SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(a) OF THE
SECURITIES EXCHANGE ACT OF 1934
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ALEXANDER & BALDWIN, INC.
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ALEXANDER & BALDWIN, INC.
822 Bishop Street, Honolulu, Hawaii 96813
March 12, 2007
To the Shareholders of Alexander & Baldwin, Inc.:
The 2007 Annual Meeting of Shareholders of Alexander & Baldwin, Inc.
will be held in the Bankers Club on the 30th Floor of the First Hawaiian Center,
999 Bishop Street, Honolulu, Hawaii, on Thursday, April 26, 2007 at 8:30 a.m.
You are invited to attend the meeting, and we hope you will be able to do so. At
the meeting, we will have the opportunity to discuss the Company's financial
performance during 2006, and our future plans and expectations.
Whether or not you now plan to attend the Annual Meeting, please vote
as soon as possible. You may vote via the Internet, by telephone or by signing,
dating and mailing the enclosed proxy card. Specific instructions for
shareholders of record who wish to use Internet or telephone voting procedures
are set forth in the enclosed proxy.
Regardless of the size of your holding, it is important that your
shares be represented. If you attend the Annual Meeting, you may withdraw your
proxy and vote in person.
Sincerely,
/s/ W. Allen Doane
W. ALLEN DOANE
Chairman of the Board, President
and Chief Executive Officer
[OBJECT OMITTED]
ALEXANDER & BALDWIN, INC.
822 Bishop Street, Honolulu, Hawaii 96813
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
The Annual Meeting of Shareholders of Alexander & Baldwin, Inc. will be
held in the Bankers Club on the 30th Floor of the First Hawaiian Center, 999
Bishop Street, Honolulu, Hawaii, on Thursday, April 26, 2007, at 8:30 a.m.,
Honolulu time, for the following purposes:
1. To elect nine directors to serve until the next Annual Meeting
of Shareholders and until their successors are duly elected
and qualified;
2. To ratify the appointment of auditors for the ensuing year;
3. To approve the Alexander & Baldwin, Inc. 2007 Incentive
Compensation Plan; and
4. To transact such other business as properly may be brought
before the meeting or any adjournment or postponement thereof.
The Board of Directors has fixed the close of business on February 16,
2007 as the record date for the determination of shareholders entitled to notice
of and to vote at the meeting.
PLEASE PROMPTLY SIGN AND DATE THE ENCLOSED PROXY AND RETURN IT IN THE
ENVELOPE PROVIDED, OR VOTE VIA THE INTERNET OR BY TELEPHONE.
By Order of the Board of Directors,
/s/ Alyson J. Nakamura
ALYSON J. NAKAMURA
Secretary
March 12, 2007
ALEXANDER & BALDWIN, INC.
822 Bishop Street, Honolulu, Hawaii 96813
PROXY STATEMENT
GENERAL INFORMATION
This Proxy Statement is furnished in connection with the solicitation
of proxies by the Board of Directors of Alexander & Baldwin, Inc. ("A&B" or the
"Company") for use at the Annual Meeting of Shareholders to be held on April 26,
2007 and at any adjournment or postponement of the meeting (the "Annual
Meeting"). Shareholders may submit their proxies either by signing, dating and
returning the enclosed proxy, or via the Internet or by telephone in accordance
with the procedures set forth in the enclosed proxy. A proxy may be revoked at
any time prior to its exercise by a written revocation bearing a later date than
the proxy and filed with the Secretary of A&B, by submission of a later-dated
proxy or subsequent Internet or telephonic proxy, or by voting in person at the
Annual Meeting.
Only shareholders of record at the close of business on February 16,
2007 are entitled to notice of and to vote at the Annual Meeting. On that date,
A&B had outstanding 42,877,919 shares of common stock without par value, each of
which is entitled to one vote. Provided a quorum is present, the affirmative
vote of a majority of the shares of A&B common stock represented at the Annual
Meeting, in person or by proxy, will be necessary for the election of directors,
the ratification of the appointment of auditors and the approval of the A&B 2007
Incentive Compensation Plan ("2007 Plan"). Abstentions and broker non-votes will
be included for purposes of determining a quorum at the Annual Meeting. Broker
non-votes will have the same effect as a vote to withhold authority in the
election of directors, and abstentions and broker non-votes will have the same
effect as a vote against both the ratification of auditors and the approval of
the 2007 Plan.
Following the original mailing of proxy soliciting material, officers,
employees and directors of A&B and its subsidiaries may without additional
compensation, solicit proxies by appropriate means, including by mail, telephone
or personal interview. Arrangements also will be made with brokerage houses and
other custodians, nominees and fiduciaries that are record holders of A&B's
common stock to forward proxy soliciting material to the beneficial owners of
the stock, and A&B will reimburse those record holders for their reasonable
expenses. A&B has retained the firm of Morrow & Co., Inc. to assist in the
solicitation of proxies, at a cost of $10,000 plus reasonable out-of-pocket
expenses.
This Proxy Statement and the enclosed proxy are being mailed to
shareholders, and are being made available on the Internet at
www.alexanderbaldwin.com, on or about March 12, 2007.
ELECTION OF DIRECTORS
Directors will be elected at the Annual Meeting to serve until the next
Annual Meeting of Shareholders and until their successors are duly elected and
qualified. There is no cumulative voting in the election of directors.
Director Nominees. The nominees of the Board of Directors are the nine
persons named below, all of whom currently are members of the Board of
Directors. The Board of Directors believes that all nominees will be able to
serve. However, if any nominee or nominees should decline or become unable to
serve for any reason, shares represented by the accompanying proxy will be voted
for such other person or persons as the Board of Directors may nominate.
The following table sets forth the name, age (as of March 31, 2007) and
principal occupation of each person nominated by the A&B Board, their business
experience during at least the last five years, and the year each first was
elected or appointed a director.
Principal occupation, information as to
other positions with A&B, and other Director
Name directorships Age since
---- --------------------------------------- --- --------
W. Blake Baird President of AMB Property Corporation 46 2006
("AMB"), San Francisco, California (real
estate investment trust) from January 2000
to December 2006; Director of AMB from
May 2001 to December 2006.
Michael J. Chun President and Headmaster, The Kamehameha 63 1990
Schools, Kapalama Campus, Honolulu, Hawaii
(educational institution) since June 1988;
Director of Bank of Hawaii Corporation.
W. Allen Doane Chairman of the Board of A&B since April 59 1998
2006; President and Chief Executive
Officer of A&B since October 1998;
Chairman of the Board of A&B's subsidiary,
Matson Navigation Company, Inc. ("Matson"),
from April 2006 to present and from July
2002 to January 2004; Vice Chairman of the
Board of Matson from January 2004 to April
2006 and from December 1998 to July 2002;
Director of First Hawaiian Bank, banking
subsidiary of BancWest Corporation.
Walter A. Dods, Non-Executive Chairman of the Board of 65 1989
Jr. BancWest Corporation (formerly known as
First Hawaiian, Inc. prior to a 1998
merger) and its subsidiary, First Hawaiian
Bank, Honolulu, Hawaii (banking) since
January 2005; Chairman of the Board and
Chief Executive Officer of BancWest
Corporation and First Hawaiian Bank,
from September 1989 through December
2004; Director of BancWest Corporation
and its banking subsidiaries, First
Hawaiian Bank and Bank of the West;
Director of Maui Land & Pineapple Company,
Inc. since October 2004. Lead independent
director of A&B since April 2006.
Charles G. King President and Dealer Principal, King 61 1989
Auto Center, Lihue, Kauai, Hawaii
(automobile dealership) since October
1995; Dealer Principal, King Windward
Nissan, Kaneohe, Oahu, Hawaii (automobile
dealership) since February 1999; Dealer
Principal, King Infiniti (automobile
dealership) since April 2004.
Constance H. Lau President, Chief Executive Officer and 55 2004
Director of Hawaiian Electric Industries,
Inc. ("HEI"), Honolulu, Hawaii (electric
utility/banking) since May 2006; Chairman
of the Boards of American Savings Bank,
F.S.B. ("ASB") and Hawaiian Electric
Company, Inc., subsidiaries of HEI, since
May 2006; President, Chief Executive
Officer and Director of ASB since June
2001; Chief Operating Officer and Senior
Executive Vice President of ASB from
December 1999 to June 2001.
Douglas M. President and Chief Executive Officer of 52 2005
Pasquale Nationwide Health Properties, Inc. ("NHP")
Newport Beach, California (healthcare real
estate investment trust) since April 2004;
Director of NHP since November 2003;
Executive Vice President and Chief
Operating Officer of NHP from November 2003
to April 2004; Chairman of the Board and
Chief Executive Officer of ARV Assisted
Living, Inc. from December 1999 to
September 2003; President and Chief
Executive Officer of Atria Senior Living
Group from April 2003 to September 2003.
Maryanna G. Shaw Private investor. 68 1980
Jeffrey N. Partner, Watanabe Ing & Komeiji LLP, 64 2003
Watanabe Honolulu, Hawaii (attorneys at law) since
1971; Director of HEI; Non-Executive
Chairman of the Board of HEI since May 2006.
The Bylaws of A&B provide that no person (other than a person nominated
by or on behalf of the Board) will be eligible to be elected a director at an
annual meeting of shareholders unless a written shareholder's notice that the
person's name be placed in nomination is received by the Chairman of the Board,
the President, or the Secretary of A&B not less than 120 days nor more than 150
days prior to the anniversary date of the immediately preceding annual meeting.
If the annual meeting is not called for a date which is within 25 days of the
anniversary date of the preceding annual meeting, a shareholder's notice must be
given not later than 10 days after the date on which notice of the annual
meeting was mailed or public disclosure of the date of the annual meeting was
made, whichever occurs first. To be in proper written form, a shareholder's
notice must include specified information about each nominee and the shareholder
making the nomination. The notice also must be accompanied by a written consent
of each proposed nominee to being named as a nominee and to serve as a director
if elected.
Separate procedures have been established for shareholders to submit
director candidates for consideration by the Nominating and Corporate Governance
Committee. These procedures are described below under the subsection "Nominating
Committee Processes."
CERTAIN INFORMATION CONCERNING THE BOARD OF DIRECTORS
Director Independence. The Board has reviewed each of its current
directors and has determined that all such persons, with the exception of Mr.
Doane, who is an executive officer of A&B, are independent under Nasdaq rules.
The Board also has previously determined that Charles M. Stockholm and Carson R.
McKissick, both of whom were directors until their retirement from the Board on
April 27, 2006, were independent under Nasdaq rules. In making its independence
determinations, the Board considered the following transactions, relationships
or arrangements not otherwise disclosed elsewhere in this Proxy Statement: Dr.
Chun - the purchase of a condominium unit from an A&B subsidiary at the market
price and A&B's banking relationships with Bank of Hawaii, an entity of which
Dr. Chun is a director; Mr. Dods - A&B's banking relationships with First
Hawaiian Bank, an entity of which Mr. Dods is Non-Executive Chairman of the
Board; Ms. Lau - a leasing relationship and property development agreements with
Kamehameha Schools, an entity of which Ms. Lau is a trustee (such trusteeship is
to cease on March 31, 2007); and Mr. Watanabe - A&B's banking relationships with
American Savings Bank, an entity of which Mr. Watanabe is a director, and which
is a subsidiary of HEI, an entity of which Mr. Watanabe is Non-Executive
Chairman of the Board, and electricity sales to a subsidiary of HEI.
Board of Directors and Committees of the Board. The Board of Directors
held nine meetings during 2006. In conjunction with five of these meetings, the
independent directors of A&B met in formally-scheduled executive sessions, led
by either the non-executive Chairman of the Board through April 26, 2006 or the
Lead Independent Director since April 27, 2006. In 2006, all directors were
present at 100 percent of the meetings of the Board of Directors and Committees
of the Board on which they serve that were held during the period for which the
person has been a director, with the limited exceptions of two directors who
each were absent from one Committee meeting. The Board of Directors has an Audit
Committee, a Compensation Committee, and a Nominating and Corporate Governance
Committee.
Audit Committee: The current members of the Audit Committee, which held
---------------
six meetings during 2006, are Mr. Pasquale, Chairman, Mr. Baird, Mr. Dods and
Ms. Lau, each of whom is an independent director under the applicable Nasdaq
listing standards and SEC rules and regulations. All four members of the Audit
Committee have been determined by the Board of Directors to be audit committee
financial experts under the rules of the SEC. The duties and responsibilities of
the Audit Committee are set forth in a written charter adopted by the Board of
Directors, and are summarized in the Audit Committee Report which appears in
this Proxy Statement. A current copy of the charter of the Audit Committee is
available on the corporate governance page of A&B's corporate website at
www.alexanderbaldwin.com.
Compensation Committee: The current members of the Compensation
----------------------
Committee, which held six meetings during 2006, are Mr. King, Chairman, Dr.
Chun, Mr. Watanabe and Ms. Shaw, each of whom is an independent director under
the applicable Nasdaq listing standards. The Compensation Committee has general
responsibility for management and other salaried employee compensation and
benefits, including incentive compensation and stock incentive plans, and for
making recommendations on director compensation to the Board. The Compensation
Committee is governed by a charter, a current copy of which is available on the
corporate governance page of A&B's corporate website at
www.alexanderbaldwin.com.
The following are the processes and procedures performed by the
Compensation Committee:
o Reviews the Company's compensation, benefit and incentive plans,
and, if appropriate, adopts or recommends to the Board the
adoption of new plans or amendments to existing plans.
o Approves the granting of any stock option, stock grant, stock
appreciation right or other equity-based awards, or deferred
compensation under incentive plans.
o Initiates the performance appraisal process by which the Board
evaluates the performance of the Chief Executive Officer ("CEO")
and approves the CEO's base compensation level.
o Approves the compensation of executive officers of the Company,
other than the base compensation of the CEO.
o Evaluates and recommends to the Board the appropriate level of
compensation for Board and Committee service by non-employee
members of the Board.
o Conducts or authorizes investigations into or studies of matters
within the Committee's scope of responsibilities and retains such
independent counsel or other advisers as deemed necessary.
The Compensation Committee may form subcommittees and delegate such
power and authority as the Committee deems appropriate. However, no subcommittee
may have fewer than two members and the Committee may not delegate to a
subcommittee any power or authority required by any law, regulation or listing
standard to be exercised by the Committee as a whole. Certain authorities have
been delegated to the CEO regarding the approval of base compensation of
non-executive officers, administration of certain small non-executive sales
commission and incentive plans and exceptions to eligibility and minor
adjustments to target opportunities under the A&B Annual Incentive Plan.
In 2006, the Company's Compensation Committee directly retained the
independent consulting firm Watson Wyatt Worldwide ("Watson Wyatt") to assist
the Committee in various compensation matters, as described in the Compensation
Discussion and Analysis section of this Proxy Statement. With the knowledge of
the Compensation Committee, management retained Watson Wyatt to assist the
Company on several special projects, including a review of pension programs and
incentive goal-setting training.
The role of executive officers in executive compensation is described
in the Compensation Discussion and Analysis section of this proxy statement.
Executive officers are not involved in determining director compensation.
Nominating and Corporate Governance Committee: The current members of
---------------------------------------------
the Nominating and Corporate Governance Committee (the "Nominating Committee"),
which held five meetings in 2006, are Mr. Dods, Chairman, Dr. Chun and Ms. Shaw,
each of whom is an independent director under the applicable Nasdaq listing
standards. The functions of the Nominating Committee include identifying and
recommending to the Board individuals qualified to serve as directors of A&B;
recommending to the Board the size of committees of the Board and monitoring the
functioning of the committees; advising on Board composition and procedures;
reviewing corporate governance principles and other corporate governance issues;
and developing and recommending processes for the annual evaluation of the Board
and evaluating the Nominating Committee's performance. The Nominating Committee
is governed by a charter, a current copy of which is available on the corporate
governance page of A&B's corporate website at www.alexanderbaldwin.com.
------------------------
Nominating Committee Processes. The Nominating Committee identifies
potential nominees by asking current directors to notify the Committee if they
become aware of qualified persons who might be available to serve on the Board.
The Committee also, from time to time, engages firms that specialize in
identifying director candidates.
The Nominating Committee also will consider director candidates
recommended by shareholders. In considering such candidates, the Nominating
Committee will take into consideration the needs of the Board and the
qualifications of the candidate. The Nominating Committee may also take into
consideration the number of shares held by the recommending shareholder and the
length of time that such shares have been held. To have a candidate considered
by the Nominating Committee, a shareholder must submit a written recommendation
that includes the name of the shareholder, evidence of the shareholder's
ownership of A&B stock (including the number of shares owned and the length of
time of ownership), the name of the candidate, the candidate's resume or a
listing of his or her qualifications to be a director of A&B and the candidate's
consent to be named as a director if recommended by the Nominating Committee and
nominated by the Board for approval by the shareholders.
The shareholder recommendation and information described above must be
sent to the Corporate Secretary at 822 Bishop Street, Honolulu, Hawaii 96813 and
must be received not less than 120 days before the anniversary of the date on
which A&B's Proxy Statement was released to shareholders in connection with the
previous year's annual meeting.
The Nominating Committee believes that the minimum qualifications for
serving as a director of A&B are that a nominee demonstrate high ethical
standards, a commitment to shareholders, a genuine interest in A&B and a
willingness and ability to devote adequate time to a director's duties. The
Committee also may consider other factors that it deems to be in the best
interests of A&B and its shareholders, such as business experience, financial
expertise and group decision-making skills.
Once a potential candidate has been identified by the Nominating
Committee, the Committee collects and reviews information regarding the person
to determine whether the person should be considered further. If appropriate,
the Committee may request information from the candidate, review the person's
accomplishments, qualifications and references, and conduct interviews with the
candidate. The Committee's evaluation process does not vary based on whether or
not a candidate is recommended by a shareholder.
In 2006, A&B paid a fee to a third-party search firm to assist in
identifying and evaluating candidates for nomination as directors. The search
firm provided information on potential candidates, assisted in background
reviews and performed other functions in connection with assisting the
Nominating Committee in identifying and evaluating potential director
candidates. Mr. Baird, who was appointed as a director by the Board in June
2006, was recommended to the Nominating Committee by the third-party search
firm.
Corporate Governance Guidelines. The Board of Directors has adopted
Corporate Governance Guidelines to assist the Board in the exercise of its
responsibilities and to promote the more effective functioning of the Board and
its committees. The guidelines provide details on matters such as:
o Goals of the Board
o Selection of directors, including the Chairman of the Board
and Lead Independent Director
o Board membership criteria and director retirement age
o Stock ownership guidelines
o Director independence, and executive sessions of independent
directors
o Board self-evaluation
o Board orientation and continuing education
o Leadership development - annual evaluations of the CEO and
management succession plans
The full text of the A&B Corporate Governance Guidelines is available
on the corporate governance page of A&B's corporate website at
www.alexanderbaldwin.com.
Compensation of Directors. The following table summarizes the cash and
noncash compensation paid by A&B to directors for services rendered during 2006.
