<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 (AMENDMENT NO. )
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 Rule 14a-11(c) or Rule 14a-12.
Johnson Controls, Inc.
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(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 fee required.
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and
0-11.
(1) Title of each class of securities to which transaction applies:
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(2) Aggregate number of securities to which transaction applies:
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(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 state how it was determined):
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(4) Proposed maximum aggregate value of transaction:
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(5) Total fee paid:
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[ ] Fee paid previously with preliminary materials.
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[ ] 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:
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(2) Form, Schedule or Registration Statement No.:
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(3) Filing Party:
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(4) Date Filed:
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<PAGE> 2
[JOHNSON CONTROLS, INC. LOGO]
JOHNSON CONTROLS, INC.
5757 N. Green Bay Ave.
Milwaukee, Wisconsin 53209
ANNUAL SHAREHOLDERS MEETING
NOTICE AND PROXY STATEMENT
ANNUAL MEETING: January 26, 2000 Italian Community Center
2:00 p.m. 631 East Chicago
Milwaukee, WI 53202
RECORD DATE: November 18, 1999. If you were a shareholder at the
close of business on that date, then you may vote at
the meeting. If you hold the Company's Common Stock,
then you are entitled to one vote per share. If you
hold the Company's Preferred Stock (each share consists
of 10,000 units) you are entitled to two votes per
unit. There is no cumulative voting. On the record
date, 85,404,246 shares of our Common Stock were
outstanding and 261.0554 shares of our Preferred Stock
were outstanding.
AGENDA: The purpose of the meeting is to vote on the following
proposals:
1. The election of 4 directors.
2. The approval of PricewaterhouseCoopers LLP as our
independent auditors for 2000.
3. The approval of the 2000 Stock Option Plan.
4. Consideration of a shareholder proposal to adopt
global corporate standards.
5. To transact such other business as may properly come
before the Meeting and any adjournment thereof.
Unless you tell us on the proxy card to vote
differently, we will vote signed returned proxies "FOR"
the Board's nominees in agenda item 1 and "FOR" agenda
items 2 and 3. Unless you tell us on the proxy card to
vote differently, we will vote signed returned proxies
"AGAINST" the shareholder proposal referenced in agenda
item 4. The Board or proxy holders will use their
discretion on other matters that may arise at the
meeting. If a nominee cannot or will not serve as a
director, then the Board or proxy holders will vote for
a person whom they believe will carry on our present
policies.
<PAGE> 3
PROXIES SOLICITED BY: The Board of Directors.
FIRST MAILING DATE: The Company anticipates first mailing this proxy
statement on December 3, 1999.
REVOKING YOUR PROXY: You may revoke your proxy before it is voted at the
meeting. To revoke:
Deliver a signed, written revocation letter, dated
later than the proxy, to John P. Kennedy, Secretary, at
our Milwaukee address listed on the first page;
Submit a proxy with a later date; or
Attend the meeting and vote in person or by proxy.
Attending the meeting alone will not revoke your proxy.
PROXY SOLICITATION: The Company will primarily solicit proxies by mail and
will cover the expense of such solicitation. D.F. King
& Co., Inc., will help us solicit proxies for all
brokers and nominees at a cost of $11,000 plus their
expenses. Our officers and employees may also solicit
proxies for no additional compensation. We may
reimburse brokers or other nominees for reasonable
expenses they incur in sending these proxy materials to
you if you are a beneficial holder of our shares.
ANNUAL REPORT: The Company's 1999 Annual Report is being mailed to you
with this proxy statement.
YOUR COMMENTS: Your comments about any aspects of our business are
welcome. You may use the space provided on the proxy
card for this purpose, if desired.
PLEASE VOTE -- YOUR VOTE IS IMPORTANT
PROMPT RETURN OF YOUR PROXY WILL HELP REDUCE THE COST OF THIS SOLICITATION.
<PAGE> 4
TABLE OF CONTENTS
<TABLE>
<S> <C>
*ELECTION OF DIRECTORS...................................... 3
*SELECTION OF INDEPENDENT AUDITORS FOR FISCAL YEAR 2000..... 7
*RATIFICATION OF THE 2000 STOCK OPTION PLAN................. 8
*CONSIDERATION OF SHAREHOLDER PROPOSAL...................... 15
BOARD INFORMATION........................................... 17
BOARD COMPENSATION.......................................... 19
COMPENSATION COMMITTEE REPORT............................... 20
PERFORMANCE GRAPH........................................... 24
EXECUTIVE COMPENSATION...................................... 25
EMPLOYMENT AGREEMENTS....................................... 30
JOHNSON CONTROLS SHARE OWNERSHIP............................ 32
VOTING PROCEDURES........................................... 34
SECTION 16(A) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE..... 34
SUBMISSION OF SHAREHOLDER PROPOSALS AND DIRECTOR
NOMINATIONS............................................... 34
MAP TO ANNUAL MEETING....................................... 36
EXHIBIT A
</TABLE>
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* Agenda items for the Annual Meeting
2
<PAGE> 5
ELECTION OF DIRECTORS
BOARD STRUCTURE: The Board of Directors consists of 12 members. The
directors are divided into three classes. At each
annual meeting, the term of one class expires.
Directors in each class serve for three-year terms, or
until the directors earlier retirement pursuant to the
Board of Directors Retirement Policy.
BOARD NOMINEES
NOMINEES FOR TERMS TO EXPIRE AT THE 2003 ANNUAL MEETING:
<TABLE>
<S> <C>
[BARTH PHOTO] JOHN M. BARTH Director since 1997
Age 53
President, Chief Operating Officer and member of the Board
of Directors Johnson Controls, Inc., since September 1998
and Executive Vice President since 1991. In 1987, Mr. Barth
was named Vice President and General Manager of the Plastics
Technology Group. In 1990, he became Vice President and
General Manager of the Plastics Technology Group and the
Automotive Systems Group. Mr. Barth is a member of the
Executive Committee.
[BRUNNER PHOTO] PAUL A. BRUNNER Director since 1983
Age 64
President and Chief Executive Officer, Spring Capital Inc.,
Stamford, Connecticut (international investment management),
since 1985. President and Chief Executive Officer, ASEA,
Inc., 1982-1984. President and Chief Executive Officer,
Crouse Hinds Co., 1967-1982. Mr. Brunner is the Chairman of
the Audit Committee and member of Compensation Committee.
</TABLE>
3
<PAGE> 6
<TABLE>
<S> <C>
[MORCOTT PHOTO] SOUTHWOOD J. MORCOTT Director since 1993
Age 61
Chairman since 1990, President 1986-1996, and Chief
Executive Officer from 1989-1999 of Dana Corporation,
Toledo, Ohio (vehicular and industrial systems
manufacturer). Mr. Morcott is a director of CSX Corporation,
Dana Corporation and Phelps-Dodge Corporation. Mr. Morcott
is Chairman of the Compensation Committee and member of the
Directors Committee.
[WHITAKER JR. PHOTO] GILBERT R. WHITAKER JR. Director since 1986
Age 68
Dean and H.J. Nelson Professor of Business Economics, Jesse
Jones Graduate School of Management, Rice University since
June 1997. Professor of Business Economics, University of
Michigan, 1979 through June 30, 1997. Provost and Executive
Vice President for Academic Affairs, University of Michigan,
1990-1996. Mr. Whitaker served as Dean, School of Business
Administration, University of Michigan 1979-1990. Mr.
Whitaker is a director of Lincoln National Corporation and
Structural Dynamics Research Corp. Mr. Whitaker is Chairman
of the Pension and Benefits Committee.
</TABLE>
THE BOARD RECOMMENDS THAT YOU VOTE "FOR" ITS NOMINEES
CONTINUING DIRECTORS
TERMS EXPIRE AT THE 2001 ANNUAL MEETING:
<TABLE>
<S> <C>
[ANDREWS PHOTO] WILLIAM F. ANDREWS Director since 1991
Age 68
Chairman of Northwestern Steel and Wire Co., since 1999.
Chairman of Scovill Fasteners Inc., since 1995. Chairman,
President and Chief Executive Officer, Amdura Corporation
from 1993-1996. President and Chief Executive Officer, UNR
Industries Inc., Chicago, Illinois (diversified
manufacturer) from 1991-1993, President of Massey Investment
Co., Nashville, Tennessee (private investment company) from
1989-1990, and Chairman, CEO and President of Singer Sewing
Machine Company (SSMC) Inc., Shelton, Connecticut
(diversified manufacturer) from 1986-1989. Mr. Andrews is a
director of Black Box Corp., Dayton Superior Corporation,
Katy Industries, Navistar International Corporation,
Northwestern Steel & Wire Co., and Trex Co. Mr. Andrews is a
member of the Compensation and Pension and Benefits
Committees.
</TABLE>
4
<PAGE> 7
<TABLE>
<S> <C>
[BARNETT PHOTO] ROBERT L. BARNETT Director since 1986
Age 59
Executive Vice President and President, Commercial,
Government and Industrial Solutions Sector, Motorola, Inc.
(manufacturer of electronics products), Schaumburg,
Illinois, June 1998-present. Executive Vice President and
President, Motorola Inc., Land Mobile Products Sector,
Motorola Inc., March 1997 - March 1998. Corporate Vice
President, iDen Group, Motorola Inc., May 1995 - March 1997.
Consultant in the field of international communications
1992-1993. Vice-Chairman, Ameritech and President, Ameritech
Bell Group, American Information Technologies Corporation,
Chicago, Illinois (telecommunications) 1989-1993 and
President, Ameritech Enterprise Group, 1987-1989. Mr.
