<PAGE> 1
SCHEDULE 14A
(RULE 14A-101)
INFORMATION REQUIRED IN PROXY STATEMENT
SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(A) OF THE SECURITIES
EXCHANGE ACT OF 1934
Filed by the Registrant [x]
Filed by a Party other than the Registrant [ ]
Check the appropriate box:
[ ] Preliminary Proxy Statement
[ ] Confidential, for Use of the Commission Only (as permitted by Rule
14a-6(e)(2))
[x] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to Section 240.14a-11(c) or Section
240.14a-12
JOHNSTON INDUSTRIES, INC.
------------------------------------------
(Name of Registrant as Specified in Its Charter)
-------------------------------------------------------
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
[x] No filing fee required
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and 0-11
(1) Title of each class of securities to which transaction applies:
- -------------------------------------------------------------------------------
(2) Aggregate number of securities to which transactions applies:
- -------------------------------------------------------------------------------
(3) Per unit price or other underlying value of transaction computed pursuant
to Exchange Act Rule 0-11 (Set forth the amount on which the filing fee is
calculated and how it was determined):
- -------------------------------------------------------------------------------
(4) Proposed maximum aggregate value of transaction:
- -------------------------------------------------------------------------------
(5) Total fee paid:
- -------------------------------------------------------------------------------
[ ] Fee paid previously with preliminary materials.
[ ] Check box if any part of the fee is offset as provided by Exchange Act
Rule 0-11(a)(2) and identify the filing for which the offsetting fee was paid
previously. Identify the previous filing by registration statement number, or
the form or schedule and the date of its filing.
(1) Amount previously paid:
- -------------------------------------------------------------------------------
(2) Form, Schedule or Registration Statement No.:
- -------------------------------------------------------------------------------
(3) Filing party:
- -------------------------------------------------------------------------------
(4) Date Filed:
<PAGE> 2
[LOGO]
JOHNSTON INDUSTRIES, INC.
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD ON JUNE 11, 1997
To the Stockholders of
Johnston Industries, Inc.
NOTICE IS HEREBY GIVEN that the 1997 Annual Meeting of Stockholders (the
"Meeting") of Johnston Industries, Inc., a Delaware corporation, will be held
at 1:00 p.m. (Eastern Daylight Savings Time) on June 11, 1997 at the offices of
Johnston Industries, Inc., 105 Thirteenth Street, Columbus, Georgia 31901, to
consider and take action with respect to the following actions:
(1) election of five (5) Directors to serve for one-year terms;
(2) approval of an amendment to the Company's existing Amended and
Restated Stock Incentive Plan for Key Employees;
(3) a stockholder proposal requesting that the Compensation
Committee of the Board of Directors institute a review of the compensation
paid to executive officers of the Company; and
(4) such other business as may properly come before the Meeting or any
adjournment thereof.
Only stockholders of record as of the close of business on April 15, 1997
are entitled to notice of and to vote at the Meeting or any adjournment
thereof. A list of such stockholders will be available for the inspection of
any stockholder for any purpose germane to the Meeting during the ten days
prior to the Meeting, at the offices of Johnston Industries, Inc., 105 - 13th
Street, Columbus, Georgia 31901.
By Order of the Board of Directors
/s/ F. Ferrell Walton
---------------------
F. Ferrell Walton
Secretary
Columbus, Georgia
May 15, 1997
IT IS IMPORTANT THAT YOUR SHARES BE REPRESENTED AT THE MEETING IN ORDER TO
SECURE A QUORUM. WHETHER OR NOT YOU PLAN TO BE PRESENT AT THE MEETING AND
REGARDLESS OF THE NUMBER OF SHARES YOU HOLD, PLEASE COMPLETE AND MAIL THE
ENCLOSED PROXY IN THE ACCOMPANYING POSTAGE-PAID ENVELOPE. IF YOU RECEIVE MORE
THAN ONE PROXY BECAUSE YOUR SHARES ARE REGISTERED IN DIFFERENT NAMES OR
ADDRESSES, EACH PROXY SHOULD BE SIGNED AND RETURNED TO ASSURE THAT ALL OF YOUR
SHARES WILL BE VOTED. THE PROXY SHOULD BE SIGNED BY ALL REGISTERED HOLDERS
EXACTLY AS THE STOCK IS REGISTERED.
<PAGE> 3
JOHNSTON INDUSTRIES, INC.
105 THIRTEENTH STREET
COLUMBUS, GEORGIA 31901
PROXY STATEMENT DATED MAY 15, 1997
FOR ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD ON JUNE 11, 1997
INTRODUCTION
VOTE BY PROXY
The 1997 Annual Meeting of Stockholders of Johnston Industries, Inc. (the
"Company" or "Johnston") will be held at 1:00 p.m. (Eastern Daylight Savings
Time) on June 11, 1997 at the offices of Johnston Industries, Inc., 105
Thirteenth Street, Columbus, Georgia 31901, for the purposes set forth in the
foregoing notice. The Board of Directors of the Company (the "Board of
Directors" or the "Board") solicits your proxy for use at the meeting and at
any adjournment thereof (the "Meeting") and urges you to complete and return
the accompanying form of proxy promptly. This Proxy Statement, together with
the accompanying form of proxy, is first being mailed to stockholders on or
about May 15, 1997.
All properly executed proxies in the accompanying form which are received
in time for the Meeting and not revoked will be voted according to the
instructions contained thereon. If no choice is specified, proxies will be
voted FOR the election of the five (5) Directors named herein, FOR approval of
an amendment to the Company's existing Amended and Restated Stock Incentive
Plan for Key Employees (the "Stock Incentive Plan") and AGAINST approval of the
stockholder proposal.
A proxy may be revoked at any time before its exercise by submitting a
later dated proxy or by giving written notice of revocation to the Secretary of
the Company. In addition, if a person executing a proxy is present at the
Meeting, he or she may elect to revoke his or her proxy by notice of such
revocation to the Secretary of the Meeting and vote his or her shares in
person. Proxies, if in the form enclosed, duly signed and received in time for
voting, and not revoked before they are voted, will be voted at the Meeting in
accordance with the instructions specified therein. Your cooperation in
promptly returning the enclosed proxy will reduce the Company's expenses and
enable the Company's management and employees to continue their normal duties
for your benefit with minimum interruption for follow-up proxy solicitation.
At the close of business on April 15, 1997, the record date for the Meeting
(the "Record Date"), a total of 10,381,174 shares of the Company's Common
Stock, $.10 par value per share (the "Common Stock"), were issued and
outstanding, with each share of Common Stock entitled to one vote.
COST OF PROXY SOLICITATION
The cost of soliciting proxies will be borne by the Company. Proxies may
be solicited by members of the Board of Directors ("Directors"), officers and
regular employees, without separate remuneration, in person or by telephone,
facsimile transmission, telegram or mail. As is customary and in accordance
with the regulations of the Securities and Exchange Commission ("SEC") and the
New York Stock Exchange, the Company will, upon request, reimburse banks,
brokerage houses and other custodians, nominees, fiduciaries, and other record
holders for out-of-pocket expenses of forwarding soliciting material to
beneficial owners of the stock.
The Company has retained Corporate Investor Communications, Inc. ("CIC") to
assist the Company in the distribution and solicitation of proxies, primarily
from brokers, nominees, fiduciaries and other custodians of the Common Stock.
The Company has agreed to pay CIC a solicitation fee in the approximate amount
of $3,500 and to reimburse CIC for all printing, postage, freight and other
delivery charges CIC incurs in connection with its activities on behalf of the
Company.
SEC rules require that an annual report accompany or precede the proxy
materials. However, no more than one annual report need be sent to the same
address. If more than one annual report is being sent to your address and you
wish to reduce the number of annual reports you receive, please mark the
Discontinue Duplicate Annual Report Mailing box in the Special Action area on
the proxy card.
<PAGE> 4
OUTSTANDING SHARES AND VOTING RIGHTS
The Common Stock is the Company's only class of securities with general
voting rights. Each share of Common Stock is entitled to one vote on each
matter properly coming before the Meeting. Only stockholders of record as of
the close of business on the Record Date will be entitled to vote at the
Meeting. Each stockholder has one vote per share on all business to be
conducted at the meeting, and cumulation of votes is not permitted. Holders of
a majority of the outstanding shares, if present in person or represented by
proxy, will constitute a quorum at the Meeting. Abstentions and "broker
non-votes" (which occur if a broker or other nominee does not have
discretionary authority and has not received voting instructions from the
beneficial owner with respect to the particular item) are counted for purposes
of determining the presence or absence of a quorum for the transaction of
business. The affirmative vote of a majority of the Company's outstanding
Common Stock entitled to vote thereon is required to approve Agenda Item Two
and the affirmative vote of the majority of shares present in person or by
proxy at the Meeting and entitled to vote thereon are required to approve
Agenda Item Three. For both such agenda items, abstentions are counted for
purposes of calculating shares entitled to vote but are not counted as shares
voting and therefore have the effect of a vote against such proposal. For
Agenda Item Two, broker non-votes will have the same effect as abstentions.
