 115,710 $ 489,290
I. Yoskowitz............ 6,960 $ 138,330 117,724 18,978 $2,011,426 $ 72,101
</TABLE>
-------
(1) The value reported is based either on the closing price on the date of
exercise or on December 31, 1994, as applicable, and is calculated by
subtracting the exercise price of the option from the applicable amount.
23
<PAGE>
PERFORMANCE GRAPH
The following graph presents a comparison of the cumulative total shareowner
return for the five years ending December 31, 1994 on the Corporation's Common
Stock, as measured against the Standard & Poor's 500 Stock Index and the
thirty companies that comprise the Dow Jones Industrial Average. The
Corporation is a component of both indices. These figures assume that all
dividends paid over the five year period were reinvested, and the starting
value of each index and the investment in the Corporation's Common Stock was
$100 on December 31, 1989.
[GRAPH APPEARS HERE]
<TABLE>
<CAPTION>
1989 1990 1991 1992 1993 1994
<S> <C> <C> <C> <C> <C> <C>
United Technologies $100.0 $91.4 $107.6 $99.1 $132.0 $137.9
Standard & Poor's 500 $100.0 $96.9 $126.3 $135.9 $149.5 $151.5
Dow Jones Industrial Average $100.0 $99.4 $123.5 $132.6 $155.1 $163.0
</TABLE>
EMPLOYMENT CONTRACTS AND TERMINATION OF EMPLOYMENT AND CHANGE-IN-CONTROL
ARRANGEMENTS
In 1981, the Board of Directors adopted the Senior Executive Severance Plan
(the "Severance Plan"). The Committee on Compensation and Executive
Development has the authority to select the participants under the Severance
Plan. Effective December 31, 1994, there were 37 key executives, including the
five named executive officers, covered under the Severance Plan. The Severance
Plan provides that in the event of termination of the participant's employment
with the Corporation for any reason (other than death, disability or
retirement at or after the normal retirement date) within two years after any
change of control of the Corporation, as defined in the Severance Plan, the
participant will receive: (i) a cash payment of three times the participant's
highest annual compensation (including base salary and incentive compensation)
during the preceding three years; (ii) accelerated vesting of all awards
outstanding under the Corporation's Long Term Incentive Plan; (iii) special
supplemental retirement benefits determined as if the participant had three
years additional credited service under the Corporation's pension plans as of
the date of termination; and (iv) continuation of other fringe benefits or
equivalent benefits for a period of three years. The Severance Plan provides
for a supplemental cash payment to Severance Plan participants to the extent
necessary to preserve the level of benefits provided in the Plan in the event
of the imposition on any such participant of excise taxes payable in respect
of "excess parachute payments" under the Internal Revenue Code.
24
<PAGE>
In addition to the Severance Plan, 32 key executives, including the five
named executive officers, are eligible to receive separation benefits at the
time of their termination from employment with the Corporation, subject to
certain limited exceptions. The value of such separation benefits under this
program is 2.5 times base salary at the date of separation. Benefits are
subject to offset against any amounts paid pursuant to the Severance Plan (as
described above).
PENSION PLAN
<TABLE>
<CAPTION>
PENSION PLAN TABLE
-----------------------------------------------------------------
YEARS OF SERVICE
-----------------------------------------------------------------
REMUNERATION 15 20 25 30 35 40
------------ -------- -------- -------- -------- -------- ----------
<S> <C> <C> <C> <C> <C> <C>
$ 500,000 $146,800 $195,700 $219,600 $243,500 $267,800 $ 292,800
$ 750,000 $221,800 $295,700 $332,100 $368,500 $405,300 $ 442,800
$1,000,000 $296,800 $395,700 $444,600 $493,500 $542,800 $ 592,800
$1,250,000 $371,800 $495,700 $557,100 $618,500 $680,300 $ 742,800
$1,500,000 $446,800 $595,700 $669,600 $743,500 $817,800 $ 892,800
$1,750,000 $521,800 $695,700 $782,100 $868,500 $955,300 $1,042,800
</TABLE>
Compensation covered by the pension plans of the Corporation and its
subsidiaries includes total cash remuneration in the form of salaries and
wages, including awards paid under the Annual Executive Incentive Compensation
Plan (shown in the Bonus Column of the Summary Compensation Table) but
excluding awards paid under the United Technologies Corporation Long Term
Incentive Plan (shown in the Long Term Compensation Columns of the Summary
Compensation Table). Benefits are computed as a percentage of final average
earnings during the highest five consecutive years out of the last ten years
worked, less a portion of the participant's social security benefit.