2006 DIRECTOR COMPENSATION
Name Fees Earned Stock Option Awards Non-Equity Change in All Other Total
or Paid in Awards ($)(1) Incentive Pension Compensation ($)
Cash ($) Plan Value and ($)
($) Compensation Nonqualified
($) Deferred
Compensation
Earnings
($)
(a) (b) (c) (d) (e) (f) (g) (h)
- -------------------------------------------------------------------------------------------------------------------------
W. Blake Baird 27,700 6,811 0 N/A N/A 0 34,511
Michael J. Chun 52,800 13,622 74,384 N/A 18,441 0 159,247
Walter A. Dods, Jr. 73,872 13,622 74,384 N/A 4,815 0 166,693
Charles G. King 59,500 13,622 74,384 N/A 12,050 0 159,556
Constance H. Lau 50,800 13,622 72,545 N/A N/A 0 136,967
Douglas M. Pasquale 58,158 13,622 52,793 N/A N/A 0 124,573
Maryanna G. Shaw 52,800 13,622 74,384 N/A 0 (3) 0 140,806
Jeffrey N. Watanabe 50,800 13,622 74,384 N/A N/A 0 138,806
Carson R. McKissick 22,995 3,406 47,389 N/A N/A 0 73,790
Charles M. Stockholm 211,875 (2) 3,406 47,389 N/A N/A 0 262,670
(1) Represents the dollar value of a proportional amount of
options earned under SFAS No. 123R granted via the A&B 1998 Non-Employee
Director Stock Option Plan for 2006 based on the Black Scholes value on the date
of each grant. See Note 11 of the consolidated financial statements of the
Company's 2006 Annual Report on Form 10-K regarding the assumptions underlying
valuation of equity awards. Grant date fair value for each award includes:
Messrs. Chun, Dods, King and Watanabe and Ms. Shaw - 4/24/03 - $17,680, 4/22/04
- - $59,314, 4/28/05 - $77,561, 4/27/06 - $118,919, Ms. Lau - 4/22/04 - $59,314,
4/28/05 - $77,561, 4/27/06 - $118,919, Messrs. McKissick and Stockholm - 4/24/03
- - $17,680, 4/22/04 - $59,314, 4/28/05 - $77,561 and Mr. Pasquale - 4/28/05 -
$77,561, 4/27/06 - $118,919. The aggregate number of stock option awards
outstanding at the end of the year for each director is as follows:
Mr. Baird - 0; Dr. Chun - 42,515 shares; Messrs. Dods and King and
Ms. Shaw - 45,000 shares each; Ms. Lau - 24,000 shares; Mr. McKissick - 31,000
shares; Mr. Pasquale - 16,000 shares; Mr. Stockholm - 14,334 shares; and
Mr. Watanabe - 27,000 shares. There are no outstanding unvested stock awards
for any of the directors listed above.
(2) Includes a discretionary cash bonus of $125,000 in connection with
services as Chairman of the Board in 2005 and a proportional amount ($50,000) of
an additional annual retainer of $150,000 for service as Chairman of the Board
until April 27, 2006.
(3) The change in pension value was a decrease of $8,621.
Under A&B's retirement policy for directors, Messrs. McKissick and
Stockholm retired from the Board of Directors on April 27, 2006. Mr. Baird was
appointed a director of A&B on June 22, 2006.
Outside directors received an annual cash retainer of $27,000. Messrs.
King and Dods received an additional annual retainer fee (or a proportional
amount of such annual retainer in the case of Mr. Dods, who became Chairman of
the Nominating Committee in April 2006) of $7,500 for serving as Chairpersons of
the Compensation Committee and the Nominating Committee, respectively, and Mr.
Pasquale received a proportional amount of an additional annual retainer fee of
$10,000 for serving as Chairperson of the Audit Committee since April 2006. Mr.
Dods received a proportional share of an additional annual retainer fee of
$20,000 for service as the Lead Independent Director since April 2006. Outside
directors received an attendance fee of $1,200 per Board meeting and, in
addition, attendance fees of $1,000 per committee meeting if serving as a
member, or $1,200 if serving as a chairperson, of a Board committee. All
directors of A&B served as directors of A&B's Matson subsidiary and, in such
capacities, outside directors received attendance fees of $1,000 per Matson
Board meeting.
Based on the recommendations of Watson Wyatt, effective April 1, 2007,
the annual cash retainer for outside directors will increase to $33,000; the
additional annual cash retainer for the Chairperson of the Audit Committee will
increase to $12,000; the meeting attendance fees for A&B and for Matson Board
meetings will increase to $1,500 and $1,200 per Board meeting, respectively;
and committee attendance fees will increase to $1,500 per committee meeting
(with no additional attendance fees for serving as a chairperson of a Board
committee). Other fees remain unchanged.
Outside directors may defer up to 100 percent of their annual cash
retainer and meeting fees until retirement or until such earlier date as they
may select; no directors have deferred any fees currently.
In addition to the annual cash retainer and meeting fees, each
individual who served as an outside director during 2006 received an annual
stock retainer of 300 shares of A&B common stock (or a proportionate amount if
the director served for less than a full year), with a value recorded of
$13,622. Directors who are employees of A&B or its subsidiaries do not receive
compensation for serving as directors.
Under A&B's 1998 Non-Employee Director Stock Option Plan (the
"Non-Employee Director Plan"), a non-qualified stock option to purchase 8,000
shares of A&B common stock automatically is granted at each Annual Meeting of
Shareholders to each individual who is, at the meeting, elected or reelected as
an outside director of A&B. The option price per share is the average of the
highest and lowest selling prices per share of A&B common stock on the grant
date, and the option expires 10 years from the date of grant, or earlier if the
optionee ceases to be a director. Options become exercisable in three equal
annual installments, beginning one year after the grant date. At the 2006 Annual
Meeting, held on April 27, 2006, options to purchase 8,000 shares of A&B common
stock, at an exercise price of $48.81 per share, were granted to each of the
outside directors under the Non-Employee Director Plan. If the proposed 2007
Plan is approved by shareholders, the annual grant of a stock retainer of 300
shares and the option to purchase 8,000 shares will cease and will be replaced
by a grant of $100,000 in restricted stock units.
Under A&B's retirement plan for directors, a director with five or more
years of service will receive a lump-sum payment upon retirement or attainment
of age 65, whichever is later (but in no event later than the date of the first
annual meeting of shareholders after the director attains age 72), that is
actuarially equivalent to a payment stream for the life of the director
consisting of 50 percent of the amount of the annual retainer fee in effect at
the time of his or her retirement or other termination, plus 10 percent of that
amount, up to an additional 50 percent, for each year of service as a director
over five years. Effective December 31, 2004, these retirement benefits were
frozen based on a director's service and retainer on that date and no further
benefits accrue for subsequent periods.
Directors have business travel accident coverage of $200,000 for
themselves and $50,000 for their spouses while accompanying directors on A&B
business. They also may participate in the Company's deferred compensation
program and matching gifts program, in which the Company matches contributions
to qualified cultural and educational organizations up to a maximum of $3,000
for each director annually.
Director Share Ownership Guidelines. The Board has adopted a "Share
Ownership Guideline Policy" for itself, encouraging each non-employee director
by April 1, 2010 to own A&B common stock with either a value of five times the
amount of the 2005 cash retainer of $27,000 or three thousand (3,000) shares.
Shareholder Communications with Directors. The Board has a process to
receive communications from shareholders. Shareholders may contact any member
(or all members) of the Board by mail. To communicate with the Board of
Directors, correspondence should be addressed to the Board of Directors or any
one or more individual directors or group or committee of directors by either
name or title. All such correspondence should be sent "c/o A&B Law Department"
at A&B's headquarters at 822 Bishop Street, Honolulu, Hawaii 96813.
All communications received as described above will be opened by the
A&B Law Department for the sole purpose of determining whether the contents
constitute a communication to A&B's directors. Any contents that are not in the
nature of advertising, promotions of a product or service, or patently offensive
material will be forwarded promptly to the director or directors to whom it is
addressed. In the case of communications to the Board or to any group of
directors, the A&B Law Department will make sufficient copies of the contents to
send to each addressee.
In addition, it is A&B policy that directors are invited and strongly
encouraged to attend the Annual Meeting of Shareholders. All of the directors
who were members of the Board of Directors at the time of the 2006 Annual
Meeting attended the meeting.
SECURITY OWNERSHIP OF CERTAIN SHAREHOLDERS
The following table lists the names and addresses of the only
shareholders known by A&B on February 16, 2007 to have owned beneficially more
than five percent of A&B's common stock outstanding, the number of shares they
beneficially own, and the percentage of outstanding shares such ownership
represents, based upon the most recent reports filed with the SEC. Except as
indicated in the footnotes, such shareholders have sole voting and dispositive
power over shares they beneficially own.
Name and Address Amount of Percent of
of Beneficial Owner Beneficial Ownership Class
------------------- -------------------- ----------
FMR Corp. 3,623,067 (a) 8.5%
82 Devonshire Street
Boston, MA 02109
Third Avenue Management LLC 2,669,467 (b) 6.2%
622 Third Avenue, 32nd Floor
New York, NY 10017
Hotchkis and Wiley Capital 2,156,900 (c) 5.0%
Management, LLC
725 S. Figueroa Street, 39th Floor
Los Angeles, CA 90017
(a) As reported in Amendment No. 6 to Schedule 13G dated February 14, 2007
(the "FMR 13G") filed with the SEC. According to the FMR 13G, FMR
Corp., through its subsidiaries, Fidelity Management & Research
Company, Fidelity Management Trust Company, Strategic Advisers, Inc.,
Pyramis Global Advisors, LLC, Pyramis Global Advisors Trust Company,
and an affiliate of FMR Corp., Fidelity International Limited, has, in
the aggregate, sole voting power over 776,250 shares, sole dispositive
power over all 3,623,067 shares, and does not have shared voting or
dispositive power over any shares.
(b) As reported in a Schedule 13G dated February 14, 2007 (the "Third
Avenue 13G") filed with the SEC. According to the Third Avenue 13G,
Third Avenue Management LLC has sole voting power and sole dispositive
power over all 2,669,467 shares, and does not have shared voting or
dispositive power over any shares.
(c) As reported in a Schedule 13G dated February 13, 2007 (the "Hotchkis
13G") filed with the SEC. According to the Hotchkis 13G, Hotchkis and
Wiley Capital Management, LLC has sole voting power over 1,774,200
shares, sole dispositive power over all 2,156,900 shares, and does not
have shared voting or dispositive power over any shares.
CERTAIN INFORMATION REGARDING DIRECTORS AND EXECUTIVE OFFICERS
Security Ownership of Directors and Executive Officers. The following
table shows the number of shares of A&B common stock beneficially owned as of
February 16, 2007 by each director and nominee, by each executive officer named
in the "Summary Compensation Table" below, and by directors, nominees and
executive officers as a group and, if at least one-tenth of one percent, the
percentage of outstanding shares such ownership represents. Except as indicated
in the footnotes, directors, nominees and executive officers have sole voting
and dispositive power over shares they beneficially own.
Name or Number Number of Shares Stock Percent
in Group Owned (a)(b)(c) Options (d) Total of Class
-------------- --------------- ----------- ----- --------
W. Blake Baird 2,650 0 2,650 --
Michael J. Chun 4,776 34,514 39,290 --
W. Allen Doane 257,894 403,399 661,293 1.5
Walter A. Dods, Jr. 13,842 36,999 50,841 0.1
Charles G. King 9,985 36,999 46,984 0.1
Constance H. Lau 1,000 15,999 16,999 --
Douglas M. Pasquale 2,350 7,999 10,349 --
Maryanna G. Shaw 282,785 36,999 319,784 0.7
Jeffrey N. Watanabe 1,138 18,999 20,137 --
Christopher J. Benjamin 34,853 33,404 68,257 0.2
James S. Andrasick 105,757 60,600 166,357 0.4
Stanley M. Kuriyama 94,626 119,000 213,626 0.5
Matthew J. Cox 23,480 16,800 40,280 --
19 Directors, Nominees
and Executive Officers
as a Group 949,880 894,173 1,844,053 4.2
(a) Amounts do not include shares owned by spouses of those directors and
executive officers who disclaim beneficial ownership thereof, as
follows: Ms. Shaw - 17,121 shares. Amounts do not include shares
beneficially owned in a fiduciary capacity by trust companies or the
trust departments of banks of which A&B directors are trustees or
directors, including as follows: BancWest Corporation - 385,157
shares, Bank of Hawaii - 496,163 shares, The Wallace Alexander Gerbode
Foundation, of which Ms. Shaw is a trustee - 40,000 shares, and the
William Garfield King Educational Trust, of which Mr. King is a trustee
- 400 shares.
(b) Amounts include shares as to which directors, nominees and executive
officers have (i) shared voting and dispositive power, as follows: Mr.
Baird - 2,650 shares, Dr. Chun - 3,395 shares, Mr. King - 685 shares,
Ms. Lau - 700 shares, Mr. Pasquale - 2,350 shares, Ms. Shaw 18,248
shares, and directors, nominees and executive officers as a group -
31,507 shares and (ii) sole voting power only: directors, nominees and
executive officers as a group - 577 shares.
(c) None of the shares have been pledged as security.
(d) Amounts reflect shares deemed to be owned beneficially by directors,
nominees and executive officers because they may be acquired prior to
May 12, 2007 through the exercise of stock options.
Section 16(a) Beneficial Ownership Reporting Compliance. Section 16(a)
of the Securities Exchange Act of 1934 (the "Exchange Act") requires A&B's
directors and executive officers, and persons who own more than 10 percent of
its common stock, to file reports of ownership and changes in ownership on Forms
3, 4 and 5 with the SEC. A&B believes that during fiscal 2006, its directors and
executive officers filed all reports required to be filed under Section 16(a) on
a timely basis.
Certain Relationships and Transactions. A&B has adopted a written
policy under which the Audit Committee must pre-approve all related person
transactions that are disclosable under SEC Regulation S-K, Item 404(a). Prior
to entering into a transaction with A&B, directors and executive officers (and
their family members) must make full disclosure of all facts and circumstances
to the Law Department. The Law Department then determines whether such
transaction or arrangement requires the approval of the Audit Committee.
The Audit Committee considers all of the relevant facts and circumstances
available, including (if applicable) but not limited to: the benefits to the
Company; the impact on a director's independence in the event the person in
question is a director, an immediate family member of a director or an entity in
which a director is a partner, shareholder or executive officer; the
availability of other sources for comparable products or services; the terms of
the transaction; and the terms available to unrelated third parties or to
employees generally. The Audit Committee will approve only those related person
transactions that are in, or not inconsistent with, the best interests of the
Company and its stockholders.
The Audit Committee has established written procedures to address
situations when approvals need to be sought between meetings. Whenever possible,
proposed related person transactions will be included as an agenda item at the
next scheduled Audit Committee meeting for review and approval. However, if it
appears that a proposed related person transaction will occur prior to the next
scheduled Audit Committee meeting, approval will be sought from Audit Committee
members between meetings via fax, e-mail or written correspondence. Approval by
a majority of the Committee members will be sufficient to approve the related
person transaction. If a related person transaction is approved in this manner,
the action will be reported upon at the next Audit Committee meeting.
Walter A. Dods, Jr., a director of A&B, purchased two residential units
on January 11, 2006, at market prices in a project being developed by a limited
liability company in which a subsidiary of A&B is a member, for an aggregate
purchase price of $1,950,000. Both G. Stephen Holaday, General Manager, Hawaiian
Commercial & Sugar Company, and the son of Carson R. McKissick, a director
of A&B who retired from the Board on April 27, 2006, have entered into
agreements to purchase condominium units in a project being developed by a
limited liability company in which a subsidiary of A&B is a member, for a
purchase price of $1,817,500 and $1,070,000, respectively. Charles G. King, a
director of A&B, owns a 6.1 percent interest, and Mr. King's brother owns a 65
percent interest, in a corporation that has entered into a five-year commercial
lease (with one five-year renewal option) at market rates with a subsidiary of
A&B. The amount of gross rent paid in 2006 was $231,955, and the remaining
aggregate net rental obligation under the five-year lease term is $636,450.
Constance H. Lau, a director of A&B, is President, Chief Executive
Officer and Director of HEI, as well as Chairman of the Board, President and
Chief Executive Officer of American Savings Bank, F.S.B., a subsidiary of HEI.
A&B and its subsidiaries have a number of relationships with American Savings
Bank, including:
American Savings Bank (i) had a 9 percent participation in A&B's $200
million revolving credit and term loan agreement (which was superseded on
December 28, 2006 by the agreements described in (ii) and (iii)), for which, in
2006, the largest aggregate amount of principal outstanding under the facility
was $40 million, and $40 million and $665,934 were paid in principal and
interest, respectively, at a rate of London Interbank Offered Rate ("LIBOR")
plus 0.475 percent, (ii) has a 10.8 percent participation in A&B's $225 million
revolving credit and term loan agreement (such loan being the successor to the
$200 million agreement described in (i)), of which, in 2006, the largest
aggregate amount of principal outstanding was $26.5 million with no principal or
interest paid, and $26.5 million was outstanding at February 16, 2007, with
interest payable on a sliding scale at rates between 0.225 percent to 0.475
percent (based on A&B's current credit rating) plus LIBOR, (iii) has a 10.8
percent participation in Matson's $100 million revolving credit and term loan
agreement (such loan being linked to the $225 million facility described in
(ii) above), of which, in 2006, there were no amounts outstanding and no
principal or interest paid, and no amounts outstanding at February 16, 2007,
with interest payable on a sliding scale at rates between 0.225 percent to 0.475
percent (based on Matson's current credit rating) plus LIBOR, (iv) has a $40
million construction loan made to a limited liability company in which a
subsidiary of A&B is a member, of which, in 2006, the largest aggregate amount
of principal outstanding was $38,586,562, $21,009,791 was outstanding at
February 16, 2007, and $18,462,914 and $1,614,477 were paid in principal and
interest in 2006, respectively, at a rate of LIBOR plus 1.25 percent, (v) has
a $12 million revolving credit facility made to a limited liability company
in which a subsidiary of A&B is a member, of which, in 2006, there were no
amounts outstanding and no principal or interest paid, and no amounts
outstanding at February 16, 2007, with interest payable at a rate of LIBOR plus
1.25 percent, (vi) had a $5 million bridge loan made to a limited liability
company in which a subsidiary of A&B is a member, of which, in 2006, the largest
aggregate amount of principal outstanding was $5 million, $5 million and $56,635
were paid in principal and interest in 2006, respectively, at a rate of LIBOR
plus 1.25 percent, and which was paid in full on December 14, 2006, (vii) is a
commercial tenant in certain properties owned by A&B or its subsidiaries, under
leases with terms that have expired or are expiring from May 2006 to December
2017, with aggregate gross rents in 2006 of $347,958, and aggregate net rents
from and after January 1, 2007 of $637,966, and (viii) is a holdover lessee and
licensee in A&B's Maui Mall Shopping Center, with a month-to-month lease and
a month-to-month license for a net monthly rent of $300 and $1,800 per month,
respectively. A&B also has two certificates of deposit with American Savings
Bank that total $45,209 and which have maturities of less than six months.
In 2006, an A&B division sold electricity that it had produced to Maui
Electric Company, Inc., an HEI subsidiary, in the amount of approximately
$19,711,000, which is based on a rate approved by the Hawaii Public Utilities
Commission.
Ms. Lau's spouse is the Vice Chairman, Chief Executive Officer and
Director of Finance Factors, Ltd., a Hawaii-based financial institution. Finance
Factors has three commercial leases with A&B, two of which have terms expiring
in November 2007 and one of which has a term expiring in November 2010, with
aggregate gross rents in 2006 of approximately $148,653, and aggregate net
rents from and after January 1, 2007 of approximately $252,514.
The brother of Matthew J. Cox, Executive Vice President and Chief
Operating Officer of Matson, is an officer in a company from which Matson leased
transportation equipment. The aggregate amount paid under the lease in 2006 was
$2,196,596, and the remaining aggregate rental obligation under the lease is
$4,141,152.
Jeffrey N. Watanabe, a director of A&B, is a partner in a law firm that
performed legal services in 2006 in the amount of $145,248 for a limited
liability company in which a subsidiary of A&B is a member.
Code of Ethics. A&B has adopted a Code of Ethics that applies to the
CEO, Chief Financial Officer ("CFO") and Controller (the "Code"). A copy of the
Code, along with copies of Codes of Conduct applicable to all directors,
officers and employees of A&B, is posted on the corporate governance page of
A&B's corporate website, www.alexanderbaldwin.com. A&B intends to satisfy any
disclosure requirements under Item 5.05 of Form 8-K regarding an amendment to,
or a waiver from, a provision of the Code by posting such information on its
website.