Barnett is a director of USG Corp., Central Vermont Public
Service. Mr. Barnett is a member of the Executive and the
Pension and Benefits Committees and the Chairman of the
Directors Committee.
[DAVIS PHOTO] WILLIE D. DAVIS Director since 1991
Age 65
President of All Pro Broadcasting Incorporated, Los Angeles,
California (radio broadcasting), since 1977. Mr. Davis is a
director of Alliance Bank Co., Dow Chemical Company, Kmart
Corporation, MGM Grand Inc., Sara Lee Corporation, Strong
Capital Management, MGM Inc., and WICOR, Inc. Mr. Davis is a
member of the Audit and the Directors Committees.
[TEERLINK PHOTO] RICHARD F. TEERLINK Director since 1994
Age 63
Retired Chairman of the Board and President and Chief
Executive Officer of Harley-Davidson, Inc., Milwaukee,
Wisconsin, December 1998 and June 1997, respectively. Mr.
Teerlink served as President and Chief Operating Officer of
Harley-Davidson since March 1988. Mr. Teerlink remains a
member of the board of directors of Harley- Davidson, Inc.
Mr. Teerlink is a director of Snap-on, Incorporated. He is a
member of the Audit and the Executive Committees.
</TABLE>
5
<PAGE> 8
TERMS EXPIRE AT THE 2002 ANNUAL MEETING:
<TABLE>
<S> <C>
[BLACK PHOTO] NATALIE A. BLACK Director since 1998
Age 49
Group President, Kohler Co., Kohler, Wisconsin (manufacturer
and marketer of plumbing products and furniture) since 1998.
Group Vice President -- Interiors from 1986 through 1998 and
Vice President from 1983 through 1986. Ms. Black has also
served as General Counsel for Kohler Co. since 1991. Ms.
Black is a member of the Directors Committee.
[CORNOG PHOTO] ROBERT A. CORNOG Director since 1992
Age 59
President, Chief Executive Officer and Chairman of the Board
of Directors of Snap-on, Incorporated, Kenosha, Wisconsin
(tool manufacturer) since 1991. Mr. Cornog is a director of
Snap-on Incorporated and Wisconsin Energy Corporation. Mr.
Cornog is a member of the Audit and the Executive
Committees.
[KEYES PHOTO] JAMES H. KEYES Director since 1985
Age 59
Chairman and Chief Executive Officer, Johnson Controls,
Inc., Milwaukee, Wisconsin. In 1985 Mr. Keyes was named
Executive Vice President and subsequently became Chief
Operating Officer and a member of the Board of Directors. He
became President of Johnson Controls, Inc., in 1986, its
Chief Executive Officer in 1988, and Chairman in 1993. Mr.
Keyes is a director of the Federal Reserve Bank of Chicago,
LSI Logic Corporation and Pitney Bowes, Inc. Mr. Keyes is
Chairman of the Executive Committee.
[LACY PHOTO] WILLIAM H. LACY Director since 1997
Age 54
President (1987 to 1996) and Chairman (1996 to present) and
Chief Executive Officer (1996-1998) of Mortgage Guaranty
Insurance Corporation (MGIC), and Chairman and Chief
Executive Officer of its parent company, MGIC Investment
Corporation, Milwaukee, Wisconsin (secondary mortgage market
activities) since 1987. Mr. Lacy is a member of the
Compensation and the Pension and Benefits Committees.
</TABLE>
6
<PAGE> 9
SELECTION OF INDEPENDENT AUDITORS FOR FISCAL YEAR 2000
We ask that you approve the appointment of
PricewaterhouseCoopers LLP as our independent auditors:
PricewaterhouseCoopers LLP, formally known as Price
Waterhouse, has audited our accounts for many years. The
Board appointed them as independent auditors for 2000,
upon recommendation of the Audit Committee.
We expect a representative of PricewaterhouseCoopers to
attend the meeting, respond to appropriate questions and
be given an opportunity to speak.
THE BOARD RECOMMENDS THAT YOU VOTE "FOR" THE
RATIFICATION OF THE APPOINTMENT OF
PRICEWATERHOUSECOOPERS AS JOHNSON CONTROLS INDEPENDENT
AUDITORS FOR 2000.
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<PAGE> 10
RATIFICATION OF 2000 STOCK OPTION PLAN
The Board of Directors has adopted, subject to
shareholder approval and ratification, a new 2000 Stock
Option Plan. The full text of the Stock Option Plan is
set forth in Exhibit A attached hereto.
MATERIAL TERMS OF THE 2000 STOCK OPTION PLAN
PURPOSE: The 2000 Stock Option Plan (the "Plan") is intended to
provide Stock Options ("Options") and Stock
Appreciation Rights ("SARs") to induce certain officers
and other key employees to remain in the employ of the
Company or its subsidiaries and to encourage such
employees to secure or increase on reasonable terms
their stock ownership in the Company. The Board of
Directors 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.
STOCK SUBJECT TO THE
PLAN: The total number of shares of the Company's Common
Stock available for awards under the Plan will be 15%
of the shares of Common Stock outstanding on the
effective date of the Plan reduced by the number of
shares of Common Stock subject to awards made under any
prior stock option plan of the Company and outstanding
upon the effective date of the Plan. This number will
be subject to adjustment in the event of a stock
dividend, stock split or similar change in outstanding
shares. In addition, shares that would have become
available under any prior stock option plan due to the
lapse of an outstanding award or similar events will
instead be available for awards under the Plan.
ELIGIBILITY: The Company may grant Options or SARs to officers and
other key employees of the Company and its
subsidiaries, including the named executive officers
(the "Participants"). The maximum number of shares of
Common Stock covered by Options that the Company may
grant to any Participant within any two consecutive
calendar year periods may not exceed 500,000 shares.
The Company may not grant an Option or SAR 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
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<PAGE> 11
of a subsidiary will not be eligible to receive any
Option or SAR under the Plan.
ADMINISTRATION: The Plan will be administered by the Compensation
Committee of the Board of Directors (the "Committee").
The Committee will have complete authority to establish
rules and regulations for the administration of the
Plan and to determine the individuals to whom, and the
time or times at which Options or SARs shall be
granted, the types of Options, the Option Periods,
limitations on exercise and the number of shares to be
subject to each Option. The Committee will also have
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 and to make all other determinations
necessary or advisable for the administration of the
Plan.
OPTIONS: Some Options issued under the Plan are intended to be
Incentive Stock Options ("ISOs") within the meaning of
Section 422 of the Internal Revenue Code and the
remainder of the Options issued pursuant to the Plan
will constitute nonqualified Options.
OPTION PRICE: The per share Option price will be determined by the
Committee and shall be an amount not less than 100% of
the fair market value of the stock on the date the
Option is granted. The consideration received by the
Company for the award of any Option includes the
continued service of the Participant.
OPTION PERIOD: The Committee will determine the term of each Option.
However, the term of an Option may not exceed a period
of 10 years from the date of its grant. The Option will
terminate immediately upon termination of employment
other than by reason of early or normal retirement,
death or total and permanent disability. Unless the
Option expires earlier under the terms of the
Participant's Option Agreement, Options may be
exercised no later than 60 months (three months in the
case of ISOs) after termination of employment by reason
of death, early or normal retirement or total and
permanent disability.
EXERCISE OF OPTIONS; A Participant may not exercise an Option for a period
DEFERRAL OF SHARES: of at least six months commencing on the date of grant
except under certain conditions in the event of a
change in control of the Company. Payment of the Option
price may be made in cash or, if permitted by the
applicable Option Agreement, by delivery of shares of
Common Stock equivalent in fair market value, or if
permitted by the
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<PAGE> 12
applicable Option Agreement, partly in cash and partly
in shares of Common Stock. The Committee may provide
one or more means to enable Participants and the
Company to defer delivery of shares of Common Stock
deliverable upon exercise of an Option on such terms
and conditions as the Committee may determine.
WITHHOLDING: A Participant may, if permitted by the applicable
Option Agreement, satisfy the Company's withholding tax
requirements by electing to have the Company withhold
shares of Common Stock otherwise issuable under the
Option or to deliver to the Company shares of Common
Stock having a fair market value on the date income is
recognized on the exercise of a nonqualified Option
equal to the minimum amount required to be withheld.
The Committee shall establish rules governing these
withholding elections, and these elections will be made
at the times required to conform with applicable
securities laws.
MAXIMUM VALUE OF The aggregate fair market value of the stock for which
ISOS: an ISO is 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 may not
exceed $100,000. To the extent the fair market value of
the shares of Common Stock attributable to ISOs first
exercisable in any calendar year exceeds $100,000, the
excess portion of the ISO will be treated as
nonqualified Options.
SARS: The Company may grant SARs separate from any Option
granted under the Plan to any participant. SARs entitle
the Participant to receive an amount equal to the
excess of the fair market value of one share of Common
Stock on the date of exercise over the per share grant
price multiplied by the number of shares in respect of
which the other SARs will have been exercised.
TERMINATION AND The Plan will terminate on December 31, 2009. The Board
AMENDMENT: of Directors may amend or terminate the Plan earlier,
but the consent of the Participants is required for any
amendment or termination that would adversely affect
outstanding options. The Company's shareholders must
approve any modifications for which shareholder
approval is required by applicable law.
