DEF 14A of RTX Corp, Mar 18, 2019

DEF 14A of RTX Corp

Filed Mar 18, 2019 · FY20180001206774-19-000888

Open on EDGAR

  1. Executive Compensation Overview

    | | | | | | Base Salary ($K) | Annual Bonus ($K) | LTI ($K) | Total ($K) | | Base Salary | | Annual Bonus | | LTI | | | | | | Gregory J. Hayes | | | | 72% | $1,600 | $3,500 | $13,000 | $18,100 | | Akhil Johri | | | | 68% | $900 | $1,200 | $4,500 | $6,600 | | Robert K. Ortberg | | | | 96% | $112* | $140* | $6,000 | $6,252 | | Judith F. Marks | | | | 70% | $875 | $900 | $4,100 | $5,875 | | David L. Gitlin | | | | 65% | $900 | $1,300 | $4,100 | $6,300 | | | | | “At-Risk” Compensation | | | | | |

  2. Executive Compensation Overview

    | Reflects a pro-rata portion of Mr. Ortberg’s base salary and the target annual bonus paid to him for the portion of the year that he was a UTC employee (November 26, 2018, the closing date of the Rockwell Collins acquisition, through December 31, 2018). Mr. Ortberg’s annualized 2018 base salary of $1,170,500 was previously approved by the Rockwell Collins Compensation Committee prior to UTC’s acquisition of the company.* |

  3. Executive Compensation Overview

    | What | we changed | Why | we changed it | | We changed our annual bonus funding formula for business unit executives. Beginning in 2019, the annual bonus funding formula for business unit executives will be based solely on business unit performance. Previously, 60% of funding was based on business unit performance and 40% on UTC’s overall performance. | | With the announcement of our intention to separate UTC, Otis and Carrier into independent companies, the Committee believes business unit executives should focus on segment performance during the pre-separation transition period. | | | The mix of LTI for our Executive Leadership Group (“ELG”) has changed. Beginning with the 2019 awards, ELG members (which include each of our NEOs) received 50% of their annual LTI awards in stock appreciation rights (“SARs”) and 50% in performance share units (“PSUs”). | | Over the past two years, the Committee had included restricted stock units (“RSUs”) in the ELG LTI mix to enhance retention during a period of significant business investment. With the Company’s announcement to separate into three independent companies, the Committee believes that a return to the prior LTI structure of 50% SARs and 50% PSUs will help drive long-term performance during the transition period and beyond. | |

  4. Executive Compensation Overview

    | Annual Bonus Metrics | PSU Metrics | | ●Earnings measures the immediate impact of operating decisions on the Company’s annual performance. (For Corporate executive bonuses, we use net income, a UTC-wide goal; for each business unit we use earnings before interest and taxes (“EBIT”) as the relevant “earnings” metric.) ●Free Cash Flow (“FCF”) measures the Company’s ability to generate cash to fund our operations and key business investments, whether that means funding critical research and development, strategic acquisitions, paying down debt, or distributing earnings to shareowners. | ●3-Year EPS Growth measures the Company’s ability to create long-term, sustainable value that will ultimately drive total shareowner return. ●3-Year Return on Invested Capital (“ROIC”) measures the efficiency with which we allocate capital resources, taking into account not just the quantity of earnings, but also the quality of earnings and investments that drive sustainable growth. ●3-Year Relative Total Shareowner Return (“TSR”) measures our ability to return value to our shareowners relative to competing investment opportunities and is consistent with our program’s pay-for-performance objectives. |

  5. Executive Compensation Overview

    | Incentive Plans(1) | Performance Results | Performance Factor | Payout Factor | | 2018 Annual Bonus(2) | | | 125%(3) | | Earnings (net income) | $5.9 billion | 152% | | | Free Cash Flow | $4.9 billion | 95% | | | 2016 PSUs | | | 116% | | 3-Year EPS Growth | 4.4% | 98% | | | 3-Year ROIC | 11.1% | 131% | | | 3-Year Relative TSR vs. Companies within the S&P 500 Index | 54.9th %ile | 120% | |

  6. Executive Compensation Overview

    | Performance goals and results are based on non-GAAP financial measures. See Appendix B on page 88 for definitions of the performance metrics used for our incentive compensation plans. For additional details on how these goals and results were measured, see pages 42-43.(1) | | Reflects annual bonus goals and results for UTC. Business unit goals and results differ. Refer to pages 42-43 for additional details.(2) | | The Committee used its discretion and reduced the calculated payout factor from 129% to 125%. See page 43 for additional details on this adjustment.(3) |

  7. Election of Directors

    Election of Directors

  8. Election of Directors

    | | | | | We are seeking your support for the election of the thirteen individuals that the Board has nominated to serve on the Board of Directors for a one-year term beginning on the date of the Annual Meeting. We believe that the nominees have the qualifications consistent with our position as a large, diversified industrial corporation with worldwide operations. We also believe that the nominees have the experience and perspective to guide the Company as we separate into three independent companies, and as we adjust to rapidly changing technologies, business cycles and competitive environments. |

  9. Nominees

    | ● | Chairman Emeritus, S&P Global Inc. (formerly McGraw Hill Financial, Inc.) (ratings, benchmarks and analytics for financial reports), since 2015 | | ● | Chairman, McGraw Hill Financial, Inc., 1999-2015 | | ● | President and Chief Executive Officer, The McGraw-Hill Companies, 1998-2013 | | ● | President and Chief Operating Officer, The McGraw-Hill Companies, 1993-1998 |

  10. Board Committees

    | | | | Jean-Pierre Garnier (Chair) John V. Faraci Ellen J. Kullman Harold W. McGraw III Denise L. Ramos* Brian C. Rogers 2018 Meetings: 5 | ●Reviews UTC’s executive compensation policies and practices to ensure that they adequately and appropriately align executive and shareowner interests ●Reviews and approves the design of and sets performance goals for the annual bonus and long-term incentive awards for executives ●Evaluates the performance of UTC, the business units and the NEOs relative to the pre-established performance goals set by the Committee for the annual and long-term incentive programs ●Approves compensation levels for ELG members and executive officers ●Reviews a risk assessment of UTC’s compensation policies, plans and practices |

  11. How We Manage Risk

    | ● | Emphasis on Long-Term Performance. Long-term incentives are the cornerstone of UTC’s executive compensation program. Our LTI program incorporates long-term financial performance metrics which align executive and shareowner interests. | | ● | Rigorous Share Ownership Requirements. UTC maintains significant share ownership requirements for our senior executives and directors. These requirements are intended to reduce risk by aligning the economic interests of executives and directors with those of our shareowners. A significant stake in future performance discourages the pursuit of short-term opportunities that can create excessive risk. |

  12. How We Manage Risk

    | ● | Prohibition on Short Sales, Pledging and Hedging of UTC Securities. UTC prohibits directors, officers and employees from entering into transactions involving short sales of our securities. Further, directors and executive officers are prohibited from pledging or assigning an interest in UTC stock, stock options or other equity interests as collateral for a loan. Transactions in put options, call options or other derivative securities that have the effect of hedging the value of UTC securities also are prohibited, whether or not those securities were granted to or held, directly or indirectly, by a director, officer or employee. | | ● | Clawback Policy. UTC maintains a comprehensive policy on recoupment (see page 56 for more details) that applies to both annual and long-term incentive compensation. The policy allows UTC to clawback compensation in a number of circumstances including, but not limited to, financial restatements, compensation earned as a result of financial miscalculations, violations of UTC’s Code of Ethics and violations of post-employment restrictive covenants. | | ● | Post-Employment Covenants. Executive Leadership Group members (which include each of our NEOs) may not engage in post-employment activities detrimental to UTC, such as disclosing proprietary information, soliciting UTC employees or engaging in competitive activities. |

  13. Pay Structure

    | New Director Restricted Stock Unit (“RSU”) Award |

  14. Pay Structure

    | COMPENSATION OF DIRECTORS |

  15. 2018 Director Compensation

    2018 Director Compensation

  16. 2018 Director Compensation

    | Name | Fees Earned or Paid in Cash ($) | Stock Awards ($)(1) | All Other Compensation ($)(2) | Total ($) | | Lloyd J. Austin III | $132,000 | $198,000 | $6,236 | $336,236 | | Diane M. Bryant | $0 | $330,000 | $857 | $330,857 | | John V. Faraci | $0 | $325,000 | $1,236 | $326,236 | | Jean-Pierre Garnier | $0 | $325,000 | $1,236 | $326,236 | | Christopher J. Kearney(3) | $0 | $265,000 | $0 | $265,000 | | Ellen J. Kullman | $0 | $380,000 | $1,236 | $381,236 | | Marshall O. Larsen | $132,000 | $198,000 | $1,236 | $331,236 | | Harold W. McGraw III | $120,000 | $180,000 | $1,236 | $301,236 | | Margaret L. O’Sullivan | $132,000 | $198,000 | $857 | $330,857 | | Denise L. Ramos(3) | $0 | $265,000 | $0 | $265,000 | | Fredric G. Reynolds | $136,000 | $204,000 | $1,236 | $341,236 | | Brian C. Rogers | $0 | $325,000 | $1,236 | $326,236 | | Christine T. Whitman | $120,000 | $180,000 | $857 | $300,857 |

  17. 2018 Director Compensation

    | Stock Awards consist of the grant date fair value of DSU and RSU awards credited to the director’s account, including any portion of the annual cash retainer that the director elected to receive as DSUs. The value of DSU and RSU awards has been calculated in accordance with the Compensation — Stock Compensation Topic of the FASB ASC using assumptions described in Note 12: Employee Benefit Plans, to the Consolidated Financial Statements in Exhibit 13 to UTC’s 2018 Annual Report on Form 10-K. The number of units credited to each director in 2018 was calculated by dividing the value of the award by $120.15, the NYSE closing price per share of UTC Common Stock on April 30, 2018, which was the date of the 2018 Annual Meeting. For directors who joined the Board following the Annual Meeting, the number of DSUs and RSUs was based on the NYSE closing price of UTC Common Stock effective on the date of his or her appointment. Since DSU awards vest on the grant date, but are not distributed until the director leaves the Board, the only unvested units as of December 31, 2018 are the following unvested portions of the new director RSU awards: L. Austin III, 562 units; D. Bryant, 541 units; C. Kearney, 837 units; M. O’Sullivan, 666 units; D. Ramos, 837 units; F. Reynolds, 419 units; and B. Rogers, 419 units. The aggregate number of shares underlying awards outstanding for each director can be found in the table on page 30.(1) | | Amounts in this column include incidental benefits and matching contributions made to eligible universities, colleges and certain other eligible nonprofit organizations under the Company’s matching gift program that covers non-employee directors as well as company employees.(2) | | Mr. Kearney and Ms. Ramos were elected to the Board effective December 10, 2018. In accordance with the Board’s annual retainer policy, they received 50% of the total value of the annual retainer for their Board service from the date of election until the date of the 2019 Annual Meeting. They also received the new director RSU award in 2018.(3) |

  18. 2018 Director Compensation

    | United Technologies Notice of 2019 Annual Meeting of Shareowners and Proxy Statement | 29 |

