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EXHIBIT 10.A
JOHNSON CONTROLS, INC.
1992 Stock Option Plan
(Amended January 24, 1996)
1. ESTABLISHMENT. JOHNSON CONTROLS, INC. (the "Company") hereby
establishes a stock option plan for certain officers and other key
employees, as described herein, which shall be known as the JOHNSON
CONTROLS, INC. 1992 STOCK OPTION PLAN (the "Plan"). It is intended that
certain of the stock options issued pursuant to the Plan may constitute
incentive stock options within the meaning of Section 422 of the Internal
Revenue Code ("Incentive Stock Options") and the remainder of the options
issued pursuant to the Plan shall constitute nonqualified options.
Incentive Stock Options and nonqualified stock options are hereinafter
jointly referred to as "Options." The Committee may also award stock
appreciation rights along with Options issued pursuant to the Plan and,
subject to certain limitations, apart from Options issued pursuant to the
Plan.
2. PURPOSE. The purpose of the Plan is 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 of the Company (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.
3. EFFECTIVE DATE OF THE PLAN. The effective date of the Plan is the date
of its adoption by the Board of Directors, September 23, 1992, subject to
the approval of the Plan by the shareholders of the Company within twelve
months of the effective date. Any and all Options granted prior to such
approval shall be subject to such approval.
4. STOCK SUBJECT TO THE PLAN. Subject to adjustment in accordance with
the provisions of paragraph 19, the total number of shares of the common
stock of the Company ("Common Stock"), available for awards during the
term of this Plan shall not exceed 4,000,000 shares. Shares of Common
Stock to be delivered upon exercise of Options or settlement of stock
appreciation rights under the Plan shall be made available from presently
authorized but unissued Common Stock of the Company or authorized and
issued shares of Common Stock reacquired and held as treasury shares, or
a combination thereof. If any Option or stock appreciation right shall
be canceled, expire or terminate without having been exercised in full,
or to the extent a stock appreciation right is settled in cash, the
shares of Common Stock allocable to the unexercised, canceled, forfeited
portion of such Option or stock appreciation right, or portion of such
stock appreciation right which is settled in cash, shall again be
available for the purpose of the Plan. The surrender of any Options (and
the surrender of any related stock appreciation rights
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granted under paragraph 18) in connection with the receipt of stock
appreciation rights as provided in paragraph 18A shall, as to such
Options, have the same effect under this paragraph 4 as the cancellation
or termination of such Options without having been exercised. If any
stock appreciation rights are granted under the Plan separate and apart
from Options (including any grant in connection with the surrender of
outstanding Options), as provided in paragraph 18A, and shares of Common
Stock may be issuable in connection with such stock appreciation rights,
then the grant of such stock appreciation rights shall be deemed to have
the same effect under this paragraph 4 as the grant of Options; provided,
however, if any such stock appreciation rights shall be canceled, expire
or terminate without having been exercised in full, or to the extent a
stock appreciation right is settled in cash, the shares of Common Stock
allocable to the unexercised, canceled, forfeited portion of such stock
appreciation right, or portion of such stock appreciation right which is
settled in cash, shall again be available for the purpose of the Plan.
5. ADMINISTRATION. (a) The Plan shall be administered by the Compensation
Committee (the "Committee") consisting of not less than three members of
the Board of not less than three members of the Board of Directors
appointed from time to time by the Board of Directors. No member of the
Committee shall be, nor at any time during the preceding one-year period
have been, eligible to receive stock, stock options or stock appreciation
rights of the Company or of its subsidiaries pursuant to the Plan or any
other plan of the Company or its subsidiaries, other than a plan for
directors of the Company who are not officers or employees of the Company
which provides for automatic grants without exercise of discretion by any
member of the Board of Directors, or by any officer or employee of the
Company.
(b) Subject to the express provisions of the Plan, the Committee shall
have authority to establish such rules and regulations as it deems
necessary or advisable for the proper administration of the Plan, and in
its discretion, to determine the individuals (the "Participants") to
whom, and the time or times at which, Options and stock appreciation
rights shall be granted, the type of Options, the Option periods,
limitations on Option exercise, and the number of shares to be subject to
each Option. In making such determinations, the Committee may take into
account the nature of the services rendered by the respective employees,
their present and potential contributions to the success of the Company
or its subsidiaries, and such other factors as the Committee, in its
discretion, shall deem relevant.
(c) Subject to the express provisions of the Plan, the Committee shall
also have complete authority to interpret the Plan, to prescribe, amend,
and rescind rules and regulations relating to it, to determine the terms
and provisions of the respective Option Agreements (which need not be
identical) and to make all other determinations necessary or advisable
for the administration of the Plan. The Committee s determinations on
the matters referred to in this paragraph 5 shall be conclusive and
binding upon all parties.
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(d) Neither the Committee nor any member thereof shall be liable for any
act, omission, interpretation, construction or determination made in
connection with the Plan in good faith, and the members of the Committee
shall be entitled to indemnification and reimbursement by the Company in
respect of any claim, loss, damage or expense (including attorneys fees)
arising therefrom to the full extent permitted by law and under any
directors and officers liability insurance that may be in effect from
time to time.
(e) A majority of the Committee shall constitute a quorum, and the acts
of a majority of the members present at any meeting at which a quorum is
present, or acts approved in writing by a majority of the Committee
without a meeting, shall be the acts of the Committee.
6. ELIGIBILITY. Options and stock appreciation rights may be granted to
officers and other key employees of the Company and of any of its present
and future subsidiaries. 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. No Option or stock appreciation right shall be granted to any
person who owns, directly or indirectly, shares of stock possessing more
than 10% 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 stock appreciation right hereunder.