TRANSFERABILITY OF A Participant may not transfer an Option or SAR during
OPTIONS AND SARS: his or her lifetime other than (1) by will or by the
laws of descent or distribution, (2) pursuant to
qualified domestic relations order or, as designated
transferable by the Compensation Committee (3) to his
or her spouse, children or grandchildren ("Immediate
Family Members"),
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a partnership in which the only partners are the
Participant's Immediate Family Members, or a trust or
trusts established solely for the benefit of the
Participant's Immediate Family Members, provided that
there may be no consideration for any such transfer by
a Participant.
CHANGE OF CONTROL: The Options and SARs will become immediately
exercisable in the event of certain changes of control
of the Company. Also, during the 60-day period from and
after a change of control of the Company, each
Participant will have the right to elect to surrender
all or part of any Option and to receive in lieu
thereof cash in the amount by which the value per share
on the date of such election exceeds the Option price
per share ("LSARs"). The value of the share is
determined by the greater of highest reported sales
price of a share during the 60-day period prior to the
date of the change of control of the Company, and the
highest price per share paid in certain transactions
constituting a change of control.
REPRICING: Neither the per share Option price for any outstanding
Option granted under the Plan nor the per share grant
price for stock appreciation rights granted under the
Plan may be decreased after the date of grant. No
outstanding Option or stock appreciation right granted
under the Plan or a Prior Plan may be surrendered to
the Company as consideration for the grant of a new
Option or stock appreciation right with a lower
exercise or grant price.
FEDERAL INCOME TAX CONSEQUENCES
The Federal income tax consequences described in this
section are based on laws and regulations in effect on
the date of this proxy statement and future changes in
those laws and regulations may affect the tax
consequences described below. No discussion of state
income tax treatment has been included.
INCENTIVE STOCK Options granted under the Plan which constitute ISOs
OPTIONS: will, in general, be subject to the following Federal
income tax treatment.
- The grant of an ISO does not give rise to any income
tax consequences to either the Company or the
Participant.
- No deduction is allowed to the Company on a
Participant's exercise of an ISO.
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<PAGE> 14
- A Participant's exercise of an ISO does not result in
ordinary income to the Participant for regular tax
purposes, but may result in the imposition of or an
increase in alternative minimum tax. If shares
acquired upon exercise of an ISO are not disposed of
within the same taxable year of the ISO exercise, the
excess of the fair market value of the shares at the
time the ISO is exercised over the option price is
included in the Participant's computation of
alternative minimum taxable income in the year of
exercise.
- If shares acquired upon the exercise of an ISO are
disposed of within two years of the date of the
option grant, or within one year of the date of the
option exercise, the Participant recognizes ordinary
taxable income at the time of the disposition to the
extent that the fair market value of the shares at
the time of exercise exceeds the option price, but
not in an amount greater than the excess, if any, of
the amount realized on the disposition over the
option price. Capital gain (long-term or short-term
depending upon the holding period) is recognized by
the Participant at the time of such a disposition to
the extent that the amount of proceeds from the sale
exceeds the fair market value at the time of the
exercise of the ISO. Capital loss (long-term or
short-term depending upon the holding period) is
recognized by the Participant at the time of such a
disposition to the extent that the fair market value
at the time of the exercise of the ISO exceeds the
amount of proceeds from the sale. The Company is
entitled to a deduction in the taxable year in which
the disposition is made in an amount equal to the
amount of ordinary income recognized by the
Participant.
- 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 in a taxable transaction, the
Participant recognizes long-term capital gain or loss
at the time of the disposition in an amount equal to
the difference between the amount realized by the
Participant on the disposition and the Participant's
basis in the shares. The Company will not be entitled
to any income tax deduction with respect to the ISO.
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<PAGE> 15
NONQUALIFIED STOCK Options granted under the Plan which do not qualify as
OPTIONS: ISOs will, in general, be subject to the following
Federal income tax treatment:
- The grant of a nonqualified option does not give rise
to any income tax consequences to either the Company
or the Participant.
- The exercise of a nonqualified option generally
results in ordinary taxable income to the Participant
in the amount equal to the excess of the fair market
value of the shares at the time of exercise over the
option price. A deduction from taxable income is
allowed to the Company in an amount equal to the
amount of ordinary income recognized by the
Participant.
- Upon a subsequent taxable disposition of shares, a
Participant recognizes short-term or long-term
capital gain (or loss) depending on the holding
period, equal to the difference between the amount
received and the tax basis of the shares, usually the
fair market value at the time of exercise.
STOCK APPRECIATION Any SAR and LSAR granted under the Plan, will in
RIGHTS: general, be subject to the following Federal income tax
treatment:
- The grant of a SAR or LSAR does not give rise to any
income tax consequences to either the Company or the
Participant.
- Upon the exercise of a SAR or LSAR, the Participant
recognizes ordinary income equal to the amount of any
cash plus the fair market value of any shares of
Common Stock received. The Company is generally
allowed a deduction in an amount equal to the income
recognized by the Participant.
INTERNAL REVENUE Section 162(m) of the Internal Revenue Code limits the
CODE Company's income tax deduction for compensation paid in
SECTIONS 162(M) AND any taxable year to certain executive officers to
280G $1,000,000 per individual. Amounts in excess of
$1,000,000 are not deductible unless one of several
exceptions apply. The Committee intends to grant awards
under the Plan that are designated, in most cases, to
qualify for one such exception, the performance-based
compensation exception. Grants of Options and SARs can
be structured so as to qualify for this exception. The
Company does not anticipate that Section 162(m) will
have a material impact on its ability to deduct
compensation payable under the Plan. Section 280G of
the Internal Revenue Code limits the Company's income
tax deduction in the event there is a
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change in control of the Company. Accordingly, all or
some of the amount which would otherwise be deductible
may not be deductible with respect to those Options,
SARs and LSARs that become immediately exercisable in
the event of a change in control of the Company.
OTHER DISCLOSURES
MARKET PRICE OF The closing price of a share of the Common Stock on the
COMMON STOCK: New York Stock Exchange on November 18, 1999 was
$58.00.
NEW PLAN BENEFITS: The Company cannot determine the number of Options to
be received by all current executive officers as a
group and all other key employees as a group. In fiscal
1999, however, approximately 848 employees received
option grants under the current stock option plan. See
"Option/SAR Grants in Fiscal Year 1999" for information
relating to the stock options and stock appreciation
rights granted to the Company's five most highly
compensated executive officers. The number of Options
will be determined by the Committee pursuant to the
terms of the Plan.
REQUIRED VOTE: The affirmative vote of a majority of the votes cast on
the proposal by shareholders of the Company's Common
Stock and Preferred Stock units is required for
approval and ratification of the Plan, provided that a
majority of the outstanding shares of the Company's
Common Stock and Preferred Stock are voted on the
proposal. Assuming such proviso is met, any shares not
voted (whether by abstention, broker nonvote or
otherwise) have no impact on the vote. Proxies
solicited by the Board of Directors will be voted "FOR"
approval and ratification of the proposed 2000 Stock
Option Plan unless a shareholder specified otherwise.
THE BOARD RECOMMENDS THAT YOU VOTE "FOR" THE
RATIFICATION OF THE 2000 STOCK OPTION PLAN.
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<PAGE> 17
SHAREHOLDER PROPOSAL
Two shareholders, the Benedictine Sisters, 530 Bandera Road, San Antonio, Texas,
78228, owner of 260 shares of Johnson Controls Common Stock, and the General
Board of Pension and Health Benefits of the United Methodist Church, 1201 Davis
Street, Evanston, Illinois, 60201, owner of 10,000 shares of Johnson Controls
Common Stock, have informed the Company that they intend to present jointly the
following proposal at the meeting:
PROPOSAL FOR A GLOBAL SET OF CORPORATE STANDARDS
Whereas, our company, as a global corporation, faces numerous complex problems
which also affect our interests as shareholders. The international context
within which our company operates is becoming increasingly diverse as we enter
the new millennium.
Companies operating in the global economy are faced with important concerns
arising from diverse cultures and political and economic contexts. These
concerns require management to address issues beyond the traditional business
focus. These include human rights, workers' right to organize and bargain
collectively, non-discrimination in the workplace and sustainable community
development. Companies should find effective ways to eliminate the use of child
labor, forced labor and any unecological practices.
We believe global companies need to operationalize comprehensive codes of
conduct, such as those found in the "Principles for Global Corporate
Responsibility: Bench Marks for Measuring Business Performance," developed by an
international group of religious investors. Companies need to formulate
policies, programs and practices to address the challenges they face in the
global marketplace.
A New York Times editorial stated, "[Corporations] should hold themselves to
some guidelines. Their own practices should not be abusive, even if local laws
allow it. This means giving workers wages they can live on and good working
conditions." ("Corporations and Conscience," New York Times, 12/6/98).
Our company should be in a position to assure Shareholders that its employees
are treated fairly and paid a sustainable living wage wherever they work in the
global economy. One important element of ensuring compliance is the utilization
of independent monitors made up of respected local human rights, religious, and
other non-governmental organizations. A number of global companies are involved
in the development of credible code enforcement mechanisms that include
independent monitoring.
Improving the quality of life for employees and their communities can lead to
productivity and enhance the bottom line for the company.
RESOLVED, the shareholders request the Board of Directors to review or amend,
where applicable, its code or standards for its international operations and to
report a summary of this review to shareholders by October 2000.
15
<PAGE> 18
SUPPORTING STATEMENT
We recommend the review include the following areas:
1. A description of policies which are designed to protect human
rights -- civil, political, social, cultural, and economic -- consistent with
respect for human dignity and international labor rights standards.
2. A report of efforts to ensure that the company does not employ children under
the age of fifteen, or younger than the age of completing compulsory education
in the country of manufacture where such age is higher than fifteen.