As of December 31, 1994, the executive officers named in the Summary
Compensation Table had the following full years of credited service for
determining benefits: R. Daniell, 38 years; G. David, 19 years; K. Krapek, 12
years; S. Page, 1 year; and I. Yoskowitz, 15 years.
OTHER BUSINESS
The Board of Directors knows of no other matters to be voted upon at the
meeting. However, the persons named in the enclosed proxy card will, at their
discretion, vote the shares they represent upon any other business that may
properly come before the meeting.
PROXIES AND VOTING
TABULATION AND SECRECY OF VOTES
Pursuant to the Bylaws of the Corporation, the Board of Directors has
appointed representatives of First Chicago Trust Company of New York to serve
as Inspectors of Election to supervise the voting at the annual meeting. The
Inspectors will decide all questions respecting the qualification of voters,
the validity of the proxies and the acceptance or rejection of votes. None of
the Inspectors is an officer, employee or shareowner of the Corporation. In
addition, the Corporation has engaged the services of First Chicago Trust
Company of New York to receive, inspect, tabulate and maintain custody of
proxies returned to First Chicago Trust Company of New York. The Inspectors
and all other persons, including employees of First Chicago Trust Company of
New York and the Corporation, whose duties require the handling of proxies and
tabulation of votes, have been instructed that the vote of any shareowner will
be kept secret and shall not be disclosed except as may be required for legal
purposes.
25
<PAGE>
SOLICITATION
Solicitation of proxies is being made by the Board of Directors through the
mail, in person and by telephone. The cost will be borne by the Corporation.
In addition, arrangements have been made with brokerage houses and other
custodians to send proxies and proxy soliciting material to the persons for
whom they hold shares, and the Corporation will reimburse them for their
expenses in so doing. The Corporation has also retained Georgeson & Company
Inc., New York, NY, to aid in the solicitation of proxies at a fee estimated
at $15,500 plus out-of-pocket expenses.
REVOCATION
A shareowner executing and returning a proxy has the power to revoke it at
any time before it is voted by giving written notice of such revocation to the
Secretary of the Corporation, by submission of another proxy bearing a later
date, or by attending the meeting and requesting to vote in person.
SIGNATURES IN CERTAIN CASES
If a shareowner is a corporation, the enclosed proxy card should be signed
in its corporate name by an authorized officer and his/her title should be
indicated. If stock is registered in the names of two or more trustees or
other persons, the proxy card may be signed by one of them. If stock is
registered in the name of a decedent, the proxy card should be signed by an
executor or administrator, whose title as such should follow the signature.
QUORUM AND VOTE REQUIRED FOR APPROVAL
The presence, in person or by proxy, of the owners of the majority of
outstanding shares entitled to be cast, will constitute a quorum for the
transaction of business. Directors are elected by a plurality of votes cast. A
majority of shares represented in person or by proxy which are entitled to be
voted at the Annual Meeting is required for the appointment of Price
Waterhouse LLP as General Auditor, and for the adoption of the amendment to
the Annual Executive Incentive Plan, for the adoption of the amendment to the
Long Term Incentive Plan, and for approval of the shareowner proposal on
executive compensation.
ACTION TO BE TAKEN UNDER THE PROXY
In accordance with the recommendations of the Board of Directors, all
proxies will be voted, if no contrary instruction is indicated on the proxy,
for the election as directors of the persons nominated by the Board of
Directors, for the appointment of Price Waterhouse LLP as General Auditor, for
the adoption of the proposed amendment to the United Technologies Corporation
Annual Incentive Plan, for the adoption of the proposed amendment to the
United Technologies Corporation Long Term Incentive Plan, and against the
shareowner proposal on executive compensation.
SAVINGS PLANS
A separate proxy card has been sent by the Trustee to each employee who
participates in a Savings Plan of the Corporation or one of its subsidiaries
through investment in a UTC Stock Fund or the Employee Stock Ownership Plan.