EXECUTIVE COMPENSATION
Compensation Discussion and Analysis ("CD&A")
Compensation Philosophy
-----------------------
Objectives: The Company operates in a highly competitive and challenging
environment. To attract, retain and motivate qualified executive officers,
the objectives of the Company's compensation philosophy include:
o Rewarding favorable corporate, business unit and individual
performance,
o Providing an appropriate mix of short-term and long-term
executive compensation that is heavily performance-based,
o Providing incentives for long-term performance through equity
compensation, which align executive interests with shareholder
interests with the ultimate objective of improving shareholder
value, and
o Providing competitive pay to executive officers with similar job
responsibilities in organizations of similar size.
Pay Elements: The Company provides the following pay elements to our executive
officers in varying combinations to accomplish our compensation objectives:
o Base salary,
o Annual incentives and other cash awards delivered through the:
- One-Year Performance Improvement Incentive Plan ("One-Year
PIIP"), and
- Three-Year Performance Improvement Incentive Plan
("Three-Year PIIP") under which no grants have been made
since the 2004-2006 plan cycle,
o Equity-based compensation (stock options and restricted stock
grants under the A&B 1998 Stock Option/Stock Incentive Plan ("1998
Plan") and the A&B Restricted Stock Bonus Plan),
o Retirement benefits provided through the:
- A&B Retirement Plan for Salaried Employees and Retirement Plan
for Employees of Matson (broad-based employee defined benefit
programs),
- A&B Excess Benefits Plan,
- A&B Executive Survivor/Retirement Benefit Plan (which only has
four active participants, only one of which is a named
executive officer ("NEO" - the term "NEO" is defined below in
the section captioned "Summary Compensation Table"), and no
new participants have been added since 1997),
- A&B 1985 Supplemental Executive Retirement Plan (which only
has three participants, only one of which is an NEO, and no
new participants have been added since 1997),
- A&B Individual Deferred Compensation Plan (a broad-based
employee defined contribution 401(k) program), and
- A&B Profit Sharing Retirement Plan (a broad-based employee
defined contribution program),
o Deferred compensation through the A&B Deferred Compensation Plan,
o Certain modest executive perquisites and benefits, and
o Severance Plan and Change in Control agreements.
Each compensation element and its purpose are further described below.
Pay Program Administration and Policies: The Compensation Committee has general
responsibility for executive compensation and benefits, including incentive
compensation and stock incentive plans.
For 2006, the Compensation Committee directly retained Watson Wyatt to
assist the Committee in:
o Evaluating salary and incentive compensation levels,
o Providing information on current trends in executive compensation,
o Preparing a summary of the value of all compensation elements
provided to the executive during the year,
o Reviewing change in control arrangements including the term,
conditions, participation levels and estimated aggregate payout
values to ensure such arrangements are reasonable and competitive,
and
o Evaluating the pay arrangements for the non-employee members of
the Board of Directors.
With the knowledge of the Compensation Committee, management also retained
Watson Wyatt to assist the Company on several special projects, including a
review of pension programs and incentive goal-setting training.
The Company competes across a broad group of industries and, based
on the recommendation of Watson Wyatt, uses data from a combination of four
national and highly recognized published surveys representing a broad group of
industrial companies to benchmark competitive pay practices. The Company uses
statistics from these surveys, as available, and determines competitive pay for
each executive on the basis of his or her corporate or business unit revenue
responsibilities and role. Survey data obtained by Watson Wyatt is also
typically summarized within revenue range groupings and the Company generally
uses data that represents companies of between $500 million and $2.5 billion in
revenues. Because the Company operates in a number of different industries, it
does not use data that is specific to any individual segment of the Company's
business. The Compensation Committee has periodically conducted competitive
benchmark studies for each component of the executive compensation program. In
2006, the Compensation Committee conducted a competitive assessment of the
combined base salary, cash incentives and equity grants, based on information
provided by Watson Wyatt.
Although there is no specific formula applied by the Company to
determine the allocation between cash and noncash compensation or between the
noncash forms of pay, the Company's general philosophy is to provide cash
compensation at the 50th percentile of competitive survey data and a combination
of salary, target bonuses and longer-term incentives at about the 60th
percentile of competitive survey data.
In addition to the compensation benchmarking survey data provided by
Watson Wyatt, the Compensation Committee reviews a summary of the value of all
compensation elements provided to the executive during the year when making its
pay decisions. The Compensation Committee takes into consideration the tax and
accounting treatment for compensation as part of its decision-making
deliberations. While the Compensation Committee does not anticipate
circumstances where a restatement of earnings upon which incentive compensation
award decisions were based would occur, should such circumstances occur the
Compensation Committee has the discretion to take necessary actions to protect
the interests of shareholders including actions to seek to recover such
incentive awards.
Section 162(m) of the Internal Revenue Code limits the deductibility
for federal income tax purposes of executive compensation in excess of
$1,000,000 for any fiscal year, except to the extent that the compensation in
excess of that amount meets the statutory definition of "performance-based
compensation." The Compensation Committee will not necessarily limit executive
compensation to that amount, but will consider it as one factor in its
consideration of compensation matters and will consider reasonable steps to
preserve the deductibility of compensation payments.
The role of management in executive compensation includes:
o Identifying appropriate performance measures and establishing
individual performance goals that are consistent with the
Board-approved operating plans and in alignment with the
strategic plan,
o Implementing the programs approved by the Compensation Committee,
o Based on information provided by a third party compensation
consultant, providing guidelines and recommendations to the
Compensation Committee regarding pay levels for officers on the
basis of plan formulas, salary structures, and the CEO's
assessment of individual officer performance. (The Compensation
Committee works with the Board of Directors to determine
compensation levels for the CEO), and
o Providing the Committee with the financial and other data used to
measure performance against established goals.
Pay Components
--------------
Salary: The base salary component is intended to compensate the executive for
the basic market value of the job and the responsibilities of that job in
comparison with other positions in the Company. The Company's general philosophy
is to provide base salaries at the median of salaries paid to officers with
comparable job responsibilities in general industry companies of similar size to
the Company. Factors that are considered in determining where the executive is
paid in relation to the competitive pay data and the Company's philosophy
include: the executive's performance, positioning within the executive's
salary range, an individual's job experience and role responsibilities.
The CEO recommends annual base salary changes for the other NEOs. These
recommendations are determined by reviewing:
o An assessment of the individual's performance during the year,
o Competitive survey data obtained by Watson Wyatt,
o Projected salary increases for the coming year for general
industry companies gathered from nationally recognized survey
data sources obtained by Watson Wyatt, and
o The executive's position in the salary range.
The Board of Directors determines the CEO's annual salary change on the
basis of the same factors mentioned above. The Company does not consider any one
specific corporate performance factor in determining base salary changes. In
2006, Mr. Doane declined being considered for any increase for the year. The
Board has a formalized performance review process for the CEO. Beginning in
2007, the Board is expanding that process to include additional non-financial
competency criteria for determining base salary increases.
The Board of Directors may adjust the CEO's base compensation and the
CEO may recommend adjustments for officer compensation (other than his own) at
other times during the year based on factors such as new hires or mid-year
promotions, the executive's pay relative to the market, unexpected changes in
the executive's role during the year, or extraordinary events.
The Compensation Committee reviews the competitive analysis and reports
provided by Watson Wyatt when making salary determinations. Base salary
increases for NEOs are considered by the Compensation Committee in February of
each year for implementation on April 1st. For 2006, base salaries for NEOs in
the aggregate were at about the 50th percentile of the competitive market, and
no individual NEO exceeded the 75th percentile of the competitive market.
Annual Incentives: Annual incentives are provided to motivate and reward
executives for achieving specific annual business goals. These goals are
established in February of each year.
Company Performance. For determination of award levels for the 2006
performance cycle, the Company's 2006 operating performance was compared to the
performance standards approved by the Compensation Committee in February 2006.
These standards were based on the Company's 2006 operating plan approved by the
Board of Directors in December 2005. This plan recognized the financial
challenges posed by the expiration in February 2006 of Matson's 10-year
operating alliance with American President Lines, Ltd. The expiration of the
alliance and the costs of transitioning to a new service were expected to create
a $32 million to $37 million pre-tax earnings shortfall as compared to 2005.
While growth in Matson's other business lines, especially integrated logistics,
and in A&B's real estate leasing and sales segments were expected to offset much
of this loss, the Company's 2006 operating plan projected consolidated earnings
to be lower in 2006 as compared to 2005.
Actual operating performance in 2006 was better than expected.
Consolidated net income exceeded plan targets and approached 2005 levels. The
transportation, real estate and agribusiness units of the Company all exceeded
operating plan targets and, as a result, the corporate and business unit metrics
for determination of incentive payments also exceeded target levels.
One-Year PIIP: The One-Year PIIP provides performance-based incentives
to eligible executives based on corporate, business unit and individual goals.
The weighting among the corporate, business unit and individual goals depended
on the executive's position and job responsibilities. Corporate executives were
weighted 60 percent for corporate performance and 40 percent on individual
goals. Business unit executives were weighted 20 percent on corporate
performance, 20 percent to 40 percent on business unit performance and 40
percent to 60 percent on individual goals. The corporate component measures in
2006 were based on the operating plan approved by the Board in December 2005
and were weighted 65 percent on corporate profit before income tax and
35 percent on return on invested capital. Financial performance goals for each
business unit were based on the operating plan approved by the Board and were
weighted 100 percent on business unit profit before income tax.
The performance factors, measures and their relative weights are
determined annually by the Compensation Committee, and therefore are subject to
change in future years. The Compensation Committee conducted a review of the
weights and, based on the advice of Watson Wyatt and the recommendation of
management, the 2007 One-Year PIIP will place greater emphasis on corporate
and business unit financial goals and less emphasis on individual goals.
The annual corporate and business unit targets for performance reflect
the Company's confidential operating plan and, thus, the Company does not
disclose the targets publicly for competitive reasons. The operating plan is
reviewed and approved in principle by the Board of Directors. When establishing
the operating plan, management and the Board of Directors consider the
historical performance of the Company, external elements such as economic
conditions and competitive factors, Company capabilities, performance
objectives as well as the Company's strategic plan. Three levels of
performance were established for 2006, with the levels structured to be
moderately challenging (threshold level, or 85% of the operating plan amounts),
challenging (target level, or 100% of the operating plan amounts) and
significantly challenging (extraordinary level, or 110% of the operating plan
amounts) to achieve.
In addition to corporate and business unit performance goals, each NEO
has a portion of his award based on achieving individual goals. These
individual goals vary, depending upon the NEO's position in the Company and/or
the activities of the NEO's business unit. Individual goals are reviewed
annually and approved by the Compensation Committee in February of each year.
Performance against individual goals is assessed at threshold (moderately
challenging), target (challenging) and extraordinary (significantly
challenging) levels.
The CEO reviews the formula award calculations for each individual
earning an award under the One-Year PIIP, and makes recommendations to the
Compensation Committee regarding the payout for each individual, including the
reasons for his recommendations. Each component of the award - corporate,
business unit and individual - is evaluated individually against the respective
performance measures. Target award opportunity levels for NEOs range from
50 percent to 70 percent of base salary. If the two measures of the corporate
component do not reach threshold levels, there will be no payouts under the One-
Year PIIP program, unless authorized by the Compensation Committee to take into
consideration factors it believes more appropriately reflect the performance
of the Company, unit or individual. If target goals are achieved for a
particular component, a participant will receive 100 percent of the target award
opportunity pertaining to the component. If threshold goals are achieved, a
participant will receive 50 percent of the target award opportunity pertaining
to that component. If performance is below the threshold goal, there is no award
payment. If extraordinary performance levels are achieved or exceeded, the
maximum award paid is equal to 200 percent of the participant's target award
opportunity pertaining to that component. As described further in the
Restricted Stock Bonus Program, at the executive's election, up to 50 percent of
the final award payment can be made in stock, and the Compensation Committee has
the discretion to provide a matching grant of up to 50 percent of additional
shares of restricted stock. The Compensation Committee approves the awards, and
has discretion to modify recommended awards, both positively and negatively, to
take into consideration factors it believes more appropriately reflect the
performance of the Company, unit or individual.
For 2006, the Company exceeded its targets for corporate profit before
income tax, return on invested capital and the NEOs' respective business unit
profit before income tax. These are key operating objectives of the executive
team. In 2006, all NEOs received awards that were between the target and
extraordinary performance levels for all applicable components.
Working with Watson Wyatt-supplied reports, management and the
Compensation Committee reviewed the participation levels and target award levels
for the One-Year PIIP and found that the Company's participation levels, target
award opportunity levels and potential payout costs as a percentage of income
were well within the competitive range at about the median or below. For 2006,
base salary compensation levels for the NEOs were slightly below the 50th
percentile and actual incentive payouts placed total cash compensation at about
the 60th percentile.
Three-Year PIIP: There were no grants made under the Three-Year PIIP in 2005 or
2006. The Compensation Committee does not plan to make any additional cash
awards in the near-term, because it believes that equity-based compensation is
better aligned with the Company's long-term performance.
Equity-Based Compensation: The equity portion of the total compensation program
is provided to:
o Align management and shareholder interests,
o Provide an incentive to increase shareholder value over the
longer-term, and
o Provide a means to attract, motivate and retain, as well as
reward, the management team responsible for the success of the
Company.
The Company's longer-term incentive award opportunities are targeted
such that the combination of base salary, target annual incentives and long-term
incentive award opportunities are positioned at the 60th percentile of the
competitive market median. Actual realized gain may be higher or lower,
depending on the Company's common stock price performance over time.
1998 Plan: The Compensation Committee makes grants of nonqualified
stock options, time-vested restricted stock and performance-based restricted
stock under the 1998 Plan. Grants under the 1998 Plan are generally considered
and granted annually in January by the Compensation Committee. In determining
the size of a grant to an executive officer, the Compensation Committee
considers, among other things, general industry survey data, general industry
practice, and the executive officer's current and expected future contributions
to the Company.
In 2006, the Compensation Committee adopted a performance-based
restricted stock component, using a one-year operating plan pre-tax income
performance measure. The purpose of this component is to strengthen the
performance characteristics of equity-based compensation grants, increase
ownership holdings of executives and link rewards to the achievement of the
Company's business plan.
The Compensation Committee, with the assistance of Watson Wyatt,
reviews and determines the appropriate types and weights of equity grants each
year. For 2006, the Compensation Committee made equity grants in a combination
of stock options, time-vested restricted stock and performance-based restricted
stock. The mix of the value of these three components was weighted 25 percent,
50 percent and 25 percent respectively. For 2007, the Compensation Committee
revised the mix to one-third each of stock options, time-vested restricted stock
and performance-based restricted stock. The Compensation Committee believes
a mix of grants:
o Creates greater alignment between management and shareholder
interests through equity ownership,
o Continues to provide upside opportunity through the use of stock
options, but balances that potential upside with the downside
risks of an actual shareholder delivered through
restricted stock,
o Retains key management that has successfully directed the
Company's performance over recent years, and
o Ties a portion of equity compensation to attaining specific
performance goals.
For the 2006 performance-based restricted stock grants, three levels
of performance goals were established, with the levels structured to be
moderately challenging (threshold level), challenging (target level) and
significantly challenging (extraordinary level) to achieve, with no payout
received if the threshold level is not achieved. The goals were established to
reflect the Company's operating plan, which is fully reviewed and approved in
principle by the entire Board of Directors. In 2006, the Company's performance
exceeded the target goal and resulted in executives earning 166 percent of their
targeted performance-based shares which, as noted above, represented 25 percent
of the overall 2006 equity grant at target.
Restricted Stock Bonus Plan: The Restricted Stock Bonus Plan is
designed to:
o Increase management ownership,
o Align management interests with those of the Company's
shareholders,
o Motivate management to achieve sustained excellence in Company
performance, and
o Encourage management to remain with the Company through a risk of
forfeiture of awards if the executive resigns during the
restriction period.
Executives receiving awards under the One-Year PIIP or, if applicable,
the Three-Year PIIP, may elect to receive up to 50 percent of the award in
restricted stock. The Compensation Committee has the discretion to provide a
matching grant of up to 50 percent of additional shares of restricted stock or
stock-equivalent units. All shares paid in restricted stock and any related
matching shares fully vest at the end of a three-year vesting period. If the
participant resigns prior to the end of the vesting period, the bonus shares
will be forfeited and the original restricted stock may be repurchased by the
Company at the lower of the then fair market value or the amount of the award
applied to the acquisition of the restricted shares.
Retirement Plans: The Company provides various retirement plans to assist its
executives and other employees with retirement income planning, increase the
attractiveness of employment with the Company, and attract mid-career
executives. The retirement plans, in the aggregate, are designed to achieve
these purposes and to provide a competitive retirement package. None of the
qualified or nonqualified retirement plans are tied directly to Company
performance, with the exception of the A&B Profit Sharing Plan as described
below. Actuarial assumptions used to determine the present values of retirement
benefits are included immediately following the Pension Benefits table of this
Proxy Statement.
A&B Retirement Plan for Salaried Employees and Retirement Plan for
Employees of Matson: The A&B Retirement Plan for Salaried Employees and
Retirement Plan for Employees of Matson ("Qualified Retirement Plans"), which
are non-contributory defined benefit pension plans, provide retirement benefits
to the Company's salaried employees who are not subject to collective bargaining
agreements. The Pension Benefits table of this Proxy Statement shows estimated
present values of annual accrued retirement benefits of covered participants
payable at age 62 (earliest age at which benefits are unreduced) under these
plans.
A&B Excess Benefits Plan: The A&B Excess Benefits Plan provides pension
benefits to certain executives, including the five NEOs, to help the Company
meet its objectives for retirement plans, as described above. It is not a
qualified plan under the Internal Revenue Code. The Excess Benefits Plan works
together with the Qualified Retirement Plans and A&B Profit Sharing Retirement
Plan to provide benefits and contributions in an amount equal to what otherwise
would have been provided using the Qualified Retirement Plans' formulas except
for the contribution, compensation and benefits limits imposed by tax law. The
present value of the accrued benefits are reflected in the Pension Benefits
table of this Proxy Statement.
A&B Executive Survivor/Retirement Benefit Plan: The A&B Executive
Survivor/Retirement Benefit Plan provides selected executives a pre-retirement
death benefit equal to 50 percent of final base compensation payable for 10
years and, at the executive's election upon retirement, either (i) a
continuation of the death benefit or (ii) a retirement income benefit equal to
26 percent of final base compensation payable for 10 years. This plan has four
active participants, only one of which, the CEO, is an NEO. No new participants
have been added since 1997, and there are no plans to add any participants in
the future. The present value of the accrued benefits is reflected in the
Pension Benefits table of this Proxy Statement.
A&B 1985 Supplemental Executive Retirement Plan: The A&B 1985
Supplemental Executive Retirement Plan is designed to enhance the Company's
ability to hire and retain executives who, because of a career change, would
have less than a full service career with the Company. This plan has three
active participants, only one of which, the CEO, is an NEO. No new participants
have been added since 1997 and there are no plans to add any participants in the
future. The present value of the accrued benefit is reflected in the Pension
Benefits table of this Proxy Statement.
A&B Profit Sharing Retirement Plan and Individual Deferred Compensation
Plan: The Company has a Profit Sharing Retirement Plan available to all
non-bargaining unit salaried employees that provides for discretionary
contributions to participants of between 1 percent and 3 percent of compensation
based on the degree of achievement of income before taxes as established in the
Company's annual operating plan. The Company does not make a contribution
unless, after such contribution, Company net income at the end of the year is at
least equal to 6 percent of shareholders' equity as of the beginning of the
year. The purpose of the Profit Sharing Retirement Plan is to complement the
Company's Individual Deferred Compensation Plan match by linking a portion of
the Company's contribution to meeting Company performance goals. The Company
also has an Individual Deferred Compensation Plan (a 401(k) plan) available to
all non-bargaining unit salaried employees that generally provides for a match
of up to 3 percent of the compensation deferred by a participant during the
fiscal year.
