UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
(Mark One)
|X| QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934 For the quarterly period ended September 30, 2004
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OR
|_| TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the transition period from __________________ to _________________
Commission file number 0-565
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ALEXANDER & BALDWIN, INC.
-------------------------
(Exact name of registrant as specified in its charter)
Hawaii 99-0032630
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(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
P. O. Box 3440, Honolulu, Hawaii 9680l
822 Bishop Street, Honolulu, Hawaii 96813
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(Address of principal executive offices) (Zip Code)
(808) 525-6611
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(Registrant's telephone number, including area code)
N/A
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(Former name, former address, and former
fiscal year, if changed since last report)
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days. Yes |X| No |_|
Indicate by check mark whether the registrant is an accelerated filer (as
defined in Rule 12b-2 of the Exchange Act). Yes |X| No |_|
Number of shares of common stock outstanding as of
September 30, 2004: 42,662,182
PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
- -----------------------------
The condensed financial statements and notes for the third quarter and first
nine months of 2004 are presented below, with comparative figures from the 2003
financial statements. These financial statements are unaudited.
ALEXANDER & BALDWIN, INC. AND SUBSIDIARIES
Condensed Consolidated Statements of Income
(In millions, except per-share amounts)
Three Months Ended Nine Months Ended
September 30, September 30,
2004 2003 2004 2003
---- ---- ---- ----
Revenue:
Operating revenue $ 384.2 $ 316.3 $ 1,105.0 $ 903.5
------------ ------------ ----------- -----------
Costs and Expenses:
Costs of goods sold, services and rentals 310.1 253.4 872.2 729.6
Selling, general and administrative 31.3 26.6 93.3 86.5
Interest 3.1 3.1 9.5 8.1
------------ ------------ ----------- -----------
Total costs and expenses 344.5 283.1 975.0 824.2
------------ ------------ ----------- -----------
Income Before Taxes 39.7 33.2 130.0 79.3
Income taxes 15.1 11.7 49.4 28.6
------------ ------------ ----------- -----------
Income From Continuing Operations 24.6 21.5 80.6 50.7
Discontinued Operations (net of income taxes):
Properties 0.2 0.2 1.4 11.8
------------ ------------- ----------- -----------
Net Income $ 24.8 $ 21.7 $ 82.0 $ 62.5
============ ============ =========== ===========
Basic Earnings Per Share:
Continuing operations $ 0.58 $ 0.52 $ 1.90 $ 1.22
Discontinued operations -- -- 0.03 0.29
------------ ------------ ----------- -----------
Net income $ 0.58 $ 0.52 $ 1.93 $ 1.51
============ ============ =========== ===========
Diluted Earnings Per Share:
Continuing operations $ 0.58 $ 0.52 $ 1.88 $ 1.22
Discontinued operations -- -- 0.03 0.28
------------ ------------ ----------- -----------
Net income $ 0.58 $ 0.52 $ 1.91 $ 1.50
============ ============ =========== ===========
Dividends Per Share $ 0.225 $ 0.225 $ 0.675 $ 0.675
Average Number of Shares Outstanding 42.5 41.6 42.5 41.5
See Notes to Condensed Consolidated Financial Statements.
ALEXANDER & BALDWIN, INC. AND SUBSIDIARIES
Industry Segment Data, Net Income
(In millions)
Three Months Ended Nine Months Ended
September 30, September 30,
2004 2003 2004 2003
---- ---- ---- ----
Revenue:
Transportation:
Ocean transportation $ 215.0 $ 191.6 $ 619.6 $ 577.0
Logistics services 99.5 60.8 267.1 169.2
Property Development and Management:
Leasing 20.9 20.3 62.1 60.0
Sales 11.6 10.4 80.0 53.5
Less amounts reported in discontinued
operations (0.4) (0.4) (2.3) (39.8)
Food Products 38.3 33.6 80.6 83.6
Inter-segment Revenue (0.7) -- (2.1) --
------------ ------------ -------------- --------------
Total revenue $ 384.2 $ 316.3 $ 1,105.0 $ 903.5
============ ============ ============== ==============
Operating Profit, Net Income:
Transportation:
Ocean transportation $ 33.0 $ 25.1 $ 83.0 $ 60.4
Logistics services 2.2 1.4 5.8 3.3
Property Development and Management:
Leasing 10.1 9.1 28.8 27.2
Sales 2.5 2.6 34.9 21.1
Less amounts reported in discontinued
operations (0.3) (0.3) (2.2) (19.0)
Food Products 0.6 0.4 3.5 4.6
------------ ------------ -------------- --------------
Total operating profit 48.1 38.3 153.8 97.6
Interest Expense (3.1) (3.1) (9.5) (8.1)
General Corporate Expenses (5.3) (2.0) (14.3) (10.2)
------------ ------------ -------------- --------------
Income From Continuing Operations Before
Income Taxes 39.7 33.2 130.0 79.3
Income Taxes (15.1) (11.7) (49.4) (28.6)
------------ ------------ -------------- --------------
Income From Continuing Operations 24.6 21.5 80.6 50.7
Discontinued Operations (net of income taxes):
Properties 0.2 0.2 1.4 11.8
------------ ------------ -------------- --------------
Net Income $ 24.8 $ 21.7 $ 82.0 $ 62.5
============ ============ ============== ==============
See Notes to Condensed Consolidated Financial Statements.
ALEXANDER & BALDWIN, INC. AND SUBSIDIARIES
Condensed Consolidated Balance Sheets
(In millions)
September 30, December 31,
2004 2003
---- ----
ASSETS
Current Assets:
Cash and cash equivalents $ 35 $ 6
Accounts and notes receivable, net 180 160
Inventories 19 16
Real estate held for sale 21 30
Deferred income taxes 13 15
Prepaid expenses and other assets 20 20
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Total current assets 288 247
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Investments 100 68
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Real Estate Developments 74 77
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Property, at cost 2,000 1,888
Less accumulated depreciation and amortization 850 809
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Property - net 1,150 1,079
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Capital Construction Fund 25 165
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Other Assets 123 124
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Total $ 1,760 $ 1,760
=========== =========
LIABILITIES AND
SHAREHOLDERS' EQUITY
Current Liabilities:
Notes payable and current portion of long-term debt $ 39 $ 15
Accounts payable 97 95
Other 103 73
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Total current liabilities 239 183
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Long-term Liabilities:
Long-term debt 230 330
Deferred income taxes 334 356
Post-retirement benefit obligations 45 44
Other 36 36
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Total long-term liabilities 645 766
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Commitments and Contingencies
Shareholders' Equity:
Capital stock 35 35
Additional capital 127 112
Accumulated other comprehensive loss and Deferred (9) (8)
compensation
Retained earnings 734 684
Cost of treasury stock (11) (12)
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Total shareholders' equity 876 811
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Total $ 1,760 $ 1,760
=========== =========
See Notes to Condensed Consolidated Financial Statements.
ALEXANDER & BALDWIN, INC. AND SUBSIDIARIES
Condensed Consolidated Statements of Cash Flows
(In millions)
Nine Months Ended
September 30,
2004 2003
---- ----
Cash Flows from Operating Activities $ 124 $ 115
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Cash Flows from Investing Activities:
Capital expenditures (135) (130)
Proceeds from disposal of property and other assets 21 6
Capital Construction Fund, net 140 38
Deposit in escrow for property purchase -- (77)
Investments, net (22) (4)
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Net cash from (used in) investing activities 4 (167)
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Cash Flows from Financing Activities:
Proceeds from issuances of long-term debt 56 226
Payments of long-term debt (134) (133)
Proceeds from issuances of capital stock , net 8 11
Dividends paid (29) (28)
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Net cash from (used in) financing activities (99) 76
------- -------
Net Increase in Cash and Cash Equivalents $ 29 $ 24
======= =======
Other Cash Flow Information:
Interest paid, net of amounts capitalized $ (11) $ (8)
Income taxes paid, net of refunds (49) (23)
Other Non-cash Information:
Depreciation expense (59) (52)
Tax-deferred property sales 1 34
Tax-deferred property purchases -- (30)
Debt assumed in real estate acquisition -- 15
Assets conveyed to joint venture 5 28
See Notes to Condensed Consolidated Financial Statements.
Notes to Condensed Consolidated Financial Statements
(Unaudited)
(1) The Condensed Consolidated Financial Statements are unaudited. Because
of the nature of the Company's operations, the results for interim
periods are not necessarily indicative of results to be expected for
the year. In the opinion of management, all material adjustments
necessary for the fair presentation of interim period results have been
included in the interim financial statements.
(2) The 2004 estimated effective income tax rate is substantially the same
as the statutory rate. The 2003 estimated effective income tax rate
differs from the statutory rate due primarily to tax credits and life
insurance.
(3) Commitments and Contingencies: Commitments, excluding operating lease
commitments, that were in effect at September 30, 2004, included the
following (in millions):
Guarantee of Hokua debt (a) $ 18
Guarantee of HS&TC debt (b) $ 15
Standby letters of credit (c) $ 18
Bonds (d) $ 13
Benefit plan withdrawal obligations (e) $ 64
These amounts are not recorded on the Company's balance sheet and,
based on the Company's current knowledge and with the exception of item
(a), it is not expected that the Company or its subsidiaries will be
called upon to advance funds under these commitments.
(a) At September 30, 2004, A&B Properties, Inc.
("Properties") had guaranteed $2.5 million of the $12
million component of a $130 million construction loan
agreement that was entered into by Hokua Development
Group LLC ("Hokua"), a limited liability company in
which the Company is an investor. The $12 million
component was used by Hokua to acquire the land that is
being developed. This guarantee terminates upon the
initial funding of the balance of the construction loan.
This funding is expected to begin in early 2005.
Properties would be called upon to honor this guarantee
in the event that the construction loan is not funded.
Properties also has a limited guarantee equal to the
lesser of $15 million or 15.5 percent of the outstanding
balance of the construction loan that could be triggered
if the purchasers of condominium apartments become
entitled to rescind their purchase obligations. This
could occur if Hokua breaches covenants contained in its
sales contracts or violates the Interstate Land Sales
Practices Act, the Hawaii Condominium Act, the
Securities Act of 1933 or the Securities Exchange Act of
1934.
(b) The Company guarantees up to $15 million of a $30
million revolving credit line of Hawaiian Sugar &
Transportation Cooperative ("HS&TC," a raw sugar
marketing and transportation cooperative that the
Company uses to market and transport its sugar and of
which the Company is a member). That credit line is
used primarily to fund purchases of raw sugar from the
Hawaii growers and is fully secured by the inventory,
receivables and transportation assets of the
cooperative. The amount that may be drawn by HS&TC
under the facility is limited to 95 percent of its
inventory value plus the lesser of 90 percent or $16
million of HS&TC's receivables. The Company's
guarantee is limited to the lesser of $15 million or
the actual amounts drawn. Although the amount drawn by
HS&TC on its credit line varies, as of September 30,
2004, the amount drawn was $22 million. The Company has
not recorded a liability for its obligation under the
guarantee because it believes that the likelihood of
making any payment is not probable.
(c) The Company has arranged for standby letters of credit
totaling $18 million. Letters of credit include
approximately $12 million that enable the Company to
qualify as a self-insurer for state and federal workers'
compensation liabilities. The amount also includes a
letter of credit of $3 million for workers' compensation
claims incurred by employees of C&H Sugar Company, Inc.
("C&H," an unconsolidated entity in which the Company
has a minority ownership equity interest), under a
now-closed self-insurance plan, prior to December 24,
1998. The Company only would be called upon to honor
this letter of credit in the event of C&H's insolvency.
The agreement with C&H to provide this letter of credit
expired on December 24, 2003. C&H has advised the
Company that it is unable to provide a replacement
security deposit. Until C&H meets this contractual
obligation, the Company will not be released from this
letter of credit. The remaining letters of credit,
totaling $3 million, are for routine operating matters.
(d) Of the $13 million in bonds, $6 million consists of
subdivision bonds related to real estate construction
projects in Hawaii. These bonds are required either by
the state or by county governments to ensure that
certain infrastructure work, as part of real-estate
development, is completed. The Company has the financial
ability and intention to complete these improvements.
Also included in the total are $5 million of customs
bonds.
(e) The withdrawal liabilities for multi-employer pension
plans, in which Matson is a participant, aggregated
approximately $64 million as of the most recent
valuation dates. Management has no present intention of
withdrawing from and does not anticipate the termination
of any of the aforementioned plans.
Contingencies: As reported in Items 7 and 8 of the Company's 2003 Form
10-K, the State of Hawaii Department of Health ("DOH") has issued a
notice of violation of state and federal air pollution control
regulations and a $2 million proposed penalty, following the Company's
self reporting of this matter and taking corrective action to comply
with the regulations. The Company has contested this matter, but there
has been no change in the status since 2003 year-end. The Company
believes that the resolution of this matter will not have a material
effect on its financial statements and that appropriate accruals for
this matter have been recorded.
As described in the Company's 2003 Form 10-K, a petition was filed in
January 2004, by the Native Hawaiian Legal Corporation, on behalf of
four individuals, requesting that the State of Hawaii Board of Land and
Natural Resources declare that the Company has no current legal
authority to continue to divert water from streams in East Maui for use
in its sugar-growing operations. The Company objected to the petition.
The Company has also been working to make improvements to the water
systems of the petitioner's four clients so as to improve the flow of
water to their taro patches. The interim agreement that was entered
into during the first quarter of 2004 between the parties to allow the
improvements to be completed, expired without renewal by the
petitioners. The Company is continuing to pursue its objections and
has, again, requested an administrative hearing on the petition. The
effect of this claim on the Company's sugar-growing operations cannot
currently be estimated.
The Company and certain subsidiaries are parties to various legal
actions and are contingently liable in connection with claims and
contracts arising in the normal course of business, the outcome of
which, in the opinion of management after consultation with legal
counsel, will not have a material adverse effect on the Company's
financial position or results of operations.
(4) Accounting Method for Stock-Based Compensation and Diluted Earnings per
Share: As allowed by Statement of Financial Accounting Standards
("SFAS") No. 123, "Accounting for Stock-Based Compensation," and by
SFAS No. 148, "Accounting for Stock-Based Compensation - Transition and
Disclosure," the Company has elected to continue to apply the
provisions of Accounting Principles Board Opinion No. 25, "Accounting
for Stock Issued to Employees." Accordingly, no compensation cost is
recognized in the Company's net income for options granted with
exercise prices that are equal to the market values of the underlying
common stock on the dates of grant.
Pro forma information regarding net income and earnings per share,
using the fair value method and reported below, has been estimated
using a Black-Scholes option-pricing model. This model was developed
for use in estimating the fair value of traded options which do not
have vesting requirements and which are fully transferable. The
Company's options have characteristics significantly different from
those of traded options. Had compensation cost for the stock options
been based on the estimated fair values at grant dates, the Company's
pro forma net income and net income per share for the three and nine
months ended September 30, 2004 and 2003 would have been as follows (in
millions, except per share amounts):
Quarter Ended Nine Months Ended
September 30, September 30,
------------- -------------
2004 2003 2004 2003
---- ---- ---- ----
Net Income:
As reported $ 24.8 $ 21.7 $ 82.0 $ 62.5
Stock-based compensation
expense determined under
fair value based method
for all awards, net of
related tax effects (0.4) (0.3) (1.0) (0.9)
-------- -------- -------- --------
Pro forma $ 24.4 $ 21.4 $ 81.0 $ 61.6
======== ======== ======== ========
Net Income Per-share:
Basic, as reported $ 0.58 $ 0.52 $ 1.93 $ 1.51
Basic, pro forma $ 0.57 $ 0.51 $ 1.91 $ 1.48
Diluted, as reported $ 0.58 $ 0.52 $ 1.91 $ 1.50
Diluted, pro forma $ 0.57 $ 0.51 $ 1.89 $ 1.48
Effect on average shares outstanding of
assumed exercise of stock options
(in millions of shares):
Average number of shares outstanding 42.5 41.6 42.5 41.5
Effect of assumed exercise of
outstanding stock options 0.5 0.3 0.5 0.2
-------- -------- -------- --------
Average number of shares outstanding
after assumed exercise of outstanding
stock options 43.0 41.9 43.0 41.7
======== ======== ======== ========
The pro forma effects are not necessarily representative of the pro
forma effects on future net income or earnings per share, because the
number of future shares that may be issued is not known; shares vest
over several years, and assumptions used to determine the fair value
can vary significantly. Total shares considered antidilutive and that
were not included in the computation of diluted earnings per share were
312,000 and 866,000 at September 30, 2004 and 2003. Additional
information about stock-based compensation is included in Notes 1 and
12 of Item 8 in the Company's most recently filed Form 10-K.
(5) Accounting for and Classification of Discontinued Operations: As
required by Statement of Financial Accounting Standards ("SFAS") No.
144, "Accounting for the Impairment or Disposal of Long-Lived Assets,"
the sales of certain income-producing assets are classified as
discontinued operations if (i) the operations and cash flows of the
assets can be clearly distinguished from the remaining assets of the
Company, (ii) the cash flows that are specific to the assets sold have
been, or will be, eliminated from the ongoing operations of the
Company, (iii) the Company will not have a significant continuing
involvement in the operations of the assets sold, and (iv) the amount
is considered material. Certain assets that are "held for sale," based
on the likelihood and intention of selling the property within 12
months, are also treated as discontinued operations. Depreciation on
these assets is discontinued upon reclassification. Sales of land,
residential houses, and office condominium units are generally
considered inventory and are not included in discontinued operations.
Discontinued operations were as follows (in millions):
Quarter Ended Nine Months Ended
September 30, September 30,
------------- -------------
2004 2003 2004 2003
---- ---- ---- ----
Discontinued Operations (net of tax)
Sales of Assets -- -- $ 1.0 $ 10.5
Leasing Operations $ 0.2 $ 0.2 0.4 1.3
-------- --------- -------- --------
Total $ 0.2 $ 0.2 $ 1.4 $ 11.8
======== ======== ======== ========
(6) Other Comprehensive Income for the three and nine months ended
September 30, 2004 and 2003 was as follows, (in millions):
Quarter Ended Nine Months Ended
September 30, September 30,
------------- -------------
2004 2003 2004 2003
---- ---- ---- ----
Net Income $ 24.8 $ 21.7 $ 82.0 $ 62.5
Other Comprehensive Income (Loss):
Change in valuation of derivative (0.6) 3.5 0.9 --
Company's share of investee's minimum
pension liability adjustment -- -- -- (7.2)
-------- -------- -------- --------
Comprehensive Income $ 24.2 $ 25.2 $ 82.9 $ 55.3
======== ======== ======== ========
The change in valuation of derivative amount reflects the funding of
Matson's two vessel purchases and the settlement of the interest rate
lock agreements.
C&H reported a $20.1 million minimum pension liability adjustment at
the end of 2002. The Company recorded its share of that adjustment
during the first quarter of 2003.
(7) Pension and Post-retirement Plans: The Company has defined benefit
pension plans that cover substantially all non-bargaining unit and
certain bargaining unit employees. The Company also has unfunded
non-qualified plans that provide benefits in excess of the amounts
permitted to be paid under the provisions of the tax law to
participants in qualified plans. The assumptions related to discount
rates, expected long-term rates of return on invested plan assets,
salary increases, age, mortality and health care cost trend rates,
along with other factors, are used in determining the assets,
liabilities and expenses associated with pension benefits. Management
reviews the assumptions annually with its independent actuaries, taking
into consideration existing and future economic conditions and the
Company's intentions with respect to these plans. Management believes
that its assumptions and estimates for 2004 are reasonable. Different
assumptions, however, could result in material changes to the assets,
obligations and costs associated with benefit plans.
