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NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
WEDNESDAY, JANUARY 24, 1996
To the Shareholders of Johnson Controls, Inc.:
NOTICE IS HEREBY GIVEN that the annual meeting of the shareholders of Johnson
Controls, Inc., a Wisconsin corporation, will be held in the Superior Room,
Milwaukee Athletic Club, 758 North Broadway Street, Milwaukee, Wisconsin, on
Wednesday, January 24, 1996, at 2:00 o'clock P.M. (Central Standard Time), for
the following purposes:
(1) To elect four directors of the class to serve for a term of three years
expiring at the annual meeting to be held in 1999 or until the
director's earlier retirement;
(2) To consider and act upon a proposal to ratify the appointment of Price
Waterhouse as auditors for 1996;
(3) To consider and act upon a proposal to approve the Johnson Controls,
Inc., 1995 Common Stock Purchase Plan for Executives;
(4) To consider and act upon a proposal to amend the Johnson Controls,
Inc., 1992 Stock Option Plan; and
(5) To consider and act upon any other matters which may properly come
before the meeting or any adjournments thereof.
Holders of Common Stock and Preferred Stock units of record at the close of
business on December 1, 1995, will be entitled to vote at the meeting and any
adjournments thereof.
BY ORDER OF THE BOARD OF DIRECTORS,
John P. Kennedy, Secretary
Milwaukee, Wisconsin
December 20, 1995
A PROXY FOR THE MEETING AND A PROXY STATEMENT ARE ENCLOSED HEREWITH. YOU ARE
REQUESTED TO FILL IN AND SIGN THE ENCLOSED FORM OF PROXY, WHICH IS SOLICITED BY
THE COMPANY'S BOARD OF DIRECTORS, AND TO MAIL IT PROMPTLY. SHAREHOLDERS WHO
EXECUTE PROXIES RETAIN THE RIGHT TO REVOKE THEM AT ANY TIME BEFORE THEY ARE
VOTED.
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JOHNSON CONTROLS, INC.
5757 NORTH GREEN BAY AVENUE
P.O. BOX 591
MILWAUKEE, WISCONSIN 53201
DECEMBER 20, 1995
PROXY STATEMENT
FOR ANNUAL MEETING OF SHAREHOLDERS TO BE HELD JANUARY 24, 1996
This proxy statement is furnished to the shareholders of Johnson Controls, Inc.
(the Company), in connection with the solicitation by the Board of Directors of
the Company of proxies for use at the annual meeting of shareholders to be held
at the Milwaukee Athletic Club at 758 North Broadway Street, Milwaukee,
Wisconsin, on January 24, 1996, at 2:00 o'clock P.M., Central Standard Time, and
any adjournments of such meeting.
Execution of a proxy given in response to this solicitation will not affect a
shareholder's right to attend the meeting and to vote in person. Presence at the
meeting of a shareholder who has signed a proxy does not alone revoke a proxy.
Any shareholder giving a proxy may revoke it at any time before it is exercised
by giving notice thereof to the Company in writing. Unless so revoked, the
shares represented by proxies will be voted at the meeting and at any
adjournments thereof. Where a shareholder specifies a choice by means of a
ballot provided in the proxy, the shares will be voted in accordance with such
specification.
Only owners of the Company's Common Stock and Preferred Stock units of record on
December 1, 1995, will be entitled to vote at the meeting. As of December 1,
1995, there were 41,120,558 shares of the Company's Common Stock outstanding,
each having one vote per share. As of December 1, 1995, there were also 310.875
shares of the Company's Preferred Stock outstanding. Each share of Preferred
Stock consists of 10,000 units, each having one vote. On October 31, 1995, the
directors, nominees for directors, and officers of the Company as a group were
beneficial owners of 624,435 shares of the Company's Common Stock (including
297,030 shares subject to options exercisable within 60 days) constituting
approximately 1.526% of the outstanding shares of Common Stock, and 7,855 units
of the Company's Preferred Stock, constituting approximately 2.516% of the
outstanding units.
Effective as of November 30, 1994, rights (Rights) declared as a dividend by the
Board of Directors of the Company were approved, to be issued to shareholders as
of November 30, 1994. The Rights are not presently exercisable, but ten days
after a person or group acquires 20% or more of the Company's Common Stock or
ten business days (subject to extension) after a person or group announces a
tender offer
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to acquire at least 20% of the Company's Common Stock, the Rights will become
exercisable. Such Rights will entitle each holder of Common Stock of the Company
to purchase one share of authorized but unissued Common Stock of the Company for
each Right. The exercise price of each Right is $175.00. Upon the occurrence of
certain events, including the acquisition by any person or group of 20% or more
of the Common Stock, each Right, other than Rights held by an acquiring party,
will entitle the holder to purchase, at the exercise price, Common Stock having
a market value of two times the exercise price. The Rights Agreement excludes
from the effects thereof the inadvertent acquisition of 20% or more of the
Company's Common Stock, provided there is prompt divestment to less than 20%.
The Rights may be redeemed as provided and subject to the limitations set forth
in the agreement setting forth the terms of the Rights; otherwise, such rights
expire on November 30, 2004. None of the shareholdings or percentages of
outstanding shares reported in this proxy statement reflect the Rights or shares
of Common Stock which may be purchased upon the exercise of the Rights. The
Company has prepared a Summary of Rights to Purchase Common Shares, a copy of
which is available free of charge from the Company.
Set forth below is a tabulation indicating those persons whom the management of
the Company believes to be beneficial owners of more than 5% of any class of the
Company's securities. The following information is based on reports on Schedules
13G filed with the Securities and Exchange Commission or other information
believed to be reliable.
Amount and
Name and Address of Nature of Percent
Title of Class Beneficial Owner Ownership of Class
- - -------------------- ---------------------------------- ---------- --------
Common Stock FMR Corporation 5,310,542 (1) 12.9%
$0.16 2/3 Par Value 82 Devonshire Street
Boston, MA 02109
Series D Convertible Fidelity Management Trust Company 312.107 (2) 100%
Preferred Stock 82 Devonshire Street
$1.00 Par Value Boston, MA 02109
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(1) FMR Corporation reported as of October 31, 1995, sole voting power with
respect to 132,582 shares, and sole dispositive power with respect to
5,298,452 shares. The report includes shares beneficially owned by Fidelity
Management and Research Company, a wholly-owned subsidiary of FMR Corp. In
addition, Fidelity International Limited, also a wholly-owned subsidiary of
FMR Corp., has sole voting and sole dispositive power with respect to
12,000 shares.
(2) Fidelity Management Trust Company reported that, as of October 31, 1995, it
held shared voting power and sole dispositive power with respect to the
shares indicated above in its capacity as trustee of the Johnson Controls,
Inc. Employee Stock Ownership Trust.
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ELECTION OF DIRECTORS
The Board of Directors consists of 13 members of whom approximately one-third
are elected each year to serve for terms of three years or until the director's
earlier retirement pursuant to the Board of Directors Retirement Policy(1). It
is intended that the enclosed form of proxy will be voted for the election of
Messrs. Fred L. Brengel, Robert A. Cornog, James H. Keyes, and R. Douglas
Ziegler, all of whom are now members of the Board, for three-year terms or until
the director's earlier retirement.
Directors are elected by a plurality of the votes cast by the holders of the
Company's Common Stock and Preferred Stock units at a meeting at which a quorum
is present. "Plurality" means that the individuals who receive the largest
number of votes cast are elected as directors up to the maximum number of
directors to be chosen at the meeting. Consequently, any shares not voted
(whether by abstention, broker nonvote or otherwise) have no impact in the
election of directors except to the extent the failure to vote for an individual
results in another individual receiving a larger number of votes.
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(1) The Board of Directors has adopted a Retirement Policy that requires a
director to retire as of the last regular Board of Directors' meeting held
in the year of his or her 70th birthday or, in the event a shareholders'
meeting is held on that date, then such retirement shall be effective the
next day. The Retirement Policy does not apply to Mr. Brengel.
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The Directors Committee of the Board of Directors has no reason to believe that
any of such nominees will be unable or unwilling to serve as a director if
elected, but if any nominee should be unable or for good cause unwilling to
serve, the shares represented by proxies solicited by the Board of Directors
will be voted for the election of such other person for the office of director
as the Board of Directors may recommend in place of such nominee. Set forth
below is information with respect to the nominees and the other directors on the
Board.
CLASS OF 1999 (ALL OF WHOM ARE NOMINEES)
- - ---------------- FRED L. BRENGEL Director since 1964
Age 72
Chairman of the Board, Johnson Controls, Inc., Milwaukee,
Wisconsin, until 1993. Mr. Brengel served as the Chief
Executive Officer of Johnson Controls, Inc., from 1967 to
1988. Mr. Brengel is a director of Rexworks, Inc. Member of
Executive Committee.
- - ---------------- ROBERT A. CORNOG Director since 1992
Age 55
President, Chief Executive Officer and Chairman of the Board
of Directors of Snap-on Incorporated (tool manufacturer)
since 1991. Previously, Mr. Cornog served as President of
Macwhyte Company (wire rope manufacturer), Kenosha,
Wisconsin, a subsidiary of Amsted Industries. Mr. Cornog is
a director of Snap-on Incorporated, Wisconsin Electric
Power Company, and Wisconsin Energy Corporation. Member of
Audit Committee and Executive Committee.
