2002 Revenues

2. United Technologies Corporation provides high technology products to the aerospace and building systems industries throughout the world. UTC’s companies are industry leaders and include Pratt & Whitney, Carrier, Otis, UTC Fuel Cells, Hamilton Sundstrand, and Sikorsky. International revenues contributed 56% of total revenues.

3. 2002 Revenues Pratt & Whitney Carrier Flight Otis $28.2 Billion Total – 56% From Outside the U.S.

4. 2002 Revenues ($ billions) 25 20 International 15 International 10 United States 5 United States 0 72 74 76 78 80 82 84 86 88 90 92 94 96 98 99

5. 72 74 76 78 80 82 84 86 88 90 92 94 96 98 2002 REVENUES ($ billions) 30 25 20 Commercial 15 10 5 Aerospace 0 99

6. (Employees 000) 200 150 International 100 50 United States 0 72 74 76 78 80 82 84 86 88 90 92 94 96 98 99

7. UTC REVENUES 2002 $ billions $1.5 $1.3 $0.2 $4.7 $14.9 $3.4 $1.4 $0.3 $2.0 $0.4 $0.7

9. Time is a relative thing outside the U.S. Initial meeting Relationships Commitments Negotiation Performance Culture Clashes

10. Consider The Following • Country of Laws vs. Country of People - know the difference. • Offset & Countertrade - irritation or edge? • E-business - trading exchanges and legality of signatures/transactions. • Foreign Investment Tax Credits - does it fit your business? • Country Sales of Goods Acts - get familiar.

11. Civil code jurisdictions abhor trivia – e.g., performance problems No “magic” language Contracts not “all-inclusive” Rarely address dispute resolution Civil law jurisdictions believe the contract is only one piece of evidence regarding the parties’ “meeting of the minds” Actions speaks louder than the words The Lex Mercatoria

12. Consider The Following • Channels to Market - employees, agents, sales representatives? • Two-Way Termination - where does it fit? • Cultural Factors and Aspects

13. Consider The Following • Exchange Rates and Pricing/Payment - avoid painful surprises. • Policies, Procedures and Forms - how many languages? • Export/Import Laws - business risk. • International Law/Business Firm - cost effective risk management?

14. Consider The Following • Governing Language - is English still the international business language? • Governing Law - home court advantage? • Disputes Forum - home court advantage? • Arbitration (ADR) vs. Litigation - are all parties at the party? • United Nations Convention for the InternationalSale of Goods (CISG) - use or disclaim?

15. All parties must at all times act in good faith Breach of good faith is the most serious shortcoming in contract performance Often completely unenforceable clauses will be honored in the interests of good faith Good Faith

16. Litigation is a last resort Litigation only over code issues, the parties can’t work it out, the potential losses are significant, and the only alternative is litigation Litigation considered evidence of bad management End of the relationship – hence, no appetite to “sue first, talk later.” 5-10 year process, including multiple appeals Commercial Litigation in Europe

17. Huge stigma Declaration that we’ll never do business again Admission of failure on a personal level Civil codes generally not equipped to handle Commercial Litigation in Asia

18. Regulating Relationships • “Denied Persons,” “Specially Designated Nationals,” and similar lists • ITAR Denial Orders • BIS’s “Entities List” implementing EPCI

19. Therefore . . . • “Control” of foreign nationals is more than a “people” issue -- it can impact your organization’s structure and its relationships with other organizations.

20. Employees Temporary help Contractors Collaboration partners Students Interns Researchers Brokers Distributors Dealers Customers U.S. nationals who represent foreign interests Foreign Nationals Include . . .

21. Hiring/Retaining: Nationality Visas Denied Parties screening Right to work Seeking permanent resident status Potential for national origin discrimination Work Assignments: Export restrictions Technology transfer Computer access Facility access DOD and NASA contract restrictions M&A “Due Diligence” issue Issues

22. Consider The Following • Foreign Corrupt Practices Act (FCPA) - reaches outside the U.S. • U.S. Anti-Boycott Laws - also reach outside the U.S. • Business Practices/Ethics - Transparency International and OECD influences and indices. • INCOTERMS - title, risk of loss, acceptance, transportation.

23. THE CHANGING LANDSCAPE OF MULTILATERAL ETHICS • _____________________________________________ • Convention on Combating Bribery of Foreign Officials in International Business Transactions (“OECD Convention”) • Inter-American Convention Against Corruption (“OAS Convention”) • The U. S. Foreign Corrupt Practices Act (“FCPA”) • Pitfalls for U. S. Companies and Their Foreign Subsidiaries

24. Worldwide anti-corruption initiatives were highlighted at Vice President Gore’s “Global Forum on Fighting Corruption” in Washington, D. C. from February 24-26, 1999 • * “Comprehensive, global response to the problem of corruption” • International Conventions / Recommendations -- OECD, OAS, Council of Europe, International Chamber of Commerce • Intergovernmental Organizations -- European Union, United Nations, World Trade Organization, Asia-Pacific Economic Cooperation Forum • International Financial Institutions -- International Monetary Fund, World Bank, European Bank for Reconstruction and Development, Asian Development Bank, Inter-American Development Bank • U.S. Institutions -- Ex-Im Bank, Overseas Private Investment Corp.