  19. 2018 Director Compensation

    | SHARE |

  20. 2018 SHAREOWNER FEEDBACK

    | Competitiveness | Long-Term Focus | Balance | | Total compensation should be sufficiently competitive to attract, retain and motivate a leadership team capable of maximizing UTC’s performance. Each element should be benchmarked relative to peers. | For our most senior executives, long-term, stock-based compensation opportunities should significantly outweigh short-term, cash-based opportunities. Annual objectives should complement sustainable, long-term performance. | The portion of total compensation contingent on performance should increase with an executive’s level of responsibility. Annual and long-term incentive opportunities should reward the appropriate balance of short-, medium- and long-term financial, strategic and operational business results. | | Pay-for-Performance | Responsibility | Shareowner Alignment | | A substantial portion of compensation should be variable, contingent and directly linked to individual, company and business unit performance. | A complete commitment to ethical and corporate responsibility is a fundamental principle incorporated into all aspects of our compensation program. Compensation should take into account each executive’s responsibility to act at all times in accordance with our Code of Ethics and our environmental, health and safety objectives. Financial, strategic and operational performance must not compromise these values. | The financial interests of executives should be aligned with the long-term interests of our shareowners through stock-based compensation and performance metrics that correlate with long-term shareowner value. |

  21. 2018 SHAREOWNER FEEDBACK

    | Pay Component | Time Horizon | Performance Measures | Purpose | | Base Salary | 1 year | Individual achievement | Attract and retain talent | | Annual Bonus | 1 year | Earnings | | | | | Free cash flow | Drive near-term performance goals | | | | Individual achievement | | | Performance Share Units | 3 years | Adjusted earnings per share | Drive medium-term performance goals | | | | Return on invested capital | | | | | Total shareowner return vs. the S&P 500 | | | | | Share price appreciation | | | Restricted Stock Units | 3 years | Share price appreciation | Retain talent | | Stock Appreciation Rights | 10 years | Share price appreciation | Drive long-term share price appreciation |

  22. FINANCIAL HIGHLIGHTS*

    | Incentive Plans(1) | Threshold | Target | Maximum | Actual | Payout Factor | | 2018 Annual Bonus(2) | | | | | | | UTC Earnings (net income) | $5.1 billion | $5.6 billion | $6.2 billion | $5.9 billion | 152% | | UTC Free Cash Flow | $3.8 billion | $5.0 billion | $6.3 billion | $4.9 billion | 95% | | | | Calculated UTC Financial Performance Factor | | | 129%(3) | | | Committee Approved UTC Financial Performance Factor | | | | 125%(3) | | 2016-2018 Performance Share Units | | | | | | | EPS Growth | 1.5% | 4.5% | 7.5% | 4.4% | 98% | | Return on Invested Capital | 9% | 10.5% | 12.5% | 11.1% | 131% | | UTC’s TSR rank vs. S&P 500 companies(4) | 25th %ile | 50th %ile | 75th %ile | 54.9th %ile | 120% | | | | Committee Approved Payout Factor | | | 116% |

  23. FINANCIAL HIGHLIGHTS*

    | Performance goals and results are based on non-GAAP financial measures. See Appendix B on page 88 for details.(1) | | Reflects annual bonus goals and results for the UTC financial performance factor. Business unit goals and results differ. See pages 42-43 for details.(2) | | The Committee used its discretion and reduced the calculated payout factor from 129% to 125%. See page 43 for additional details on this adjustment.(3) | | TSR is calculated using a 60-day average stock price at the beginning and end of the performance period for UTC and the companies within the S&P 500 Index at the beginning of the performance period.(4) |

  24. How We Make Pay Decisions and Assess Our Programs

    | Compensation Committee Oversees our programs ●Sets financial, strategic and operational goals and objectives for the Company, the business units and the CEO, as they relate to the annual and long-term incentive programs. ●Assesses Company, business unit and NEO performance relative to the pre-established goals and objectives set for the year. ●Approves CEO pay adjustments based on its assessment of CEO performance. ●Reviews the CEO’s recommendations for pay changes for ELG members and executive officers, and makes adjustments as appropriate. ●Evaluates the competitiveness of the compensation packages for ELG members and executive officers. ●Approves all executive compensation program design changes, including severance, change-in-control and supplemental benefit arrangements. ●Reviews risk assessments of UTC’s compensation plans, policies and practices. ●Considers shareowner input regarding executive compensation decisions and policies. ●All decisions are subject to review by the other independent directors. | CEO Provides selective input to the Committee ●Considers the performance of each ELG member/executive officer, his or her business unit and/or function, market benchmarks, internal equity and retention risk when determining pay recommendations. ●Presents the Committee with recommendations for each principal element of compensation for ELG members (including the other NEOs) and executive officers. ●Does not have any role in the Committee’s determination of his own compensation. | | Management and the Independent Consultant Provide insight and assistance The Executive Vice President & Chief Human Resources Officer, along with UTC’s Human Resources staff and the independent compensation consultant, provide insights on program design and compensation market data to assist the Committee with its decisions. Management also has been delegated oversight responsibility of executive compensation plan administration. | Shareowners Provide feedback on our programs In assessing our program each year, the Committee reviews the feedback received from shareowners. This feedback, along with other factors, helps the Committee in its decisions and its ongoing assessment of the effectiveness of our program. |

  25. How We Make Pay Decisions and Assess Our Programs

    | Role of Independent Compensation Consultant |

  26. How We Make Pay Decisions and Assess Our Programs

    The Compensation Committee retained Pearl Meyer & Partners (“Pearl Meyer”) to serve as its executive compensation consultant for 2018. Although Pearl Meyer may make recommendations on the form and amount of compensation, the Committee makes all decisions regarding the compensation of our NEOs and other ELG members. During 2018, Pearl Meyer advised the Committee on a variety of subjects, including compensation plan design and trends, pay-for-performance analytics, benchmarking data and related matters. Pearl Meyer reports directly to the Committee, participates in meetings as requested and communicates with the Committee Chair between meetings as necessary. A Pearl Meyer representative attended each of the five Committee meetings in 2018. Prior to engaging Pearl Meyer, the Committee reviewed the firm’s qualifications, independence and any potential conflicts of interest. Pearl Meyer does not perform other services for or receive other fees from UTC (except for an incidental amount of $9,400 in 2018 for participation in certain business surveys). The Committee therefore determined that Pearl Meyer qualified as an independent consultant. The Committee has the sole authority to modify or approve Pearl Meyer’s compensation, determine the nature and scope of its services, evaluate its performance, terminate the engagement, and hire a replacement or additional consultant at any time. The Committee also uses market data from other compensation consulting firms for benchmarking and other purposes. However, this benchmark data is generally available broadly to these firms’ other consulting clients. No other consulting firm made recommendations to the Committee or Management on peer group composition or on the form, amount or design of executive compensation in 2018. How We Use Peer Group Data. We compare our executive compensation program to those at the 23 companies that make up our Compensation Peer Group (“CPG”). Data from a broader range of companies, including the Fortune 100, are used for insight into general compensation trends and to supplement CPG data when necessary and appropriate. To maintain a sufficiently competitive executive compensation program, the Committee believes the target value of each principal element of compensation should approximate the market median of the companies UTC views as competitors for executive talent. The Committee annually evaluates each compensation element relative to the market for each ELG member’s role and makes adjustments as necessary. However, individual compensation may vary from market median benchmarks based on the Committee’s assessment of Company, business unit/function and individual performance, job scope, retention risk, tenure, and other factors that it determines to be relevant to its evaluation. How Our Compensation Peer Group is Constructed. The CPG’s composition reflects a mix of both industry and non-industry peers that the Committee views as competitors for senior executive talent. Like UTC, 11 of these 23 companies are Dow Jones Industrial Average components. In its 2018 review, the Committee made no adjustments to the CPG. The Committee believes the companies in the CPG provide a relevant comparison based on their similarity to UTC in size, geographic footprint and operational complexity, taking into account factors such as revenue, market capitalization, global scope of operations, manufacturing footprint, research and development activities, and diversified product portfolios. The CPG is constructed to serve the specific purpose of benchmarking executive compensation. For this reason, we do not use the relative financial performance of the CPG as a performance metric in our incentive compensation programs. We target compensation to approximate the market median.

  27. How We Make Pay Decisions and Assess Our Programs

    | PEER GROUP DATA* |

  28. How We Make Pay Decisions and Assess Our Programs

    | Peer company data is provided by S&P Capital IQ. Net sales and employee data reflect the most recent publicly available information (as of February 21, 2019). Net sales are based on continuing operations, as reported, in accordance with U.S. GAAP financial reporting standards. Market capitalization for peer companies is calculated based on shares outstanding as of December 31, 2018.* |

  29. How We Make Pay Decisions and Assess Our Programs

    | February 2018 | April 2018 | December 2018 | February 1, 2019 | February 5, 2019 | 1st Quarter of 2019 | | 2018 base salary adjustments were approved. Performance goals for the 2018 annual bonuses were approved. | 2018 base salary adjustments took effect. | Review of preliminary 2018 Company/ business unit/individual performance. | Review of final 2018 Company/business unit/ individual performance. Financial performance factors and individual payout levels for 2018 annual bonuses were approved. Performance goals for the 2019-2021 PSU awards were approved. 2019 LTI award values were approved. | 2019 LTI awards granted. | 2018 annual bonuses paid. |

  30. How We Make Pay Decisions and Assess Our Programs

    | Annual Bonus |

  31. OUR OBJECTIVES

    | ● | Sets financial performance goals that are consistent with the Committee’s assessment of the opportunities and risks for the upcoming year, as communicated to investors. | | ● | Establishes challenging but achievable performance goals for our executives. | | ● | Provides incentive opportunities that are market competitive. | | ● | Allows the Committee to make discretionary adjustments if it determines that measured performance does not fully align with its assessment of overall performance. |

  32. ANNUAL BONUS TARGETS

    ANNUAL BONUS TARGETS The Committee approves annual bonus target levels based on relevant market data for each ELG member’s role. Target levels are expressed as a percentage of base salary and generally approximate the market median. The 2018 annual bonus targets for each NEO are shown below:

  33. ANNUAL BONUS TARGETS

    | NEO | ANNUAL BONUS TARGET | | Gregory J. Hayes | 175% | | Akhil Johri | 100% | | Robert K. Ortberg | 125% | | Judith F. Marks | 100% | | David L. Gitlin | 100% |

  34. SETTING FINANCIAL PERFORMANCE METRICS AND GOALS FOR 2018

    SETTING FINANCIAL PERFORMANCE METRICS AND GOALS FOR 2018 For 2018, the Committee established annual performance goals at threshold, target and maximum levels for two financial metrics: earnings and free cash flow (“FCF”). Performance relative to these pre-established goals determines the financial performance factors for UTC and each business unit. The charts below show the weighting of each financial metric. UTC’s financial performance factor determines the annual bonus pool for Corporate executives, while a blend of the UTC factor and business unit-specific financial performance factors are used to determine the pool for business unit executives for 2018.