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- - ---------------- JAMES H. KEYES Director since 1985
Age 55
Chairman and Chief Executive Officer, Johnson Controls, Inc.,
Milwaukee, Wisconsin. In 1985 Mr. Keyes was named Executive
[Photo] Vice President and subsequently became Chief Operating Officer
and a member of the Board of Directors. He became President of
Johnson Controls, Inc., in 1986, its Chief Executive Officer in
1988, and Chairman in 1993. Mr. Keyes is a director of Firstar
Corp., LSI Logic Corporation, and Universal Foods Corporation.
Chairman of Executive Committee.
- - ---------------- R. DOUGLAS ZIEGLER Director since 1979
Age 68
President and director, Principal Preservation Portfolios, West
Bend, Wisconsin (mutual funds) and Chairman, The Ziegler
[Photo] Companies, Inc., West Bend, Wisconsin (holding
company-financial services and environmental services). Mr.
Ziegler served as the Chief Executive Officer of The Ziegler
Companies, Inc., through 1990. Mr. Ziegler is a director of
Principal Preservation Portfolios, Inc., and The Ziegler
Companies, Inc. Chairman of Pension and Benefits Committee and
member of Executive and Directors Committees.
CLASS OF 1998
- - ---------------- WILLIAM F. ANDREWS Director since 1991
Age 64
Chairman of Schrader, Inc. and Chairman of Scovill Fasteners
Inc., since 1995. Chairman, President and Chief Executive
[Photo] Officer, Amdura Corporation from 1993-1995. President and Chief
Executive Officer, UNR Industries, Inc., Chicago, Illinois
(diversified manufacturer) from 1991 to 1993, President of
Massey Investment Company, Nashville, Tennessee (private
investment company) from 1989 to 1990, and Chairman, CEO and
President of Singer Sewing Machine Company (SSMC) Inc.,
Shelton, Connecticut (diversified manufacturer) from 1986 to
1989. Mr. Andrews is a director of Corrections Corporation of
America, Harley-Davidson, Inc., Katy Industries, Black Box
Corp., Navistar International Corporation, Northwestern Steel &
- - ---------------- Wire Co. Process Technology Holdings Co., and Southern New
England Telecommunications Corporation. Member of Compensation
and Directors Committees.
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- - ---------------- ROBERT L. BARNETT Director since 1986
Age 55
Vice President, iDen Group, Motorola, Schaumburg, Illinois
since May, 1995. Consultant in the field of international
communications from 1992 to 1995. Vice-Chairman, Ameritech
and President, Ameritech Bell Group, American Information
Technologies Corporation, Chicago, Illinois
(telecommunications) from 1989 to 1993 and President,
Ameritech Enterprise Group, from 1987 to 1989. Mr. Barnett
is a director of USG Corp. Member of Executive and Pension
and Benefits Committees and Chairman of Directors Committee.
- - ---------------- WILLIE D. DAVIS Director since 1991
Age 61
President of All Pro Broadcasting Incorporated, Los Angeles,
California (radio broadcasting) since 1977. Mr. Davis is a
director of Alliance Bank Co., Dow Chemical Company, Kmart
Corporation, MGM Grand, Inc., Sara Lee Corporation,
Strong/Corneliuson Capital Management, Inc., and WICOR, Inc.
Member of Audit Committee.
- - ---------------- DONALD TAYLOR Director since 1975
Age 68
Principal in Sullivan Associates, Milwaukee, Wisconsin
(specialists in board of directors searches) since 1992. Mr.
Taylor served as Managing Director U.S.A., Anatar
Investments, Ltd., (venture capital specialist) from 1989
to 1992, and previously as Chairman of Rexnord, Inc.,
Milwaukee, Wisconsin. Mr. Taylor is a director of Banta
Corporation and Harnischfeger Industries, Inc. Chairman of
Compensation Committee and member of Executive and Audit
Committees.
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- - ---------------- RICHARD F. TEERLINK Director since 1994
Age 59
President and Chief Executive Officer of Harley-Davidson, Inc.,
Milwaukee, Wisconsin since March 1989. Mr. Teerlink has served
[Photo] as President and Chief Operating Officer of Harley-Davidson
since March 1988. Mr. Teerlink is a director of Firstar Bank
Milwaukee and Outboard Marine Corporation. Member of Audit
Committee.
CLASS OF 1997
- - ---------------- PAUL A. BRUNNER Director since 1983
Age 60
President and Chief Executive Officer, Spring Capital, Inc.,
Stamford, Connecticut (investment management) since 1985.
[Photo] President and Chief Executive Officer, ASED, Inc., 1982-1984.
President and Chief Executive Officer, Crouse Hinds Co.,
1967-1982. Chairman of Audit Committee and member of
Compensation Committee.
- - ---------------- SOUTHWOOD J. MORCOTT Director since 1993
Age 57
Chairman since 1990, President since 1986, and Chief Executive
Officer since 1989 of Dana Corporation, Toledo, Ohio (vehicular
[Photo] and industrial component manufacturer). Mr. Morcott is a
director of CSX Corporation, Dana Corporation, and Phelps-Dodge
Corporation. Member of Compensation Committee and Directors
Committee.
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- - ---------------- MARTHA R. SEGER Director since 1991
Age 63
Visiting Distinguished Professor of Finance at Central Michigan
University from 1993 to present. John M. Olin Distinguished
Fellow in the Karl Eller Center for the Study of the Private
Market Economy, School of Business and Public Administration,
University of Arizona, Tucson, Arizona, from 1991 to 1993.
Member of the Federal Reserve Board from 1984 to 1991. Dr.
Seger is a director of Amoco Corp., Providian Corp., Fluor
Corp., Kroger, Inc., Tucson Electric, and Xerox Corp. Member of
Pension and Benefits Committee.
- - ---------------- GILBERT R. WHITAKER, JR. Director since 1986
Age 64
Professor of Business Economics, University of Michigan, 1995-
Present. Provost and Executive Vice-President for Academic
Affairs, University of Michigan, 1990-1995. Mr. Whitaker served
as Dean, School of Business Administration, University of
Michigan, from 1979 to 1990. Mr. Whitaker is a director of
Handleman Company, Lincoln National Corporation, and Structural
Dynamics Research Corp. Member of Pension and Benefits
Committee.
Each of the directors or nominees for director has had the principal occupation
indicated or in certain instances has served in another executive position with
the employer indicated or an affiliate thereof during the last five years.
The Audit Committee of the Board of Directors met three times during fiscal
1995. Its functions include, but are not necessarily limited to, the following:
(1) to review the adequacy of internal controls established by management; (2)
to assess the adequacy of the financial reporting process and selection of
accounting policies; (3) to review management's evaluation and proposed
selection of independent accountants, including the appropriateness of fees, and
to recommend to the Board of Directors the appointment of independent
accountants subject to the ratification by the shareholders; (4) to review the
adequacy of audit plans prepared by internal audit and independent accountants;
(5) to review periodically the status of significant issues and internal control
recommendations; (6) to meet and to consult with the Company's internal auditors
and accounting and financial personnel and with independent public accountants
concerning the foregoing matters; (7) to report on the results of these
activities periodically to the Board of Directors; (8) to review significant
issues concerning litigation, contingent liabilities, and tax and insurance; (9)
to review management information systems of the Company; and (10) to monitor
compliance procedures of the Company and their implementation.
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The Compensation Committee of the Board of Directors met four times during
fiscal 1995. Its functions include, but are not necessarily limited to, the
following: (1) to consider and make recommendations to the Board of Directors
regarding the selection and retention of elected officers and certain other
principal officers and key employees of the Company and its subsidiaries; (2) to
consider and make recommendations regarding salary structure, officer gradings,
and salaries for elected officers; (3) to administer, make grants and awards,
make rules, and recommend amendments to the Company's executive compensation
plans; (4) to consider and make recommendations to the Board concerning bonus
awards, perquisites, and other remuneration to executive officers; (5) to
consider and make recommendations concerning the total compensation package for
all elected officers and to approve the disclosure of such information in the
Company's proxy statement; (6) to oversee the selection of, and to meet with,
outside consultants to review the Company's executive compensation programs as
appropriate; (7) to review and make recommendations concerning management
succession; and (8) to recommend to the Board of Directors the selection of the
Chief Executive Officer of the Company.
The Directors Committee of the Board of Directors met three times during fiscal
1995. Its function includes, but is not necessarily limited to, the following:
(1) to review the qualifications of, and to make recommendations to the Board of
Directors concerning, nominees for directors; (2) to review and consider
candidates for election as directors submitted by the shareholders; (3) to
consider and make recommendations concerning the size and composition of the
Board of Directors; (4) to develop and recommend guidelines and criteria to
determine the qualifications of directors; (5) to recommend an overall
compensation program for directors; (6) to review and recommend committees and
committee structure for the Board; (7) to recommend performance criteria for the
Board of Directors and to review its performance; and (8) to review conflicts of
interest that may affect directors. Shareholders wishing to propose director
candidates for consideration by the Directors Committee may do so by writing to
the Secretary of the Company, giving the candidate's name, biographical data and
qualifications. Further, the Company's By-Laws set forth certain requirements
for shareholders wishing to nominate director candidates for consideration by
shareholders. With respect to elections of directors to be held at an annual
meeting, among other things, a shareholder must give written notice of an intent
to make such a nomination complying with the By-Laws to the Secretary of the
Company not less than 60 days nor more than 90 days prior to the fourth Tuesday
in the month of January.