3. A report of company policies ensuring that there is no use of forced labor,
whether in the form of prison labor, indentured labor, or bonded labor.
4. Establishment of consistent standards for workers' health and safety,
practices for handling hazardous wastes and protection of the environment, as
well as promoting a fair and dignified quality of life for workers and their
communities.
We believe a company poised to compete in the 21st Century needs comprehensive
global standards to guide them.
RECOMMENDATION OF THE BOARD OF DIRECTORS
THE BOARD OF DIRECTORS RECOMMENDS A VOTE "AGAINST" THE PROPOSAL.
The Company has an ethics policy which addresses a number of important issues:
e.g., antitrust, equal employment, the environment, safety, the security of
company information and funds, conflicts of interest, etc. This shareholder
proposal would have the Company single out the issues of child labor and forced
labor for special treatment. While these issues may be important, they are no
more important than the other subjects addressed by the Company's ethics policy.
Furthermore, such practices have not been associated with the Company or its
industries.
The Company has adopted an ethics policy which clearly states that the use of
child labor or forced labor is strictly prohibited. In addition, the Company
promotes the health and safety of its employees throughout the world and
consistently seeks to routinely review and improve workplace conditions to
ensure a safe and healthful workplace. The company has extensive procedures in
place to assure compliance with such policies. The ethics policy is translated
into thirteen different languages and distributed to all employees throughout
the world. All managers are required to sign certificates of compliance with the
ethics policy. The Company's law department conducts training sessions
throughout the world to educate its employees on such policies and their
responsibilities under them. The Company's internal audit department monitors
compliance with such procedures as part of its scheduled audits of the Company's
global operations. A "hotline" exists and is publicized for use by employees to
report any failures in compliance. These matters are regularly reviewed with the
Audit Committee of the Board of Directors of the Company.
16
<PAGE> 19
FOR THESE REASONS, YOUR BOARD OF DIRECTORS RECOMMENDS A VOTE "AGAINST" THE
PROPOSAL.
The affirmative vote of the holders of a majority of the shares of the Company's
common stock present in person or by proxy at the 2000 Annual Meeting, and
entitled to vote on this proposal, is required to approve it.
BOARD INFORMATION
BOARD MEETINGS: In 1999 the Board held a total of six regular quarterly
and special meetings. All of the directors attended at
least 90% of his or her Board and committee meetings.
BOARD COMMITTEES: EXECUTIVE COMMITTEE: The primary functions of the
committee are to exercise all the powers of the Board
when the Board is not in session, as permitted by law.
The Executive Committee held no meetings last year.
Members: Mr. Keyes, Chairman, and Messrs. Barnett,
Barth, Cornog and Teerlink.
AUDIT COMMITTEE: The primary functions of the committee
are to:
- Review the internal controls established by
management;
- Assess the financial reporting process and selection
of accounting policies;
- Review management's evaluation and proposed selection
of independent accountants;
- Review the audit plans prepared by internal audit and
independent accountants;
- Review significant issues concerning litigation,
contingent liabilities, tax and insurance as
reflected in periodic reports to the SEC;
- Review management information systems;
- Review and monitor compliance procedures; and
- Report the results of these activities to the Board
on a periodic basis.
The Audit Committee held three meetings last year. All
members are non-employee directors. Members: Mr.
Brunner, Chairman, and Messrs. Cornog, Davis, and
Teerlink.
17
<PAGE> 20
COMPENSATION COMMITTEE: The primary functions of the
committee are to:
- Recommend to the Board the selection and retention of
officers and key employees;
- Recommend salary structures, officer gradings, and
salaries for elected officers;
- Administer and recommend amendments to the executive
compensation plans;
- Review and recommend salary adjustments of the Chief
Executive Officer;
- Recommend to the Board bonus awards, income and other
compensation to executive officers;
- Recommend officer compensation packages and the
approval of disclosure statements;
- Review the Company's executive compensation programs
with outside consultants; and
- Recommend management succession.
The Compensation Committee held four meetings last
year. Members: Mr. Morcott, Chairman, and Messrs.
Andrews, Brunner and Lacy.
DIRECTORS COMMITTEE: The primary functions of the
committee are to:
- Recommend to the Board nominees for directors;
- Consider shareholder nominated candidates for
election as directors;
- Recommend the size and composition of the Board;
- Develop guidelines and criteria for the
qualifications of directors;
- Recommend director compensation programs;
- Recommend committees and committee structure for the
Board;
- Recommend performance criteria for the Board and to
review its performance;
- Review and recommend corporate governance practices
and policies of the Company; and
- Review conflicts of interest that may affect
directors.
18
<PAGE> 21
The Directors Committee held three meetings last year.
Members: Mr. Barnett, Chairman, Ms. Black and Messrs.
Davis and Morcott.
PENSION AND BENEFITS COMMITTEE: The primary functions
of the committee are to:
- Review actuarial assumptions and actuarial valuation
of the pension plans on an annual basis;
- Review investment policies of the funds of employee
benefit plans;
- Select and terminate investment managers as
appropriate; Review with investment advisors past
performance and current investment strategy;
- Review and approve the adoption of any new trust
agreements or master trusts implementing the plans;
- Monitor Company policies affecting employee benefit
plans; and
- Review plan provisions annually, and propose
amendments when necessary.
The Pension and Benefits Committee held five meetings
last year. Members: Mr. Whitaker, Chairman, and Messrs.
Andrews, Barnett and Lacy.
BOARD COMPENSATION
RETAINER AND FEES: Non-employee directors receive a $39,000 annual
retainer. To encourage such directors to own our
shares, they receive 50% of their retainer in our
Common Stock each year. The stock is priced as of the
date of the Annual Meeting. New Directors also receive
a grant of 400 shares of Common Stock upon election or
appointment and a pro rata share of the annual retainer
for the remainder of that year. This stock is priced as
of the date of the first meeting of the Board at which
the new director participates. Directors also receive
$1,500 for each Board or committee meeting they attend,
or $2,000 for each meeting they attend of which they
are the Chairperson. We also reimburse directors for
any related expenses.
RETIREMENT PLAN: The former Directors' Retirement Plan was discontinued
for Fiscal 1999 and was replaced by a Director Share
Unit Plan. Non-employee directors are eligible to
participate in the Director Share Unit Plan. The
Company credits $25,000 worth of stock units annually
into each non-
19
<PAGE> 22
employee director's account at the then current market
price. Such units are accumulated and credited with
dividends until retirement at which time the units will
be paid out based upon the market price of the Common
Stock at that time.
MEDICAL PLAN: Current directors who are not covered by other
insurance and who are under 70 years of age may
purchase medical coverage on the same basis as Company
employees.
COMPENSATION COMMITTEE REPORT
THE COMMITTEE: The Compensation Committee is composed only of
independent directors. The committee exercises the
Board's powers in compensating executive officers of
our Company and its subsidiaries. We make every effort
to see that our compensation program is consistent with
the values of our Company and furthers its business
strategy.
OVERALL OBJECTIVES: The Company aligns executive compensation with its
values and business objectives. The objectives target
customer satisfaction, technology, growth, market
leadership and shareholder value. The Compensation
Committee has established a program to:
- Attract and retain key executives critical to the
long-term success of the Company.
- Reward executives for long-term strategic management
and the enhancement of shareholder value.
- Integrate compensation programs, which can focus on
after-tax return on shareholders equity, return on
investment and growth.
- Support a performance-oriented environment that
rewards performance not only with respect to Company
goals but also Company performance as compared to
that of industry performance levels.
- Preserve the federal income tax deductibility of
compensation paid. Accordingly, the Company has taken
appropriate actions to preserve the deductibility of
annual incentives, long-term performance plan
payments, and stock option awards. However, the
Committee may authorize payments that may not be
deductible if it believes that this is in the best
interests of the Company and its shareholders.
EXECUTIVE
COMPENSATION
GENERALLY: The Compensation Committee reviews executive pay each
year. Compensation depends on many factors, including
20
<PAGE> 23
individual performance and responsibilities, future
challenges and objectives, and how he or she might
contribute to our future success. We also look at the
Company's financial performance and the compensation
levels at comparable companies.
To meet the objectives, we studied competitive
compensation data based on surveys provided to the
Committee by an independent compensation consultant.
The survey for officers and senior managers involved 22
companies. We made adjustments to account for
differences in annual sales of our Company and those
companies in the survey.
TOTAL COMPENSATION: Annual executive compensation consists of a base salary
and incentive compensation.
Approximately 73% of the total compensation paid to the
executive officer group is performance related. This is
comparable to the average of the companies in the
executive compensation survey. Doing so helps encourage
performance that increases the value of your shares.
The Committee sets target minimum and maximum
performance levels for our annual and long-term
incentive plans in accordance with return on
investment, growth and industry performance objectives.
Doing so motivates officers to meet and exceed goals
and performance objectives and enhance shareholder
value.
BASE SALARY: The Committee determines the levels of salary for key
executive officers and a salary range for other
executive officers. Factors considered are:
- Salary survey comparison results;
- Prior year salary;
- Changes in individual job responsibilities;
- Past performance of individuals; and most
importantly,
- Achievement or trends toward achievement of specified
Company goals.
ANNUAL INCENTIVES: The Committee sets an annual incentive award formula
under the Executive Incentive Compensation Plan (EICP).
The award is based on specific benchmarks that are
consistent with our annual and long-term strategic
planning objectives. These benchmarks are also based on
achievement of business plans that the Board has
approved that include goals of improved performance
over the previous year and take into account industry
growth and cycles.