Shares held in the UTC Stock Fund will be voted by the Trustee in accordance
with the employee's directions. If an employee does not mark instructions on
the card or if the employee does not
26
<PAGE>
return the instruction card to the Trustee, the Trustee will vote such shares
in accordance with the instructions it receives with respect to a plurality of
the shares for which instruction cards are received by the Trustee. All
employer stock in the ESOP Fund that has been allocated to the employees'
accounts for which the Trustee receives voting instructions will be voted in
accordance with those instructions. All employer stock that has been allocated
to the employees' accounts but for which the Trustee has not received voting
instructions, and all unallocated shares in the ESOP account, will be voted by
the Trustee in accordance with the instructions it receives with respect to a
plurality of the shares that are allocated to the employees' ESOP accounts.
ANNUAL REPORT
The Corporation's Sixty First Annual Report, including financial statements
for the year 1994, was mailed to shareowners on or about February 23, 1995.
William H. Trachsel
Vice President and Secretary
Hartford, Connecticut
March 24, 1995
27
<PAGE>
APPENDIX A
UNITED TECHNOLOGIES CORPORATION
ANNUAL EXECUTIVE INCENTIVE COMPENSATION PLAN
AMENDMENT 1
The United Technologies Corporation Annual Executive Incentive Plan (the
"Annual Incentive Plan") is hereby amended by adding Section VI, as set forth
herein, effective January 1, 1995, subject to the approval of shareowners at
the Corporation's Annual Meeting to be held April 25, 1995.
VI. COVERED EMPLOYEE PERFORMANCE POOL
A. INTRODUCTION. The Covered Employee Performance Pool shall be added to the
Annual Incentive Plan, effective January 1, 1995, for the purpose of
establishing a fund from which annual incentive awards to the Corporation's
Chief Executive Officer and four other most highly compensated executives who
are considered "covered employees" within the meaning of Internal Revenue Code
Section 162(m) shall be paid. The five individuals who will participate in the
Covered Employee Performance Pool shall be determined as of the last day of
each fiscal year and shall be referred to as the "Performance Pool
Participants." The Covered Employee Performance Pool shall be the exclusive
source of Annual Incentive Plan Awards for Performance Pool Participants. In
no event will a Performance Pool Participant be eligible to receive an Annual
Incentive Award from either the Corporate Fund or the Operating Unit Funds.
B. DEFINITIONS. For purposes of this Section VI the following terms shall
have the following meanings:
Committee means the Corporation's Board of Directors Committee on
Compensation and Executive Development.
Adjusted Net Income means, for each fiscal year of the Corporation, net
income reported on its consolidated financial statement included in its
Annual Report on Form 10-K for such year, adjusted to eliminate: (i)
restructuring charges to the extent they are separately disclosed in the
Corporation's Annual Report; (ii) the effects of changes in accounting
principles; and (iii) "extraordinary items" determined under generally
accepted accounting principles.
C. ALLOCATIONS TO THE COVERED EMPLOYEE PERFORMANCE POOL
(i) Aggregate Annual Allocation.
Each year an amount equal to 0.75% of the Corporation's Adjusted Net
Income shall be allocated to the Covered Employee Performance Pool. Such
amount is the maximum amount that may be distributed from the Covered
Employee Performance Pool to the Performance Pool Participants.
(ii) Allocation of Individual Awards.
Each year the maximum award payable to a Performance Pool Participant
shall be as follows: the Chief Executive Officer--30% of the amount
allocated to the Covered Employee Performance Pool; and the four other
Performance Pool Participants--17.5% of the amount allocated to the Covered
Employee Performance Pool.
D. DISCRETION TO REDUCE ANNUAL INCENTIVE PLAN AWARDS FOR PERFORMANCE POOL
PARTICIPANTS.
Performance Pool Participants will be eligible to receive Annual Incentive
Plan Awards with respect to each year for which an amount is allocated to the
Covered Employee Performance Pool. The Committee may,
28
<PAGE>
in its sole discretion, reduce the amount of any Performance Pool
Participant's Annual Incentive Plan Award, taking into account such factors as
it deems relevant, including, without limitation: (i) the Corporation's
Adjusted Net Income; (ii) other significant financial or strategic
achievements during the year; (iii) its subjective assessment of each
Performance Pool Participant's overall performance for the year; and (iv)
information about compensation practices at other peer group companies for the
purpose of evaluating competitive compensation levels so that the Committee
may determine that the amount of the annual incentive award is within the
targeted competitive compensation range of the Corporation's executive
compensation program.