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The Executive Committee of the Board of Directors met once during fiscal 1995.
Its functions include the exercise of certain powers of the Board of Directors
in the general supervision and control of the business and affairs of the
Company during intervals between meetings of the Board of Directors.
The Pension and Benefits Committee of the Board of Directors met five times
during fiscal 1995. Its functions include, but are not necessarily limited to,
the following: (1) to review annually actuarial assumptions and actuarial
valuation of the pension plans of the Company; (2) to review investment policy
of the funds of the employee benefit plans of the Company; (3) to select and to
terminate investment managers as appropriate; (4) to review with investment
advisors past performance and current investment strategy; (5) to review and
approve the adoption of any new trust agreements or master trusts implementing
the plans; (6) to monitor and oversee Company policies affecting employee
benefit plans; and (7) to oversee administration of plans, to review annually
plan provisions, and to recommend amendments to the plans as appropriate.
During fiscal 1995, the Board of Directors met six times. Each director attended
80% or more of the total number of meetings held during fiscal 1995 while he or
she was a member of the Board, including meetings of committees of which the
director is a member.
Directors who are not employees receive a $33,000 annual retainer, plus $1,200
for each Board meeting they attend, $1,200 for each meeting they attend of Board
committees of which they are members, $1,500 for each meeting they attend of
Board committees of which they are chairmen, plus expenses.
In addition, directors who are not employees are covered by a medical
reimbursement plan. This medical coverage is secondary coverage and only
available to the extent a director does not have primary coverage. Effective
October 1, 1995, the Board limited the availability of this medical coverage to
those directors currently eligible for such coverage. Future directors will not
be eligible to receive this coverage. Prior to October 1, 1995, directors who
are not employees were also covered under a life insurance plan. Effective
October 1, 1995, the Board eliminated this life insurance coverage.
Under the Stock Plan for Outside Directors adopted on January 27, 1993, up to
50% of the retainer fee will be paid in Common Stock each year. The remainder
will be paid in cash at the same time. The stock will be priced as of the date
of the Annual Meeting. In addition, new directors receive an initial grant of
200 shares of Common Stock. New directors also receive a pro rata share of the
annual retainer for the remainder of that year, and the stock provided as part
of the annual retainer will be priced as of the date of the first meeting of the
Board at which the new director participates.
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EXECUTIVE COMPENSATION
SUMMARY COMPENSATION TABLE
The Summary Compensation Table on page 11 shows the compensation for the past
three fiscal years of each of the Company's five most highly compensated
executive officers, including the Chief Executive Officer (the named executive
officers).
STOCK OPTION/STOCK APPRECIATION RIGHT GRANTS
The Company has in effect employee stock option plans pursuant to which options
to purchase Common Stock of the company and stock appreciation rights (SARs),
which are rights, granted in tandem with an option, to receive cash payments
equal to any appreciation in value of the shares subject to option from the date
of the option grant to the date of exercise in lieu of exercise of the option,
are granted to officers and other key employees of the Company and its
subsidiaries. The table on page 12 shows Options/SAR grants in fiscal 1995 to
the named executive officers. Of the stock options shown in the Summary
Compensation Table on page 11 and the Option/SAR Grant Table on page 12, 25% of
the options were options with tandem SARs. In April 1995, stock options granted
in November 1994 to foreign nationals were canceled and free-standing SARs were
issued in their place.
AGGREGATED OPTION/SAR EXERCISES IN FISCAL YEAR AND OPTION/SAR VALUE TABLE
The table on page 12 shows information concerning the exercise of stock options
or tandem SARs during fiscal 1995 by each of the named executive officers and
the fiscal year-end value of unexercised options and SARs.
SUMMARY COMPENSATION TABLE
Annual Compensation Long-Term Compensation
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Long-Term
Fiscal Options/SARs Incentive
Name and Principal Position Year Salary($) Bonus($) (#) Payout($)
- - ---------------------------- ------ --------- -------- ------------ ---------
James H. Keyes 1995 731,250 599,400 30,000 363,000
Chairman and Chief Executive 1994 662,500 628,560 51,000 330,000
Officer 1993 606,246 523,438 No Grant 208,850
John M. Barth 1995 407,496 264,649 20,000 165,000
Executive Vice-President 1994 367,500 268,114 24,000 145,000
1993 329,997 246,976 No Grant 85,211
Joseph W. Lewis 1995 346,000 175,463 15,000 156,200
Executive Vice-President 1994 326,750 210,367 19,000 137,000
1993 306,504 192,294 No Grant 85,211
Stephen A. Roell 1995 302,496 200,136 15,000 79,200
Vice-President and Chief 1994 250,000 189,168 20,000 72,000
Financial Officer 1993 212,496 133,925 No Grant 27,569
John P. Kennedy 1995 248,500 144,547 7,000 78,100
Vice-President, Secretary, 1994 221,250 131,162 8,500 71,000
and General Counsel 1993 197,034 87,170 No Grant 44,276
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OPTIONS/SAR GRANTS IN FISCAL 1995(1)
Potential Realizable
Individual Grants
- - ------------------------------------------------------------------------- Value at Assumed
% of Total Annual Rates of Stock
Options/SARs Exercise Price Appreciation
Granted to or Base for Full Option Term
Options/SARs Employees in Price Expiration ---------------------
Name Granted Fiscal 1995 ($/Share) Date 5% 10%
- - ------------------- ------------ ------------ --------- ---------- -------- ----------
OPTIONS/SARs GRANTED November 16, 1994
James H. Keyes 30,000 4.31% $49.3125 11/16/04 $930,371 $2,357,743
John M. Barth 20,000 2.88% $49.3125 11/16/04 $620,247 $1,571,828
Joseph W. Lewis 15,000 2.16% $49.3125 11/16/04 $465,185 $1,178,871
Stephen A. Roell 15,000 2.16% $49.3125 11/16/04 $465,185 $1,178,871
John P. Kennedy 7,000 1.01% $49.3125 11/16/04 $217,087 $ 550,140
- - -------------------------
(1) The Stock Option/SAR plans are administered by the Compensation Committee of
the Board of Directors, which has authority to determine the individuals to
whom and the terms at which option and SAR grants shall be made, certain
terms of the options, and the number of shares to be subject to each
option. The per share option/SAR prices are the fair market value of the
Company's Common Stock on the date of the grant, and the term of the
options is 10 years. Fifty percent of each award is exercisable two years
after the grant, and the remainder is exercisable three years after the
grant.
AGGREGATED OPTIONS/SAR EXERCISES IN LAST FISCAL YEAR
AND FISCAL YEAR-END OPTION/SAR VALUES
Value of Unexercised
Number of Number of Unexercised In-the-Money
Shares/SARs Options/SARs at FY-End Options/SARs at FY-End
Acquired on Value ------------------------- -------------------------
Name Exercise Realized Exercisable/Unexercisable Exercisable/Unexercisable
- - ----------------------- ----------- -------- ------------------------- -------------------------
James H. Keyes 25,000 $568,750 71,000 / 81,000 $1,804,000 / $909,562
John M. Barth 9,600 $262,200 20,000 / 44,000 $467,500 / $510,750
Joseph W. Lewis 12,000 $317,250 28,600 / 34,000 $734,525 / $392,625
Stephen A. Roell 4,482 $ 76,618 10,000 / 35,000 $233,750 / $402,187
John P. Kennedy 0 $ 0 15,200 / 15,500 $404,800 / $179,718
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LONG-TERM INCENTIVE PLAN AWARDS
The following table shows each Contingent Performance Award made to any named
executive officer for the 1996 fiscal year under the Company's Long-Term
Performance Plan (LTPP). Payouts of awards are tied to the Company's weighted
average return on shareholder's equity for fiscal years 1996, 1997 and 1998
compared to the median return on shareholder's equity of the Standard & Poor's
Manufacturers (Diversified Industrial) Index (S&P index) during the same
three-year period. Performance in the third year of the award is multiplied by
3/6, performance in the second year is multiplied by 2/6, and performance in the
first year is multiplied by 1/6 to establish a weighted average. If the
Company's average level of return is: (1) less than the 45th percentile of the
return for companies in the S&P index, no award is earned; (2) equal to or
greater than the 45th percentile, the threshold amount is earned; (3) equal to
or greater than the 50th percentile, the target amount is earned; (4) equal to
or greater than the 55th percentile, 110% of the target amount is earned; and
(5) equal to or greater than the 60th percentile, the maximum amount is earned.
In fiscal 1995, based upon the data available at the time of this proxy, LTPP
participants were paid 92% of the maximum amount available under the criteria
established by the Compensation Committee. When the remaining comparison
companies have reported, these awards could increase to 100% of the maximum
amount.