For 2006, the Compensation Committee determined that all participants
would receive a profit-sharing contribution of 2.7 percent of their eligible
compensation, in addition to matching contributions under the Company's
Individual Deferred Compensation Plan. The value of the Company's 2006 profit
sharing contribution and Individual Deferred Compensation matches for NEOs are
shown in the Summary Compensation table of this Proxy Statement.
Deferred Compensation: The Deferred Compensation Plan allows participants, if
any, in the Three-Year PIIP to voluntarily defer up to 100 percent of the
participant's One-Year and Three-Year PIIP award payouts to a future date in the
form of cash and/or stock equivalent units. The purpose of the Plan is to allow
executives to defer current tax liabilities to a future date and allow them
greater flexibility to manage their cash flow needs. In addition, to the extent
that executives elect to receive stock equivalent units, it aligns executives'
and shareholders' interests. The executive contributions, Company contributions,
aggregate earnings and aggregate balance for each of the NEOs are reflected in
the Summary Compensation and Deferred Compensation tables of this Proxy
Statement. No NEO elected to defer compensation in 2006. The Compensation
Committee has not designated any participants in the Three-Year PIIP since the
2004-2006 cycle and does not plan to designate participants in the near term.
Accordingly, after 2006, there will be no further opportunities to defer awards
unless participation in the Three-Year PIIP is renewed.
Executive Perquisites and Benefits: The Company's philosophy is to provide
executives with limited perquisites that are below market. The value of the
perquisites provided to each of the NEOs are reflected in the Summary
Compensation table of this Proxy Statement. The aggregate cost for all five NEOs
in 2006 was $83,906.
Severance Plan and Change in Control Agreements: The Company provides a
Severance Plan and Change in Control Agreements to executives to provide a
competitive package of pay and retain talent during transitions due to a Change
in Control or other covered event. In particular, Change in Control agreements
promote the continuation of management to ensure a smooth transition and protect
the underlying stock value during the transitional period. The value of the
arrangements for each NEO upon various severance scenarios is shown in the Other
Potential Post-Employment Payments section of this Proxy statement.
Change in Control Agreements: The Company has Change in Control
agreements (the "Agreements") with the five NEOs to encourage their continued
employment with the Company by providing them with greater security in the event
of termination of their employment following a change in control of the Company.
During 2006, the Compensation Committee requested that Watson Wyatt
review the Agreements including their terms, conditions, individual benefits and
aggregate costs. Watson Wyatt's findings indicated that the Company's Agreement
costs were conservative and within a competitive range. The Company adopted a
participation policy that extends Agreements to only senior level executives
whose employment would be most likely at risk upon a Change in Control. The
Compensation Committee continues to periodically review the Agreements for
potential changes, in accordance with the terms of the Agreements. These
Agreements are described in further detail in the Other Potential
Post-Employment Payments section of this Proxy Statement.
Executive Severance Plan: The Executive Severance Plan ("Severance
Plan") covers certain designated executives, including the five NEOs. The
purpose of the Severance Plan is to retain key employees and provide a
competitive level of severance benefits should the executive be involuntarily
terminated due to certain circumstances. The value of the arrangements for each
NEO upon various severance scenarios and further detail of the Severance Plan
are shown in the Other Potential Post-Employment Payments section of this proxy
statement.
Retiree Health and Medical Plan: The Company provides to all salaried
non-bargaining unit employees retiree medical and life insurance benefits to aid
in retaining and recognizing long-term service employees, and to provide for
health care costs in retirement. The Company's contribution towards the monthly
premium payable under these programs is limited, based on the employee's age and
years of service. The benefits from this plan are reflected in the Other
Potential Post-Employment Payments section of this Proxy Statement.
Stock Ownership Guidelines
--------------------------
Based on research provided by Watson Wyatt, the Company believes that
better stock ownership by senior executives correlates with higher Company
financial performance. The Company encourages executive ownership in many ways
including restricted stock grants, stock option grants and paying out a portion
of the One-Year PIIP in restricted shares. The Company has had guidelines in
place since 1994 to encourage stock ownership among its executive ranks to be
achieved within a five-year period. The Compensation Committee periodically
reviews the guidelines to ensure they continue to be reasonable and competitive.
The Compensation Committee receives periodic updates from management on the
progress toward the following ownership goals:
Position Salary Multiple
-------- ---------------
CEO 5X
Other NEOs 3.5X
Achievement of the guidelines can be met in either of two ways:
o Value of stock: owning shares of the Company common stock with a
value of 3.5 times to 5 times (as set forth above) the amount of
the covered executive's salary as of the date the executive
became covered by the guidelines; or
o Number of shares: owning a number of shares of the Company common
stock which, at the time the executive became covered by the
guidelines, would have had a then current value equal to 3.5
times to 5 times (as set forth above) the amount of the
executive's salary at that time.
The Compensation Committee reviewed the holdings during 2006 for the
NEOs and found that those executives that have been in their current position
for five years or more significantly exceeded the ownership guidelines by almost
two to three times the guidelines and those with less than five years in their
current position are on track to meeting their guidelines within the five-year
period.
Equity Granting Policy
----------------------
The Company does not have any practice, policy or program allowing for
timing of equity grants in relation to the Company's current stock price or
material non-public information. Equity awards are normally granted for current
employees at the same time of year each year at the January Compensation
Committee meeting, which generally is held on the fourth Wednesday of the month.
Equity grants for new hires or promoted employees are established and approved
at regularly scheduled Compensation Committee meetings. The CEO does not have
the discretion to set any grant dates of awards.
The strike price for stock option grants is set in accordance with the
terms and conditions of the 1998 Plan, which establishes the price as the
average of the highest and lowest price on the date of grant. In the proposed
2007 Plan, the methodology to be used for the determination of the strike price
is the closing price on the date of grant. The terms and conditions of each
grant are determined by the Compensation Committee at the time of the grant
approval.
Summary Compensation Table. The following table summarizes the cash and
noncash compensation paid by A&B for services rendered during 2006 by A&B's CEO,
CFO and the three other most highly compensated executive officers. As used in
this Proxy Statement, "NEOs" means all persons identified in the Summary
Compensation Table.
2006 SUMMARY COMPENSATION TABLE
Name and Year Salary Bonus Stock Awards Option Non-Equity Change in All Other Total
Principal Position ($) ($) ($) Awards Incentive Pension Compensation ($)
($) Plan Value and ($)
Compensation Nonqualified
($) Deferred
Compensation
Earnings
($)
(a) (b) (c) (d) (e) (f) (g) (h)(5) (i) (j)
- ------------------------------------------------------------------------------------------------------------------------------------
W. Allen Doane (1) 2006 765,000 - 3,626,966 (2) 694,863 (3) 889,131 (4) 1,593,801 44,416 (6) 7,614,177
Chairman of the
Board, President
and Chief Executive
Officer of A&B
Christopher J. 2006 293,750 - 595,116 (2) 131,960 (3) 289,172 (4) 65,874 26,826 (6) 1,402,698
Benjamin
Senior Vice
President,
Chief Financial
Officer &
Treasurer of A&B
James S. Andrasick 2006 482,000 - 1,277,246 (2) 251,622 (3) 372,787 (4) 387,220 53,269 (6) 2,824,145
President and Chief
Executive Officer
of Matson
Stanley M. Kuriyama 2006 375,000 - 762,861 (2) 180,513 (3) 347,325 (4) 296,900 30,165 (6) 1,992,765
President and Chief
Executive Officer
of A&B Land Group
Matthew J. Cox 2006 307,500 - 392,577 (2) 82,564 (3) 261,545 (4) 51,091 31,958 (6) 1,127,235
Executive Vice
President and
Chief Operating
Officer of Matson
(1) Mr. Doane was appointed Chairman of the Board of A&B effective April 27,
2006.
(2) Includes (i) the dollar value of a proportional amount of time-vested
restricted stock earned under SFAS No. 123R granted via the A&B 1998 Plan
for the fiscal year identified in column (b) based on the fair market
value on date of grant (average of the high and low), (ii) the dollar
value of a proportional amount of performance-based restricted stock
earned under SFAS No. 123R granted via the A&B 1998 Plan for the fiscal
year identified in column (b) based on the fair market value on date of
grant (average of the high and low), (iii) the dollar value of One-Year
PIIP awards earned under the Restricted Stock Bonus Plan for the fiscal
year identified in column (b) elected to be received in stock, (iv) the
dollar value of A&B's Three-Year PIIP awards earned under the Restricted
Stock Bonus Plan for the three-year plan cycle ending with and including
the fiscal year identified in column (b) elected to be received in stock
and (v) additional restricted stock earned, at the discretion of the
Compensation Committee, in an amount equal to 50% of the dollar value of
the One-Year PIIP and/or the Three-Year PIIP award that the NEO elected
to take in stock.
(3) Represents the dollar value of a proportional amount of options earned
under SFAS No. 123R granted via the A&B 1998 Plan for the fiscal year
identified in column (b) based on the Black Scholes value on the date of
each grant. See Note 11 of the consolidated financial statements of the
Company's 2006 Annual Report on Form 10-K regarding the assumptions
underlying valuation of equity awards.
(4) Includes (i) the portion of the NEO's award under the One-Year PIIP for
the fiscal year identified in column (b) payable in cash in January of
the following year and (ii) the portion of the NEO's award under the
Three-Year PIIP for the three-year plan cycle ending with and including
the fiscal year identified in column (b) payable in cash in January of
the following year.
(5) All amounts are attributable to the aggregate change in the actuarial
present value of the NEO's accumulated benefit under all defined benefit
and actuarial pension plans.
(6) Includes: (i) amounts contributed by A&B to the A&B Individual Deferred
Compensation Plan and the A&B Profit Sharing Retirement Plan ($12,540
each for Messrs. Doane, Benjamin, Andrasick, Kuriyama and Cox), (ii)
amounts accrued for profit sharing under the A&B Excess Benefits Plan
(Mr. Doane - $14,715, Mr. Benjamin - $1,991, Mr. Andrasick - $7,074, Mr.
Kuriyama - $4,185 and Mr. Cox - $2,363), (iii) meeting fees of $600 for
Messrs. Andrasick and Benjamin as directors of Hawaiian Sugar &
Transportation Cooperative and $8,500 for Mr. Andrasick as a director of
The Standard Club (a maritime insurance entity); and (iv) modest
perquisites. The bulk of the perquisite amounts are attributable to
automobile allowances. For example, in the case of Mr. Doane, $10,200 of
the $17,161 in perquisites was attributable to his automobile allowance.
Categories of perquisites that each executive received are as follows:
Mr. Doane - legal, financial or tax planning, auto allowance, health
club fees, executive physical, company parking, two spousal meals
and director gifts; Mr. Benjamin - legal, financial or tax planning,
auto allowance, club fees, company parking and a spousal meal; Mr.
Andrasick - legal, financial or tax planning, auto allowance, club
fees, company parking and a spousal meal; Mr. Kuriyama - auto allowance,
company parking and club fees; and Mr. Cox - legal, financial or tax
planning, auto allowance, club fees, company parking and a spousal meal.
Grants of Plan-Based Awards. The following table contains information
concerning the equity and non-equity grants under A&B's incentive plans during
2006 to the NEOs.
2006 GRANTS OF PLAN-BASED AWARDS
Name Grant Estimated Future Payouts Estimated Future Payouts
Date Under Non-Equity Incentive Under Equity Incentive Plan
Plan Awards(1) Awards(2)
---------------------------------- --------------------------------
Threshold Target Maximum Threshold Target Maximum
($) ($) ($) (#) (#) (#)
(a) (b) (c) (d) (e) (f) (g) (h)
- --------------------------------------------------------------------------------------------------------------------
W. Allen Doane 1/25/2006 267,750 535,500 1,071,000 6,500 13,000 26,000
Christopher J. Benjamin 1/25/2006 82,500 165,000 330,000 1,250 2,500 5,000
James S. Andrasick 1/25/2006 132,550 265,100 530,200 2,000 4,000 8,000
Stanley M. Kuriyama 1/25/2006 108,000 216,000 432,000 1,500 3,000 6,000
Matthew J. Cox 1/25/2006 75,000 150,000 300,000 1,000 2,000 4,000
2006 GRANTS OF PLAN-BASED AWARDS (CONTD.)
All All Other Exercise Grant Closing
Other Option or Base Date Fair Market
Stock Awards: Price of Value of Price
Awards: Number of Option Stock on Date
Number Securities Awards and of
of Underlying ($/Sh) Option Grant
Shares Options Awards ($/Sh)
of Stock (#) ($)
or Units
(#)(3)
(i) (j) (k) (l) (m)
- ------------------------------------------------------------------------------------------
W. Allen Doane 31,483 54,700 52.5250 2,403,275 52.59
Christopher J. Benjamin 5,451 10,500 52.5250 430,210 52.59
James S. Andrasick 10,472 16,800 52.5250 780,276 52.59
Stanley M. Kuriyama 7,675 12,600 52.5250 575,805 52.59
Matthew J. Cox 5,078 8,400 52.5250 381,839 52.59
(1) Amounts reflected in this section relate to estimated payouts under the
One-Year PIIP. The value of the actual payouts is included in column (g)
of the Summary Compensation Table. Under the Restricted Stock Bonus Plan,
at the executive's election, up to 50% of the One-Year PIIP award may be
received in restricted stock, and the Compensation Committee may
provide a matching grant of up to 50% of additional shares of
restricted stock. In 2006, Messrs. Doane, Benjamin, Andrasick and
Kuriyama elected to take a portion of their award in stock and received
a 50% matching grant of additional shares; the value of the restricted
stock and the matching grant of restricted stock is included in column
(e) of the Summary Compensation Table.
(2) Amounts in this section reflect performance-based restricted stock
grants.
(3) Amounts in this section reflect time-vested restricted stock grants and
the matching grants of shares issued in connection with the 2005
One-Year PIIP and Three-Year PIIP (granted on 1/25/06) under the
Restricted Stock Bonus Plan.
The One-Year PIIP is based on corporate, business unit, and individual
goals depending on the executive's position and job responsibilities.
Performance measures, weighting of goals and target opportunities are discussed
in the CD&A section of this Proxy Statement. In addition to corporate
performance and/or business unit goals, each participant has a portion of his or
her award based on achieving individual goals. These individual goals vary,
depending upon an individual's position in the organization and/or the
activities of their business unit. The Company also has an Annual Incentive Plan
that provides performance-based incentives to key employees who are not eligible
to participate in the One-Year PIIP.
Stock options granted under the 1998 Plan vest in equal increments over
three years and have a maximum term of 10 years. Stock options continue to vest
and are exercisable for three years after disability, normal retirement at 65 or
approved early retirement at 55 (with five years of service). Stock option
vesting automatically accelerates in the event of death and the executive's
personal representative has up to 12 months to exercise the stock options. Stock
options automatically vest immediately prior to the specified effective date of
a Change in Control and will remain exercisable up to the consummation of the
event unless assumed by the successor corporation. If an employee is terminated
due to misconduct, providing services to another organization that may be
considered competitive with the Company's business operations or engages in
other conduct considered materially detrimental to the business, then the option
terminates immediately. If an employee who has been designated a Section 16
officer (which includes all NEOs) ceases to be employed for any other reason the
option may be exercised within six months of termination to the degree vested at
the time of termination.
Time-vested restricted stock grants vest in equal increments over three
years. Time-vested restricted stock grants that are unvested will automatically
vest upon death, permanent disability, normal retirement at 65 or approved early
retirement at 55 (with five years of service).
Performance-based restricted stock grants vest at the end of one year
and the number of shares that vest is determined on the basis of achieving
pre-established corporate pre-tax income goals set at target, threshold and
extraordinary performance goal levels. Actual performance at target results in
earning 100 percent of the target award shares. Actual performance at the
threshold goal results in earning 50 percent of the target award shares. Actual
performance below the threshold goal results in no awards earned. Actual
performance at the extraordinary goal level results in earning the maximum
number of shares equal to 200 percent of the target number of shares. For actual
performance between threshold, target and extraordinary, awards are determined
on a prorated basis between these anchor points on a straight line-basis. If a
participant receiving a performance-based restricted stock grant terminates
employment for any reason other than death, permanent disability, normal
retirement or retirement, they will not receive a payout. If a participant
terminates due to death, permanent disability, normal retirement or approved
early retirement, his or her award will be prorated on the basis of the number
of full or partial months employed and the amount paid at the end of the
performance period.
Grantees receive dividends on the full amount of restricted stock
granted, regardless of vesting, at the same rate as is payable on the Company's
common stock generally. Common stock equivalents are credited with dividends and
are reinvested to purchase additional common stock equivalents valued at fair
market value until such time as the deferral account is paid.
Outstanding Equity Awards at Fiscal Year-End. The following table
contains information concerning the outstanding equity awards owned by the NEOs
at the end of 2006.
2006 OUTSTANDING EQUITY AWARDS AT FISCAL YEAR-END
Name Option Awards
--------------------------------------------------------------------------------
Number of Number of Equity Option Option
Securities Securities Incentive Exercise Expiration
Underlying Underlying Plan Price Date
Unexercised Unexercised Awards: ($)
Options Options Number of
(#) (#) Securities
Exercisable Unexercisable Underlying
Unexercised
Unearned
Options
(#)
(a) (b) (c) (d) (e) (f)
- ---------------------------------------------------------------------------------------------------------------
W. Allen Doane 93,500 0 N/A 28.3125 1/23/2011
75,000 0 26.5200 1/22/2012
85,000 0 26.0050 1/21/2013
56,666 28,334 (1) 33.5050 2/24/2014
23,333 46,667 (2) 44.4450 1/25/2015
0 54,700 (3) 52.5250 1/24/2016
Christopher J. Benjamin 2,200 0 N/A 26.0050 1/21/2013
13,932 6,968 (1) 33.5050 2/24/2014
204 0 37.9800 8/21/2011
3,300 6,600 (10) 44.4450 1/25/2015
0 10,500 (11) 52.5250 1/24/2016
James S. Andrasick 13,334 0 N/A 26.0050 1/21/2013
13,766 13,768 (1) 33.5050 2/24/2014
7,066 14,134 (4) 44.4450 1/25/2015
0 16,800 (5) 52.5250 1/24/2016
Stanley M. Kuriyama 28,000 0 N/A 28.3125 1/23/2011
22,000 0 26.5200 1/22/2012
25,000 0 26.0050 1/21/2013
20,266 10,134 (1) 33.5050 2/24/2014
4,700 9,400 (6) 44.4450 1/25/2015
0 12,600 (7) 52.5250 1/24/2016
Matthew J. Cox 6,800 3,400 (1) N/A 33.5050 2/24/2014
1,900 3,800 (8) 44.4450 1/25/2015
0 8,400 (9) 52.5250 1/24/2016
2006 OUTSTANDING EQUITY AWARDS AT FISCAL YEAR-END (CONTD.)
Stock Awards
-------------------------------------------------------------------
Number of Market Value Equity Equity
Shares or of Shares or Incentive Incentive
Units of Units of Stock Plan Plan
Stocks That That Have Not Awards: Awards:
Have Not Vested Number of Market or
Vested ($) (18) Unearned Payout
(#) Shares, Value of
Units or Unearned
Other Shares,
Rights That Units or
Have Not Other
Vested Rights
(#) That Have
Not
Vested
($) (18)
(g) (h) (i) (j)
- ----------------------------------------------------------------------------------------------------
W. Allen Doane 83,946 (12) 3,733,918 13,000 (17) 578,240
Christopher J. Benjamin 12,697 (16) 564,763 2,500 (17) 111,200
James S. Andrasick 34,880 (13) 1,551,462 4,000 (17) 177,920
Stanley M. Kuriyama 21,502 (14) 956,409 3,000 (17) 133,440
Matthew J. Cox 9,233 (15) 410,684 2,000 (17) 88,960
(1) Vesting date: 2/25/07
(2) Vesting dates: 1/26/07 (23,333) and 1/26/08 (23,334)
(3) Vesting dates: 18,233 shares each on 1/25/07 and 1/25/08 and 18,234
shares on 1/25/09
(4) Vesting dates: 1/26/07 (7,066) and 1/26/08 (7,068)
(5) Vesting dates: 5,600 shares each on 1/25/07, 1/25/08 and 1/25/09
(6) Vesting dates: 4,700 shares each on 1/26/07 and 1/26/08
(7) Vesting dates: 4,200 shares each on 1/25/07, 1/25/08 and 1/25/09
(8) Vesting dates: 1,900 shares each on 1/26/07 and 1/26/08
(9) Vesting dates: 2,800 shares each on 1/25/07, 1/25/08 and 1/25/09
(10) Vesting dates: 3,300 shares each on 1/26/07 and 1/26/08
(11) Vesting dates: 3,500 shares each on 1/25/07, 1/25/08 and 1/25/09
(12) Vesting dates of unvested stock - 3,200 shares each on 2/25/07,
2/25/08 and 2/25/09; 16,000 shares each on 1/26/07 and 1/26/08; 9,066
shares each on 1/25/07 and 1/25/08; and 9,068 shares on 1/25/09
(13) Vesting dates of unvested stock - 1,620 shares each on 2/25/07,
2/25/08 and 2/25/09; 4,733 shares on 1/26/07; 4,734 shares on 1/26/08;
2,783 shares each on 1/25/07 and 1/25/08; and 2,784 shares on 1/25/09
(14) Vesting dates of unvested stock - 1,200 shares each on 2/25/07,
2/25/08 and 2/25/09; 3,150 shares each on 1/26/07 and 1/26/08; and
2,100 shares each on 1/25/07, 1/25/08 and 1/25/09
(15) Vesting dates of unvested stock - 400 shares each on 2/25/07, 2/25/08
and 2/25/09; 1,266 shares on 1/26/07; 1,268 shares on 1/26/08; and
1,400 shares each on 1/25/07, 1/25/08 and 1/25/09
(16) Vesting dates of unvested stock - 820 shares each on 2/25/07, 2/25/08
and 2/25/09; 2,216 shares on 1/26/07; 2,218 shares on 1/26/08; and
1,750 shares each on 1/25/07, 1/25/08 and 1/25/09
(17) Vesting date of unvested performance based stock - 1/25/07
(18) The market value in columns (h) and (j) were calculated based on the
mean of the highest and lowest sales price of A&B common stock on the
last business day of the year ($44.48 on 12/29/06)
Option Exercises and Stock Vested. The following table contains
information concerning option exercises and stock awards for the NEOs in 2006.