7. RIGHTS OF EMPLOYEES. Nothing in this Plan or in any Option or stock
appreciation right shall interfere with or limit in any way the right of
the Company and any of its subsidiaries to terminate any Participant s or
employee s employment at any time, nor confer upon any Participant or
employee any right to continue in the employ of the Company and its
subsidiaries.
8. OPTION AGREEMENTS. All Options and stock appreciation rights granted
under the Plan shall be evidenced by written agreements (an "Option
Agreement") in such form or forms as the Committee shall determine.
9. OPTION PRICE. The per share Option price for Options and for stock
appreciation rights granted under paragraph 18, and the per share grant
price for stock appreciation rights granted under paragraph 18A, as
determined by the Committee, shall be an amount not less than 100% of the
fair market value of the stock on the date such Options or stock
appreciation rights are granted (or, if the Committee so determines, in
the case of any stock appreciation right granted under paragraph 18A upon
the surrender of any outstanding Option, on the date of grant of such
Option). The fair market value of a share of stock on any date shall be
the average of the highest and lowest market prices of sales of the
Common Stock on that date, or on the next preceding trading day if such
date was not a trading day as reported on the New York Stock Exchange or
as otherwise determined by the Committee.
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10. OPTION PERIOD. The term of each Option and stock appreciation right
shall be as determined by the Committee but in no event shall the term of
an Option or stock appreciation right exceed a period of ten (10) years
from the date of its grant. Each Option and stock appreciation right
granted hereunder may granted at any time on or after the effective date
of the Plan, and prior to its termination, provided that no Option or
stock appreciation right may be granted later than ten years after the
date this Plan is adopted. The Committee shall determine whether any
Option or stock appreciation right shall become exercisable in cumulative
or non-cumulative installments or in full at any time. An exercisable
Stock Option or stock appreciation right, or portion thereof, may be
exercised in whole or in part only with respect to whole shares of Common
Stock.
11. MAXIMUM VALUE OF INCENTIVE STOCK OPTIONS. The aggregate fair market
value (as defined in paragraph 9) of the Common Stock for which any
Incentive Stock Options are exercisable for the first time by a
Participant during any calendar year under the 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 Common Stock attributable to
Incentive Stock Options first exercisable in any calendar year exceeds
$100,000, the excess portion of the Incentive Stock Options shall be
treated as nonqualified options.
12. TRANSFERABILITY OF OPTION OR STOCK APPRECIATION RIGHT. No Option or
stock appreciation right granted hereunder shall be transferable other
than by will or by the laws of descent and distribution, or, in the case
of a nonqualified option, pursuant to a "Qualified Domestic Relations
Order" as defined in Section 414(p) of the Internal Revenue Code, and
such Options and stock appreciation rights may be exercised during the
life of the Participant only by the Participant or, if applicable, by the
alternate payee designated under a Qualified Domestic Relations Order.
13. EXERCISE OF OPTION. The Committee shall prescribe the manner in which
a Participant may exercise an Option which is not inconsistent with the
provisions of this Plan. However, no Option shall be exercisable, in
whole or in part, for a period of at least six months commencing on the
date of grant, except as provided in paragraph 22 in the event of a
Change in Control. An Option may be exercised, subject to limitations on
its exercise contained in the Option Agreement and in this Plan, in full,
at any time, or in part, from time to time, only by (a) written notice of
intent to exercise the Option with respect to a specified number of
shares, and (b) by payment in full to the Company at the time of
exercise, of the Option of the option price of the shares being
purchased. Payment of the Option price may be made (i) in cash, (ii) if
permitted by the applicable Option Agreement, by delivery of shares of
Common Stock equivalent in fair market value (as defined in paragraph 9),
or (iii) if permitted by the applicable Option Agreement, partly in cash
and partly in shares of Common Stock.
14. WITHHOLDING. If permitted by the applicable Option Agreement, a
Participant may be permitted to satisfy the Company s withholding tax
requirements by electing (i) to have the Company withhold shares of
Common Stock of the Company, or (ii) to deliver to the Company shares of
Common Stock of the Company having a fair market value on the date
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income is recognized on the exercise of a nonqualified option equal to
the minimum amount required to be withheld, or such greater amount as may
be requested by the Participant. The election shall be made in writing
and according to such rules and in such form as the Committee shall
determine.
Notwithstanding the foregoing, the election and satisfaction of any
withholding requirement through the withholding of Common Stock or the
tender of shares of Company Stock may be made only at such times as are
permitted, without incurring liabilities, by Rule 16b-3 of the Securities
Exchange Act of 1934, as amended, or such other securities laws, rules or
regulations as may be applicable.
15. [intentionally omitted]
16. [intentionally omitted]
17. TERMINATION OF EMPLOYMENT. (a) In the event a Participant s employment
with the Company or any of its subsidiaries shall be terminated for any
reason, except early retirement or total and permanent disability, all
rights to exercise an Option or stock appreciation right shall terminate
immediately.
(b) If the Participant should die while employed by the Company or any
subsidiary prior to the expiration of the term of the Option or stock
appreciation right, the Option or stock appreciation right may be
exercised by the person to whom it is transferred by will or by the
applicable laws of descent and distribution to the extent it could have
been exercised by the Participant had he lived, by giving notice as
provided in paragraph 13, at any time within twelve months after the date
of death unless such Option or stock appreciation right expires earlier
under the terms of the Option Agreement. For purposes of this paragraph,
the six-month limitation imposed pursuant to paragraph 13 shall not
be applicable.
(c) In the event of termination of employment with the Company due to
early or normal retirement, or due to total and permanent disability
prior to the expiration of the term of an Option or stock appreciation
right, the Option or stock appreciation right may be exercised by the
Participant, to the extent it could have been exercised had the
Participant remained actively employed, at any time within thirty-six
months (except Incentive Stock Options which may be exercised within
three months) after the date of such early or normal retirement or total
permanent disability, as the case may be, unless such Option or stock
appreciation right expires earlier under the terms of the Option
Agreement. For purposes hereof, a Participant's employment shall be
deemed to have terminated due to (a) early or normal retirement if such
Participant is then eligible to receive early or normal retirement
benefits under the provisions of any of the Company's or its subsidiaries
pension plans and (b) total and permanent disability if he is permanently
disabled within the meaning of Section 22(e)(3) of the Internal Revenue
Code, as in effect from time to time.