  35. SETTING FINANCIAL PERFORMANCE METRICS AND GOALS FOR 2018

    | UTC FINANCIAL PERFORMANCE FACTOR | BUSINESS UNIT FINANCIAL PERFORMANCE FACTORS | | | |

  36. SETTING FINANCIAL PERFORMANCE METRICS AND GOALS FOR 2018

    | United Technologies Notice of 2019 Annual Meeting of Shareowners and Proxy Statement | 41 |

  37. SETTING FINANCIAL PERFORMANCE METRICS AND GOALS FOR 2018

    | BACKGROUND ON FINANCIAL PERFORMANCE METRICS AND GOALS |

  38. SETTING FINANCIAL PERFORMANCE METRICS AND GOALS FOR 2018

    | | UTC Earnings | UTC FCF | Business Unit Earnings | Business Unit FCF | | How are performance metrics defined for annual bonus purposes? | UTC’s net income, adjusted for restructuring, non-recurring and other significant, non-operational items.* | UTC FCF, adjusted for restructuring, non-recurring and other significant, non-operational items.* | Business unit earnings before interest and taxes (“EBIT”) at constant currency, adjusted for restructuring, non-recurring and other significant, non-operational items, and the impact of acquisitions/ divestitures.* | Business unit FCF, adjusted for restructuring, non-recurring and other significant, non-operational items.* | | Why has the Committee selected these metrics? | The Committee believes that adjusted net income is an appropriate UTC-wide goal because it includes the impact of items such as tax, interest and foreign exchange fluctuations, which are managed at the Corporate level and thus relevant to assessing UTC’s overall performance. | The Committee believes that FCF performance is a relevant measure of the Company’s ability to generate cash to fund our operations and key business investments. | The Committee believes operating earnings growth, exclusive of tax, interest and foreign exchange exposure should be the focus of business unit performance. | The Committee believes that FCF performance is a relevant measure of the business units’ ability to generate cash to fund our operations and key business investments. | | Why does the Company use non-GAAP financial performance goals for annual bonus purposes? | The Committee believes annual bonuses should not be positively or negatively impacted by short-term decisions made in the best interest of UTC’s long-term business strategies. Using non-GAAP performance measures encourages decision-making that considers long-term value creation that does not conflict with short-term incentive metrics. Adjustments for restructuring, non-recurring and other significant, non-operational items and acquisitions and divestures, provides a more stable performance assessment of the Company’s core business, and aligns compensation opportunities with the non-GAAP financial expectations we communicate to investors. | | | | | How did the Committee set performance goals? | An adjusted net income goal was set to correspond to the expected adjusted EPS range communicated to investors for the year. | The UTC FCF goal was set to align with the performance expectations communicated to investors for the year. | Adjusted EBIT goals were set to contribute to the overall adjusted UTC net income goal and reflect each business unit’s anticipated opportunities and challenges for the year. | FCF goals were set to contribute to the overall UTC goal and to align with each business unit’s strategic business plan for the year. | | What goals did the Committee set for 2018? | A $5.6 billion adjusted net income goal was set to correspond to an adjusted EPS of $7.00, which fell within the EPS range communicated to investors at the beginning of the year. | $5.0 billion FCF goal. | Adjusted EBIT goals ranged from $1.5 to $3.1 billion. | FCF goals ranged from $1.0 to $2.1 billion. |

  39. SETTING FINANCIAL PERFORMANCE METRICS AND GOALS FOR 2018

    | See Appendix B on page 88 for a detailed definition on how we calculate earnings and FCF for the purposes of determining the UTC and business unit financial performance factors.* |

  40. PAYOUT FACTORS

    PAYOUT FACTORS Payout factors begin at 50% of target (for threshold-level performance) and are capped at 200% of target (for maximum-level performance). There are no payouts for below threshold-level performance and at no point can the Committee approve a payout factor above 200% of target.

  41. PAYOUT FACTORS

    | UTC Earnings Goal* | Threshold | Target | Maximum | | Adjusted Net Income | $5.1 billion | $5.6 billion | $6.2 billion | | Payout Factor (as a % of target) | 50% | 100% | 200% | | UTC Free Cash Flow Goal* | Threshold | Target | Maximum | | Free Cash Flow | $3.8 billion | $5.0 billion | $6.3 billion | | Payout Factor (as a % of target) | 50% | 100% | 200% |

  42. PAYOUT FACTORS

    | Reflects the goals set for the UTC financial performance factor. Earnings and FCF goals for our business units vary.* |

  43. PAYOUT FACTORS

    | 42 | United Technologies Notice of 2019 Annual Meeting of Shareowners and Proxy Statement |

  44. PAYOUT FACTORS

    | HOW 2018 FINANCIAL PERFORMANCE RESULTS LED TO THE FINANCIAL PERFORMANCE FACTORS |

  45. PAYOUT FACTORS

    | | UTC Earnings | UTC FCF | Business Unit Earnings | Business Units FCF | | What 2018 financial results were used to determine the financial performance factors? | UTC’s adjusted 2018 net income was $6.2 billion. The Committee subsequently adjusted out the benefit of the Rockwell Collins acquisition, which was completed in the last quarter of the performance period, and neutralized the effect of the Tax Reform and Jobs Act. The resulting net income used for annual bonus purposes was $5.9 billion. | UTC’s free cash flow was $4.4 billion, which was adjusted to $4.9 billion for annual bonus purposes to exclude restructuring, non-recurring and other significant, non-operational items, including the benefit of the Rockwell Collins acquisition that occurred in the last quarter of the performance period. | Adjusted business unit EBIT ranged from $1.6 to $3.1 billion. | Free cash flow results for the business units ranged from $1.2 to $2.0 billion. | | What were the payout factors for each metric? | 152% of target. | 95% of target. | Ranged from 77% to 114% of target. | Ranged from 80% to 200% of target. | | What were the calculated financial performance factors? | The weighted earnings and free cash flow payout factors resulted in a blended UTC financial performance factor of 129% of target. | | After incorporating the UTC factor, the weighted earnings and free cash flow payout factors resulted in blended financial performance factors for the business units ranging from 99% to 141% of target. | | | Did the Committee make any adjustments to the calculated financial performance factors? | The Committee used its discretion and reduced the calculated UTC financial performance factor from 129% to 125% of target to account for certain issues with a Pratt & Whitney supplier program, which it deemed relevant to assessing the overall performance of the Company. See “Committee’s Use of Discretion in Annual Bonus Awards” below for more details. | | The Committee used its discretion and adjusted some of the business units’ calculated financial performance factors upward and others downward to account for various items it deemed relevant to assessing overall performance. After these adjustments, the business unit factors ranged from 95% to 130% of target. See “Committee’s Use of Discretion in Annual Bonus Awards” below for more details. | |

  46. POOL DETERMINATION

    POOL DETERMINATION Annual bonus funding pools are calculated by first multiplying each executive’s annual bonus target value (base salary x target bonus percentage) by the applicable UTC or business unit financial performance factor approved by the Committee. These amounts are then aggregated to determine award pools for Corporate executives and each business unit, and are subsequently allocated among eligible executives based on individual performance.

  47. INDIVIDUAL PERFORMANCE

    INDIVIDUAL PERFORMANCE Our NEOs begin the year with individual financial, strategic and operational objectives. Based on the CEO’s assessment of each NEO’s performance, he may recommend that the Committee make a discretionary adjustment to increase or decrease the annual bonus calculated using the applicable financial performance factor. The Committee considers these recommendations and makes adjustments as it deems appropriate. Mr. Hayes has no role in the Committee’s determination of his own annual bonus.

  48. COMMITTEE’S USE OF DISCRETION IN ANNUAL BONUS AWARDS

    COMMITTEE’S USE OF DISCRETION IN ANNUAL BONUS AWARDS As previously discussed, the annual bonus program is designed to closely align individual payouts with performance relative to pre-established goals. However, the Committee retains the authority to make upward or downward adjustments if it determines that Company, business unit and/or individual performance measured by the metrics does not accurately reflect the overall quality of performance for the year. Although the achievement of financial performance goals remains the primary basis for determining actual annual bonus amounts, the Committee has previously made positive and negative discretionary adjustments to financial performance factors and as a result of individual performance. Examples of situations that could result in discretionary adjustment include:

  49. COMMITTEE’S USE OF DISCRETION IN ANNUAL BONUS AWARDS

    | ● | Material, unforeseen circumstances beyond Management’s control that affected financial performance results relative to the established goals or certain non-recurring charges or credits unrelated to operating performance; | | ● | Tax or accounting rule adjustments that positively or negatively impact performance; | | ● | Changes to the Company’s capital structure; | | ● | An executive’s performance relative to specific individual annual objectives; or | | ● | An executive’s failure to adhere to UTC’s Code of Ethics, Enterprise Risk Management program or other Company policies. |

  50. COMMITTEE’S USE OF DISCRETION IN ANNUAL BONUS AWARDS

    | United Technologies Notice of 2019 Annual Meeting of Shareowners and Proxy Statement | 43 |

  51. COMMITTEE’S USE OF DISCRETION IN ANNUAL BONUS AWARDS

    | Long-Term Incentive Awards |

  52. COMMITTEE’S USE OF DISCRETION IN ANNUAL BONUS AWARDS

    Each year the Committee reviews the design of our LTI awards to ensure consistency with our program’s fundamental objective of aligning the interests of executives and shareowners while attracting and retaining talented senior leaders. Our annual LTI awards are subject to three-year, service-based (and in the case of PSUs, performance-based) vesting requirements, with limited exceptions for death, disability, retirement, change-in-control and certain qualifying involuntary terminations.

  53. 2018 LTI VEHICLES

    2018 LTI VEHICLES The Committee approves a total LTI award value for each NEO at its meeting prior to the grant date. For the January 2, 2018 grant, our NEOs received their annual award weighted in the LTI vehicles shown in the chart to the right. The number of PSUs, SARs and RSUs awarded is determined based on the 30-day average of UTC’s closing stock price prior to the grant date. This method has been adopted as a mechanism to stabilize the impact of potential volatility of UTC’s stock price on the date of grant. However, because the award value is ultimately determined based on the closing price of UTC Common Stock on the grant date and other accounting valuation assumptions, the value approved by the Committee differs from the grant date fair value shown in the Summary Compensation Table on page 58.

  54. 2018 LTI VEHICLES

    | 2018 NEO LTI MIX |

  55. PERFORMANCE SHARE UNITS

    PERFORMANCE SHARE UNITS PSUs vest at the end of a three-year performance period if, and to the extent that, the Company achieves performance goals established by the Committee. When a PSU vests, it converts into one share of UTC Common Stock. Unvested PSUs do not earn dividend equivalents. PSUs are designed to deliver market median compensation at target levels of performance. Performance below or above target levels will result in payouts that differ from the market median. Performance Metrics and Goals for the 2018-2020 PSUs. On January 2, 2018, the Committee granted PSU awards subject to pre-established three-year performance goals. On November 26, 2018, UTC completed the $30+ billion (including debt) acquisition of Rockwell Collins. Given the significant change to the Company’s capital structure and the financial impact of this transaction, the Committee adjusted the performance goals for the 2018 and 2017 PSUs to neutralize the impact of the transaction. This adjustment was necessary to maintain the same level of challenge as the originally established performance goals and is in accordance with plan provisions designed to maintain the integrity of the performance goals in such scenarios. The adjusted goals for 2018 PSUs are described below.