21
<PAGE> 24
At the end of the fiscal year, the Committee applies
the formula to objective performance results to
determine the executive's award for the year.
LONG-TERM
INCENTIVES: All executive officers participate in the Long Term
Performance Plan (LTPP), which serves to motivate
executives to achieve longer-term objectives by
providing incentive compensation based on our
performance over a three-year period. Under the LTPP,
the Committee assigns an executive a contingent
performance award. The executive may earn this award
based upon the Company's return on shareholder equity
during the specified three-year period relative to the
Standard & Poor's Manufacturers Diversified Industrial
Index median return on shareholders' equity over the
same period. At the end of the period, the Committee
determines the Company's relative performance results
to determine the actual LTPP award amount.
STOCK OWNERSHIP
GUIDELINES: The Executive Stock Ownership Policy requires all
officers and senior managers in each business group,
within five years of becoming subject to the Policy, to
hold our Common Stock in an amount of one to three
times their annual salary.
The 1995 Common Stock Purchase Plan for Executives
(CSPPE) facilitates the acquisition of common stock by
executives subject to the Executive Stock Ownership
Policy. Participants in the CSPPE may deduct from their
pay up to $2,500 per month to purchase shares of Common
Stock. The price of each share is 100% of the average
price of shares purchased by Firstar Bank, N.A as agent
for the participants. No brokerage fees or commission
are charged and the Company bears the expense of
administering the CSPPE.
STOCK OPTION
PROGRAM: The Committee grants stock options and stock
appreciation rights (SARs) under the 1992 Stock Option
Plan. The Committee determines which individuals are
awarded stock options and SARs, the terms at which
option grants shall be made, the terms of the options,
and the number of shares subject to each option. In
1999, compensation to executives through stock options
and SARs and the LTPP, taken together, was targeted at
the 50th percentile of such compensation granted by
similar companies as identified in the survey.
SAVINGS AND
INVESTMENT PLAN
(401K): Executive officers may participate in the Company's
Savings and Investment Plan, which includes Company
contributions to the plan, and an Equalization Benefit
Plan under which certain executives are entitled to
additional benefits that cannot be paid under qualified
plans due to
22
<PAGE> 25
Internal Revenue Code limitations. Employee and Company
contributions in excess of qualified plan limits are
accounted for as if invested in various accounts.
CEO COMPENSATION Mr. Keyes' total compensation is based on our Company's
outstanding performance, his individual performance,
executive compensation levels at other companies, the
desire to retain his services and terms of his
employment agreement. His salary and incentives reflect
the leadership, vision and focus he has provided to our
Company.
Mr. Keyes' base salary increased to $1,030,000 in 1999
from $975,000 in 1998. This salary approximated the
average base salary for other chief executive officers
for the 22 companies reviewed.
Approximately 80% of Mr. Keyes' compensation is tied to
performance goals. Mr. Keyes' fiscal 1999 EICP award of
$1,844,000 is based upon the return on shareholder's
equity and operating income growth for the Company for
fiscal 1999 and represents 74% of the maximum amount
available under the criteria set forth by the
Committee. In fiscal 1999, Mr. Keyes received payment
under the LTPP of $864,000, which is based upon the
Company's return on shareholder equity over the past
three fiscal years and represents 100% of the maximum
amount available under the criteria established by the
Committee. Mr. Keyes received an option award of
175,000 shares on November 18, 1998.
Southwood J. Morcott, Chairman
William F. Andrews
Paul A. Brunner
William H. Lacy
Members, Compensation Committee
23
<PAGE> 26
PERFORMANCE GRAPH
EXPLANATION OF THE
GRAPH: The line graph below compares the cumulative total
shareholder return on our Common Stock with the cumulative total return of
companies on the Standard & Poor's 500 Stock Index and
the S&P Manufacturers (Diversified Industrial) Index.
This graph is based on the market price of the Common
Stock and assumes the reinvestment of dividends.
COMPARISON OF FIVE YEAR CUMULATIVE TOTAL RETURN AMONG S&P 500 INDEX,
S&P MANUFACTURERS (DIVERSIFIED INDUSTRIAL)
INDEX AND JOHNSON CONTROLS, INC.
PERFORMANCE GRAPH
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------
COMPANY/INDEX 9/94 9/95 9/96 9/97 9/98 9/99
- -----------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
Johnson Controls Inc. 100 130.9 158.8 214.1 204.4 296.1
- -----------------------------------------------------------------------------------------------
S&P Manufacturers (Diversified Industrial) 100 133.3 171.8 239.2 215.6 337.9
- -----------------------------------------------------------------------------------------------
S&P 500 Comp-Ltd 100 129.7 156.1 219.2 239.0 305.5
- -----------------------------------------------------------------------------------------------
</TABLE>
Assumes $100 invested on September 30, 1994 in S&P 500 Index, S&P Manufacturers
(Diversified Industrial) Index and Johnson Controls, Inc., and dividends are
reinvested at the end of month in which they are paid.
24
<PAGE> 27
EXECUTIVE COMPENSATION
The following table summarizes the compensation we paid
for the past three fiscal years to each of the five
most highly compensated executive officers, including
the Chief Executive Officer.
SUMMARY OF COMPENSATION TABLE
<TABLE>
<CAPTION>
OTHER ANNUAL OPTIONS/ LONG-TERM ALL OTHER
NAME AND FISCAL SALARY BONUS COMPENSATION SARS INCENTIVE COMPENSATION
PRINCIPAL POSITION YEAR ($) ($) ($)(1) (#)(2) PAYOUTS($) ($)(3)
------------------ ------ ------ ----- ------------ -------- ---------- ------------
<S> <C> <C> <C> <C> <C> <C> <C>
James H. Keyes 1999 1,016,256 1,844,000 175,000 864,000 89,344
Chairman and Chief 1998 956,250 826,000 -- 120,000 810,000 78,064
Executive Officer 1997 875,001 689,000 -- 120,000 730,000 67,714
John Barth 1999 606,255 910,000 90,000 378,000 50,004
President and Chief 1998 537,498 458,000 -- 60,000 299,000 42,791
Operating Officer 1997 487,503 371,000 -- 48,000 277,000 34,966
Stephen A. Roell 1999 417,507 554,000 45,000 238,000 32,245
Senior Vice 1998 373,752 270,000 -- 40,000 223,000 26,526
President and 1997 348,747 246,000 -- 34,000 202,000 26,643
Chief Financial
Officer
Giovanni Fiori 1999 397,503 492,000 45,000 148,000 --
Vice President 1998 324,458 310,000 -- 24,000 138,000 --
Automotive Systems 1997 301,359 197,000 -- 24,000 155,000 --
Group
Michael F. Johnston 1999 397,503 451,000 45,000 130,000 31,790
Vice President 1998 318,330 310,000 -- 24,000 118,000 23,913
Automotive Systems 1997 266,253 203,000 -- 20,000 86,000 21,176
Group
</TABLE>
- -------------------------
(1) The aggregate amount of "Other Annual Compensation" which includes
perquisites and personal benefits was less than the required reporting
threshold (the lesser of $50,000 or 10% of the officer's annual salary and
bonus for the year).
(2) The Options/SARs reflect the effects of the 2 for 1 stock split which took
place on March 31, 1997.
(3) "All Other Compensation" consists of contributions by the Company on behalf
of the named individuals to the Company's Savings and Investment plan.
25
<PAGE> 28
STOCK OPTIONS AND
STOCK APPRECIATION
GRANTS: The following table lists our grants during 1999 of
stock options and tandem SARs to the officers named in
the Summary Compensation Table.
OPTIONS/SAR GRANTS IN FISCAL YEAR 1999(1)
<TABLE>
<CAPTION>
INDIVIDUAL GRANTS
-----------------------------------------
% OF TOTAL POTENTIAL REALIZABLE
OPTIONS/SARS VALUE AT ASSUMED ANNUAL
GRANTED TO EXERCISE OR RATES OF STOCK PRICE
OPTIONS/SARS EMPLOYEES IN BASE PRICE EXPIRATION APPRECIATION FOR
NAME GRANTED FISCAL 1999 ($/SHARE) DATE FULL OPTION TERM
---- ------------ ------------ ----------- ---------- -----------------------
<S> <C> <C> <C> <C> <C>
James H. Keyes 175,000 18.08% $57.78 11/18/08 $6,359,211/$16,115,489
John M. Barth 90,000 9.29% $57.78 11/18/08 $3,270,451/$8,287,966
Stephen A. Roell 45,000 4.64% $57.78 11/18/08 $1,635,226/$4,143,983
Giovanni Fiori 45,000 4.64% $57.78 11/18/08 $1,635,226/$4,143,983
Michael F. Johnston 45,000 4.64% $57.78 11/18/08 $1,635,226/$4,143,983
</TABLE>
- -------------------------
(1) As of September 30, 1999, Mr. Keyes waived all rights to existing SARs.
The Company has an employee Stock Option Plan under
which options to purchase Common Stock and SARs are
granted to officers and other key employees of the
Company and its subsidiaries. The per share option/SAR
prices are the fair market value of the Company's
Common Stock on the date of the grant and the term of
the option is 10 years. Fifty percent of each award is
exercisable two years after the grant date and the
remainder is exercisable three years after the grant
date.
The amounts shown above as potential realizable values
rely on arbitrarily assumed rates of share price
appreciation prescribed by the SEC. In assessing those
values, please note that the ultimate value of the
options, as well as your shares, depends on actual
future share values. Market conditions and the efforts
of the directors, the officers and others to foster the
future success of our Company can influence those
future share values.