The Committee shall determine the amount of any reduction in a Performance
Pool Participant's Award on the basis of the foregoing and other factors it
deems relevant and shall not be required to establish any allocation or
weighting formula with respect to the factors it considers. The Committee
shall have no obligation to disburse the full amount allocated to the Covered
Employee Performance Pool. Amounts allocated but not actually disbursed to a
Performance Pool Participant may not be re-allocated to other Performance Pool
Participants or utilized for awards in respect of other years. In no event
shall any Performance Pool Participant's Annual Incentive Plan Award exceed
the amount allocated to the Covered Employee Performance Pool with respect to
such Participant.
E. ADMINISTRATION. The Committee shall have exclusive authority to interpret
this Section VI and to administer the Covered Employee Performance Pool. The
Committee shall be responsible for certifying the amount of Adjusted Net
Income to be allocated to the Covered Employee Pool each year. The Committee
shall rely on such financial information and other materials as it deems
necessary and appropriate to certify the amount of Adjusted Net Income to be
allocated to the Covered Employee Performance Pool. The Committee shall
administer the Covered Employee Performance Pool so that Annual Incentive Plan
Awards paid therefrom will meet the requirements of "performance-based
compensation" as defined in Code Section 162(m).
F. AMENDMENT. The Committee shall have the authority to amend the Annual
Incentive Plan, provided however, that the Committee may not amend the Annual
Incentive Plan after the first 90 days of any award year in a manner that
would, directly or indirectly: (i) change the method of calculating the amount
allocated to the Covered Employee Performance Pool for that year; (ii)
increase the maximum award payable to any Performance Pool Participant for
that year; or (iii) remove the amendment restriction set forth in this
sentence with respect to that year.
29
<PAGE>
APPENDIX B
UNITED TECHNOLOGIES CORPORATION LONG TERM INCENTIVE PLAN
AMENDMENT 1
The United Technologies Corporation Long Term Incentive Plan (the "LTIP") is
hereby amended, effective January 1, 1995, subject to the approval of
shareowners at the Corporation's Annual Meeting to be held April 25, 1995.
1. Section 5(e) is amended and restated as follows:
DIVIDEND EQUIVALENTS. A Dividend Equivalent is the right to receive a
cash payment equal to the amount of dividends paid on Common Stock for a
period of time, as specified in the Award Agreement. Dividend Equivalent
Awards are subject to performance based vesting criteria.
2. Section 6, "Limitation on Number of Shares" is amended by adding the
following sub-section (c) thereto:
(c) The Plan shall be subject to an individual share award limitation of
1.5 million shares over any consecutive 36 month period. For purposes of
this limitation, all awards of shares of stock, options to acquire shares
of stock or any other award which can be converted into shares shall be
subject to this limit, determined in a manner consistent with Section 6(b)
hereof. Any award that is forfeited or cancelled within a thirty-six month
period shall continue to count against this limitation for the remainder of
the thirty-six month period.
3. Section 17 is hereby added to the Plan as follows:
17. CONTINUOUS IMPROVEMENT INCENTIVE PLAN.
(a) INTRODUCTION. The Committee has approved the Continuous Improvement
Incentive Program (the "CIIP"), a performance based program of Plan Awards.
Under the CIIP, Dividend Equivalent Awards ("DEs") are granted subject to
performance based vesting criteria related to key financial performance
measurements of the Corporation and the business units. Non-qualified stock
options awarded along with DEs become exercisable three years after the
date of grant. Exercisability of stock options is not contingent upon
achievement of CIIP performance based vesting criteria because the value of
stock option awards is directly linked to share price appreciation measured
from the date of grant and is therefore performance based independent of
CIIP vesting criteria.