  56. PERFORMANCE SHARE UNITS

    | EARNINGS PER SHARE GROWTH (“EPS”) |

  57. PERFORMANCE SHARE UNITS

    | | EPS Growth (weighted 35%) ●Three-year EPS compound annual growth rate goal was set at 9.5%. ●Aligned with our mid-range strategic business plan. ●Reflects what the Committee determined to be a challenging yet attainable target. |

  58. PERFORMANCE SHARE UNITS

    | RETURN ON INVESTED CAPITAL (“ROIC”) |

  59. PERFORMANCE SHARE UNITS

    | | Return on Invested Capital (weighted 35%) ●ROIC goal was set at 8.6%. ●ROIC is calculated using a quarterly average over the three-year performance period. ●Incentivizes our executives to make disciplined capital allocation decisions. |

  60. PERFORMANCE SHARE UNITS

    | 44 | United Technologies Notice of 2019 Annual Meeting of Shareowners and Proxy Statement |

  61. PERFORMANCE SHARE UNITS

    | TOTAL SHAREOWNER RETURN (“TSR”) VS. S&P 500 |

  62. PERFORMANCE SHARE UNITS

    | | Relative TSR (weighted 30%) ●Cumulative three-year TSR goal was set at the 50th percentile relative to the companies within the S&P 500 Index at the beginning of the performance period. ●Vesting does not occur if UTC’s TSR ranks below the 25th percentile and is capped at 200% of target if TSR reaches the 75th percentile. ●If UTC’s three-year TSR is negative, the payout for this portion of the award is capped at 100% of target regardless of UTC’s relative performance vs. the S&P 500 companies. ●Beginning and end periods measured using a 60-day average. |

  63. PERFORMANCE SHARE UNITS

    Why We Compare UTC’s TSR to the TSR of the Companies within the S&P 500 Index. The Committee believes that comparing UTC’s TSR to the companies within the S&P 500 provides an appropriate benchmark for measuring our share price performance as a large capitalization company. The Committee does not set TSR goals relative to the performance of the CPG (see pages 39-40 for more details on our peer group) because the CPG is used solely to measure the competitiveness of our executive compensation program. The Committee believes the S&P 500 provides a more comprehensive and relevant comparison for our share price performance and, unlike the CPG, is not a self-selected, customized benchmark based on a limited number of companies. What the Committee Considers when Setting Performance Goals. When setting financial performance goals for our PSU awards, the Committee considers various long-term business factors, including, but not limited to, planned share buybacks, macroeconomic market trends, pension headwinds/tailwinds and cost reduction plans. Certain items such as unplanned share buybacks, restructuring charges, and non-recurring and non-operational items may be excluded from performance results, as appropriate, to maintain the validity of the targets as originally formulated. See Appendix B on page 88 for a definition of how we calculate these metrics. PSU Vesting (2016-2018 Performance Period). PSU awards granted on January 4, 2016, were subject to vesting based on UTC’s three-year performance relative to pre-established EPS growth, ROIC and relative TSR goals. The performance results used to determine the final payout factor for the 2016-2018 performance period were as follows:

  64. PERFORMANCE SHARE UNITS

    | Metric | Weight | Threshold | Target | Maximum | Actual | Payout Factor | | 3-Year EPS Growth | 35% | 1.5% | 4.5% | 7.5% | 4.4% | 98% | | 12-Quarter Average ROIC | 35% | 9% | 10.5% | 12.5% | 11.1% | 131% | | 3-Year TSR vs. the S&P 500 | 30% | 25th %ile | 50th %ile | 75th %ile | 54.9th %ile | 120% | | | | | | Final Payout Factor | | 116% |

  65. PERFORMANCE SHARE UNITS

    The 2018 GAAP diluted EPS of $6.50 was adjusted to $7.61 to account for the impact of restructuring, non-recurring and other significant items unrelated to operational performance (see Appendix A on pages 86-87 for details on GAAP and non-GAAP financial measures). For PSU vesting purposes, the Committee neutralized the impact of the Rockwell Collins acquisition (completed in the last quarter of the performance period) and the effects of the Tax Reform and Jobs Act (passed into law in the middle of the performance period), resulting in diluted EPS of $7.17. These adjustments are in accordance with plan provisions and were made to maintain the integrity of the original goals, which did not anticipate these significant events.

  66. RESTRICTED STOCK UNITS

    RESTRICTED STOCK UNITS Since 2017, ELG members (including each of our NEOs) have received 20% of their annual total LTI award in the form of RSUs. RSUs vest three years from the grant date and earn dividend equivalents during the vesting period that are reinvested as additional RSUs each time UTC pays a dividend to shareowners. The reinvested RSUs vest on the same date as the underlying RSUs. The Committee believes this time-based vesting vehicle has enhanced senior executive retention during a period of significant business investment and market volatility. RSUs have less upside potential than SARs, but have a stabilizing effect on the value of LTIP grants.

  67. SPECIAL EQUITY-BASED AWARDS

    SPECIAL EQUITY-BASED AWARDS The Committee also may, from time to time, approve special equity grants for purposes such as recruitment, retention and recognition, or to drive the achievement of specific strategic performance goals. These special grants may be in the form of PSUs, SARs, RSUs, restricted stock or performance-based SARs. Since these grants are awarded for special purposes, we do not include them in total direct compensation which is intended to show the Committee’s annual pay decisions as it relates to its evaluation of executive performance.

  68. CEO Pay Overview

    | $1.6M | $3.5M | 175% target | $13.0M | | base salary | annual bonus | annual bonus | LTI award | | 6.7% increase in 2018 | aligned with the UTC performance factor of 125% | No change from prior year | approved by the Committee in February 2019 and aligned with the market median |

  69. CEO Pay Overview

    | 2016 Reflects January 2017 LTI Grant | | | 2017 Reflects January 2018 LTI Grant | | | 2018 Reflects February 2019 LTI Grant | | | | |

  70. CEO Pay Overview

    | TOTAL DIRECT COMPENSATION $18.10 MILLION The Committee assessed Mr. Hayes’ 2018 performance favorably. Under his leadership, UTC successfully executed its 2018 financial, strategic and operational objectives in tandem with closing the Rockwell Collins acquisition and conducting an in-depth analysis of the Company’s business portfolio. The Committee’s compensation decisions below reflect his ability to deliver near-term performance while focusing on long-term strategic initiatives. Base Salary. The Committee increased Mr. Hayes’ base salary from $1.5 to $1.6 million, effective April 2018, consistent with the market median for our Compensation Peer Group (“CPG”). Annual Bonus. UTC’s 2018 annual bonus factor is determined based on adjusted net income and free cash flow performance against pre-established goals. 2018 adjusted net income of $5.9 billion used for annual bonus purposes exceeded the $5.6 billion goal, resulting in a payout factor of 152% for the earnings metric. Free cash flow used for annual bonus purposes equaled $4.9 billion, compared to the $5.0 billion goal. This resulted in a 95% payout factor for the UTC cash flow metric. In combination, these results generated a UTC financial performance factor of 129%. The Committee subsequently adjusted the calculated factor to 125%, as discussed in detail on page 43. | The Committee used this adjusted factor and awarded Mr. Hayes a $3.5 million annual bonus, an amount that aligned with the Company’s adjusted performance factor of 125%. LTI. The Committee approved a 2019 long-term incentive award of $13 million, an amount that exceeds the value of Mr. Hayes’ 2018 grant and aligns with the CPG market median for his role. As previously noted, due to differences in valuation methodologies (see page 44 for details), the grant date fair value of this award will be reported as $13.4 million in next year’s Summary Compensation Table. INDIVIDUAL PERFORMANCE HIGHLIGHTS ●Delivery of strong financial performance in 2018, including diluted EPS growth of 14% (GAAP and non-GAAP) and net income growth of 16% (GAAP and non-GAAP). In addition, net sales growth was 11% (GAAP), which included organic growth of 8% (non-GAAP). ●Successful completion of the $30+ billion (including debt) Rockwell Collins acquisition, one of the largest aerospace acquisitions in history. ●Completion of the Company’s portfolio review which resulted in our plan to separate UTC, Carrier and Otis into three standalone companies, allowing these businesses to focus on their core competencies and unique competitive challenges. ●Continued commitment to innovation, as evidenced by UTC’s strategic purchase of Predikto, Inc., a cloud-based analytics software company, with expertise that enables customers to predict, prevent and control equipment failures. ●Effectively driving a high-performance culture while emphasizing ethical standards, transparency and corporate responsibility. |

  71. How We Assess Pay-for-Performance

    | Summary Compensation Table | Realizable Compensation | Realized Compensation | | Basic concept | | | | Uses SEC methodology, which includes a mix of both compensation actually earned during the year and future contingent pay opportunities. | Three-year average compensation measure that captures how UTC’s year-end stock price affects the in-the-money value(1) of previously granted equity awards. | Includes only pay actually earned during the year, including any gains realized on equity awards that were granted in prior years. | | Purpose | | | | SEC-mandated compensation disclosure. | Used to evaluate pay-for-performance alignment by correlating the value of an executive’s long-term incentive awards with the returns our shareowners receive from investing in UTC stock over the same period. | Used to evaluate pay-for-performance alignment by focusing on the strength of the correlation between UTC’s stock performance and the actual cash and equity payouts earned by our CEO during the year. | | How it is calculated | | | | Sum of: | Three-Year Average of: | Sum of: | | Base salary paid during the year | Base salary paid | Base salary paid during the year | | | | | | Annual bonus earned for the applicable year’s performance | Annual bonus earned | Annual bonus earned for the applicable year’s performance | | | | | | Accounting grant date fair value of equity awards granted during the year reflecting prior year’s performance | In-the-money value(1) of equity awards granted during the prior three fiscal years, calculated using the stock price at the end of the third year | Gains realized on equity awards exercised and vested during the year | | | | | | All other compensation | Other direct(2) compensation | Other direct(2) compensation | | | | | | Change in the actuarial value of pension benefits | Excludes: | Excludes: | | | | | | Above-market earnings of nonqualified deferred compensation | ●Change in the actuarial present value of pension benefits ●Above-market earnings of nonqualified deferred compensation ●Other indirect(3) compensation | ●Change in the actuarial present value of pension benefits ●Above-market earnings of nonqualified deferred compensation ●Other indirect(3) compensation |

  72. How We Assess Pay-for-Performance

    | | Future pay opportunities that may or may not be realized. | | (1) | Defined as the difference between the closing stock price of UTC Common Stock at the end of the fiscal year and the exercise price of the award (if any) multiplied by the number of shares underlying equity awards. For PSU awards for which the vesting factor is not yet known, the target number of shares is used. | | (2) | Includes personal use of the Corporate aircraft, leased vehicle expenses, financial planning, security benefits, healthcare benefits and other miscellaneous items. | | (3) | Includes insurance premiums and Company contributions to nonqualified deferred compensation plans and defined contribution retirement plans. |

  73. How We Assess Pay-for-Performance

    | Our program’s fundamental objective is to drive long-term shareowner value, align executive and shareowner interests, and reward pay-for-performance. |