1999 OPTIONS,
SAR HOLDINGS AND
EXERCISES: The following table lists the number of shares acquired
and the value realized as a result of option exercises
during fiscal 1999 for the listed officers. It also
includes the number and value of their exercisable and
non-exercisable options and SARs as of September 30,
1999.
26
<PAGE> 29
AGGREGATED OPTIONS/SAR EXERCISES IN LAST FISCAL YEAR AND
FISCAL YEAR-END OPTIONS/SAR VALUES
<TABLE>
<CAPTION>
VALUE OF UNEXERCISED
NUMBER OF NUMBER OF UNEXERCISED IN-THE-MONEY
SHARES/SARS OPTIONS/SARS AT FY-END OPTIONS/SARS AT FY-END
ACQUIRED ON VALUE ------------------------- -------------------------
NAME EXERCISE REALIZED EXERCISABLE/UNEXERCISABLE EXERCISABLE/UNEXERCISABLE
- ----------------------- ----------- ---------- ------------------------- -------------------------
<S> <C> <C> <C> <C>
James H. Keyes 0 0 444,000 / 355,000 $17,704,050 / $5,757,329
John M. Barth 0 0 48,000 / 174,000 $ 1,526,248 / $2,724,180
Stephen A. Roell 33,984/ $1,165,528/ 17,000 / 102,000 $ 497,250 / $1,719,277
30,016 1,025,532
Giovanni Fiori 32,000 1,246,873 48,000 / 81,000 $ 1,687,998 / $1,235,527
Michael F. Johnston 4,500/ $ 168,890/ 10,000 / 79,000 $ 292,500 / $1,177,027
4,500 173,671
</TABLE>
LONG-TERM INCENTIVE
COMPENSATION: As noted above in the Compensation Committee's report,
the Long-Term Performance Plan (LTPP) rewards
executives for helping us achieve sustained performance
goals and encourages their continued efforts on our
behalf. Payouts of awards granted for fiscal 1999 are
tied to our Company's weighted average return on
shareholders' equity for fiscal years 1999, 2000, 2001
compared with the median return on shareholders' equity
of the Standard & Poor's Manufacturers (Diversified
Industrial) Index (S&P Index) during the same
three-year period. To establish a weighted average,
performance in the third year of the award is
multiplied by 3/6, performance in the second year is
multiplied by 2/6, and performance in the first year is
multiplied by 1/6. If the Company's average level of
return is:
- Less than the 45th percentile of the return for
companies in the S&P Index, no award is earned;
- Equal or greater than the 45th percentile, the
threshold amount is earned;
- Equal to or greater than the 50th percentile, the
target amount is earned;
- Equal to or greater than the 55th percentile, 110% of
the target amount is earned; and
- Equal to or greater than the 60th percentile, the
maximum amount is earned.
In fiscal 1999, based upon the data available at this
time, LTPP participants were granted 100% of the target
available under the criteria established by the
Compensation Committee. When the remaining comparison
companies have reported, these awards could increase,
decrease or vary.
27
<PAGE> 30
LONG-TERM INCENTIVE PLANS -- AWARDS IN FISCAL 1999(1)
<TABLE>
<CAPTION>
AMOUNT OF PERFORMANCE
CONTINGENT PERIOD UNTIL
PERFORMANCE MATURATION OR THRESHOLD TARGET MAXIMUM
NAME AWARD($) PAYOUT ($) ($) ($)
---- ----------- ------------- --------- ------ -------
<S> <C> <C> <C> <C> <C>
James H. Keyes 1,100,000 1999-2001 880,000 1,100,000 1,320,000
John M. Barth 525,000 420,000 525,000 630,000
Stephen A. Roell 322,000 Fiscal Years 258,000 322,000 386,000
Giovanni Fiori 286,000 229,000 286,000 343,000
Michael F. Johnston 286,000 229,000 286,000 343,000
</TABLE>
- -------------------------
(1) The values in this table were calculated based on each executive's salary
that will be effective January 1, 2000. Actual values at the time of payout
will be calculated using each executive's base salary on the last day of the
performance period, and therefore, the values in the table could increase or
decrease. The maximum values in the table may not be increased higher than
the maximum of $3 million under the LTPP.
RETIREMENT PLANS: The following table shows the maximum annual retirement
benefits payable under the Company's plans, including
amounts attributable to the Company's Equalization
Benefit Plan. Under the Johnson Controls Pension Plan
(the Plan), participants become entitled to benefits
after five years of service with the Company or any of
its subsidiaries, and the normal retirement date is a
participant's 65th birthday.
The Internal Revenue Code places maximum limitations on
the amount of benefits that may be paid under the Plan.
The Company has adopted an Equalization Benefit Plan
under which certain executives are entitled to pension
benefits that cannot be paid under the qualified Plan
due to these limitations.
28
<PAGE> 31
PENSION PLAN TABLE*
<TABLE>
<CAPTION>
AVERAGE ANNUAL MAXIMUM ANNUAL PENSION AT NORMAL RETIREMENT AGE
COMPENSATION IN AFTER YEARS OF PARTICIPATING SERVICE
HIGHEST 5 CONSECUTIVE YEARS (PRIOR TO ADJUSTMENT FOR SOCIAL SECURITY COVERED COMPENSATION)
OF LAST 10 YEARS ----------------------------------------------------------------
BEFORE RETIREMENT 15 YEARS 20 YEARS 25 YEARS 30 YEARS 35 YEARS
- --------------------------- -------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C>
100,000 25,500 34,000 42,500 51,000 56,750
200,000 51,000 68,000 85,000 102,000 113,500
250,000 63,750 85,000 106,250 127,500 141,875
300,000 76,500 102,000 127,500 153,000 170,250
400,000 102,000 136,000 170,000 204,000 227,000
500,000 127,500 170,000 212,000 255,000 283,750
600,000 153,000 204,000 255,000 306,000 340,500
700,000 178,500 238,000 297,500 357,000 397,250
800,000 204,000 272,000 340,000 408,000 454,000
900,000 229,500 306,000 382,500 459,000 510,750
1,000,000 255,000 340,000 425,000 510,000 567,500
1,100,000 280,500 374,000 467,500 561,000 624,250
1,200,000 306,000 408,000 510,000 612,000 681,000
1,300,000 331,500 442,000 552,500 663,000 737,750
1,400,000 357,000 476,000 595,000 714,000 794,500
1,500,000 382,500 510,000 637,500 765,000 851,250
1,600,000 408,000 544,000 680,000 816,000 908,000
1,700,000 433,500 578,000 722,555 867,000 964,750
1,800,000 459,000 612,000 765,000 918,000 1,021,500
1,900,000 484,500 646,000 807,500 969,000 1,078,250
2,000,000 510,000 680,000 850,000 1,020,000 1,135,000
2,100,000 535,500 714,000 892,500 1,071,000 1,191,750
2,200,000 561,000 748,000 935,000 1,122,000 1,248,500
2,300,000 586,500 782,000 977,500 1,173,000 1,305,250
</TABLE>
- -------------------------
* Assuming normal retirement age and years of service under provisions in effect
on September 30, 1999 and assuming retirement on that date.
YEARS OF SERVICE: As of September 30, 1999, the persons named in the
Summary Compensation table were credited with the
following years of service under the Plan: Mr. Keyes,
30 years, Mr. Barth, 29 years, Mr. Roell 16 years, and
Mr. Johnston, 9 years. Mr. Fiori is not a participant
in the Plan.
BENEFITS ACCRUAL: Pension plans of the Company apply to all regular
employees, including officers of the Company. The Plan
covers all salaried and non-union hourly employees of
the Company. Under the Plan, benefits are accrued
according to the following formula: 1.15% of
Participant's Average Monthly Compensation multiplied
by the Participant's years of Benefit Service plus
0.55% of Average Monthly Compensation in excess of the
Participant's Covered Compensation multiplied by the
Participant's years of Benefit Service. The amounts
payable may be adjusted to
29
<PAGE> 32
reflect the Participant's decision on survivor
benefits, early retirement or termination, and in some
instances age.
DEFINITIONS: "Average Monthly Compensation" is defined as the
average monthly compensation, including salary and
bonus, for the highest five consecutive years in the
last 10 years.
"Covered Compensation" means the average of
compensation subject to Social Security taxes
(including salary and bonus) for the 35-year period
ending in the year the Participant attains Social
Security Retirement Age; i.e. the age at which the
Participant will be entitled to full Social Security
payments.
EMPLOYMENT AGREEMENTS
EMPLOYMENT
AGREEMENTS
GENERALLY: We have employment agreements with each of the named
executive officers of the Company. These agreements
provide that employment shall continue unless
terminated by either the Company or the employee. Such
agreements do not automatically extend after the
employee reaches age 65.
TERMINATION: The agreements provide for termination by the Company
for cause, for death or disability and under certain
circumstances without cause. If terminated without
cause, the employee is entitled to receive pay in an
amount equal to or greater than two times the Company's
termination allowance policy or an amount equal to 52
weeks' earnings of the employee. If terminated with
cause, the employee's compensation is terminated
immediately.
CHANGE OF CONTROL: We also have change of control agreements with each of
these officers. In the event of a change of control,
the agreements provide for a severance payment equal to
three times the executive's annual compensation plus a
lump sum payment equal to lost benefits under the
retirement plan if the executive is terminated other
than for cause or has a good reason to terminate
employment. If the amount paid upon termination exceeds
amounts established under the Internal Revenue Code,
which results in payment of additional federal taxes,
the executive will receive an additional payment so
that the executive will retain the full amount to which
he is entitled under the agreement. The executive also
has 30 days at the end of the first year after a change
of control to terminate his employment for any reason
and still receive this benefit.