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For purposes of this Plan: (a) a transfer of an employee from the Company
to a 50% or more owned subsidiary, partnership, joint venture or other
affiliate (whether or not incorporated) or vice versa, or from one
subsidiary, partnership, joint venture or other affiliate to another or
(b) a leave of absence duly authorized in writing by the Company,
provided the employee s right to re-employment is guaranteed either by
statute or by contract, shall not be deemed a termination of employment
under the Plan.
Notwithstanding the foregoing, from and after a Change of
Control, as defined in paragraph 22, Options (other than Incentive Stock
Options granted prior to May 24, 1989) and stock appreciation rights
shall continue to be exercisable for three months after a Participant's
termination of employment.
18. STOCK APPRECIATION RIGHTS. Stock appreciation rights may be granted in
conjunction with all or part of any Option granted under the Plan. Stock
appreciation rights may be exercised by a Participant by surrendering the
related Option or applicable portion thereof. Upon such exercise and
surrender, the Participant shall be entitled to receive the economic
value of such stock appreciation rights determined in the manner
prescribed in subparagraph (b) of the Paragraph 18 and in the form
prescribed in subparagraph (c) of this Paragraph 18. Options which have
been so surrendered, in whole or in part, shall no longer be
exercisable.
Stock appreciation rights shall be subject to such terms and
conditions not inconsistent with other provisions of the Plan as shall be
determined by the Committee, which shall include the following:
(a) Stock appreciation rights shall 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.
(b) Upon the exercise of stock appreciation rights, a Participant shall
be entitled to receive the economic value thereof, which value shall be
equal to the excess of the fair market value of one share of Common Stock
of the Company on the date of exercise over the Option price per
share, multiplied by the number of shares in respect of which the stock
appreciation rights shall have been exercised.
(c) The Committee shall have sole discretion either (i) to determine the
form in which payment of such economic value will be made (i.e. cash,
stock, or any combination thereof) or (ii) to consent to or disapprove
the election of the Participant to receive cash in full or partial
payment of such economic value.
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(d) The exercise of stock appreciation rights by a Participant pursuant
to the Plan may be made only at such times as are permitted by Rule 16b-3
of the Securities Exchange Act of 1934, without liabilities, or such
other securities laws or rules as may be applicable.
(e) Stock appreciation rights shall be exercisable only when the fair
market value of the Common Stock subject to the Option to which the stock
appreciation rights relate exceeds the exercise price of such Option.
18A. OTHER STOCK APPRECIATION RIGHTS. Stock appreciation rights may also be
granted separate from any Option granted under the Plan to any
Participant who at the time of grant is not then an officer of the
Company for purposes of Section 16 of the Securities Exchange Act of
1934, as amended (a "Section 16 Officer"). The Committee may also grant
stock appreciation rights under this paragraph 18A to any person who is
not then a Section 16 Officer in connection with the surrender of any
outstanding Option granted under the Plan prior to September 22, 1993
(and the surrender of any related stock appreciation rights granted under
paragraph 18). Such stock appreciation rights may be exercised by a
Participant by written notice of intent to exercise the stock
appreciation rights delivered to the Committee, which notice shall state
the number of shares of stock in respect of which the stock appreciation
rights are being exercised. Upon such exercise, the Participant shall be
entitled to receive the economic value of such stock appreciation rights
determined in the manner described in subparagraph (b) of this paragraph
18A and in the form prescribed in subparagraph (c) of this paragraph 18A.
Stock appreciation rights shall be subject to terms and conditions not
inconsistent with other provisions of the Plan as shall be determined by
the Committee, which shall include the following:
(a) Stock appreciation rights granted in connection with the surrender of
an Option shall be exercisable or transferable at such time or times and
only to the extent that the Option to which they related was exercisable
or transferable. The Committee shall have complete authority to
determine the terms and conditions applicable to other stock appreciation
rights, including the periods applicable to such rights, limitations on
exercise and the number of shares of stock in respect to which such stock
appreciation rights are exercisable.
(b) Upon the exercise of stock appreciation rights, a Participant shall
be entitled to receive the economic value thereof, which value shall be
equal to the excess of the fair market value of one share of Common Stock
of the Company on the date of exercise over the grant price per share,
multiplied by the number of shares in respect of which the stock
appreciation rights shall have been exercised. Stock appreciation rights
which have been so exercised shall no longer be exercisable in respect of
such number of shares.
(c) The Committee shall have the sole discretion either (i) to determine
the form in which payment of such economic value will be made (i.e.,
cash, stock, or any combination thereof) or (ii) to consent to or
disapprove the election of the Participant to receive cash in
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full or partial payment of such economic value.
(d) The exercise of stock appreciation rights by a Participant pursuant
to the Plan may be made only at such times as are permitted by Rule 16b-3
of the Securities Exchange Act of 1934, without liabilities, or such
other securities laws or rules as may be applicable.
(e) Stock appreciation rights shall be exercisable only when the fair
market value of the Common Stock to which the stock appreciation rights
relate exceeds the grant price of such stock appreciation rights.
19. ADJUSTMENT PROVISIONS. In the event of any change in the shares of the
Common Stock of the Company by reason of a declaration of a stock
dividend (other than a stock dividend declared in lieu of an ordinary
cash dividend), spin-off, merger, consolidation recapitalization, or
split-up, combination or exchange of shares, or otherwise, the aggregate
number and class of shares available under this Plan, the number and
class of shares subject to each outstanding Option and stock appreciation
right, the option price for shares subject to each outstanding Option,
and the option price or grant price and economic value of any stock
appreciation rights shall be appropriately adjusted by the Committee,
whose determination shall be conclusive.