  74. Pay Decisions for the Other NEOs

    | TOTAL DIRECT COMPENSATION $6.60 MILLION | INDIVIDUAL PERFORMANCE HIGHLIGHTS ●Effective management of UTC’s Finance function, as evidenced by our strong 2018 financial performance, including: ●14% diluted EPS growth (GAAP and non-GAAP), an amount that exceeded the expectations we communicated to investors at the beginning of the year; ●Net sales growth of 11% (GAAP), which included organic growth of 8% (non-GAAP); and ●Growth in net income from continuing operations of 16% (GAAP and non-GAAP). ●Leadership in driving UTC’s disciplined capital allocation strategy, including: ●$2.5 billion returned to shareowners in 2018 through dividends and share repurchases; and ●$4.0 billion in company- and customer-funded investments in research and development. ●Significant role in completing the Rockwell Collins acquisition and the business portfolio review that culminated in our plan to separate UTC, Carrier and Otis into three independent companies. ●Ranked best CFO in the Aerospace and Defense Electronics sector by Institutional Investor magazine based on a survey of analysts and shareowners. | | Base Salary. During 2018, Mr. Johri received a merit increase to his base salary from $860,000 to $900,000. This increase reflected the Committee’s favorable assessment of his performance, as well as its efforts to keep Mr. Johri’s base salary aligned with the CPG and Fortune 100 market medians for his role. Following this increase, Mr. Johri’s base salary closely aligns with the market median. Annual Bonus. The Committee considered the UTC adjusted financial performance factor of 125% (as previously discussed on page 43), Mr. Johri’s effective leadership of UTC’s Finance function and the individual performance considerations noted here, and awarded him a $1.2 million annual bonus for 2018. This amount is closely aligned with the adjusted 125% UTC financial performance factor. LTI. In consideration of Mr. Johri’s strong 2018 performance, the Committee approved a $4.5 million 2019 LTI award, an amount above the CPG and Fortune 100 market medians for his role. As previously noted, due to differences in valuation methodologies, the grant date fair value of this award will be reported as $4.6 million in next year’s Summary Compensation Table. | |

  75. Pay Decisions for the Other NEOs

    | TOTAL DIRECT COMPENSATION | INDIVIDUAL PERFORMANCE HIGHLIGHTS | | $5.88 MILLION | ●Leading Otis’ significant efforts to digitalize the entire business, including the 2018 launch of the Otis ONE digital platform, which collects real-time performance data to help predict and prevent equipment shutdowns. ●Major contract wins for some of the world’s largest and most complex projects, including: ●Installation of 171 escalators and moving walkways for SNCF French Rail, which includes a 15-year maintenance contract and “mid-life” renovations. ●More than 200 units to be installed in the new Resorts World Las Vegas entertainment complex. ●More than 2,500 units for metro, rail and airport projects in 11 cities across China. ●Selected to provide nine super double-deck elevators for the iconic Haikou Twin Towers project on Hainan Island off the coast of southern China. ●Exceeded 2 million units under maintenance contracts for the first time in Otis’ history. | | Base Salary. Ms. Marks received a base salary increase from $850,000 to $875,000 in 2018. This increase reflected the Committee’s favorable assessment of her performance in her short tenure as President of Otis. Ms. Marks’ base salary is now closely aligned with our CPG market median. Annual Bonus. The unadjusted UTC financial performance factor (129%, as discussed on page 43) and the Otis factor (78%), resulted in a blended financial performance factor of 99% of target. The Committee subsequently used its discretion and reduced the Otis factor to 95% of target. Based on this factor, along with the individual performance considerations noted here, the Committee awarded Ms. Marks an annual bonus of $900,000, an amount that is slightly above Otis’ blended financial performance factor. LTI. In consideration of Ms. Marks’ strong 2018 performance, the Committee approved a $4.1 million 2019 LTI award, an amount above the CPG market median for her role. As previously noted, due to differences in valuation methodologies, the grant date fair value of this award will be reported as $4.2 million in next year’s Summary Compensation Table. Other Compensation Elements. Ms. Marks joined UTC in late 2017 as President of Otis. In early 2018, UTC paid Ms. Marks a one-time $500,000 cash sign-on bonus to offset compensation she forfeited with her former employer. | |

  76. Pay Decisions for the Other NEOs

    | TOTAL DIRECT COMPENSATION $6.30 MILLION Mr. Gitlin served in the role of President, UTC Aerospace Systems (“UTAS”), until the completion of the Rockwell Collins acquisition on November 26, 2018, at which point he transitioned to the role of President & Chief Operating Officer of the combined Collins Aerospace business. Since Mr. Gitlin led the UTAS business for most of the year, the Committee evaluated his performance relative to the performance of the pre-merger UTAS organization. Base Salary. Mr. Gitlin’s base salary remained at $900,000 for 2018, an amount that is closely aligned with the CPG market median for his role. Annual Bonus. The unadjusted UTC financial performance factor (129%, as discussed on page 43) and the UTAS factor (111%) resulted in a blended financial performance factor of 118% of target. The Committee subsequently adjusted the UTAS factor to 130% in recognition of the successful closing of the Rockwell Collins acquisition and the continued integration of the two businesses. Based on these results, along with the individual performance considerations noted here, the Committee awarded Mr. Gitlin an annual bonus of $1.3 million, an amount moderately above UTAS’ blended financial performance factor. LTI. In consideration of Mr. Gitlin’s strong 2018 performance, the Committee approved a $4.1 million 2019 LTI award, an amount above the CPG market median for his role. As previously noted, due to differences in valuation methodologies, the grant date fair value of this award will be reported as $4.2 million in next year’s Summary Compensation Table. | INDIVIDUAL PERFORMANCE HIGHLIGHTS ●Successful closing of the Rockwell Collins acquisition and his continued efforts in support of the integration of the merged Collins Aerospace business. ●Met or exceeded all key financial and operational goals for the year, notwithstanding the significant additional challenges associated with the closing of the acquisition of Rockwell Collins and the ongoing integration process. ●Leadership in driving substantial Collins Aerospace accomplishments, including: ●Selection by Dassault Aviation to furnish an advanced nacelle system for its Falcon 6X business jet, providing for quieter and more fuel-efficient operations. ●Achieved significant wins for wheel and brake systems in 2018, with more than 35 airlines selecting Collins Aerospace’s equipment, which represent commitments totaling more than $500 million. ●Selection by Boeing to provide the ACES 5 ejection seat and fully integrated landing gear system for the U.S. Air Force’s new T-X jet trainer. ●Contracted to develop state-of-the-art electric power generation system for South Korea’s KF-X fighter. |

  77. Other Compensation Elements

    | Plan | Description | | UTC Employee Retirement Plan | Employees hired prior to January 1, 2010, are eligible to participate in this tax-qualified pension plan. Effective December 31, 2014, participants who had been covered by the original final average earnings (“FAE”) formula of this plan transitioned to a more modest cash balance formula, which was already in effect for newer participants. See page 63 for details on these formulas. | | UTC Pension Preservation Plan | An unfunded, nonqualified retirement plan utilizing the same benefit formula, compensation recognition, retirement eligibility and vesting provisions as the tax-qualified UTC Employee Retirement Plan. For employees hired prior to January 1, 2010, it provides pension benefits not provided under the tax-qualified pension plan because of Internal Revenue Code limits. | | UTC Employee Savings Plan | A tax-qualified plan where employees receive a matching contribution in the form of UTC stock units with a value equal to 60% of the first 6% of pay (consisting of base salary plus annual bonus) contributed by the employee. Salaried employees hired on or after January 1, 2010, who are not eligible to participate in the UTC Employee Retirement Plan receive an additional age-based Company contribution (ranging from 3% to 5.5% of earnings) to their UTC Employee Savings Plan account. | | UTC Savings Restoration Plan | An unfunded, nonqualified plan that matches the executive’s contributions with Company contributions in UTC stock units at the same rate as the UTC Employee Savings Plan, to the extent such contributions exceed Internal Revenue Code limits. | | UTC Company Automatic Contribution Excess Plan | An unfunded, nonqualified plan for which salaried employees hired on or after January 1, 2010, may receive an additional age-based Company automatic contribution (ranging from 3% to 5.5% of earnings) for amounts above the Internal Revenue Code limits applicable to the qualified UTC Employee Savings Plan. Participants receiving benefits under this plan are ineligible to accrue a benefit under the UTC Pension Preservation Plan described above. | | UTC Deferred Compensation Plan | An unfunded, nonqualified, deferred compensation plan that offers executives the opportunity to defer up to 50% of base salary and up to 70% of annual bonus. | | UTC PSU Deferral Plan | An unfunded, nonqualified, deferred compensation plan that allows executives to defer between 10% and 100% of their vested PSU awards. Upon vesting, the deferred portion of each PSU award is converted into deferred stock units that accrue dividend equivalents. |

  78. Other Compensation Elements

    | Severance and Change-in-Control Arrangements |

  79. Other Compensation Elements

    ELG members participate in severance and change-in-control arrangements similar to programs in effect at the majority of the companies within our Compensation Peer Group. The Committee believes such arrangements are part of a competitive executive compensation program. Our severance program incorporates post-employment restrictive covenants designed to protect UTC’s interests, including non-competition, non-solicitation and non-disclosure obligations. Severance and change-in-control benefits are contingent upon certain future events that may never occur. The Committee, therefore, does not consider these contingent benefits when setting other compensation elements or measuring total direct compensation. For specific details on our severance and change-in-control arrangements, and how these programs have evolved over time, see the Potential Payments on Termination or Change-in-Control section on pages 66-69.

  80. Other Executive Compensation Policies and Practices

    | Employment Agreements |

  81. Other Executive Compensation Policies and Practices

    UTC has a comprehensive policy on recoupment (“clawback”) of executive compensation, which applies to both our annual and long-term incentive compensation programs. In the event of a financial restatement or recalculation of a financial metric applicable to an award, the Company has the right to recover annual bonus payments and gains realized from vested long-term incentive awards from any executive (including NEOs) involved in activities that caused the restatement or recalculation. Clawbacks of bonuses, long-term incentive awards and compensation realized from prior awards also may be triggered by violations of our Code of Ethics, failure to meet employee health and safety standards, violations of post-employment restrictive covenants, or the exposure of UTC to excessive risk as determined under our Enterprise Risk Management program (for additional details on this program refer to page 21). In addition, the Company has the right to recover compensation when an executive’s negligence (including negligent supervision of a subordinate) causes significant harm to UTC. If required or otherwise appropriate, the Company may publicly disclose the circumstances surrounding the Committee’s decision to seek recoupment.