The components of Net Periodic Benefit Cost for the third quarters of
2004 and 2003 were as follows (in millions):
Pension Benefits Post-retirement Benefits
---------------- ------------------------
2004 2003 2004 2003
---- ---- ---- ----
Service Cost $ 1.7 $ 1.6 $ 0.2 $ 0.2
Interest Cost 4.0 4.8 0.8 0.7
Expected Return on Plan Assets (5.7) (5.5) -- --
Amortization of Prior Service Cost 0.1 1.1 -- --
Amortization of Net (Gain) Loss 0.5 1.6 0.1 0.1
-------- -------- -------- ---------
Net Periodic Benefit Cost $ 0.6 $ 3.6 $ 1.1 $ 1.0
======== ======== ======== =========
The components of Net Periodic Benefit Cost for the first nine months
of 2004 and 2003 were as follows (in millions):
Pension Benefits Post-retirement Benefits
---------------- ------------------------
2004 2003 2004 2003
---- ---- ---- ----
Service Cost $ 4.7 $ 4.8 $ 0.5 $ 0.5
Interest Cost 11.9 14.4 2.2 2.2
Expected Return on Plan Assets (17.1) (16.5) -- --
Amortization of Prior Service Cost 0.4 3.2 -- --
Amortization of Net (Gain) Loss 1.5 4.9 0.4 0.3
-------- -------- -------- ---------
Net Periodic Benefit Cost $ 1.4 $ 10.8 $ 3.1 $ 3.0
======== ======== ======== =========
During the third quarter of 2004, the Company contributed approximately
$5 million to its pension plan. Total year 2004 pension expense is
expected to be approximately $2 million.
(8) Subsequent Events: On October 1, 2004, the Company renewed its
multi-bank revolving credit agreement. The agreement was extended for
three years and the amount available under the line was increased from
$185 million to $200 million. At September 30, 2004, the Company had no
amounts drawn on this facility.
On October 1, 2004, Properties repaid a $15 million term loan that had
been assumed in connection with a 2003 real estate purchase. The loan
had a maturity date of January 2005, but could be repaid without
penalty as early as October 1, 2004. The $15 million balance was
classified as a current liability at September 30, 2004.
On October 19, 2004, the Company renewed and extended for one year its
uncommitted overnight credit facility. The amount of the facility was
also increased from $70 million to $78.5 million
On October 19, 2004, two community-based organizations filed a Citizen
Complaint and a Petition for a Declaratory Order with the Commission on
Water Resource Management of the State of Hawaii ("Water Commission")
against Hawaiian Commercial & Sugar Company and an unrelated company,
to order the companies to leave all water of four streams on the west
side of the Island of Maui that is not being put to "actual, reasonable
and beneficial use" in the streams of origin. The complainants had
earlier filed, on June 25, 2004, with the Water Commission a petition
to increase the interim in-stream flow standards for those streams. The
Company objects to the petitions. If the Company is not permitted to
divert stream water for its use to the extent that is currently
diverting, it may have an adverse effect on the Company's sugar
operations.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
- ------------------------------------------------
The following analysis of the consolidated financial condition and results of
operations of Alexander & Baldwin, Inc. and its subsidiaries (collectively, the
"Company") should be read in conjunction with the condensed consolidated
financial statements and related notes thereto.
FORWARD-LOOKING STATEMENTS
The Company, from time to time, may make or may have made certain
forward-looking statements, whether orally or in writing, such as forecasts and
projections of the Company's future performance or statements of management's
plans and objectives. These statements are "forward-looking" statements as that
term is defined in the Private Securities Litigation Reform Act of 1995. Such
forward-looking statements may be contained in, among other things, Securities
and Exchange Commission ("SEC") filings, such as the Forms 10-K, 10-Q and 8-K,
press releases made by the Company, the Company's Internet Web sites (including
Web sites of its subsidiaries), and oral statements made by the officers of the
Company. Except for historical information contained in these written or oral
communications, such communications contain forward-looking statements. These
forward-looking statements are not guarantees of future performance, and involve
a number of risks and uncertainties that could cause actual results to differ
materially from those projected in the statements, including, but not limited to
the following factors:
1) economic conditions in Hawaii and elsewhere;
2) market demand;
3) competitive factors, such as the entrance of a new
competitor in the Hawaii shipping trade, and pricing
pressures, principally in the Company's transportation
businesses;
4) renewal or replacement of significant agreements including,
but not limited to, lease agreements and Matson's alliance
and charter agreement with American President Lines, Ltd.;
5) significant fluctuations in fuel prices
6) legislative and regulatory environments at the federal,
state and local levels, including, among others, government
rate regulations, land use regulations, government
administration of the U.S. sugar program, and modifications
to or retention of cabotage laws;
7) availability of water for irrigation and to support real
estate development;
8) performance of unconsolidated affiliates and ventures;
9) significant fluctuations in raw sugar prices and the ability to
sell raw sugar to C&H Sugar Company, Inc. ("C&H");
10) vendor and labor relations in Hawaii, the U.S. Pacific Coast,
Guam and other locations where the Company has operations;
11) risks associated with construction and development
activities, including, among others, construction costs,
construction defects, labor issues, ability to secure
insurance, and land use regulations;
12) performance of pension assets;
13) acts of nature, including but not limited to, drought, greater
than normal rainfall, hurricanes and typhoons;
14) resolution of tax issues with the IRS or state tax authorities;
15) acts of war and terrorism;
16) risks associated with current or future litigation; and
17) other risk factors described elsewhere in these communications
and from time to time in the Company's filings with the SEC.
CONSOLIDATED REVENUE & NET INCOME
- --------------------------------------------------------------------------------
Quarter Ended September 30,
- --------------------------------------------------------------------------------
(dollars in millions) 2004 2003 Change
- --------------------------------------------------------------------------------
Revenue $ 384.2 $ 316.3 21%
Net income $ 24.8 $ 21.7 14%
Consolidated revenue of $384.2 million for the third quarter of 2004 increased
$67.9 million, or 21 percent, compared with the third quarter of 2003. This
increase was due principally to $38.7 million growth in Matson Integrated
Logistics revenue, $23.4 million higher revenue for ocean transportation
revenue, $4.7 million higher revenue in food products, and $1.2 million higher
revenue from real estate sales. The reasons for the revenue growth are described
below in Analysis of Operating Revenue and Profit.
Costs of goods sold, services and rentals of $310.1 million for the third
quarter of 2004 increased $56.7 million, or 22 percent, compared with the third
quarter of 2003 due to higher purchased transportation services of approximately
$35.8 million at the Matson Integrated Logistics business, higher cargo handling
costs at Matson associated with higher container volume and higher vessel costs
at Matson associated with an additional vessel during much of the 2004 third
quarter in the Long Beach to Hawaii trade due to a Southern California longshore
labor shortage. These higher costs were partially offset by lower pension and
employee benefit costs, a gain on the sale of Matson's investment in Sea
Star Line, LLC ("Sea Star") and the non-recurrence of accruals in 2003 for (1)
excise taxes at Matson, (2) a building maintenance expenditure at A&B
Properties, (3) unscheduled drydock repairs for a vessel, and (4) an emissions
fine at HC&S. Additional information about operating expenses is contained in
the Analysis of Operating Revenue and Profit.
Selling, general and administrative costs were 18 percent higher than the third
quarter of 2003 due to higher consulting costs for Sarbanes-Oxley section 404
readiness and fluctuations in incentive compensation plans and non-qualified
benefit plan expenses. These higher costs were partially offset by lower pension
costs and lower occupancy costs at Matson. Income taxes were higher than the
third quarter of 2003 due to higher pre-tax income and a higher effective tax
rate.
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Nine Months Ended September 30,
- --------------------------------------------------------------------------------
(dollars in millions) 2004 2003 Change
- --------------------------------------------------------------------------------
Revenue $ 1,105.0 $ 903.5 22%
Net income $ 82.0 $ 62.5 31%
Consolidated revenue of $1,105 million for the first nine months of 2004
increased $201.5 million, or 22 percent, compared with the first nine months of
2003. This increase was due principally to $97.9 million growth in Matson
Integrated Logistics revenue, $42.6 million higher ocean transportation revenue,
$37.5 million of lower amounts reported as discontinued operations, and $26.5
million higher revenue from real estate sales, partially offset by $3.0 million
lower revenue in food products. The reasons for the revenue growth are described
below in Analysis of Operating Revenue and Profit.
Costs of goods sold, services and rentals of $872.2 million for the first nine
months of 2004 increased $142.6 million, or 20 percent, compared with the first
nine months of 2003 due to higher purchased transportation services of
approximately $90.6 million at the Matson Integrated Logistics business, higher
cargo handling costs at Matson associated with higher container volume, the
sales of higher cost-basis real-estate in 2004, and higher vessel costs at
Matson associated with the additional vessel placed in service during the 2004
third quarter. These higher costs were partially offset by lower pension and
employee benefit costs, and the non-recurrence of the previously noted 2003
accruals. Additional information about operating expenses is contained in the
Analysis of Operating Revenue and Profit.
Selling, general and administrative costs of $93.3 million were $6.8 million, or
eight percent, higher than the first nine months of 2003 for the same reasons
cited for the third quarter increase. Higher interest expense reflects the cost
of financing portions of two new vessels. Income taxes were higher than the
first nine months of 2003 due to higher pre-tax income and a higher effective
tax rate.
Additional information about the revenue and profits of the Company are provided
in the segment discussion below. Because the Company operates in five different
segments, the review of segment operations provides an important perspective on
the financial results for the Company.
2004 FOURTH QUARTER OPERATING PROFIT OUTLOOK
Fourth quarter 2004 earnings are not expected to reach the level of 2003's
fourth quarter, due principally to the non-recurrence of a one-time $16.7
million gain in 2003 resulting from the conversion of a Matson pension plan to a
multi-employer plan. Excluding this item, Matson is expected to have a
respectable quarter, given the seasonally lower results typically achieved in
the fourth quarter. As noted in the 2004 second quarter Form 10-Q, A&B
Properties had, by mid-year, concluded almost all of its planned sales activity
for the year. Therefore few property sales are expected in the fourth quarter.
The food products segment, excluding the possible federal sugar transportation
allowance noted in the Results of Operations -- Food Products discussion, is
currently expected to show modest improvement compared with the fourth quarter
of 2003. The Company anticipates that A&B's performance in 2004 will exceed its
internal target objectives for the year.
RESULTS OF SEGMENT OPERATIONS
Transportation - Ocean Transportation
- --------------------------------------------------------------------------------
Quarter Ended September 30,
- --------------------------------------------------------------------------------
(dollars in millions) 2004 2003 Change
- --------------------------------------------------------------------------------
Revenue $ 215.0 $ 191.6 12%
Operating profit $ 33.0 $ 25.1 31%
- --------------------------------------------------------------------------------
Volume (Units)
Hawaii containers 43,600 41,300 6%
Automobiles 32,400 29,900 8%
Guam containers 4,400 4,700 -6%
- --------------------------------------------------------------------------------
Ocean Transportation revenue of $215 million for the third quarter of 2004 was
$23.4 million, or 12 percent, higher than the third quarter of 2003. Of this
increase, approximately $9.3 million was due to higher container and auto
volume, $5.5 million was due to improved yields and cargo mix, $4.4 million was
due to increases in the bunker fuel surcharge, $2 million was due to higher
conventional cargo volume, and $2.1 million was from vessel charters. Total
Hawaii container volume was six percent higher than the third quarter of 2003.
This reflects the strong and continuing growth in the Hawaii economy and, in
particular, the growth in the construction sector.
Operating profit of $33 million was $7.9 million, or 31 percent, better than the
third quarter of 2003. This was primarily the result of $5.2 million from
favorable yields and mix, $3.2 million from higher container volume, $2.1
million of lower administrative and employee benefits costs, $1.6 million for
the non-recurrence of a 2003 excise tax accrual, a $1.2 million gain on the sale
of Matson's Sea Star investment, and $1 million for the non-recurrence of a 2003
unscheduled drydocking of a vessel, partially offset by $4.3 million higher
vessel operating expenses and depreciation and $2.1 million of higher cargo
handling costs and gains on disposal of assets in 2003.
The higher vessel cost resulted principally from the addition of one vessel in
the Long Beach to Hawaii service for much of the 2004 third quarter. A second
vessel was used in that service for several weeks toward the end of the third
quarter. These two additional vessels have enabled Matson to continue providing
on-time service to its customers while labor shortages in southern California
have delayed port operations.
During the third quarter, Matson took delivery of a new vessel, the MV
Maunawili, for a total project cost of approximately $105 million.
- --------------------------------------------------------------------------------
Nine Months Ended September 30,
- --------------------------------------------------------------------------------
(dollars in millions) 2004 2003 Change
- --------------------------------------------------------------------------------
Revenue $ 619.6 $ 577.0 7%
Operating profit $ 83.0 $ 60.4 37%
- --------------------------------------------------------------------------------
Volume (Units):
Hawaii containers 123,700 120,200 3%
Automobiles 110,300 109,000 1%
Guam containers 13,200 13,700 -4%
- --------------------------------------------------------------------------------
Ocean Transportation revenue of $619.6 million for the first nine months of 2004
was $42.6 million, or seven percent, higher than the first nine months of 2003.
Of this increase, approximately $18.5 million was due to improved yields and
cargo mix, $8.2 million was due to increases in the bunker fuel surcharge and
$11.5 million was due to higher container and auto volume and $6 million was due
to vessel charters. As with the third quarter, higher container volume reflects
a return to normalized shipments of consumer goods, increasing growth in
construction related products and a growing Hawaii economy. Total Hawaii cargo
was three percent higher than the first nine months of 2003.
Operating profit of $83 million was $22.6 million, or 37 percent, better than
the first nine months of 2003. This was primarily the result of $18.5 million
from favorable yields, $6.6 million of lower administrative and employee benefit
costs, $5 million for the non-recurrence of a 2003 excise tax accrual, $4.4
million from higher container volume, $2.3 million from vessel charters and a
$1.2 million gain on the sale of the Company's investment in Sea Star, partially
offset by $10.3 million higher vessel operating expenses and depreciation, and
$2.8 million of higher cargo handling and other operating costs.
Transportation - Logistics Services
- --------------------------------------------------------------------------------
Quarter Ended September 30,
- --------------------------------------------------------------------------------
(dollars in millions) 2004 2003 Change
- --------------------------------------------------------------------------------
Revenue $ 99.5 $ 60.8 64%
Operating profit $ 2.2 $ 1.4 57%
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Nine Months Ended September 30,
- --------------------------------------------------------------------------------
(dollars in millions) 2004 2003 Change
- --------------------------------------------------------------------------------
Revenue $ 267.1 $ 169.2 58%
Operating profit $ 5.8 $ 3.3 76%
- --------------------------------------------------------------------------------
Revenue and operating profit growth for the third quarter and first nine months
of 2004 for the integrated logistics services business was mainly the result of
increased customer volume in all business lines (domestic, international and
highway). The increase in highway volume was, in large part, due to an
acquisition in late 2003. This acquisition is discussed in Items 7 and 8 of the
Company's 2003 Form 10-K.
The revenue for integrated logistics services includes the total amount billed
to customers for transportation services. The primary costs include purchased
transportation services. As a result, the operating profit margins for this
business are narrower than other A&B businesses. The primary operating profit
and investment risk for this business is the quality of receivables, which is
monitored closely.
Property Development and Management - Leasing
- --------------------------------------------------------------------------------
Quarter Ended September 30,
- --------------------------------------------------------------------------------
(dollars in millions) 2004 2003 Change
- --------------------------------------------------------------------------------
Revenue $ 20.9 $ 20.3 3%
Operating profit $ 10.1 $ 9.1 11%
- --------------------------------------------------------------------------------
Occupancy Rates:
Mainland 95% 96% -1%
Hawaii 90% 90% --
- --------------------------------------------------------------------------------
Property leasing revenue for the third quarter of 2004 was three percent higher
than the amounts reported for the third quarter of 2003. The slightly lower
occupancies for the mainland commercial leasing portfolio were due to a vacancy
of one large warehouse space. Higher operating profit was mainly due to a large
2003 repair expense for a Hawaii property, new properties that were acquired in
late 2003, and higher rents and royalties.
- --------------------------------------------------------------------------------
Nine Months Ended September 30,
- --------------------------------------------------------------------------------
(dollars in millions) 2004 2003 Change
- ------------------------------------------- -------------------- ---------------
Revenue $ 62.1 $ 60.0 4%
Operating profit $ 28.8 $ 27.2 6%
- ------------------------------------------- -------------------- ---------------
Occupancy Rates:
Mainland 94% 93% 1%
Hawaii 90% 90% --
- ------------------------------------------ -------------------- ----------------
Property leasing revenue and operating profit growth for the first nine months
of 2004 was the result of higher occupancies for the mainland commercial leasing
portfolio, higher contributions from replacement properties, the previously
noted 2003 repair expenditure, and higher rents and royalties.
Property Development and Management - Sales
- --------------------------------------------------------------------------------
Quarter Ended September 30,
- --------------------------------------------------------------------------------
(dollars in millions) 2004 2003 Change
- --------------------------------------------------------------------------------
Revenue $ 11.6 $ 10.4 12%
Operating profit $ 2.5 $ 2.6 -4%
- --------------------------------------------------------------------------------
Sales during the third quarter of 2004 included principally seven office
condominium units for $7.6 million and three Maui and Oahu commercial properties
for $2.8 million.
By comparison, sales during the third quarter of 2003 were comprised principally
of the sales of 15 residential properties for $5.6 million and six Oahu
properties for $3 million.
In addition to property sales, operating profit also included the Company's
share of earnings in real estate joint ventures.
- --------------------------------------------------------------------------------
Nine Months September 30,
- --------------------------------------------------------------------------------
(dollars in millions) 2004 2003 Change
- --------------------------------------------------------------------------------
Revenue $ 80.0 $ 53.5 50%
Operating profit $ 34.9 $ 21.1 65%
- --------------------------------------------------------------------------------
Sales during the first nine months of 2004 included 33 Maui and Oahu commercial
properties for $24 million, three residential development parcels for $13.8
million, 15 1/2 office condominium floors for $17.4 million and 28 residential
properties for $23.2 million.
By comparison, sales during the first nine months of 2003 included a shopping
center in Nevada for $23.5 million, 16 commercial properties for $18.3 million,
and 23 residential properties for $9.2 million.
The mix of property sales in any year or quarter can be diverse. Sales can
include developed residential real estate, commercial properties, developable
subdivision lots, undeveloped land, and property sold under threat of
condemnation. The sale of undeveloped land and vacant parcels in Hawaii
generally provides a greater contribution to earnings than does the sale of
developed and commercial property, due to the low historical-cost basis of the
Company's Hawaii land. Consequently, property sales revenue trends, cash flows
from the sales of real estate and the amount of real estate held for sale on the
balance sheets do not necessarily indicate future profitability trends for this
segment. Additionally, the operating profit reported in each quarter does not
necessarily follow a percentage of sales trend because the cost basis of
property sold can differ significantly between transactions. The reporting of
property sales is also affected by the classification of certain property sales
as discontinued operations.
Property Development and Management - Discontinued Operations
- ------------------------------------------------------------------------------------------------------
Quarter Ended September 30, Nine Months Ended September 30,
- ------------------------------------------------------------------------------------------------------
(dollars in millions, before tax) 2004 2003 2004 2003
- ------------------------------------------------------------------------------------------------------
Sales revenue -- -- $ 1.1 $ 36.9
Leasing revenue $ 0.4 $ 0.4 $ 1.2 $ 2.9
Sales operating profit -- -- $ 1.5 $ 17.0
Leasing operating profit $ 0.3 $ 0.3 $ 0.7 $ 2.0
- ------------------------------------------------------------------------------------------------------
There were no sales of property during the third quarter of 2004 or 2003 that
resulted in discontinued operations. Leasing revenue and operating profit for
the two quarters included one commercial property in California that the Company
intends to sell.