20. TERMINATION AND AMENDMENT OF PLAN. The Plan shall terminate on
September 22, 2002, unless sooner terminated as hereinafter provided.
The Board of Directors may at any time terminate the Plan, or amend the
Plan as it shall deem advisable including (without limiting the
generality of the foregoing) any amendments deemed by the Board of
Directors to be necessary or advisable to assure conformity of the Plan
and any Incentive Stock Options granted thereunder to the requirements of
Section 422 of the Internal Revenue Code as now or hereafter in effect
and to assure conformity with any requirements of other state and federal
laws or regulations now or hereafter in effect; provided, however, that
the Board of Directors may not, without further approval by the
shareholders of the Company, make any modifications which, by applicable
law, require such approval. No termination or amendment of the Plan may,
without the consent of the Participant to whom any Option or stock
appreciation rights shall have been granted, adversely affect the rights
of such Participant under such Option or stock appreciation rights. The
Board of Directors may also, in its discretion, permit any Option or
stock appreciation right to be exercised prior to the earliest date fixed
for exercise thereof under the Option Agreement.
21. RIGHTS OF A SHAREHOLDER. A Participant shall have no rights as a
shareholder with respect to shares covered by his or her Option until the
date of issuance of the stock certificate to the participant and only
after such shares are fully paid or with respect to stock appreciation
rights. No adjustment will be made for dividends or other rights for
which the record date is prior to the date such stock is issued.
22. CHANGE OF CONTROL. Notwithstanding the foregoing, upon Change of
Control, all previously granted Options and stock appreciation rights
shall immediately become
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exercisable to the full extent of the original grant. For purposes of
this Plan, a "Change of Control" means any of the following events:
(i) the acquisition, other than from the Company, by any individual,
entity or group (within the meaning of Section 13(d) or 14(d)(2) of the
Securities Exchange Act of 1934, as amended from time to time) (the
"Exchange Act") of beneficial ownership (within the meaning of Rule 13d-3
promulgated under the Exchange Act) of 20% or more of either (A) the then
outstanding shares of common stock of the Company (the "Outstanding
Company Common Stock") or (B) the combined voting power of the then
outstanding voting securities of the Company entitled to vote generally
in the election of directors (the "Company Voting Securities"), provided,
however, that any acquisition by (x) the Company of any of its
subsidiaries, or any employee benefit plan (or related trust) sponsored
or maintained by the Company or any of its subsidiaries or (y) any
corporation with respect to which, following such acquisition, more than
60% of respectively, the then outstanding shares of common stock of such
corporation and the combined voting power of the then outstanding voting
securities of such corporation entitled to vote generally in the election
of directors is then beneficially owned, directly or indirectly, by all
or substantially all of the individuals and entities who were the
beneficial owners, respectively, of the Outstanding Company Common Stock
and Company Voting Securities immediately prior to such acquisition in
substantially the same proportion as their ownership, immediately prior
to such acquisition of the Outstanding Company Common Stock and Company
Voting Securities, as the case may be, shall not constitute a change in
control of the Company; or (ii) individuals who, as of May 24, 1989,
constitute the Board of Directors of the Company (the "Incumbent Board")
cease for any reason to constitute at least a majority of the Board,
provided that any individual becoming a director subsequent to May 24,
1989, whose election or nomination for election by the Company's
shareholders was approved by a vote of at least a majority of the
directors then comprising the Incumbent Board shall be considered as
though such individual were a member of the Incumbent Board, but
excluding, for this purpose, any such individual whose initial assumption
of office is in connection with an actual or threatened election contest
relating to the election of the Directors of the Company (as such terms
are used in Rule 14a-11 of Regulation 14A promulgated under the Exchange
Act); or (iii) approval by the shareholders of the Company of a
reorganization, merger or consolidation (a "Business Combination"), in
each case, with respect to which all or substantially all of the of the
individuals and entities who were the respective beneficial owners of the
Outstanding Company Common Stock and Company Voting Securities
immediately prior to such Business Combination do not, following such
Business Combination, beneficially own, directly or indirectly, more than
60% of, respectively, the then outstanding shares of common stock and the
combined voting power of the then outstanding voting securities entitled
to vote generally in the election of directors, as the case may be, of
the corporations resulting from such Business Combination in
substantially the same proportion as their ownership immediately prior to
such Business Combination or the Outstanding Company Common Stock and
Company Voting Securities, as the case may be; or (iv) (A) a complete
liquidation or dissolution of the company or a (B) sale or other
disposition of all or substantially all of the assets of the Company
other than to a
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corporation with respect to which, following such sale or disposition,
more than 60% of, respectively, the then outstanding shares of common
stock and the combined voting power of the then outstanding voting
securities entitled to vote generally in the election of directors is
then owned beneficially, directly or indirectly, by all or substantially
all of the individuals and entities who were the beneficial owners,
respectively, of the Outstanding Company Common Stock and Company Voting
Securities immediately prior to such sale or disposition in substantially
the same proportion as their ownership of the Outstanding Company Common
Stock and Company Voting Securities, as the case may be, immediately
prior to such sale or disposition.