OPTION EXERCISES AND STOCK VESTED FOR 2006
Name OPTION AWARDS STOCK AWARDS
------------------------------------------ ------------------------------------------
Number of Shares Value Realized on Number of Shares Value Realized on
Acquired on Exercise Exercise Acquired on Vesting Vesting
(#) ($) (#) ($)
(a) (b) (c) (d) (e)
- ------------------------------------------------------------------------------------------------------------------------------------
W. Allen Doane 0 0 26,422 1,386,754
Christopher J. Benjamin 0 0 3,699 192,396
James S. Andrasick 0 0 15,257 804,203
Stanley M. Kuriyama 9,000 204,300 11,067 583,377
Matthew J. Cox 5,334 81,157 1,666 86,368
The value realized in columns (c) and (e) was calculated based on the mean of
the highest and lowest sales price of A&B common stock on the last business
day of the year. No amounts realized upon exercise of options or vesting of
stock have been deferred.
Pension Benefits. The following table contains information concerning
pension benefits for the NEOs at the end of 2006.
PENSION BENEFITS FOR 2006
Present Value of Payments
Number of Years Accumulated During Last
Name Plan Name Credited Service Benefit Fiscal Year
(#) ($) ($)
(a) (b) (c) (d) (e)
- -------------------------------------------------------------------------------------------------------------------
W. Allen Doane A&B Retirement Plan for 15.8 528,127 0
Salaried Employees
A&B Excess Benefits Plan 15.8 5,648,629 0
A&B 1985 Supplemental 18.9 (1) 1,681,692 0
Executive Retirement Plan
A&B Executive 18.9 (1) 1,285,351 0
Survivor/Retirement Benefit
Plan
Christopher J. A&B Retirement Plan for 5.4 70,642 0
Benjamin Salaried Employees
A&B Excess Benefits Plan 5.4 95,433 0
James S. Andrasick Retirement Plan for Employees 6.6 258,782 0
of Matson
A&B Excess Benefits Plan 6.6 1,447,585 0
Stanley M. A&B Retirement Plan for 15.0 353,544 0
Kuriyama Salaried Employees
A&B Excess Benefits Plan 15.0 1,061,231 0
Matthew J. Cox Retirement Plan for Employees 5.6 83,466 0
of Matson
A&B Excess Benefits Plan 5.6 159,068 0
(1) Years of credited benefit service used to determine annual accrued pension
benefit is 25 years minus the number of years between date of determination and
member's normal retirement date.
Actuarial assumptions used to determine the present values of the retirement
benefits include: discount rates for qualified and non-qualified retirement
plans of 6.0 percent and 5.75 percent, respectively, a lump sum interest rate
for the Excess Benefits Plan and Supplemental Executive Retirement Plan of 2.93
percent (and 2.90 percent for those over age 62 and assumed to retire on
1/1/07), and certain mortality rate assumptions. Qualified benefits are assumed
to be paid on a life annuity basis. Excess Benefits Plan benefits are paid as a
lump sum equal to the present value of the benefit assumed to be paid on a life
annuity basis. Supplemental Executive Retirement Plan benefits are paid as a
lump sum equal to the present value of the benefit assumed to be paid on an
unreduced 50 percent joint and survivor annuity basis, assuming a hypothetical
spouse three years younger. Executive Survivor/Retirement Plan benefits are
assumed to be paid as a 10-year annuity.
A&B Retirement Plan for Salaried Employees: The A&B Retirement Plan
provides retirement benefits to the Company's salaried employees who are not
subject to collective bargaining agreements. Retirement benefits are based on
participants' average monthly compensation in the five highest consecutive years
of their final 10 years of service. Compensation includes base salary, overtime
pay and one-year bonuses. The amounts are based on an ordinary straight life
annuity payable at normal retirement age. An employee vests after five years of
service with the Company. The normal retirement age is 65. An employee may take
an early retirement at age 55 or older, if the employee has already completed at
least five years of service with the Company. If an employee retires early, the
same formula for normal retirement is used, although the benefit will be reduced
for commencement before age 62 because the employee will receive payment early
over a longer period of time. A substantially similar plan, the Retirement Plan
for Employees of Matson, provides retirement benefits to the employees of
Matson. Messrs. Doane and Andrasick are eligible for early retirement.
A&B Excess Benefits Plan: The Excess Benefits Plan was adopted to help the
Company meet its objectives for retirement plans, including assisting employees
with retirement income planning, increasing the attractiveness of employment
with the Company and attracting mid-career executives. The Excess Benefits Plan
works together with the Qualified Retirement Plans and A&B Profit Sharing
Retirement Plan to provide Company benefits and contributions in an amount equal
to what otherwise would have been provided using the Qualified Retirement Plans'
formulas except for the contribution, compensation and benefits limits imposed
by tax law. Under the A&B Profit Sharing Retirement Plan, amounts are credited
to executives' accounts, to be payable after the executive's separation from
service. Executives may elect to convert cash payments in their accounts to
common stock-equivalent units. Benefits based on the Qualified Retirement Plan
are also payable after the executive's separation from service. Payment will be
made six months following separation from service as required by the Internal
Revenue Code.
A&B 1985 Supplemental Executive Retirement Plan: The A&B 1985 Supplemental
Executive Retirement Plan was adopted to enhance the Company's ability to hire
and retain executives who, because of a career change, would have less than a
full service career with the Company. At normal retirement, the award is
calculated as if the participant had 25 years of service at normal retirement
reduced by benefits payable under the Qualified Retirement Plan, the A&B Excess
Benefits Plan and the benefit equivalent which the Participant is eligible to
receive or has received under the pension plan of another employer. The benefit
is payable under the plan in a single lump sum at the time benefits are payable
under the Qualified Retirement Plan. Payment will be made six months following
separation from service as required by the Internal Revenue Code.
A&B Executive Survivor/Retirement Benefit Plan: The Supplemental Executive
Retirement Plan was adopted to provide selected executives with supplemental
pre-retirement death benefits. The Executive Survivor Plan provides for a
pre-retirement death benefit equal to 50 percent of final base compensation
payable for 10 years and, at such person's election upon retirement, either (i)
a continuation of such death benefit or (ii) a retirement income benefit equal
to 26 percent of final base compensation payable for 10 years.
Non-Qualified Deferred Compensation. The following table contains
information concerning non-qualified deferred compensation for the NEOs in 2006.
2006 NONQUALIFIED DEFERRED COMPENSATION
Name Executive Registrant Aggregate Aggregate Aggregate
Contributions in Contributions in Earnings in Withdrawals/ Balance at Last
Last FY Last FY Last FY Distributions FYE
($) ($)(1) ($) ($) ($)
(a) (b) (c) (d) (e) (f)
- ------------------------------------------------------------------------------------------------------------------------------
W. Allen Doane 0 16,350 28,346 0 1,310,892
Christopher J. Benjamin 0 1,238 77 0 1,315
James S. Andrasick 0 8,012 2,528 0 35,355
Stanley M. Kuriyama 0 3,713 1,556 0 21,475
Matthew J. Cox 0 2,384 778 0 36,023
(1) Contributions reflect amounts paid in 2006 based on 2005 deferrals.
Participants in the Three-Year PIIP may defer up to 100 percent of
their One-Year or Three-Year PIIP award payouts to a future date in the form of
cash and/or stock equivalent units. Participants must make their deferral
election at least six months in advance of the end of the performance period
(unless they are a newly eligible employee where special rules apply). Any cash
amounts deferred are credited with annually compounded interest equal to the New
York Reserve Bank discount rate effective as of January 15 of each year within
the deferral period plus 1 percent. Cash payments under the plan are made in a
single lump-sum or in installments at the election of the participant over a
designated period. None of the NEOs elected to defer in 2006.
Other Potential Post-Employment Payments.
Change in Control Agreements: As described in the CD&A section of this
Proxy Statement, A&B has Change in Control Agreements with the five NEOs in
order to encourage their continued employment with A&B by providing them with
greater security in the event of termination of their employment following a
change in control of A&B. Each Change in Control Agreement has an initial
one-year term and is automatically extended at the end of each term for a
successive one-year period, unless terminated by A&B. The Change in Control
Agreements provide for certain severance benefits if the executive's employment
is terminated by A&B without "cause" or by the executive for "good reason"
following a "Change in Control Event" of A&B, as defined by Internal Revenue
Service Notice 2005-1. Upon termination of employment, the executive will be
entitled to receive a lump-sum severance payment equal to two times the sum of
the executive's base salary and bonus, plus certain awards and amounts under
various A&B incentive and deferred compensation plans, and an amount equal to
the spread between the exercise price of outstanding options held by the
executive and the higher of the then-current market price of A&B common stock or
the highest price paid in connection with a change in control of A&B. In
addition, A&B will maintain all (or provide similar) employee benefit plans for
the executive's continued benefit for a period of two years after termination.
A&B will also reimburse executives for individual outplacement counseling
services. Under certain limited circumstances, the Agreements provide for a tax
gross-up payment to offset any excise taxes that may become payable under
Sections 280G and 4999 of the tax code, if the executive's employment is
terminated without cause or for good reason following a change in control of
A&B; currently, four of the five NEOs would not receive any tax gross-up
payments following a change in control event.
If there is a potential change in control of the Company, the executive
agrees to remain in the employ of the Company until the earliest of (1) a date
six months after the occurrence of the potential change in control, (2) the
termination of the executive's employment by reason of disability or retirement,
or (3) the occurrence of a change in control of the Company. A "potential change
in control of the Company" is deemed to occur if the Company enters into a
change in control agreement, any person publicly announces an intention to take
actions leading to the change in control of the Company, any person becomes the
beneficial owner of 20 percent or more of the voting power of the Company, or
the Board adopts a resolution that a potential change in control has occurred.
Executive Severance Plan: The Company also has an Executive Severance
Plan ("Severance Plan") that covers certain designated executives, including the
NEOs. The purpose of the Severance Plan is to retain key employees and to
encourage such employees to use their best business judgment in managing the
Company's affairs. The Plan continues from year to year, subject to an annual
review by the Board of Directors. The Severance Plan provides certain severance
benefits if a designated executive is involuntarily terminated without "cause"
or laid off from employment as part of a job elimination/restructuring or
reduction in force. Upon such termination of employment, the executive will be
entitled to receive an amount equal to six months' base salary, payable in equal
installments over a period of one year, and designated benefits. If the
executive executes an acceptable release agreement, the executive shall receive
additional benefits, including an additional six months of base salary and
designated benefits, reimbursement for outplacement counseling services and a
prorated share of incentive plan awards at target levels that would have been
payable to the executive had he or she remained employed until the end of the
applicable performance period. Payments under the Severance Plan begin six
months after termination for executive officers.
Voluntary Resignation: If the executive voluntarily resigns from the
Company, no amounts are payable under the One-Year PIIP or Three-Year PIIP. The
executive may be entitled to receive retirement and retiree health and medical
benefits to the extent those benefits have been earned or vested under the
provisions of the plans. The executive may have up to six months after
termination to exercise stock options to the degree vested at the time of
termination. In addition, the executive would be entitled to any amounts
voluntarily deferred (and the earnings accrued) under the Deferred Compensation
Plan, Individual Deferred Compensation Plan and the Profit Sharing Retirement
Plan. The executive would forfeit the bonus under the Restricted Stock Bonus
Plan and the original deferred shares may be repurchased by the Company at the
lower of the then fair market value of the shares or the amount of the award
applied to the acquisition of the restricted shares.
Other benefits, as described in the CD&A section of this Proxy
Statement, may include participation in the A&B Retirement Plan, the A&B
Executive Survivor/Retirement Benefit Plan, the A&B Excess Benefits Plan, and
the A&B 1985 Supplemental Executive Retirement Plan.
The following tables show the potential value to each executive under various
termination-related scenarios.
EXECUTIVE TERMINATION SCENARIOS
W. Allen Doane
Change in
Control Termination Termination Voluntary Early
w/Termina- w/o cause w/cause Resigna- Retire- Disability Retirement
Components tion($) ($)(1) ($) tion($) ment($)(2) Death($) ($)(3) ($)(4)
- ---------- ---------- ----------- ------- --------- ---------- -------- ---------- ----------
Cash Severance 3,865,500 1,300,500 -- -- -- -- -- --
Retirement 3,127,567 826,948 -925,276(8) 1,238,134(6) Not yet 1,304,510 -- 1,238,134
Benefits (5) eligible
62,407(7) 62,407(7) -1,222,944(7)(8) 113,325(7) 1,473,028(7) 113,325(7)
Health & Welfare
Benefits 49,131 18,160 -- -- -- -- -- --
Outplacement
Counseling 10,000 10,000 -- -- -- -- -- --
Long-Term
Incentives (9) 3,934,010 -- -- -- -- 3,894,530 3,587,531(10) 3,587,531(10)
Christopher J. Benjamin
Change in
Control Termination Termination Voluntary Early
w/Termina- w/o cause w/cause Resigna- Retire- Disability Retirement
Components tion($) ($)(1) ($) tion($) ment($)(2) Death($) ($)(3) ($)(4)
- ---------- ---------- ----------- ------- --------- ---------- -------- ---------- ----------
Cash Severance 1,203,228 480,000 -- -- -- -- -- --
Retirement 406,298 17,894 17,894 17,894 Not yet 17,894 Not yet
Benefits (5) -15,653(7)(8) -15,653(7)(8) -15,653(7)(8) -15,653(7)(8) eligible -46,075(7)(8) -- eligible
Health & Welfare
Benefits 41,265 19,833 -- -- -- -- -- --
Outplacement
Counseling 10,000 10,000 -- -- -- -- -- --
280G Tax Gross-up 774,600 -- -- -- -- -- -- --
Long-Term
Incentives (9) 724,813 -- -- -- -- 717,221 641,723(10) --
James S. Andrasick
Change in
Control Termination Termination Voluntary Early
w/Termina- w/o cause w/cause Resigna- Retire- Disability Retirement
Components tion($) ($)(1) ($) tion($) ment($)(2) Death($) ($)(3) ($)(4)
- ---------- ---------- ----------- ------- --------- ---------- -------- ---------- ----------
Cash Severance 2,477,036 747,100 -- -- -- -- -- --
Retirement 284,225 0 0 0 0 -124,076(7)(8) -- 0
Benefits (5)
Health & Welfare
Benefits 28,296 7,864 -- -- -- -- -- --
Outplacement
Counseling 10,000 10,000 -- -- -- -- -- --
Long-Term
Incentives (9) 1,332,034 -- -- -- -- 1,319,842 1,170,666(10) 1,170,666(10)
Stanely M. Kuriyama
Change in
Control Termination Termination Voluntary Early
w/Termina- w/o cause w/cause Resigna- Retire- Disability Retirement
Components tion($) ($)(1) ($) tion($) ment($)(2) Death($) ($)(3) ($)(4)
- ---------- ---------- ----------- ------- --------- ---------- -------- ---------- ----------
Cash Severance 1,588,000 608,000 -- -- -- -- -- --
Retirement 943,839 -80,367(8) -80,367(8) -80,367(8) Not yet -80,367(8) Not yet
Benefits (5) -78,337(7)(8) -78,337(7)(8) -78,337(7)(8) -78,337(7)(8) eligible -221,756(7)(8) -- eligible
Health & Welfare
Benefits 50,124 21,878 -- -- -- -- -- --
Outplacement
Counseling 10,000 10,000 -- -- -- -- -- --
Long-Term
Incentives (9) 961,130 -- -- -- -- 952,019 842,217(10) --
Matthew J. Cox
Change in
Control Termination Termination Voluntary Early
w/Termina- w/o cause w/cause Resigna- Retire- Disability Retirement
Components tion($) ($)(1) ($) tion($) ment($)(2) Death($) ($)(3) ($)(4)
- ---------- ---------- ----------- ------- --------- ---------- -------- ---------- ----------
Cash Severance 1,173,390 465,000 -- -- -- -- -- --
Retirement 302,355 19,412 19,412 19,412 Not yet 19,412 Not yet
Benefits (5) -18,494(7)(8) -18,494(7)(8) -18,494(7)(8) -18,494(7)(8) eligible -52,647(7)(8) -- eligible
Health & Welfare
Benefits 79,276 38,731 -- -- -- -- -- --
Outplacement
Counseling 10,000 10,000 -- -- -- -- -- --
Long-Term
Incentives (9) 477,313 -- -- -- -- 471,239 434,400(10) --
(1) Assumes execution of an acceptable release agreement as provided by the
Executive Severance Plan.
(2) An executive may retire at age 62 with unreduced retirement benefits under
qualified retirement plans.
(3) If an NEO is disabled, he will continue to accrue pension benefits as long
as he is continuously receiving disability benefits under A&B's sickness
benefits plan or long-term disability benefit plan. Should the NEO stop
receiving disability benefits, the accrual of credited vesting service and
credited benefit service will cease. Upon the later of attainment of age 65 or
the date at which he is no longer eligible for disability benefits, the NEO will
be entitled to receive a retirement benefit based on his years of credited
benefit service including the period while he had been receiving disability
benefits and his compensation as if he continued to receive his rate of pay in
effect just prior to his becoming disabled for the period he was receiving
disability benefits.