For Agenda Item Three, broker non-votes will not be counted as shares eligible
to vote and therefore will have no effect. Directors will be elected by a
plurality of the votes of the shares present in person or represented by proxy
and entitled to vote for the position on the Board of Directors which that
nominee represents. Accordingly, abstentions and broker non-votes will have no
effect on the outcome of the election of Directors.
PRINCIPAL STOCKHOLDERS
The following table sets forth as of the Record Date certain information
concerning ownership of Common Stock by: (i) each person who is known by the
Company to own beneficially more than 5% of the Common Stock, (ii) each
Director individually, (iii) the Company's Chief Executive Officer ("CEO") and
each of the four most highly compensated executive officers (other than the
CEO) who earned more than $100,000 during the fiscal year ended December 31,
1996 ("fiscal 1996") listed in the Summary Compensation Table ("Named Executive
Officers"), and (iv) all directors and executive officers of the Company as a
group. The determinations of "beneficial ownership" of Common Stock are based
upon Rule 13d-3 under the Exchange Act of 1934, as amended (the "Exchange
Act"). Such rule provides that shares will be deemed "beneficially owned"
where a person has, either solely or in conjunction with others, the power to
vote or to direct the voting of shares and/or the power to dispose, or to
direct the disposition of, shares or where a person has the right to acquire
any such power within 60 days after the date such "beneficial ownership" is
determined.
<TABLE>
<CAPTION>
AMOUNT OF PERCENT
BENEFICIAL OF OUTSTANDING
NAME AND ADDRESS OF BENEFICIAL OWNER OR IDENTITY OF GROUP OWNERSHIP(1) SHARES
- -------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Gerald B. Andrews(2)(3) . . . . . . . . . . . . . . . . . . . . . 234,525 2.3%
J. Reid Bingham(4) . . . . . . . . . . . . . . . . . . . . . . . 10,500 *
David L. Chandler(3)(5) . . . . . . . . . . . . . . . . . . . . . 4,785,448 46.1%
John A. Friedman(6) . . . . . . . . . . . . . . . . . . . . . . . 1,000 *
Larry L. Galbraith(3)(7) . . . . . . . . . . . . . . . . . . . . 68,113 *
William J. Hart(8) . . . . . . . . . . . . . . . . . . . . . . . 18,007 *
L. Allen Hinkle(3) . . . . . . . . . . . . . . . . . . . . . . . 18,550 *
Gaines R. Jeffcoat(9) . . . . . . . . . . . . . . . . . . . . . . 26,434 *
C.J. Kjorlien(10) . . . . . . . . . . . . . . . . . . . . . . . . 2,000 *
Donald L. Massey(3) . . . . . . . . . . . . . . . . . . . . . . . 35,850 *
All directors and officers as a group (14 persons) (11) . . . . . 5,413,389 52.1%
Redlaw Industries, Inc.(12) . . . . . . . . . . . . . . . . . . . 3,781,829 36.4%
Dimensional Fund Advisors, Inc.(13) . . . . . . . . . . . . . . . 785,798 7.6%
- ---------------
* Less than 1%.
</TABLE>
-2-
<PAGE> 5
(1) Unless otherwise indicated, the named individual or entity has sole
voting and investment power with respect to all shares shown as
beneficially owned by such person. For each beneficial
owner, the number of shares outstanding and the percentage of stock
ownership includes the number of common and common equivalent shares
(including options and warrants exercisable within 60 days) owned by
such individual or entity.
(2) Includes 150,000 shares issuable pursuant to stock options
that are currently exercisable. Effective May 12, 1997, Mr. Andrews
retired from employment with the Company including his position as a
director.
(3) The address of Messrs. Andrews, Chandler, Galbraith, Hinkle
and Massey is 105 Thirteenth Street, Columbus, Georgia 31901.
(4) The address of Mr. Bingham is 3750 NW 87th Avenue, 6th Floor,
Miami, Florida 33178.
(5) Includes 3,781,829 shares owned by Redlaw Industries, Inc.
("Redlaw") and its wholly owned subsidiary GRM Industries, Inc.
("GRM"), of which Mr. Chandler may be deemed to be a beneficial owner
by virtue of his relationship with Redlaw as set forth in footnote 12
below, and 671,330 shares issuable pursuant to stock options which
are currently exercisable or exercisable within 60 days.
(6) The address of Mr. Friedman is 430 Park Avenue, 4th Floor, New
York, New York 10022.
(7) Effective February 1, 1997, Mr. Galbraith resigned from employment
with the Company. From April 1, 1996 until his resignation, Mr.
Galbraith served as the Company's Vice President-Special Projects.
(8) The address of Mr. Hart is 750 N. Jefferson, Springfield, Missouri
65802.
(9) The address of Mr. Jeffcoat is 819 Brookside Drive, Opp, Alabama 36467.
(10) The address of Mr. Kjorlien is 86 Gomez Road, Hobe Sound, Florida
33455.
(11) Includes an aggregate of 1,078,330 shares issuable pursuant to stock
options which are currently exercisable or exercisable within 60 days.
(12) Redlaw Industries, Inc. ("Redlaw") reports its address as 174 Stanley
Street, Brantford, Ontario, Canada N3S7S3. These shares are owned by
GRM Industries, Inc., a Tennessee corporation and wholly-owned
subsidiary of Redlaw. Redlaw is a holding company incorporated in
Ontario, Canada, and its stock is traded on the American Stock
Exchange. David L. Chandler, Chairman of the Company, owns
approximately 55.4% of the outstanding stock of Redlaw and may be
deemed to be the beneficial owner of the shares owned by Redlaw. Mr.
Chandler is Chairman of the Board, President and Chief Executive
Officer of both Redlaw and GRM.
(13) Dimensional Fund Advisors, Inc. ("Dimensional") reports its address
as 1299 Ocean Avenue, Santa Monica, California 90401. Dimensional
reports sole voting power with respect to 491,886 shares and sole
dispositive power with respect to all 785,798 shares. Dimensional
reports that its officers also serve as officers of DFA Investment
Dimensions Group, Inc. (the"Fund") and The DFA Investment Trust
Company (the "Trust"), which are each open-end management investment
companies registered under the Investment Company Act of 1940. In
their capacities as officers of the Fund and the Trust, these persons
vote the 207,987 shares owned by the Fund and the 85,925 shares owned
by the Trust. The foregoing information is based on a Schedule 13G
dated February 12, 1997.
-3-
<PAGE> 6
AGENDA ITEM ONE
ELECTION OF DIRECTORS
INFORMATION REGARDING DIRECTORS
Directors serve for one-year terms ending after the Annual Meeting of
Stockholders at which their term of office expires and their successors have
been elected and qualified. In the case of a vacancy, the Board of Directors
may elect a replacement or leave the vacancy unfilled. Decisions regarding the
election of new Directors during the year are based upon such considerations as
the size of the Board and the need to obtain fresh perspectives or to replace
the particular skills or experience of former Directors. There is no formal
procedure for stockholder nominations for Directors, although the Company's
By-laws (the "By-laws") require advance notice to the Company and the
furnishing of certain information to make such a stockholder nomination.
Proxies received from holders of Common Stock will be voted "FOR" the
election of the nominees named below as Directors for one-year terms expiring
at the 1998 Annual Meeting of Stockholders, unless authority to do so is
withheld. In the event any nominee is unable or declines to serve as a
Director at the time of the Meeting, the persons named as proxies therein will
have discretionary authority to vote the proxies for the election of such
person or persons as the present Board of Directors may nominate in
substitution therefor. It is not anticipated that any nominee will be
unavailable for election.
GENERAL
The Company's Certificate of Incorporation provides for the number of
Directors to be fixed from time to time by or pursuant to the By-laws, provided
that the number of Directors may not be less than one. The By-laws currently
fix the number of Directors at not less than one or more than eight as
determined from time to time by Board resolution. Current resolutions of the
Board have fixed the number of Directors at five. Such resolutions may be
changed by the Board to increase or decrease the number of Directors, subject
to compliance with procedures required for the removal of Directors.
Biographical information concerning the Directors is set forth below:
NOMINEES FOR REELECTION AS DIRECTORS
J. Reid Bingham, age 51, has served as a Director since 1991. Mr.
Bingham has been General Counsel of Hamilton Bancorp, Inc. and Hamilton Bank,
N.A. since October 1993. Mr. Bingham has been associated with Hamilton Bank,
N.A. since October 1996. He previously was a partner from April 1994 to
October 1996 of the law firm of Concepcion, Sexton, Bingham & Urdaneta
(formerly Bingham & Castilla). Prior to this time, he was a partner of the law
firm of Kirkpatrick & Lockhart from April 1989 to April 1994.
David L. Chandler, age 70, has served as Chairman of the Board since
1981. Mr. Chandler served as the Company's CEO from January 1990 through
December 2, 1995 and as its President from January 1990 to October 1992. Mr.