23. LSARs. Notwithstanding the foregoing, during the sixty-day period from
and after a Change in Control of the Company, each optionee shall have
the right (the "LSAR") with respect to any Option [other than (x) an
Incentive Stock Option granted prior to May 24, 1989 and (y) an Option
granted to an officer or director of the Company (within the meaning of
Section 16 of the Securities Exchange Act of 1934, as amended from time
to time) unless such Option was granted more than six months prior to the
Change of Control of the Company], in lieu of the payment of the full
Option price for the shares of Common Stock ("Shares") subject to such
Option, to elect (within such sixty-day period) to surrender all or a
part of the Option to the Company and to receive in lieu thereof cash in
the amount by which the fair market value per Share on the date of such
election shall exceed the option price per Share under the Option
multiplied by the number of Shares granted under the Option as to which a
LSAR granted hereunder shall have been exercised. As used in this
paragraph 23, the fair market value of a Share on the date of exercise
shall mean with respect to an election by an optionee to receive cash in
respect of a Stock Option, the higher of (x) the highest reported sales
price, regular way, of a Share on the Composite Tape for New York Stock
Exchange Listed Stocks (the "Composite Tape") during the sixty-day period
prior to the date of the Change in Control of the Company and (y) if the
Change in Control of the Company is the result of a transaction or a
series of transactions described in paragraphs (i) or (ii) of the
definition of Change in Control of the Company set forth in paragraph 22,
the highest price per Share paid in such transaction or series of
transactions.
24. GOVERNING LAW. The Plan, all awards hereunder, and all determinations
made and actions taken pursuant to the Plan shall be governed by the laws
of the State of Wisconsin and construed in accordance therewith, to the
extent not otherwise governed by the laws of the United States.
25. UNFUNDED PLAN. This Plan shall be unfunded. No person shall have any
rights greater than those of a general creditor of the Company.
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FURTHER INFORMATION
This prospectus contains certain information concerning the Company, its Common
Stock, the Rights and the 1992 Plan, but it does not contain all information
set forth in the Registration Statement and exhibits thereto filed with the
Securities and Exchange Commission (the "SEC") in Washington, D.C., under the
Securities Act of 1933, as amended. The Company will provide without charge,
upon written or oral request by any person to whom this Prospectus is
delivered, copies of the documents incorporated by reference in Item 3 of Part
II of the Registration Statement. Such documents are hereby incorporated by
reference into this Prospectus. The Company will also provide without charge,
upon written or oral request of any person to whom this Prospectus is
delivered, copies of all other documents required to be delivered pursuant to
SEC Rule 428(b). Any such request should be directed to John P. Kennedy,
Secretary, Johnson Controls, Inc., 5757 North Green Bay Avenue, P.O. Box 591,
Milwaukee, Wisconsin 53201 (telephone: 414/228-1200).
THE COMPANY
The Company is a Wisconsin corporation with principal executive offices at 5757
North Green Bay Avenue, P.O. Box 591, Milwaukee, Wisconsin 53201. The
Company's telephone number is 414/228-1200. The shares offered hereby are
shares of the Company's authorized Common Stock with attached Rights.
THE 1992 PLAN
GENERAL
The 1992 Plan was approved by the Company's Board of Directors on September 23,
1992, and was amended by the Board of Directors on January 27, 1993, and
September 22, 1993. The 1992 Plan was approved and ratified by the Company's
shareholders on January 27, 1993, and amended by the shareholders on January
24, 1996.
The 1992 Plan authorized the grant of options which are intended to be
Incentive Stock Options ("ISOs") as defined in Section 422 of the Internal
Revenue Code, as well as Nonqualified Stock Options ("NSOs"). It also provides
that Stock Appreciation Rights ("SARs") may be granted either in conjunction
with all or any part of an option granted under the 1992 Plan, or, provided the
recipient is not an officer of the Company subject to Section 16 of the
Securities Exchange Act of 1934, as amended (the "Exchange Act"), separate from
options subject to grant under the 1992 Plan. SARs granted in conjunction with
options are exercisable at the related option price at such time or times and
only to the extent that the option to which they relate is exercisable. SARs
granted separate from options are exercisable at the grant price, subject to
terms and conditions not inconsistent with the Plan as determined by the
Committee. SARs entitle the holders thereof to receive an amount equal to the
excess of the fair market value of the Common Stock and Rights on the date of
surrender over the option or grant price of the SAR. In the case of SARs
granted in conjunction with options, the holder must surrender the related
option or applicable portion thereof. Options which are surrendered upon
exercise of SARs will no longer be exercisable. The Committee (as defined in
Item 5) has sole discretion to determine the medium of
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payment of the economic value of the SARs and to consent or disapprove the
election by a holder of an option to receive cash in full or partial payment of
such economic value.
The 1992 Plan is not required to be qualified under Section 401(a) of the
Internal Revenue Code and is not subject to the provisions of the Employee
Retirement Income Security Act of 1974 (commonly known as "ERISA").
RIGHTS
Effective as of November 30, 1994, the Board of Directors of Johnson Controls,
Inc., (the "Company") declared a dividend of one common share purchase right (a
"Right") for each outstanding share of common stock, par value $.16-2/3 per
share (the "Common Shares"), of the Company. The dividend is payable on
November 30, 1994 (the "Record Date") to the stockholders of record on that
date. Each Right entitles the registered holder to purchase from the Company
one Common Share of the Company at a price of $175.00 per share (the "Purchase
Price"), subject to adjustment. The description and terms of the Rights are
set forth in a Rights Agreement (the "Rights Agreement") between the Company
and Firstar Trust Company, as Rights Agent (the "Rights Agent"). Except as
described below, the Rights and the Rights Agreement is substantially similar
to the rights agreement previously in effect between the Company and the Rights
Agent (the "Old Rights Agreement") and the rights previously issued thereunder
(the "Old Rights"). The Old Rights and the Old Rights Agreement expired by
their terms on November 30, 1994.
Until the earlier to occur of (i) 10 days following a public announcement that
a person or group of affiliated or associated persons (an "Acquiring Person")
have acquired beneficial ownership of 20% or more of the outstanding Common
Shares or (ii) 10 business days (or such later date as may be determined by
action of the Board of Directors prior to such time as any person or group of
affiliated persons becomes an Acquiring Person) following the commencement of,
or public consummation of which would result in the beneficial ownership by a
person or group of 20% or more of the outstanding Common Shares (the earlier of
such dates being called the "Distribution Date"), the Rights will be evidenced,
with respect to any of the Common Share certificates outstanding as of the
Record Date, by such Common Share certificate.