(b) PERFORMANCE TARGETS. Under the CIIP, Participants shall be eligible
to receive awards of dividend equivalents ("DEs"), with one DE granted for
each stock option granted. A DE is the right to receive a cash payment
equal to the amount of dividends paid on Common Stock for a period of time
as specified in the Award Agreement, but in no event more than seven years,
provided, however, that DE payments will cease if the stock option
associated with the vested DE is exercised. The vesting of DEs shall be
contingent upon the achievement of certain minimum performance targets
measured over a period of time of not less than one year, as established by
the Committee. DEs that do not vest will be forfeited without value. The
vesting of each years award shall be based upon the achievement of pre-
established performance targets as established by the Committee for one or
more of the following performance measurements: earnings per share ("EPS");
total shareholder return ("TSR"); return on equity ("ROE"); return on sales
("ROS"); return on net operating assets ("RNOA") and working capital
turnover ("WCT"). ROS, RNOA and WCT targets may be specifically formulated
for each business unit. Business unit Participants may be subject to
performance targets specifically applicable to their business unit or to a
combination of corporate and business unit performance targets. If vesting
is subject to more than one performance target, the relative weighting of
each performance target to be used for determining the cumulative vesting
percentage shall be as determined by the Committee.
30
<PAGE>
Performance targets shall be measured on the basis of audited
consolidated financial statements of the Corporation and financial
statements of the business units which are used in the audited consolidated
financial statements of the Corporation. For purposes of this Section 17,
performance targets shall be defined as follows:
Earnings Per Share means primary or fully diluted earnings per share
determined under generally accepted accounting principles.
Return on Equity means net income available to Common Stock owners
divided by average equity.
Return on Sales means operating profit before interest expense and
income taxes divided by sales.
Return on Net Operating Assets means operating profit before interest
expense and income taxes divided by average net operating assets.
Total Shareholder Return means the percentage change in the value of a
share of Common Stock between the beginning and end of the measurement
period, including the amount of dividends paid during the measurement
period.
Working Capital Turnover means the ratio obtained by dividing sales by
average working capital. For purposes of this definition, working
capital means external accounts receivable plus net inventory less
external accounts payable and advances on sales contracts.
(c) ESTABLISHMENT OF PERFORMANCE TARGETS. The Committee shall be
exclusively responsible for establishing performance targets applicable to
CIIP awards with respect to EPS, ROE, ROS, RNOA, TSR, and WCT, as the case
may be. The Committee shall grant CIIP awards and establish performance
targets no later than 90 days following the commencement of the performance
measurement period. The Committee shall also establish the relative
weightings of multiple performance targets no later than 90 days following
the commencement of the performance measurement period.
(d) MEASUREMENT OF ACHIEVEMENT OF PERFORMANCE TARGETS. The Committee
shall certify to the measurement of performance by the Corporation and the
business units relative to CIIP performance targets and the resulting
vesting percentage. The Committee shall rely on such financial information
and other materials as it deems necessary and appropriate to enable it to
certify to the percentage of achievement of CIIP performance targets.
Performance targets will be adjusted by the Committee to eliminate: (i)
restructuring charges to the extent they are separately disclosed in the
Corporation's Annual Report on Form 10K; (ii) the effects of changes in
accounting methods; (iii) the translation impact of changes in foreign
currency exchange rates; and (iv) "extraordinary items" determined under
generally accepted accounting principles. The Committee shall make its
vesting determination not later than the end of the first quarter following
the end of the performance measurement period.
(e) VESTING SCHEDULE. DE payments will commence following the vesting
determination date. CIIP Participants shall vest in 100% of their DEs if
100% of their applicable CIIP performance targets are achieved as of the
end of the three year performance measurement period. If the cumulative
weighted achievement equals 90% of target, 50% of associated DEs will vest.
To the extent that cumulative weighted achievement is greater than 90% but
less than 100%, the vesting percentage will be determined in accordance
with the following formula:
Vesting Percentage = (Cumulative Weighted Performance Achievement
Percentage - 90) X 5 + 50
If the cumulative weighted performance achievement percentage is less
than 90, all DEs will be forfeited without value.