Chandler was Chairman of the Board of Directors and CEO of Jupiter National,
Inc. ("Jupiter") from June 1990 and January 1991, respectively, until March 28,
1996. Mr. Chandler has also served as Chairman of the Board of Redlaw
Industries Inc. ("Redlaw"), a former manufacturer of automotive and
transportation products, and Redlaw's wholly owned subsidiary GRM Industries,
Inc. ("GRM"), a former manufacturer of ferrous casting products, each for more
than five years. Mr. Chandler has been Chairman of the Board of Directors of
Galtaco, Inc. since 1959 and was President and CEO of Galtaco from March 1991
to November 7, 1996. On October 27, 1994, Mr. Chandler, in an administrative
proceeding, without admitting or denying the findings or undertaking to pay any
fine or penalty, consented to the issuance of a cease and desist order and
findings of the SEC in connection with certain incorrect or late filings of
Forms 3, 4 and 5 and Schedules 13D required to be filed with respect to
Johnston and Redlaw. Under the order, Mr. Chandler may not commit or cause any
violation of Section 13(d) and 16(a) of the Securities Exchange Act of 1934 and
Rules 13d-1, 13d-2, 16a-2 and 16a-3 promulgated thereunder.
-4-
<PAGE> 7
John A. Friedman, age 61, has served as a Director since 1996. For
the past four years, Mr. Friedman has been engaged in the private practice of
law. Prior to entering private practice Mr. Friedman was a partner in the law
firm of Kaye, Scholer, Fierman, Hays and Handler for 20 years.
William J. Hart, age 55, has served as a Director since 1981. Mr.
Hart has been a partner of the law firm of Husch & Eppenberger since January
1997. From August 1970 to January 1997 he was a partner of the law firm of
Farrington & Curtis, which was merged into the firm of Husch & Eppenberger.
Gaines R. Jeffcoat, age 75, has served as a Director since 1986.
Prior to Mr. Jeffcoat's retirement on June 30, 1990, he served as Vice
President of the Company since January 1, 1988 and as Chairman of the Board of
Opp and Micolas Mills, Inc., a subsidiary of the Company ("Opp"), from January
1, 1988 to December 31, 1989. Mr. Jeffcoat was President of Opp for more than
five years prior to that time.
THE BOARD OF DIRECTORS RECOMMENDS THAT YOU VOTE "FOR" THE REELECTION
OF ALL OF THE NOMINEES FOR THE BOARD OF DIRECTORS.
-5-
<PAGE> 8
DIRECTORS' FEES AND COMPENSATION
Pursuant to the Company's director compensation policy, each Director
who is not an officer or employee of or consultant to the Company is paid an
annual Director's fee of $12,000 plus $1,000 for each meeting of the Board or
any committee thereof at which such Director is in attendance.
GOVERNANCE OF THE COMPANY
In accordance with applicable Delaware state law, the business and
affairs of the Company are managed under the direction of the Board of
Directors. The Board has responsibility for establishing broad corporate
policies and for the Company's overall performance rather than day-to-day
operating details. Members of the Board of Directors are kept informed of the
Company's business by various reports and documents sent to them periodically
as well as by reports presented at meetings of the Board and its committees by
officers and employees of the Company.
The Board of Directors held six (6) regular meetings and two (2)
special meetings during fiscal 1996. Each Director attended at least
seventy-five percent (75%) of the total number of meetings of the Board of
Directors and any committees on which he served.
COMMITTEES OF THE BOARD
The Board of Directors has standing Audit and Compensation Committees
but no Nominating Committee.
AUDIT COMMITTEE
The Audit Committee, whose members during the past year were Messrs.
Bingham, Jeffcoat and Kjorlien, did not meet during fiscal 1996. Instead, such
committee met on January 7, 1997 with respect to fiscal 1996. The Audit
Committee is comprised entirely of directors who are not officers or employees
of the Company.
The Audit Committee reviews the Company's accounting functions,
operations and management and the adequacy and effectiveness of the internal
controls and internal auditing methods and procedures of the Company. The Audit
Committee recommends to the Board the appointment of the independent public
accountants for the Company. In connection with its duties, the Audit
Committee periodically meets privately with the independent public accountants.
COMPENSATION COMMITTEE
The Compensation Committee, whose members are Messrs. Bingham,
Friedman and Hart, met eleven (11) times during fiscal 1996. The Compensation
Committee represents the Board in discharging its responsibilities relating to
executive compensation. The Compensation Committee is responsible for
reviewing and analyzing management's recommendations regarding executive
compensation. In addition, the Compensation Committee develops and enacts
executive compensation policies designed to enhance the Company's profitability
by aligning the financial interests of the Company with its executives.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
Messrs. Bingham, Friedman and Hart served on the Compensation
Committee of the Board of Directors (the "Compensation Committee"), during
fiscal 1996; none of such Directors are employees or officers of the Company,
and there were no compensation committee interlocks.
-6-
<PAGE> 9
COMPENSATION COMMITTEE REPORT
During fiscal 1996, the compensation paid to the Company's executive
officers was approved by the Compensation Committee, which is responsible for
reviewing and analyzing management's recommendations regarding executive
compensation and developing and enacting executive compensation policies.
Under the Compensation Committee's direction, the Company has developed and
implemented executive compensation policies and programs designed to enhance
the Company's profitability, and thus stockholder value, by aligning the
financial interests of the Company with those of its executives.
The Company's executive compensation system has three components: (i)
a monthly base salary; (ii) incentive- based compensation consisting of
year-end bonuses based on performance criteria; and (iii) an incentive-based
stock option program.
Base Pay. Before the beginning of each fiscal year, the Compensation
Committee approves the base pay component of each executive's compensation.
Such review may include a review and analysis of historical and current market
data regarding compensation paid to executives in comparable positions at
similarly-sized companies that are involved in similar manufacturing
operations. The Compensation Committee then considers each of the Company's
executives, taking into account the particular requirements and circumstances
of each position and other relevant factors. Each executive's prior
performance is then evaluated, and his potential future contributions are
considered. After consideration of all of the above, the Compensation
Committee approves the base pay level for each executive for the coming fiscal
year with actual awards based primarily on the Committee's discretionary
assessment of Company or business unit performance and individual performance.
Year-End Compensation. Year-end executive compensation payments,
other than to Mr. Chandler, the Company's Chairman, are primarily based on
management's recommendations, which are reviewed and approved by the
Compensation Committee. Management's recommendations are based upon (i) the
relative performance and contribution to profitability of each operation or
business unit; (ii) each executive's personal role in and contribution to such
performance; and (iii) each executive's individual impact in promoting the
long-term growth, development and enhancement of stockholder value. The
Compensation Committee reviews management's recommended year-end payments for
each executive and then sets final levels of year-end payments for each
executive. Year-end executive compensation considerations may also include a
recommendation that a grant of stock options be made to executives who have
made outstanding contributions to the Company during the preceding year.
Under contractual provisions in effect from January 1, 1990 through
December 31, 1996, year-end compensation payments to Mr. Chandler, the
Company's Chairman, were to be made equal to 1.5% of the Company's pretax
earnings net of any pretax loss for prior years. This provision was
substantially identical to provisions contained in the Company's employment
contracts with Mr. Chandler's predecessors. Effective January 1, 1997,
contractual provisions no longer require any such payment and, accordingly, any
future year-end compensation payments to Mr. Chandler will be as determined by
the Compensation Committee.
The Compensation Committee believes that its compensation policies
successfully direct the Company's management to long-term success and
increasing stockholder value, and that management is thus dedicated to
achieving significant improvements in long-term financial performance. The
compensation policies provide significant compensation for superior performance
by an executive and the Company.
In its review of compensation matters, the Compensation Committee
considers the anticipated tax consequences of various payments and benefits.
For instance, deductibility of certain types of compensation payments depend
upon the timing of an executive's vesting or exercise of previously granted
rights. Further, interpretations and changes in the tax laws and other factors
beyond the Compensation Committee's control may also affect the deductibility
of compensation. In 1993, Congress enacted Section 162(m) of the U.S. Internal
Revenue Code of 1986, as amended (the "Code"), effective for taxable years
commencing 1994. This legislation generally limits the Company's deduction to
$1 million per year per executive for certain compensation paid to its CEO and
Named Executive Officers. The Code and current regulations issued under the
Code contain exclusions from this limitation. In general, the regulations
exclude from this limitation compensation that is calculated based on
"objective" performance criteria (as defined). The regulations do not exclude
from this limitation compensation that is calculated based on achievement of a
range of quantitative and qualitative criteria with full discretion by the
Compensation Committee to evaluate performance. Grants to covered executives
under the Company's Stock Incentive Plan and the existing
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<PAGE> 10
stock option grants do not currently qualify as grants pursuant to
"performance-based plans" for purposes of Section 162(m). Although the
Company is reviewing its stock option plan arrangements, the Compensation
Committee will not necessarily and in all circumstances limit executive
compensation to that deductible under Section 162(m); although it usually will
consider various alternatives to preserving the deductibility of compensation
payments and benefits to the extent reasonably practicable and to the extent
consistent with the Company's compensation objectives.