The Rights Agreement provides that, until the Distribution Date (or earlier
redemption or expiration of the Rights), the Rights will be transferred with
and only with the Common Shares. Until the Distribution Date (or earlier
redemption or expiration of the Rights), new Common Share certificates issued
after the Record Date upon transfer or new issuance of Common Shares will
contain a notation incorporating the Rights Agreement by reference. Until the
Distribution Date (or earlier redemption or expiration of the Rights), the
surrender for transfer of any certificates for Common Shares outstanding as of
the Record Date, even without such notation, will also constitute the transfer
of the Rights associated with the Common Shares represented by such
certificate. As soon as practicable following the Distribution Date, separate
certificates evidencing the Rights ("Right Certificates") will be mailed to
holders of record of the Common Shares as of the close of business on the
Distribution Date and such separate Right Certificates alone will evidence the
Rights.
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The Rights are not exercisable until the Distribution Date. The Rights will
expire on November 30, 2004 (the "Final Expiration Date"), unless the Final
Expiration Date is extended or unless the Rights are earlier redeemed or
exchanged by the Company, in each case, as described below.
The Purchase Price payable, and the number of Common Shares or other securities
or property issuable, upon exercise of the Rights are subject to adjustment
from time to time to prevent dilution (i) in the event of a stock dividend on,
or a subdivision, combination or reclassification of, the Common Shares, (ii)
upon the grant to holders of the Common Shares of certain rights or warrants to
subscribe for or purchase Common Shares at a price, or securities convertible
into Common Shares with a conversion price, less than the then-current market
price of the Common Shares or (iii) upon the distribution to holders of the
Common Shares of evidences of indebtedness or assets (excluding regular
periodic cash dividends paid out of earnings or retained earnings or dividends
payable in Common Shares ) or of subscription rights or warrants (other than
those referred to above).
In the event that the Company is acquired in a merger or other business
combination transaction or 50% or more of its consolidated assets or earning
power are sold after a person or group has become an Acquiring Person, proper
provision will be made so that each holder of a Right will thereafter have the
right to receive, upon the exercise thereof at the then current exercise price
of the Right, that number of shares of common stock of the acquiring company
which at the time of such transaction will have a market value of two times the
exercise price of the Right. In the event that any person or group of
affiliated or associated persons becomes an Acquiring Person, proper provision
shall be made so that each holder of a Right, other than Rights beneficially
owned by the Acquiring Person (which will thereafter be void), will thereafter
have the right to receive upon exercise that number of Common Shares having a
market value of two times the exercise price of the Right.
At any time after any person or group becomes an Acquiring Person and prior to
the acquisition by such person or group of 50% or more of the outstanding
Common Shares, the Board of Directors of the Company may exchange the Rights
(other than Rights owned by such person or group which will have become void),
in whole or in part, at an exchange ratio of one Common Share per Right
(subject to adjustment).
With certain exceptions, no adjustment in the Purchase Price will be required
until cumulative adjustments require an adjustment of a least 1% in such
Purchase Price. No fractional Common Shares will be issued and in lieu
thereof, an adjustment in cash will be made based on the market price of the
Common Shares of the last trading day prior to the date of exercise.
At any time prior to the acquisition by a person or group of affiliated or
associated persons of beneficial ownership of 20% or more of the outstanding
Common Shares, the Board of Directors of the Company may redeem the Rights in
whole, but not in part, at a price of $.01 per Right (the "Redemption Price").
The redemption of the Rights may be made effective at such time on such basis
with such conditions as the Board of Directors in its sole discretion may
establish.
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Immediately upon any redemption of the Rights, the right to exercise the Rights
will terminate and the only right of the holders of Rights will be to receive
the Redemption Price.
The terms of the Rights may be amended by the Board of Directors of the Company
without the consent of the holders of the Rights, including an amendment to
lower certain thresholds described above to not less than the greater of (i)
the sum of .001% and the largest percentage of the outstanding Common Shares
then known to the Company to be beneficially owned by any person or group of
affiliated or associated persons and (ii) 10%, except that from and after such
time as any person or group of affiliated or associated persons becomes an
Acquiring Person, no such amendment may adversely affect the interests of the
holders of the Rights.
Until a Right is exercised, the holder thereof, as such, will have no rights as
a stockholder of the Company, including, without limitation the right to vote
or to receive dividends.
OTHER RESTRICTIONS
Persons who wish to sell shares of Common Stock and Rights received under the
1992 Plan and who are directors of officers of the Company, or who by stock
ownership or otherwise may be deemed to control the affairs of the Company at
the time of sale, may sell such shares only (1) pursuant to an effective
applicable registration statement under the Securities Act of 1933, as amended,
(2) in compliance with Rule 144 under said Act, or (3) in a transaction
otherwise exempt from registration thereunder and (4) in compliance with state
securities laws. In addition, optionees who are subject to the provisions of
Section 16 under the Securities Exchange Act of 1934, as amended, are subject
to the liability provisions of Section 16(b) on the resale of shares of Common
Stock and Rights received under the 1992 Plan. Section 16(b) provides, in
general, that any "profit" arising from the purchase and sale of company Common
Stock within any period of less than six months must be paid to the Company.
Accordingly, such optionees should consult with counsel regarding the
implications under Section 16 of grants and exercises of options and SARs and
sales of the underlying shares.