  82. Tables

    | SUMMARY COMPENSATION TABLE |

  83. Tables

    | Year | Salary ($) | Bonus ($)(1) | Stock Awards ($)(2) | Option Awards ($)(3) | Change in Pension Value and Nonqualified Deferred Compensation Earnings ($)(4) | All Other Compensation ($)(5) | Total ($) | Total Without Change in Pension Value ($) | | GREGORY J. HAYES • Chairman & Chief Executive Officer | | | | | | | | | | 2018 | $1,575,000 | $3,500,000 | $8,878,810 | $3,165,260 | $829,344 | $469,901 | $18,418,315 | $17,599,694 | | 2017 | $1,500,000 | $3,300,000 | $7,877,818 | $2,589,650 | $1,277,981 | $482,044 | $17,027,493 | $15,759,799 | | 2016 | $1,450,000 | $3,000,000 | $4,960,217 | $3,706,560 | $2,392,716 | $321,842 | $15,831,335 | $13,448,390 | | AKHIL JOHRI • Executive Vice President & Chief Financial Officer | | | | | | | | | | 2018 | $890,000 | $1,200,000 | $2,950,834 | $1,051,810 | $0 | $361,924 | $6,454,568 | $6,454,568 | | 2017 | $851,250 | $1,100,000 | $2,674,030 | $883,225 | $198,047 | $356,512 | $6,063,064 | $5,865,017 | | 2016 | $766,667 | $1,100,000 | $1,609,731 | $1,207,440 | $151,840 | $259,356 | $5,095,034 | $4,943,194 | | ROBERT K. ORTBERG • Chief Executive Officer, Collins Aerospace(6) | | | | | | | | | | 2018 | $112,240 | $140,300 | $9,875,022 | $0 | $30,107 | $147,381 | $10,305,050 | $10,274,943 | | JUDITH F. MARKS • President, Otis | | | | | | | | | | 2018 | $868,750 | $1,400,000(7) | $2,950,834 | $1,051,810 | $0 | $241,555 | $6,512,949 | $6,512,949 | | DAVID L. GITLIN • President & Chief Operating Officer, Collins Aerospace | | | | | | | | | | 2018 | $900,000 | $1,300,000 | $2,950,834 | $1,051,810 | $0 | $239,548 | $6,442,192 | $6,442,192 | | 2017 | $812,500 | $1,100,000 | $6,855,052 | $943,250 | $385,996 | $181,970 | $10,278,768 | $9,892,772 |

  84. Tables

    | Bonus. Cash bonuses provided under the UTC Annual Executive Incentive Compensation Plan. Payments are primarily based on measured performance against pre-established goals. However, the Committee retains discretion to adjust annual bonus amounts based on its assessment of overall performance. Consequently, we report annual bonuses in the Bonus column rather than in the Non-Equity Incentive Plan Compensation column. For Mr. Ortberg, the amount shown reflects a pro-rata target bonus paid for the period between November 26, 2018 (the closing date of the Rockwell Collins acquisition) and the end of the calendar year.(1) | | Stock Awards. Grant date fair value of PSUs and RSUs issued under the LTIP, calculated in accordance with the Compensation — Stock Compensation Topic of the FASB ASC, but excluding the effect of estimated forfeitures. The assumptions made in calculating the fair value of these awards are set forth in Note 12: Employee Benefit Plans, to the Consolidated Financial Statements in Exhibit 13 to UTC’s 2018 Annual Report on Form 10-K (“2018 Form 10-K”). PSU awards are discussed in the Compensation Discussion and Analysis and in footnote (2) of the Grants of Plan-Based Awards table on page 60 of this Proxy Statement. The grant date fair values shown for PSU awards granted in 2018 to our NEOs assume target-level performance. If the highest level of performance is achieved, the grant date fair values would be: Mr. Hayes, $10,453,351; Mr. Johri, $3,470,081; Ms. Marks, $3,470,081; and Mr. Gitlin, $3,470,081. Mr. Ortberg did not receive PSUs in 2018. Following the close of the Rockwell Collins acquisition, UTC entered into an agreement with Mr. Ortberg to waive his rights and benefits under his Rockwell Collins change-in-control agreement. In exchange, he was granted a one-time retention RSU award which includes various post-termination restrictive covenants that protect UTC’s interests. Additional details concerning this award can be found on page 67.(2) | | Option Awards. Grant date fair value of SARs granted under the LTIP, calculated in accordance with the Compensation — Stock Compensation Topic of the FASB ASC, but excluding the effect of estimated forfeitures. The assumptions made in the valuation of these awards are set forth in Note 12: Employee Benefit Plans, to the Consolidated Financial Statements in Exhibit 13 to UTC’s 2018 Form 10-K.(3) | | Change in Pension Value and Nonqualified Deferred Compensation Earnings. The amounts in this column reflect the change, if any, in the year-over-year actuarial present value of each executive’s accrued benefit under UTC’s defined benefit plans and above-market earnings (if any) under UTC’s deferred compensation plans. Actuarial value computations are based on the assumptions established in accordance with the Compensation — Retirement Benefits Topic of the FASB ASC and discussed in Note 12: Employee Benefit Plans, to the Consolidated Financial Statements in Exhibit 13 to UTC’s 2018 Form 10-K. The actuarial value of pension benefits normally increases each year with the value of additional pension benefits earned (if applicable) and age, which reduces the time required to retire with an unreduced benefit. This year there was a net reduction in actuarial value for Mr. Johri and Mr. Gitlin because the discount rate used to determine the present value of these benefits increased from 3.59% in 2017 to 4.28% in 2018. In accordance with SEC rules, no amount is reported for the NEOs with a negative value. The total year-over-year decrease in pension benefits for Mr. Johri was -$54,011 and for Mr. Gitlin was -$39,886. UTC’s deferred compensation plans do not provide above-market rates of return. However, an above-market interest rate is paid under the frozen Sundstrand Corporation Deferred Compensation Plan, which was assumed by UTC upon the acquisition of Sundstrand Corporation in 1999. Mr. Hayes accrued $10,723 in above-market earnings under this plan in 2018.(4) |

  85. Tables

    | 58 | United Technologies Notice of 2019 Annual Meeting of Shareowners and Proxy Statement |

  86. Tables

    | All Other Compensation. The 2018 amounts in this column consist of the following items:(5) |

  87. Tables

    | Name | Personal Use of Corporate Aircraft(a) | Leased Vehicle(b) | Insurance Premiums(c) | Company Contributions to 401(k) Plans(d) | Company Contributions to Non-Qualified Retirement Plans(e) | Relocation Benefits(f) | Financial Planning(g) | Healthcare Benefits(h) | Misc. | Total | | G. Hayes | $85,401 | $44,598 | $143,741 | $9,900 | $165,600 | $0 | $0 | $18,574 | $2,087 | $469,901 | | A. Johri | $0 | $31,371 | $129,963 | $25,025 | $156,065 | $0 | $4,900 | $13,465 | $1,135 | $361,924 | | R. Ortberg | $0 | $2,100 | $0 | $0 | $9,904 | $133,984 | $0 | $1,116 | $277 | $147,381 | | J. Marks | $0 | $16,780 | $0 | $15,125 | $55,719 | $124,006 | $16,000 | $13,502 | $423 | $241,555 | | D. Gitlin | $0 | $33,388 | $63,604 | $9,900 | $62,100 | $36,309 | $16,000 | $17,113 | $1,134 | $239,548 |

  88. Tables

    | Incremental variable operating costs incurred for personal air travel which includes fuel (calculated on the basis of aircraft-specific average consumption rates and fleet average fuel costs), fleet average landing and handling fees, additional crew lodging and meal allowances and catering and hourly maintenance contract charges, when applicable. Because fleet-wide aircraft utilization is primarily for business purposes (approximately 99% in 2018), capital and other fixed expenditures are not treated as an incremental cost.(a) | | Annual costs incurred by UTC in connection with a leased vehicle provided to the executive. Mr. Ortberg’s amount reflects a monthly vehicle allowance under the legacy Rockwell Collins car program.(b) | | Premiums paid on behalf of the executive under the ELG life insurance program. This benefit was eliminated for ELG members appointed after January 31, 2015, thereby excluding Ms. Marks and Mr. Ortberg. Under this program, UTC pays the premiums on a cash value life insurance contract owned by the executive. Life insurance benefits equal up to three times the executive’s actual or projected base salary at age 62. Once vested (age 55 or older with three years of service as an ELG member), UTC funds the policy to maintain coverage following retirement.(c) | | Dollar value of Company matching contributions made into the UTC Employee Savings Plan, which includes an additional Company automatic contribution for employees hired on or after January 1, 2010 (e.g., Mr. Johri and Ms. Marks) who do not participate in UTC’s pension plans which were closed to new participants. Mr. Johri does have a benefit under the UTC pension plans with respect to his service before January 1, 2010, but due to his break in UTC service no longer accrues additional benefits. For further details on this Plan refer to page 54.(d) | | Dollar value of Company contributions to the UTC Savings Restoration Plan (“SRP”) and the UTC Company Automatic Contribution Excess Plan (“CACEP”). Under the SRP, participants are credited with a benefit equal to the Company matching contribution that the executive did not receive under the UTC Employee Savings Plan due to IRC limits. For executives hired on or after January 1, 2010, including Mr. Johri and Ms. Marks, the CACEP provides an additional age-based Company automatic contribution for compensation earned over IRC limits. The amounts shown for Mr. Ortberg represent matching and retirement contributions made under the legacy Rockwell Collins Non-Qualified Retirement Savings Plan for the period between November 26, 2018 and December 31, 2018. For additional details on these UTC Plans, see page 65 of this Proxy Statement.(e) | | Costs associated with relocation expenses, which include tax reimbursement payments of $11,418 for Mr. Ortberg and $26,400 for Ms. Marks.(f) | | Costs associated with a financial planning benefit available to ELG members.(g) | | Costs incurred by the Company associated with annual executive physicals and Company-covered healthcare benefits.(h) | | All values shown in the Summary Compensation Table for Mr. Ortberg reflect compensation earned as a UTC employee for the period between November 26, 2018 (the closing date of the Rockwell Collins acquisition) and December 31, 2018.(6) | | Includes a cash sign-on bonus of $500,000 paid in the first quarter of 2018 to offset compensation forfeited from Ms. Marks’ former employer.(7) |

  89. Tables

    | United Technologies Notice of 2019 Annual Meeting of Shareowners and Proxy Statement | 59 |

  90. Tables

    | GRANTS OF PLAN-BASED AWARDS |

  91. Tables

    | OUTSTANDING EQUITY AWARDS AT FISCAL YEAR-END |

  92. Tables

    | OPTIONS EXERCISED AND STOCK VESTED |

  93. Tables

    | PENSION BENEFITS |

  94. Tables

    Overview of Plans. Salaried employees hired before January 1, 2010, participate in the UTC Employee Retirement Plan (“ERP”) and the UTC Pension Preservation Plan (“PPP”), as described below. The ERP is a tax-qualified plan subject to Internal Revenue Code (“IRC”) provisions that, as of December 31, 2018, limit recognized annual compensation to $275,000 and annual retirement benefits to $220,000. The PPP is an unfunded, nonqualified retirement plan that utilizes the same benefit formula, retirement eligibility and vesting provisions as the ERP, but provides benefits that cannot be accrued under the ERP due to the IRC limits described above. Pension Benefit Formula. Through the end of 2014, both the ERP and PPP used a traditional final average earnings (“FAE”) retirement benefit formula for salaried employees hired prior to July 1, 2002. Under this formula, the plans provided an annual benefit equal to 2% of the executive’s earnings (defined below) for each year of service up to a maximum of 20 years, plus 1% of earnings for each year of service thereafter, minus 1.5% of the executive’s Social Security benefit for each year of service (up to a maximum 50% offset of the annual Social Security benefit). Earnings recognized under this formula consist of the highest average annual base salary and annual bonus received over any consecutive five calendar-year period ending on or before December 31, 2014. The FAE formula does not recognize long-term incentive compensation. Effective December 31, 2014, for employees hired prior to July 1, 2002, the FAE formula was replaced by a cash balance formula. Employees hired after June 30, 2002, but prior to January 1, 2010, accrue benefits under this cash balance formula. The cash balance formula credits a participant’s account with amounts that grow each month through two types of credits — pay credits and interest credits. Pay credits range from 3% to 8% of base salary and annual bonus, depending on the participant’s age. Interest credits are based on 30-year U.S. Treasury Bond yields and are subject to annual adjustments but cannot fall below 3.8%. Distribution Options. The following distribution options are available for election by Plan participants:

  95. Tables

    | Plan | FAE Benefit Formula | Cash Balance Benefit Formula | | Employee Retirement Plan | ●Lump-sum payment ●Annuity payments | ●Lump-sum payment ●Annuity payments | | Pension Preservation Plan | ●Lump-sum* payment ●Annuity payments ●Two- to 10-year annual installments | ●Lump-sum payment ●Annuity payments ●Two- to 10-year annual installments |

  96. Tables

    | Uses a discount rate equal to the Barclay’s Capital Municipal Bond Index averaged over five years (currently 2.304%). This non-taxable investment index is intended to yield an after-tax income stream on the net after-tax proceeds reinvested in tax-free bonds that are comparable to a more tax efficient annuity distribution.* |

  97. Tables

    | United Technologies Notice of 2019 Annual Meeting of Shareowners and Proxy Statement | 63 |

  98. Tables

    Vesting and Retirement. Under both the ERP and the PPP, vesting requires three years of service. The normal retirement age under both the FAE and the cash balance benefit formulas is 65, but the FAE formula also provides full retirement benefits at age 62 for a participant who retires with at least 10 years of service. Early retirement benefits also are available under the FAE formula beginning at age 55 with at least 10 years of service, reduced by 0.2% for each month by which retirement precedes age 62. The value of the cash balance account is not impacted by an employee’s age at retirement. As of December 31, 2018, Messrs. Hayes and Johri were eligible for early retirement under the FAE formula. Other Formulas Used. Benefits shown below for Mr. Hayes also include amounts accrued under a different formula used in a predecessor Sundstrand pension plan that was merged into UTC’s pension plans, upon the acquisition of Sundstrand Corporation. Benefits shown for Mr. Ortberg are based on the formula under the frozen Rockwell Collins qualified and nonqualified pension plans which merged into the UTC ERP and PPP, respectively, as of December 31, 2018.

  99. Tables

    | Name | Plan Name | Number of Years of Credited Service (#) | Present Value of Accumulated Benefit ($)(1) | Payments During Last Fiscal Year ($) | | G. Hayes | UTC Employee Retirement Plan | 29 | $1,355,349 | — | | | UTC Pension Preservation Plan | 29 | $10,526,882 | — | | | Total | | $11,882,231 | — | | A. Johri(2) | UTC Employee Retirement Plan | 15 | $756,700 | — | | | UTC Pension Preservation Plan | 15 | $1,699,475 | — | | | Total | | $2,456,175 | — | | R. Ortberg | UTC Employee Retirement Plan(3) | 19 | $718,044 | — | | | UTC Pension Preservation Plan(3) | 19 | $381,077 | — | | | Total | | $1,099,121 | — | | J. Marks(4) | UTC Employee Retirement Plan | — | — | — | | | UTC Pension Preservation Plan | — | — | — | | | Total | | — | — | | D. Gitlin | UTC Employee Retirement Plan | 21 | $633,872 | — | | | UTC Pension Preservation Plan | 21 | $1,306,345 | — | | | Total | | $1,940,217 | — |

  100. Tables

    | The assumptions used to determine the present value of the accumulated pension benefit are described in the pension expense assumptions of Note 12: Employee Benefit Plans, to the Consolidated Financial Statements in Exhibit 13 to UTC’s 2018 Form 10-K. The following additional assumptions also are used: (i) the NEOs are assumed to retire at age 62, the earliest date the NEOs can retire without a reduction of benefits due to age; (ii) projected lump-sum payments under the UTC Pension Preservation Plan (“PPP”) are calculated using a lump-sum interest rate of 3.5% (for Mr. Hayes) or 4.0% (for other NEOs who will receive a lump-sum payment). The PPP lump-sum interest rate used for Mr. Hayes differs from the other NEOs because he will reach age 62 in 2022 and the current low interest rate environment will still have an influence on his PPP lump-sum interest rate. The other NEOs who will receive PPP lump-sum payments will not reach age 62 until after 2023, by which time it is assumed the PPP lump-sum interest rate will return to the historic norm of 4.0%; (iii) unless an NEO elected another form of benefit payment, the amounts shown assume the following form of payment: (a) 70% in a monthly annuity and 30% in a lump-sum payment for benefits earned under the final average earnings (“FAE”) formula of the UTC Employee Retirement Plan (“ERP”); (b) a lump-sum payment for benefits earned under the cash balance formula of the ERP; and (c) a lump-sum payment for benefits accrued under the PPP (with the exception of a monthly life annuity for Mr. Ortberg’s PPP benefit, consistent with his election).(1) | | Mr. Johri was first employed by UTC in November 1986 and later separated from UTC service before returning to the Company in 2015. Mr. Johri had accrued pension benefits under the FAE formula of the ERP and the PPP. However, he was not eligible for early retirement upon his departure and distribution of his previously accrued benefit did not occur. Upon rejoining UTC, Mr. Johri was no longer eligible to participate in UTC’s pension plans, and now receives age-based Company automatic contributions under the UTC Employee Savings Plan and the UTC Company Automatic Contribution Excess Plan (detailed in footnotes (5(d)) and (5(e)) on page 59).(2) | | The present value of the accumulated benefits shown for Mr. Ortberg are based on benefits earned under the legacy Rockwell Collins qualified and nonqualified defined benefit pension plans which were frozen in 2006 and have since merged into the equivalent UTC pension plans. The number of years of credited service for Mr. Ortberg reflects the years of service he had when the plans were frozen. Benefit calculations are based on age, years of service, and average annual base salary and annual bonus. Payments to Mr. Ortberg from the legacy Rockwell Collins nonqualified pension plan are payable upon separation from service as a monthly life annuity. A portion of Mr. Ortberg’s accrued nonqualified pension benefits were previously distributed to him in a lump-sum payment in accordance with the change-in-control provisions in that plan.(3) | | Ms. Marks was hired by UTC after January 1, 2010, and therefore does not participate in UTC’s legacy pension plans.(4) |

  101. Tables

    | 64 | United Technologies Notice of 2019 Annual Meeting of Shareowners and Proxy Statement |

  102. Tables

    | NONQUALIFIED DEFERRED COMPENSATION |

  103. Tables

    | POTENTIAL PAYMENTS ON TERMINATION OR CHANGE-IN-CONTROL |

  104. SEVERANCE BENEFITS

    SEVERANCE BENEFITS Over the last 10 years, the Committee has made a number of modifications to the ELG severance program to align with market best practices and to serve the evolving needs of the Company. These changes were applied prospectively due to existing contractual commitments. Therefore, benefit eligibility depends on when the executive was appointed to the ELG, as shown in the table below:

  105. SEVERANCE BENEFITS

    | | ELG Appointment Date | | | | | Prior to January 2006 | Between January 2006 and April 2013 | On or after May 2013 | | ELG Cash Separation Benefit | 2.5x base salary | 2.5x base salary | No cash benefit | | Conditions to Receive Cash Separation Benefit | ●Mutually agreeable separation, and ●3+ years as an ELG member | ●Mutually agreeable separation prior to age 62, and ●3+ years as an ELG member, or ●Change-in-control | N/A | | ELG RSU Award* | No award granted | Grant value equal to 2x base salary at time of grant | Grant value up to $2 million, depending on role | | Conditions to Vest in the ELG RSU Award | N/A | ●Mutually agreeable separation on or after age 62, and ●3+ years as an ELG member, or ●Change-in-control | ●Mutually agreeable separation, and ●3+ years as an ELG member, or ●Change-in-control | | NEO Participation | Gregory Hayes | N/A | Akhil Johri David Gitlin Judith Marks |

  106. SEVERANCE BENEFITS

    | ELG RSUs receive dividend equivalents during the vesting period that are reinvested as additional RSUs and are subject to the same vesting conditions as the underlying award.* |

  107. SEVERANCE BENEFITS

    A mutually agreeable separation occurs when:

  108. SEVERANCE BENEFITS

    | ● | An ELG member’s position with UTC has been eliminated or diminished by a divestiture, restructuring, shift in priorities or similar event; | | ● | An ELG member retires between age 62 and 65 with the Company’s consent; or | | ● | An executive retires at age 65 or older. |

  109. SEVERANCE BENEFITS

    Voluntary terminations prior to age 62 or terminations related to misconduct do not qualify as mutually agreeable separations. Receipt of the ELG cash separation benefit and the ELG RSU award is contingent upon the executive entering into an agreement containing the following restrictive covenants for the protection of UTC: (i) non-competition; (ii) employee non-solicitation; (iii) non-disparagement; (iv) protection of confidential, sensitive and proprietary information; and (v) post-termination cooperation. The ELG separation benefit is not treated as compensation for purposes of determining benefits under UTC’s pension plans or any other benefit programs. Distributions are subject to certain restrictions imposed by Internal Revenue Code Section 409A.

  110. SEVERANCE BENEFITS

    | 66 | United Technologies Notice of 2019 Annual Meeting of Shareowners and Proxy Statement |

  111. SEVERANCE BENEFITS

    Agreement with Robert K. Ortberg. In anticipation of Mr. Ortberg’s continuing role with the Company following the acquisition of Rockwell Collins, Mr. Ortberg agreed to waive his rights and benefits under his Rockwell Collins change-in-control agreement. UTC then granted Mr. Ortberg a one-time, retention RSU award valued at $9,875,022. The award vests three years from the acquisition date, subject to Mr. Ortberg’s continued employment with UTC. Vesting will accelerate in the event of an adverse change to the terms and conditions of his employment, as detailed on pages 68-69. Under the terms of this agreement, Mr. Ortberg is subject to post-termination restrictive covenants that protect UTC, including restrictions on competitive activities, customer and employee solicitation and disclosure of Company information and intellectual property. This compensation strategy focuses on retaining Mr. Ortberg and better serves UTC’s interests. Mr. Ortberg was appointed to the ELG upon the close of the Rockwell Collins acquisition. However, he did not receive an ELG RSU award in connection with his appointment. His retention RSU award described above includes restrictive covenants substantially similar to those applicable to the ELG RSU award.