The Compensation Committee of the Board of Directors:
J. Reid Bingham
John A. Friedman
William J. Hart
PERFORMANCE GRAPH
The following graph compares the percentage change in the Company's
cumulative total shareholder return on Common Stock with the cumulative total
return, assuming reinvestment of dividends, of (i) the Standard & Poor's 500
Stock Index and (ii) a peer group index constructed by the Company. During
September 1995, the Company's Board of Directors approved a change in the
Company's fiscal year end from June 30 to the Saturday nearest December 31, as
reflected in the calculation dates for the following graph.
COMPARISON OF CUMULATIVE TOTAL RETURN AMONG
JOHNSTON INDUSTRIES, INC., S&P 500 INDEX AND PEER GROUP
(ART)
<TABLE>
<CAPTION>
6/30/92 6/30/93 6/30/94 6/30/95 12/30/95 12/28/96
------- ------- ------- ------- -------- --------
<S> <C> <C> <C> <C> <C> <C>
Johnston Industries, Inc. . $176 $277 $294 $250 $264 $248
S&P 500 Index . . . . . . . $113 $129 $131 $165 $189 $232
Peer Group Index(1) . . . . $135 $167 $147 $145 $140 $138
</TABLE>
- ---------------
(1) The Company's self-constructed peer group is composed of the following
companies: Dominion Textiles, Inc., Fieldcrest Cannon, Inc., Guilford
Mills, Inc., Springs Industries, Inc. and Thomaston Mills, Inc., Burlington
Industries Equity, Inc., Cone Mills Corporation N.C. and Galey and Lord,
Inc. The Peer Group Index has been weighted to account for the respective
market capitalization of the subject companies.
-8-
<PAGE> 11
EXECUTIVE COMPENSATION AND OTHER INFORMATION
The following table sets forth the compensation paid by the Company for the
periods indicated to any individual serving as the Company's CEO during fiscal
1996 and to the Named Executive Officers, the four most highly compensated
executive officers (other than the CEO) who earned more than $100,000 during
fiscal 1996.
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
LONG TERM
COMPENSATION
ANNUAL COMPENSATION (1) AWARDS
--------------------------------------------------- --------------
OTHER SECURITIES
SALARY ANNUAL UNDERLYING ALL OTHER
BONUS COMPEN- OPTIONS COMPENSATION
NAME AND PRINCIPAL POSITION YEAR(2) ($) (1) ($) SATIONS($) (#) ($) (3)
--------------------------- -------- ------- ------- ---------- ---------- ------------
<S> <C> <C> <C> <C> <C> <C>
David L. Chandler, 1996 470,792 22,061 58,731(4) 537,330(5) 88,431
Chairman of the Board 1995 -2 272,500 --- --- --- 100,856
1995 -1 467,600 213,000 46,138(4) 44,444 118,391
1994 390,000 176,788 47,296(4) 12,718
Gerald B. Andrews, 1996 402,500 --- --- --- 27,173
President and CEO (6) 1995 -2 185,000 --- --- --- 14,161
1995 -1 370,000 200,000 --- --- 15,306
1994 361,945 185,000 --- --- 3,321
Donald L. Massey 1996 187,917 --- --- 18,000 6,024
Vice President-Home 1995 -2 --- --- --- --- ---
Furnishings-Sales and 1995 -1 --- --- --- --- ---
Marketing (7) 1994 --- --- --- --- ---
L. Allen Hinkle 1996 218,750 --- --- 18,000 ---
Vice President-Industrial 1995 -2 100,000 27,528 --- --- ---
Fabrics- Sales and 1995 -1 100,000 25,850 --- --- ---
Marketing (7) 1994 --- --- --- --- ---
Larry L. Galbraith 1996 245,000 --- --- 8,000 13,942
Vice President-Special 1995 -2 122,500 --- --- --- 9,496
Projects, (8) 1995 -1 245,000 35,648 --- --- 15,561
1994 235,000 55,695 --- --- 3,297
</TABLE>
- ---------------
(1) The amounts shown do not include perquisites and other personal
benefits, the value of which for each executive officer did not exceed the
lesser of $50,000 or 10% of the aggregate compensation for such officer.
(2) Compensation data is presented for fiscal 1996, the six-month fiscal year
ended December 31, 1995 ("1995-2"), and the twelve-month fiscal years
ended June 30, 1995 ("1995-1") and 1994.
(3) Except as described herein,
all payments relate to the stock purchase plan described below under the
heading Stock Purchase Plan. "All Other Compensation" for 1995-2 also
includes $18,000 for Mr. Chandler representing a partial payment of
premiums under a "split dollar" life insurance program.
(4) Present value of consulting payments (as described below under the caption
"Employment Agreements"). The payments shown in 1996 represent $23,486
for the period July 1, 1995-December 31, 1995 that was not paid until
August 26, 1996 in the Company's discretion. The balance of $35,245 is
payment for January 1, 1996-September 30, 1996.
(5) Includes 510,330 ten-year options granted to Mr. Chandler in exchange for
options previously held by Mr. Chandler representing the right to
purchase shares of stock of Jupiter National, Inc.("Jupiter"). At
issuance, these options were equivalent in value to Mr. Chandler's Jupiter
options. Such options were granted in lieu of cash in conjunction with
the Company's acquisition of Jupiter (the "Jupiter Acquisition") on March
28, 1996.
(6) Effective May 12, 1997, Mr. Andrews retired as President and CEO of the
Company. Mr. Andrews had served as President Since October, 1992 and as
CEO since December, 1995.
-9-
<PAGE> 12
(7) Messrs. Massey and Hinkle became Executive Officers of the Company in April
1996 and January 1995, respectively. Accordingly, only compensation
information is reported for fiscal 1996 for Mr. Massey and fiscal 1996,
1995-2 and 1995-1 for Mr. Hinkle.
(8) Effective February 1, 1997, Mr. Galbraith resigned from employment with the
Company including his position as the Company's Vice President-Special
Projects, the position Mr. Galbraith held since April 1, 1996.
The following table sets forth certain information concerning options,
all of which are currently exercisable unless otherwise noted, which were
granted during fiscal 1996 to the CEO and the Company's Named Executive
Officers under the Company's Amended and Restated Stock Incentive Plan for Key
Employees (the "Stock Incentive Plan"):
<TABLE>
<CAPTION>
OPTION GRANTS IN LAST FISCAL YEAR
POTENTIAL VALUE AT
ASSUMED ANNUAL RATES
OF STOCK PRICE
APPRECIATION
NAME INDIVIDUAL GRANTS FOR OPTION TERM
---- ------------------------------------------------ ------------------------------
% OF TOTAL
NUMBER OF OPTIONS
SECURITIES GRANTED TO EXERCISE
UNDERLYING EMPLOYEES PRICE
OPTIONS IN EXPIRATION 0% 5%(2) 10%(2)
GRANTED(#) FISCAL YEAR ($/SH)(1) DATE $ $ $
---------- ----------- --------- ---------- --------- ---------- ---------
<S> <C> <C> <C> <C> <C> <C> <C>
David L. Chandler
99,816(3) 12.6% 2.50 03/28/06 0 3,058,362 4,127,392
287,360(3) 36.2% 1.98 03/28/06 0 6,933,997 9,419,661
123,154(3) 15.5% 3.62 04/11/06 0 5,438,481 7,369,535
15,000 1.9% 8.25 05/01/06 0 1,509,450 2,047,650
12,000 1.5% 7.50 12/13/07 0 1,098,360 1,489,080
Gerald B. Andrews -- -- -- -- -- -- --
Donald L. Massey 10,000 1.3% 8.25 05/01/06 0 1,006,300 1,365,100
8,000 1.0% 7.50 12/13/07 0 732,240 992,720
L. Allen Hinkle 10,000 1.3% 8.25 05/01/06 0 1,006,300 1,365,100
8,000 1.0% 7.50 12/13/07 0 732,240 992,720
Larry L. Galbraith 8,000 1.0% 8.25 05/01/06 0 805,040 1,092,080
</TABLE>
- ---------------
(1) Based on the closing price of the Common Stock on the date of grant.
(2) These amounts represent certain assumed rates of appreciation only.
Actual gains, if any, on stock option exercises are dependent on the
future performance of the Common Stock and overall market conditions.
There can be no assurance that the amounts reflected in these columns
will be achieved or if achieved will exist at the time of any option
exercise. Option term is for ten years.
(3) Represents ten-year options granted to Mr. Chandler in exchange for
options previously held by Mr. Chandler representing the right to
purchase shares of Jupiter stock. At issuance, these options were
equivalent in value to Mr. Chandler's Jupiter options. Such options
were granted in lieu of cash in conjunction with the Jupiter
Acquisition.
-10-
<PAGE> 13
The following table provides information concerning options exercised
and year-end option values for fiscal 1996 with respect to the Company's CEO
and the Named Executive Officers.