Amount of Performance
Contingent Period Until
Performance Maturation or Threshold Target Maximum
Name Award ($) Payout ($) ($) ($)
- - ------------------- ----------- ------------- --------- ------- -------
James H. Keyes 675,000 1996-1998 540,000 675,000 810,000
John M. Barth 249,000 Fiscal Years 199,200 249,000 298,800
Joseph W. Lewis 211,000 168,800 211,000 253,200
Stephen A. Roell 186,000 148,800 186,000 223,200
John P. Kennedy 139,000 111,200 139,000 166,800
EMPLOYMENT CONTRACTS
The Company has employment agreements with each of the executive officers of the
Company including the named executive officers. These agreements provide that
employment shall continue for continuous terms, unless terminated by either the
Company or the employee as provided therein; the term of the agreements,
however, does not extend automatically after the employee reaches age 60. These
agreements
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provide for termination by the Company for cause, for death or disability and
under certain circumstances without cause. In the event of termination without
cause the employees under any of the contracts will be entitled to receive
benefits in an amount equal to the greater of two times the Company's
termination allowance policy for administrative employees or an amount equal to
52 weeks' earnings of the employee. In the event of termination by the Company
for cause, the employee's compensation is terminated immediately. Change of
control agreements have also been entered into by the Company with these
executives. In the event of a change of control, these agreements provide for a
severance payment equal to three times the executive's annual compensation at
the time plus a lump sum payment for the actuarial equivalent of lost benefits
under the applicable retirement plan if the executive is terminated other than
for cause or has good reason to terminate his or her employment. If the amount
to be paid upon termination exceeds certain amounts established under the
Internal Revenue Code, so as to require the payment of additional federal taxes,
the executive receives an additional payment such that, after payment by the
executive of all taxes payable in connection with the agreement, the executive
will retain the full amount of the payments to which he is entitled under the
agreement. The executive has a 30-day period at the end of the first year after
a change of control to terminate his or her employment for any reason and
receive the benefit.
The Company has in effect an Executive Survivor Benefits Plan for certain
executives. Coverage under this plan is in lieu of the Company's regular group
life insurance coverage. In the event of the death of a participating executive
while he is employed by the Company, his beneficiary is entitled to payments of
between 90% and 100% (depending on the executive's age) of the executive's final
base annual salary for a period of 10 years.
The Executive Incentive Compensation Plan (EICP) provides that, in the event of
a change of control of the Company, certain participants, including the named
executive officers, may re-elect to receive early payment of deferred amounts,
and a participant may direct the Company to cause a letter of credit be issued
in an amount sufficient to provide for all payments due to such participant
under the Plan. The Long-Term Performance Plan also provides that, in the event
of a change of control of the Company, certain participants, including the named
executive officers, shall be entitled to receive early payment of deferred
amounts.
SECURITY OWNERSHIP OF MANAGEMENT
Set forth below is the tabulation indicating as of October 31, 1995, the shares
of the Company's Common Stock beneficially owned by each director and nominee,
each of the named executive officers, and directors and executive officers of
the Company as a
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group. No executive officer or director owns more than 1% of the outstanding
shares of Common Stock.
SECURITY OWNERSHIP OF MANAGEMENT
Amount and
Nature(1)
Name of of
Beneficial Owner Ownership
- - ------------------------- ----------
James H. Keyes 199,464(2)(3)
John M. Barth 45,990(2)(3)
Joseph W. Lewis 122,008(2)(3)
Stephen A. Roell 28,271(2)
John P. Kennedy 24,053(2)(3)
William F. Andrews 2,155
Robert Barnett 8,125(3)
Fred L. Brengel 126,280(3)
Paul A. Brunner 5,850
Amount and
Nature(1)
Name of of
Beneficial Owner Ownership
- - ------------------------- ----------
Robert A. Cornog 2,865(3)
Willie D. Davis 1,050
Southwood J. Morcott 1,856(3)(4)
Martha R. Seger 1,384(3)
Donald Taylor 3,736(3)
Richard F. Teerlink 1,078
Gilbert R. Whitaker, Jr. 4,678(3)
R. Douglas Ziegler 10,650
All directors and executive officers as a group (not including deferred shares
referred to in footnote 3 or the shares referred to in footnote 4) TOTAL
624,435(2)
TOTAL PERCENT OF CLASS 1.52%
- - -------------------------
(1) Includes all shares with respect to which each officer or director directly,
through any contract, arrangement, understanding, relationship or otherwise,
has or shares the power to vote or to direct voting of such shares or to
dispose or to direct the disposition of such shares.
(2) Includes shares of Common Stock which, as of October 31, 1995, were subject
to outstanding stock options exercisable within 60 days.
(3) Includes deferred shares under the EICP, LTPP, or the Deferred Compensation
Plan for Certain Directors. Total amounts of such deferred shares include
Mr. Keyes at 40,973 shares; Mr. Barth at 3,175 shares; Mr. Lewis at 23,314
shares; Mr. Kennedy at 2,338 shares; Mr. Barnett at 6,709 shares; Mr.
Brengel at 17,203 shares; Mr. Cornog at 1,015 shares; Mr. Morcott at 762
shares; Ms. Seger at 427 shares; Mr. Taylor at 568 shares; and Mr. Whitaker
at 2,443 shares. Including deferred shares, management holds 725,972 shares,
or 1.76% of the class of common stock.
(4) Includes 300 shares acquired on November 24, 1995.
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CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Willie D. Davis, a director of the Company, is an owner of more than 10% of
Process Adhesives, from which the Company purchased approximately $169,470 of
goods during fiscal year 1995. It is not practicable to determine the amount of
his interest in the transaction.
COMPENSATION COMMITTEE REPORT
EXECUTIVE COMPENSATION PRINCIPLES
The Company's Executive Compensation Program is based on guiding principles
designed to align executive compensation with Company values and objectives,
business strategy, management initiatives, and business financial performance.
The Johnson Controls Vision, approved by the Board of Directors, identifies
customer satisfaction, technology, growth, market leadership, and shareholder
value as the Company's primary objectives. In applying these principles the
Compensation Committee (the Committee) has established a program to:
- - - Attract and retain key executives critical to the long-term success of the
Company and each of its business groups.
- - - Reward executives for long-term strategic management and the enhancement of
shareholder value.
- - - Integrate compensation programs with both the Company's annual and long-term
strategic planning and measuring processes, which focus on after-tax return on
shareholder equity, return on investment, growth, market share, and cost
reduction.
- - - Support a performance-oriented environment that rewards performance not only
with respect to Company goals but also Company performance as compared to that
of industry performance levels.
- - - Take steps to assure that future executive compensation payments remain tax-
deductible.
EXECUTIVE COMPENSATION PROGRAM
The total compensation program involves a market comparison of total
compensation, based on surveys provided to the Company by an independent
compensation consultant. A survey of 22 companies with annual sales between $1
billion and $13 billion, comparing all elements of executive officer
compensation, including stock options and benefits, was provided by an
independent compensation consultant with respect to compensation for officers
and senior managers. Average sales of these 22 companies
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was $5 billion; adjustments were made to account for differences in annual sales
between the Company and those companies in the survey. The level of comparison
is the 50th percentile for total compensation.
The program consists of both cash and equity-based compensation. The annual
compensation consists of a base salary and an annual bonus under the EICP. The
Committee determines the level of salary for key executive officers and a salary
range for other executive officers. Factors considered in determining salary
amounts or ranges include prior year salary, changes in individual job
responsibilities, past performance of individuals, and, most importantly,
achievement or trends toward achievement of specified Company goals and the
salary comparison survey results. Generally, all executive officers participate
in the EICP. For each fiscal year, the Committee determines in advance and
communicates to the executive the formula for the award, which is based on
specified benchmarks for return on shareholders' equity, or return on group or
division assets, increase in market share, or cost reduction. These benchmarks
are consistent with the Company's annual and long-term strategic planning
objectives based on achievement of business plans approved by the Board of
Directors that include goals of improved performance over the previous year and
take into account industry growth and cycles. At the end of the fiscal year, the
Committee applies the formula to objective performance results to determine an
executive's award for the year. Except under the EICP Qualified Plan, where
discretionary increases to the bonus amount may no longer be made, adjustments
may then be made by the Committee, within specified ranges, for the executive's
achievement of specified objectives and individual job performance.
Long-term incentives are provided through both the LTPP and stock options. The
Committee reviews and approves the participation of executive officers of the
Company and its subsidiaries under the LTPP. Generally, all named executive
officers participate in the LTPP, which is intended to motivate executives to
achieve longer-term objectives by providing incentive compensation based on
Company performance over a three-year period. For each award under the LTPP, the
Committee assigns an executive a contingent performance award, which the
executive has the opportunity to earn based upon the Company's return on equity
during the specified three-year period. Currently, LTPP awards are based upon a
specified level of return on shareholders' equity relative to the Standard &
Poor's Manufacturers (Diversified Industrial) Index median return on
shareholders' equity. The specified level of return is consistent with the
Company's strategic planning objectives. At the end of the period, the Committee
applies the specified goal to objective performance results to determine the
executive's LTPP award.
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The Committee grants stock options and stock appreciation rights (SARs) under
the 1992 Stock Option Plans. The Committee has the authority to determine the
individuals to whom stock options and SARs are awarded, the terms at which
option grants shall be made, the terms of the options, and the number of shares
subject to each option. Compensation to executives through stock options and
SARs and the LTPP, taken together, is targeted at the 50th percentile of such
compensation granted by similar companies as identified in the survey. Current
stock ownership by executives, the number of unexercised options that may be
outstanding for an executive or executives as a whole, and other factors may be
considered only for new or promoted officers. Through the award of stock option
grants, the objective of aligning executive officers' long-range interests with
those of the shareholders is met by providing the executive officers with the
opportunity to build a meaningful stake in the Company.