(4) Employees may elect "Early Retirement" upon attaining 55 years of age, with
five years of service or more.
(5) Retirement Benefits figures are incremental to the values shown in the
Pension Benefits table, which uses a different set of assumptions as described
in the related narrative.
(6) Assumes approval of early retirement to obtain a portion of the award.
(7) Present value of amount paid as an annuity.
(8) The Retirement Benefits figures are incremental to the values shown in the
Pension Benefits table. Under certain termination scenarios, benefits reflected
in the Pension Benefits table under the various retirement plans are forfeited,
resulting in a negative value.
(9) Includes the gain on accelerated stock options and the value of accelerated
restricted stock.
(10) An NEO receives continued three-year vesting of stock options; see
Outstanding Equity Awards at Fiscal Year End table in this Proxy Statement for
vested and unvested equity awards.
All amounts shown are lump-sum payments, unless otherwise noted.
Assumptions used in the tables above include: discount rates for qualified and
non-qualified retirement plans of 6.0 percent and 5.75 percent, respectively, a
lump sum interest rate for the Excess Benefits Plan and Supplemental Executive
Retirement Plan of 2.93 percent for changes in control and 2.90 percent for
retirement/termination, a lump sum interest rate for the Executive
Survivor/Retirement Benefit Plan of 4.73 percent for changes in control and 4.69
percent for retirement/termination, certain mortality assumptions and a stock
price of $44.34. Qualified benefits are assumed to be paid on a life annuity
basis. Excess Benefits Plan benefits are paid as a lump sum equal to the present
value of the benefit assumed to be paid on a life annuity basis. Supplemental
Executive Retirement Plan benefits are paid as a lump sum equal to the present
value of the benefit assumed to be paid on an unreduced 50 percent joint and
survivor annuity basis, based on participants' and spouses' ages on 12/29/06.
Executive Survivor/Retirement Plan benefits are assumed to be paid as a 10-year
annuity, except when paid as a lump sum for a change in control or termination
without cause.
Statements in this section that are not historical facts are
"forward-looking statements" that involve a number of risks and uncertainties
that could cause actual results to differ materially from those contemplated by
the relevant forward-looking statement.
Compensation Committee Report
The Compensation Committee has reviewed and discussed the CD&A section
of this Proxy Statement with management and, based on these discussions and
review, it has recommended to the Board of Directors that the CD&A disclosure be
included in this Proxy Statement.
The foregoing report is submitted by Mr. King (Chairman), Dr. Chun,
Ms. Shaw and Mr. Watanabe.
Compensation Committee Interlocks and Insider Participation
During 2006, the members of the Compensation Committee were Mr. King,
Chairman, Dr. Chun, Mr. Watanabe and Ms. Shaw. As set forth above under the
subsection "Certain Relationships and Transactions," Mr. King owns a 6.1 percent
interest, and his brother owns a 65 percent interest, in a corporation that has
entered into a commercial lease with a subsidiary of A&B and Mr. Watanabe is a
partner in a law firm that performed legal services for a limited liability
company in which a subsidiary of A&B is a member.
AUDIT COMMITTEE REPORT
The Audit Committee provides assistance to the Board of Directors in
fulfilling its obligations with respect to matters involving the accounting,
auditing, financial reporting, internal control and legal compliance functions
of A&B, including the review and approval of all related person transactions
required to be disclosed in this Proxy Statement. Among other things, the Audit
Committee reviews and discusses with management and Deloitte & Touche LLP, A&B's
independent auditors, the results of the year-end audit of A&B, including the
auditors' report and audited financial statements. In this context, the Audit
Committee has reviewed and discussed A&B's audited financial statements with
management, has discussed with Deloitte & Touche LLP the matters required to be
discussed by Statement on Auditing Standards No. 61, as amended, and, with and
without management present, has discussed and reviewed the results of the
independent auditors' examination of the financial statements.
The Audit Committee has received the written disclosures and the letter
from Deloitte & Touche LLP required by Independence Standards Board Standard No.
1, and has discussed with Deloitte & Touche LLP its independence from A&B. The
Audit Committee has determined that the provision of non-audit services rendered
by Deloitte & Touche LLP to A&B is compatible with maintaining the independence
of Deloitte & Touche LLP from A&B in the conduct of its auditing function.
In compliance with applicable SEC rules, the Audit Committee has
adopted policies and procedures for Audit Committee approval of audit and
non-audit services. Under such policies and procedures, the Audit Committee
pre-approves or has delegated to the Chairman of the Audit Committee authority
to pre-approve all audit and non-prohibited, non-audit services performed by the
independent auditor in order to assure that such services do not impair the
auditor's independence. Any additional proposed services or costs exceeding
pre-approved cost levels require additional pre-approval as described above. The
Audit Committee may delegate pre-approval authority to one or more of its
members for services not to exceed a specific dollar amount per engagement.
Requests for pre-approval include a description of the services to be performed,
the fees to be charged and the expected dates that the services will be
performed.
Based on the review and discussions referred to above, the Audit
Committee recommended to the Board of Directors that A&B's audited consolidated
financial statements be included in A&B's Annual Report on Form 10-K for the
fiscal year ended December 31, 2006 for filing with the SEC. The Audit Committee
also has appointed, subject to shareholder ratification, Deloitte & Touche LLP
as independent auditors.
The foregoing report is submitted by Mr. Pasquale (Chairman), Messrs.
Baird and Dods, and Ms. Lau.
RATIFICATION OF APPOINTMENT OF INDEPENDENT AUDITORS
The Audit Committee of the Board of Directors has appointed Deloitte &
Touche LLP as independent auditors of A&B for the ensuing year, and the Audit
Committee recommends that shareholders vote in favor of ratifying such
appointment. Deloitte & Touche LLP and its predecessors have served A&B as such
since 1957. Representatives of Deloitte & Touche LLP are expected to be present
at the Annual Meeting, where they will have the opportunity to make a statement
if they desire to do so and will be available to respond to appropriate
questions from shareholders.
For the years ended December 31, 2006 and 2005, professional services
were performed by Deloitte & Touche LLP (including consolidated affiliates) as
follows:
Audit Fees. The aggregate fees billed for the audit of the Company's
annual financial statements, including Sarbanes-Oxley Section 404
attestation-related work, for the fiscal years ended December 31, 2006
and 2005 and for the reviews of the financial statements included in
the Company's Quarterly Reports on Form 10-Q were $1,548,750 and
$1,557,150, respectively.
Audit-Related Fees. The aggregate fees billed for Audit-Related
services for the fiscal years ended December 31, 2006 and 2005 were
$163,415, and $94,250, respectively. The fees related to research and
consultation on real estate profit recognition, accelerated stock
repurchase accounting and audits of employee benefit plans for the
fiscal year ended December 31, 2006, and to audits of employee benefit
plans and research and consultation on vessel delivery for the fiscal
year ended December 31, 2005.
Tax Fees. There were no aggregate fees billed for tax services for the
fiscal years ended December 31, 2006 and 2005.
All Other Fees. There were no aggregate fees for services not included
above for the fiscal years ended December 31, 2006 and 2005.
APPROVAL OF ALEXANDER & BALDWIN, INC. 2007 INCENTIVE COMPENSATION PLAN
The Company is asking its shareholders to vote on a proposal to approve
the implementation of the 2007 Incentive Compensation Plan (the "2007 Plan")
under which 2,215,000 shares of its common stock will initially be reserved for
issuance. The 2007 Plan was adopted by the Company's Board of Directors on
February 22, 2007, subject to shareholder approval at the 2007 Annual Meeting,
and is intended to serve as a successor to the 1998 Stock Option/Stock Incentive
Plan, the 1998 Non-Employee Director Stock Option Plan, the Restricted Stock
Bonus Plan and the Non-Employee Director Stock Retainer Plan (the "Predecessor
Plans"). Shareholder approval of the 2007 Plan will not affect any options or
stock issuances outstanding under the Predecessor Plans at the time of the
Annual Meeting. To the extent any of those options subsequently terminate
unexercised or those stock issuances are forfeited prior to vesting, the number
of shares of common stock subject to those terminated options, together with the
forfeited shares, will be added to the share reserve available for issuance
under the 2007 Plan, up to an additional 750,000 shares. However, no further
awards will be made under the Predecessor Plans following shareholder approval
of the 2007 Plan.
Incentive compensation programs play a pivotal role in the Company's
efforts to attract and retain key personnel essential to its long-term growth
and financial success. For that reason, the Company has structured the 2007 Plan
to provide it with more flexibility in designing cash and equity incentive
programs in an environment where a number of companies have moved from
traditional option grants to other stock or stock-based awards such as
restricted stock, restricted stock units and performance shares. Accordingly,
with the 2007 Plan, the Company will have a broader array of equity incentives
to utilize for purposes of attracting and retaining the services of key
individuals.
A description of the 2007 Plan is set forth in Appendix A to this Proxy
Statement. The description is intended to be a summary of the material
provisions of the 2007 Plan, and does not purport to be complete. Any
shareholder who wishes to obtain a copy of the actual plan documents may do so
upon written request to the Corporate Secretary at the Company's principal
offices at 822 Bishop Street, Honolulu, Hawaii 96813.
The following table provides information with respect to the shares of
the Company's common stock that may be issued under the Company's existing
equity compensation plans as of December 31, 2006. The table does not include
the additional shares of the Company's common stock that will be reserved under
the 2007 Plan, if such plan is approved by the Company's shareholders.
Securities authorized for issuance under equity compensation plans as
of December 31, 2006, included:
- --------------------------------------------------------------------------------------------------------------------
Number of securities
remaining available for
Plan Category Number of securities to be Weighted-average exercise future issuance under
issued upon exercise of price of outstanding equity compensation plans
outstanding options, options, warrants and (excluding securities
warrants and rights rights reflected in column (a))
(a) (b) (c)
- --------------------------------------------------------------------------------------------------------------------
Equity compensation plans
approved by security holders 1,557,056 $34.47 1,463,588*
Equity compensation plans
not approved by security
holders -- -- 101,577**
- --------------------------------------------------------------------------------------------------------------------
Total 1,557,056 $34.47 1,565,165
- --------------------------------------------------------------------------------------------------------------------
* Under the 1998 Plan, 1,283,682 shares may be issued either as
restricted stock grants or option grants.
** A&B has two compensation plans under which its stock is authorized for
issuance and that were adopted without the approval of its security
holders. (1) Under A&B's Non-Employee Director Stock Retainer Plan
adopted on June 25, 1998, each outside Director is issued a stock
retainer of 300 A&B shares after each year of service on A&B's Board
of Directors. Those 300 shares vest immediately and are free and clear
of any restrictions. These shares are issued in January of the year
following the year of the Director's service to A&B. Directors that
retire during the year may be awarded a prorated number of shares
based on the time served. If the 2007 Plan is approved by shareholders,
the annual grant of 300 shares will cease and be replaced by a grant of
restricted stock units. (2) Under A&B's Restricted Stock Bonus Plan
restated effective April 28, 1998, the Compensation Committee
identifies the executive officers and other key employees who
participate in the One-Year and Three-Year PIIP and formulates
performance goals to be achieved for the plan cycles. At the end of
each plan cycle, results are compared with goals, and awards are made
accordingly. Participants may elect to receive awards entirely in cash
or up to 50 percent in shares of A&B stock and the remainder in cash.
If a participant elects to receive a portion of the award in stock, an
additional 50 percent stock bonus may be awarded. In general, shares
issued under the Restricted Stock Bonus Plan may not be traded for
three years following the award date; special vesting provisions apply
for the death, termination or retirement of a participant.
The Board of Directors believes that approval of the 2007 Plan is in
the Company's best interests and in the best interests of its shareholders and
recommends a vote FOR the implementation of the 2007 Incentive Compensation
Plan.
The affirmative vote of the holders of a majority of the shares of A&B
common stock represented at the Annual Meeting is required for approval of the
2007 Plan. Should such approval not be obtained, then the 2007 Plan will not be
implemented. However, the Predecessor Plans will continue in full force and
effect, and awards may continue to be made under those plans until their
specified expiration dates (if any) or until the available share reserve has
been issued.
OTHER BUSINESS
The Board of Directors of A&B knows of no other business to be
presented for shareholder action at the Annual Meeting. However, should matters
other than those included in this Proxy Statement properly come before the
Annual Meeting, the proxyholders named in the accompanying proxy will use their
best judgment in voting upon them.
SHAREHOLDER PROPOSALS FOR 2008
Proposals of shareholders intended to be presented pursuant to Rule
14a-8 under the Exchange Act at the Annual Meeting of A&B in the year 2007 must
be received at the headquarters of A&B on or before November 13, 2007 in order
to be considered for inclusion in the year 2008 Proxy Statement and proxy. In
order for proposals of shareholders made outside of Rule 14a-8 under the
Exchange Act to be considered "timely" within the meaning of Rule 14a-4(c) under
the Exchange Act, such proposals must be received at the headquarters of A&B not
later than December 28, 2007. A&B's Bylaws require that proposals of
shareholders made outside of Rule 14a-8 under the Exchange Act must be
submitted, in accordance with the requirements of the Bylaws, not later than
December 28, 2007 and not earlier than November 28, 2007.
By Order of the Board of Directors
/s/ Alyson J. Nakamura
ALYSON J. NAKAMURA
Secretary
March 12, 2007
APPENDIX A
Summary Description of the Alexander & Baldwin, Inc.
2007 Incentive Compensation Plan
The principal terms and provisions of the 2007 Incentive
Compensation Plan (the "2007 Plan") are summarized below. The summary, however,
is not intended to be a complete description of all the terms of the 2007 Plan
and is qualified in its entirety by reference to the complete text of the 2007
Plan. Any shareholder who wishes to obtain a copy of the actual plan documents
may do so upon written request to the Corporate Secretary at the Company's
principal offices at 822 Bishop Street, Honolulu, Hawaii 96813.
The 2007 Plan will serve as a successor to the 1998 Stock
Option/Stock Incentive Plan, the 1998 Non-Employee Director Stock Option Plan,
the Restricted Stock Bonus Plan and the Non-Employee Director Stock Retainer
Plan (the "Predecessor Plans"). The 2007 Plan will not affect any outstanding
options or stock issuances under the Predecessor Plans, but no further awards
will be made under the Predecessor Plans following shareholder approval of the
2007 Plan.
Incentive Programs. The 2007 Plan consists of four separate
incentive compensation programs: (i) the discretionary grant program, (ii) the
stock issuance program, (iii) the incentive bonus program and (iv) the automatic
grant program for the non-employee members of the Company's Board of Directors.
The principal features of each program are described below.
Administration. The Compensation Committee of the Board of
Directors (either acting directly or through a subcommittee of two or more
members) will have the exclusive authority to administer the discretionary
grant, stock issuance and incentive bonus programs with respect to awards made
to the Company's executive officers and non-employee Board members and will also
have the authority to make awards under those programs to all other eligible
individuals. However, the Company's Board of Directors may at any time appoint a
secondary committee of one or more Board members to have separate but concurrent
authority with the Compensation Committee to make awards under those programs to
individuals other than executive officers and non-employee Board members.
The term "plan administrator," as used in this summary, will
mean the Company's Compensation Committee (or subcommittee) and any secondary
committee, to the extent each such entity is acting within the scope of its
administrative authority under the 2007 Plan.
The subcommittee of the Compensation Committee will have the
limited discretion under the automatic grant program to determine the annual
dollar amount to be used to determine the specific number of shares subject to
each grant made under that program, up to the maximum dollar amount permissible
per grant, but all grants will otherwise be made in strict compliance with the
express terms of that program.
Eligibility. Officers and employees, as well as independent
consultants and contractors, in the Company's employ or service or in the employ
or service of the Company's parent or subsidiary companies (whether now existing
or subsequently established) will be eligible to participate in the
discretionary grant, stock issuance and incentive bonus programs. The
non-employee members of the Board of Directors will also be eligible to
participate in those three programs as well as the automatic grant program. As
of February 28, 2007, approximately 750 persons (including 11 executive
officers) would have been eligible to participate in the discretionary grant,
stock issuance and incentive bonus programs had the 2007 Plan been in effect,
and 8 non-employee Board members would have been eligible to participate in
those programs and the automatic grant program.
Securities Subject to 2007 Plan. 2,215,000 shares of the
Company's common stock will initially be reserved for issuance over the term of
the 2007 Plan. The reserve consists of (i) a new share pool of approximately 1.2
million shares plus (ii) approximately 1,015,000 shares transferred from the
unallocated share reserve remaining under the Predecessor Plans. To the extent
any options outstanding under the Predecessor Plans on the date of the Annual
Meeting subsequently terminate unexercised or any stock issuances outstanding
under the Predecessor Plans at such time are subsequently forfeited prior to
vesting, the number of shares of common stock subject to those terminated
options, together with the forfeited shares, will be added to the share reserve
available for issuance under the 2007 Plan, up to an additional 750,000 shares.
As of February 28, 2007, 1,759,384 shares were subject to
outstanding options under the Predecessor Plans and 259,797 unvested shares were
issued and outstanding under such plans. An additional 1,015,000 shares remained
unallocated and available for future awards. It is anticipated that no awards of
the Company's common stock will be granted under the Predecessor Plans between
February 28, 2007 and the date of the Annual Meeting.
Awards made under the 2007 Plan will be subject to the
following per-participant limitations in order to provide the plan administrator
with the opportunity to structure one or more of those awards as
performance-based compensation under Section 162(m) of the Internal Revenue Code
("Section 162(m)").
o For awards designated in terms of shares of the
Company's common stock at the time of grant (whether payable in the
Company's common stock, cash or a combination of both), no participant
in the 2007 Plan may receive awards for more than 500,000 shares of
the Company's common stock in any single calendar year, subject to
adjustment for subsequent stock splits, stock dividends and similar
transactions. Shareholder approval of this proposal will also
constitute approval of that 500,000-share limitation for purposes
Section 162(m). Accordingly, such limitation will assure that any
deductions to which the Company would otherwise be entitled upon the
exercise of stock options or stock appreciation rights granted under
the discretionary grant program will not be subject to the $1 million
limitation on the income tax deductibility of compensation paid per
executive officer imposed under Section 162(m). In addition, one or
more shares issued under the stock issuance program may also qualify
as performance-based compensation that is not subject to the Section
162(m) limitation, if the vesting of those shares is tied to the
attainment of the corporate performance milestones discussed below in
the summary description of that program.
o For awards designated in terms of cash dollars at the
time of grant (whether payable in cash, shares of the Company's
common stock, or both), no participant in the 2007 Plan may receive
awards with an aggregate dollar value in excess of five million dollars
in any one calendar year. Shareholder approval of this proposal will
also constitute approval of that five million-dollar limitation for
purposes of Section 162(m). Accordingly, such limitation will assure
that any deductions to which the Company would otherwise be entitled
upon the payment of cash bonuses or the settlement of performance
units will not be subject to the $1 million limitation on the income
tax deductibility of compensation paid per executive officer imposed
under Section 162(m), to the extent the vesting of those awards is
tied to the attainment of one or more of the corporate performance
milestones discussed below in the summary description of the stock
issuance program.
The shares of common stock issuable under the 2007 Plan may be
drawn from shares of the Company's authorized but unissued common stock or from
shares of its common stock that the Company acquire, including shares purchased
on the open market or in private transactions.