25. The OECD Convention • _____________________________________________________ • The OECD Convention was adopted on 17 December 1997 • The OECD Convention entered into force on 15 February 1999 • Culmination of years of work to negotiate a multilateral agreement addressing the “supply side” of the bribery and corruption equation • All 29 members of the OECD and five non-member countries have signed the Convention, including six Western Hemisphere nations. • Jurisdictional bases include Territorial (acts committed by individuals or corporations of any nationality in whole or in part within a party’s territory), or Nationality (acts committed inside or outside a party’s territory by its nationals/citizens, including corporations)

26. The OECD Convention __________________________________________________ The OECD Convention requires that parties to the treaty enact national laws making it a criminal offense to bribe or offer to bribe a foreign government official, and take measures concerning maintenance of books and records, financial statement disclosures, and accounting standards to prevent the concealment of bribery

27. The OECD Convention _____________________________________________________ OECDNon-OECD Australia Hungary* Norway* Argentina Austria Iceland* Poland Brazil Belgium Ireland Portugal Bulgaria* Canada* Italy Spain Chile Czech Republic Japan* Sweden Slovakia Denmark Korea* Switzerland Finland* Luxembourg Turkey France Mexico United Kingdom* Germany* Netherlands United States* Greece* New Zealand * Denotes 12 nations that have ratified the Convention

28. The OAS Convention • ____________________________________________________ • The OAS Convention was adopted on 29 March 1996, and entered into force nearly one year later on 6 March 1997 • The OAS Convention has been signed by all 25 OAS member states: • Argentina Ecuador Nicaragua • Bahamas El Salvador Panama • Bolivia Guatemala Paraguay • Brazil Guyana Peru • Chile Haiti Suriname • Colombia Honduras Trinidad & Tobago Costa Rica Jamaica United States • Dominican Republic Mexico Uruguay • Venezuela • Ten countries, including the United States and Brazil, have not yet ratified or implemented the OAS Convention

29. The OAS Convention • __________________________________________________ • Scope. The OAS Convention seeks to promote the development and strengthening of legal mechanisms to prevent, detect and punish both domestic and foreign corruption, and to facilitate cooperation among the parties to combat official corruption • ØDomestic measures to fight domestic and transnational corruption • ØMultilateral cooperation to aid national authorities in enforcement of domestic measures • In both spheres, the OAS Convention sets forth different levels of obligation -- some articles are binding, others are conditional, and still others are aspirational only

30. The OAS Convention • ________________________________________________ • Domestic Measures • ØCriminalization of domestic “acts of corruption” (solicitation or acceptance of a bribe, offering or granting a bribe, improper acts/ omissions by public officials, fraudulent use of property) • ØCriminalization of transnational bribery of public officials (similar to FCPA and OECD Convention) • ØCriminalization of “illicit enrichment” of public officials • Multilateral Measures • ØExtradition (self-executing extradition treaty among parties) • ØMutual Assistance and Cooperation (looks to existing treaties and domestic laws)

31. Pitfalls for U.S. Companies and Their Foreign Subsidiaries ____________________________________________________ Foreign subsidiaries and foreign national employees of U.S. companies will be directly subject to civil and criminal penalties for bribery of foreign public officials for the first time ØThe FCPA now applies to U.S. persons or entities acting abroad, and to non-U.S. persons or entities if some act in furtherance of prohibited conduct occurs in the United States ØDomestic laws of foreign nations will apply to foreign subsidiaries and foreign national employees National implementing laws under the OECD and OAS Conventions will differ among countries Enforcement practices will vary among countries Enforcement by more than one country at once is possible, although coordination is encouraged

32. Pitfalls for U.S. Companies and Their Foreign Subsidiaries • __________________________________________________ • Key elements for compliance with the FCPA and foreign laws implementing international anti-bribery conventions: • ØCorporate policy and compliance program • ØDue diligence reviews of intermediaries and business partners • ØPeriodic audit/review of compliance procedures • ØTraining and education • Red Flags: identifying suspicious business transactions • Country Agents • Industry Third Party Intermediaries • Commissions Relationships • Cash Payments Secrecy • Bonuses/Reimbursements Compliance Guarantees

33. ANY QUESTIONS?