Executive officers may also participate in the Company's Savings and Investment
Plan (401k Plan), which includes Company contributions to the Plan, an
Equalization Benefit Plan under which certain executives, including the named
executive officers, are entitled to additional benefits that cannot be paid
under qualified plans due to Internal Revenue Code limitations and in addition
other benefit plans generally available to all levels of salaried employees.
Also, certain executive officers may elect to defer certain awards or
compensation under plans. Deferred awards are accounted for as if invested in
various accounts.
The Board of Directors has adopted an Executive Stock Ownership Policy, which
requires that all officers and senior managers in each business group, within
five years of becoming subject to the Policy, hold Common Stock of the Company
in an amount, depending upon the officer or manager, of one to three times their
annual salary. Total compensation to be received by these individuals is not
affected by the policy. To facilitate the acquisition of Common Stock by
executives subject to the Executive Stock Ownership Policy, the Board of
Directors has adopted, subject to shareholder approval at the January 24, 1996
Annual Meeting, a Common Stock Purchase Plan for Executives (CSPPE). All
officers and key executives may participate in the CSPPE. Participants in the
CSPPE may deduct from their pay up to a maximum of $2,500 per month to purchase
shares of the Company's Common Stock. The price of each share of such stock will
be 100% of the average price of shares purchased by Firstar Trust Company as
agent for the participants. No brokerage fees or commissions will be charged,
and the Company will bear the expenses of administering the CSPPE.
Approximately 50% of the total compensation paid in the executive officer group
is performance related, which is comparable to the average of the companies
identified in the executive compensation survey.
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CHIEF EXECUTIVE OFFICER COMPENSATION
The Committee relied on the same approach in determining the Chief Executive
Officer's compensation as it used for compensation of other executive officers.
The Chief Executive Officer of the Company received a base salary in fiscal 1995
of $750,000, which represented an increase of 11% over the previous year. The
Chief Executive Officer's base salary remained below the average base salary for
chief executive officers for the 22 companies reviewed. His fiscal 1995 EICP
award of $599,400 was based upon the return on shareholder's equity for the
Company for fiscal 1995 and represented 52.1% of the maximum amount available
under the criteria established by the Committee. In fiscal 1995, the Chief
Executive Officer received payments under the LTPP of $363,000, based upon the
Company's return on shareholder's equity over the past three fiscal years, and
it represented 92% of the maximum amount available under the criteria
established by the Committee based upon the data available on the date of this
proxy. When the remaining comparison companies have reported, this award could
subsequently increase to 100% of the maximum amount. Stock options were awarded
in November 1994, when the Chief Executive Officer received an option award of
30,000 shares.
Approximately 70% of the total compensation paid to the Chief Executive Officer
is performance related, which is comparable to the average for the companies
identified in the survey.
COMPENSATION COMMITTEE
Donald Taylor, Chairman
William F. Andrews
Paul A. Brunner
Southwood J. Morcott
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PERFORMANCE GRAPH
Set forth below is a line graph comparing the cumulative total shareholder
return on the Company's Common Stock, based on the market price of the Common
Stock and assuming reinvestment of dividends, with the cumulative total return
of companies on the Standard & Poor's 500 Stock Index and the S&P Manufacturers
(Diversified Industrial) Index.
COMPARISON OF FIVE YEAR CUMULATIVE TOTAL RETURN
AMONG S&P 500 INDEX, S&P MANUFACTURERS (DIVERSIFIED
INDUSTRIAL) INDEX AND JOHNSON CONTROLS, INC.
Manufacturers
Measurement Period (Diversified
(Fiscal Year Covered) S&P 500 Industrial) JCI
--------------------- ------- ------------- ---
1990 100.0 100.0 100.0
1991 131.2 131.0 175.7
1992 145.7 137.7 217.8
1993 164.6 163.2 305.4
1994 170.7 181.3 287.2
1995 221.4 241.5 375.7
ASSUMES $100 INVESTED ON SEPTEMBER 30, 1990, IN S&P 500 INDEX
S&P MANUFACTURERS (DIVERSIFIED INDUSTRIAL) INDEX AND JOHNSON CONTROLS, INC.,
AND THAT DIVIDENDS ARE REINVESTED AT THE END OF MONTH IN WHICH THEY ARE PAID.
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PENSION PLANS
PENSION PLAN TABLE
The following table shows the maximum annual retirement benefits payable in
dollars under the Company's plans (including amounts attributable to the
Company's Equalization Benefit Plan) at the normal retirement age for specified
remunerations and years of service under provisions in effect on September 30,
1995, and assuming retirement on that date. Compensation for purposes of the
plans for the named executive officers generally corresponds with the aggregate
of the earned salary, plus bonus or Executive Incentive Compensation Plan awards
for each such person.
Maximum Annual Pension at Normal Retirement Age
After Years of Participating Service
Average Annual (Prior to Adjustment for Social Security
Compensation in Highest Covered Compensation)
5 Years of Last 10 Years -----------------------------------------------
Before Retirement 25 Years 30 Years 35 Years 40 Years
- - ------------------------ -------- -------- -------- --------
$ 100,000 42,500 51,000 56,750 62,500
$ 200,000 85,000 102,000 113,500 125,000
$ 250,000 106,250 127,500 141,875 156,250
$ 300,000 127,500 153,000 170,250 187,500
$ 400,000 170,000 204,000 227,000 250,000
$ 500,000 212,500 255,000 283,750 312,500
$ 600,000 255,000 306,000 340,500 375,000
$ 700,000 297,500 357,000 397,250 437,500
$ 800,000 340,000 408,000 454,000 500,000
$ 900,000 382,500 459,000 510,750 562,500
$1,000,000 424,992 509,988 567,492 624,996
$1,100,000 467,496 561,000 624,252 687,492
As of September 30, 1995, the persons named in the Summary Compensation Table
were credited with the following years of service under the Company's pension
plan: Mr. Keyes, 26 years; Mr. Barth, 25 years; Mr. Lewis, 34 years; Mr. Roell,
12 years; and Mr. Kennedy, 10 years.
Pension plans of the Company generally apply to all regular employees, including
officers of the Company. The Johnson Controls Pension Plan (the Plan), effective
January 1, 1989, generally covers all salaried and non-union hourly employees of
the Company. The Plan has been amended from time to time. Under the Plan,
benefits are accrued according to the following formula: 1.15% of Participant's
Average Monthly Compensation multiplied by the Participant's years of Benefit
Service plus 0.55% of Average Monthly Compensation in excess of the
Participant's Covered Compensation
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multiplied by the Participant's years of Benefit Service. The amounts actually
payable may be actuarially adjusted to reflect the Participant's marital status,
early retirement or termination, and, in some circumstances, age. "Average
Monthly Compensation" is defined as the average monthly compensation for the
highest five consecutive years in the last 10 years. "Benefit Service" generally
means the number of years worked for the Company. "Covered Compensation" means
the average of compensation subject to Social Security taxes for the 35-year
period ending in the year the Participant attains Social Security Retirement
Age; i.e. the age at which the Participant will be entitled to full Social
Security payments.
Participants become entitled to benefits under the Plan after five years of
service with the Company or any of its subsidiaries, and the normal retirement
date is a Participant's 65th birthday.
The Internal Revenue Code places maximum limitations on the amount of benefits
that may be paid under the Plan. The Company has adopted an Equalization Benefit
Plan under which certain executives, including the named executive officers, are
entitled to the additional pension benefits that cannot be paid under the
qualified plan due to these limitations and because they have elected to defer a
portion of their award under an incentive compensation plan.
COMPENSATION PLANS SUBJECT TO SHAREHOLDER APPROVAL
The Board of Directors has adopted, subject to shareholder approval and
ratification, a new 1995 Common Stock Purchase Plan for Executives (CSPPE) and
it has amended the 1992 Stock Option Plan. The original 1992 Stock Option Plan
was approved and ratified by the shareholders at the 1993 Annual Meeting.
PROPOSED COMMON STOCK PURCHASE PLAN FOR EXECUTIVES (CSPPE)
Under the Common Stock Purchase Plan for Executives (CSPPE), all officers and
key executives of the Company are eligible to deduct from their pay a maximum of
$2,500 per month to purchase shares of the Company's Common Stock. The purpose
of the CSPPE is to facilitate the acquisition of Company Common Stock by those
officers and executives subject to the Executive Stock Ownership Policy
previously adopted by the Board of Directors. The Executive Stock Ownership
Policy requires all officers and senior managers in each of the Company's
business groups to hold, within five years of becoming subject to the policy,
Common Stock in the Company in an amount, depending on the officer or manager,
one to three times their annual salary.
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The full text of the CSPPE is set forth in Exhibit A attached hereto. Major
provisions of the CSPPE include the following:
(A) Participants in the CSPPE may deduct up to a maximum of $2,500 per
month from their pay to purchase shares of the Company's Common Stock.
(B) All officers and key executives of the Company or a subsidiary that are
subject to the Company's Executive Stock Ownership Policy may
participate in the CSPPE. As of December 1, 1995, the number of such
officers and key executives totalled 38.
(C) The Company's transfer agent and registrar, Firstar Trust Company, is
responsible for administration of the Plan, subject to the supervision
and control of the Compensation Committee of the Board of Directors of
the Company.