AGGREGATED OPTION/SAR EXERCISES IN LAST FISCAL YEAR
AND FISCAL YEAR-END OPTION/SAR VALUES
<TABLE>
<CAPTION>
NUMBER OF UNEXERCISED VALUE ($) OF UNEXERCISED IN-
SHARES OPTIONS/SARS AT THE-MONEY OPTIONS/SARS AT
ACQUIRED ON VALUE YEAR-END EXERCISABLE/ YEAR-END EXERCISABLE/
NAME EXERCISE(#) REALIZED ($) UNEXERCISABLE UNEXERCISABLE(1)
---- ------------ ------------ ------------- ----------------
<S> <C> <C> <C> <C>
David L. Chandler 46,000 297,160 659,330/12,000 2,482,992/---
Gerald B. Andrews --- --- 150,000/ --- 49,950/---
Donald L. Massey --- --- 10,000/ 8,000 ---/---
L. Allen Hinkle --- --- 10,000/ 8,000 ---/---
Larry L. Galbraith --- --- 8,000/ --- ---/---
</TABLE>
- ---------------
(1) Based on the closing sales price for the Common Stock on the New York
Stock Exchange on December 27, 1996 of $7.25 per share.
The following table sets forth the estimated annual normal retirement
benefits payable under the Company's Salaried Employees Pension Plan and
Executive Supplemental Retirement Plan based on 1996 Plan limits (assuming
Social Security Average wages of $45,000 per year) for various combinations of
pre-retirement remuneration and years of benefit service:
PENSION PLAN TABLE
<TABLE>
<CAPTION>
AVERAGE ANNUAL SALARY YEARS OF BENEFIT SERVICE
LAST 10 YEARS --------------------------
(OR LESS WHERE 5 10 15 20 25 30 35
--------------- - -- -- -- -- -- --
APPLICABLE)
-----------
<S> <C> <C> <C> <C> <C> <C> <C>
125,000 14,250 28,500 42,750 57,000 60,000 63,000 66,000
150,000 17,438 34,875 52,313 69,750 73,688 77,625 81,563
175,000 20,625 41,250 61,875 82,500 87,375 92,250 97,125
200,000 23,813 47,625 71,438 95,250 101,063 106,875 112,688
225,000 27,000 54,000 81,000 108,000 114,750 120,608 120,608
250,000 30,188 60,375 90,563 120,608 120,608 120,608 120,608
300,000 30,800 61,101 92,401 120,608 120,608 120,608 120,608
400,000 30,800 61,101 92,401 120,608 120,608 120,608 120,608
500,000 30,800 61,101 92,401 120,608 120,608 120,608 120,608
730,000 30,800 61,101 92,401 120,608 120,608 120,608 120,608
</TABLE>
- ---------------
The years of benefit service under the Pension Plan as of December 28,
1996 for Messrs. Chandler, Andrews, Galbraith, Massey and Hinkle were 24, 4,
25, 4 and 0, respectively.
The Pension Plan provides that if an employee's employment terminates
prior to normal retirement date, payments at normal retirement date will be
reduced to reflect the early termination of employment; if employment
terminates later than normal retirement date, payments will be adjusted to
provide benefits actuarially equivalent to the benefits otherwise payable at
the normal retirement date, but not less than the accrued benefit determined at
date of retirement; and if the employee elects a
-11-
<PAGE> 14
method of distribution of benefits other than a single life annuity, payments
will be adjusted to provide benefits actuarially equivalent to the benefits to
which he would be entitled if he had elected the single life annuity method.
EMPLOYMENT AGREEMENTS
Mr. Chandler's employment agreement entitles him to receive a base
salary of not less than $390,000, as well as any bonuses and additional
compensation amounts as determined by the Compensation Committee. The
agreement currently in effect may be terminated by either Mr. Chandler or the
Company upon 60 days' prior written notice.
Effective May 12, 1997, Mr. Andrews retired from employment with the
Company. In connection with his retirement and to satisfy obligations under
his employment agreement, the Company agreed with Mr. Andrews to the
continuation of Mr. Andrews' base salary ($400,000 per year) and benefits for a
twelve month period.
Mr. Massey's employment agreement provided for his employment with the
Company for an initial period extending until December 31, 1994 and continuing
thereafter from year to year at a base salary of not less than $140,000.
On July 26, 1995, the Company's former Wellington Sears subsidiary
entered into an employment agreement with L. Allen Hinkle effective November
19, 1992. The employment agreement, which has been assigned to the Company,
provides for an initial term of three years, a second term of 18 months, and
successive one-year terms thereafter. Mr. Hinkle's employment agreement
provided for Mr. Hinkle to receive an annual salary of at least $200,000 plus
such bonuses as the Company may determine.
Mr. Galbraith's employment agreement provided for his employment as
President and CEO of the Company's former Southern Phenix Textiles, Inc.
subsidiary until June 30, 1998 and entitled him to a base salary of not less
than $245,000 a year and such additional compensation as determined by the
Company's CEO. Upon Mr. Galbraith's resignation from employment with the
Company effective February 1, 1997, the Company agreed to continue to pay Mr.
Galbraith's benefits (excluding long-term disability coverage) through December
31, 1997. In addition, as of February 1, 1997, the Company agreed to pay Mr.
Galbraith an amount representing one-half of the salary to which Mr. Galbraith
would have been entitled to receive over the seventeen remaining months of the
employment agreement, with such amount to be paid to Mr. Galbraith ratably
over the remaining eleven months of 1997.
-12-
<PAGE> 15
AGENDA ITEM TWO
APPROVAL OF AN AMENDMENT TO THE COMPANY'S EXISTING
AMENDED AND RESTATED STOCK INCENTIVE PLAN FOR KEY EMPLOYEES
GENERAL
In December 1988, the Company's stockholders approved adoption of the
Stock Incentive Plan, which is administered by the Stock Option Committee.
Pursuant to the Stock Incentive Plan, the Stock Option Committee may award
Incentive Stock Options ("ISOs"), Non-Qualified Stock Option ("NQSOs"), Stock
Appreciation Rights ("SARs"), Restricted Stock, or any combination, to selected
officers and key employees of the Company and its subsidiaries, whose positions
enable them to make significant contributions to the Company's long-term
performance and growth. A maximum of 2,358,450 shares of Common Stock are
presently available for issuance under the Stock Incentive Plan.
The Board of Directors, upon recommendation of the Stock Option
Committee, has approved and recommends for stockholder approval the amendment
of the Stock Incentive Plan (the "Amendment"), the text of which is set forth
in Appendix A to this Proxy Statement. The principal purposes of the Amendment
are to increase the maximum number of shares of Common Stock which may be
issued under the plan and to permit certain stock incentives to be awarded to
directors who are not also employees of the Company or its subsidiaries
("Non-Employee Directors") so as to strengthen the Company's ability to attract
and retain highly competent key employees and Non-Employee Directors and to
align further the interests of such persons with stockholder interests.
If adopted, the Amendment will increase the total number of shares of
Common Stock issuable under the Stock Incentive Plan by 500,000. In addition,
each Non-Employee Director will automatically be granted a NQSO, on the last
trading day in April of each year, commencing on April 30, 1997. The NQSOs
granted on April 30, 1997 were granted subject to stockholder approval of the
amendment proposed hereby. Such NQSO will be for 5,000 shares of Common Stock
and will become exercisable in four equal annual installments commencing on the
first anniversary of grant. All NQSOs will be issued at an exercise price
equal to the fair market value of the Common Stock on the date of grant.
NQSOs granted to Non-Employee Directors under the Stock Incentive Plan
will expire on the tenth anniversary of grant. However, if a Non-Employee
Director's services on the Board terminate (except by reason of such director's
death as described in the following sentence), any unvested NQSOs held by such
Non-Employee Director will immediately expire, and any vested NQSOs held by
such Non-Employee will expire three months later. Additionally, if a
Non-Employee Director's services on the Board terminate by reason of the
director's death, all unvested NQSOs issued to such deceased Non-Employee
Director will immediately vest, and all NQSOs will remain exercisable by the
Non-Employee's legal representative for six months following the Non-Employee
Director's death.
SUMMARY DESCRIPTION OF STOCK INCENTIVE PLAN
General. The Company's Amended and Restated Stock Incentive Plan for
Key Employees (the "Stock Incentive Plan"), which was approved by the
stockholders in December 1988, authorizes the grant of awards in the form of
ISOs within the meaning of Section 422A of the Code, NQSOs, SARs, Restricted
Stock, or a combination of these forms of awards. All officers and key
employees of the Company and its subsidiaries who are in positions which enable
them to make significant contributions to the long-term performance and growth
of the Company are eligible to receive awards. The Stock Incentive Plan is
administered by the Stock Option Committee, whose members are not eligible to
participate (other than with respect to automatic awards to Non-Employee
Directors).
Incentive Stock Options. An ISO's exercise price may not be less than
the fair market value of the Common Stock on the date of the grant, and the
aggregate exercise price of all shares that become exercisable by an individual
optionee in a single calendar year for options granted after January 1, 1987
may not exceed $100,000, plus any unused limit carryover to such year within
the meaning of Code Section 422A. Additional restrictions apply to ISOs
granted to a "10 percent stockholder" (as such term is defined in Code Section
422A(b)(6)). An ISO may be exercised in whole or in part throughout the
period of the ISO,
-13-
<PAGE> 16
with the exercise price to be paid in cash or in such alternate form as
the Committee may authorize. An ISO terminates upon termination of the
optionee's employment, except that if employment terminates due to the
optionee's death or disability, the ISO will remain exercisable until the
earlier of 12 months after termination or the ISO's expiration date.