31
<PAGE>
(f) TRANSFERS. If a Participant transfers from one business unit to
another business unit (for this purpose including Corporate Headquarters as
a business unit) after the date of a CIIP Award but before the end of the
three-year measurement period applicable to the Award, the number of vested
DE's will equal the sum of (i) plus (ii) where:
(i) equals DEs granted, multiplied by a fraction, where the numerator
equals the number of months in the unit where the Participant was
employed at the time the Award was granted and the denominator equals
36, multiplied by the performance achievement percentage applicable to
such business unit; and
(ii) equals DEs granted, multiplied by a fraction where the numerator
equals the number of months employed in the unit to which the
Participant was transferred and the denominator equals 36, multiplied by
the performance achievement percentage applicable to such business unit.
If there are subsequent transfers to other business units, vesting
calculations will be done using the same formula.
(g) AMENDMENT. The Committee shall have the authority to amend the CIIP,
provided however, that the Committee may not amend the CIIP after the first
90 days of a performance measurement period in a manner that would,
directly or indirectly: (i) change the method of measuring performance for
that year's CIIP award; (ii) increase the maximum amount payable to any
CIIP Participant for that year; or (iii) remove the amendment restriction
set forth in this sentence with respect to that year.
32
<PAGE>
[LOGO OF UNITED TECHNOLOGIES APPEARS HERE]
<PAGE>
[LOGO OF UNITED TECHNOLOGIES APPEARS HERE]
One Financial Plaza
Hartford, CT 06101
P PROXY SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS OF
R THE CORPORATION FOR ANNUAL MEETING, APRIL 25, 1995
O
X The undersigned hereby appoints Charles W. Duncan, Jr., Robert H. Malott
Y and Jacqueline G. Wexler, and each of them with power of substitution to
each, proxies for the undersigned to act and vote at the Annual Meeting of
the Shareowners of United Technologies Corporation to be held April 25,
1995, at 11:00 a.m., and at any adjournment thereof, as directed on this
card, upon the matters set forth on the reverse side hereof, all as
described in the proxy statement, and, in their discretion, upon any other
business which may properly come before said meeting.
Election of Directors. Nominees: COMMON STOCK
Howard H. Baker, Jr., Antonia Handler Chayes, Robert F. Daniell,
George David, Robert F. Dee, Charles W. Duncan, Jr., Pehr G.
Gyllenhammar, Gerald D. Hines, Charles R. Lee, Robert H. Malott,
Harold A. Wagner and Jacqueline G. Wexler.
YOU ARE ENCOURAGED TO SPECIFY YOUR CHOICES BY MARKING THE APPROPRIATE
BOXES, SEE REVERSE SIDE, BUT YOU NEED NOT MARK ANY BOXES IF YOU WISH TO
VOTE IN ACCORDANCE WITH THE BOARD OF DIRECTORS' RECOMMENDATIONS. THE PROXY
COMMITTEE CANNOT VOTE YOUR SHARES UNLESS YOU SIGN AND RETURN THIS CARD.
See Reverse Side
<PAGE>
+
+++ + 1787
[X] PLEASE MARK YOUR + +
VOTES AS IN THE + ++++++
EXAMPLE.
This Proxy when properly executed will be voted in the manner directed herein.
If no direction is made, this Proxy will be voted FOR all of the Board of
Directors nominees, FOR proposals 2, 3 and 4, AGAINST proposal 5.
--------------------------------------------------------------------------------
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR THE ELECTION OF DIRECTORS.
--------------------------------------------------------------------------------
1. Election of Directors (see reverse) FOR WITHHELD
[_] [_]
Vote for all nominees except:
--------------------------------------
--------------------------------------------------------------------------------
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR
PROPOSALS 2, 3 AND 4 AND AGAINST PROPOSAL 5.
FOR AGAINST ABSTAIN
2. Appointment of [_] [_] [_]
General Auditor.
3. Approve Amendment [_] [_] [_]
of Annual Incentive
Plan.
4. Approve Amendment [_] [_] [_]
of Long-Term Incentive
Plan.
5. Disclosure of [_] [_] [_]
executive
compensation.
--------------------------------------------------------------------------------
SIGNATURE(S) _____________________________________________ Date_________________
The signer hereby revokes all proxies heretofore given by the signer to vote at
said meeting or any adjournments thereof.
NOTE: Please sign exactly as name appears hereon. Joint owners should each
sign. When signing as attorney, executor, administrator, trustee or guardian,
please give full title as such.