Discontinued operations for the first nine months of 2004 included the sale, for
$1 million, of a Maui property and the leasing income from the above mentioned
commercial property in California. Sales in 2003 included the sales of a Nevada
property and five commercial properties on Maui.
Because the Company regularly sells commercial properties, the amounts reported
as continuing and discontinued operations in prior quarters are restated each
time a property is designated as discontinued.
Food Products
- --------------------------------------------------------------------------------
Quarter Ended September 30,
- --------------------------------------------------------------------------------
(dollars in millions) 2004 2003 Change
- --------------------------------------------------------------------------------
Revenue $ 38.3 $ 33.6 14%
Operating profit $ 0.6 $ 0.4 50%
- --------------------------------------------------------------------------------
Tons sugar produced 77,500 68,600 13%
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Nine Months Ended September 30,
- --------------------------------------------------------------------------------
(dollars in millions) 2004 2003 Change
- --------------------------------------------------------------------------------
Revenue $ 80.6 $ 83.6 -4%
Operating profit $ 3.5 $ 4.6 -24%
- --------------------------------------------------------------------------------
Tons sugar produced 142,400 156,200 -9%
- --------------------------------------------------------------------------------
Food products revenue increased for the third quarter of 2004 compared with 2003
due mainly to higher sugar production and power sales partially offset by lower
sugar prices. Revenue for the first nine months of 2004 declined compared with
2003 due to lower sugar production and continuing low raw-sugar sales prices.
Sugar prices were approximately seven percent lower than 2003. Sugar production
for 2004 was affected adversely earlier in the year by wet field conditions and
poorly burnt cane. Production in the third quarter improved 13 percent over the
comparable quarter last year. Power sales of $4.1 million and $10.7 million for
the 2004 quarter and nine months, respectively, were approximately 95 percent
and 56 percent higher than the comparable periods of 2003.
Compared with the 2003 third quarter, sugar margins were $3.5 million lower.
This was more than offset by power margins that were $2 million higher than 2003
and improved margins on Maui Brand Sugar sales, Kauai Coffee sales and the
Company's two trucking operations and the non-recurrence of a 2003 accrual for
an emissions fine that, combined, comprised the remaining $1.7 million quarter
over quarter improvement.
Compared with the first nine months of 2003, sugar and molasses margins were
$7.6 million lower. This was partially offset by power margins that were $3.8
million higher than 2003 and improved margins on Maui Brand Sugar sales, Kauai
Coffee sales, and for the Company's two trucking operations and the
non-recurrence of the 2003 emissions fine that, combined, comprised the
remaining $2.7 million year-over-year variance.
HS&TC, the raw sugar marketing and transportation cooperative that the Company
uses to market and transport its sugar and of which the Company is a member,
may receive a federal sugar transportation assistance payment during the fourth
quarter of 2004 or the first quarter of 2005. If this assistance is received,
HC&S operating profit may benefit by $5 to $6 million.
Quarterly fluctuations in sales and operating profit are normal for this
business due to commodity sugar prices, weather, production and other
seasonality factors. The Company's sugar business uses a standard cost system
for determining cost of sales. As total-year production and cost estimates
change, the standard cost per ton is adjusted to reflect those changes. During
each quarter the cost of crop is adjusted to reflect total-year production
estimates.
FINANCIAL CONDITION, LIQUIDITY, FINANCING ARRANGEMENTS AND CASH FLOWS
Liquid Resources: The Company's principal liquid resources, comprising cash and
cash equivalents, receivables, sugar and coffee inventories and unused lines of
credit, less accrued deposits to the Capital Construction Fund ("CCF"), totaled
$623 million at September 30, 2004, an increase of $78 million from December 31,
2003. The increase was due primarily to $29 million of higher cash balances, $26
million of higher balances available under variable rate debt facilities, $20
million of higher receivable balances, and $3 million of higher sugar and coffee
inventory balances. Inventory balances were the result of normal business
seasonality. Cash balances were higher than 2003 year-end due to receivable
collections, business growth, timing of capital expenditures, and lower
short-term debt balances that could be paid down prior to quarter-end.
Balance Sheet: Working capital was $49 million at September 30, 2004, a decrease
of $15 million from the balance carried at the end of 2003. The lower working
capital was due primarily to higher taxes payable, an increase in current
portion of notes payable, and lower balances in real estate held for sale,
partially offset by higher cash and accounts receivable balances. Real Estate
Held for Sale declined during the first nine months due mainly to the sales of
office condominium units.
Long-term Debt, including current portion of long-term debt, totaled $269
million at September 30, 2004 compared with a balance of $345 million at
December 31, 2003. This $76 million decrease was due principally to the
retirement of the Company's commercial paper program in August 2004 and normal
debt repayments partially offset by additional borrowing in connection with the
purchase and delivery of a new ship in the third quarter of 2004. The weighted
average interest rate for the Company's outstanding borrowings at September 30,
2004 was approximately 5.8%.
During the third quarter, Matson took delivery of a new vessel, the MV
Maunawili. The total project cost of the vessel was financed with $55 million of
U.S. government Guaranteed Ship Financing Bonds, more commonly known as Title XI
bonds, $46 million from the Company's Capital Construction Fund, and $4 million
of operating funds.
During the third quarter of 2004, Matson repaid and retired its $100 million
commercial paper program. The repayment was accomplished by a withdrawal of $100
million from the Capital Construction Fund. Matson also terminated a $25 million
short-term revolving credit facility that served as a liquidity back-up line for
the commercial paper notes.
Cash Flows and Capital Expenditures: Cash Flows from Operating Activities were
$124 million for the first nine months of 2004, compared with Cash Flows from
Operating Activities of $115 million for the first nine months of 2003. The
higher cash flow was due to better operating results, increased depreciation,
the sales of real estate classified as Real Estate Held for Sale, higher income
taxes payable, higher trade payables, and fluctuations in other working capital
balances. During the first nine months of 2004, the Company invested
approximately $23 million into the Hokua joint venture, in which the Company has
a 50 percent voting interest.
For the first nine months of 2004, capital expenditures totaled $135 million
compared with $130 million for the first nine months of 2003. These expenditures
were primarily for the purchase of a new ship, shipping containers, a 2.7-acre
parcel in Honolulu on which the Company intends to develop a high-rise
residential condominium building, ongoing real estate development, information
systems, and normal capital replacements. These amounts do not include the
re-investment of proceeds from tax-deferred sales into new income-producing
property since tax-deferred transactions are not included on the Statement of
Consolidated Cash Flows.
Tax-Deferred Real Estate Exchanges: Sales - During the first nine months of
2004, the Company recorded, on a tax-deferred basis, the sales of two properties
for $1 million. During the first nine months of 2003, the Company recorded, on a
tax-deferred basis, $34 million of sales. The proceeds from tax-deferred sales
are held in escrow, but are available for reinvestment in replacement property.
Purchases - No property was purchased during the first nine months of 2004.
During the first nine months of 2003, the Company utilized $30 million of
tax-deferred funds to acquire new income-producing property.
Commitments, Contingencies and Environmental Matters: A description of
commitments and contingencies in effect at the end of the third quarter is
described in Note (3) to the financial statements of Item 1.
OTHER MATTERS
Charter Agreement: Matson and American President Lines, Ltd. ("APL") are parties
to a Successor Alliance Slot Hire and Time Charter Agreement ("APL Agreement")
that expires in February 2006. The APL Agreement provides the structure of an
alliance through which Matson provides a weekly service to Guam. Pursuant to the
APL Agreement, Matson time charters three C-9 class vessels to APL and APL
reserves a designated number of container slots on each C-9 vessel as well as
two additional APL vessels for Matson's exclusive use. Matson's annual time
charter revenues arising from the APL Agreement are approximately $35 million,
and Matson generates substantial additional revenues from its Guam trade. Taken
together, such revenues contribute a significant portion of the Ocean
Transportation segment's total operating profit. Based on discussions with APL
in late June 2004, Matson currently believes that the APL Agreement will not be
renewed in its present form after February 2006, and any new or revised
agreement with APL, if a new or revised agreement is entered into with APL,
would be on terms substantially less favorable to Matson. Regardless of whether
an agreement is entered into with APL, Matson will continue serving the Guam
market after February 2006, and Matson intends to pursue operating changes in
that market and its Hawaii service in order to optimize service and
profitability. For example, regardless of whether there is an agreement with APL
after February 2006, it is Matson's present intention to redeploy the three C-9
vessels in its Hawaii service, replacing smaller, less cost-efficient vessels.
Although it is too early to estimate with certainty the financial implications
of alternative service arrangements being explored by Matson, any such
alternative is not expected to substitute fully for the operating profit
contribution of the current APL alliance arrangement. Due substantially to the
termination of the charter arrangement with APL described above, Matson
currently estimates that an annual operating profit reduction of $10 to $20
million, and possibly higher during the transition period following the
agreement's expiration, can be expected. With over a year remaining before the
APL Agreement's expiration, Matson is focused on developing an optimal successor
service to the current APL Guam arrangement.
Unrelated to the Guam service, Matson intends to further moderate the estimated
reduction in operating profit in the Guam service described above through a
combination of cost reductions, organic growth, acquisitions, and yield
management initiatives.
Investments: The Company's joint ventures are described in Item 2 of the
Company's two most recently filed Form 10-Q's and in Item 8 of its most recently
filed Form 10-K.
In August 2004, the Company exercised an option to increase its equity
investment in the Kukui'ula resort property. The additional investment is
expected to range from $50 million to $75 million and occur over the next three
to four years. Additionally, the 1,000 acre master-planned residential resort
community was successfully re-entitled in July. The total project cost for the
resort is projected to be approximately $725 million, which does not include
the vertical construction costs for homes. With its additional equity
investment, the Company will likely receive between fifty and sixty percent
of the venture's returns.
In August 2004, A&B Properties, Inc. and Intertex General Contractors, Inc.
formed Crossroads Plaza Development Partners LLC ("Crossroads Plaza").
Crossroads Plaza intends to develop a Class "A" 62,000 square-foot retail and
office center on a 6.5-acre parcel in Valencia California, which the venture
purchased during the third quarter. Construction of the complex, for an
estimated $11 million, is expected to begin in early 2005.
In August 2004, Matson sold its investment in Sea Star for approximately $7
million and recognized a gain of approximately $1.2 million. Concurrent with the
sale, Matson's $11 million guarantee obligation of Sea Star's debt was
discontinued.
The Company has evaluated investments in unconsolidated affiliates, including
reconsideration events for such investments, relative to Financial
Interpretation ("FIN") Number 46 "Consolidation of Variable Interest Entities,"
as revised, and has determined that the investments in these affiliates are
either not subject to or do not meet the consolidation requirements of FIN No.
46. Accordingly, the Company accounts for these investments using the equity
method of accounting and the consolidation provisions of Accounting Research
Bulletin No. 51 "Consolidated Financial Statements," as amended.
Significant Accounting Policies: The Company's significant accounting policies
are described in Note 1 of the consolidated financial statements included in
Item 8 of the Company's Form 10-K for the year ended December 31, 2003 and in
the Financial Notes included in Item 1 of this Form 10-Q.
Critical Accounting Policies Estimates: The Company's accounting policies are
described in Note 1 of the Consolidated Financial Statements included in Item 8
of the Company's most recently filed Form 10-K. The preparation of financial
statements in conformity with accounting principles generally accepted in the
United States of America, upon which the Management's Discussion and Analysis is
based, requires that management exercise judgment when making estimates and
assumptions about future events that affect the amounts reported in the
financial statements and accompanying notes. Future events and their effects
cannot be determined with absolute certainty and actual results will,
inevitably, differ from those estimates. These differences could be material.
The most significant accounting estimates inherent in the preparation of A&B's
financial statements were described in Item 7 of the Company's 2003 Form 10-K.
New and Proposed Accounting Standards: On October 13, 2004, the Financial
Accounting Standards Board ("FASB") deferred the application date of the
proposed standard on Share-Based Payment to June 14, 2005. The proposed standard
now requires that the cost of awards that are granted, modified or settled in
interim or annual periods beginning after June 15, 2005 should be charged to the
income statement. This standard, as proposed, would not affect A&B until the
third quarter of 2005. The effect of this standard cannot be estimated prior to
the effective date.
Additional information about the impacts of newly issued accounting standards
are discussed in Item 2 of the Company's Form 10-Q for the quarters ended March
31, 2004 and June 30, 2004 and in Item 8 of the Company's Form 10-K for the year
ended December 31, 2003.
Economic Conditions: With support from external economies, especially the U.S.
Mainland and Japan, Hawaii's expansion continues. As the growth cycle has
matured, its sources of strength have broadened. Job growth continues and the
unemployment rate remains the lowest among all of the states. Visitor strength
from a variety of U.S. markets has been joined by improving levels of visitors
from Japan. Sustained construction activity is highly likely in spite of hikes
in short interest rates because of unfulfilled housing demand, which continues
strong in spite of interest rate increases. Adding to that are several programs
to renovate or replace the majority of military housing on Oahu, which also
represents rate-insensitive construction activity.
With higher energy and housing prices, understandably, the local inflation rate
has increased. Forecasts anticipate that inflation will be about 3.5 percent for
the next few years. In addition, some concerns are arising about the
availability materials and cost of skilled labor in the construction trades.
Overall, however, this cyclical growth appears to be sustained, baring external
events, because of the breadth of its sources and its moderate pace.
Management Changes: Effective September 1, 2004, Ruthann S. Yamanaka joined A&B
as vice president, human resources.
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
- -------------------------------------------------------------------
Information concerning market risk is incorporated herein by reference to Item
7A of the Company's Form 10-K for the fiscal year ended December 31, 2003. There
has been no material change in the quantitative and qualitative disclosure about
market risk since December 31, 2003.
ITEM 4. CONTROLS AND PROCEDURES
- --------------------------------
(a) Disclosure Controls and Procedures. The Company's management, with
the participation of the Company's Chief Executive Officer and Chief
Financial Officer, has evaluated the effectiveness of the Company's
disclosure controls and procedures (as such term is defined in Rules
13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934,
as amended (the "Exchange Act")) as of the end of the period covered
by this report. Based on such evaluation, the Company's Chief
Executive Officer and Chief Financial Officer have concluded that,
as of the end of such period, the Company's disclosure controls and
procedures are effective in recording, processing, summarizing and
reporting, on a timely basis, information required to be disclosed by
the Company in the reports that it files or submits under the
Exchange Act.
(b) Internal Control Over Financial Reporting. There have not been any
changes in the Company's internal control over financial reporting
(as such term is defined in Rules 13a-15(f) and 15d-15(f) under the
Exchange Act) during the fiscal quarter to which this report relates
that have materially affected, or are reasonably likely to materially
affect, the Company's internal control over financial reporting.
PART II. OTHER INFORMATION
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
- -----------------------------------------
(a) Exhibits
--------
4.b.(iii) Second Amendment to Third Amended and Restated Revolving
Credit and Term Loan Agreement, effective as of October 1, 2004,
among Alexander & Baldwin, Inc. and First Hawaiian Bank, Bank of
America, N.A., Bank of Hawaii, The Bank of New York, Wells Fargo
Bank, National Association, American Savings Bank, F.S.B., and First
Hawaiian Bank, as Agent.
10.a.(xix) Thirteenth Amendment dated October 19, 2004 to the
Revolving Credit Agreement between Alexander & Baldwin, Inc. and
First Hawaiian Bank, dated December 30, 1993.
10.a.(xxvi) Security Agreement between Matson Navigation
Company, Inc. and the United States of America, with respect
to $55 million of Title XI ship financing bonds, dated July 29, 2004.
10.b.1.(xiii) Forms of Non-Qualified Stock Option Agreement and
Restricted Stock Issuance Agreement pursuant to the Alexander &
Baldwin, Inc. 1998 Stock Option/Stock Incentive Plan.
31.1 Certification of Chief Executive Officer, as Adopted
Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
31.2 Certification of Chief Financial Officer, as Adopted
Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
32 Certification of Chief Executive Officer and Chief Financial
Officer Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to
Section 906 of the Sarbanes-Oxley Act of 2002.
(b) Reports on Form 8-K
-------------------
A&B filed a Current Report on Form 8-K dated August 31, 2004
pursuant to Item 1.02 relating to the terminations by Matson
Navigation Company, Inc. of its commercial paper program and a
$25 million revolving credit facility.
A&B furnished a Current Report on Form 8-K dated October 28,
2004 pursuant to Item 2.02 that attached a press release
announcing A&B's financial results for the quarter ended
September 30, 2004.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934,
the registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
ALEXANDER & BALDWIN, INC.
-------------------------------------
(Registrant)
Date: November 1, 2004 /s/ Christopher J. Benjamin
--------------------------------------
Christopher J. Benjamin
Vice President and Chief Financial Officer
Date: November 1, 2004 /s/ Thomas A. Wellman
---------------------------------------
Thomas A. Wellman
Vice President, Controller and Treasurer
EXHIBIT INDEX
4.b.(iii) Second Amendment to Third Amended and Restated Revolving
Credit and Term Loan Agreement, effective as of October 1, 2004, among
Alexander & Baldwin, Inc. and First Hawaiian Bank, Bank of America, N.A., Bank
of Hawaii, The Bank of New York, Wells Fargo Bank, National Association,
American Savings Bank, F.S.B., and First Hawaiian Bank, as Agent.
10.a.(xix) Thirteenth Amendment dated October 19, 2004 to the Revolving
Credit Agreement between Alexander & Baldwin, Inc. and First Hawaiian Bank,
dated December 30, 1993.
10.a.(xxvi) Security Agreement between Matson Navigation Company, Inc.
and the United States of America, with respect to $55 million of Title XI ship
financing bonds, dated July 29, 2004.
10.b.1.(xiii) Forms of Non-Qualified Stock Option Agreement and
Restricted Stock Issuance Agreement pursuant to the Alexander & Baldwin, Inc.
1998 Stock Option/Stock Incentive Plan.
31.1 Certification of Chief Executive Officer, as Adopted Pursuant to
Section 302 of the Sarbanes-Oxley Act of 2002.
31.2 Certification of Chief Financial Officer, as Adopted Pursuant to
Section 302 of the Sarbanes-Oxley Act of 2002.
32 Certification of Chief Executive Officer and Chief Financial Officer
Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the
Sarbanes-Oxley Act of 2002.
Appendix III to Guarantee Commitment Document 9
Contract No. MA-13897
SECURITY AGREEMENT
SPECIAL PROVISIONS
------------------
THIS SECURITY AGREEMENT, Contract No. MA-13897, dated July 29, 2004
(this "Security Agreement"), is made and entered into by MATSON NAVIGATION
COMPANY, INC., a corporation organized under the laws of the State of Hawaii
(the "Shipowner"), and the UNITED STATES OF AMERICA (the "United States"),
represented by the SECRETARY OF TRANSPORTATION, acting by and through the
MARITIME ADMINISTRATOR (the "Secretary"), pursuant to Title XI of the Act.
RECITALS:
--------
A. The Shipowner has entered into the Construction Contract, dated
May 29, 2002 (the "Construction Contract"), with Kvaerner Philadelphia Shipyard
Inc., a Pennsylvania corporation (the "Shipyard"), with respect to the
Construction of the vessel MAUNAWILI, Official Number 1153166 (the "Vessel").
B. Kvaerner ASA, a Norwegian company (the "Guarantor"), entered into
that certain Guaranty with the Shipowner, dated May 29, 2002 (the "Guaranty"),
guaranteeing performance by the Shipyard under the Construction Contract,
including, but not limited to, post-delivery warranty obligations.
D. On the date hereof, the Secretary entered into, and the Shipowner
accepted a Commitment to Guarantee Obligations, Contract No. MA-13895, whereby
the United States has committed itself to guarantee the payment in full of all
the unpaid interest on, and the unpaid principal balance of, Obligations
(as defined herein) in the aggregate principal amount not to exceed eighty-seven
and one-half percent (87-1/2%) of the Actual Cost of the Vessel, which amounts
are set out in Table A.