(D) The price of each share of Common Stock purchased under the CSPPE shall
be 100% of the average price of the share purchased by Firstar Trust
Company as agent for the Participants. No brokerage fee or commission
shall be charged.
(E) Except for a Participant's initial election to purchase shares under
the CSPPE, the purchase of shares by a Participant pursuant to a
payroll deduction, an increase of amounts deducted from pay, the
termination of payroll deductions, the sale of shares, or the closure
of the account shall be made only pursuant to an irrevocable election
made by the Participant at least six months in advance of the
designated transaction. Participants that terminate payroll deductions,
sell shares, or close accounts shall be prohibited from participating
in the CSPPE until six months after such transaction.
(F) The Company shall bear the expenses of administering the CSPPE.
(G) The CSPPE shall terminate as of September 30, 2000.
Because participation in the CSPPE is voluntary and benefits of participation
relate primarily to the ability to acquire Common Stock without paying
commissions, the Company cannot determine the benefits that will accrue under
the CSPPE to the named executive officers, other executive officers or other
employees. Directors of the Company who are not employees are not eligible to
participate in the CSPPE.
The affirmative vote of a majority of the votes cast on the proposal by
shareholders of the Company's Common Stock and Preferred Stock units is required
for approval and ratification of the Company's Common Stock Purchase Plan for
Executives (CSPPE), provided that a majority of the outstanding shares of the
Company's Common Stock
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and Preferred Stock are voted on the proposal. For purposes of determining the
vote regarding this proposal, abstentions will have the effect of a vote against
the proposal (but will not be counted as votes cast with respect to the proposal
for purposes of determining whether a majority of the outstanding shares were
voted), and broker nonvotes will have no impact on the vote.
Proxies solicited by the Board of Directors will be voted "FOR" approval and
ratification of the proposed 1995 Common Stock Purchase Plan for Executives
(CSPPE) unless a shareholder specified otherwise.
PROPOSED AMENDMENTS TO 1992 STOCK OPTION PLAN.
The 1992 Stock Option Plan (Stock Option Plan) was approved and ratified by the
shareholders at the 1993 annual meeting. The Stock Option Plan is intended to
provide Stock Options (Options) and Stock Appreciation Rights ("SARs") to induce
certain officers and other key employees to remain in the employ of the Company
or its subsidiaries and to encourage such employees to secure or increase on
reasonable terms their stock ownership in the Company. The Board of Directors
has adopted, subject to shareholder approval and ratification, the following
four amendments to the Stock Option Plan:
(A) Article 4 has been amended so that the maximum number of shares of the
Company's Common Stock that may be subject to option under the Stock Option
Plan has been increased from 2,000,000 shares to 4,000,000 shares. An
increased number of shares is required due to the extension of the Stock
Option Plan to a larger number of employees;
(B) Article 6 has been amended so that the maximum number of shares of Common
Stock covered by Options which may be granted to any Participant within any
two consecutive calendar year periods shall not exceed 250,000 shares in the
aggregate. This amendment has been made in order to meet requirements of the
Internal Revenue Code to maintain tax deductibility of the Stock Option Plan
for the Company;
(C) Article 16 has been deleted in its entirety from the Stock Option Plan. The
deleted Article provided as follows:
ADDITIONAL OPTIONS. The Compensation Committee shall have the authority to
include in any Option Agreement a provision entitling the Participant to an
additional Option in the event such Participant exercises the Option
represented by the Option Agreement, in whole or in part, by delivering
previously owned whole shares of Common Stock in payment of the Option
price. Any such
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additional Option shall be for a number of shares of Common Stock equal to
the number of delivered shares, shall have an Option price determined by
the Committee in accordance with Paragraph 9, shall be exercisable on the
terms and subject to the conditions established by the Committee at the
time of grant of such additional Option, and shall be subject to such
other terms and conditions as the Committee shall determine in accordance
with this Plan.
(D) Article 17(c) has been amended so that the period during which a Participant
may exercise an Option or SAR after the date of a Participant's termination
of employment due to early or normal retirement or total permanent
disability prior to the expiration of the Option or SAR has been extended
from 12 months to 36 months.
The Board of Directors believes that the Plan will promote continuity of
management and increased incentive and personal interest in the welfare of the
Company by those who are responsible for shaping and carrying out the long-range
plans of the Company and securing its continued growth and financial success.
The text of the proposed amendments to the Stock Option Plan is set forth in
Exhibit B attached hereto. The major provisions of the 1992 Stock Option Plan,
with specific mention of the four proposed amendments, include the following:
(A) A maximum of 4,000,000 shares of the Common Stock of the Company may be
subject to option under the Stock Option Plan, subject to adjustment in the
event of stock dividend, stock split or similar change in outstanding
shares. The Stock Option Plan approved and ratified by the shareholders at
the 1993 annual meeting provided for a maximum of 2,000,000 shares and the
Board of Directors, subject to shareholder approval and ratification at the
1996 annual meeting, has increased the maximum number to 4,000,000.
(B) Employees eligible to receive Options and SARs will be officers and other
key employees of the Company and its subsidiaries, including the named
executive officers, (the "Participants"). No Option or SAR shall be granted
to any person who owns directly or indirectly shares of stock possessing
more than 10 percent of the total combined voting power of all classes of
stock of the Company. A director of the Company or of a subsidiary who is
not also an employee of the Company or of a subsidiary will not be eligible
to receive any Option or SAR under the Stock Option Plan. The Board of
Directors, subject to shareholder approval and ratification at the 1996
annual meeting, has amended the Stock Option Plan so that the maximum number
of shares of Common Stock covered by the Options which may be granted to any
Participant within any two consecutive calendar year periods shall not
exceed 250,000 in the aggregate.
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(C) The per share Option price, as determined by the Compensation Committee of
the Board of Directors (the "Committee"), shall be an amount not less than
100 percent of the fair market value of the stock on the date such Option is
granted. The consideration received by the Company for the award of an
Option includes the continued service of the Participant.
(D) The term of each Option shall be as determined by the Committee, but in no
event shall the term of an Option exceed a period of 10 years from the date
of its grant. The Option will terminate immediately upon termination of
employment other than by reason of early or normal retirement, death or
total and permanent disability. Unless the Option expires earlier under the
terms of the Participant's Option Agreement, Options may be exercised within
12 months after termination of employment by reason of early or normal
retirement, death, or total and permanent disability. The Board of
Directors, subject to shareholder approval and ratification at the 1996
annual meeting, has extended the exercise period in the previous sentence
from 12 months to 36 months in the event the termination of employment is
due to early or normal retirement or total and permanent disability.
(E) Options may not be granted after September 22, 2002, at which time the Stock
Option Plan will terminate. The Stock Option Plan may be amended or
terminated earlier by the Board of Directors, but the consent of the
Participants is required for any amendment or termination which would
adversely affect outstanding options. The approval of shareholders is
required for any modifications for which approval is required to assure
conformity with applicable law.
(F) Options may not be transferred during the Participant's lifetime other than
pursuant to a qualified domestic relations order.
(G) No Option shall be exercisable for a period of at least six months
commencing on the date of grant except under certain conditions in the event
of a change in control of the Company.
(H) Payment of the Option price may be made in cash or, if permitted by the
applicable Option Agreement, by delivery of shares of common stock
equivalent in fair market value, or if permitted by the applicable Option
Agreement, partly in cash and partly in shares of common stock.
(I) The Board of Directors, subject to shareholder approval and ratification at
the 1996 annual meeting, has deleted a provision that had provided the
Committee with the authority to include in any Option Agreement a provision
entitling the Participant to an additional Option in the event the
participant exercised an Option by delivering previously owned shares of
common stock in payment of the Option
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price. Under the terms of that provision, any such additional Option would
have been for a number of shares equal to the number of delivered shares,
would have had an Option price determined by the Committee of not less than
100 percent of the fair market value on the date the Option is granted, and
would have been exercisable on the terms and conditions established by the
Committee at the time of the grant and in accordance with the Stock Option
Plan.
(J) A Participant may, if permitted by the applicable Option Agreement, satisfy
the Company's withholding tax requirements by electing to have the Company
withhold shares of Common Stock otherwise issuable under the Option or to
deliver to the Company shares of Common Stock having a fair market value on
the date income is recognized on the exercise of a nonstatutory Option equal
to the minimum amount required to be withheld, or such greater amount as may
be requested by the Participant. The Committee shall establish rules
governing such withholding elections, and such elections shall be made at
such times as required to conform with applicable securities laws.
(K) The Stock Option Plan will be administered by the Committee. The Committee
will have complete authority to establish rules and regulations for the
administration of the Stock Option Plan and to determine the individuals to
whom, and the time or times at which Options or SAR's shall be granted, the
types of Options, the Option periods, limitations on exercise and the number
of shares to be subject to each Option.
(L) Certain Options issued under the Stock Option Plan are intended to be
Incentive Stock Options ("ISOs") within the meaning of Section 422 of the
Internal Revenue Code, as amended, (the "Code") and the remainder of the
Options issued pursuant to the Plan shall constitute nonstatutory Options.
(M) The aggregate fair market value of the stock for which an ISO is exercisable
for the first time by a Participant during any calendar year under the Stock
Option Plan or any other plan of the Company or any subsidiary shall not
exceed $100,000. To the extent the fair market value of the shares of stock
attributable to ISOs first exercisable in any calendar year exceeds
$100,000, the excess portion of the ISO shall be treated as non-statutory
Options.