Non-qualified Stock Options. NQSOs granted under the Stock Incentive
Plan (a) may be for such number of shares, purchase price and term (up to 10
years) as the Stock Option Committee, in its sole discretion, may determine and
(b) become exercisable six months after date of grant (or later if such
committee so determines). Unless the committee in its sole discretion
determines otherwise, an NQSO terminates upon termination of the optionee's
employment, except that if employment terminates due to the optionee's
retirement at or after age 65, disability, or death, the NQSO will remain
exercisable for three months after retirement or disability or one year after
death, unless the NQSO's expiration date occurs sooner.
Stock Appreciation Rights. SARs are granted only (i) in conjunction
with the granting of options, (ii) in an amount not in excess of the number of
shares granted in the related option and (iii) on terms providing that the
exercise of an option for a given number of shares terminates the related SAR
for that number of shares (so that the total number of shares for which an
option and the related SAR may be exercised cannot exceed the number of shares
granted in the option). SARs provide the participant with an amount equal to
the difference between the fair market value of the shares on the date the SAR
is exercised and the exercise price of the option. Each SAR is subject to the
same conditions on termination of employment as the related option.
Restricted Stock. The Stock Incentive Plan provides that the Stock
Option Committee may make awards entitling the recipient to receive shares at
no out-of-pocket costs or at such price as the committee determines, the shares
purchased to be subject to the restrictions set by the Stock Option Committee
and which lapse or may be waived as determined by it.
PREVIOUS GRANTS
From July 1, 1993 to date, other than the formula options granted on
April 30, 1997 subject to approval of the amendment as discussed above, options
have been granted under the Stock Incentive Plan to (i) the Company's CEO and
each of the Named Executive Officers, (ii) each nominee for election as a
director, and (iii) each of the following groups, as set forth below, with
exercise prices varying from $1.979 to $8.25, in the amounts indicated:
<TABLE>
<CAPTION>
Stock Incentive Plan
--------------------
Number of Underlying
Name and Position Dollar Value $ (1) Shares of Common Stock (2)
----------------- ------------------ --------------------------
<S> <C> <C>
David L. Chandler 2,435,357 537,330
Gerald B. Andrews --- ---
Donald L. Massey --- 18,000
L. Allen Hinkle --- 18,000
Larry L. Galbraith --- 8,000
J. Reid Bingham --- ---
John A. Friedman --- ---
William J. Hart --- ---
Gaines R. Jeffcoat --- ---
All Executive Officers,
as a Group 2,435,357 638,330
All Non-Employee Directors,
as a Group --- ---
All Employees other than
Executive Officers, as a Group --- 213,000
</TABLE>
- ---------------
(1) The amounts shown represent the dollar value of the options calculated
by multiplying the number of shares issuable upon exercise of the
options by the difference (if positive) between (i) the closing market
price of the Company's Common Stock on the last day of the Company's
1996 fiscal year and (ii) the exercise price payable upon exercise of
each option.
-14-
<PAGE> 17
(2) All options granted have been designated as NQSOs, with the exception
of 410,514 options granted to David L. Chandler, which were designated
ISOs. Of the options listed, options have been exercised by Mr.
Chandler for 64,300 shares.
No additional grants are currently contemplated by the Company.
FEDERAL INCOME TAX CONSEQUENCES OF THE STOCK INCENTIVE PLAN
The tax consequences of awards granted under the Stock Incentive Plan
are complex. The following is a summary only of the general tax principles
applicable to awards under the Stock Incentive Plan under federal law as in
effect on the date of this Proxy Statement.
Options. There are no tax consequences to the optionee upon the grant
of an option pursuant to the Stock Incentive Plan. There are no tax
consequences to the optionee upon exercise of an ISO, except that the amount by
which the fair market value of the shares at the time of the exercise exceeds
the option exercise price is a tax preference item possibly giving rise to
alternative minimum tax. If the shares of Common Stock acquired are not
disposed of within two years from the date the ISO was granted and within one
year after the shares are transferred to the optionee, any gain realized upon
the subsequent disposition of the shares will be characterized as long-term
capital gain and any loss will be characterized as long-term capital loss. If
all requirements other than the above described holding period are met, a
"disqualifying disposition" occurs and gain in an amount equal to the lesser of
(i) the fair market value of the shares on the date of exercise minus the
option exercise price or (ii) the amount realized on disposition minus the
option exercise price (except for certain "wash" sales, gifts or sales to
related persons), is taxed as ordinary income and the Company will be entitled
to a corresponding deduction in an amount equal to the optionee's ordinary
income at that time. The gain in excess of this amount, if any, will be
characterized as long-term capital gain if the optionee held the shares for
more than one year.
Other than ISO's, all options granted under the Stock Incentive Plan
will be taxed as NQSOs. Upon the exercise of a NQSO, the optionee will
recognize taxable income in the amount by which the then fair market value of
the shares of Common Stock acquired exceeds the option exercise price, with the
Company being entitled to a deduction in an equal amount. The amount of such
taxable income will be characterized as compensation income to the optionee.
Upon the subsequent disposition of the Common Stock the optionee will recognize
gain or loss, which will be characterized as capital gain or loss in an amount
equal to the difference between the proceeds received upon disposition and his
or her basis for the shares (the basis being equal to the sum of the price paid
for the stock and the amount of income realized upon exercise of the option)
provided the shares are held as a capital asset. Any capital gain or loss to
the optionee will be characterized as long-term or short-term, depending upon
whether his or her holding period for tax purposes exceeds one year.
The taxable income recognizable upon the exercise of a NQSO is subject
to withholding for federal income tax purposes. Accordingly, the Company
generally must, as a condition to the exercise of a NQSO, deduct from payments
or shares otherwise due to the optionee the amount of taxes required to be
withheld by virtue of such exercise or require that the optionee pay such
withholding to the Company or make other arrangements satisfactory to the
Company regarding the payment of such taxes.
Stock Appreciation Rights. The amount of any cash received by the
holder of SARs under the Stock Incentive Plan will be subject to ordinary
income tax in the year of receipt and the Company will be entitled to a
deduction for such amount.
Restricted Stock Awards. An employee who has been awarded restricted
stock will not recognize taxable income at the time of the award unless he
elects otherwise. If the recipient elects to be taxed at the time of the
award, the recipient will be taxed on the stock's fair market value as
compensation income at the time of the transfer of the stock to the recipient.
The Company will be entitled to a corresponding deduction. Any appreciation in
value of the stock thereafter will not be includable in the recipient's gross
income until the stock is later sold. Such gain, if any, will be long-term
capital gain if the stock has been held for at least one year. If the
recipient decides not to elect immediate tax consequences upon the award of the
restricted stock, then at the time restrictions applicable to the restricted
stock award lapse, the employee will recognize ordinary income and the Company
will be entitled to a corresponding deduction. The recipient's income and the
Company's deduction will be equal to the fair market value of such stock at
such time. Any appreciation in the value of the stock thereafter will be taxed
-15-
<PAGE> 18
as long-term capital gain upon the sale of stock, provided the applicable
holding period has been satisfied. Dividends paid on the restricted stock
during the period the shares are subject to restriction will generally be
ordinary compensation income to the recipient of the restricted stock and
deductible as such by the Company, unless the election discussed above has been
made in which case the dividends received are taxed as true dividends to the
employee and such amounts are not deductible by the Company.
General Tax Law Considerations. The preceding paragraphs are intended
to be merely a summary of the most important Federal income tax consequences
concerning the grant of awards under the Stock Incentive Plan and the
disposition of shares of Common Stock issued thereunder in existence as of the
date of this Proxy Statement. Therefore, participants in the Stock Incentive
Plan should review the current tax treatment with their individual tax advisors
at the time of the grant, exercise or any other transaction relating to any
award or underlying stock issued under the Stock Incentive Plan.
REQUIRED VOTE FOR APPROVAL
Approval of the Amendment requires the affirmative vote of a majority
of the Company's outstanding voting stock.
THE BOARD OF DIRECTORS RECOMMENDS THAT YOU VOTE
"FOR" THE PROPOSED AMENDMENT OF THE STOCK INCENTIVE PLAN
-16-
<PAGE> 19
AGENDA ITEM THREE
SHAREHOLDER PROPOSAL
Mr. Dean V. Shahinian, 8909 Captains Row, Alexandria, Virginia 22308,
who states that he is the beneficial owner of 7,100 shares of Common Stock, has
given notice that he plans to introduce the following resolution at the Meeting
and has asked that a statement of reasons for its introduction be printed in
this proxy statement.
PROPOSAL REGARDING EXECUTIVE COMPENSATION
RESOLVED, that the shareholders ask the Board of Directors to
commission an independent study to evaluate and make recommendations with
respect to the Johnston Industries' compensation of executive officers and
directors and to send the results to shareholders. Executive compensation
would include executive salaries, options and stock appreciation rights,
employment and consulting contracts, bonuses, special buybacks of securities,
noncash benefits, and other relevant items. The study would consider, among
other things: compensation paid by other companies of comparable size and
profitability, stock performances, and any reduction for executives who work
part-time, but not full-time, on Johnston business. The results would be
mailed to stockholders in the next Annual Report, proxy statement or other
appropriate mailing, with a copy of the full report available on request.