Certificates for shares of Common Stock and Rights acquired pursuant to the
1992 Plan through exercise of Incentive Stock Options will be held in escrow
for one year by the Company. Such certificates shall be issued in the name of
the optionee exercising the option, but will not be transferable by the
optionee while the shares are held in escrow. The certificates will be held in
escrow so long as a disposition of the shares of Common Stock and Rights
represented by the certificates would give rise to ordinary income
considerations or possible withholding liability of the Company for federal,
state and local income or other taxes by virtue of such a disposition.
However, the certificates may be released from escrow if the optionee makes
arrangements, satisfactory to the Company in its sole discretion, to satisfy
any reporting or withholding liability the Company may have for such ordinary
income or taxes.
FEDERAL INCOME TAX CONSIDERATIONS
The following is a summary of significant federal income tax consequences of
Incentive Stock Options, Nonqualified Stock Options and Stock Appreciation
Rights. The following discussion is
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not a complete discussion of all the federal income tax aspects of the 1992
Plan. Future changes in the laws and regulations may affect the tax
consequences described herein. No discussion of state income tax treatment has
been included. The optionee should consult with his or her own tax advisor
with respect to the tax consequences of participation in the 1992 Plan.
INCENTIVE STOCK OPTIONS
Options granted under the 1992 Plan which constitute Incentive Stock Options
("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 optionee.
ii) An optionee's exercise of an ISO will result in no federal income tax
consequences to the Company.
iii) An optionee's exercise of an ISO will not result in ordinary federal
taxable income to the optionee, but may result in the imposition of or an
increase in Alternative Minimum Tax (see section entitled "Incentive Stock
Options and the 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 ("FMV") of the shares at the time the ISO
is exercised over the option price is included in the optionee'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 optionee will realize ordinary federal taxable income
at the time of the disposition to the extent that the FMV 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 optionee at
the time of such a disposition to the extent that the amount of proceeds from
the sale exceeds the FMV at the time of the exercise of the ISO.
Short-term or long-term capital loss will be realized by the optionee at
the time of such a disposition to the extent that the option price exceeds the
amount of proceeds from the sale. If the option shares were subject to a
Disqualifying Disposition and the FMV was added to the optionee's ordinary
income in the one year following date of exercise and the proceeds from the
sale are less than the FMV, a short- or long-term capital loss will be
realized.
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 optionee.
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 optionee
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will realize long-term capital gain or loss in an amount equal to the
difference between the amount realized by the optionee on the disposition and
the optionee'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 ISOs.
NONQUALIFIED STOCK OPTIONS
Options granted under the Stock Option Plan which do not qualify as ISOs
("Nonqualified Stock Options") will, in general, be subject to the following
federal income tax treatment:
i) The grant of a Nonqualified Stock Option ("NSO") will give rise to no
federal income tax consequences to either the Company or the optionee.
ii) An exercise of an NSO will generally result in ordinary federal
taxable income to the optionee in the amount equal to the excess of the FMV 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 optionee, provided the Company
deducts and withholds all appropriate federal withholding tax.
iii) Upon a subsequent disposition of shares, an optionee 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 FMV at the time of
exercise.
STOCK APPRECIATION RIGHTS
The grant of Stock Appreciation Rights ("SARs") or Limited Stock Appreciation
Rights ("LSARs") will give rise to no federal income tax consequences to either
the Company or the Optionee. Upon exercise of SARs or LSARs, an optionee will
recognize ordinary income computed as the difference between the fair market
value of the Johnson Controls common stock on the date of exercise and the
option price paid for SARs or LSARs. The fair market value is calculated by
using the average of the high and low prices for the Johnson Controls stock on
the New York Stock Exchange on the date of exercise. The applicable taxes due
on the exercise will be withheld from the amount paid to the optionee. The
Company will receive a federal income tax deduction in an amount equal to the
income realized by the optionee.
U.S. optionees will have the income generated from the exercise and applicable
taxes paid included on their W-2.
For foreign nationals exercising SARs, the Payroll Department at the optionee's
place of work will be notified to add the income generated from the exercise to
the next salary check due the employee. Applicable taxes will be withheld.
CERTAIN MODIFICATIONS
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It should be noted that in certain circumstances changes in the terms of an
Incentive Stock Option in order to grant additional benefits to an optionee
could result in disqualification of the option for ISO tax treatment and make
the nonqualified stock option rules applicable.
EXERCISE OF STOCK OPTION WITH COMMON STOCK
Shares of the Company's common stock owned by the optionee are used as payment
for the new option shares. The shares being exchanged are valued at the
average of the high and low prices of the Johnson Controls stock on the New
York Stock Exchange on the date of exercise. If the entire cost of the
exercise price is not covered by the shares presented, the additional amount is
to be paid by check. When enough shares are presented for the exchange, there
is a small amount due for the difference between the value of the common stock
and the option cost. This amounts to less than the cost of one share.
INCENTIVE STOCK OPTIONS EXERCISED WITH COMMON STOCK
There are no regular income tax consequences when paying for the cost of the
option through the exchange (also called a "swap") of shares if the shares used
in the swap are not ISO shares acquired within the past twelve months. The
spread on the exercise is an item of tax preference and must be considered for
Alternative Minimum Tax purposes (see section entitled "Incentive Stock Options
and the Alternative Minimum Tax").
There is a regular income tax liability at the time ISO shares are sold.
Ordinary income treatment applies if the stock is sold within one year of the
date of exercise. If the stock is sold after the one-year period, the profit
is treated as a capital gain.