Shares subject to outstanding awards under the 2007 Plan that
expire or otherwise terminate prior to the issuance of the shares subject to
those awards will be available for subsequent issuance under the 2007 Plan. Any
unvested shares issued under the 2007 Plan that are subsequently forfeited or
that the Company repurchases, at a price not greater than the original issue
price paid per share, pursuant to the Company's repurchase rights under the 2007
Plan will be added back to the number of shares reserved for issuance under the
2007 Plan and will accordingly be available for subsequent issuance.
There are no net counting provisions in effect under the 2007
Plan. Accordingly, the following share counting procedures will apply in
determining the number of shares of common stock available from time to time for
issuance under the 2007 Plan:
o Should the exercise price of an option be paid in
shares of the Company's common stock, then the number of shares
reserved for issuance under the 2007 Plan will be reduced by the gross
number of shares for which that option is exercised, and not by the
net number of new shares issued under the exercised option.
o Should shares of common stock otherwise issuable under
the 2007 Plan be withheld by the Company in satisfaction of the
withholding taxes incurred in connection with the issuance, exercise
or settlement of an award under the plan, then the number of shares of
common stock available for issuance under the 2007 Plan will be
reduced by the full number of shares that were issuable under the
award, and not by the number of shares actually issued after any such
share withholding.
o Upon the exercise of any stock appreciation right
granted under the 2007 Plan, the share reserve will be reduced by the
gross number of shares as to which such stock appreciation right is
exercised, and not by the net number of shares actually issued upon
such exercise.
Equity Incentive Programs
Discretionary Grant Program. Under the discretionary grant
program, eligible persons may be granted options to purchase shares of the
Company's common stock or stock appreciation rights tied to the value of the
Company's common stock. The plan administrator will have complete discretion to
determine which eligible individuals are to receive option grants or stock
appreciation rights, the time or times when those options or stock appreciation
rights are to be granted, the number of shares subject to each such grant, the
vesting schedule (if any) to be in effect for the grant, the maximum term for
which the granted option or stock appreciation right is to remain outstanding
and the status of any granted option as either an incentive stock option or a
non-statutory option under the federal tax laws.
Each granted option will have an exercise price per share
determined by the plan administrator, but the exercise price will not be less
than one hundred percent of the fair market value of the option shares on the
grant date. No granted option will have a term in excess of ten years. The
shares subject to each option will generally vest in one or more installments
over a specified period of service measured from the grant date. However, one or
more options may be structured so that they will be immediately exercisable for
any or all of the option shares. The shares acquired under such immediately
exercisable options will be subject to repurchase by the Company, at the lower
of the exercise price paid per share or the fair market value per share, if the
optionee ceases service prior to vesting in those shares. In addition, one or
more awards may be structured so that those awards will vest and become
exercisable only after the achievement of pre-established corporate performance
objectives.
Notwithstanding the foregoing, the following limitations apply
with respect to the vesting schedules established for awards made under the
discretionary grant program: (i) for any award which is to vest in the basis of
service, the minimum vesting period is three years, with incremental vesting to
occur over that period as determined by the plan administrator, and (ii) for any
award which is to vest on the basis of performance objectives, the performance
period will have a duration of at least one year.
Upon cessation of service, the optionee will have a limited
period of time in which to exercise his or her outstanding options to the extent
exercisable for vested shares. The plan administrator will have complete
discretion to extend the period following the optionee's cessation of service
during which his or her outstanding options may be exercised, provide for
continued vesting during the applicable post-service exercise period and/or to
accelerate the exercisability or vesting of such options in whole or in part.
Such discretion may be exercised at any time while the options remain
outstanding.
The 2007 Plan will allow the issuance of two types of stock
appreciation rights under the discretionary grant program:
o Tandem stock appreciation rights granted in conjunction
with stock options which provide the holders with the right to
surrender the related option grant for an appreciation distribution
from the Company in an amount equal to the excess of (i) the fair
market value of the vested shares of the Company's common stock
subject to the surrendered option over (ii) the aggregate exercise
price payable for those shares.
o Stand-alone stock appreciation rights which allow the
holders to exercise those rights as to a specific number of shares of
the Company's common stock and receive in exchange an appreciation
distribution from the Company in an amount equal to the excess of (i)
the fair market value of the shares of common stock as to which those
rights are exercised over (ii) the aggregate exercise price in effect
for those shares. The exercise price per share may not be less than
the fair market value per share of the Company's common stock on the
date the stand-alone stock appreciation right is granted, and the
right may not have a term in excess of ten years.
The appreciation distribution on any exercised tandem or
stand-alone stock appreciation right will be paid in (i) cash, (ii) shares of
the Company's common stock or (iii) a combination of cash and shares of the
Company's common stock. Upon cessation of service with the Company, the holder
of a stock appreciation right will have a limited period of time in which to
exercise such right to the extent exercisable at that time. The plan
administrator will have complete discretion to extend the period following the
holder's cessation of service during which his or her outstanding stock
appreciation rights may be exercised, provide for continued vesting during the
applicable post-service exercise period and/or to accelerate the exercisability
or vesting of those stock appreciation rights in whole or in part. Such
discretion may be exercised at any time while the stock appreciation right
remains outstanding.
Repricing Prohibition. The plan administrator may not
implement any of the following repricing programs without obtaining
shareholder approval: (i) the cancellation of outstanding options or stock
appreciation rights in return for new options or stock appreciation rights
with a lower exercise price per share, (ii) the cancellation of outstanding
options or stock appreciation rights with exercise prices per share in excess
of the then current fair market value per share of the Company's common stock
for consideration payable in its equity securities or (iii) the direct
reduction of the exercise price in effect for outstanding options or stock
appreciation rights.
Stock Issuance Program. Shares may be issued under the stock
issuance program subject to performance or service vesting requirements
established by the plan administrator. Shares may also be issued as a
fully-vested bonus for past services without any cash outlay required of the
recipient. Shares of the Company's common stock may also be issued under the
program pursuant to restricted stock units which entitle the recipients to
receive those shares upon the attainment of designated performance goals or the
completion of a prescribed service period or upon the expiration of a designated
time period following the vesting of those units, including (without
limitation), a deferred distribution date following the termination of the
recipient's service with the Company. Performance shares may also be issued
under the program in accordance with the following parameters:
(i) The vesting of the performance shares will be tied to the
attainment of corporate performance objectives over a specified performance
period, all as established by the plan administrator at the time of the award.
(ii) At the end of the performance period, the plan
administrator will determine the actual level of attainment for each performance
objective and the extent to which the performance shares awarded for that period
are to vest and become payable based on the attained performance levels.
(iii) The performance shares which so vest will be paid as
soon as practicable following the end of the performance period, unless such
payment is to be deferred for the period specified by the plan administrator at
the time the performance shares are awarded or the period selected by the
participant in accordance with the applicable requirements of Internal Revenue
Code Section 409A.
(iv) Performance shares may be paid in cash or shares of
common stock.
(v) Performance shares may also be structured so that the
shares are convertible into shares of the Company's common stock, but the rate
at which each performance share is to so convert will be based on the attained
level of performance for each applicable performance objective.
The plan administrator will have complete discretion under the
program to determine which eligible individuals are to receive awards under the
stock issuance program, the time or times when those awards are to be made, the
form of those awards, the number of shares subject to each such award, the
vesting schedule (if any) to be in effect for the award, the issuance schedule
for the shares which vest under the award and the cash consideration (if any)
payable per share.
Notwithstanding the foregoing, the following limitations apply
with respect to the vesting schedules established for awards made under the
stock issuance program: (i) for any award which is to vest in the basis of
service, the minimum vesting period is three years, with incremental vesting to
occur over that period as determined by the plan administrator, and (ii) for any
award which is to vest on the basis of performance objectives, the performance
period will have a duration of at least one year.
In order to assure that the compensation attributable to one or more
award made under the program will qualify as performance-based compensation
which will not be subject to the $1 million limitation on the income tax
deductibility of the compensation paid per executive officer which is imposed
under Internal Revenue Code Section 162(m), the plan administrator will also
have the discretionary authority to structure one or more awards so that the
shares of common stock subject to those awards will vest only upon the
achievement of certain pre-established corporate performance goals based on one
or more of the following criteria: (i) cash flow; (ii) earnings (including gross
margin, earnings before interest and taxes, earnings before taxes, earnings
before interest, taxes, depreciation, amortization and charges for stock-based
compensation, earnings before interest, taxes, depreciation and amortization,
and net earnings); (iii) earnings per share; (iv) growth in earnings or earnings
per share; (v) stock price; (vi) return on equity or average shareholder equity;
(vii) total shareholder return or growth in total shareholder return either
directly or in relation to a comparative group; (viii) return on capital; (ix)
return on assets or net assets; (x) invested capital, required rate of return on
capital or return on invested capital; (xi) revenue, growth in revenue or return
on sales; (xii) income or net income; (xiii) operating income, net operating
income or net operating income after tax; (xiv) operating profit or net
operating profit; (xv) operating margin; (xvi) return on operating revenue or
return on operating profit; (xvii) collections and recoveries; (xviii) property
purchases, sales, investments and construction goals; (xix) application
approvals; (xx) litigation and regulatory resolution goals; (xxi) occupancy or
occupancy rates; (xxii) leases, contracts or financings, including renewals;
(xxiii) overhead, savings, G&A and other expense control goals; (xxiv) budget
comparisons; (xxv) growth in shareholder value relative to the growth of the S&P
400 or S&P 400 Index, the S&P Global Industry Classification Standards ("GICS")
or GICS Index, or another peer group or peer group index; (xxvi) credit rating;
(xxvii) development and implementation of strategic plans and/or organizational
restructuring goals; (xxviii) development and implementation of risk and crisis
management programs; (xxix) improvement in workforce diversity; (xxx) net cost
per ton; (xxxi) price per container or average price per container; (xxxii)
voyage days or vessel scheduling; (xxxiii) lift volume of containers, volume of
containers, number of units or size of units; (xxxiv) compliance requirements
and compliance relief; (xxxv) safety goals; (xxxvi) productivity goals; (xxxvii)
workforce management and succession planning goals; (xxxviii) economic value
added (including typical adjustments consistently applied from generally
accepted accounting principles required to determine economic value added
performance measures); (xxxix) measures of customer satisfaction, employee
satisfaction or staff development; (xl) development or marketing collaborations,
formations of partnerships or joint ventures or the completion of other similar
transactions intended to enhance the Company's revenue or profitability or
enhance its customer base; (xli) merger and acquisitions; and (xlii) other
similar criteria consistent with the foregoing. In addition, such performance
criteria may be based upon the attainment of specified levels of the Company's
performance under one or more of the measures described above relative to the
performance of other entities and may also be based on the performance of any of
the Company's business units or divisions or any parent or subsidiary. Each
applicable performance goal may include a minimum threshold level of performance
below which no award will be earned, levels of performance at which specified
portions of an award will be earned and a maximum level of performance at which
an award will be fully earned. Each applicable performance goal may be
structured at the time of the award to provide for appropriate adjustment for
one or more of the following items: (A) asset impairments or write-downs; (B)
litigation judgments or claim settlements; (C) the effect of changes in tax law,
accounting principles or other such laws or provisions affecting reported
results; (D) accruals for reorganization and restructuring programs; (E) any
extraordinary nonrecurring items as described in Accounting Principles Board
Opinion No. 30 and/or in management's discussion and analysis of financial
condition and results of operations appearing in the Company's annual report to
shareholders for the applicable year; (F) the operations of any business the
Company acquires; and (G) any other adjustment consistent with the operation of
the 2007 Plan.
Outstanding awards under the stock issuance program will
automatically terminate, and no shares of the Company's common stock will
actually be issued in satisfaction of those awards, if the performance goals or
service requirements established for such awards are not attained. The plan
administrator, however, will have the discretionary authority to issue shares of
the Company's common stock in satisfaction of one or more outstanding awards as
to which the designated performance goals or service requirements are not
attained. However, no vesting requirements tied to the attainment of performance
objectives may be waived with respect to awards which were intended at the time
of issuance to qualify as performance-based compensation under Section 162(m),
except in the event of the participant's involuntary termination or upon a
change in control of the company, as described under the heading "General
Provisions - Vesting Acceleration."
Incentive Bonus Program. Cash bonus awards, performance unit
awards and dividend equivalent rights may be awarded under the incentive bonus
program. Cash bonus awards will vest over an eligible individual's designated
service period or upon the attainment of pre-established performance goals.
Performance unit awards will be subject to the following parameters:
(i) A performance unit will represent a participating
interest in a special bonus pool tied to the attainment of pre-established
corporate performance objectives based on one or more performance goals
described above in the description of the stock issuance program. The amount of
the bonus pool may vary with the level at which the applicable performance
objectives are attained, and the value of each performance unit which becomes
due and payable upon the attained level of performance will be determined by
dividing the amount of the resulting bonus pool (if any) by the total number of
performance units issued and outstanding at the completion of the applicable
performance period.
(ii) Performance units may also be structured to
include a service-vesting requirement which the participant must satisfy
following the completion of the performance period in order to vest in the
performance units awarded with respect to that performance period.
(iii) Performance units which become due and payable
following the attainment of the applicable performance objectives and the
satisfaction of any applicable service-vesting requirement may be paid in cash
or shares of the Company's common stock valued at fair market value on the
payment date.
Dividend equivalent rights may be issued as stand-alone awards
or in tandem with other awards made under the 2007 Plan. Each dividend
equivalent right award will represent the right to receive the economic
equivalent of each dividend or distribution, whether in cash, securities or
other property (other than shares of the Company's common stock) which is made
per issued and outstanding share of common stock during the term the dividend
equivalent right remains outstanding. Payment of the amounts attributable to
such dividend equivalent rights may be made either concurrently with the actual
dividend or distribution made per issued and outstanding share of the Company's
common stock or may be deferred to a later date. Payment may be made in cash or
shares of the Company's common stock.
The plan administrator will have complete discretion under the
program to determine which eligible individuals are to receive such awards under
the program, the time or times when those awards are to be made, the form of
each such award, the performance objectives for each such award, the amount
payable at one or more designated levels of attained performance, any applicable
service vesting requirements, the payout schedule for each such award and the
method by which the award is to be settled (cash or shares of the Company's
common stock).
In order to assure that the compensation attributable to one
or more awards under the program will qualify as performance-based compensation
which will not be subject to the $1 million limitation on the income tax
deductibility of the compensation paid per executive officer which is imposed
under Internal Revenue Code Section 162(m), the plan administrator will also
have the discretionary authority to structure one or more awards so that cash or
shares of common stock subject to those awards will vest only upon the
achievement of certain pre-established corporate performance goals based on one
or more of the performance goals described above in the summary of the stock
issuance program.
The plan administrator will have the discretionary authority
at any time to accelerate the vesting of any and all awards outstanding under
the incentive bonus program. However, no vesting requirements tied to the
attainment of performance objectives may be waived with respect to awards which
were intended at the time of issuance to qualify as performance-based
compensation under Section 162(m), except in the event of the participant's
involuntary termination or upon a change in control as described under the
heading "General Provisions - Vesting Acceleration."
Automatic Grant Program. Under the automatic grant program,
each individual who first becomes a non-employee Board member at any time on or
after the date of the Annual Meeting will automatically receive a restricted
stock unit award covering that number of shares of the Company's common stock
determined by dividing the applicable dollar amount by the fair market value per
share of the Company's common stock on such date, provided such individual has
not been in the Company's employ during the immediately preceding twelve months.
In addition, on the date of each annual shareholders meeting, beginning with the
Annual Meeting, each individual serving as a non-employee Board member at that
time will automatically be granted a restricted stock unit award covering that
number of shares of the Company's common stock determined by dividing an
applicable dollar amount by the fair market value per share of the Company's
common stock on such date, provided such individual has served on the Company's
Board for at least six months. The applicable dollar amounts subject to each
such initial or annual restricted stock unit award will be determined by the
Compensation Committee of the Company's Board of Directors (or a subcommittee
thereof), but will not exceed $300,000. Accordingly, the size of the initial
restricted stock unit grant may vary as to each new non-employee Board member,
and the size of the annual restricted stock unit grants may vary from year to
year. For each non-employee Board member re-elected at the Annual Meeting, the
subcommittee of the Company's Compensation Committee has set the applicable
dollar amount at $100,000 for the annual grant, and it is currently anticipated
that any newly-appointed or elected non-employee Board member would receive an
automatic restricted stock unit grant with the same dollar amount.
Each initial and annual restricted stock unit grant will vest
in three successive equal annual installments upon the non-employee Board
member's completion of each year of Board service over the three-year period
measured from the grant date. However, the shares will immediately vest in full
upon the non-employee Board member's death or disability while a Board member,
retirement at or after the age of seventy-two or the occurrence of certain
changes in ownership or control. The shares of common stock underlying each
initial or annual restricted stock unit award which vests in accordance with the
foregoing vesting provisions will be issued as they vest. However, future awards
may be structured so as to allow the non-employee Board members to defer, in
accordance with the applicable requirements of Internal Revenue Code Section
409A and the regulations thereunder, the issuance of the shares beyond the
vesting date to a designated date or until cessation of Board service or an
earlier change in control.
Should any dividend or other distribution payable other than
in shares of the Company's common stock be declared and paid on the Company's
common stock while an initial or annual restricted stock unit award is
outstanding, then a special book account shall be established for the
non-employee director holding the award and credited with a phantom dividend
equivalent to the actual dividend or distribution which would have been paid on
the shares subject to the restricted stock unit award had they been issued and
outstanding and entitled to that dividend or distribution. The amount
attributable to phantom dividend equivalents will be distributed to the
non-employee director (in cash or such other form as the compensation committee
may deem appropriate in its sole discretion) concurrently with the issuance of
the vested shares to which those phantom dividend equivalents relate.
Stock Awards--Predecessor Plan
The following table sets forth, as to the Company's Chief
Executive Officer, Chief Financial Officer, three other most highly compensated
executive officers and the other individuals and groups indicated, the number of
shares of the Company's common stock subject to option grants made under the
Predecessor Plans from January 1, 2006 through February 28, 2007, together with
the weighted average exercise price per share in effect for such option grants.
Number of Shares Weighted Average
Underlying Exercise Price
Name and Position Options Granted Per Share ($)
----------------- (#)
W. Allen Doane, Chairman, President and Chief Executive Officer, A&B 138,700 49.90
Christopher J. Benjamin, Senior Vice President, Chief Financial 26,014 49.94
Officer and Treasurer, A&B
James S. Andrasick, President and Chief Executive Officer, Matson 38,779 50.07
Stanley M. Kuriyama, President and Chief Executive Officer, A&B Land 31,993 49.90
Group
Matthew J. Cox, Executive Vice President and Chief Operating 19,389 50.07
Officer, Matson
All current executive officers as a group (11 persons) 291,613 49.87
Directors:
W. Blake Baird 0
Michael J. Chun 8,000 48.81
Walter A. Dods, Jr. 8,000 48.81
Charles G. King 8,000 48.81
Constance H. Lau 8,000 48.81
Douglas M. Pasquale 8,000 48.81
Maryanna G. Shaw 8,000 48.81
Jeffrey N. Watanabe 8,000 48.81
All current non-employee directors as a group (8 persons) 56,000 48.81
All employees, including current officers who are not 156,603 49.58
executive officers, as a group (60 persons)
The following table sets forth, as to the Company's Chief
Executive Officer, Chief Financial Officer, three other most highly compensated
executive officers and the other individuals and groups indicated, the number of
shares of the Company's common stock subject to direct stock awards (vested or
unvested) made under the Predecessor Plans from January 1, 2006 through February
28, 2007.