(N) The Stock Option Plan provides that SARs may be granted in conjunction with
all or part of any Option granted under the Plan. SARs will be exercisable
or transferable at such time or times and only to the extent that the Option
to which they relate is exercisable or transferable. SAR's entitle the
participant to receive any increase in the market value of the stock subject
to the Option between the date of the Option grant and the date of exercise,
and are exercised in lieu of exercising the Option with respect to such
stock. The Committee shall have the
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sole discretion to determine the medium of payment of the economic value
of the SARs (i.e., cash, stock, or any combination thereof) or to consent
to or disapprove the election of the Participant to receive cash in full
or partial payment. If SARs are granted, the Company must recognize as a
compensation expense, and charge against earnings, an amount equal to the
amount of appreciation, if any, of the value of its stock over the
exercise price as the appreciation occurs.
(O) The Options will become immediately exercisable in the event of certain
changes of control of the Company ("Change of Control"). Also, during the
60-day period from and after a Change of Control, each Participant shall
have the right to elect to surrender all or part of the Option and to
receive in lieu thereof cash in the amount by which the value per share on
the date of such election exceeds the Option price per share ("LSARs"). The
value of the share is determined by the highest reported sales price of a
share during the 60-day period prior to the Change of Control.
The Company cannot now determine the number of Options to be received by all
current executive officers as a group and all other key employees as a group. In
fiscal 1995, however, approximately 741 employees received option grants under
the current Stock Option Plan. The number of such Options shall be determined by
the Committee pursuant to the terms of the Stock Option Plan.
The following table shows the number of fiscal 1996 Options granted on November
15, 1995 under the Stock Option Plan to the named executive officers, all
executive officers as a group, and all employees as a group. The Options were
granted at an exercise price of $63.6875/share. The closing price of a share of
Common Stock on the New York Stock Exchange on December 1, 1995, was $68.50.
Options granted under the Stock Option Plan to the named executive officers
during fiscal 1995 are disclosed in the Summary Compensation Table.
FISCAL 1996 OPTIONS
NUMBER OF OPTIONS
GRANTED ON
NAME NOVEMBER 15, 1995
- - --------------------------------------------------------------- -----------------
James H. Keyes................................................. 40,000
John M. Barth.................................................. 24,000
Joseph W. Lewis................................................ 17,000
Stephen A. Roell............................................... 17,000
John P. Kennedy................................................ 12,000
All Executive Officers as a Group (19 persons)................. 205,100
All Employees as a Group....................................... 760,465
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Directors and other persons who are not employees of the Company and who are not
engaged to become employees of the Company are not eligible to receive Options
under the Stock Option Plan.
FEDERAL INCOME TAX CONSEQUENCES TO THE COMPANY AND THE OPTIONEE
Incentive Stock Options. Options granted under the Stock Option Plan which
constitute ISOs will, in general, be subject to the following Federal income tax
treatment:
i) The grant of an ISO will give rise to no Federal income tax
consequences to either the Company or the Participant.
ii) A Participant's exercise of an ISO will result in no Federal income
tax consequences to the Company.
iii) A Participant's exercise of an ISO will not result in ordinary Federal
taxable income to the Participant, but may result in the imposition of
or an increase in alternative minimum tax. If shares acquired upon
exercise of an ISO are not disposed of within the same taxable year of
the ISO exercise, the excess of the fair market value of the shares at
the time the ISO is exercised over the option price in included in the
Participant's computation of alternative minimum taxable income.
iv) If shares acquired upon the exercise of an ISO are disposed of within
two years of the date of the option grant, or within one year of the
date of the option exercise, the Participant will realize ordinary
Federal taxable income at the time of the disposition to the extent
that the fair market value of the shares at the time of exercise
exceeds the option price, but not in an amount greater than the excess,
if any, of the amount realized on the disposition over the option
price.
Short-term or long-term capital gain will be realized by the
Participant at the time of such a disposition to the extent that the
amount of proceeds from the sale exceeds the fair market value at the
time of the exercise of the ISO.
Short-term or long-term capital loss will be realized by the
Participant at the time of such a dispositon to the extent that the
option price exceeds the amount of proceeds from the sale.
If a disposition is made as described in this section, the Company will
be entitled to a Federal income tax deduction in the taxable year in
which the disposition is made in an amount equal to the amount of
ordinary Federal taxable income realized by the Participant.
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v) If shares acquired upon the exercise of an ISO are disposed of after
the later of two years from the date of the option grant or one year
from the date of the option exercise, the Participant will realize
long-term capital gain or loss in an amount equal to the difference
between the amount realized by the Participant on the disposition and
the Participant's Federal income tax basis in the shares, usually the
option price. In such event, the Company will not be entitled to any
Federal income tax deduction with respect to the ISO.
Nonstatutory Stock Options. Options granted under the Stock Option Plan which do
not qualify as ISOs ("nonstatutory options") will, in general, be subject to the
following Federal income tax treatment:
i) The grant of a nonstatutory option will give rise to no Federal income
tax consequences to either the Company or the Participant.
ii) The exercise of a nonstatutory option will generally result in
ordinary Federal taxable income to the Participant in the amount equal
to the excess of the fair market value of the shares at the time of
exercise over the option price. A deduction from Federal taxable
income will be allowed to the Company in an amount equal to the amount
of ordinary income recognized by the Participant, provided the Company
deducts and withholds all appropriate Federal withholding tax.
iii) Upon a subsequent disposition of shares, a Participant will recognize
a short-term or long-term capital gain (or loss) equal to the
difference between the amount received and the tax basis of the
shares, usually fair market value at the time of exercise.
Stock Appreciation Rights. Any SARs which may be granted in conjunction with all
or part of any option granted under the Stock Option Plan, including LSARs, will
be subject to the following Federal income tax treatment:
i) The grant of a SAR or LSAR will give rise to no Federal income tax
consequences to either the Company or the Participant.
ii) Upon the exercise of a SAR or LSAR, the economic value received by the
Participant, the excess of the fair market value of the shares on the
date of the exercise over the option price, will be taxable to the
Participant as ordinary Federal taxable income. The Company will
receive a Federal income tax deduction in an amount equal to the
income realized by the Participant.
The Federal income tax consequences described in this section are based on laws
and regulations in effect on October 31, 1995, and future changes in those laws
and
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regulations may affect the tax consequences described herein. No discussion of
state income tax treatment has been included.
The affirmative vote of a majority of the votes cast on the proposal by
shareholders of the Company's Common Stock and Preferred Stock units is required
for approval and ratification of the amendments to Stock Option Plan, provided
that a majority of the outstanding shares of the Company's Common Stock and
Preferred Stock are voted on the proposal. For purposes of determining the vote
regarding this proposal, abstentions will have the effect of a vote against the
proposal (but will not be counted as votes cast with respect to the proposal for
purposes of determining whether a majority of the outstanding shares were
voted), and broker nonvotes will have no impact on the vote.
Proxies solicited by the Board of Directors will be voted "FOR" approval and
ratification of the proposed amendments to the 1992 Stock Option Plan unless a
shareholder specified otherwise.
COMPLIANCE WITH SECTION 16(A) OF THE SECURITIES EXCHANGE ACT
Section 16(a) of the Securities Exchange Act of 1934 requires the Company's
officers and directors, and persons who own more than ten-percent of a
registered class of the Company's equity securities, to file reports of
ownership and changes in ownership with the Securities and Exchange Commission
and the New York Stock Exchange. Officers, directors and greater than
ten-percent shareholders are required by SEC regulation to furnish the Company
with copies of all Section 16(a) forms they file.
Based solely on its review of the copies of such forms received by the Company,
or written representations from certain reporting persons that no Forms 5 were
required for those persons, the Company believes that, since October 1, 1994,
all filing requirements applicable to its officers, directors, and greater than
ten-percent beneficial owners were complied with.
SELECTION OF AUDITORS
Management will propose the adoption of a resolution ratifying the Board of
Directors' decision to appoint Price Waterhouse as auditors. If the shareholders
fail to ratify such selection, the Board will reconsider it. Representatives of
Price Waterhouse are expected to be present at the shareholders' meeting with
the opportunity to make a statement if they desire to do so and to be available
to respond to appropriate questions.
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SHAREHOLDERS' PROPOSALS
Proposals of shareholders which are intended to be presented at the 1997 annual
meeting must be received by the Company no later than August 18, 1996, to be
included in the Company's proxy materials for that meeting. Further, a
shareholder who otherwise intends to present business at the 1997 annual meeting
must comply with the requirements set forth in the Company's By-Laws. Among
other things, to bring business before an annual meeting, a shareholder must
give written notice thereof, complying with the By-Laws, to the Secretary of the
Company not less than 60 days and not more than 90 days prior to the fourth
Tuesday of the month of January. The 1997 annual meeting will be held on January
22, 1997, or on such other date designated by the Board of Directors.
OTHER MATTERS
The matters referred to in the notice of meeting and in the proxy statement are,
as far as management now knows, the only matters which will be presented for
consideration at the meeting. If any other matters properly come before the
meeting, the persons named in the accompanying form of proxy will vote on them
in accordance with their best judgment.