-17-
<PAGE> 20
Shareholder's Statement
Shareholders are concerned with their investment in the Company. Executive
compensation affects this investment. Shareholders want executive compensation
to be fair and motivating, but not excessive or extravagant.
Shareholders notice that Johnston's executive compensation policies have
resulted in some growing and seemingly high compensation levels. These policies
persist even when Johnston's stock price has fallen and significantly
underperformed the overall stock market, as happened in recent years (e.g.,
during 1995, Johnston stock price went down by 24%, while the Dow Jones
Industrial Average went up by over 33%), and after an internal study by the
Compensation Committee. Therefore, shareholders feel that independent,
third-party scrutiny of Johnston's executive compensation will be beneficial.
The shareholders note, for example, that the Chairman of Johnston Industries
during the last several years has been working for Johnston on a part-time basis
while simultaneously serving as Chairman of Redlaw Industries, Inc., Galtaco,
Inc., GRM Industries, Inc., and, more recently, as Chairman of Jupiter National,
Inc. While shareholders do not know the compensation these other companies paid
him, Johnston Industries paid for part-time work a salary that has grown to very
significant levels. For the years ended June 30, it is:
<TABLE>
<CAPTION>
Year Ended June 30 - Cash Compensation
for Part-Time Work
<S> <C>
1995 - $845,029
1994 - $626,802
1993 - $574,207
1992 - $582,556
1991 - $482,038
1990 - $390,000
1989 - $352,000
1988 - $340,000
1987 - $302,500
1986 - $195,000
1985 - $140,000.
</TABLE>
The above does not include Johnston's noncash benefits or payments to the
Chairman of options and stock appreciation rights (SARs) which would be added to
the above compensation. The last Proxy Statement, for the year ended June 30,
1995, states options and SARs given to the Chairman are worth $417,600 for
Johnston and $1,951,664 for Jupiter and that, in return for his Jupiter options,
the Board is giving the Chairman $2,616,487 plus options to purchase Johnston
common stock equivalent in value to $74,444 Jupiter National options.
Johnston's executive compensation practices, for part-time or full-time
work, raises a concern among shareholders. The executive compensation system
should be reviewed by an independent third party and the results shared with the
shareholders.
-18-
<PAGE> 21
Board of Directors' Response
The Board of Directors opposes this stockholder proposal. Implementation of
this proposal would burden the Company with additional costs while not providing
any reasonable benefit to the Company or its stockholders. The Board of
Directors, which is charged with management of the Company, has delegated the
authority to administer the Company's executive compensation policies to the
Compensation Committee of the Board of Directors. The Compensation Committee is
comprised entirely of outside, non-employee Directors of the Company. In making
determinations about executive pay and as described more fully in the
Compensation Committee's Report contained elsewhere in this proxy statement, the
Compensation Committee uses pre-established guidelines designed to align the
Company's financial interests with those of its executives and to aid the
Compensation Committee in ensuring that executive compensation is fair and
appropriate.
Since Mr. Shahinian's proposal focuses on the compensation of the Company's
Chairman, it should be noted that, as the Compensation Committee Report sets
forth, Mr. Chandler's compensation heretofore included contractually mandated
year-end payments based on a percentage of the Company's pre-tax profits. Those
year-end payment provisions were the same as those contained in the contracts of
Mr. Chandler's predecessors, although these contracts provided for significantly
higher base compensation than Mr. Chandler's. Effective January 1, 1997, Mr.
Chandler's contractually mandated compensation is $390,000, the same level that
prevailed at the beginning of the decade.
Mr. Shahinian asserts that, in return for his Jupiter options, Mr. Chandler
received $2,616,487 in cash when, in fact, as disclosed in the Company's last
annual report on Form 10-K, in satisfaction both of Mr. Chandler's Jupiter stock
options and in settlement of his Jupiter employment agreement, the Company: (i)
made a lump sum payment to Mr. Chandler of approximately $407,598, and (ii)
converted Mr. Chandler's options in Jupiter, including the 74,444 Jupiter
options referred to by Mr. Shahinian, into options of Johnston at comparable
values, all of which has been previously disclosed.
The Board of Directors believes that current procedures for establishing
executive compensation are adequate to ensure that executive compensation levels
are appropriate. The Board of Directors further believes that while Mr.
Shahinian's proposal would create expense to the Company, neither management nor
stockholders would gain any meaningful information from the report he proposes.
Thus, the Board of Directors believes that no further consideration of Mr.
Shahinian's proposal is warranted.
THE BOARD OF DIRECTORS STRONGLY RECOMMENDS THAT STOCKHOLDERS VOTE
"AGAINST" THIS PROPOSAL.
UNLESS INDICATED TO THE CONTRARY, PROXIES
WILL BE VOTED "AGAINST" THIS PROPOSAL.
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<PAGE> 22
COMPLIANCE WITH SECTION 16(a) OF THE EXCHANGE ACT
Section 16(a) of the Exchange Act requires the Company's executive
officers and directors, and persons who beneficially own more than ten percent
of the Company's Common Stock, to file initial reports of ownership and reports
of changes in ownership with the SEC. Persons subject to these reporting
requirements are also required by SEC regulations to furnish the Company with
copies of all Section 16(a) forms they file. Based solely on a review of
copies of the SEC reporting forms furnished to the Company and written
representations from the Company's executive officers and directors, the
Company believes that all required Section 16(a) reports were timely filed
during fiscal 1996, except for Mr. C. J. Kjorlien, a Director of the Company,
who inadvertently failed to report the sale of an aggregate 9,875 shares sold
in four transactions.
AVAILABILITY OF
ANNUAL REPORT TO STOCKHOLDERS AND REPORT ON FORM 10-K
Copies of the Company's Annual Report to Stockholders for fiscal 1996,
which includes certain financial information about the Company, are currently
being mailed, together with this Proxy Statement, to the Company's
stockholders. ADDITIONAL COPIES OF SUCH ANNUAL REPORT ALONG WITH COPIES OF THE
COMPANY'S ANNUAL REPORT ON FORM 10-K, FOR FISCAL 1996, AS FILED WITH THE
SECURITIES AND EXCHANGE COMMISSION (EXCLUSIVE OF EXHIBITS AND DOCUMENTS
INCORPORATED BY REFERENCE), ARE AVAILABLE TO STOCKHOLDERS WHO MAKE WRITTEN
REQUEST THEREFOR ADDRESSED TO: THE COMPANY SECRETARY, JOHNSTON INDUSTRIES,
INC., 105 THIRTEENTH STREET, COLUMBUS, GEORGIA 31901. COPIES OF THE ANNUAL
REPORT ON FORM 10-K ARE AVAILABLE WITHOUT CHARGE. COPIES OF EXHIBITS AND BASIC
DOCUMENTS FILED WITH THE ANNUAL REPORT ON FORM 10-K OR REFERENCED THEREIN WILL
BE FURNISHED TO STOCKHOLDERS UPON WRITTEN REQUEST AND PAYMENT OF THE COMPANY'S
EXPENSES IN FURNISHING SUCH DOCUMENTS.
INDEPENDENT AUDITORS
Deloitte & Touche LLP, independent auditors, were the Company's
auditors during fiscal 1996, and the Board of Directors has not yet discussed
the selection of the Company's auditors for fiscal 1997. A representative of
Deloitte & Touche LLP is expected to be present at the Meeting, will have an
opportunity to make a statement if he or she desires to do so, and is expected
to be available to respond to appropriate questions which stockholders might
have.
OTHER MATTERS
Management does not intend to present to the Meeting any business other
than the items stated in the "Notice of Meeting of Stockholders" and does not
know of any matters to be brought before the Meeting other than those referred
to above. If, however, any other matters requiring a vote of the stockholders
properly come before the Meeting or any adjournment thereof, the persons
designated as proxies will vote on each such matter in accordance with their
best judgment.
Whether or not you expect to be at the Meeting in person, please sign,
date and return promptly the enclosed proxy. No postage is necessary if the
proxy is mailed in the United States.
STOCKHOLDER PROPOSALS
Stockholder proposals to be presented at the 1998 Annual Meeting of
Stockholders must be received by the Secretary of the Company, 105 Thirteenth
Street, Columbus, Georgia 31901, at the principal executive offices of the
Company not later than January 15, 1998 to be eligible for inclusion in the
Company's 1998 proxy material.