30
<PAGE> 33
The EICP provides that, in the event of a change of
control of our Company, certain participants, including
the named executive officers, may re-elect to receive
early payment of deferred amounts, and the participant
may direct the Company to cause a letter of credit to
be issued in an amount sufficient to provide for all
payments due to such participant under the Plan.
The LTPP also provides that, in the event of a change
of control of our Company, certain participants,
including the named executives, shall be entitled to
receive early payment of deferred amounts.
EXECUTIVE SURVIVOR
BENEFITS PROGRAM: The Company has in effect an Executive Survivor
Benefits Plan for certain executives. Coverage under
this plan is in lieu of the Company's regular group
life insurance coverage. If a participating executive
dies while he is employed by the Company, his
beneficiary is entitled to payments of between 90% and
100% (depending on the executive's age) of the
executive's final base annual salary for a period of 10
years.
31
<PAGE> 34
JOHNSON CONTROLS SHARE OWNERSHIP
DIRECTORS AND
OFFICERS: The following table lists our Common Stock ownership as
of October 31, 1999, for the persons or groups
specified. Ownership includes direct and indirect
(beneficial) ownership as defined by SEC rules. To our
knowledge, each person, along with his or her spouse,
has sole voting and investment power over the shares
unless otherwise noted. None of these persons
beneficially owns more than 1% of the outstanding
Common Stock.
<TABLE>
<CAPTION>
AMOUNT AND UNITS REPRESENTING
NATURE(1) OF DEFERRED
NAME OF BENEFICIAL OWNER STOCK OWNERSHIP COMPENSATION(3)
------------------------ --------------- ------------------
<S> <C> <C>
James H. Keyes 627,764(2) 60,303 units
John M. Barth 155,745(2) 18,970 units
Stephen A. Roell 104,787(2) 3,192 units
Michael F. Johnston 44,728(2) 5,321 units
Giovanni Fiori 85,050(2) 10,068 units
William F. Andrews 6,273 5,891 units
Robert Barnett 3,055 21,389 units
Natalie Black 482 709 units
Paul A. Brunner 13,265 5,383 units
Robert A. Cornog 5,409 7,156 units
Willie D. Davis 3,665 5,281 units
William H. Lacy 1,500 2,647 units
Southwood J. Morcott 2,188 7,756 units
Richard F. Teerlink 3,721 3,047 units
Gilbert R. Whitaker, Jr. 5,640 12,336 units
All Directors and Executive Officers as a
group (not including deferred shares
referred to in footnote (3) Total: 1,610,179(2)
TOTAL PERCENT OF CLASS OF COMMON STOCK
EQUIVALENTS 1.78
</TABLE>
- -------------------------
(1) Includes all shares for each officer or director which directly has or
shares the power to vote or to direct the vote of such shares, or to dispose
of or direct disposition of such shares.
(2) Includes shares of Common Stock, which, as of October 31, 1999, were subject
to outstanding stock options exercisable within 60 days as follows: Mr.
Keyes, 564,000, Mr. Barth, 102,000, Mr. Roell, 54,000, Mr. Fiori, 72,000 and
Mr. Johnston 32,000. This also reflects common stock equivalents of
Preferred Units that are owned by these officers.
(3) Includes deferred shares under the EICP, LTPP, and Deferred Compensation
Plan for certain Directors. Units will not be distributed in the form of
Common Stock.
32
<PAGE> 35
SCHEDULE 13G FILINGS: The Company believes that the following table is an
accurate representation of beneficial owners of more
than 5% of any class of the Company's securities. The
table is based upon reports on Schedules 13G filed with
the Securities and Exchange Commission or other
information believed to be reliable.
<TABLE>
<CAPTION>
AMOUNT AND
NAME AND ADDRESS NATURE OF PERCENT OF
TITLE OF CLASS OF BENEFICIAL OWNER OWNERSHIP CLASS
-------------- ------------------------- ------------------- ----------------
<S> <C> <C> <C>
Common Stock Capital Research and 4,915,300(1) 5.8%
$0.16 2/3 Par Value Management Company
333 South Hope Street
Los Angeles, CA 90071
Firstar Corporation 4,502,978(2) 5.3%
777 East Wisconsin Avenue
Milwaukee, WI 53202
Series D Convertible Fidelity Management 273.273(3) 100%
Preferred Stock Trust Company
$1.00 Par Value 82 Devonshire Street
Boston, MA 02109
</TABLE>
- -------------------------
(1) Capital Research and Management Company reported as of December 31, 1998,
sole dispositive power with respect to 4,915,300 shares.
(2) Firstar Corporation reported as of December 31, 1998, sole voting power with
respect to 934,475 shares, shared voting power with respect to 3,568,503
shares, and sole dispositive power with respect to 47,685 shares. Of the
total shares reported, 3,609,939.47 shares represent holdings for the
benefit of the Johnson Controls, Inc. Automatic Dividend Reinvestment Plan
and Common Stock Purchase Plans. Of the total shares reported, 800,000
shares represent holdings for the benefit of the Johnson Controls, Inc.
Pension Plan.
(3) As of October 31, 1999, Fidelity Management Trust Company reported that it
held shared voting power and sole dispositive power with respect to the
shares indicated above in its capability as trustee of the Johnson Controls,
Inc. Employee Stock Ownership Trust.
33
<PAGE> 36
VOTING PROCEDURES
ELECTION OF DIRECTORS: To be elected, directors must receive a plurality of
the shares present and voting in person or by proxy,
provided a quorum exists. A quorum is present if at
least a majority of the outstanding shares on the
record date are present in person or by proxy.
Plurality means that the number of directors who
receive the largest number of votes cast are elected as
directors up to the maximum number of directors to be
chosen at the meeting. Consequently, any shares not
voted (whether by abstention, broker non vote or
otherwise) have no impact in the election of directors
except to the extent the failure to vote for an
individual results in another individual receiving a
larger number of votes.
OTHER PROPOSALS: To be approved, each of the proposals: (a) to ratify
the election of PricewaterhouseCoopers LLP as our
independent auditors for 2000, (b) to ratify the 2000
Stock Option Plan and (c) to consider the shareholder
proposal to adopt global corporate standards, must
receive more votes "FOR" the proposal than "AGAINST".
For purposes of determining the vote with respect to
these proposals, any shares not voted (whether by
abstention, broker nonvote or otherwise) will have no
impact.
The enclosed proxies will be voted in accordance with
the instructions you place on the proxy card. Unless
otherwise stated, all shares represented by your
returned, signed proxy will be voted as the Board
recommends for each proposal as noted on the first page
of this proxy statement. Proxies may be revoked as
noted on that page.
BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
SECTION 16(a) Based on a review of reports filed by our directors,
executive officers and of beneficial holders of 5% or
more of our shares, and upon representations from those
persons all reports required to be filed during 1999
with the Securities and Exchange Commission under
Section 16(a) of the Securities Exchange Act of 1934
were timely made.
SUBMISSION OF SHAREHOLDER PROPOSALS AND DIRECTOR NOMINATIONS
SHAREHOLDER
PROPOSALS: Proposals of shareholders which are intended to be
presented at the 2001 annual meeting pursuant to SEC
Rule 14a-8, must be received by the Company no later
than August 5, 2000 to be included in the Company's
proxy materials for that meeting.
34
<PAGE> 37
A shareholder that intends to present business at the
2001 Annual Meeting other than pursuant to Rule 14a-8
must comply with the requirements set forth in the
Company's By-Laws. Among other things, to bring
business before an annual meeting, a shareholder must
give written notice to the Company, complying with the
By-Laws to the Secretary of the Company not less than
45 days and not more than 75 days prior to the month
and day in the current year corresponding to the date
on which the Company first mailed its proxy materials
for the prior year's annual meeting of shareholders.
Therefore, since the Company anticipates mailing its
proxy statement on December 3, 1999, the Company must
receive notice of a shareholder proposal submitted
other than pursuant to Rule 14a-8 no sooner than
September 19, 2000, and no later than October 19, 2000.
If the notice is received after October 19, 2000, then
the notice will be considered untimely and the Company
is not required to present such proposal at the 2001
Annual Meeting. If the Board of Directors chooses to
present a proposal submitted after October 19, 2000 at
the 2001 Annual Meeting, then the persons named in
proxies solicited by the Board of Directors for the
2001 Annual Meeting may exercise discretionary voting
power with respect to such proposal.
DIRECTOR NOMINATIONS: Shareholders wishing to propose direct candidates for
consideration by the Directors Committee may do so by
writing to the Secretary of the Company, giving the
candidate's name, biographical data and qualifications.
The Company's By-Laws set forth additional requirements
for shareholders wishing to nominate director
candidates for consideration by shareholders. For
elections of directors at an annual meeting, the
requirements include written notice by the shareholder
of an intent to make such a nomination that complies
with the By-Laws to the Secretary of the Company not
less than 45 days and not more than 75 days prior to
the month and day in the current year corresponding to
the date on which the Company first
35
<PAGE> 38
mailed its proxy materials for the prior year's meeting
of shareholders.
By order of the Board of Directors.
JOHN P. KENNEDY
John P. Kennedy, Secretary
December 3, 1999
[MAP]
36
<PAGE> 39
EXHIBIT A
JOHNSON CONTROLS, INC.