Except as discussed below, the exercise of an option by using previously owned
Common Stock to pay the exercise price of the option will not result in
immediate taxation of any previously unrealized appreciation in the value of
the Common Stock surrendered. The aggregate cost basis in the shares of Common
Stock acquired upon exercise of an ISO with Common Stock will be the same as it
was in the Common Stock used to pay the exercise price of the option. With
respect to the shares of newly acquired Common Stock equal in number to the
shares of Common Stock used to pay the exercise price of the option, the
optionee's basis will be the same as it was in the Common Stock used to pay the
exercise price of the option and the optionee's basis in any additional shares
of the newly acquired Common Stock will be zero. The period of time during
which the previously owned Common Stock was held will be included in computing
the capital gain holding period for the number of shares of new Common Stock
equal to the number of shares used to pay the exercise price. The holding
period of the excess newly acquired Common Stock begins on the date the option
is exercised. If any shares of Common Stock acquired upon exercise of an ISO
by using previously owned Common Stock to pay the exercise price of the option
are disposed of in a "Disqualifying Disposition," the shares of newly acquired
Common Stock having zero basis will be deemed to have been disposed of first.
If a person exercises an ISO by delivery of shares previously acquired by the
optionee under another incentive stock option or certain other types of
employee plans; and, if the required
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holding period for the surrendered shares has not been satisfied, the delivery
will constitute a "Disqualifying Disposition" of the surrendered shares. The
result will be recognition of ordinary income by the optionee in an amount
equal to the difference between the option price paid to acquire the
surrendered shares and their FMV at the time the previous option was exercised.
If the previous option was exercised by the payment of the option price in
cash, the basis of the number of shares of new Common Stock equal to the number
of shares used to pay the exercise price of the option will be equal to the FMV
of the surrendered shares of Common Stock at the time the previous option was
exercised and such shares will have a carryover holding period. If the
previous option was exercised by payment of the option price with previously
acquired shares of Common Stock, the number of new shares equal to the number
of surrendered shares which were deemed to have a zero basis under the rules
discussed above will have a basis equal to the amount of ordinary income
recognized (by the person because of the Disqualifying Disposition) and a
holding period which includes the holding period of such surrendered shares.
The number of new shares equal to the difference between the number of such
surrendered shares and the total number of surrendered shares will be deemed to
have a carryover basis and holding period. In either case, the basis of the
remainder of the shares (i.e., the number of new shares received in excess of
the number surrendered) will be zero and their holding period will begin on the
date the second option is exercised.
NONQUALIFIED STOCK OPTIONS EXERCISED WITH COMMON STOCK
When a Nonqualified Stock Option ("NSO") is exercised by using Common Stock to
pay for the exercise price, the optionee will take a carryover basis in the
shares of newly acquired Common Stock equal to the basis in the number of
shares of Common Stock used to pay the exercise price of the options. The
exchanged shares' holding period will carry over for this limited number of new
shares of Common Stock. The optionee's basis in any other shares of newly
acquired Common Stock will be their FMV on the date income is recognized and
the holding period for excess shares will begin on this date. If an optionee
exercises an NSO by delivery of shares previously acquired by the optionee
under an ISO, such delivery will not be a Disqualifying Disposition,
notwithstanding that the shares so surrendered are not held for the applicable
holding periods. However, the number of new shares issued equal to the number
of shares delivered shall be treated as stock acquired pursuant to the exercise
of an ISO and will be subject to the rules regarding Disqualifying
Dispositions. Any shares acquired in excess of the shares delivered will be
treated as stock acquired pursuant to the exercise of an NSO.
INCENTIVE STOCK OPTIONS AND THE ALTERNATIVE MINIMUM TAX
The "minimum tax" concept grew out of a concern within government that the tax
laws permitted some individuals with large incomes to pay little or no tax,
while other individuals with far less income were required to pay a higher
percentage of their income in tax. This undermining of the progressive rate
structure and unfair allocation of the tax burden was believed to be caused by
the existence of a favored tax status afforded certain types of income. As a
result, the minimum tax was introduced to prevent taxpayers with substantial
economic income from avoiding tax liability.
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The computation of a taxpayer's alternative minimum tax ("AMT") liability first
requires a determination of his or her alternative minimum taxable income
("AMTI"). AMTI is computed by adjusting the taxpayer's taxable income for
certain items, called "Adjustments," and then adding tax "Preference Items."
The exercise of an Incentive Stock Option ("ISO") may require an Adjustment to
taxable income for purposes of computing the taxpayer's AMTI. As a general
rule, the Adjustment is computed as the difference between the FMV of the
shares at the date of exercise and the option price paid for the shares (the
"Spread"). If the taxpayer disposes of the ISO shares in the same year as the
purchase, the Spread is taxed as regular income and is no longer a Preference
Item for AMT. Taxpayers should complete IRS Form 6251 (Alternative Minimum Tax
- - - Individuals) to determine whether the AMT applies.
The optionee may be entitled to a credit against his or her regular tax in
later years to the extent the individual pays AMT with respect to ISOs. AMT
that results from other Adjustments, however, may not give rise to an income
tax credit. In general, the payment of AMT as a result of ISO exercises
generates a minimum Tax Credit that can be applied dollar for dollar against
future year's regular income tax. The Tax Credit applies against any
subsequent years' regular income tax in excess of the AMT and can be carried
forward indefinitely. For purposes of claiming a Tax Credit, taxpayers should
consult IRS Form 8801 "Credit for Prior Minimum Tax."
The calculation of the AMT, if any, is complicated and the optionee should
discuss it with a personal tax advisor.
WITHHOLDING
If the Company determines that it is required to withhold state or federal
income tax as a result of the exercise of any option or SAR, it may require the
optionee to make arrangements satisfactory to the Company in order to enable
the Company to satisfy such withholding requirements. If such arrangements are
not made, the Company may refuse to issue funds or issue and transfer shares of
Common Stock upon exercise of the options or SARs.
If an optionee delivers shares of Common Stock to satisfy withholding
requirements, the transaction will be treated as if the Company had redeemed
the shares for an amount equal to their FMV. Assuming that the redemption is
treated as a sale of the shares for federal income tax purposes, the difference
(if any) between the FMV on the date income is recognized on the option or SAR
and the tax basis of such shares will be a long-term or a short-term capital
gain or loss, depending on the holding period.
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