  112. CHANGE-IN-CONTROL BENEFITS

    CHANGE-IN-CONTROL BENEFITS Change-in-control severance protection under our legacy Senior Executive Severance Plan (“SESP”) was designed to ensure continuity of management in potential change-in-control situations. In response to changing market practices, we closed this program to new participants effective June 2009. Accordingly, Mr. Hayes is the only NEO who remains eligible for the SESP benefit. NEOs appointed to the ELG on or after June 2009 do not participate in the SESP and are instead covered by the ELG RSU award which would vest in the event of a qualifying termination following a change-in-control. For Mr. Hayes, the SESP provides a cash severance benefit of 2.99x the sum of base salary and target annual bonus for the year in which termination occurs, subject to various restrictive covenants. The SESP cash severance is reduced by 1/36th for each month that termination occurs after age 62 and, accordingly, is completely phased out at age 65. A change-in-control generally occurs upon:

  113. CHANGE-IN-CONTROL BENEFITS

    | ● | The acquisition of 20% of UTC’s outstanding shares by a person or a group; | | ● | Incumbent directors no longer constitute a majority of the Board; or | | ● | A merger or similar event where UTC shareowners own less than 50% of the voting shares of the new organization. |

  114. CHANGE-IN-CONTROL BENEFITS

    Benefits under the legacy SESP, the UTC 2018 Long-Term Incentive Plan and the predecessor long-term incentive plan are subject to a “double trigger” where benefits are provided only if a change-in-control is followed by an involuntary termination or termination by the executive for “good reason” within two years following a change-in-control. “Good reason” generally includes material adverse changes in an executive’s compensation, responsibilities, authority, reporting relationship or work location. Under the LTIP, upon a qualifying termination following a change-in-control or in the event of death, the vesting of outstanding equity awards will be accelerated. For performance-based awards, acceleration will occur at either the greater of actual or target performance levels (for the 2018 LTIP) or at target performance (for the predecessor plan).

  115. CHANGE-IN-CONTROL BENEFITS

    | United Technologies Notice of 2019 Annual Meeting of Shareowners and Proxy Statement | 67 |

  116. CHANGE-IN-CONTROL BENEFITS

    The table below estimates the value of payments and benefits that each NEO would have been entitled to receive had employment terminated on December 31, 2018, under various hypothetical circumstances. Under UTC’s programs, benefit eligibility and the value of benefits an executive may receive vary depending on the reason for termination and whether the executive is eligible for retirement at that time.

  117. CHANGE-IN-CONTROL BENEFITS

    | Payment Type | G. Hayes | A. Johri | R. Ortberg | J. Marks | D. Gitlin | | Involuntary Termination (for cause) | | | | | | | Cash Payment | $0 | $0 | $0 | $0 | $0 | | Pension Benefit(1) | $13,546,111 | $2,482,139 | $513,095 | $0 | $1,500,390 | | SAR Award Value(2) | $0 | $0 | $0 | $0 | $0 | | Stock Award Value(2) | $0 | $0 | $0 | $0 | $0 | | Sub-Total | $13,546,111 | $2,482,139 | $513,095 | $0 | $1,500,390 | | Less: Vested Pension | -$13,546,111 | -$2,482,139 | -$513,095 | $0 | -$1,500,390 | | Amount Triggered due to Termination | $0 | $0 | $0 | $0 | $0 | | Voluntary Termination | | | | | | | Cash Payment | $0 | $0 | $0 | $0 | $0 | | Pension Benefit(1) | $13,546,111 | $2,482,139 | $513,095 | $0 | $1,500,390 | | SAR Award Value(3)(4) | $14,996,210 | $2,779,958 | $0 | $0 | $1,852,063 | | Stock Award Value(3)(4) | $19,585,292 | $6,556,293 | $1,490,507 | $0 | $0 | | Sub-Total | $48,127,613 | $11,818,390 | $2,003,602 | $0 | $3,352,453 | | Less: Vested Pension and Equity | -$48,127,613 | -$11,818,390 | -$2,003,602 | $0 | -$3,352,453 | | Amount Triggered due to Termination | $0 | $0 | $0 | $0 | $0 | | Involuntary Termination (not for cause) | | | | | | | Cash Payment(5) | $4,000,000 | $0 | $0 | $0 | $0 | | Pension Benefit(1) | $13,546,111 | $2,482,139 | $513,095 | $0 | $1,500,390 | | SAR Award Value(3)(6) | $14,996,210 | $2,779,958 | $0 | $0 | $2,713,953 | | Stock Award Value(3)(6)(7) | $19,585,292 | $7,985,468 | $13,891,807 | $0 | $6,776,813 | | Sub-Total | $52,127,613 | $13,247,565 | $14,404,902 | $0 | $10,991,156 | | Less: Vested Pension and Equity | -$48,127,613 | -$11,818,390 | -$2,003,602 | $0 | -$3,352,453 | | Amount Triggered due to Termination | $4,000,000 | $1,429,175 | $12,401,300 | $0 | $7,638,703 | | Termination Following a Change-in-Control | | | | | | | Cash Payment(8) | $13,156,000 | $0 | $0 | $0 | $0 | | Pension Benefit(1) | $13,546,111 | $2,482,139 | $513,095 | $0 | $1,500,390 | | SAR Award Value(9) | $14,996,210 | $2,779,958 | $0 | $0 | $2,713,953 | | Stock Award Value(9) | $21,495,117 | $8,575,899 | $13,891,807 | $5,157,679 | $12,546,219 | | Sub-Total | $63,193,438 | $13,837,996 | $14,404,902 | $5,157,679 | $16,760,562 | | Less: Vested Pension and Equity | -$42,750,373 | -$9,986,934 | -$2,003,602 | $0 | -$3,352,453 | | Amount Triggered due to Termination | $20,443,065 | $3,851,062 | $12,401,300 | $5,157,679 | $13,408,109 |

  118. CHANGE-IN-CONTROL BENEFITS

    | Estimated lump-sum value of the nonqualified portion of the retirement benefits accrued under UTC’s pension plans, assuming retirement or termination on December 31, 2018, payable as of such date or attainment of age 55 (if later) based on the plan’s 2019 lump-sum basis. The present value of benefits payable under the qualified plan are shown in the Pension Benefits table on page 64.(1) | | Outstanding equity awards will be forfeited upon involuntary termination (for cause).(2) | | Equity awards are valued based on the closing price of UTC Common Stock on the NYSE ($106.48) on the last trading day of 2018. For PSUs, maximum-level vesting is shown for the 2018 and 2017 PSU grants, respectively, based on estimated performance as of December 31, 2018. The actual vesting of 116% of target is shown for the 2016 PSU grant.(3) | | SARs and RSUs awards granted under UTC’s annual LTI program that are outstanding for more than one year will vest in the event of voluntary termination only after attaining qualifying retirement under the LTIP (defined as either: (i) age 65; (ii) age 55 plus 10 years of service; or (iii) “Rule of 65” — age 50 to 55 plus years of service add up to 65 or more). For executives who have attained qualifying retirement status, PSUs outstanding for at least one year will remain eligible to vest at the completion of the performance period to the extent performance targets are achieved. All NEOs, except for Mr. Gitlin and Ms. Marks, have satisfied at least one of these qualifying retirement conditions. For non-retirement eligible executives who voluntarily terminate, all unvested awards are cancelled and vested SARs may be exercised up to 90 days following separation. Special out-of-cycle and ELG RSU awards do not have retirement eligibility treatment and, therefore, forfeit upon voluntary termination (except for Mr. Ortberg’s retention RSU award which was granted in exchange for waiving his rights and benefits under his Rockwell Collins change-in-control agreement). This RSU award must be outstanding for more than one year to vest in the event of voluntary termination, after attaining qualifying retirement. Awards granted to Mr. Ortberg under the legacy Rockwell Collins long-term incentive plan, and subsequently converted to UTC RSUs upon the acquisition of Rockwell Collins, will vest on a pro-rata basis upon voluntary retirement on or after age 55.(4) |

  119. CHANGE-IN-CONTROL BENEFITS

    | 68 | United Technologies Notice of 2019 Annual Meeting of Shareowners and Proxy Statement |

  120. CHANGE-IN-CONTROL BENEFITS

    | ELG cash separation benefit equal to 2.5x base salary payable as a lump-sum in the event of a mutually agreeable separation (defined on page 66) following at least three years of ELG service. ELG members appointed on or after May 2013, including Messrs. Johri, Ortberg and Gitlin and Ms. Marks, are not eligible for this cash separation benefit and instead received an ELG RSU grant (except for Mr. Ortberg), as described in footnote (7) below.(5) | | SARs and RSUs awards granted under UTC’s annual LTI program that are outstanding for more than one year will vest and PSUs will remain eligible to vest (to the extent performance targets are achieved) in the event of involuntary termination (not for cause) after an executive qualifies for retirement. For executives who have not yet qualified for retirement but have held awards for at least one year, in the event of involuntary termination (not for cause) a pro-rata portion of SARs and RSUs will vest and a pro-rata portion of PSUs will remain eligible to vest at the completion of the performance period to the extent performance goals are achieved. Special out-of-cycle and ELG RSU awards do not have retirement eligibility treatment and, therefore, forfeit upon involuntary termination (not for cause), except for Mr. Ortberg’s retention RSU award which was granted in exchange for waiving his rights and benefits under his Rockwell Collins change-in-control agreement. This award will vest in the event of involuntary termination (not for cause). Awards granted to Mr. Ortberg under the legacy Rockwell Collins long-term incentive plan, and subsequently converted to UTC RSUs upon the acquisition of Rockwell Collins, will vest in the case of involuntarily termination (not for cause).(6) | | ELG RSUs will vest in the case of mutually agreeable separation (as defined on page 66) following three years of ELG service. Mr. Ortberg did not receive an ELG RSU award upon his appointment to the ELG. Instead, he was granted a retention RSU award in exchange for waiving his Rockwell Collins change-in-control agreement. The UTC retention RSU award granted to Mr. Ortberg includes post-termination restrictive covenants substantially similar to those restrictive covenants applicable to UTC’s standard ELG RSU award (see page 67 for additional details).(7) | | Mr. Hayes is the only NEO eligible for change-in-control benefits under the Senior Executive Severance Plan (“SESP”), which was closed to new participants effective June 2009. The SESP provides a lump-sum cash benefit equal to 2.99x the sum of base salary and target annual bonus. ELG members appointed on or after June 2009 but prior to May 2013 are eligible for the standard ELG cash severance payment upon change-in-control (2.5x base salary), while ELG members appointed on or after May 2013 (Messrs. Johri, Ortberg and Gitlin, and Ms. Marks) are not eligible for a cash payment under either program.(8) | | In the event of qualifying termination following a change-in-control (as defined on page 67), the LTIP provides for the accelerated vesting of all outstanding equity awards (including awards outstanding for less than one year, special out-of-cycle and ELG RSU awards). Values shown reflect the closing stock price on the last trading day of 2018 and PSUs vesting at target (for awards granted under the predecessor to the UTC 2018 Long-Term Incentive Plan), except where actual performance is known as of December 31, 2018. As part of the agreement with Mr. Ortberg to waive his Rockwell Collins change-in-control agreement, UTC agreed to include the definition of “good reason” under Mr. Ortberg’s Rockwell Collins change-in-control agreement for the retention RSU award described on page 67.(9) |

  121. CHANGE-IN-CONTROL BENEFITS

    | United Technologies Notice of 2019 Annual Meeting of Shareowners and Proxy Statement | 69 |

  122. CHANGE-IN-CONTROL BENEFITS

    | CEO |

  123. Pay Ratio

    Pay Ratio

  124. How We Identified the Median Employee

    | CEO PAY RATIO |

  125. Calculating the Ratio

    | Summary Compensation Table Values |