-------
E. The Shipowner has entered into the Bond Purchase Agreement providing
for the sale and delivery, on the Closing Date, of obligations in the aggregate
principal amount of $55,000,000, to be designated "United States Government
Guaranteed Ship Financing Bonds, Maunawili Series" (the "Obligations"), having
the maturity dates and interest rates set forth in the Bond Purchase Agreement,
the Indenture and the Obligations.
F. On the date hereof, the Shipowner and Wells Fargo Bank, N.A., a
national banking association, as Indenture Trustee, executed and delivered the
Trust Indenture (the "Indenture") pursuant to which the Shipowner will issue the
Obligations.
G. On the date hereof, the Secretary and the Indenture Trustee executed
the Authorization Agreement, Contract No. MA-13896, which authorizes the
Indenture Trustee to endorse, execute and authenticate the Secretary's Guarantee
on each of the Obligations.
H. As security for the due and timely payment of the Secretary's Note,
issued this date by the Shipowner, and for the Secretary's issuance of the
Guarantees, the Shipowner has executed and delivered the Security Agreement,
Contract No. MA-13897, and Amendment No. 1 to Title XI Reserve Fund and
Financial Agreement, Contract No. MA-13855, granting the Secretary a security
interest in, among other things, the Construction Contract, and certain other
property, tangible and intangible, which the Shipowner now has or hereafter will
acquire, and all of the proceeds thereof, and on the Delivery Date the Shipowner
will execute and deliver the Mortgage, Contract No. MA-13898, granting the
Secretary a security interest in the Vessel.
I. As further security to the Secretary and in consideration of the
Secretary agreeing to issue the Guarantees, the Shipyard has executed and
delivered the Consent of Shipyard to the assignment of the Construction Contract
to the Secretary hereunder.
J. As further security to the Secretary and in consideration of the
Secretary agreeing to issue the Guarantees, the Guarantor has executed and
delivered the Consent of Guarantor to the assignment by Shipowner to the
Secretary hereunder of the Guaranty.
K. In order to implement certain aspects of the transactions
contemplated by the Security Agreement and the Financial Agreement, the
Secretary and the Shipowner have entered into the Depository Agreement, Contract
No. MA-13899, on the date hereof.
NOW, THEREFORE, in consideration of the premises and the mutual
covenants herein contained, and of other good and valuable consideration, the
receipt and adequacy of which are hereby acknowledged, and in order to provide
security to the Secretary for the Secretary's Note provided for herein, the
parties hereto hereby agree as follows:
1. Concerning These Special and General Provisions. This Security
-----------------------------------------------
Agreement shall consist of two parts: the Special Provisions and the General
Provisions attached hereto as Exhibit 1 of the Security Agreement and
incorporated herein by reference. In the event of any conflict, or inconsistency
between the Special Provisions of this Security Agreement and Exhibit 1 hereto,
the Special Provisions shall control.
2. No Construction Period Financing. The parties acknowledge that
--------------------------------
pursuant to the Construction Contract, the Shipowner has no responsibility for,
or risk in the Vessel under construction, and that its only obligation is to pay
the entire Purchase Price for the Vessel upon acceptance of delivery upon
completion of the Vessel in accordance with that Construction Contract, and that
any and all such responsibility for, or risk in the Vessel shall arise only upon
such delivery and payment. The parties further acknowledge that all proceeds of
the Obligations sold prior to the Delivery Date shall be deposited in the Escrow
Fund, and no withdrawal from the Escrow Fund will be made until such delivery
giving rise to the obligation of payment for the Vessel. In result, neither the
Shipowner nor the Secretary bear any pre-delivery risk of loss or damage to, or
performance by, the Shipyard, and all provisions in the General Provision of
this Agreement regarding Shipowner obligations for pre-delivery insurance, loss
proceeds, performance bonds and security interest against the Shipyard shall not
apply.
3. Additions, Deletions and Amendments to Exhibit 1. The following
------------------------------------------------
additions, deletions and amendments are hereby made to the Security Agreement:
(a) Concerning Section 1.01. The following is added after the period at
-----------------------
the end of Section 1.01:
"Whenever there is a reference to a Vessel, any vessel or
Vessels signifying more than one Vessel, the reference shall
be read as applying to the "Vessel" in the singular, except as
otherwise required by the Financial Agreement or the
Depository Agreement."
(b) Concerning Section 1.03.
-----------------------
(1) Granting Clause (3) is amended by adding the words ", all
charters of the Vessel" before the words "any charter hire".
(2) Granting Clause (8) is renumbered as Granting Clause (9)
and a new Granting Clause (8) is added as follows:
"(8) the Guaranty."
The reference to "paragraphs (1) through (7)" in newly
renumbered Granting Clause (9) is changed to "paragraphs (1) through (8); and
Granting Clause (9) is renumbered as Granting Clause (10), and the words "date
hereof" are deleted from newly renumbered Clause (10) and the words "Delivery
Date" are inserted in lieu thereof.
(c) Concerning Section 2.01. The following words are added prior to the
-----------------------
semicolon at the end of Section 2.01(a)(3): ", except that the above
representations and warranties regarding the Mortgage shall be true effective as
of the Delivery Date".
(d) Concerning Section 2.02. The following changes are made to Section
-----------------------
2.02:
(1) In Section 2.02(a), the words "On the date of this
Security Agreement" are deleted and the words "Effective as of the Delivery
Date" are inserted in lieu thereof.
(2) In Section 2.02(b)(1), the word "The" in the first line is
deleted and the following words are inserted in lieu thereof: "Except as
otherwise permitted in the Financial Agreement, the".
(3) Section 2.03(a) and (b) are deleted in their entirety and
the following inserted in lieu thereof:
"On and after the Delivery Date, the Construction Contract
shall be maintained in full force and effect insofar as it
relates to post-delivery performance by the Shipowner and the
Shipyard, and the Shipowner shall not, without the Secretary's
prior written consent, amend, modify, assign or terminate the
Construction Contract or consent to any change therein which
releases the Shipyard from its post-delivery obligations under
the Construction Contract or any applicable laws, conventions,
rules and regulations."
(e) Concerning Section 2.05. The following changes are made to Section
-----------------------
2.05:
(1) In connection with Section 2.05(b)(3), and the last
paragraph of Section 2.05(e) relating to liability insurance, and cargo
insurance, the maximum amount of self-insurance permitted to the Shipowner in
each case is $2,500,000 per occurrence.
(2) In connection with subparagraph (ii) of the initial
paragraph of Section 2.05(c), the Secretary shall permit payment of losses up to
an amount of $2,500,000 to be made directly to the Shipowner.
(3) In connection with Section 2.05(l), as evidence of
insurance maintained under Section 2.05, the Shipowner may submit a broker's
cover note or comparable certificate of insurance setting forth the terms of the
policies; provided, however, that the Secretary reserves the right at any time
to require the delivery to him of all original policies or copies of policies
pursuant to Section 2.05(l) and all of the provisions of said Section 2.05(l)
shall apply to said policies.
(f) Concerning Section 2.07. The words ", termination of the
-----------------------
Construction Contract relating to such Vessel" are deleted from the first
paragraph of Section 2.07, and the word "termination" is deleted from
subparagraph (b) thereof.
(g) Concerning Section 2.08(c). The words "NOTICE OF FLEET MORTGAGE"
--------------------------
are deleted and the following words inserted in lieu thereof: "NOTICE OF SHIP
MORTGAGE".
(h) Concerning Section 5.02. The second sentence of Section 5.02 is
-----------------------
deleted in its entirety.
(i) Concerning Section 5.03(b). Section 5.03(b) is deleted in its
--------------------------
entirety, and the following inserted in lieu thereof:
"(b) Any amount, as determined by the Secretary, on deposit in
the Escrow Fund which represents interest on the principal
amount deposited, may, unless there is an existing default, be
disbursed by the Secretary to the Shipowner upon the
Shipowner's Request made not more than ten (10) Business Days
prior to the final disbursement of such principal amount on
the Delivery Date, or made at least sixty (60) days after such
final disbursement of such principal amount."
(j) Concerning Section 6.01(b):
--------------------------
(1) Section 6.01(b)(3) is hereby amended by adding the
following prior to the semicolon at the end thereof:
"provided, however, that, for purposes of Section 6.01(b)(3)
-----------------
and Section 6.01(b)(6), in the event of any default pursuant
to Section 2.01(a)(5) the cure period may exceed thirty (30)
days after such notice for a period of up to forty-five (45)
days during which the Shipowner is diligently attempting to
resolve, stay or adequately provide for such litigation,
proceeding or investigation referred to in said Section
2.01(a)(5) in a manner that would not prevent or jeopardize
the performance by the Shipowner of its Obligations under the
Documents"
(2) Section 6.01(b)(9) is hereby amended by adding the
following prior to the period at the end thereof:
"continued after the Shipowner receives actual knowledge of such
default"
(k) Concerning Section 6.04. Section 6.04(b)(4) is hereby amended by
-----------------------
inserting the words "with a copy of said notice" between the words "Authorized
Newspaper" and the words "to the Shipowner".
(l) Concerning Section 8.01(a). The following words are added to
--------------------------
Section 8.01(a) after the words "provided that,": "except as otherwise permitted
in the Financial Agreement,".
(m) Concerning Section 9.01. Subject to Section 9.01, any notice,
-----------------------
request, demand, direction, consent waiver, approval or other communication,
when given to a party hereto, shall be addressed as follows:
If to the Secretary: Secretary of Transportation
U.S. Department of Transportation
c/o Maritime Administrator
Maritime Administration
400 Seventh Street, S.W.
Washington, D.C. 20590
Telephone: 202-366-5882
Facsimile: 202-366-7485
Attention: Richard M. Lorr, Esq.
Office of Chief Counsel
E-Mail: richard.lorr@marad.dot.gov
If to the Shipowner: Matson Navigation Company, Inc.
555 12th Street
Oakland, CA 94607
Telephone: 510-628-4583
Facsimile: 510-628-7331
Attention: Kevin C. O'Rourke, Esq.
Senior Vice President &
General Counsel
E-Mail: korourke@matson.com
If to the Indenture Trustee: Wells Fargo Bank, N.A.
Corporate Trust Services
555 Montgomery Street, 10th Floor
San Francisco, CA 94111
Telephone: 415-396-6774
Facsimile: 415-395-9064
Attention: Karen T. Mitani
Vice President-Manager
E-Mail: karen.t.mitani@wellsfargo.com
4. Governing Law. This Security Agreement and the rights and
-------------
obligations of the parties hereto shall be governed and construed in accordance
with the United States maritime laws, to the extent applicable, and otherwise in
accordance with the laws of the State of California.
5. Execution of Counterparts. This Security Agreement may be executed
-------------------------
in any number of counterparts. All such counterparts shall be deemed to be
originals, and shall constitute but one and the same document.
6. Inconsistencies. Notwithstanding any provisions herein, in the event
---------------
here are inconsistencies between the original of this document held by the
Secretary and the original of this document held by any other party hereto, the
provisions of the original of this document held by the Secretary shall prevail.
(SIGNATURE PAGE FOLLOWS)
IN WITNESS WHEREOF, this Security Agreement Special Provisions has been
executed by the parties hereto as of the day and year first above written.
SHIPOWNER
---------
MATSON NAVIGATION COMPANY, INC.
By: /s/ Matthew J. Cox
---------------------------
Attest: Name: Matthew J. Cox
- ------ Title: Senior Vice President &
Chief Financial Officer
By: /s/ Kevin C. O'Rourke
--------------------------------
Name: Kevin C. O'Rourke
Title: Senior Vice President &
General Counsel
UNITED STATES
-------------
UNITED STATES OF AMERICA,
SECRETARY OF TRANSPORTATION
BY: MARITIME ADMINISTRATOR
By: /s/ Joel C. Richard
----------------------------
Secretary
Attest: Maritime Administration
- ------
By: /s/ Sarah J. Washington
-----------------------------------
Assistant Secretary
Maritime Administration
EXHIBITS/SCHEDULES
TO THE
SECURITY AGREEMENT SPECIAL PROVISIONS
-------------------------------------
Schedule X - Schedule of Definitions to Security Agreement
Exhibit 1 - General Provisions Incorporated into the Security Agreement by
Reference
Exhibit 2 - Form of Secretary's Note
Exhibit 3 - Form of First Preferred Ship Mortgage
Exhibit 4 - Amendment No. 1 to Financial Agreement
Exhibit 5 - Construction Contract
Exhibit 6 - Form of Consent of Shipyard
Exhibit 7 - Guaranty
Exhibit 8 - Form of Consent of Guarantor
Exhibit 9 - Depository Agreement
TABLE A
TO THE
SECURITY AGREEMENT SPECIAL PROVISIONS
-------------------------------------
The aggregate Actual Cost of the Vessel as of the date hereof as
determined by the Secretary, namely, (i) the amounts paid by or for the account
of the Shipowner as of the date hereof for the Construction of the Vessel, plus
(ii) the amount which the Shipowner was on said date obligated under the
Construction Contract to pay for the Construction of the Vessel as of the date
determined by the Secretary, plus (iii) other amounts estimated to be paid by
the Shipowner, is $102,925,340, less foreign items of $22,079,819*, for a net
Actual Cost of $80,845,521.
- -----------------------------------------------------------------------------------------------------------
ITEM AMOUNT AMOUNT TOTAL ($)
PAID ($) OBLIGATED
TO BE PAID ($)
- -----------------------------------------------------------------------------------------------------------
Contract Price 91,625,000 2,375,000 94,000,000
- -----------------------------------------------------------------------------------------------------------
Changes & Extras 2,388,404 2,388,404
- -----------------------------------------------------------------------------------------------------------
Spare Parts
- -----------------------------------------------------------------------------------------------------------
Owner-Furnished Items** 18,814 2,455,186 2,474,000
- -----------------------------------------------------------------------------------------------------------
Design, Engineering & Inspection** 975,724 599,276 1,575,000
- -----------------------------------------------------------------------------------------------------------
Estimated Guarantee Fee 2,487,936 2,487,936
- -----------------------------------------------------------------------------------------------------------
Total Actual Cost 97,495,878 5,429,462 102,925,340*
- -----------------------------------------------------------------------------------------------------------
* Less $22,079,819 of foreign costs shipped on or after November 21, 2002, yielding a total Actual Cost of $80,845,521.
** "Amount Paid" is through June, 2004. "Amount Obligated to be Paid" is estimated.
Schedule X to the Security Agreement Document 10
SCHEDULE OF DEFINITIONS
-----------------------
"Act" means the Merchant Marine Act, 1936, as amended and in effect on
the Closing Date.
"Actual Cost" means the actual cost of a Vessel, as set forth in Table
A of the Security Agreement or as subsequently redetermined by the Secretary
pursuant to the Security Agreement and the Act.
"Audited Financial Statements" means the annual audit of the
Shipowner's accounts in accordance with generally accepted auditing standards by
independent certified public accountants or independent licensed public
accountants, certified or licensed by a regulatory authority of a state or other
political subdivision of the United States, who may be the Shipowner's regular
auditors.
"Authorization Agreement" means the Authorization Agreement, Contract
No. MA-13896, dated as of the Closing Date, between the Secretary and the
Indenture Trustee, whereby the Secretary authorizes the Guarantee of the United
States to be endorsed on the Obligations, as the same is originally executed, or
as modified, amended or supplemented therein.
"Authorized Newspapers" means The Wall Street Journal or if it ceases
to exist, then in such other newspapers as the Secretary may designate.
"Bond" means each, and "Bonds" means every sinking fund bond in the
aggregate principal amount of $55,000,000, designated "United States Government
Guaranteed Ship Financing Bonds, Maunawili Series," issued by the Shipowner and
bearing a Guarantee that is authenticated and delivered under the Authorization
Agreement and the Indenture having the Stated Maturity and interest rate set
forth in the Bond Purchase Agreement and the Indenture.
"Bond Purchase Agreement" means the agreement for the purchase of the
Bonds, executed by the Shipowner and the Purchaser named therein, as originally
executed, modified or supplemented.
"Business Day" means a day which is not a Saturday, Sunday or a bank
holiday under the laws of the United States or the States of California, New
York and the District of Columbia.
"Chapter 313" means the provisions of 46 United States Code Chapter
313, as amended.
"Classification Society" means the American Bureau of Shipping or, as
specified in the Special Provisions of the Security Agreement, either a member
of the International Association of Classification Societies ("IACS") that has
been ISO 9000 series registered or an IACS member that meets the requirements of
the International Maritime Organization, is qualified under a Quality Systems
Certificate Scheme and recognized by the United States Coast Guard and the
Secretary as meeting acceptable standards.
"Closing Date" or "Closing" means the date when the Security Agreement
is executed and delivered by the Shipowner.
"Commitment to Guarantee Obligations" has the same meaning as the term
Guarantee Commitment.
"Company" means the entity designated as such under the Financial
Agreement.
"Consent of Shipyard" means the document evidencing the Shipyard's
consent to assignment of the Construction Contract to the Secretary under the
Security Agreement as originally executed, modified, amended or supplemented.
"Consent of Guarantor" means the document evidencing the Guarantor's
consent to the assignment of the Guaranty relating to the Construction of the
Vessel to the Secretary under the Security Agreement as originally executed,
modified, amended or supplemented.
"Construction" means construction of the Vessel, including designing,
inspecting, outfitting and equipping thereof and post-delivery obligations
relating thereto, pursuant to the terms of the Construction Contract.
"Construction Contract" means the Construction Contract between the
Shipowner and the Shipyard, dated May 29, 2002, relating to the Construction of
the Vessel as originally executed, or as modified or supplemented pursuant to
the applicable provisions thereof.
"Default" when used in the Security Agreement has the meaning
attributed to it in Article VI thereof.
"Delivery Date" means the date on which the Vessel is delivered to and
accepted by the Shipowner pursuant to the Construction Contract.
"Deposit Fund" means the account held pursuant to Section 1109 of the
Act and in accordance with the terms of the Depository Agreement.
"Depository Agreement" means the Depository Agreement, Contract No.
MA-13899, dated as of the Closing Date, between the Shipowner and the Secretary,
as originally executed, or as modified or supplemented in accordance with the
applicable provisions thereof.
"Eligible Investment" has the meaning given by Section 5 of the
Financial Agreement.
"Escrow Fund" means the account held by the Secretary, established
under Section 1108 of the Act and administered pursuant to Article V of the
Security Agreement.
"Financial Agreement" means the Title XI Reserve Fund and Financial
Agreement, Contract No. MA-13855, executed by the Shipowner and the Secretary,
as originally executed, or as modified, amended or supplemented.
"Financial Asset" has the meaning given by Article 8-102(a)(9) of the
UCC.
"Government Use" means the use of a Vessel or requisition of its title
required by a government or governmental body of the United States of America.
"Guarantee" means each, and the "Guarantees" means every, guarantee of
an Obligation by the United States pursuant to Title XI of the Act, as provided
in the Authorization Agreement.
"Guarantee Commitment" means the Commitment to Guarantee Obligations,
Contract No. MA-13895, dated as of the Closing Date, executed by the Secretary
and accepted by the Shipowner relating to the Guarantees, as originally executed
or as modified, amended or supplemented.
"Guarantor" has the meaning ascribed thereto in Recital B of the
Security Agreement.
"Guaranty" means the Guaranty dated May 29, 2002, between the Guarantor
and the Shipowner.
"Increased Security" means the Secretary's Note, the Security
Agreement, the Vessel, the Security, the Escrow Fund, the Title XI Reserve Fund,
the Guaranty, the Policies of Insurance, and the proceeds of the foregoing.
"Indenture" means the Trust Indenture, between the Shipowner and the
Indenture Trustee, as originally executed, or as modified, amended or
supplemented.