Name and Position Number of Shares Subject to Direct
----------------- Stock Award (#)
W. Allen Doane, Chairman, President and Chief Executive Officer, A&B 139,199
Christopher J. Benjamin, Senior Vice President, Chief Financial 23,059
Officer and Treasurer, A&B
James S. Andrasick, President and Chief Executive Officer, Matson 46,009
Stanley M. Kuriyama, President and Chief Executive Officer, A&B Land 31,942
Group
Matthew J. Cox, Executive Vice President and Chief Operating 18,665
Officer, Matson
All current executive officers as a group (11 persons) 258,874
Directors:
W. Blake Baird 150
Michael J. Chun 600
Walter A. Dods, Jr. 600
Charles G. King 600
Constance H. Lau 600
Douglas M. Pasquale 600
Maryanna G. Shaw 600
Jeffrey N. Watanabe 600
All current non-employee directors as a group (8 persons) 4,350
All employees, including current officers who are not 136,075
executive officers, as a group (60 persons)
New Plan Benefits
No awards will be made under the 2007 Plan at any time prior
to shareholder approval of the plan at the Annual Meeting. If such shareholder
approval is obtained, then the following non-employee members of the Company's
Board of Directors will each, upon their re-election to the Board at the Annual
Meeting, receive an automatic restricted stock unit award covering that number
of shares of the Company's common stock determined by dividing $100,000 by the
fair market value per share of the Company's common stock on the date of the
Annual Meeting: Mr. W. Blake Baird, Dr. Michael J. Chun, Mr. Walter A. Dods,
Jr., Mr. Charles G. King, Ms. Constance H. Lau, Mr. Douglas M. Pasquale,
Ms. Maryanna G. Shaw, and Mr. Jeffrey N. Watanabe.
General Provisions
Vesting Acceleration. In the event the Company should
experience a change in control, the following special vesting acceleration
provisions will be in effect for all outstanding awards under the discretionary
grant, stock issuance and incentive bonus programs:
(i) Each outstanding award will automatically
accelerate in full upon a change in control, if that award is
not assumed or otherwise continued in effect by the successor
corporation or replaced with a cash incentive program which
preserves the intrinsic value of the award and provides for
subsequent payout of that value in accordance with the same
vesting schedule in effect for that award.
(ii) The plan administrator will have
complete discretion to grant one or more awards which will vest
in the event the individual's service with the Company or the
successor entity terminates within a designated period
following a change in control transaction in which those awards
are assumed or otherwise continued in effect.
(iii) The plan administrator will have the
discretion to structure one or more awards so that those awards
will immediately vest upon a change in control, whether or not
they are to be assumed or otherwise continued in effect.
(iv) Unless the plan administrator
establishes a different definition for one or more awards, a
change in control will be deemed to occur for purposes of the
2007 Plan in the event (a) the Company is acquired by merger or
asset sale; (b) there occurs any transaction or series of
related transactions pursuant to which any person or group of
related persons becomes directly or indirectly the beneficial
owner of securities possessing (or convertible into or
exercisable for securities possessing) thirty-five percent
(35%) or more of the total combined voting power of the
Company's outstanding securities; or (c) a change in a majority
of the membership of the Board over a period of less than
twelve (12) months that is not approved by the current
membership of the Board or their approved successors.
The plan administrator's authority above extends to any awards
intended to qualify as performance-based compensation under Section 162(m), even
though the accelerated vesting of those awards may result in their loss of
performance-based status under Section 162(m).
Changes in Capitalization. In the event any change is made to
the outstanding shares of the Company's common stock by reason of any stock
split, stock dividend, recapitalization, combination of shares, exchange of
shares, spin-off transaction or other change in corporate structure effected
without the Company's receipt of consideration or should the value of the
Company's outstanding shares of common stock be substantially reduced by reason
of a spin-off transaction or extraordinary dividend or distribution, equitable
adjustments will be made to: (i) the maximum number and/or class of securities
issuable under the 2007 Plan; (ii) the maximum number and/or class of securities
by which the share reserve may increase by reason of the expiration or
termination of unexercised options or the forfeiture of shares under the
Predecessor Plans; (iii) the maximum number and/or class of securities for which
any one person may be granted common stock-denominated awards under the 2007
Plan per calendar year; (iv) the number and/or class of securities and the
exercise price per share in effect for outstanding awards under the
discretionary grant program; (v) the number and/or class of securities subject
to each outstanding award under the stock issuance and automatic grant programs
and the cash consideration (if any) payable per share; (vi) the number and/or
class of securities for which awards may subsequently be made to new and
continuing non-employee Board members under the automatic grant program; and
(vii) the number and/or class of securities subject to each outstanding award
under the incentive bonus program denominated in shares of the Company's common
stock. Such adjustments will be made in such manner as the plan administrator
deems appropriate in order to preclude any dilution or enlargement of benefits
under the 2007 Plan or the outstanding awards thereunder.
Valuation. The fair market value per share of the Company's
common stock on any relevant date under the 2007 Plan will be deemed to be equal
to the closing selling price per share on that date on the Nasdaq Global Select
Market. On February 28, 2007, the fair market value per share of the Company's
common stock determined on such basis was $49.42.
Shareholder Rights and Transferability. No optionee will have
any shareholder rights with respect to the option shares until such optionee has
exercised the option and paid the exercise price for the purchased shares. The
holder of a stock appreciation right will not have any shareholder rights with
respect to the shares subject to that right unless and until such person
exercises the right and becomes the holder of record of any shares of the
Company's common stock distributed upon such exercise. Options are not
assignable or transferable other than by will or the laws of inheritance
following optionee's death, and during the optionee's lifetime, the option may
only be exercised by the optionee. However, the plan administrator may structure
one or more non-statutory options under the 2007 Plan so that those options will
be transferable during optionee's lifetime to one or more members of the
optionee's family or to a trust established for the optionee and/or one or more
such family members or to the optionee's former spouse, to the extent such
transfer is in connection with the optionee's estate plan or pursuant to a
domestic relations order. Stand alone stock appreciation rights will be subject
to the same transferability restrictions applicable to non-statutory options.
A participant will have full shareholder rights with respect
to any shares of common stock issued to him or her under the 2007 Plan,
whether or not his or her interest in those shares is vested. A participant
will not have any shareholder rights with respect to the shares of common
stock subject to a restricted stock unit or performance share award until that
award vests and the shares of common stock are actually issued thereunder.
However, dividend-equivalent units may be paid or credited, either in cash or
in actual or phantom shares of common stock, on outstanding restricted stock
units or performance shares, subject to such terms and conditions as the plan
administrator may deem appropriate.
Special Tax Election. The plan administrator may provide one
or more holders of awards under the 2007 Plan with the right to have the
Company withhold a portion of the shares otherwise issuable to such
individuals in satisfaction of the withholding taxes to which they become
subject in connection with the issuance, exercise or settlement of those
awards. Alternatively, the plan administrator may allow such individuals to
deliver previously acquired shares of the Company's common stock in payment of
such withholding tax liability.
Amendment and Termination. The Company's Board of Directors
may amend or modify the 2007 Plan at any time; provided, however, that
shareholder approval will be required for any amendment which materially
increases the number of shares of common stock authorized for issuance under
the 2007 Plan (other than in connection with certain changes to the Company's
capital structure as explained above), materially increases the benefits
accruing to participants, materially expands the class of individuals eligible
to participate in the 2007 Plan, expands the types of awards which may be made
under the 2007 Plan or extends the term of the 2007 Plan or to the extent such
shareholder approval may be otherwise required under applicable law or
regulation or pursuant to the listing standards of the stock exchange on which
the Company's common stock is at the time primarily traded. Unless sooner
terminated by the Company's Board of Directors, the 2007 Plan will terminate
on the earliest of (i) April 26, 2017, (ii) the date on which all shares
available for issuance under the 2007 Plan have been issued as fully-vested
shares or (iii) the termination of all outstanding awards in connection with
certain changes in control or ownership.
Summary of Federal Income Tax Consequences
The following is a summary of the Federal income taxation
treatment applicable to the Company and the participants who receive awards
under the 2007 Plan.
Option Grants. Options granted under the discretionary grant
program may be either incentive stock options which satisfy the requirements of
Section 422 of the Internal Revenue Code or non-statutory options which are not
intended to meet such requirements. The Federal income tax treatment for the two
types of options differs as follows:
Incentive Options. No taxable income is recognized by the
optionee at the time of the option grant, and no taxable income is recognized
for regular tax purposes at the time the option is exercised, although taxable
income may arise at that time for alternative minimum tax purposes. The optionee
will recognize taxable income in the year in which the purchased shares are sold
or otherwise made the subject of certain other dispositions. For Federal tax
purposes, dispositions are divided into two categories: (i) qualifying, and (ii)
disqualifying. A qualifying disposition occurs if the sale or other disposition
is made more than two (2) years after the date the option for the shares
involved in such sale or disposition is granted and more than one (1) year after
the date the option is exercised for those shares. If the sale or disposition
occurs before these two periods are satisfied, then a disqualifying disposition
will result.
Upon a qualifying disposition, the optionee will recognize
long-term capital gain in an amount equal to the excess of (i) the amount
realized upon the sale or other disposition of the purchased shares over (ii)
the exercise price paid for the shares. If there is a disqualifying disposition
of the shares, then the excess of (i) the fair market value of those shares on
the exercise date or (if less) the amount realized upon such sale or disposition
over (ii) the exercise price paid for the shares will be taxable as ordinary
income to the optionee. Any additional gain recognized upon the disposition will
be a capital gain.
If the optionee makes a disqualifying disposition of the
purchased shares, then the Company will be entitled to an income tax deduction,
for the taxable year in which such disposition occurs, equal to the amount of
ordinary income recognized by the optionee as a result of the disposition. The
Company will not be entitled to any income tax deduction if the optionee makes a
qualifying disposition of the shares.
Non-Statutory Options. No taxable income is recognized by an
optionee upon the grant of a non-statutory option. The optionee will in general
recognize ordinary income, in the year in which the option is exercised, equal
to the excess of the fair market value of the purchased shares on the exercise
date over the exercise price paid for the shares, and the optionee will be
required to satisfy the tax withholding requirements applicable to such income.
The Company will be entitled to an income tax deduction equal to the amount of
ordinary income recognized by the optionee with respect to the exercised
non-statutory option. The deduction will in general be allowed for the Company's
taxable year in which such ordinary income is recognized by the optionee.
Stock Appreciation Rights. No taxable income is recognized
upon receipt of a stock appreciation right. The holder will recognize ordinary
income in the year in which the stock appreciation right is exercised, in an
amount equal to the excess of the fair market value of the underlying shares of
common stock on the exercise date over the base price in effect for the
exercised right, and the holder will be required to satisfy the tax withholding
requirements applicable to such income. The Company will be entitled to an
income tax deduction equal to the amount of ordinary income recognized by the
holder in connection with the exercise of the stock appreciation right. The
deduction will be allowed for the taxable year in which such ordinary income is
recognized.
Restricted Stock Awards. The recipient of unvested shares of
common stock issued under the 2007 Plan will not recognize any taxable income at
the time those shares are issued but will have to report as ordinary income, as
and when those shares subsequently vest, an amount equal to the excess of (i)
the fair market value of the shares on the vesting date over (ii) the cash
consideration (if any) paid for the shares. The recipient may, however, elect
under Section 83(b) of the Internal Revenue Code to include as ordinary income
in the year the unvested shares are issued an amount equal to the excess of (i)
the fair market value of those shares on the issue date over (ii) the cash
consideration (if any) paid for such shares. If the Section 83(b) election is
made, the recipient will not recognize any additional income as and when the
shares subsequently vest. The Company will be entitled to an income tax
deduction equal to the amount of ordinary income recognized by the recipient
with respect to the unvested shares. The deduction will in general be allowed
for the Company's taxable year in which such ordinary income is recognized by
the recipient.
Restricted Stock Units. No taxable income is recognized upon
receipt of restricted stock units. The holder will recognize ordinary income in
the year in which the shares subject to the units are actually issued to the
holder. The amount of that income will be equal to the fair market value of the
shares on the date of issuance, and the holder will be required to satisfy the
tax withholding requirements applicable to such income. The Company will be
entitled to an income tax deduction equal to the amount of ordinary income
recognized by the holder at the time the shares are issued. The deduction will
be allowed for the taxable year in which such ordinary income is recognized.
Cash Awards. The payment of a cash award will result in the
recipient's recognition of ordinary income equal to the dollar amount received.
The recipient will be required to satisfy the tax withholding requirements
applicable to such income. The Company will be entitled to an income tax
deduction equal to the amount of ordinary income recognized by the holder at the
time the cash award is paid. The deduction will be allowed for the taxable year
in which such ordinary income is recognized.
Performance Units. No taxable income is recognized upon
receipt of performance units. The holder will recognize ordinary income in the
year in which the performance units are settled. The amount of that income will
be equal to the fair market value of the shares of common stock or cash received
in settlement of the performance units, and the holder will be required to
satisfy the tax withholding requirements applicable to such income. The Company
will be entitled to an income tax deduction equal to the amount of the ordinary
income recognized by the holder of the performance units at the time those units
are settled. That deduction will be allowed for the taxable year in which such
ordinary income is recognized.
Dividend Equivalent Rights. No taxable income is recognized
upon receipt of a dividend equivalent right award. The holder will recognize
ordinary income in the year in which a payment pursuant to such right, whether
in cash, securities or other property, is made to the holder. The amount of that
income will be equal to the fair market value of the cash, securities or other
property received, and the holder will be required to satisfy the tax
withholding requirements applicable to such income. The Company will be entitled
to an income tax deduction equal to the amount of the ordinary income recognized
by the holder of the dividend equivalent right award at the time the dividend or
distribution is paid to such holder. That deduction will be allowed for the
taxable year in which such ordinary income is recognized.
Deductibility of Executive Compensation. The Company
anticipates that any compensation deemed paid by it in connection with the
exercise of non-statutory options or stock appreciation rights will qualify as
performance-based compensation for purposes of Section 162(m) and will not have
to be taken into account for purposes of the $1 million limitation per covered
individual on the deductibility of the compensation paid to certain of the
Company's executive officers. Accordingly, the compensation deemed paid with
respect to options and stock appreciation rights granted under the 2007 Plan
will remain deductible by the Company without limitation under Section 162(m).
However, any compensation deemed paid by the Company in connection with shares
issued under the stock issuance program or shares or cash issued under the
incentive bonus program will be subject to the $1 million limitation, unless the
issuance of the shares or cash is tied to one or more of the performance
milestones described above.
Accounting Treatment. The accounting principles applicable to
awards made under the 2007 Plan may be summarized in general terms as follows:
Pursuant to the accounting standards established by Statement
of Financial Accounting Standards No. 123R, Share-Based Payment, or SFAS 123R,
the Company will be required to expense all share-based payments, including
grants of stock options, stock appreciation rights, restricted stock, restricted
stock units and all other stock-based awards under the 2007 Plan. Accordingly,
stock options and stock appreciation rights which are granted to the Company's
employees and non-employee Board members and payable in shares of the Company's
common stock will have to be valued at fair value as of the grant date under an
appropriate valuation formula, and that value will then have to be charged as a
direct compensation expense against the Company's reported earnings over the
requisite service period. For shares issuable upon the vesting of restricted
stock units awarded under the 2007 Plan, the Company will be required to
amortize over the requisite service period a compensation cost equal to the
fair market value of the underlying shares on the date of the award. If any
other shares are unvested at the time of their direct issuance, then the fair
market value of those shares at that time will be charged to the Company's
reported earnings ratably over the requisite service period. Such accounting
treatment for restricted stock units and direct stock issuances will be
applicable whether vesting is tied to service periods or performance goals. The
issuance of a fully-vested stock bonus will result in an immediate charge to
the Company's earnings equal to the fair market value of the bonus shares on
the issuance date.
For performance units awarded under the 2007 Plan, the Company
will be required to amortize the dollar value of those units (whether eventually
settled in cash or shares of the Company's common stock) over the applicable
performance period and any subsequent service vesting period. Dividends or
dividend equivalents paid on the portion of an award that vests will be charged
against the Company's retained earnings. If the award holder is not required to
return the dividends or dividend equivalents if they forfeit their awards,
dividends or dividend equivalents paid on instruments that do not vest will be
recognized by the Company as additional compensation cost.
(PROXY CARD)
ALEXANDER & BALDWIN, INC.
822 Bishop Street, Honolulu, Hawaii 96813
PROXY FOR ANNUAL MEETING OF SHAREHOLDERS, APRIL 26, 2007
SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
The undersigned hereby appoints W. A. Doane,
W. A. Dods, Jr., and M. G. Shaw, and each of them,
proxies with full power of substitution, to vote
the shares of stock of Alexander & Baldwin, Inc.,
which the undersigned is entitled to vote at the
Annual Meeting of Shareholders of the Corporation
to be held on Thursday, April 26, 2007, and at any
adjournments or postponements thereof, on the
matters set forth in the Notice of Meeting and
Proxy Statement, as follows:
(continued and to be signed on reverse side)
______________________________________________________________________________
FOLD AND DETACH HERE
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR PROPOSALS 1, 2 AND 3 BELOW.
---
Please mark your |X|
votes as indicated
in this example
1. ELECTION OF DIRECTORS (Check one box only): 01 W. B. Baird, 02 M. J. Chun,
03 W. A. Doane, 04 W. A. Dods,
Jr., 05 C. G. King, 06 C. H. Lau,
07 D. M. Pasquale, 08 M. G. Shaw,
09 J. N. Watanabe.
FOR WITHOUT AUTHORITY (To withhold authority to vote
all nominees to vote for all for any individual nominee,
listed to nominees listed to check the "FOR all nominees"
the right: the right: box to the left and write the
__ __ name of the nominee for whom
|__| |__| you wish to withhold authority
in the space provided below.)
____________________________________________________________________________
2. PROPOSAL TO RATIFY THE 3. PROPOSAL TO ADOPT THE ALEXANDER &
APPOINTMENT OF DELOITTE & BALDWIN, INC. 2007 INCENTIVE
TOUCHE LLP as the auditors COMPENSATION PLAN
of the Corporation:
FOR AGAINST ABSTAIN FOR AGAINST ABSTAIN
__ __ __ __ __ __
|__| |__| |__| |__| |__| |__|
4. In their discretion on such other matters as properly may come before the
meeting or any adjournments or postponements thereof.
THIS PROXY WILL BE VOTED IN THE MANNER DIRECTED HEREIN BY THE UNDERSIGNED
SHAREHOLDER. IF NO DIRECTION IS GIVEN, THIS PROXY WILL BE VOTED FOR
PROPOSALS 1, 2 AND 3 AND IN THE DISCRETION OF THE PROXIES ON SUCH OTHER MATTERS
AS PROPERLY MAY COME BEFORE THE MEETING OR ANY ADJOURNMENTS OR POSTPONEMENTS
THEREOF.
PLEASE SIGN, DATE AND RETURN THIS PROXY PROMPTLY IN THE ENCLOSED ENVELOPE.
PLEASE SIGN EXACTLY AS NAME(S) APPEARS ABOVE
Signature____________________ Signature__________________ Date_________________
IMPORTANT: WHEN STOCK IS IN TWO OR MORE NAMES, ALL SHOULD SIGN. WHEN SIGNING
AS EXECUTOR, TRUSTEE, GUARDIAN OR OFFICER OF A CORPORATION, GIVE TITLE AS SUCH.
______________________________________________________________________________
FOLD AND DETACH HERE
WE ENCOURAGE YOU TO TAKE ADVANTAGE OF INTERNET OR TELEPHONE VOTING,
BOTH ARE AVAILABLE 24 HOURS A DAY, 7 DAYS A WEEK.
Internet and telephone voting is available through 11:59 PM Eastern Time
the day prior to annual meeting day.
Your Internet or telephone vote authorizes the named proxies to vote your
shares in the same manner as if you marked, signed and returned your proxy
card.
Internet
http://www.proxyvoting.com/alex
Use the Internet to vote your proxy. Have your proxy card in hand when you
access the web site.
OR
Telephone
1-866-540-5760
Use any touch-tone telephone to vote your proxy. Have your proxy card in hand
when you call.
If you vote your proxy by Internet or by telephone, you do NOT need to mail
back your proxy card.
To vote by mail, mark, sign and date your proxy card and return it in the
enclosed postage-paid envelope.
Choose MLinkSM for fast, easy and secure 24/7 online access to your future
proxy materials, investment plan statements, tax documents and more. Simply
log on to Investor ServiceDirectR at www.melloninvestor.com/isd where
--------------------------
step-by-step instructions will prompt you through enrollment.