2000 STOCK OPTION PLAN
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. 2000 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 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 Plan was adopted by the Board of
Directors on November 17, 1999, and, subject to the approval of the Plan by the
shareholders of the Company within twelve months of this date, the effective
date of the Plan will be January 1, 2000. Any and all Options granted prior to
shareholder approval shall be subject to such approval.
4. STOCK SUBJECT TO THE PLAN. Subject to adjustment in accordance with the
provisions of this paragraph and paragraph 17, the total number of shares of the
common stock of the Company ("Common Stock") available for awards during the
term of the Plan shall be an amount calculated as follows: (a) fifteen percent
(15%) of the number of shares of Common Stock outstanding upon the effective
date of the Plan minus (b) the number of shares of Common Stock subject to
awards made under any prior stock option plan of the Company (a "Prior Plan")
and outstanding upon the effective date of the Plan ("Prior Plan Awards").
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 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
<PAGE> 40
related stock appreciation rights granted under paragraph 16) in connection with
the receipt of stock appreciation rights as provided in paragraph 16 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 (including any grant in
connection with the surrender of outstanding Options), as provided in paragraph
16, 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. If the exercise
price of any Option granted under the Plan is satisfied by tendering shares of
Common Stock to the Company (by either actual delivery or by attestation), only
the number of shares of Common Stock issued net of the shares of Common Stock
tendered shall be deemed delivered for purposes of determining the maximum
number of shares of Common Stock available for delivery under the Plan. If any
Participant satisfies the Company's withholding tax requirements upon the
exercise of an Option by properly electing to have the Company withhold shares
of Common Stock, then the shares of Common Stock so withheld shall again be
available for the purpose of the Plan, except that such shares shall not be
available for the granting of Incentive Stock Options. After the effective date
of the Plan, if any event occurs as a result of which shares of Common Stock
subject to Prior Plan Awards would again become available for the purpose of the
relevant Prior Plan if the Prior Plan were still in effect and the Company could
grant awards under the Prior Plan, then such shares shall be available for the
purpose of the Plan rather than such Prior Plan (subject to any applicable
limitation on the use of such shares for the granting of Incentive Stock
Options) and thereby increase the shares available under the Plan as determined
under the first sentence of this paragraph.
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 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
<PAGE> 41
Options, the periods of Options or stock appreciation rights, limitations
on exercise of Options or stock appreciation rights, and the number of
shares to be subject to each Option or award of stock appreciation rights.
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.
(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 500,000 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.
<PAGE> 42
9. OPTION PRICE. The per share Option price for Options and the per share
grant price for stock appreciation rights granted under paragraph 16, 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 16 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.
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
options specifically designated by the Compensation Committee as such and
meeting the following requirements of transfer:
(a) by will or by the laws of descent and distribution; or
(b) in the case of a nonqualified option:
(i) pursuant to a "Qualified Domestic Relations Order" as defined in
Section 414(p) of the Internal Revenue Code; or
(ii) to (A) his or her spouse, children or grandchildren ("Immediate
Family Members"), (B) a partnership in which the only partners are the
Participant's Immediate Family Members, or (C) a trust or trusts
established solely for the benefit of one or more of the Participant's
Immediate Family Members (collectively, the Permitted Transferees),
<PAGE> 43
provided that there may be no consideration for any such transfer by a
Participant.
Following transfer (if applicable), such Options and stock appreciation
rights shall continue to be subject to the same terms and conditions as were
applicable immediately prior to transfer, provided that 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 or the Participant's Permitted Transferees.
13. EXERCISE OF OPTION; DEFERRAL OF SHARES.
(a) 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 20 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 tendering 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. Common Stock may be tendered either by actual delivery of shares of
Common Stock or by attestation.
(b) The Committee may provide one or more means to enable Participants and
the Company to defer delivery of shares of Common Stock deliverable upon
exercise of an Option, on such terms and conditions as the Committee may
determine, including by way of example the manner and timing of making a
deferral election, the treatment of dividends paid on shares of Common Stock
during the deferral period and the permitted distribution dates or events. No
such deferral means may result in any increase in the number of shares of Common
Stock issuable hereunder other than as contemplated by paragraph 4 or paragraph
17 hereof.
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 income is recognized on the
exercise of a nonqualified option equal to the minimum amount required to be
withheld. 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
<PAGE> 44
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. 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 or normal retirement, death 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 shall be exercisable
immediately to the extent it would have been exercisable had the Participant
remained employed for twelve months after the date of death and may be exercised
by the person to whom it is transferred by will or by the applicable laws of
descent and distribution 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 shall be exercisable in full without regard to any
vesting requirement and may be exercised by the Participant 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 and
permanent disability, as the case may be, unless such Option or stock
appreciation right expires earlier under the terms of the Option Agreement.
Provided, however, that for certain participants who are officers of the Company
or who are selected by the Compensation Committee of the Board, nonqualified
options may be exercised by the Participant for five years after the date of
such early or normal retirement or total and permanent disability, as the case
may be, 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 the Option or stock appreciation right, 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; or, in the
absence of a pension plan, provided such Participant retires with ten years of
service and is at least 55 years old 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.
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
<PAGE> 45
employment under the Plan. Notwithstanding the foregoing, from and after a
Change of Control, as defined in paragraph 20, Options and stock appreciation
rights shall continue to be exercisable for three months after a Participant's
termination of employment.
16. STOCK APPRECIATION RIGHTS. Stock appreciation rights may be granted
separate from any Option granted under the Plan to any Participant. 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 16 and in the form prescribed in subparagraph (c) of this
paragraph 16.
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 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 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.
<PAGE> 46
17. 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.
18. TERMINATION AND AMENDMENT OF PLAN. The Plan shall terminate on December
31, 2009, 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, amend paragraph 24 or make any modifications to the
Plan 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.
19. 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.
20. CHANGE OF CONTROL. Notwithstanding the foregoing, upon Change of
Control, all previously granted Options and stock appreciation rights shall
immediately become 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
<PAGE> 47
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 September 28, 1994,
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 September 28, 1994, 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 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.
<PAGE> 48
21. 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, 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 21, 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 20, the highest price per Share paid in such transaction
or series of transactions.
22. 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.
23. UNFUNDED PLAN. This Plan shall be unfunded. No person shall have any
rights greater than those of a general creditor of the Company.
24. REPRICING. Except for adjustments pursuant to paragraph 17, neither the
per share Option price for any outstanding Option granted under the Plan nor the
per share grant price for stock appreciation rights granted under the Plan may
be decreased after the date of grant nor may an outstanding Option or stock
appreciation right granted under the Plan or a Prior Plan be surrendered to the
Company as consideration for the grant of a new Option or stock appreciation
right with a lower exercise or grant price.
<PAGE> 49
JOHNSON CONTROLS, INC.
P.O. BOX 591
MILWAUKEE, WI 53201
SHAREHOLDER'S PROXY ANNUAL MEETING-JANUARY 26, 2000
The undersigned, having received the Notice of Meeting and Proxy Statement
dated December 3, 1999, and Annual Report for 1999, hereby appoints J.P.
Kennedy and J.H. Keyes, and each of them, proxies with power of substitution to
vote for the undersigned at the annual shareholders' meeting of Johnson
Controls, Inc., on January 26, 2000, and at any adjournments thereof, hereby
revoking any proxy heretofore given by the undersigned for such meeting.
This proxy when properly executed will be voted in the manner directed therein
by the undersigned.
The Board of Directors recommends a vote FOR Proposals 1, 2 and 3. If no
direction is made, this proxy will be voted FOR all nominees listed in Proposal
1 and FOR Proposals 2 and 3. The Board of Directors recommends a vote AGAINST
Proposal 4. If no direction is made, this proxy will be voted AGAINST Proposal
4.
/\ DETACH BELOW AND RETURN USING THE ENVELOPE PROVIDED /\
JOHNSON CONTROLS, INC. 2000 ANNUAL MEETING
<TABLE>
<S><C>
The Board of Directors recommends a vote FOR Proposals 1, 2 and 3. If no direction is made, this proxy will be voted FOR all
nominees listed in Proposal 1 and FOR Proposals 2 and 3.
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1. ELECTION OF DIRECTORS: 1 - JOHN M. BARTH 2 - PAUL A. BRUNNER | | FOR all nominees | | WITHHOLD AUTHORITY
3 - SOUTHWOOD J. MORCOTT 4 - GILBERT R. WHITAKER, JR. listed to the left to vote for all
(except as specified nominees listed to
below). the left.
(Instructions: To withhold authority to vote for any indicated nominee, write number(s) of --------------------------
nominee(s) in the box provided to the right.) ---------> | |
--------------------------
2. Approval of PricewaterhouseCoopers as our independent auditors for 2000. | | FOR | | AGAINST | | ABSTAIN
3. Approval of the 2000 Stock Option Plan. | | FOR | | AGAINST | | ABSTAIN
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The Board of Directors recommends a vote AGAINST Proposal 4. If no direction is made, this proxy will be voted AGAINST Proposal 4.
- ------------------------------------------------------------------------------------------------------------------------------------
4. Shareholder proposal to adopt global corporate standards. | | FOR | | AGAINST | | ABSTAIN
- ------------------------------------------------------------------------------------------------------------------------------------
And in the discretion of the proxies, upon such other matters which may properly come before the meeting or any adjournments
thereof.
Check appropriate box
Indicate changes below: | | Name Change? | | Date --------------------------
Address Change? ------------------------------------ | |
--------------------------
SIGNATURE(S) IN BOX
Please sign name exactly as
it appears hereon. When
signed as attorney,
executor, trustee or
guardian, please add title.
For joint accounts each
owner should sign.
</TABLE>