"Indenture Default" has the meaning specified in Article VI of the
Indenture.
"Indenture Trustee" means Wells Fargo Bank, N.A., a national banking
association, and any successor trustee under the Indenture.
"Interest Payment Date" means with respect to any Obligation, the date
when any installment of interest on such Obligation is due and payable.
"Long-Term Debt" means, as of any date, the total notes, bonds,
debentures, equipment obligations and other evidence of indebtedness that would
be included in long term debt in accordance with generally accepted accounting
principles; provided, such term shall not include any non-recourse liability of
--------
any unconsolidated entity for which the Company has no legal liability. There
shall also be included any guarantee or other liability for the debt of any
other Person, not otherwise included on the balance sheet.
"Maturity" when used with respect to any Obligation, means the date on
which the principal of such Obligation becomes due and payable as therein
provided, whether at the Stated Maturity or by redemption, declaration of
acceleration or otherwise.
"Monies Due with Respect to Construction of the Vessels" has the
meaning specified in Section 1.03 of the Security Agreement.
"Mortgage" means the first preferred ship mortgage on the Vessel,
Contract No. MA-13898, dated as of the Delivery Date, by the Shipowner to the
Secretary, as originally executed, modified, amended or supplemented.
"Mortgagee" means the Secretary, as Mortgagee under the Mortgage.
"Mortgagor" means the Shipowner, as Mortgagor under the Mortgage.
"Net Worth" means, as of any date, the total of paid-in capital stock,
paid-in surplus, earned surplus and appropriated surplus, and all other amounts
that would be included in net worth in accordance with generally accepted
accounting principles, but exclusive of (1) any receivables from any
stockholder, director, Officer or employee of the Company or from any Related
Party (other than current receivables arising out of the ordinary course of
business and not outstanding for more than sixty (60) days), and (2) any
increment resulting from the reappraisal of assets.
"Obligation" means each, and "Obligations" means every Bond.
"Obligee" means each, and "Obligees" means every, holder of an
Obligation.
"Offering Circular" means the Offering Circular relating to the
issuance and sale of each Obligation.
"Officer's Certificate" means a certificate conforming to Section 1.02
of the Security Agreement or the Indenture as the context may require.
"Outstanding" when used with reference to the Obligations, shall mean
all Obligations theretofore issued under the Indenture, except: (1) Obligations
Retired or Paid; and (2) Obligations in lieu of which other Obligations have
been issued under the Indenture.
"Paying Agent" means any bank or trust company meeting the
qualifications in Section 7.02(a) of the Indenture and appointed by the
Shipowner under Section 4.02 of the Indenture to pay the principal of (and
premium, if any) or interest on the Obligations on behalf of the Shipowner.
"Payment Default" has the meaning specified in Section 6.01 of the
Security Agreement.
"Person" or "Persons" means any individual, corporation, partnership,
joint venture, association, limited liability company, joint-stock company,
trust, unincorporated organization, government, or any agency or political
subdivision thereof.
"Policies of Insurance" and "policies" means all cover notes, binders,
policies of insurance and certificates of entry in a protection and indemnity
association, club or syndicate with respect to the Vessel (including all
endorsements and riders thereto), including, but not limited, to all insurance
required under Section 2.05 of the Security Agreement.
"Redemption Date" means a date fixed for the redemption of an
Obligation by the Indenture.
"Related Party" means one that can exercise control or significant
influence over the management and/or operating policies of another Person, to
the extent that one of the Persons may be prevented from fully pursuing its own
separate interests. Related Parties consist of all affiliates of an enterprise,
including (1) its management and their immediate families, (2) its principal
owners and their immediate families, (3) its investments accounted for by the
equity method, (4) beneficial employee trusts that are managed by the management
of the enterprise, and (5) any Person that may, or does, deal with the
enterprise and has ownership of, control over, or can significantly influence
the management or operating policies of another Person to the extent that an
arm's-length transaction may not be achieved.
"Request" means a written request to a Person for the action therein
specified, signed by a Responsible Officer of the Person making such request.
"Responsible Officer" means (1) in the case of any business entity, the
chairman of the board of directors, the president, any executive or senior vice
president, the secretary, the treasurer, member or partner, (2) in the case of
any commercial bank, the chairman or vice-chairman of the executive committee of
the board of directors or trustees, the president, any executive or senior vice
president, the secretary, the treasurer, any trust officer, and (3) with respect
to the signing or authentication of Obligations and Guarantees by the Indenture
Trustee, any person specifically authorized by the Indenture Trustee to sign or
authenticate Obligations.
"Retired or Paid" as applied to Obligations and the indebtedness
evidenced thereby means that such Obligations shall be deemed to have been so
retired or paid and shall no longer be entitled to any rights or benefits
provided in the Indenture if: (1) such Obligations shall have been paid in full;
(2) such Obligations shall have been canceled by the Indenture Trustee; or (3)
such Obligations shall have become due and payable at Maturity and funds
sufficient for the payment of such Obligations (including interest to the date
of Maturity, or in the case of a payment after Maturity, to the date of payment,
together with any premium thereon) and available for such payment and are held
by the Indenture Trustee or any Paying Agent with irrevocable directions, to pay
such Obligations; provided that, the foregoing definition is subject to Section
-------------
6.08 of the Indenture.
"Rights Under the Construction Contracts and Related Contracts" shall
have the meaning specified in Section 1.03 of the Security Agreement.
"Secretary" means the Secretary of Transportation or any officials duly
authorized to perform the functions of the Secretary of Transportation under
Title XI of the Act.
"Secretary's Note" means a promissory note issued and delivered by the
Shipowner to the Secretary substantially in the form of Exhibit 2 of the
Security Agreement, including any promissory note issued in substitution for, or
any endorsement or supplement thereof.
"Secretary's Notice" means a notice from the Secretary to the Indenture
Trustee that a Security Default, within the meaning of Section 6.01(b) of the
Security Agreement, has occurred.
"Security" has the meaning specified in Section 1.03 of the Security
Agreement.
"Security Agreement" means the Security Agreement, Contract No.
MA-13897, dated as of the Closing Date, consisting of the Special Provisions,
the General Provisions and this Schedule X, executed by the Shipowner as
security for the Secretary, as originally executed, or as modified, amended or
supplemented.
"Security Default" has the meaning specified in Section 6.01 of the
Security Agreement.
"Shipowner" means Matson Navigation Company, Inc., a Hawaii
corporation, and shall include its successors and assigns.
"Shipyard" means Kvaerner Philadelphia Shipyard Inc., a Pennsylvania
corporation, as party to the Construction Contract.
"Stated Maturity" means the date determinable as set forth in any
Obligation as the final date on which the principal of such Obligation is due
and payable.
"Successor" means a Person formed by or surviving a consolidation or
merger with the Shipowner or to which the Vessels have been sold.
"Title XI" means Title XI of the Act.
"Title XI Reserve Fund" has the meaning specified in the Financial
Agreement.
"Title XI Reserve Fund and Financial Agreement" means the Financial
Agreement.
"UCC" means the Uniform Commercial Code as enacted in the States of
California and Hawaii, as applicable.
"Vessel" means the MAUNAWILI, Official Number 1153166, financed with
the Obligations.
"Working Capital" shall mean the excess of current assets over current
liabilities, both determined in accordance with generally accepted accounting
principles and adjusted as follows:
(1) In determining current assets, there shall also be deducted: (A)
Any securities, obligations or evidence of indebtedness of a Related Party or of
any stockholder, director, officer or employee (or any member of his family) of
the Company or of such Related Party, except advances to agents required for the
normal current operation of the Company's vessels and current receivables
arising out of the ordinary course of business and not outstanding for more than
sixty (60) days; and (B) an amount equal to any excess of unterminated voyage
revenue over unterminated voyage expenses; and there will be added to current
assets all accounts receivable that have been deposited in the Company's Capital
Construction Fund (the "CCF") for which deposits the Company has received the
Secretary's approval; provided, such deposits shall not be subject to a pledge
--------
for any purpose and shall be at the after-tax value assuming such receivables
are withdrawn from the CCF in a non-qualified CCF withdrawal.
(2) In determining current liabilities, there shall be deducted any
excess of unterminated voyage expenses over unterminated voyage revenue; and
(3) In determining current liabilities, there shall be added one half
of all annual charter hire and other lease obligations (having a term of more
than six (6) months) due and payable within the succeeding fiscal year, other
than charter hire and such other lease obligations already included and reported
as a current liability on the Company's balance sheet.
EXHIBIT 31.1
CERTIFICATIONS
I, Allen Doane, certify that:
1. I have reviewed this quarterly report on Form 10-Q of Alexander &
Baldwin, Inc.;
2. Based on my knowledge, this report does not contain any untrue
statement of a material fact or omit to state a material fact necessary to make
the statements made, in light of the circumstances under which such statements
were made, not misleading with respect to the period covered by this report;
3. Based on my knowledge, the financial statements, and other financial
information included in this report, fairly present in all material respects the
financial condition, results of operations and cash flows of the registrant as
of, and for, the periods presented in this report;
4. The registrant's other certifying officer(s) and I are responsible
for establishing and maintaining disclosure controls and procedures (as defined
in Exchange Act Rules 13a-15(e) and 15d-15(e)) for the registrant and have:
(a) Designed such disclosure controls and procedures, or
caused such disclosure controls and procedures to be designed under our
supervision, to ensure that material information relating to the registrant,
including its consolidated subsidiaries, is made known to us by others within
those entities, particularly during the period in which this report is being
prepared;
(b) Evaluated the effectiveness of the registrant's disclosure
controls and procedures and presented in this report our conclusions about the
effectiveness of the disclosure controls and procedures, as of the end of the
period covered by this report based on such evaluation; and
(c) Disclosed in this report any change in the registrant's
internal control over financial reporting that occurred during the registrant's
most recent fiscal quarter (the registrant's fourth fiscal quarter in the case
of an annual report) that has materially affected, or is reasonably likely to
materially affect, the registrant's internal control over financial reporting;
and
5. The registrant's other certifying officer(s) and I have disclosed,
based on our most recent evaluation of internal control over financial
reporting, to the registrant's auditors and the audit committee of registrant's
board of directors (or persons performing the equivalent functions):
(a) All significant deficiencies and material weaknesses in
the design or operation of internal control over financial reporting which are
reasonably likely to adversely affect the registrant's ability to record,
process, summarize and report financial information; and
(b) Any fraud, whether or not material, that involves
management or other employees who have a significant role in the registrant's
internal control over financial reporting.
By /s/ Allen Doane
-----------------------------------
Allen Doane, President and
Chief Executive Officer
Date: November 1, 2004
EXHIBIT 31.2
CERTIFICATIONS
I, Christopher J. Benjamin, certify that:
1. I have reviewed this quarterly report on Form 10-Q of Alexander &
Baldwin, Inc.;
2. Based on my knowledge, this report does not contain any untrue
statement of a material fact or omit to state a material fact necessary to make
the statements made, in light of the circumstances under which such statements
were made, not misleading with respect to the period covered by this report;
3. Based on my knowledge, the financial statements, and other financial
information included in this report, fairly present in all material respects the
financial condition, results of operations and cash flows of the registrant as
of, and for, the periods presented in this report;
4. The registrant's other certifying officer(s) and I are responsible
for establishing and maintaining disclosure controls and procedures (as defined
in Exchange Act Rules 13a-15(e) and 15d-15(e)) for the registrant and have:
(a) Designed such disclosure controls and procedures, or
caused such disclosure controls and procedures to be designed under our
supervision, to ensure that material information relating to the registrant,
including its consolidated subsidiaries, is made known to us by others within
those entities, particularly during the period in which this report is being
prepared;
(b) Evaluated the effectiveness of the registrant's disclosure
controls and procedures and presented in this report our conclusions about the
effectiveness of the disclosure controls and procedures, as of the end of the
period covered by this report based on such evaluation; and
(c) Disclosed in this report any change in the registrant's
internal control over financial reporting that occurred during the registrant's
most recent fiscal quarter (the registrant's fourth fiscal quarter in the case
of an annual report) that has materially affected, or is reasonably likely to
materially affect, the registrant's internal control over financial reporting;
and
5. The registrant's other certifying officer(s) and I have disclosed,
based on our most recent evaluation of internal control over financial
reporting, to the registrant's auditors and the audit committee of registrant's
board of directors (or persons performing the equivalent functions):
(a) All significant deficiencies and material weaknesses in
the design or operation of internal control over financial reporting which are
reasonably likely to adversely affect the registrant's ability to record,
process, summarize and report financial information; and
(b) Any fraud, whether or not material, that involves
management or other employees who have a significant role in the registrant's
internal control over financial reporting.
By /s/ Christopher J. Benjamin
-------------------------------------
Christopher J. Benjamin, Vice President
and Chief Financial Officer
Date: November 1, 2004
ALEXANDER & BALDWIN, INC.
1998 STOCK OPTION/STOCK INCENTIVE PLAN
NON-QUALIFIED STOCK OPTION AGREEMENT
Discretionary Option Grant Program
AGREEMENT made as of _____________, by and between
ALEXANDER & BALDWIN, INC., a Hawaii corporation (the "Company"), and
___________________________________________ (the "Optionee").
W I T N E S S E T H:
--------------------
RECITALS
- --------
A. The Company has, with the approval of the shareholders, adopted the
Alexander & Baldwin, Inc. 1998 Stock Option/Stock Incentive Plan (the "Plan")
for the purpose of providing eligible persons with the opportunity to acquire a
proprietary interest, or otherwise increase their proprietary interest, in the
Company as an incentive for them to join and/or remain in the service of the
Company or its subsidiaries.
B. Optionee is an individual who is to render valuable services to the
Company or its subsidiaries, and this Agreement is executed pursuant to, and is
intended to carry out the purposes of, the Plan in connection with the Company's
grant of a stock option to Optionee.
C. The granted option is intended to be a non-qualified stock option
which does not satisfy the requirements of Section 422 of the Internal Revenue
Code.
D. For purposes of this Agreement, the following definitions shall be
in effect:
Common Stock: Common Stock shall mean the shares of the
-------------
Company's common stock, without par value.
Employee: Optionee shall be considered to be an Employee for so
--------
long as such individual remains in the employ of the Company or one or more of
its Subsidiaries.
Parent: A corporation shall be deemed to be a Parent of the Company
------
if it is a corporation (other than the Company) in an unbroken chain of
corporations ending with the Company, provided each corporation in the unbroken
chain (other than the Company) owns, at the time of the determination, stock
possessing fifty percent (50%) or more of the total combined voting power of all
classes of stock in one of the other corporations in such chain.
Section 16(b) Insider: Optionee shall be considered to be a
---------------------
Section 16(b) Insider on any relevant date under this Agreement if Optionee is
at the time an officer or director of the Company subject to the short-swing
profit restrictions of Section 16(b) of the Securities Exchange Act of 1934, as
amended (the "Exchange Act").
Service: Optionee shall be deemed to be in the Service of the
-------
Company for so long as Optionee renders services on a periodic basis to the
Company (or any Subsidiary or Parent) as an Employee.
Subsidiary: A corporation shall be deemed to be a Subsidiary
----------
of the Company if it is a member of an unbroken chain of corporations beginning
with the Company, provided each corporation in such chain (other than the last
corporation) owns, at the time of determination, stock possessing fifty percent
(50%) or more of the total combined voting power of all classes of stock in one
of the other corporations in such chain. The term "Subsidiary" shall also
include any partnership, joint venture or other business entity of which the
Company owns, directly or indirectly through another subsidiary corporation,
more than a fifty percent (50%) interest in voting power, capital or profits.
NOW, THEREFORE, it is hereby agreed as follows:
1. Grant of Option. Subject to and upon the terms and
---------------
conditions set forth in this Agreement, the Company hereby grants to Optionee,
as of the date of this Agreement (the "Grant Date"), a stock option to purchase
up to _________ shares of Common Stock (the "Optioned Shares") at the price of
the Fair Market Value on the date of this Agreement per share (the "Option
Price"). In addition, Optionee shall be eligible to receive a new option (a
"reload option"), subject to the terms and conditions set forth in the Addendum
attached hereto and incorporated herein by reference, on each occasion Optionee
exercises this option for one or more Optioned Shares by delivering
previously-acquired shares of Common Stock in payment of the Option Price and
satisfying certain other conditions set forth in such Addendum.
2. Option Term. This option shall have a maximum term of ten
-----------
years measured from the Grant Date and shall accordingly expire at the close of
business on ____________ (the "Expiration Date"), unless sooner terminated in
accordance with Paragraph 5 or 7 of this Agreement.
3. Limited Transferability. During the Optionee's lifetime,
-----------------------
this option shall be exercisable only by Optionee and shall not be transferable
or assignable by Optionee except for a transfer of this option by will or by the
laws of descent and distribution following Optionee's death.
4. Exercisability. The option shall become exercisable for the
--------------
Optioned Shares in a series of three (3) successive equal annual installments,
as set forth in the Exercise Schedule below, with the first such installment to
become exercisable on the first anniversary of the Grant Date. As the option
becomes exercisable for one or more installments, those installments shall
accumulate, and the option shall remain exercisable for the accumulated
installments until the expiration or sooner termination of the option term.
Except as otherwise expressly provided in subparagraph 5(iv) below, the option
shall not become exercisable for any additional Optioned Shares following
Optionee's cessation of Service.
Exercise Schedule
-----------------
Number of
Optioned Shares Exercise Date
--------------- -------------
--------------- -----------------
--------------- -----------------
--------------- -----------------
5. Cessation of Service; Termination of Options. The option
--------------------------------------------
term specified in Paragraph 2 shall terminate (and this option shall cease to be
exercisable) prior to the Expiration Date should one of the following provisions
become applicable:
(i) Except as otherwise provided in
subparagraphs (ii) through (vi) below, should Optionee cease to remain in the
Service of the Company at any time during the option term, then the period for
exercising this option shall be reduced to a three-month period commencing with
the date of such cessation of Service. During such three-month period, this
option may not be exercised for more than that number of Optioned Shares
(if any) for which this option is exercisable at the time of Optionee's
cessation of Service. In no event, however, shall this option be exercisable at
any time after the Expiration Date.
(ii) If Optionee is a Section 16(b) Insider
at the time of cessation of Service, then Optionee shall have a period of six
months following such cessation of Service in which to exercise this option for
any or all of the Optioned Shares for which this option is exercisable at the
time of Optionee's cessation of Service. In no event, however, shall this
option be exercised at any time after the specified Expiration Date.
(iii) Should Optionee die while this option
is outstanding, then (A) this option, to the extent it is not otherwise at the
time fully exercisable, shall automatically accelerate so that such option shall
become fully exercisable with respect to the total number of Optioned Shares at
the time subject to this option, and (B) the personal representative of
Optionee's estate (or the person or persons to whom the option is transferred
pursuant to Optionee's will or in accordance with the laws of descent and
distribution) shall have the right to exercise this option for any or all of the
Optioned Shares. Such right shall lapse, and this option shall cease to be
exercisable, upon the earlier of (A) the expiration of the twelve-month period
measured from the date of Optionee's death or (B) the Expiration Date.
(iv) Should Optionee retire on or after
attaining age fifty-five (55) in accordance with the terms of the Company's
retirement plan, or become disabled and cease by reason thereof to remain in the
Service of the Company, at any time while this option is outstanding, then
Optionee shall have a period of three years (commencing with the date of such
retirement or cessation of Service) to exercise this option for (i) any or all
of the Optioned Shares for which this option is exercisable at the time of
Optionee's retirement or cessation of Service and (ii) any additional Optioned
Shares for which the option becomes exercisable during the subsequent three-year
period. In no event, however, shall this option be exercised at any time after
the Expiration Date. For purposes of this Agreement, Optionee shall be deemed to
be disabled if Optionee is, by reason of any medically-determinable physical or
mental impairment (A) which is expected to result in death or (B) which is
expected to be, or is, of continuous duration of twelve consecutive months or
more, unable to perform his/her usual duties for the Company (or any Subsidiary
or Parent) employing his/her services.