The cost of soliciting proxies will be borne by the Company. The Company expects
to solicit proxies primarily by mail. Proxies also may be solicited personally
and by telephone by certain officers and regular employees of the Company. D.F.
King & Co., Inc., has been retained for solicitation of all brokers and nominees
at a cost of approximately $11,000 plus customary out-of-pocket expenses. The
Company may reimburse brokers and other nominees for their expenses in
communicating with the persons for whom they hold stock of the Company.
The Company's 1995 Annual Report has already been mailed to the shareholders.
JOHNSON CONTROLS, INC.
John P. Kennedy, Secretary
December 20, 1995
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EXHIBIT A
COMMON STOCK PURCHASE PLAN FOR EXECUTIVES
SECTION 1
PURPOSE
The purpose of this Plan is to facilitate the acquisition of Company shares by
those executives subject to the Executive Stock Ownership Policy previously
adopted by the Board of Directors and as amended from time to time.
SECTION 2
EFFECTIVE DATE AND TERMINATION DATE
2.1 The Plan shall be effective as of October 1, 1995. The Plan is subject to
Shareholder approval at the Annual Meeting of Shareholders of the Company on
January 24, 1996. If the shareholders do not approve the Plan at that time,
then all amounts contributed by Participants will be returned to the
Participants, without interest or credit for gains or losses on shares
purchased or sold under the Plan.
2.2 The Plan shall terminate as of September 30, 2000.
SECTION 3
DEFINITIONS
3.1 The "Company" is Johnson Controls, Inc., a Wisconsin corporation, and any
successor thereto that adopts the Plan.
3.2 The "Plan" is the Johnson Controls, Inc. Common Stock Purchase Plan for
Executives adopted on September 27, 1995, by the Board of Directors of the
Company.
3.3 The "Board" is the Board of Directors of the Company.
3.4 A "Participant" is an officer or key executive of the Company or a
subsidiary who has elected to participate in the Plan.
SECTION 4
ELIGIBILITY
All officers and key executives of the Company or a subsidiary subject to the
Company's Executive Stock Ownership Policy may participate in the Plan. All
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other employees of the Company who reside in the United States, Canada, or
Puerto Rico and have reached the age of majority in their states may participate
in the Company's Common Stock Purchase Plan without complying with the
requirements of this Plan.
SECTION 5
ADMINISTRATION
5.1 Administration of the Plan, except as otherwise provided herein, shall be
the same as, and shall be conducted as part of, the administration of the
Common Stock Purchase Plan for the Company, as set forth in JCI Publication
8777 (Rev. 3/93). The Company's transfer agent and registrar, Firstar Trust
Company, is responsible for the administration of the Plan, subject to the
supervision and control of the Compensation Committee of the Board of
Directors of the Company.
5.2 Prior to participating in the Plan, a Participant shall enter into a written
agreement with the Company in which the Participant shall agree that any
derivative security related to the Plan shall not be transferable other than
by will or descent or pursuant to a qualified domestic relations order.
5.3 The price of each share of the Company's Common Stock purchased under the
Plan shall be 100% of the average price of shares purchased by Firstar Trust
Company as agent for the Participants. No brokerage fee or commission shall
be charged. Funds representing cash dividends (both on stock held in the
name of the Participant and on any full or fractional shares held under the
Plan) will be applied to the purchase of Common Stock of the Company under
the Plan on the cash dividend payment date or as soon as practicable
thereafter, in the same manner as under the Common Stock Purchase Plan.
5.4 Except for a Participant's initial election to purchase shares under the
Plan, the purchase of shares by a Participant pursuant to payroll deduction,
an increase of amounts deducted from pay, the termination of payroll
deductions, the sale of shares, or the closure of the account shall be made
only pursuant to an irrevocable election made by the Participant at least
six months in advance of the designated transaction.
5.5 Participants that terminate payroll deductions, sell shares, or close
accounts shall be prohibited from participating again in the Plan until six
months after such transaction.
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5.6 The maximum amount that may be deducted from a Participant's pay each month
shall be $2,500.
5.7 The Company shall bear the expenses of administering the Plan.
5.8 The Board of Directors of the Company may amend the Plan from time to time;
however, any amendments requiring approval of the shareholders of the
Company pursuant to Rule 16b-3 of the Securities and Exchange Act of 1934
shall be effective only upon such shareholder approval.
5.9 This Plan shall be construed, administered and governed in all respects in
accordance with the laws of the State of Wisconsin.
5.10 Except when otherwise indicated by the context, any masculine terminology
used herein shall also include the feminine gender, and the definition of
any term herein in the singular shall also include the plural.
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EXHIBIT B
RESOLVED, that the shareholders of Johnson Controls, Inc. (the Company) hereby
approve and ratify the amendments to the Johnson Controls, Inc. 1992 Stock
Option Plan (Stock Option Plan), adopted by the Board of Directors of the
Company on September 27, 1995. The amendments are as follows:
(A) Article 4 of the Stock Option Plan has been amended so that the maximum
number of shares of the Company's Common Stock which may be issued or
delivered upon exercise of options to be granted under the Stock Option Plan
is increased from 2,000,000 shares to 4,000,000 shares so that the aggregate
number of shares authorized to be issued or transferred from the treasury of
the Company under the Stock Option Plan shall be 4,000,000 shares including
the number of shares originally authorized for issuance under the Stock
Option Plan.
(B) Article 6 of the Stock Option Plan has been amended so that the maximum
number of shares of Common Stock covered by Options which may be granted to
any Participant within any two consecutive calendar year period shall not
exceed 250,000 in the aggregate.
(C) Article 16 of the Stock Option Plan has been deleted in its entirety. That
Article provided as follows:
ADDITIONAL OPTIONS. The (Compensation) Committee shall have the authority to
include in any Option Agreement a provision entitling the Participant to an
additional Option in the event such Participant exercises the Option
represented by the Option Agreement, in whole or in part, by delivering
previously owned whole shares of Common Stock in payment of the Option
price. Any such additional Option shall be for a number of shares of Common
Stock equal to the number of delivered shares, shall have an Option price
determined by the Committee in accordance with Paragraph 9, shall be
exercisable on the terms and subject to the conditions established by the
Committee at the time of grant of such additional Option, and shall be
subject to such other terms and conditions as the Committee shall determine
in accordance with this Plan.
(D) Article 17(c) of the Stock Option Plan has been amended so that the period
during which a Participant in the Stock Option Plan may exercise an Option
or stock appreciation right (SAR) after the date of that Participant's early
or normal retirement or total permanent disability prior to the expiration
of the option or SAR is extended from 12 to 36 months.
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Johnson Controls, Inc., P.O. Box 591, Milwaukee, WI 53201
Shareholder's Proxy Annual Meeting - January 24, 1996
The undersigned, having received the Notice of Meeting and Proxy Statement
dated December 20, 1995, and Annual Report for 1995, hereby appoints J.P.
Kennedy and J.H. Keyes, and each of them, proxies with power of substitution to
vote for the undersigned at the annual shareholders' meeting of Johnson
Controls, Inc., on January 24, 1996, and at any adjournments thereof, as
follows:
The Board of Directors recommends a vote FOR Items 1, 2, 3, and 4. If no
direction is made, this proxy will be voted FOR all nominees listed and
FOR Items 2, 3, and 4.
(1) ELECTION OF DIRECTORS / / FOR all nominees listed (except as
indicated to the contrary below.)
/ / WITHHOLD AUTHORITY to
vote for all nominees
listed.
FRED L. BRENGEL, ROBERT A. CORNOG, JAMES H. KEYES, AND R. DOUGLAS
ZIEGLER
INSTRUCTION: To withhold authority to vote for any indicated nominee,
write the nominee's name below.
------------------------------------------------------------------------
(2) Ratification of the appointment of Price Waterhouse as auditors.
FOR / / AGAINST / / ABSTAIN / /
(3) Ratification of the JCI 1995 Common Stock Purchase Plan for
Executives (CSPPE).
FOR / / AGAINST / / ABSTAIN / /
(4) Ratification of amendments to the JCI 1992 Stock Option Plan.
FOR / / AGAINST / / ABSTAIN / /
(5) In their discretion, upon any other matters which may properly come
before the meeting or any adjournments, thereof, hereby revoking any
proxy heretofore given by the undersigned for such meeting.
(To be signed on other side)
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PROXY NO. (Continued from reverse side) NO. OF SHARES
THIS PROXY, WHEN PROPERLY EXECUTED, WILL BE VOTED IN THE MANNER DIRECTED THEREIN
BY THE UNDERSIGNED. IF NO DIRECTION IS MADE, THIS PROXY WILL BE VOTED FOR ALL
NOMINEES LISTED AND FOR PROPOSALS 2, 3, AND 4.
Signed ________________________________
________________________________
Dated __________________________ , 19__
Please sign name exactly as it appears
hereon. When signed as attorney,
executor, trustee or guardian, please
add title. For joint accounts, each
owner should sign.
THIS PROXY IS SOLICITED BY THE BOARD OF DIRECTORS OF JOHNSON CONTROLS, INC.
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[LOGO]
Johnson Controls, Inc. NOTICE OF 1996
Post Office Box 591 ANNUAL MEETING OF
Milwaukee, Wisconsin 53201 SHAREHOLDERS AND
Tel: 414/228 1200 PROXY STATEMENT