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<PAGE> 23
APPENDIX A
STOCK INCENTIVE PLAN AMENDMENT
A. INTRODUCTION - Johnston Industries, Inc. (the "Company") desires
to amend the Amended and Restated Stock Incentive Plan for Key
Employees adopted by its Board on October 27, 1988 and approved by its
shareholders on December, 1988 (which upon the effectiveness of this
amendment will be known as the "Johnston Stock Incentive Plan") (the
"Plan") to increase the maximum aggregate number of shares subject to
the Plan by 500,000 and to provide for the automatic grant of options
to members of its Board who are not also employees or officers of the
Company or a subsidiary ("Non-Employee Directors"). The amendment
recognizes the essential role of Non-Employee Directors and provides
incentives to such directors as well as (as heretofore) to officers
and other key employees whose performance will contribute to the long
term success of the Company and its subsidiaries. The Plan as amended
will (i) strengthen the Company's ability to attract and retain
directors and employees of high competence and (ii) increase the
identity of interest of such directors and employees with those of the
Company's shareholders. Capitalized terms not otherwise defined in
this amendment have the meanings given them in the Plan as originally
adopted.
B. EFFECTIVENESS - This amendment shall become effective if it
shall be approved by the vote of a majority of the outstanding voting
shares entitled to notice of and to vote at the 1997 annual meeting of
shareholders. In the event of any conflict between the provisions of
this amendment and of the Plan as heretofore in effect, the provisions
of this amendment shall control. If shareholders do not approve this
amendment at the 1997 annual meeting, options granted to Non-Employee
Directors on April 30, 1997 shall be deemed null and void.
C. AUTOMATIC GRANT OF OPTIONS TO NON-EMPLOYEE DIRECTORS
(I) OPTION GRANT DATES. Non-qualified stock options to
purchase 5,000 shares (such number to be subject to
adjustment in the same manner as provided for outstanding
options in Section 12 of the Plan as originally adopted)
shall be granted automatically to each Non-Employee
Director on the last day that the Company's Shares are
traded on the New York Stock Exchange or other
national securities exchange upon which the Shares are
traded or if the Shares are not then listed on a national
securities exchange and are traded over-the-counter
on the date of the last trade as reported NASDAQ or if
not reported by NASDAQ the last trade which was
reported, in April of each year.
(II) PURCHASE PRICE. The purchase prices of Shares upon
exercise of an option shall be 100% of the fair market
value of the Shares on the date of grant of an option;
which shall be: (i) if the Shares are then listed on a
national securities exchange, the closing price of the
Shares on such date; provided, however, if on such date
the Shares were traded on more than one national
securities exchange, then the closing price on the
exchange on which the greatest volume of Shares were
traded on such day; (ii) if the Shares are not then listed
on a national securities exchange and are traded
over-the-counter, the last sale price of the Shares on
such date as reported by NASDAQ or, if not reported by
NASDAQ, the average of the closing bid and asked prices
for the Shares on such date; and (iii) if the Shares are
neither then listed on a national securities exchange nor
traded in the over-the-counter market, such value as the
Committee shall in good faith determine. If the Shares
are then listed on a national securities exchange or are
traded over-the-counter but are not traded on the date of
grant, then the purchase price of such shares shall be
the closing price on the last day prior thereto on which
such Shares were traded.
(III) EXERCISABILITY AND TERM OF OPTIONS. Each option
granted a Non-Employee Director under the Plan will become
exercisable in four equal annual installments, commencing
on the first anniversary of the date of grant. Each such
option granted under the Plan shall expire ten years from
the date of the grant, and shall be subject to earlier
termination as hereinafter provided.
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<PAGE> 24
(IV) TERMINATION OF SERVICE. In the event of the
termination of service on the Board by the holder of any
option, other than by reason of death as set forth
in paragraph (v) hereof or by reason of such holders
commencement of employment with the Company, the then
outstanding options of such holders may be exercised only
to the extent that they were exercisable on the date of
such termination and shall expire three months after such
termination, or on their stated expiration date, whichever
occurs first.
(V) DEATH. In the event of the death of the holder of
any option, each of the then outstanding options of such
holder will immediately mature in full and become
exercisable by the holder's legal representative at any
time within a period of six months after death, but in no
event after the expiration date of the term of the option.
(V) PAYMENT. Options may be exercised only upon
payment to the Company in full of the purchase price of
the Shares to be delivered. Such payment shall be made
only in cash or check at the time of purchase.
(VII) OPTIONS NON-ASSIGNABLE AND NON-TRANSFERABLE. Each
option and all rights thereunder shall be non-assignable
and non-transferable other than by will or the laws of
descent and distribution and shall be exercisable during
the holder's lifetime only by the holder or the holder's
guardian or legal representative.
(VIII) NO RIGHT TO CONTINUE AS A DIRECTOR. Neither the Plan
nor the granting of an option nor any other action taken
pursuant to the Plan, shall constitute or be evidence of
any agreement or understanding, express or implied, that a
Non-Employee Director has a right to continue as a
Director for any period of time, or at any particular rate
of compensation.
(IX) NO STOCKHOLDERS' RIGHTS FOR HOLDERS OF OPTIONS.
A holder of options shall have no rights as a shareholder
with respect to the Shares covered by options granted
hereunder until the date of the issuance of a stock
certificate therefore, and no adjustment will be made for
regular cash dividend distributions for which the record
date is prior to the date such certificate is issued.
(X) LIMITATION ON AMENDMENT. In order to comply with the
executive provisions of Rule 16b-3 under the Securities
Exchange Act of 1934, no amendment of these provisions
which might otherwise be permitted shall be made within
six months of any other amendment hereto, unless such
amendment shall be made to comport with changes in the
Internal Revenue Code, the Employee Retirement Income
Security Act or the rules thereunder.
D. SHARES SUBJECT TO THE PLAN - The first sentence of Section 3 of
the Plan as originally adopted is amended to increase the number
originally set forth therein by 500,000.
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<PAGE> 25
APPENDIX
JOHNSTON INDUSTRIES, INC.
105 THIRTEENTH STREET
COLUMBUS, GEORGIA 31901
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS OF JOHNSTON
INDUSTRIES, INC. (THE "COMPANY") IN CONNECTION
WITH THE COMPANY'S ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD ON JUNE 11, 1997.
The undersigned hereby appoints John W. Johnson and F. Ferrell Walton,
and each of them, with full power of substitution as proxies and attorneys-in-
fact on behalf and in the name of the undersigned to represent the undersigned,
at the 1997 Annual Meeting of Stockholders of Johnston Industries, Inc. to be
held on June 11, 1997 at 1:00 p.m., local time at the Company's offices located
at 105 Thirteenth Street, Columbus, Georgia 31901, and at any adjournment
thereof with respect to such business as may properly come before the meeting
or any and all adjournments thereof and to vote all shares of stock which the
undersigned would be entitled to vote if then and there personally present.
The proxies appointed hereby are instructed to vote as indicated herein
on the following proposals as more fully described in the Company's Notice of
Meeting of Stockholders and Proxy Statement, each dated May 15, 1997, receipt
of which is hereby acknowledged, and in their discretion on any other business
which may properly come before the meeting or any adjournment thereof.
THE COMPANY'S BOARD OF DIRECTORS RECOMMENDS VOTING FOR THE NOMINEES
SPECIFIED IN AGENDA ITEM NO. 1, FOR THE PROPOSAL SPECIFIED IN AGENDA ITEM NO. 2
AND AGAINST THE STOCKHOLDER PROPOSAL SPECIFIED IN AGENDA ITEM NO. 3, AND THE
PROXY WILL BE SO VOTED UNLESS OTHERWISE SPECIFIED.
<TABLE>
<CAPTION>
<S> <C> <C>
1. To elect J. Reid Bingham, David L. Chandler, John A. Friedman, William J. Hart, and Gaines R. Jeffcoat as directors of the
Company to serve until the next Annual Meeting of Stockholders and until their successors are elected and qualified;
/ / FOR all nominees (except as marked to the contrary below) / / WITHHOLD authority to vote for the five nominees
Instructions: To withhold authority to vote for any individual nominee, write that nominees' name in the space provided below:
- --------------------------------------------------------------------------------------------------------------------------------
2. To authorize the amendment of the Company's existing Amended and Restated Stock Incentive Plan for Key Employees;
/ / FOR / / AGAINST / / ABSTAIN
3. To approve the stockholder proposal requesting that the Compensation Committee of the Board of Directors institute a review of
the compensation paid to executive officers of the Company;
/ / FOR / / AGAINST / / ABSTAIN
all as set forth in the Proxy Statement.
</TABLE>
(Continued and to be signed on reverse side)
<PAGE> 26
(Continued from other side)
Please mark, then date and sign this proxy, exactly as your name(s)
appear hereon, and return this entire proxy card in the enclosed postage-paid
envelope. When shares are held by joint tenants, both should sign. When
signing as an attorney, executor, administrator, trustee, guardian or in any
other fiduciary capacity, please give full title as such. If a corporation,
please sign in full corporate name by the president or other authorized
officer. If a partnership, please sign in full partnership name by authorized
person.
Signed:
------------------------
-------------------------------
Dated: 1997
---------------------,
If you also expect to attend the
stockholders' meeting, the Board of
Directors request you check the box
below:
[ ] I/we plan to attend the meeting
This proxy when properly executed will be voted in accordance with the
specifications indicated hereon or it will be voted in accordance with the
recommendations of the Board of Directors FOR the nominees specified in Agenda
Item No. 1, FOR the proposal specified in Agenda Item No. 2 and AGAINST the
proposal specified in Agenda Item No. 3.