(v) Should Optionee's Service be terminated
for Misconduct, or should Optionee (a) engage in any post-Service activity,
whether as an Employee, consultant, advisor, or otherwise, competitive with the
business operations of the Company (or any Subsidiary or Parent), or (b) engage
in any other conduct, while in Service or following cessation of Service,
materially detrimental to the business or affairs of the Company (or any
Subsidiary or Parent), as determined in the sole discretion of the Plan
Administrator, then this option shall terminate immediately and cease to be
outstanding. Misconduct shall mean the commission of any act of fraud,
embezzlement or dishonesty by Optionee, any unauthorized use or disclosure by
such person of confidential information or trade secrets of the Company (or any
Subsidiary or Parent), or any other intentional misconduct by such person
adversely affecting the business or affairs of the Company (or any Subsidiary
or Parent) in a material manner. The foregoing definition shall not be deemed to
be inclusive of all the acts or omissions which the Company (or any Subsidiary
or Parent) may consider as grounds for the dismissal or discharge of any
Optionee or other person in the Service of the Company (or any Subsidiary or
Parent).
(vi) Except as otherwise expressly provided
in subparagraph 5(iv) above, upon Optionee's cessation of Service, this option
shall, to the extent it is not otherwise exercisable at the time, for one or
more Optioned Shares, immediately terminate and cease to be outstanding with
respect to those shares.
6. Adjustment in Optioned Shares.
-----------------------------
a. In the event any change is made to the Common Stock by
reason of any stock dividend, stock split, combination of shares or other change
affecting the outstanding Common Stock as a class without the Company's receipt
of consideration, the number and/or class of shares purchasable under this
option and the Option Price payable per share shall be adjusted appropriately to
prevent the dilution or enlargement of Optionee's benefits hereunder.
b. If this option remains outstanding following any
merger or other business combination involving the Company, then this option
shall be adjusted appropriately to apply and pertain to the number and class of
securities which would have been issuable, in the consummation of such merger or
business combination, to an actual holder of Common Stock for the same number of
shares as are subject to this option immediately prior to such merger or
business combination. Appropriate adjustments also shall be made to the Option
Price payable per share; provided, however, that the aggregate Option Price
shall remain the same.
7. Acceleration and Cancellation of Options. In the event
----------------------------------------
there should occur a Change in Control (defined below), then this option, to the
extent outstanding at the time, but not otherwise fully exercisable, shall
automatically accelerate so that such option shall, immediately prior to the
specified effective date of the Change in Control, become fully exercisable for
the total number of Optioned Shares at the time subject to this option and may
be exercised for all or any portion of such Optioned Shares. Immediately
following the consummation of the Change in Control, all outstanding options
shall terminate and cease to be outstanding, except to the extent assumed by the
successor corporation (or parent thereof) or otherwise expressly continued in
full force and effect pursuant to the terms of the Change in Control
transaction.
"Change in Control" shall mean a change in control of a
nature that would be required to be reported in response to Item 6(e) of
Schedule 14A of Regulation 14A promulgated under the 1934 Act, whether or not
the Company in fact is required to comply with Regulation 14A thereunder;
provided that, without limitation, such a change in control shall be deemed to
have occurred if:
(i) any "person" (defined as such term is used in
Sections 13(d) and 14(d) of the 1934 Act) is or becomes the "beneficial owner"
(as defined in Rule 13d-3 under the 1934 Act), directly or indirectly, of
securities of the Company representing 35% or more of the combined voting power
of the Company's then outstanding securities;
(ii) at least a majority of the Company's Board of
Directors (the "Board") ceases to consist of (a) individuals who have served
continuously on the Board since January 1, 2001 and (b) new directors (other
than a director whose initial assumption of office is in connection with an
actual or threatened election contest, including but not limited to a consent
solicitation, relating to the election of directors of the Company) whose
election, or nomination for election by the Company's shareholders, was
approved by a vote of at least two-thirds of the directors then still in office
who shall at that time have served continuously on the Board since January 1,
2001 or whose election or nomination was previously so approved;
(iii) there is consummated a merger or consolidation
of the Company or any direct or indirect subsidiary of the Company with any
other entity, other than (a) a merger or consolidation immediately following
which the individuals who comprise the Board immediately prior thereto
constitute at least a majority of the board of directors of the Company, the
entity surviving such merger or consolidation or any parent thereof or (b) a
merger or consolidation effected to implement a recapitalization of the Company
(or similar transaction) in which no person is or becomes the beneficial owner,
directly or indirectly, of securities of the Company (not including in the
securities beneficially owned by such person any securities acquired directly
from the Company or its affiliates) representing 35% or more of the combined
voting power of the Company's then outstanding securities; or
(iv) the shareholders of the Company approve a plan
of complete liquidation or dissolution of the Company or there is consummated an
agreement for the sale or disposition by the Company of all or substantially all
of the Company's assets, other than a sale or disposition by the Company of all
or substantially all of the Company's assets to an entity at least a majority of
the board of directors of which or of any parent thereof is comprised of
individuals who comprised the Board immediately prior to such sale or
disposition.
Notwithstanding the foregoing, a Change in Control of the Company shall not be
deemed to have occurred by virtue of the consummation of any transaction or
series of integrated transactions immediately following which the holders of the
common stock of the Company immediately prior to such transaction or series of
transactions continue to have substantially the same proportionate ownership in
an entity which owns all or substantially all of the assets of the Company
immediately following such transaction or series of transactions.
8. Shareholder Rights. The holder of this option shall have
------------------
none of the rights of a shareholder with respect to the Optioned Shares until
such individual shall have exercised the option, paid the Option Price and been
issued one or more stock certificates for the purchased shares.
9. Manner of Exercising Option.
---------------------------
a. In order to exercise this option for one or more of the
Optioned Shares, Optionee (or in the case of exercise after Optionee's death,
Optionee's legal representative, executor, administrator, heir or legatee, as
the case may be) must take the following actions:
(i) Deliver to the Secretary of the Company, or his/her
designee, a written notice of exercise (the "Exercise Notice") in which there is
specified the number of Optioned Shares for which the Option is being exercised.
(ii) Pay the aggregate Option Price for the purchased
shares in one of the following alternative forms:
full payment in cash or cash equivalents, such as a
certified check, bank draft, personal check or postal or express money
order made payable to the Company's order; or
full payment in shares of Common Stock held by the
Optionee for the requisite period necessary to avoid a charge to the
Company's reported earnings and valued at Fair Market Value on the
Exercise Date; or
full payment in a combination of the foregoing.
(iii) Furnish to the Company appropriate documentation
that the person or persons exercising the option, if other than Optionee, have
the right to exercise this option.
b. For purposes of this Agreement, the following
definitions shall be in effect:
Exercise Date: The Exercise Date shall be the first date on
-------------
which there shall have been delivered to the Company both (I) the
Exercise Notice and (II) the payment of the Option Price for the
purchased shares.
Fair Market Value: The Fair Market Value of a share of Common
-----------------
Stock on any relevant date shall be the mean between the highest and
lowest selling prices per share of Common Stock on the date in
question, as quoted on the NASDAQ National Market (or any successor
system). Should the Common Stock become traded on a national securities
exchange, then the Fair Market Value per share shall be the mean
between the highest and lowest selling prices on such exchange on the
date in question. If there is no reported sale of Common Stock on the
NASDAQ National Market (or national securities exchange) on the date in
question, then the Fair Market Value shall be the mean between the
highest and lowest selling prices on the NASDAQ National Market (or
such securities exchange) on the last preceding date for which such
quotations exist.
c. As soon as practicable after the Exercise Date,
the Company shall issue to Optionee (or to the other person or persons
exercising this option) a certificate or certificates representing the purchased
shares.
d. In no event may this option be exercised for any
fractional shares.
10. Compliance with Laws and Regulations.
------------------------------------
a. The exercise of this option and the issuance of
Optioned Shares upon such exercise shall be subject to compliance by the Company
and Optionee with all applicable requirements of law relating thereto and with
all applicable regulations of any stock exchange on which shares of the Common
Stock may be listed at the time of such exercise and issuance.
b. In connection with the exercise of this option,
Optionee shall execute and deliver to the Company such representations in
writing as may be requested by the Company in order for it to comply with the
applicable requirements of federal and state securities laws.
11. Successors and Assigns. Except to the extent otherwise
----------------------
provided in Paragraph 3 or 7, the provisions of this Agreement shall inure to
the benefit of, and be binding upon, the successors, administrators, heirs,
legal representatives and assigns of Optionee and the successors and assigns of
the Company.
12. Non-Liability of Company.
------------------------
a. If the Optioned Shares covered by this Agreement
exceed, as of the Grant Date, the number of shares of Common Stock which may
without stockholder approval be issued under the Plan, then this option shall
be void with respect to such excess shares unless stockholder approval of an
amendment to the Plan sufficiently increasing the number of shares of Common
Stock issuable thereunder is obtained.
b. The inability of the Company to obtain approval
from any regulatory body having authority deemed by the Company to be necessary
to the lawful issuance and sale of any Common Stock pursuant to this option
shall relieve the Company of any liability with respect to the non-issuance or
sale of the Common Stock as to which such approval shall not have been obtained.
However, the Company shall use reasonable efforts to obtain all such approvals.
13. No Impairment of Company's Rights. This Agreement shall
---------------------------------
not in any way affect the right of the Company to adjust, reclassify, reorganize
or otherwise make changes in its capital or business structure or to merge,
consolidate, dissolve, liquidate or sell or transfer all or any part of its
business or assets.
14. No Employment or Service Contract. Nothing in this
---------------------------------
Agreement or in the Plan shall confer upon Optionee any right to continue in the
Service of the Company (or any Subsidiary or Parent employing or retaining
Optionee) for any period of time or otherwise interfere with or restrict in any
way the rights of the Company (or such Subsidiary or Parent) or Optionee, which
rights are hereby expressly reserved by each, to terminate Optionee's Service at
any time for any reason whatsoever, with or without cause.
15. Notices. Any notice required to be given or delivered to
-------
the Company under the terms of this Agreement shall be in writing and addressed
to the Company in care of the Corporate Secretary or his/her designee at the
principal corporate offices at 822 Bishop Street, Honolulu, HI 96813. Any notice
required to be given or delivered to Optionee shall be in writing and addressed
to Optionee at the address indicated below Optionee's signature line on this
Agreement. All notices shall be deemed to have been given or delivered upon
personal delivery or upon deposit in the U.S. mail, postage prepaid and properly
addressed to the party to be notified.
16. Construction. This Agreement and the option evidenced
------------
hereby are made and granted pursuant to the Plan and are in all respects limited
by and subject to the express terms and provisions of the Plan. All decisions of
the Plan Administrator with respect to any question or issue arising under the
Plan or this Agreement shall be conclusive and binding on all persons having an
interest in this option.
17. Tax Withholding.
---------------
a. The Company's obligation to deliver shares of Common
Stock upon the exercise of this option shall be subject to the satisfaction of
all applicable Federal, State and local income and employment tax withholding
requirements.
b. Optionee may elect to have the Company withhold,
at the time this option is exercised, a portion of the shares purchased under
the option with an aggregate Fair Market Value equal to the designated
percentage (any multiple of 5% up to 100% as specified by Optionee) of the
applicable Federal and State income tax withholding liability incurred by
Optionee in connection with the option exercise (the "Withholding Taxes").
Any such exercise of the election must be effected in
accordance with the following terms and conditions:
(i) The election must be made on or before the date
the amount of the Withholding Taxes incurred by Optionee in connection
with the exercise of the option is determined (the "Tax Determination
Date").
(ii) The election shall be irrevocable.
(iii) The election shall be subject to the approval of
the Plan Administrator, either at the time the election is made or at
any earlier time, and none of the shares purchased under the option
actually shall be withheld in satisfaction of the Withholding Taxes
incurred in connection with the exercise of the option, except to the
extent the election is so approved by the Plan Administrator.
(iv) The shares withheld pursuant to the election
shall be valued at Fair Market Value on the Tax Determination Date in
accordance with the valuation provisions of paragraph 9.b of this
Agreement.
(v) In no event may the number of shares of Common
Stock requested to be withheld exceed in Fair Market Value the dollar
amount of the Withholding Taxes incurred by Optionee in connection with
the exercise of the option.
c. Optionee may elect to deliver to the Company, at
the time the option is exercised, shares of Common Stock previously acquired by
such individual (other than in connection with such option exercise) with an
aggregate Fair Market Value equal to the designated percentage (any multiple of
5% up to 100% as specified by Optionee) of the Withholding Taxes incurred by
Optionee in connection with the option exercise.
Any such exercise of the election must be effected in
accordance with the following terms and conditions:
(i) The election must be made on or before the Tax
Determination Date.
(ii) The election shall be irrevocable.
(iii) The election shall be subject to the approval of
the Plan Administrator, either at the time the election is made or at
any earlier time, and none of the delivered shares shall be accepted in
satisfaction of the Withholding Taxes, except to the extent the
election is so approved by the Plan Administrator.
(iv) The delivered shares shall be valued at Fair
Market Value on the Tax Determination Date in accordance with the
valuation provisions of paragraph 9.b of this Agreement.
(v) In no event may the number of delivered shares
exceed in Fair Market Value the dollar amount of the Withholding Taxes
incurred by the Optionee in connection with the exercise of the option.
18. Governing Law. The interpretation, performance, and
-------------
enforcement of this Agreement shall be governed by the laws of the State of
Hawaii.
19. Counterparts. This Agreement may be executed in
------------
counterparts, each of which shall be deemed to be an original, but all of which
together shall constitute one and the same instrument.
IN WITNESS WHEREOF, the Company has caused this Agreement to
be executed in duplicate on its behalf by its duly authorized officer, and
Optionee also has executed this Agreement in duplicate, all as of the day and
year indicated above.
ALEXANDER & BALDWIN, INC.
By
-------------------------------
Its Vice President
-----------------------------------
Optionee
Address:
-----------------------------------
-----------------------------------
ADDENDUM
TO
NON-QUALIFIED STOCK OPTION AGREEMENT
The provisions of this Addendum hereby are incorporated into,
and made a part of, that certain Non-Qualified Stock Option Agreement dated
____________ (the "Option Agreement"), by and between the Company and Optionee,
evidencing the option grant (the "Original Option") made on such date to
Optionee under the terms of the Company's 1998 Stock Option/Stock Incentive Plan
(the "Plan"). All capitalized terms in this Addendum shall have the meanings
assigned to them in the Option Agreement.
RELOAD OPTION GRANT
1. Automatic Reload Grant. Optionee hereby is made eligible to
----------------------
receive one or more automatic option grants under the Plan to the extent
Optionee subsequently exercises the Original Option on one or more separate
occasions, in accordance with the following requirements:
(i) The Original Option is exercised prior to the expiration
of the five (5)- year period measured from its Grant Date.
(ii) The Option Price is, in connection with such exercise,
paid in shares of Common Stock held by the Optionee for a period of at
least six (6) months.
(iii) The Original Option is exercised by Optionee, and not by
the legal representative, heirs or legatees of the Optionee's estate.
On each occasion on which the Original Option is so exercised
by Optionee, Optionee automatically shall be granted at that time (the "Reload
Grant Date") a new option (the "Reload Option") to purchase the same number of
shares of Common Stock as is delivered in payment of the Option Price. No reload
option will be granted for shares of Common Stock delivered or withheld in
satisfaction of the withholding tax liability arising from such exercise.
2. Reload Option Terms. The terms and provisions of each
-------------------
Reload Option granted pursuant to this Addendum shall be exactly the
same as the terms and provisions of the Original Option as set forth in
the Option Agreement to which this Addendum is attached, except to the
extent otherwise indicated below:
A. Option Price. The option price per share of the Common
------------
Stock purchasable under the Reload Option (the "Reload Option Price")
shall be equal to the greater of (i) the mean between the highest and
lowest selling prices per share of Common Stock as quoted on the NASDAQ
National Market or any successor system on the Reload Grant Date or
(ii) one hundred fifty percent (150%) of the Option Price per share in
effect under the Original Option.
B. Payment. The Reload Option Price shall become immediately
-------
due upon exercise of the Reload Option and shall be payable in any of
the forms authorized under the Option Agreement for payment of the
Option Price.
C. Exercisability. The Reload Option shall not become
--------------
exercisable until all the Option Shares purchased under the Original
Option on the Reload Grant Date have been held by Optionee (or the
legal representatives or heirs or legatees of Optionee's estate) for a
period of at least two (2) years measured from the Reload Grant Date.
In the event any of such Option Shares are sold or otherwise cease to
be held by Optionee before the end of such two (2)- year period, the
Reload Option immediately shall expire in its entirety. Upon the
satisfaction of such holding period requirement, the Reload Option
shall become exercisable for any or all of the shares of Common Stock
at the time subject to such option and shall remain so exercisable
until the expiration or sooner termination of the option term of the
Reload Option. The exercisability of the Reload Option shall, however,
be subject to acceleration in accordance with Paragraph 5 of this
Addendum.
D. Option Term. The Reload Option shall have the same maximum
-----------
option term and Expiration Date as the Original Option, subject to
earlier termination, pursuant to the provisions of the Option
Agreement, in connection with the Optionee's cessation of Service.
E. Limited Transferability. During Optionee's lifetime, the
-----------------------
Reload Option shall be exercisable only by the Optionee and shall not
be assignable or transferable by Optionee other than by will or by the
laws of descent and distribution following Optionee's death.
3. No Additional Reload Option. No additional Reload Option
---------------------------
shall be granted in connection with the exercise of any Reload Option
granted pursuant to this Addendum, whether or not shares of Common
Stock are delivered in payment of the Reload Option Price in effect
under that Reload Option.
4. Stockholder Rights. The holder of the Reload Option shall
------------------
have none of the rights of a stockholder with respect to any shares
covered by the Reload Option until such individual shall have exercised
the Reload Option, paid the Reload Option Price and satisfied all other
conditions precedent to the issuance of certificates for the purchased
shares.
5. Change in Control. The following provisions shall govern
-----------------
the treatment of each Reload Option granted pursuant to this Addendum
in the event a Change in Control (as such term is defined in the Option
Agreement) should occur while that Reload Option is outstanding:
A. Should such Change in Control occur while the reload option
is outstanding, then the reload option will, immediately prior to the
specified effective date of the Change in Control, become exercisable
for all the shares of Common Stock at the time subject to that option,
and may be exercised for any or all of those shares.
B. Upon the consummation of the Change in Control, the Reload
Option shall terminate and cease to be outstanding, except to the
extent assumed by the successor corporation or its parent company or
otherwise expressly continued in full force and effect pursuant to the
terms of the Change in Control transaction.
C. If the Company is the surviving entity in any merger or
other business combination which does not result in the termination of
the Reload Option, then the Reload Option shall be adjusted
appropriately to apply and pertain to the number and class of
securities which would be issuable, in consummation of such merger or
business combination, to an actual holder of the same number of shares
of Common Stock as is subject to such Reload Option immediately prior
to such merger or business combination. Appropriate adjustments shall
be made to the Reload Option Price per share payable under the Reload
Option, provided the aggregate Reload Option Price shall remain the
same.
D. The grant of any Reload Option pursuant to this Addendum
shall in no way affect the right of the Company to adjust, reclassify,
reorganize or otherwise change its capital or business structure or to
merge, consolidate, dissolve, liquidate or sell or transfer all or any
part of its business or assets.
6. Miscellaneous Provisions. Each Reload Option granted
------------------------
pursuant to this Addendum shall be subject to the following additional
terms and provisions.
A. The Company's obligation to deliver shares of Common Stock
upon the exercise of each Reload Option shall be subject to the
satisfaction of all applicable Federal, State and local income and
employment tax withholding requirements.
B. To the extent the Optionee has the right to have a portion
of the shares purchased under the Original Option withheld by the
Company in satisfaction of the applicable withholding taxes incurred in
connection with the exercise of that Option (or otherwise to deliver
existing shares of Common Stock in satisfaction of such tax liability),
the Optionee shall have the similar right with respect to the
withholding tax liability incurred in connection with the exercise of
the Reload Option.
ALEXANDER & BALDWIN, INC.
RESTRICTED STOCK ISSUANCE AGREEMENT
-----------------------------------
AGREEMENT made as of _______________, by and between ALEXANDER &
BALDWIN, INC., a Hawaii corporation (the "Corporation"), and
_________________________ (the "Participant").
All capitalized terms in this Agreement shall have the meaning assigned
to them in this Agreement or in the Corporation's 1998 Stock Option/Stock
Incentive Plan, as amended (the "Plan").
A. ISSUANCE OF SHARES
------------------
1. Issuance. In consideration for Services and as an incentive to
--------
remain in the Service of the Corporation (or any Parent or Subsidiary), the
Participant shall be issued __________ shares (the "Issued Shares") of common
stock of the Corporation (the "Common Stock") pursuant to the provisions of the
Stock Issuance Program of the Plan. The Issued Shares shall have an issue price
per share equal to the mean between the highest and lowest selling prices per
share of Common Stock as quoted on the NASDAQ National Market or any successor
system on the date of this Agreement. The Issued Shares shall be unvested and
shall be subject to cancellation under the terms described in Paragraph C.2
hereof.
2. Stockholder Rights. Until such time as the Issued Shares vest
------------------
pursuant to the provisions of Paragraph C.1 hereof, the Participant shall have
all the rights of a stockholder (including voting, dividend and liquidation
rights) with respect to the Issued Shares, subject, however, to the
restrictions and conditions of this Agreement.
3. Escrow. The Corporation shall hold the Issued Shares in escrow
------
until those shares have vested in accordance with the vesting schedule described
in Paragraph C.1 hereof. The Issued Shares which so vest shall be released from
escrow upon the Participant's payment to the Corporation of the federal and
state income and employment withholding taxes to which the Participant becomes
subject by reason of the Participant's vesting in the Issued Shares.
4. Compliance with Law. Under no circumstances shall shares of
-------------------
Common Stock be issued or delivered to the Participant pursuant to the
provisions of this Agreement unless there shall have been compliance with all
applicable requirements of Federal and state securities laws, all applicable
listing requirements of the Nasdaq National Market or any successor system and
all other requirements of law or of any regulatory bodies having jurisdiction
over such issuance and delivery.
B. TRANSFER RESTRICTIONS
---------------------
1. Restriction on Transfer. The Participant shall not transfer,
-----------------------
assign, encumber or otherwise dispose of any of the Issued Shares which are
subject to the cancellation provisions of Paragraph C.2 hereof.
2. Restrictive Legend. The stock certificate(s) for unvested Issued
------------------
Shares shall be endorsed with the following restrictive legend:
"THIS CERTIFICATE AND THE SHARES REPRESENTED HEREBY HAVE BEEN ISSUED
PURSUANT TO THE PROVISIONS OF THE STOCK ISSUANCE PROGRAM OF THE
ALEXANDER & BALDWIN, INC. 1998 STOCK OPTION/STOCK INCENTIVE PLAN, AS
AMENDED ("PLAN") AND ARE SUBJECT TO CANCELLATION BY THE CORPORATION,
UPON THE TERMS AND CONDITIONS SPECIFIED IN A WRITTEN AGREEMENT DATED AS
OF _________________ BETWEEN THE CORPORATION AND THE REGISTERED HOLDER
OF THE SHARES. A COPY OF SUCH AGREEMENT IS MAINTAINED AT THE
CORPORATION'S PRINCIPAL CORPORATE OFFICES. WHILE SUCH CANCELLATION
RIGHT IS IN EFFECT, THE CERTIFICATE AND THE SHARES REPRESENTED HEREBY
MAY NOT BE SOLD, TRANSFERRED, ASSIGNED OR PLEDGED."
C. VESTING/CANCELLATION OF THE ISSUED SHARES
-----------------------------------------
1. Vesting. The Issued Shares shall initially be unvested and
-------
subject to cancellation in accordance with the provisions of Paragraph C.2
hereof. The following vesting schedule shall be in effect for the Issued Shares:
Twenty percent (20%) of the Issued Shares shall vest in five
(5) successive equal annual installments upon Participant's completion
of each year of Service over a five-year period measured from the date
of this Agreement; provided, however, that any unvested shares shall
automatically vest upon the occurrence of:
(i) the Participant's normal retirement (age 65) or approved early
retirement (age 55 plus 5 years Service), or
(ii) the Participant's termination of Service by reason of death or
Permanent Disability.
Upon vesting, the Participant shall acquire a fully-vested
interest in, and the transfer restrictions of Paragraph B hereof and
the cancellation provisions of Paragraph C.2 hereof shall terminate
with respect to, the vested Issued Shares.
2. Cancellation of Issued Shares. Should the Participant cease
-----------------------------
Servoce for any reason prior to the completion of the vesting schedule described
in Paragraph C.1 hereof, then all of the unvested Issued Shares shall be
immediately cancelled, and the stock certificates for those Issued Shares shall
be immediately cancelled, without any cash or other payment due from the
Corporation with respect to the cancelled Issued Shares, and the Participant
shall no longer be entitled to any rights as a stockholder with respect to those
shares or to any other entitlement or interest with respect to such shares.
3. Recapitalization. Any new, substituted or additional securities
----------------
or other property (including cash paid other than as a regular cash dividend)
which the Participant might have the right to receive with respect to unvested
Issued Shares by reason of any stock dividend, stock split, recapitalization,
combination of shares, exchanges of shares or other change affecting the
outstanding Common Stock as a class without the Corporation's receipt of
consideration, shall be issued subject to the cancellation provisions and the
escrow requirements hereunder.
4. Change in Control. In the event of a Change in Control during the
-----------------
Participant's period of Service, then the cancellation provisions of Paragraph
C.2 hereof shall lapse in their entirety, and the Issued Shares shall vest in
full.
D. GENERAL PROVISIONS
------------------
1. At Will Employment. Nothing in this Agreement or in the Plan
------------------
shall confer upon the Participant any right to continue in Service for any
period of specific duration or interfere with or otherwise restrict in any way
the rights of the Corporation (or any Subsidiary employing or retaining the
Participant) or of the Participant, which rights are hereby expressly reserved
by each, to terminate the Participant's Service at any time for any reason, with
or without cause.
2. Notices. Any notice required to be given under this Agreement
-------
shall be in writing and shall be deemed effective upon personal delivery or upon
deposit in the U.S. mail, registered or certified, postage prepaid and properly
addressed to the party entitled to such notice at the address indicated below
such party's signature line on this Agreement or at such other address as such
party may designate by ten (10) days advance written notice under this paragraph
to all other parties to this Agreement.
3. No Waiver. No waiver of any breach or condition of this
---------
Agreement shall be deemed to be a waiver of any other or subsequent breach or
condition, whether of like or different nature.
4. Cancellation of Shares. Should the cancellation provision
----------------------
contained in Paragraph C.2 hereof become applicable in connection with the
Participant's termination of Service, then from and after that time, the person
from whom such shares are to be cancelled shall no longer have any rights as a
holder of such shares. Such shares shall be deemed cancelled in accordance with
the applicable provisions hereof, and the Corporation shall be deemed the owner
and holder of such shares, whether or not the certificates therefor have been
delivered to the Corporation.
5. Participant Undertaking. The Participant hereby agrees to take
-----------------------
whateveradditional action and execute whatever additional documents the
Corporation may deem necessary or advisable in order to carry out or effect one
or more of the obligations or restrictions imposed on either the Participant or
the Issued Shares pursuant to the provisions of this Agreement.
6. Agreement and Plan Constitute Entire Contract. This Agreement and
---------------------------------------------
the Plan constitute the entire contract between the parties hereto with regard
to the subject matter hereof. This Agreement is made pursuant to the provisions
of the Plan and shall in all respects be construed in conformity with the terms
of the Plan.
7. Governing Law. This Agreement shall be governed by, and construed
-------------
in accordance with, the laws of the State of Hawaii without resort to that
State's choice of law rules.
8. Counterparts. This Agreement may be executed in counterparts,
------------
each of which shall be deemed to be an original, but all of which together shall
constitute one and the same instrument.
9. Successors and Assigns. The provisions of this Agreement shall
----------------------
inure to the benefit of, and be binding upon, the Corporation and its
successors and assigns.
IN WITNESS WHEREOF, the parties have executed this Agreement on the day
and year first indicated above.
ALEXANDER & BALDWIN, INC.
By
--------------------------------------
Its
----------------------------------------
Participant
Address:
----------------------------------------
----------------------------------------
SECOND AMENDMENT TO
THIRD AMENDED AND RESTATED
REVOLVING CREDIT AND TERM LOAN AGREEMENT
----------------------------------------
THIS SECOND AMENDMENT TO THIRD AMENDED AND RESTATED REVOLVING CREDIT
AND TERM LOAN AGREEMENT (this "Amendment"), effective as of October 1, 2004 (the
"Effective Date"), at Honolulu, Hawaii, is by and between ALEXANDER & BALDWIN,
INC., a Hawaii corporation (the "Borrower"), the undersigned Banks (herein
called, individually, a "Bank" and, collectively, the "Banks"), and FIRST
HAWAIIAN BANK, as agent for the Banks (the "Agent").
PRELIMINARY STATEMENTS
----------------------
A. The Borrower, certain of the Banks and other institutions were
parties to that certain Revolving Credit and Term Loan Agreement dated as of
December 1, 1982. Such Revolving Credit and Term Loan Agreement has been amended
and restated on numerous occasions, the last of which occurring pursuant to that
certain Third Amended and Restated Revolving Credit and Term Loan Agreement
effective as of November 30, 2001, by and between the Borrower, the Banks and
the Agent (the "Credit Agreement").
B. The Credit Agreement was amended by that certain First Amendment to
Third Amended and Restated Revolving Credit and Term Loan Agreement effective as
of February 4, 2004, to amend the definition of "Consolidated Net Income" to
account for the adoption by the Borrower of certain accounting standards.
C. The Borrower has requested the Banks to extend the Termination Date
of each Bank's Commitment from November 30, 2004, to January 1, 2008, to amend
the Credit Agreement to increase the Total Commitment from $185,000,000.00, to
$200,000,000.00, and to amend certain other terms and conditions of the Credit
Agreement.
D. The Banks are willing to amend the Credit Agreement in accordance
with the terms and conditions of this Amendment.
E. All capitalized terms used herein, unless otherwise defined, are as
defined in the Credit Agreement.
AGREEMENT
---------
In consideration of the mutual covenants set forth herein, and for
other good and valuable consideration, the receipt and sufficiency of which is
hereby acknowledged, the parties hereto agree as follows:
1. Extension of Termination Date. The Termination Date shall be January
-----------------------------
1, 2008, or the Date to which such date is extended from time to time as
provided in Section 1.1 B. of the Credit Agreement, or the Date, following the
occurrence of an Event of Default, on which the Agent, on behalf of the Banks,
exercises the remedies under Section 8.1(1) or 8.1(2).
2. Increase in Total Commitment. The Total Commitment is hereby
----------------------------
increased from $185,000,000.00, to TWO HUNDRED MILLION AND NO/100 DOLLARS
($200,000,000.00). Each Bank's Commitment is hereby amended to the amounts
designated in Schedule 1 attached hereto and made a part hereof.
3. Schedule I. Schedule I to the Credit Agreement is hereby deleted and
----------
replaced with Schedule I attached hereto and made a part hereof. In accordance
with the increase in the Total Commitment from $185,000,000.00 to
$200,000,000.00, the individual Commitments of each Bank are as shown in this
revised Schedule I.
4. Execution of Revolving Credit Notes. On the date hereof, and as a
-----------------------------------
condition to the effectiveness of this Amendment, (i) Borrower shall execute and
deliver to each Bank a Revolving Credit Note, dated the date hereof, in the
forms attached as Exhibit A hereto, as follows: (a) in the principal amount of
Fifty-three Million Five Hundred Thousand Dollars ($53,500,000.00) to First
Hawaiian Bank; (b) in the principal amount of Forty-eight Million Five Hundred
Thousand Dollars ($48,500,000.00) to Bank of America, N.A.; (c) in the principal
amount of Thirty Million Dollars ($30,000,000.00) to Wells Fargo Bank, National
Association; (d) in the principal amount of Thirty Million Dollars
($30,000,000.00) to Bank of Hawaii; (e) in the principal amount of Twenty
Million Dollars ($20,000,000.00) to The Bank of New York; (f) in the principal
amount of Eighteen Million Dollars ($18,000,000.00) to American Savings Bank,
F.S.B. Upon such execution and delivery, the existing Revolving Credit Notes,
evidencing the Borrower's obligation to pay each Bank's Commitment prior to this
Amendment, shall be replaced and cancelled.
5. Amendment to Interest Rates. The Interest Rates for certain Loans
---------------------------
are hereby amended as follows:
(a) Section 1.7 C.(ii) of the Credit Agreement is amended such
that the Interest Rate in respect of each Eurodollar Loan during its related
Eurodollar Interest Period shall be the Eurodollar Rate for such Eurodollar
Interest Period plus forty-seven and one-half one-hundredths of one percent
(0.475%); and
(b) Section 1.7 D.(ii) of the Credit Agreement is amended such
that the Interest Rate in respect of each Term Loan that is a Eurodollar Loan
during its related Eurodollar Interest Period shall be the Eurodollar Rate for
such Eurodollar Interest Period plus six-tenths of one percent (0.60%).
6. Amendment to Principal Payments Due Dates on Term Notes. Section 1.6
-------------------------------------------------------
of the Credit Agreement is hereby amended such that the quarterly principal
payments due under all Term Notes is hereby amended to be due on the first
Business Day of the immediately subsequent months of April, July, October and
January, provided, however, that the fourth such installment shall be in an
amount sufficient to repay in full the unpaid principal amount thereof. The
maturity date of any such Term Note shall be the date one (1) year subsequent to
the Termination Date. Except as amended hereby, all other terms and conditions
of Section 1.6 of the Credit Agreement shall remain in full force and effect.
Consistent with this Amendment, Exhibit B of the Agreement, the form
Term Note, shall be replaced it its entirety by the form Term Note attached
hereto as Exhibit B.
7. Minimum Amount of Each Letter of Credit. The first sentence of
---------------------------------------
Section 1.14 E. of the Credit Agreement is hereby amended so that each Letter of
Credit shall be for an amount which is at least Two Million Five Hundred
Thousand Dollars ($2,500,000.00). Except as amended hereby, all other terms and
conditions of Section 1.14(E) of the Credit Agreement shall remain in full force
and effect.
8. Letter of Credit Fee. Section 1.14 H. of the Credit Agreement is
--------------------
hereby amended such that each reference to "55 basis points (0.55%)" is replaced
with the term "47.5 basis points (0.475%)." Except as amended hereby, all other
terms and conditions of Section 1.14 H. of the Credit Agreement shall remain in
full force and effect.
9. Interest Rates Upon Interest Payment Default. Section 1.7 of the
--------------------------------------------
Credit Agreement is amended to add the following subsection G. to read as
follows:
G. Interest Rates Upon Interest Payment Default. If the
--------------------------------------------
Borrower defaults in the payment when due of any interest
amount due under any Loan, the Interest Rate on the principal
amount of such Loan shall be amended, from the date such
interest amount was due to the date of actual payment, for
each day from and including the date such amount is payable to
but excluding the date such amount is paid, at a rate equal to
the Prime Rate from time to time in effect, plus two percent
(2%). Imposition of this rate of interest shall be in addition
to any other remedies available to the Banks under Article
VIII hereunder. So long as the principal amount of any such
Loan is not accelerated by the Agent, upon payment of the
interest payment(s) then in default, the Interest Rate on such
Loan shall revert back to the applicable Interest Rate on such
Loan to be charged on such Loan in the absence of such
interest payment default.
10. Audited Financial Statements. Section 6.1 A.(iii) of the Credit
----------------------------
Agreement is hereby amended as follows: (a) the requirement that the Borrower
submit an audited consolidating balance sheet of the Borrower and its
Subsidiaries is hereby deleted, and (b) all opinions of the accountants
preparing such audited financial statements, whether by Deloitte & Touche, LLP
or other independent public accountants as may be approved by the Banks, shall
be "unqualified" as to any of the matters stated therein. Except as amended
hereby, all other terms and conditions of Section 6.1 A.(iii) of the Credit
Agreement shall continue in full force and effect.
11. Dividends; Redemptions. Section 7.8 B. of the Credit Agreement is
----------------------
hereby amended to delete the second paragraph of such section (which begins with
"On or after the date, ...) in its entirety.
12. Definitions. The following definitions in Article IX of the Credit
-----------
Agreement shall be amended as follows:
(a) The definition for "Contingent Liabilities" is hereby
----------------------
amended in its entirety as follows:
"Contingent Liabilities": shall mean, (i) Indebtedness of any
----------------------
Person (other than the Borrower or any of its Subsidiaries),
(1) that the Borrower or any of its Subsidiaries are
contingently or directly liable under any partnership or joint
venture agreement, or (2) that is assumed, endorsed,
guaranteed or co-signed, directly or indirectly, by the
Borrower or any of its Subsidiaries; and (ii) any contingent
liability of the Borrower or any of its Subsidiaries arising
from any litigation that, pursuant to FASB Statement No. 5 (or
any successor thereto), is required to be reported in the
notes to the Borrower's consolidated financial statements
referred to in Section 6.1A(iii) hereof.
(b) The definition for "Excluded Liabilities" is hereby
--------------------
deleted in its entirety.
13. Reallocation of Existing Loans.
------------------------------
(a) If on the date hereof there shall be any outstanding Prime
Loans, on the date hereof with respect to each such Loan, as conditions to the
effectiveness of this Agreement:
(i) Not later than 8:00 a.m., Hawaii Standard Time,
the Agent shall advise each Bank of such Bank's Proportional Share of such
outstanding Loans determined in accordance with the Commitments set forth on
Schedule I attached hereto (the "Revised Proportional Share") and the amount by
which such Bank's Revised Proportional Share exceeds or is less than such Bank's
Proportional Share determined in accordance with the Commitments set forth on
Schedule I attached to the Credit Agreement (the "Former Proportional Share").
(ii) To the extent that any Bank's Revised Proportional
Share exceeds such Bank's Former Proportional Share, such Bank shall, not later
than 10:00 a.m., Hawaii Standard Time, provide to the Agent at its office
specified in the Credit Agreement, immediately available funds in Dollars in
such amount in accordance with the Credit Agreement.
(iii) To the extent that any Bank's Former Proportional
Share exceeds such Bank's Revised Proportional Share, the Agent shall, not later
than 12:00 noon, Hawaii Standard Time, provide to such Bank immediately
available funds in Dollars in such amount in accordance with the Credit
Agreement.
(b) If on the date hereof there shall be any outstanding
Eurodollar Loans, each such outstanding Eurodollar Loan shall remain in effect
until the expiration date(s) of the current related Eurodollar Interest
Period(s). If the Borrower has elected, pursuant to Section 1.7 B. of the Credit
Agreement, to extend such Loan(s), such outstanding Loan(s) shall be reallocated
and repaid in the manner specified in Subsections (i) through (iii) below. Any
such Loan(s) converted to a Prime Loan pursuant to said Section 1.7 B. shall be
reallocated and repaid in the manner specified in Subsections (i) through (iii)
of Section 13(a) above, on the last day of the relevant Eurodollar Interest
Period.
(i) Not later than 8:00 a.m., Hawaii Standard Time,
on the second Domestic Business Day or Eurodollar Business Day, as applicable,
prior to the last day of the relevant Eurodollar Interest Period, the Agent
shall advise each Bank of such Bank's Revised Proportional Share of such
outstanding Loan and the amount by which such Bank's Revised Proportional Share
exceeds or is less than such Bank's Former Proportional Share.
(ii) To the extent that any Bank's Revised
Proportional Share exceeds such Bank's Former Proportional Share, such Bank
shall, not later than 10:00 a.m., Hawaii Standard Time, on the last day of such
Eurodollar Interest Period, provide to the Agent at its office specified in the
Credit Agreement, immediately available funds in Dollars in such amount in
accordance the Credit Agreement.
(iii) To the extent that any Bank's Former
Proportional Share exceeds such Bank's Revised Proportional Share, the Agent
shall, not later than 12:00 noon, Hawaii Standard Time, on the last day of such
Eurodollar Interest Period, provide to such Bank immediately available funds in
Dollars in such amount in accordance the Credit Agreement.
14. Restructuring Fee. On the Effective Date or execution date of this
Amendment, whichever is earlier, the Borrower shall pay to the Agent the
Restructuring Fee in accordance with Section 1.3 B. of the Credit Agreement,
which fee shall be equal to 0.05% of $200,000,000.00, or $100,000.00.
15. Miscellaneous.
-------------
(a) Confirmation of Warranties and Covenants: No Event of
-----------------------------------------------------
Default. All of the continuing warranties of the Borrower contained in the
- -------
Credit Agreement, are hereby confirmed and reaffirmed by the Borrower as being
true, valid and correct as of the date of this Amendment. The Borrower further
represents and warrants that:
(i) The consolidated financial statements of the
Borrower as of and for the year ended December 31, 2003, as audited by
Deloitte & Touche, LLP, and the consolidated unaudited financial statements of
the Borrower as of June 30, 2004, which statements are duly certified by the
Chief Financial Officer of the Borrower, are complete, correct and present
fairly the financial position and results of operations as of or for the periods
indicated, all in accordance with GAAP applied on a consistent basis, except as
set forth in the notes thereto.
(ii) no Event of Default exists as of the date of
this Amendment.
(b) No Offsets or Defenses; Waiver. As of the date hereof, the
----------------------
Borrower has no claims, defenses or offsets against the Agent, the Banks or
against the Borrower's obligations under the Credit Agreement, as herein
amended, whether in connection with the negotiations for or closing of the
Credit Agreement, of this Amendment, or otherwise, and if any such claims,
defenses or offsets exist, they are hereby irrevocably waived and released.
(c) Full Force and Effect. The provisions of the Credit
---------------------
Agreement and of the Notes, as previously amended, are hereby amended to conform
with this Amendment but in all other respects the provisions of the Credit
Agreement and the Notes, as previously amended and as amended by this Amendment,
shall continue in full force and effect.
(d) Rights of the Banks. This Amendment is made on the express
-------------------
condition that nothing contained herein shall in any way be construed as
affecting, impairing, or waiving any rights of the Banks under the Credit
Agreement.
(e) Bind and Inure. This Amendment shall be binding upon and
--------------
inure to the benefit of the Banks, the Borrower and their respective successors
and assigns, provided, that the Borrower may not transfer any rights or
obligations under this Amendment without the prior written consent of the Banks.
(f) Applicable Law; Severability. This Amendment shall be
----------------------------
governed by and interpreted in accordance with the laws of the State of Hawaii.
If any provision of this Amendment is held to be invalid or unenforceable, the
validity or enforceability of the other provisions shall remain unaffected.
(g) Paragraph Headings. The headings of paragraphs in this
------------------
Amendment are inserted only for convenience and shall in no way define,
describe, or limit the scope or intent of any provision of this Amendment.
(h) Counterparts and Facsimile Signatures. The parties to this
-------------------------------------
Amendment agree that this Amendment may be executed in counterparts, each of
which shall be deemed an original, and said counterparts shall together
constitute one and the same agreement, binding all of the parties hereto,
notwithstanding all of the parties are not signatory to the original or the same
counterparts. In making proof of this Amendment, it shall not be necessary to
produce or account for more than one such counterpart. For all purposes,
including, without limitation, recordation and delivery of this Amendment,
duplicate unexecuted and unacknowledged pages of the counterparts may be
discarded and the remaining pages assembled as one document. The submission of a
signature-page transmitted by facsimile or telecopy (or similar electronic
transmission facility) shall be fully binding and in full effect for all
purposes under this Amendment. In such event, original signature pages shall be
delivered within a reasonable time and substituted for the facsimile signature
pages in the counterpart copies upon receipt.
IN WITNESS WHEREOF, the parties hereto have executed this Amendment as
of the date first above written.
ALEXANDER & BALDWIN, INC.
By /s/ Christopher J. Benjamin
---------------------------------------
CHRISTOPHER J. BENJAMIN
Its Vice President and
Chief Financial Officer
By /s/ Thomas A. Wellman
---------------------------------------
THOMAS A. WELLMAN
Its Vice President, Controller and
Treasurer
"Borrower"
FIRST HAWAIIAN BANK,
as a Bank and as Agent
Corporate Hawaii Division
999 Bishop Street, 11th Floor
Honolulu, Hawaii 96813
Att'n: Mr. Alan Arizumi
Vice President
Telephone: (808) 525-6203
Facsimile: (808) 525-6200
By /s/ Alan H. Arizumi
---------------------------------------
ALAN H. ARIZUMI
Its Vice President
BANK OF AMERICA, N.A.
WA1-501-35-01
800 Fifth Avenue, 35th Floor
Seattle, Washington 98104
Att'n: Mr. Mark N. Crawford
Senior Vice President
Telephone: (206) 358-8945
Facsimile: (206) 585-1794
By /s/ Mark N. Crawford
---------------------------------------
Its Senior Vice President
BANK OF HAWAII
130 Merchant Street, 20th Floor
Honolulu, Hawaii 96813
Att'n: Mr. James Karnowski
Telephone: (808) 537-8689
Facsimile: (808) 537-8301
By /s/ James Karnowski
---------------------------------------
Its Vice President
THE BANK OF NEW YORK
10990 Wilshire Boulevard
Suite 1125
Los Angeles, California 90024
Att'n: Ms. Jennifer Ellerman
Vice President
Telephone: (310) 996-8677
Facsimile: (310) 996-8667
By /s/ Jennifer Ellerman
---------------------------------------
Its Vice President
WELLS FARGO BANK, NATIONAL ASSOCIATION
MAC A0112-101
550 California Street, 10th Floor
San Francisco, California 94104
Attn: Mr. Jeff Bailard
Vice President
Telephone: (415) 396-1648
Facsimile: (415) 989-4319
By /s/ Jeff Bailard
---------------------------------------
Its Vice President
AMERICAN SAVINGS BANK, F. S. B.
P. O. Box 2300
Honolulu, Hawaii 96804-2300
Attn: Mr. Carl A. Morita
Telephone: (808) 539-7631
Facsimile: (808) 532-7370
By /s/ Carl A. Morita
---------------------------------------
Its Vice President
"Banks"
SCHEDULE I
----------
Commitment
First Hawaiian Bank $ 53,500,000
Bank of America, N.A. 48,500,000
Wells Fargo Bank, National Association 30,000,000
Bank of Hawaii 30,000,000
The Bank of New York 20,000,000
American Savings Bank, F. S. B. 18,000,000
------------
$200,000,000
EXHIBIT A
---------
REVOLVING CREDIT NOTE
$__________________ Honolulu, Hawaii
___________________, 2004
ALEXANDER & BALDWIN, INC., a Hawaii corporation (hereafter
referred to as the "Borrower"), FOR VALUE RECEIVED, hereby promises to pay to
the order of _____________________________________________________________(the
"Payee") at the offices of First Hawaiian Bank, a Hawaii corporation, located
at 999 Bishop Street, Honolulu, Hawaii 96813, the principal sum of
_______________________________________________ AND NO/100 DOLLARS
($_____________), on the Termination Date (as defined in the Agreement
referred to below) in lawful money of the United States of America and in
immediately available funds.
The Borrower promises also to pay interest on the unpaid
principal amount thereof in like money and funds at said office from the date
hereof until paid at the rates per annum which will be determined in accordance
with the provisions of Article I and Article II of the Third Amended and
Restated Revolving Credit and Term Loan Agreement (the "Agreement") effective as
of November 30, 2001, among the Borrower, the Payee and the other banks party
thereto, as the same may be amended from time to time, said interest to be
payable at the times provided for in the Agreement.
This Note is one of the Notes referred to in the Agreement and
is entitled to the benefits thereof. This Note is subject to prepayment, in
whole or in part, as specified in the Agreement. In case an Event of Default, as
defined in the Agreement, shall occur and shall be continuing, the principal of
and accrued interest on this Note may become due and payable in the manner and
with the effect provided in the Agreement.
The Borrower hereby waives presentment, demand, protest or
notice of any kind in connection with this Note.
This Note shall be governed by and construed in accordance
with the laws of the State of Hawaii.
ALEXANDER & BALDWIN, INC.
By
---------------------------------------
Its
----------------------------------
By
---------------------------------------
Its
----------------------------------
LOAN AND REPAYMENT SCHEDULE
REVOLVING CREDIT NOTE
---------------------
- -------------------------------------------------------------------------------
(Use this section when evidencing a Eurodollar Loan)
Eurodollar Loans
----------------
- -------------------------------------------------------------------------------
Amount and
date of
Principal
Repayment Amount and
(including date of
When Maturity amounts Interest Notation
Rate Made Term Amount Date converted) Payment Made By
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
(Use this section when evidencing Prime Rate Loan)
Prime Rate Loans
----------------
- -------------------------------------------------------------------------------
Amount and
date of
Principal
Repayment Amount and
(including date of
When Maturity amounts Interest Notation
Rate Made Term Amount Date converted) Payment Made By
- -------------------------------------------------------------------------------
EXHIBIT B
---------
TERM NOTE
$___________________ Honolulu, Hawaii
January 1, ________
ALEXANDER & BALDWIN, INC., a Hawaii corporation (hereafter
referred to as the "Borrower"), for value received, hereby promises to pay to
the order of _____________________________ (the "Payee") at the offices of
FIRST HAWAIIAN BANK, a Hawaii corporation, located at 999 Bishop Street,
Honolulu, Hawaii, 96813, the principal sum of _______________________________
Dollars ($____________), in lawful money of the United States of America and in
immediately available funds, in four consecutive substantially equal quarterly
installments of $_______________, which installments shall be payable on the
first Business Day of the immediately subsequent months of April, July,
October and January, commencing April ____, ______; provided, however, that the
last such installment due on January ____, _______, shall be in an amount
sufficient to repay in full the unpaid principal amount; and to pay interest
from the date hereof on said principal sum, or the unpaid balance thereof, in
like money and funds, at said office, at the rates per annum which shall be
determined in accordance with the provisions of Articles I and II of the
Agreement referred to below, said interest to be payable at the times provided
for in the Agreement. All unpaid principal, accrued yet unpaid interest,
and all other fees and charges due under this Note shall be due and payable on
January _____, _______.
This Note is one of the Term Notes referred to in the Third
Amended and Restated Revolving Credit and Term Loan Agreement effective as of
November 30, 2001, among the Borrower, the Payee, and the other banks party
thereto, as the same may be amended from time to time (the "Agreement"), and is
entitled to all the benefits provided therein. Reference is made to said
Agreement for the rights and obligations of the Borrower, the Payee (as one of
the "Banks" defined therein), and First Hawaiian Bank, as Agent, with regard to
this Note.
This Note is subject to prepayment, in whole or in part, as
specified in the Agreement. In case an Event of Default, as defined in the
Agreement, shall occur and shall be continuing, the principal of and accrued
interest on this Note may become due and payable in the manner and with the
effect provided in the Agreement.
The Borrower hereby waives presentment, demand, protest or
notice of any kind in connection with this Note.
This Note shall be governed by and construed in accordance
with the laws of the State of Hawaii.
ALEXANDER & BALDWIN, INC.
By _____________________________________
Its _______________________________
By _____________________________________
Its _______________________________
THIRTEENTH AMENDMENT TO GRID NOTE
---------------------------------
THIS THIRTEENTH AMENDMENT TO GRID NOTE (this "Amendment") is made on
October 19, 2004, and effective as of November 30, 2004, by and between
ALEXANDER & BALDWIN, INC., a Hawaii corporation, hereinafter called the "Maker,"
and FIRST HAWAIIAN BANK, a Hawaii corporation, hereinafter called the "Bank";
WITNESSETH THAT;
----------------
WHEREAS, the Bank extended to the Maker that certain uncommitted line
of credit facility in the principal amount not to exceed FORTY MILLION AND
NO/100 DOLLARS ($40,000,000.00) which line of credit is evidenced by that
certain Grid Note (the "Note") dated December 30, 1993, with a final maturity of
said Note being November 30, 1994; and
WHEREAS, the Maker and the Bank subsequently entered into that certain
Amendment to Grid Note dated August 31, 1994, whereby the Note was increased to
SIXTY-FIVE MILLION AND NO/100 DOLLARS ($65,000,000.00), Section 4 of the Note,
"Limitation" was deleted in its entirety and replaced, and the Note was extended
----------
to November 30, 1995; and
WHEREAS, the Maker and the Bank subsequently entered into that certain
Second Amendment to Grid Note dated March 29, 1995, whereby the Note was
decreased to FORTY-FIVE MILLION AND NO/100 DOLLARS ($45,000,000.00), and Section
4 of the Note, entitled "Limitation" was deleted in its entirety and replaced,
----------
and
WHEREAS, the Maker and the Bank subsequently entered into that certain
Third Amendment to Grid Note dated November 17, 1995, that certain Fourth
Amendment to Grid Note dated November 25, 1996, that certain Fifth Amendment to
Grid Note dated November 28, 1997, and that certain Sixth Amendment to Grid Note
dated November 30, 1998, all to extend the Maturity Date of the Note, the latest
of which extended such Maturity Date to November 30, 1999; and
WHEREAS, the Maker and the Bank subsequently entered into that certain
Seventh Amendment to Grid Note dated November 23, 1999, whereby the Note was
extended to November 30, 2000, and with the merger of A&B-Hawaii, Inc. into
Alexander & Baldwin, Inc., with Alexander & Baldwin, Inc. being the surviving
corporation, the obligations of A&B-Hawaii, Inc. under the Note were terminated,
with all references in the Note to the Maker deemed to be references to
Alexander & Baldwin, Inc.; and
WHEREAS, the Maker and the Bank subsequently entered into that certain
Eighth Amendment to Grid Note dated May 3, 2000, whereby the Note was increased
to SEVENTY MILLION AND NO/100 DOLLARS ($70,000,000.00), and Section 4 of the
Note, "Limitation" was deleted in its entirety and replaced; and
----------
WHEREAS, the Maker and the Bank subsequently entered into that certain
Ninth Amendment to Grid Note dated November 30, 2000, that certain Tenth
Amendment to Grid Note dated November 30, 2001, that certain Eleventh Amendment
to Grid Note dated November 21, 2002, and that certain Twelfth Amendment to Grid
Note dated November 12, 2003, the latest of which extended the Maturity Date of
the Note to November 30, 2004; and
WHEREAS, the Maker has requested the Bank to extend the Maturity Date
of the Note to January 1, 2006, and to increase the amount available under the
credit facility from $70,000,000.00 to $78,500,000.00; and
WHEREAS, the Bank has agreed to the Maker's request, and in accordance
and as a condition thereto, the Maker and the Bank desire to further amend the
Note as hereinafter provided;
NOW, THEREFORE, in consideration of the mutual covenants contained
herein, the Maker and the Bank agree as follows:
1. The Maturity Date of the Note, as previously amended, shall be and
hereby is further amended to provide that all unpaid principal and accrued but
unpaid interest shall be due and payable on January 1, 2006, unless sooner due
as otherwise provided in the Note.
2. The first full paragraph of the Note is hereby amended to increase
the Maximum Commitment from $70,000,000.00, to SEVENTY-EIGHT MILLION FIVE
HUNDRED THOUSAND AND NO/100 DOLLARS ($78,500,000.00). All references to
$70,000,000.00 in the Note are hereby amended to $78,500,000.00.
3. Section 4 of the Note, entitled "Limitation," is hereby amended in
its entirety to read as follows:
4. Limitation. Notwithstanding any contrary provision
----------
hereunder, the aggregate balance of all outstanding advances
and all issued and outstanding letters of credit under this
Note, PLUS the aggregate balance of all outstanding Loans and
Letters of Credit owing by the Maker under First Hawaiian
Bank's share of that certain $200,000,000 credit facility made
pursuant to that certain Third Amended and Restated Revolving
Credit and Term Loan Agreement, effective as of November 30,
2001, as amended from time to time, by and between the Maker,
the Bank and the banks that are parties thereto, shall not any
time exceed the aggregate principal sum of $78,500,000.
4. In all other respects, the Note, as herein amended, shall remain
unmodified and in full force and effect, and the Maker hereby reaffirms all of
its obligations under the Note, as previously amended, and as amended hereby.
Without limiting the generality of the foregoing, the Maker hereby expressly
acknowledges and agrees that, as of the date of this Amendment, the Maker has no
offsets, claims or defenses whatsoever against the Bank or against any of the
Maker's obligations under the Note, as previously amended, and as amended
hereby, and that if any such claims, defenses or offsets exist, they are hereby
irrevocably waived and released.
5. The Maker has all requisite power and authority to execute this
Amendment and to carry out the provisions herein. The execution and delivery of
this Amendment by the officers and/or other authorized person(s) specified below
has been duly authorized by the Board of Directors of the Maker and no other
corporate action of the Maker is requisite to such execution and delivery of
this Amendment. Upon execution of this Amendment by such officers and/or
authorized person(s), this Amendment, and all provisions contained herein, shall
be the due and binding obligations of the Maker.
IN WITNESS WHEREOF, this Thirteenth Amendment to Grid Note is executed
by the undersigned parties on the date first above written.
FIRST HAWAIIAN BANK ALEXANDER & BALDWIN, INC.
By /s/ Alan H. Arizumi By: /s/ Christopher J. Benjamin
--------------------- ----------------------------
ALAN H. ARIZUMI CHRISTOPHER J. BENJAMIN
Its Vice President Its Vice President and
Chief Financial Officer
"Bank"
By: /s/ Thomas A. Wellman
----------------------------
THOMAS A. WELLMAN
Its Vice President, Controller and
Treasurer
"Maker"
EXHIBIT 32
Certification of Chief Executive Officer and
Chief Financial Officer Pursuant to
18 U.S.C. Section 1350, As Adopted Pursuant to
Section 906 of the Sarbanes-Oxley Act of 2002
In connection with the Quarterly Report on Form 10-Q of Alexander & Baldwin,
Inc. (the "Company") for the quarterly period ending September 30, 2004, as
filed with the Securities and Exchange Commission on the date hereof (the
"Report"), Allen Doane, as Chief Executive Officer of the Company, and
Christopher J. Benjamin, as Chief Financial Officer of the Company, each
hereby certifies, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to
Section 906 of the Sarbanes-Oxley Act of 2002, that to their knowledge:
(1) The Report fully complies with the requirements of Section
13(a) or 15(d) of the Securities Exchange Act of 1934; and
(2) The information contained in the Report fairly presents, in all
material respects, the financial condition and results of operations of the
Company.
/s/ Allen Doane
- -----------------------------------
Name: Allen Doane
Title: Chief Executive Officer
Date: November 1, 2004
/s/ Christopher J. Benjamin
- -----------------------------------
Name: Christopher J. Benjamin
Title: Chief Financial Officer
Date: November 1, 2004